Gujarat High Court
Hardy Exploration And Production ... vs Hindustan Oil Exploration Company ... on 26 October, 2020
Author: Biren Vaishnav
Bench: Biren Vaishnav
C/IAAP/52/2020 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 52 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed to see the NO
judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law as to NO
the interpretation of the Constitution of India or any order made
thereunder ?
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HARDY EXPLORATION AND PRODUCTION (INDIA) INC.
Versus
HINDUSTAN OIL EXPLORATION COMPANY LIMITED
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Appearance:
MR MIHIR THAKORE, SENIOR ADVOCATE WITH MR MANAN K
PANERI(7959) for the Petitioner(s) No. 1
MR KAMAL TRIVEDI, SENIOR ADVOCATE WITH MR AJAY MEHTA AND
MRANMOL A MEHTA(8390) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE BIREN VAISHNAV
Date : 26/10/2020
CAV JUDGMENT
1. This arbitration petition has been filed under Sections 47 and 49 of the Arbitration and Conciliation Act, 1996 for recognition and enforcement of a foreign award dated 28.02.2020 passed by the Arbitral Tribunal having seat at Kuala Lumpur. The prayer of the petitioner -
Page 1 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENTHardy Exploration and Production (India) Inc is that the court recognise the foreign award dated 28.02.2020 and enforce the same as a decree of this court. It is also prayed to direct the attachment and sale of the assets and properties as described in the petition at Annexures F and G and mentioned at paragraph nos. 14 and 15 of the petition, including the bank accounts of the respondent/award debtor and such other assets and properties owned and/under control of the respondent /award debtor which may be ascertained during the course of the present proceedings, especially from the affidavit of assets and through the examination of the persons in control of respondent/award debtor.
2. Facts in brief are as under:
2.1 The Government of India invited bids for carrying out petroleum operations in the contract area being CY-OS-90/1 in Cauvery basin off the eastern coast of India. A production sharing contract was entered into on 30.12.1994 between the Government of India on one part and ONGC, petitioner award holder, respondent/award debtor and TATA Petrodyne limited on other part. A joint operating ageement (JOA) was entered into between the parties on 05.12.1995 which was subsequently modified on 19.04.1999. It was for the purposes of prospecting exploring and drilling of petroleum, developing and operating, producing of petroleum etc. the participating interests were as under:
(a) Petitioner/Award Holder - 18%
(b) ONGC - 40%
(c) Respondent - 21%
(d) TPL - 21% The costs, expenses and income in relation to the said Block Page 2 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT was proportionate to the Participating Interest of the Parties.
2.2 Commercial production took place from 1997 till 30.07.2011 when the production was shut down. The controversy revolved around the circumstances of shut down as a result of which arbitral proceedings were commenced against the respondent/award debtor ONGC and TPL. Claims and counter claims were made by the respective parties. A foreign award was passed on 28.02.2020. The operative portion of the award as reproduced in the petition reads as under:
"345. For the reasons set out in this Award, the Tribunal (by Majority) hereby DECLARES, AWARDS, ORDERS and DIRECTS that:
I. Each of the Respondents shall forthwith pay to the Claimant as Operator, their respective shares of the Claimant's liability under the Samson Award in the amount indicated below together with interest at 5% per annum from 19 March 2012 until the date of full payment to the Claimant:
a. ONGC (40%) at the sum of USD 1,572,857.40; b. HOEC (21%) at the sum of USD 825,750.14; and c. TPL (21%) at the sum of USD 825,750.14.
II. The Parties shall as soon as practicable undertake a reconciliation of their cash contributions made and the expenditures incurred as from 1 August 2011 in accordance with paragraph 336 above. III. The costs of this arbitration incurred to date amounting in aggregate to USD 511,156.45 shall be borne and paid forthwith equally by the viz.: a. ONGC amounting to USD 170,385.48; b. HOEC amounting to USD 170,385.48; and c. TPL amounting to USD 170,385.47.
IV. If the Claimant should make any further payment to meet the shortfall in deposits, it shall be entitled to immediate reimbursement from the Respondents, each in equal share.
V. The Respondents shall bear their own legal Page 3 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT costs and expenses and shall bear and pay forthwith the Claimant's legal costs and expenses incurred in this arbitration which the Tribunal hereby fixes at USD 732,456.66 payable equally viz:
a. ONGC amounting to USD 244,152,22; b. HOEC amounting to USD 244,152,22; and c. TPL amounting to USD 244,152,22.
VI. The Tribunal reserves for itself the jurisdiction to consider any ancillary matter arising out of or following the account reconciliation and make a final award if it deems necessary.
VII. All other claims and counterclaims shall stand dismissed."
Enforcement of this award is sought by filing this enforcement petition.
3. Mr. Mihir Thakore, learned Senior Counsel has appeared with Mr. Manan K Paneri, learned advocate for the petitioner and made the following submissions:
(a) Taking the court through the provisions of Explanation to Section 47 of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), Mr. Thakore would submit that the petition is maintainable before this court. The award is a foreign award under Part-II of the Arbitration Act especially read in the context of the explanation. He would submit that the arbitral award is a money award, undisputedly the assets of the respondent are located within the territorial jurisdiction of this High Court and the award would therefore become enforceable by this court. He relied on the decision of the High Court of Delhi in the case of Glencore Page 4 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT International AG v. Hindustan Zinc Limited High Court of Delhi O.M.P (EFA) (Comm.) 9/2019. He would submit that the details of the assets are made out in para 13 and 14 of the petition.
(b) With regard to the applicability of Section 42 of the Act, Mr. Thakore would submit that an application under Section 9 for interim measures was filed before the Madras High Court. The same was not entertained. Also a subsequent petition filed before the Gujarat High Court was withdrawn. Section 42 dealing with filing of subsequent applications in the same court would not apply to an award under Part -II of the Act. Moreover, as per Section 48 of the Act which falls in Part-II of the Act, reading Section 2(2) of the Act with Section 42 thereof, it would indicate that Section 42 of the Act has no application to a foreign award. Moreover, Section 42 of the Act would apply only to 'arbitral proceedings' and not in a situation where the award is passed and the proceedings are final.
He would rely on the provisions of Section 32 of the Arbitration Act. Reliance was also placed on the decision in the case of Sundaram Finance Limited v. Abdul Samad and Anr. (2018) 3 SCC 622 Paras. 16 and 17.
(c) Mr. Thakore would submit that the award has become final and binding though a challenge has been made to the award before the High Court of Malaysia. Mere filing of an application does not imply that the foreign award is not final and binding. He would rely on Section 36 of the Malaysian Arbitration Act,2005 (for short 'MAA'). He would submit that the award has become final and binding and would rely on Section 17 of the Arbitration and Conciliation Act, 1942. He would submit that the area of operation Page 5 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT of Section 48(1)(e) and Section 48(3) of the Act are completely different and do not overlap. Section 48(1)(e) gets attracted when a foregin award has not yet become binding on the parties or is suspended and set aside. Section 48(3) attracts when the award has become final and binding, but a challenge application has been filed by award debtor before a competent authority. He would rely on sub section 3 and submit that on a mere filing of an application, if the court were to refuse exercise of discretion under Section 48(1)(e) of the Act, it would render Section 48(3) otiose.
(d) Mr. Thakore would submit that during the pendency of the challenge before the Malaysian High Court, though as per the decision rendered in Pacific Basin Ihx (UK) Ltd. V. Ashapura Minechem (2011) 3 Bom CR 199 @ Para 51-53, the court should be very selective in staying such enforcement proceeding. He would submit that it is the discretion of the court if it is inclined to adjourn the proceedings, it may direct the respondent to furnish suitable security in terms of Section 48(3) of the Act.
(e) Mr. Thakore would invite the attention of the court to various articles in the production sharing agreement such as Article 1.6.2 which defines the term 'Operator', 1.6.3 which defines the term participating interest, 5.6 which talks of the managing committee, article 6 of the contract, article 14 of the contract and article 28 of the contract to submit that the assets owned by the respondent cannot be liquidated by the operator as the ONGC has a right to require vesting of fill title ownership of the assets. He would submit that if the contention of the respondents as stated in the additional reply is accepted, it would make a mockery of security Page 6 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT and if the court is inclined to grant an adjournment, the respondent must furnish a suitable security.
(f) Mr. Thakore would submit that the liability of the respondent is crystallised at Rs.26,49,66,658.92 crores. This award amount would also include Rs.14,75,25,127 as an amount for reconciliation. The respondent therefore must be directed to furnish suitable security under Section 48(3) of the Act by furnishing an unconditional bank guarantee to the tune of Rs.26,49,66,658.92 crores being the amount due or the same be deposited before this court.
4. Mr. Kamal Trivedi, learned Senior Advocate with Mr. Ajay Mehta and Mr. Anmol Mehta, learned advocates appeared for the respondents. Mr. Trivedi, learned Senior Counsel raised a preliminary objection about the maintainability of the petition under Section 48 of the Act. He would submit that in terms of Section 48 of the Act, the present petition would only be maintainable before the High Court of Madras. He would invite the attention of the court to the affidavit-in-reply filed first in point of time and to the decision of High Court of Madras in OA No. 346 of 2017 and the decision of this court in IAAP No. 34 of 2020 dated 09.09.2020. Reading Section 42 of the Act, Mr. Trivedi would submit that once the jurisdiction of the Madras High Court was invoked, subsequent applications arising out of that agreement shall be made in that court. He would therefore submit that this court should not entertain the application petition as it is not maintainable before this court.
4.1 Mr. Trivedi would next submit that the award has not yet become final and binding as the same has been challenged before the Hon'ble Page 7 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT High Court of Malaysia at Kuala Lumpur. He would therefore submit that in terms of Section 48(1)(e) of the Act, the petition deserves to be rejected.
4.2 In support of his submissions that the award has not yet become binding on the parties, Mr. Trivedi would submit that under the Malaysian Arbitration Act, 2005 (MAA), there is no provision to file a separate application for stay and that mere filing of an application under Section 37 of the MAA would amount that foreign award under challenge is not binding and is unenforceable. He would rely on the provisions of Section 37 of the MAA. He would submit, on the basis of Section 37 of the MAA, that it does not have any express provision which specifies that the filing of such an application would not by itself render that award unenforceable. Drawing analogy from Section 36(2) of the Indian Arbitration Act, post 2015 amendment, he would submit that prior to the amendment of 2015, if the Indian Arbitration Act was read, mere filing of the main application would render the award unenforceable. He would therefore submit that the provisions of the MAA is similar to the pre- amendment era of the Indian Arbitration Act and therefore mere filing of an application under Section 37 of the MAA would automatically render the award non binding and unenforceable.
4.3 From the subsequent affidavit filed on record, Mr. Trivedi would submit relying on the decision in the case of Naval Gent Maritime Ltd. Vs. Shivanath Rai Harnarain (I) Ltd. reported in 2009 SCC OnLine Del 2961 - rel. para 12, in terms of Section 48(1) of the Act, the petition deserves to be rejected.
4.4 Refuting the liability to the tune of Rs. 26 crores, Mr. Trivedi, Page 8 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT learned Senior Counsel would submit that a bare perusal of the award would confirm that it is based on so called cash contribution for which undisputedly no award has been passed. The Arbitral Tribunal has directed reconciliation of cash contributions and further directed that in case of failure to reconcile the same, the parties could approach the Tribunal. He would rely on the table of the additional affidavit-in-reply and submit that the respondent's share in the incorporated joint venture is to the extent of Rs.164.25 crores. In fact it is the petitioner which is in control and possession of all the assets.
4.5 He would further submit that the term 'suitable security' occurring in Section 48(3) of the Act should mean the solvency or capacity of the party concerned to honour the burden if ultimately the party fails in its challenge against the award. He would submit that the petitioner is holding the respondent's share in the assets and therefore would not be entitled to any security.
5. Having considered the submissions of the learned advocates for the respective parties, the first aspect that needs to be considered is whether the preliminary objection as regards to the maintainability of the petition before this court needs to be sustained or over-ruled. For the purpose of considering this, Section 2(2) of the Act and Section 42 of the Act need to be reproduced and the same read as under:
Section 2(2) in THE ARBITRATION AND CONCILIATION ACT, 1996 2. Definitions. -- *** *** *** Page 9 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT
(2) This Part shall apply where the place of arbitration is in India.
Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and (clause) of sub-section (1) and sub-section (3) of section 37 shall also apply to the international commercial arbitration, even if the place of arbitration is outside India,and an arbitral award made or to be made in such place is enforeceable and recognized under the provisions of Part II of this Act} Section 42 in THE ARBITRATION AND CONCILIATION ACT, 1996
42. Jurisdiction.--Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.
5.1 Section 2(2) of the Act when read with the proviso would indicate that the provisions of Section 9 and 27 of the Act would apply to an International Commercial Arbitration even if the place of arbitration is outside India subject to an agreement to the contrary. An exception is carved out for Sections 9, 27, 37(1)(b) and 37(3) (contained in Part I of the Act) which are made applicable to an International Commercial Arbitration. Reading of the order of the Madras High Court would indicate that the court rejected the application under Section 9 on the ground that by virtue of the agreement namely Articles 17.12 read with Article 18.1 it was governed by the laws of England only and therefore the application was not maintainable. It was in this context that the petition before the Gujarat High Court was withdrawn. On a challenge Page 10 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT before the Division Bench of the Madras High Court, the Division Bench has kept the question open for the parties to raise all issues both on law and facts.
5.2 Be that as it may. What is evident on reading Section 42 of the Act is that it is clear that the words in the Section are "Notwithstanding anything contained elsewhere in this Part", which clearly implies that the operation of Section 42 is only limited to Part-I of the Act and does not apply to Part -II of the Act. Even otherwise, when the section is read, it applies to 'arbitral proceedings'. Section 48, which falls in Part - II of the Act would fall in which concerns enforcement of foreign awards. It would not apply to 'arbitral proceedings'. It would be in the fitness of things to reproduce paras 20 to 30, 35 and 40 of the decision in the case of Glencore International AG (supra) and the same reads as under:
"20. Learned Senior Counsel distinguishes the judgment in the case of Krishna Gopal Saha (supra) and argues that the said judgment was distinguished by a Division Bench of the same High Court in M/s. Anirban Chit Fund (P) Ltd. & Insulation Materials Manufacturing Company Pvt. Ltd. v. Commissioner, Sanchaita Investments, 1987 SCC OnLine Cal 221, where the Court observed that the enumeration under Section 60 of the CPC, of the properties which are attachable is not exhaustive. It was held that where the tenancy was not a residential tenancy, the exemption granted to residential tenancy from attachment under Section 60(1) (kc) of CPC would not apply. In the present case, JD has not shown any Statutory Bar to the disposition of a Leasehold interest and the tenancy is not a residential tenancy, so as to be exempted under Section 60 CPC. Even otherwise, there is no denial that JD has moveable assets within the jurisdiction of this Court and even if the assets are not sufficient to satisfy the decree, this aspect will not be relevant at this stage to decide the maintainability of the present proceedings, as held in the case of Motorola Inc. (supra).
21. In so far as the contention of the JD regarding the Page 11 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT pending proceedings in the Rajasthan High Court is concerned, learned Senior Counsel for the Petitioner contends that firstly, it is even doubtful in law whether a composite petition can be filed under Section 34 and Section 48 of the Act. Supreme Court in Hindustan Petroleum Co. Ltd. v. Videocon Industries Ltd., (2012 SCC Online Del 3610) has held that Part-I and Part-II of the Act operate in different spheres. Section 34 is for setting aside of an Arbitral Award, while Part-II deals with enforcement of certain Foreign Awards and thus, while proceedings under Section 34 of the Act are like a Sword to challenge the Award to have it set aside, proceedings Section 48 of the Act are only like a shield against the Foreign Award. It is further submitted that the Single Judge of the Rajasthan High Court has already dismissed the petitions by a judgment dated 02.05.2019, on ground of maintainability as the seat of Arbitration was London and the governing law was English Law. Though an Appeal is pending, but it is not correct for the JD to submit that proceedings under Section 48 of the Act are pending.
22. Learned Senior Counsel submits that there is no legal impediment for this Court to proceed under Section 48 of the Act for enforcement of the Award and the petition is maintainable. Reliance is placed on the judgment in Eitzen Bulk A/S v. Ashapura Minechem Limited and Another, [(2016) 11 SCC 508] where Ashapura Minechem Limited had filed a petition against Eitzen Bulk under Section 34 of the Act, before the Court in Gujarat and subsequently, Eitzen Bulk filed an application for enforcement under Section 47 of the Act, before the Bombay High Court. Contention of Ashapura Minechem Limited was that in view of Section 42 of the Act, the application ought to have been made before the Gujarat Court. This contention was rejected by the Bombay High Court on the ground that Section 42 is in Part- I of the Act and since Part-I itself has no application to a Foreign Award, Section 42 of the Act would have no application either. This view of the Bombay High Court was upheld by the Supreme Court. It is also argued that the emphasis by the learned Senior Counsel for the JD on Section 49 of the Act is also misplaced. The stage for Section 49 of the Act i.e. execution of the decree would come only after the stage when the objections are considered and cannot be a ground to prevent the Court from Page 12 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT entertaining the present petition.
23. In view of the above submissions, it is submitted that the JD be called upon to file its reply/objection under Section 48 of the Act, rather than the piecemeal approach which the JD is adopting and has been deprecated by the Supreme Court in LMJ (supra).
24. I have heard the learned Senior Counsels for the parties and examined their respective contentions.
25. Petitioner has filed the present enforcement petitions having foreign awards in its favour. The Judgment Debtor/Respondent has filed an application objecting to the maintainability of the petitions on the ground that no part of cause of action in respect of the subject matter of the Award has arisen within the jurisdiction of this Court. Since the assets of the JD are not located within the jurisdiction of this Court, there is lack of territorial jurisdiction to entertain the petitions.
26. Petitioners have sought to enforce the Awards on the ground that the JD has an immoveable property within the Territorial Jurisdiction of this Court, where it admittedly runs its business and is using the same as an Administrative Office and also has various Bank accounts, within the jurisdiction of this Court. In the application filed by the JD objecting to the jurisdiction, it is significant to note that while a categorical stand has been taken with respect to the immoveable property, that the premises are owned by the Government and the JD is using the premises as an Administrative Office only as a Lessee, but there is no denial to the averment of the Petitioner with respect to the Bank Accounts or other moveables. The stand of the JD in the application is as under:
"6.11 The Petitioner/Decree holder is well aware of the fact that the Applicant does not have any assets in the territorial jurisdiction of this Hon'ble Court other than an administrative office which is evident from the list of assets given by the Petitioner/Decree holder itself. By arraying the administrative address of the Applicant, the Petitioner/Decree holder with an ulterior motive has filed the present proceedings before this Hon'ble Court. Even the Petitioner/Decree holder is aware of the same which is evident from the documents filed by Page 13 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT the Petitioner/Decree holder."
27. The next ground on which the JD objects to the present petitions is that no cause of action has arisen within the territorial jurisdiction of this Court inasmuch as the contracts between the parties were signed outside the jurisdiction, the seat of arbitration was not Delhi and that Rajasthan High Court is seized of the petitions filed by the JD under Section 34 read with Section 48 of the Act. It is also the stand of the JD that the assets of the JD are mostly in Rajasthan. Relevant paras in this regard from the Rejoinder to the application are as under:
"2. That the Respondent reiterates that this Hon'ble court does not have the territorial jurisdiction to entertain and adjudicate upon the present lis in as much as none of the assets of the Respondent are within the jurisdiction of this Hon'ble Court. The only "asset" mentioned within the territorial jurisdiction of this Hon'ble Court is the office space mentioned at 1st floor, Core 6, Scope Complex, 7 Lodhi Road, New Delhi- 110003. However, the said "asset" is a small administrative/liason office with only 3-4 employees. The said "asset" is on lease to the Respondent from the Government of India, therefore, the Respondent does not have disposing power over the said property. Thus, the said "asset" is not liable for attachment in execution of the Awards. It is reiterated that the Respondent does not have any other assets within the territorial jurisdiction of this Hon'ble Court.
XXX
6. That the Petitioner is indulging in a roving and fishing enquiry by filing the present proceedings before this Hon'ble Court. The list of assets filed by the Petitioner itself show that the assets of the Respondent are mostly located outside the territorial jurisdiction of this Hon'ble Court."
28. In order to deal with the preliminary objection of the JD, Page 14 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT it is necessary to examine certain provisions of the Act and CPC. Section 2 (1) (e) which is in Part-I Chapter 1 of the Act is as under:
"2. Definitions:-
(e) "Court" means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subjectmatter of the arbitration if the same had been the subject matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes."
Explanation to Section 47 is as under:
"Explanation. - In this section and all the following sections of this Chapter, "Court"
means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subject- matter of the award if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes."
29. Bombay High Court in the case of Tata International Ltd., Mumbai vs. Trisuns Chemical Industry Ltd., Kutch 2002 (2) BomCR 88, while examining the issue of enforcement of a Foreign Award and where an objection to territorial jurisdiction of the Court was taken, dealt with the distinction and the interplay between the two provisions mentioned above. It was held that these two provisions relate to two different aspects. In an Arbitration, the Court considers the subject matter of the arbitration while in the enforcement of an Award, it is the subject matter of the Award which is the relevant factor. Bombay High Court held as under:
"4. We then come to the issue as to the meaning of the expression subject matter of the Award and whether that would mean also subject matter of the arbitration proceedings. This is important because under Section 2(e) the expression with reference to the expression Page 15 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT Court means the subject matter of the arbitration. The subject matter of the arbitration would include contracts. The subject matter of an Award cannot include a contract as adjudication in respect of the claims under the contract has been done and has resulted into an award. The subject matter of the Award therefore, is liable to be construed to mean what is the relief finally awarded by the Award. It may be in the form of money, it can be for specific performance, or the like. Under the Foreign Awards (Recognition and Enforcement) Act, 1961, the said issue was in issue before the Apex Court in the case of Brace Transport Corporation of Monrovia Bermuda v. Orient Middle East Lines Ltd. Saudi Arabia and Ors., 1993(4) Sca 33. Two paragraphs from the judgment may be reproduced.
"14. It was then submitted by Dr. Ghosh that the subject matter of the award was money and the 1st and 2nnd respondents had money in the jurisdiction of the Bhavnagar Court in the form of part of the purchase price of the said vessel payable to them by the 3rd and 4th respondents."
"15. This being an award for money its subject matter may be said to be money, just as the subject matter of the money decree may be said to be money."
It is therefore, clear that in respect of an award for money, subject matter can be said to be money. In other words, therefore, petition for enforcement of the foreign award can be filed in the Court where the party may have money.
This is important consideration considering a party need not be tied down as in the case of Part I where the subject matter is the subject matter of the arbitration. In other words, if the party has a foreign award in its favour, it can seek to enforce the award in any part of the country where it is sought to be enforced as long Page 16 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT as money is available or suit for recovery of money can be filed. In my opinion, therefore expression subject matter of the award to the explanation under Section 47 is different from the expression subject matter of the arbitration under Section 2(e) of Part I of the Act.
A foreign award if allowed to be enforced is a deemed decree. It can be enforced anywhere that the respondents may have money. In other words it is in the nature of forum hunting. The expression subject matter of the award and the subject matter of the arbitration agreement are two different and distinct expressions. In respect of a foreign award, if the expression subject matter of the award was to mean the same thing as the subject matter of the arbitration agreement, in most cases there would be no Court available where the award could be enforced as the entire cause of action in respect of the subject matter of the arbitration could be the foreign country. Merely because in the instant case, the contract was entered into in India cannot result in a different interpretation. The expression as the explanation itself permits forum hunting if that expression can be used.
After considering all these provisions a similar view was taken in Arbitration Petition Lodg.
No. 427 of 2001 in the case of Naval Gent Marline Ltd. v. Shivnath Rai Harnarain (I) Ltd. and Ors., decided on 5th July, 2001 in which at the ad interim stage, apart from other issues, the issue as to the meaning of the expression "subject matter of the award" was in issue and has been similarly answered.
In the instant case, defendants do not have their office or carry on business within the jurisdiction of this Court. The Offices are either at Gandhidham or Ahmedabad. It is not averred in the petition that the respondents have any money within the jurisdiction of this Court. In these circumstances, to my mind in the absence Page 17 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT of the subject matter of the Award being within the jurisdiction of this Court, this Court would have no jurisdiction to hear and decide this petition."
30. The issue of territorial jurisdiction of a Court in the context of Sections 47 and 48 of the Act again came up before the Bombay High Court in Wireless Developers Inc. vs. India Games Ltd. 2012 (2) ALLMR 790. Relying on the judgment in case of Tata International (supra), the Court observed that the distinction drawn stands to reason and logic. At the stage of arbitration, the subject matter could be a contract and therefore, the place where the Contract was entered into or such related issues would be material to decide the jurisdiction. However, once arbitration is concluded, and the stage is of enforcement then the question that has to be examined is the subject matter of the Award. Where the Award is a money Award, the enforcement would lie in a Court which is able to enforce the Award. Thus, where the properties, moveable or immoveable, are located would be the place of enforcement of the Award and issues such as the residence or the place of business of the Respondent would be of little use. Relevant part of the judgment is as under:
"8. This concept has been explained by a single Judge of this Court in the case of Tata International Ltd. Vs. Trisuns Chemical Industry Ltd.2002 (2) B.C.R. 88. In that case also a foreign award was sought to be enforced in a Court which the respondent claimed, lacked territorial jurisdiction. In paragraph 2 of the judgment, the Court considered the distinction between the aforesaid two provisions relating to the subject matter of the two aspects: in an arbitration the Court would consider the subject matter of the arbitration; in the enforcement of the award the Court would consider the subject matter of the award as the determining factors. This stands to reason and logic. The subject matter of the arbitration may be a certain contract, a certain property etc., The territorial jurisdiction of the Court would be where the contract was entered into or where the some or all the properties of the respondent would be.Page 18 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT
Once the arbitration is concluded and has to be enforced it is the subject matter of the award which would have to be seen. That would be whether the award is a money award (analogous to a money decree in a litigation) or a declaration or other relief with regard to a contract or a property. The award would have to be filed for its enforcement in a Court which would be able to enforce that award. It would be futile to file it where a cause of action may have arisen, if the respondent would have no properties in that jurisdiction. Similarly it would be of little use to file it where the respondent resided or carried on business. It would have to be filed where the respondent would have properties, movable or immovable, which could be attached and sold in execution of the award."
35. In Wireless Developers (supra), Bombay High Court also examined the provisions of CPC with regard to execution of decrees and orders. The Court examined Section 51 CPC which enumerates powers of the Court to enforce execution by delivery of any property, attachment and/or sale of the property, arrest and detention of the JD, appointment of a Receiver or any other manner as may be required in the case. Order XXI Rules 3 and 10 CPC were also considered and the Court held as under:
"11. A reading of these provisions show that the CPC had not laid down the jurisdiction of an Executing Court. It cannot be since an Executing Court would be a Court which would be able to issue a process of execution within the limits of its territorial jurisdiction only, if the property or the person which is the subject- matter of the decree is found and available within such territory. It can attach a property which is within its territorial jurisdiction. It can detain a judgment debtor who lives within its territorial jurisdiction. It can appoint receiver of a property also which is only within its territorial jurisdiction. It would have nothing to do with the residence or the business of the Page 19 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT parties or the place where the cause of action in the suit in which the decree came to be passed was. Hence if it has no property that it can attach and sell, it would transfer the decree to the Court where any property of the judgment debtor is found as the "Court having jurisdiction"."
40. Insofar as the argument of the JD that it has challenged the Awards under Section 34 read with Section 48 of the Act and the appeal is pending before the Rajasthan High Court, suffice would it be to state that pendency of those proceedings cannot come in the way of the Petitioners enforcing the Award before this Court. This issue is no longer res integra and has been settled by the Supreme Court in Eitzen Bulk (supra). In the said case, Ashapura Minechem Ltd. had filed a petition against Eitzen Bulk under Section 34 of the Act before the Court in Gujarat and Eitzen Bulk had filed an application for enforcement of the Foreign Award before the Bombay High Court. Contention of Ashapura was that in view of Section 42 of the Act, the application for enforcement ought to have been made before the Gujarat High Court. Bombay High Court rejected the contention of Ashapura on the ground that Section 42 is in Part I of the Act and since Part I itself had no application to a Foreign Award, Section 42 would have no application. This view of the Bombay High Court was upheld by the Supreme Court. Insofar as the issue of maintainability of the petition under Section 34 filed by the JD in Rajasthan High Court is concerned, the said issue is irrelevant to the present controversy in these petitions."
5.3 Reading section 42 would make clear that subsequent applications of arbitral proceedings have to be filed in the same court where previous applications have been filed. In the present case, since the application so filed is for enforcement of a foreign award where arbitral proceedings have been terminated and are at the stage of execution and also when it is not falling within Part-I of the Act, the preliminary objection as to the maintainability of petition under Section 48 of the Act deserves to be Page 20 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT rejected. It will be necessary to reproduce paras 16 and 17 of the decision in the case of Sundaram Finance Ltd. (supra) which read as under:
"16. The line of reasoning supporting the award to be filed in a so-called court of competent jurisdiction and then to obtain a transfer of the decree is primarily based on the jurisdiction clause found in Section 42, which reads as under:
"42. Jurisdiction. - Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."
The aforesaid provision, however, applies with respect to an application being filed in Court under Part I. The jurisdiction is over the arbitral proceedings. The subsequent application arising from that agreement and the arbitral proceedings are to be made in that court alone.
17. However, what has been lost sight of is Section 32 of the said Act, which reads as under: "32. Termination of proceedings.-- (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2). (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where--
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.
Page 21 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings." The aforesaid provision provides for arbitral proceedings to be terminated by the final arbitral award. Thus, when an award is already made, of which execution is sought, the arbitral proceedings already stand terminated on the making of the final award. Thus, it is not appreciated how Section 42 of the said Act, which deals with the jurisdiction issue in respect of arbitral proceedings, would have any relevance. It does appear that the provisions of the said Code and the said Act have been mixed up."
5.4 With regard to the question as to whether the award is final and binding as a result of a challenge pending before the Malaysian High Court, reliance is placed on Section 48(1)(e) of the Act, which would indicate that a court under Section 48 may refuse a request of a party for enforcement of the award, if the award has not become binding on the parties or has been set aside or suspended by a competent authority of the country in which or under the law in which the award was made. Section 48(1)(e) and Section 48(3) read as under:
Section 48(1)(e) and Section 48(3) in THE ARBITRATION AND CONCILIATION ACT, 1996 (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that--
(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
Section 48 (3) (3) If an application for the setting aside or suspension of the Page 22 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
5.5 Whereas Section 48(1)(e) talks of refusal of enforcement of award under three circumstances namely (I) the award is not final and binding,
(ii) that it has been set aside or suspended, Section 48(3) of the Act only talks about a circumstance when the application for setting aside or suspending is made before the competent court. The area of operation therefore as submitted by Mr. Thakore, learned Senior Advocate are completely different and would not overlap merits acceptance. That the award has become final and binding is also evident on reading Section 36 of the MAA, 2005 which reads as under:
"(1) An award made by an arbitral tribunal pursuant to an arbitration agreement shall be final and binding on the parties and may be relied upon by any party by way of defence, set-off or otherwise in any proceedings in any court..."
6. It would therefore become evident when Section 36 of the MAA is read with Section 37 thereof, that the award though a subject matter of challenge before the Malaysian High Court would become final and binding and may be relied upon by any party in any proceedings in any court.
7. Mr. Trivedi, learned Senior Counsel for the respondent's submission that Section 37 of the MAA is similar to the pre 2015 amendment era in context of Section 36 of the Indian Arbitration Act also Page 23 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT does not merit acceptance in view of a specific provision namely Section 36 of the MAA. Even otherwise the amended Section 36 of the Indian Arbitration Act, also provides that there is no automatic stay of the award on filing section 34 petition. There is no provision similar to the unamended section of the Indian Arbitration Act in the MAA Act. On the contrary, Section 36 of the MAA would make the foreign award in question final and binding and therefore the submission of Mr. Trivedi, learned Senior Advocate for the respondeniont that Section 48(1)(e) of the Act would apply becomes an argument without merit.
8. Under Section 48(3) of the Arbitration Act, if an application for setting aside or suspension of an award has been made to a competent authority referred to in clause (e) of sub-section (1) of Section 48, the court may if it considers proper adjourn the decision on the enforcement of the award. Sub-section (3) of Section 48 further contemplates that the court MAY ALSO on the application of the party claiming enforcement order the party to give suitable security.
9. Considering Section 36 of the MAA when the arbitral award has become final and binding and a challenge to such award is pending before the competent authority, I consider it proper to adjourn the decision on the enforcement of the award for a period upto 22.01.2021 without the respondent party being obliged to give suitable security.
10. Accordingly, Rule returnable on 22.01.2021.
11. By the returnable date, the respondent shall lodge its objections with regard to the enforceability of the award under Section 48(2) of the Act. Of course, it is also open for the respective parties to approach the Page 24 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020 C/IAAP/52/2020 CAV JUDGMENT Malaysian High Court for expeditious hearing of the appeal filed before that court, in accordance with the law concerned.
(BIREN VAISHNAV, J) Divya / DRASHTI K. SHUKLA Page 25 of 25 Downloaded on : Mon Oct 26 23:08:43 IST 2020