Bombay High Court
Open Sea Maritimes Inc. vs R. Pyarelal International Pvt. Ltd. on 10 December, 1998
Equivalent citations: 1999(2)BOMCR158, 1999(2)MHLJ1
ORDER
P.S. Patankar. J.
1. This petition has been filed under the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act of 1996") for enforcing the foreign award dated 25-2-1997 passed in favour of the petitioners.
2. There was Charter agreement entered into between the petitioners and the respondents whereunder the petitioners' Vessel M.V. VINTA was chartered to the respondents for carriage of bagged rice and wheat from Calcutta to Dar-Es-Saleem.
3. Dispute arose between the parties in respect of the said contract. Clause 24 of the charter party provided for reference to Arbitration and the English Law to apply in that event. In spite of the notice to the respondents the respondents failed to appoint the Arbitrator. The petitioners appointed the arbitrator in accordance with Clause 24 of the Charter Party. As the respondents failed to appoint their arbitrator, the Arbitrator appointed by the petitioners acted as Sole Arbitrator in view of section 7(b) of Arbitration Act, 1950. In spite of notices to the respondents, respondents failed to appear before the Arbitrator. On 11-6-1996 the respondents informed the Sole Arbitrator that they objected to the appointment of the Sole Arbitrator because the petitioners have filed a suit in the Bombay High Court. Later on the respondents addressed a fax message dated 4-10-1996 to the Arbitrator for extending the time by one month to enable them to file their defences. The said prayer was granted and the Arbitrator directed the respondents to file their defence before 8-11-1996. The respondents failed to file. Hence the award was made and published by the Arbitrator on 25-2-1997 in the sum of U.S. $ 1,37,109/57 with interest at 8% from 1-7-1996 till date of the Award. Costs of 1200 pounds sterling were also awarded.
4. The enforcement of the said Award is objected by the respondents, first on the ground that there was no proper opportunity given to them to defend. However, the respondents were required to admit that those averments made in the affidavit in reply were not correct and they were unconditionally withdrawn. This was recorded by my order dated 12-11-1998.
5. The enforcement of the said award is objected on the ground that the suit was filed by the petitioners in this High Court on Original Side i.e. Suit No. 1846 of 1996 in May 1996. This was in respect of the same subject matter which was referred for the Arbitration. Notice in respect of the said suit was also given to the Arbitrator. Hence the petitioners could not have proceeded with the arbitration proceedings. It amounted to forum shopping and hence enforcement of the award would be contrary to the public policy of this country. It is violative of section 48(2)(b) of Act of 1996.
6. The learned Counsel for the petitioners submitted that the said suit was not for recovery of the amount. It was for the purpose of securing the award that may be obtained by the petitioners against the respondents in the Arbitration proceedings. It was for security only.
7. In view of the above contention, it is necessary to examine the nature of the suit filed by the petitioners. The learned Counsel for the petitioners invited my attention to the various averments made in the said plaint and particularly paras 10, 13, 16, 18 and 19. It is clear from the averments in the suit that the petitioners have not suppressed about the arbitration proceedings in the plaint and clearly pointed out about reference sought to the arbitration under Clause 24 of the Charter party. It has been mentioned in para 9 that the respondents have failed in appoint their Arbitrator and hence the Sole Arbitrator is required to proceed and they are pursuing the arbitration proceedings in London. In para 10, it was averred that they are entitled to obtain security in respect of the award which is to follow since the repudiation of the claim by the defendants is with a view to delay the entitlement of the petitioners for demurrage. In para 11 again it is repeated that they are entitled, pending the arbitration proceedings in London, to get security in sum of U.S. $ 1,62,000/-. In para 13 it is mentioned that petitioners are entitled to get directions against the respondent to secure and/or furnish security in the sum of U.S. $ 1,62,000/- towards the claim of the petitioners for which the Arbitration proceedings are commenced in London. In para 16, it is stated that by way of security towards the claim in the arbitration proceedings, the respondents are liable to furnish the security. In para 18, it is specifically mentioned "The suit is for a limited purpose of determining security pending the arbitration proceedings between the plaintiffs and the defendants..... The suit is filed for the purpose of security, pending the arbitration proceedings..." In para 19 it is clarified that the suit is strictly for security pending the determination of the issues before the Arbitrator in the Arbitration proceedings between the parties and hence in the suit the petitioners are not seeking any determination of their claims. The averments made in the plaint leave no manner of doubt that the suit is for getting the security from the respondents for the satisfaction of their claims which they were prosecuting in the Arbitration proceedings.
8. The learned Counsel for the respondents submitted that the petitioners have annexed particulars of claim to the plaint. He invited my attention to Rule 43 of the Original Side Rules of this Court. The said Rule says that when the plaintiff claims to recover debt or a liquidated sum of money then there shall be annexed to the plaint particulars of the plaintiff's claim. However, this does not mean merely by annexing particulars of claim were annexed to the plaint, the suit is for recovery of money.
9. The learned Counsel for the respondents next submitted that the suit is valued for Court fees and jurisdiction for U.S. $ 1,62,000/-. Hence it was for recovery of the amount. It is not possible to accept this. Schedule Item 7 of Bombay Court Fees Act, 1959 reads as under :-
7. any other plaint application or petition (including memorandum of appeal) to obtain substantive relief capable of being valued in terms of monetary gain or prevention of monetary loss including cases wherein application or petition is either treated as a plaint or is described as the mode of obtaining the relief as aforesaid.
A fee on the amount of the monetary gain or loss to be prevented according to the scale prescribed under Article I The learned Counsel for the petitioners rightly cited the judgment of this Court reported in 1980 Mah.L. J. page 803 Mohan Meakin Breweries Ltd.
v. Octanic Imports and Exports Corporation and another. It was the case where the plaintiff has sought declaration and injunction restraining the bank from making payment under the Bank Guarantee and also restraining the other defendant from demanding payment from bank under the Bank guarantee. The question arose how the suit is to be valued. It was held that it is to be valued for the entire amount of Bank guarantee considering the provisions of section 6(iv)(j) and Schedule I, Item 7 of the Bombay Court Fees Act, 1959. It was held that this is the loss plaintiff wanted to prevent and the suit was capable of being valued in terms of money. The position is similar here. Therefore, it is not possible to say that the suit was for recovery of the amount.
10. The learned Counsel for the respondents relied upon prayers (a) and (b) of the plaint. In fact prayer (a) mentions that "as and by way of a security towards the plaintiffs' claim in arbitration proceedings between the plaintiffs and the defendants, invoked in pursuance of Clause 24 of the charter party between the plaintiffs and the defendants" Prayer (b) is interim prayer sought directing the respondents to secure and/or furnish security in sum of US $ 1,62,000/- towards the satisfaction of the plaintiffs' claim during the pendency of the suit therefore it is not possible to hold that the suit was for recovery of amount of US $ 1,62,000/-. In fact considering the above position, it is not necessary to consider the question regarding public policy. However I shall note certain aspects in this respect and about enforcement of foreign award.
11. In Renusagar Power Co. Ltd. v. General Electric Co., it was observed :
Para 52. In Louchs v. Standard Oil Co. of New York, 1918(224) NY 99 Cordozo, J., has said :
"...The Courts are not free to refuse to enforce a foreign right at the pleasure of the Judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep rooted tradition of the common weal"
para 54. "The cases in which the English courts refuse to enforce a foreign acquired right on the ground that its enforcement would affect some moral principle the maintenance and which admits of no possible compromise have been classified as under :
i) Where the fundamental confectionery English Justice are disregarded.
ii) Where the English confectionery morality are infringed.
iii) Where a transaction prejudices the interests of the United Kingdom or its good relations with foreign powers.
iv) Where a foreign law or status offence the English conceptions of human liberty and freedom of action."
"65. This would imply that the defence of public policy which is permissible under section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that under Article 1(c) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which is sought to be relied upon. To the same effect is the provision in section 7(1) of the Protocol and Convention Act of 1937 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression "public policy" covers the field not covered by the words "and the law of India' which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. Finally the Apex Court held that applying the criteria it must be held that the enforcement of the foreign award would be replaced on the ground that it is contrary to the public policy, if such enforcement would be contrary to policy of India law or the interest of India or justice or morality."
12. The Apex Court considered the provisions of Foreign Awards, (Recognition and Enforcement) Act in Brace Transport Corporation of Monrovia Bermuda v. Orient Middle East Lines Ltd. Saudia Arabia and others. The Apex Court in para 13 relied upon the observations from the book written by Redfern and Hunter "In the Law and Practice of International Commercial Arbitration" and approved them which are as under :
"A party seeking to enforce an award in an international commercial arbitration may have a choice of country in which to do so, as it is sometimes expressed, the party may be able to go forum shopping. This depends upon the location of the assets of the losing party. Since the purpose of enforcement proceedings is to try to ensure compliance with an award by the legal attachment or seizure of the defaulting party's assets. Legal proceedings of some kind are necessary to obtain title to the assets seized or their proceeds of sale. These legal proceedings must be taken in the State or States in which the property or other assets of the losing party are located."
13. Similarly the Division Bench of this Court in the case of Renusagar Power Company v. General Electric Company, has considered the effect of sections 34 and 35 of Arbitration Act, 1940 and section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. In the said case the Arbitration award was made during the pendency of the suit before the Civil Court at Mirajapur which covered substantially the same matters which were referred to the Arbitration. The Arbitration award was passed before the Apex Court passed the order staying the suit before the Mirajapur Court. It was contended on behalf of the appellant that the award pronounced was a nullity. It was contended that as a suit was pending the Arbitrator had become functus officio.
This was negatived by the Division Bench. The Division Bench also quoted with approval the observation made by the Division Bench of the Calcutta High Court Mury Exportation v. D. Khaitan and Sons Ltd. They were:
"Secondly, there is no provision in the Foreign Awards (Recognition and Enforcement) Act, 1961 which renders a foreign award made by a foreign tribunal during the pendency of a legal proceeding (on the same subject matter) in a local Court invalid. The appellants say that the principle of section 35 of the Arbitration Act, 1940 should be extended by analogy to the Foreign Awards (Recognition and Enforcement) Act for invalidating such an arbitration. But the Scheme of the Foreign Sic Awards Arbitration (Recognition and Enforcement) Act is quite different from that of the Arbitration Act. Sections 34 and 35 of the Arbitration Act are designed to avoid a conflict between a local Court and a local private tribunal. The latter gives way to the former. In cases such as the present, the conflict is between a local Court and a foreign private tribunal which is beyond the jurisdiction of the local Court. A local Court may face difficulties in superseding a foreign tribunal. The principles of the Arbitration Act cannot, therefore be easily applied to foreign arbitrations."
14. Therefore there is no substance in this contention that there was violation of public policy or because of the suit filed the passing of the award was illegal and hence the award was not enforceable.
15. It is also necessary to note that petitioners have withdrawn the said suit on 3-11-1998 with the consent of respondents.
16. The learned Counsel for the respondents submitted that because of the filing of the suit, the petitioners have abandoned the agreement as they have given wrong signal to the respondents. It is first to be noted that in the plaint it was specifically averred, as pointed out above, that the proceedings before the Sole Arbitrator were to go on and the respondents have failed to nominate their Arbitrator. It is also mentioned that the suit was for getting the security. It is clear that the respondents are having assets in India and hence for getting security the suit was required to be filed in this Court. The copy of the plaint was with the respondents and by no stretch of imagination it can be said the petitioners have abandoned the agreement. In addition, it is necessary to note the conduct of the respondents. The respondents received the copy of the letter which was sent by the petitioners to the Arbitrator. It was pointed out specifically that the respondents have failed to nominate the Arbitrator in accordance with section 7(b) of the Arbitration Act, 1940 and hence he was to act as a Sole Arbitrator. The Sole Arbitrator sent a notice to the respondents and the respondents sent a fax message dated 4-10-1996 and replied to the notice given by the Arbitrator calling upon the respondents to file the defence. By the said fax message they prayed for extension of further one month's time. The arbitrator on 10-10-1996 sent letter to respondents giving a last chance to them to file the defences upto 8-11-1996. Still there was no reply from the respondents. This makes it clear that there was no abandonment of the agreement and the arbitration proceedings were prosecuted.
17. The learned Counsel for the respondents next submitted that formation of Arbitral Tribunal was not legal. He relied upon section 11(6)(a) of the Act of 1996, which reads as under :
"11. Appointment of arbitrators -
(6) Where, under an appointment procedure agreed upon by the parties.
(a) a party fails to act as required under that procedure.
... a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment."
It is submitted that this procedure ought to have been followed on the failure of the respondents to nominate their arbitrator.
First in my opinion, this has no application. The Arbitral Tribunal was constituted in view of the provisions of Arbitration Act, 1950 governing English Arbitration. Section 7(b) in that respect is clear. The said section reads as under :--
7. Where an arbitration agreement provides that the reference shall be to two arbitrators, one to be appointed by each party, then, unless a contrary intention is expressed therein.
(b) if, on such a reference, one party fails to appoint an arbitrator, either originally, or by way of substitution as aforesaid, for seven clear days after the other party, having appointed his arbitrator, has served the party making default with notice to make the appointment, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference and his award shall be binding on both parties as if he had been appointed by consent."
It makes clear that if a parry fails to appoint an arbitrator even after the notice then the Arbitrator appointed by another party shall act as a Sole Arbitrator and pass the award. Precisely this has been done in the present case. Further clause 24 of the agreement between the parties provides that if the other party fails to appoint an Arbitrator in spite of the notice, the Arbitrator appointed shall be entitled to act as a Sole Arbitrator. Therefore such procedure was agreed between the parties and it cannot be said that the formation of the Arbitral Tribunal was not legal. Hence I reject this contention.
18. Considering the provisions contained in section 31(7)(b) it is necessary to give directions regarding interest from the date of the decree till payment i.e. from the date of the award till payment.
19. Original Award is already filed in this Court.
20. Hence I pass the following order :
The Award dated 25-2-1997 at Exh. B to the petition to be treated as a decree.
The petitioners shall also be entitled to get the amount as per the said award in terms of Indian rupees calculated at exchange rate of to-day. The petitioner shall also be entitled to get interest at 8% p.a. from the date of the award till payment on the principal amount awarded. As the petitioners are a foreign party, the respondents to deposit the decreetal amount in rupees in this Court within 12 weeks from today. The Advocate for the petitioners shall be at liberty to withdraw the said amount and remit it to petitioners after obtaining permission from the Reserve Bank of India.
Certified copy expedited.