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Judgment
The petitioner in this case has filed the instant application under Sections 44 to 49 of the Arbitration and Conciliation Act, 1996 for enforcement of the foreign award dated 26.08.2022 passed by the sole Arbitrator J. Hawkins in Arbitration Case No.18-634 of GAFTA.
Facts of the case:
The petitioner (Robert Mosher Transport Inc.) is a Company incorporated under the laws of Canada having its registered Office at 1706, Route 255, Noyan Quebec, Canada. The petitioner Company is primarily involved in the business of International Grain Trading and Marketing.
The respondent (Shri Mittal Agritech Private Limited) is a Company incorporated under the provisions of the Companies Act. It is indulged in the business of domestic and international grain trading and marketing as well as real estate development. Its registered office is situated at 211, Milinda Manor, RNT Marg, Indore.
The petitioner and the respondent entered into contract of sale dated 29.01.2021, which was executed between the parties electronically. As per the terms of the contract, the respondent agreed to sell and deliver to the petitioner organic soybean meal (feed grade) in quantity of 2,000 metric tonnes (+/- 5%) at a price of USD 718 per metric tonne.
In terms of Article 3 of the contract, the goods were to be shipped from Mundra Port, Gujarat or any other Indian port to Montreal Port, Canada. The delivery was to be effected between February 2021 and June 2021.
The aforesaid contract contains arbitration clause under Article 9 providing that in case of any dispute between the parties, the same shall first be tried to be settled through friendly negotiations, failing which such dispute shall be referred to arbitration in accordance with GAFTA Arbitration Rules No.125.
Pertinently, the body under which arbitration was conducted GAFTA (Grain and Feed Trade Association) is an organization registered in England and Wales as company limited by guarantee under Company No.1006456. GAFTA has framed Arbitration Rules No.125, which provide mechanism for dispute resolution through the appointment of Arbitrators for adjudication of disputes. GAFTA is situated at 9 Lincoln's Inn Fields, London WC2A 3BP. The contract, in Article 9 clearly provides agreement of the parties for reference to GAFTA for arbitration in case of any dispute. None of the parties disputed that present award would come under New York Convention thus part II of the Arbitration and Conciliation Act, 1996 will apply.
The respondent failed to commence shipment of the goods in terms of the stipulations made in the contract. On inquiry by the petitioner, the respondent vide its e-mail dated 24.03.2021 informed that it was not avoiding the performance of the contract or shipment but was facing difficulties due to the prevailing situation in India. It was further stated that it planned to start shipping of cargo in May, 2021 and would complete delivery by September 2021. In addition, the respondent suggested further business transactions for the period from June 2021 to November 2021.
On 12.05.2021, the respondent reiterated its plans to ship organic soy meal starting from July 2021 at the rate of 10 freight containers with ongoing updates to the petitioner. Again, on 08.09.2021, the respondent informed the petitioner about issues at the port and proposed substituting the contract quantity of 2,000 metric tonnes of organic soybean meal with 4,000 metric tonnes of organic soybeans to be shipped in bulk vessel in November 2021. The respondent also offered discount of USD 50 per metric tonne or the most competitive prevailing market price.
Despite these repeated assurances, the respondent failed to initiate the process of delivery of goods. Consequently, the petitioner, vide e-mail dated 31.01.2022, raised commercial claim and issued notice of default to the respondent, calling upon it to pay damages within seven days.
In the said e-mail, it was further stated that, in case of failure to make payment, the petitioner would initiate arbitration before GAFTA. The respondent replied to the aforesaid e-mail vide its e-mail dated 01.02.2022, once again expressing its desire to continue business with the petitioner and reiterating that adverse market and shipping conditions caused the failure to deliver the goods. The respondent further assured that it would commence shipment of organic soybeans and requested the petitioner’s cooperation.
Despite repeated assurances, the respondent failed to deliver the goods in terms of the contract. Consequently, the petitioner invoked the arbitration clause under Article 9 of the agreement, thereby requesting the appointment of sole Arbitrator in accordance with GAFTA Arbitration Rules No. 125. Notice dated 21.02.2022 was sent to the respondent seeking its concurrence for the appointment of sole Arbitrator and enclosing the claim to be filed before the arbitral Tribunal.
After submission of documents and invocation of arbitration, petitioner issued formal notice dated 23.02.2022 to the respondent in terms of Article 3.1 of GAFTA procedure for the appointment of sole arbitrator, informing it of the claim filed by the petitioner. Petitioner also sought the respondent’s consent for the appointment of sole Arbitrator.
The respondent, vide its e-mail dated 24.02.2022, though replied to the petitioner stating that it was still willing to continue business and maintain relations with the petitioner; however, it failed to furnish the information/consent, required by GAFTA, for appointment of the Arbitrator. The respondent also failed to raise any objection to the arbitration proceedings.
Disputed facts:
The facts narrated under this heading are disputed by the respondent in its objections.
In the absence of any objection from the respondent, GAFTA vide e-mail dated 18.03.2022 informed both parties of the appointment of Ms.Julie Hawkins as the sole Arbitrator.
On appointment of the Arbitrator, the petitioner filed its claims before GAFTA Board for damages suffered on account of breach of account against three entities namely Shrinath Corporation, Organic World Private Limited and Shri Mittal Agritech Private Limited (present respondent). The present application for enforcement is only with respect to Shri Mittal Agritech Private Limited.
As stated above, the petitioner submitted its claim before the GAFTA Board on 21.02.2022, claiming damages totalling to USD 1,938,000/- (equivalent to INR 16,10,29,389/- as on 18.08.2023).
The calculation made by the petitioner was on the basis of spot market price quoted by independent third-party supplier of organic grains dated 21.01.2022, along with certain professional fees and internal costs incurred. The petitioner also proposed an alternate claim amount of USD 2,266,000/- (equivalent to INR 18,82,83,073/-) based on the mid-point of three U.S. market prices published by the independent industry recognised source, the Jacobsen.
Both of the above alternative claims included interest on damages, compounded on monthly basis and were supported by relevant documentary evidence.
Despite service of the e-mail dated 23.02.2022 on the respondent, informing it of the filing of the claim and its reply dated 24.02.2022, the respondent did not choose to appear and participate in the arbitration proceedings. The GAFTA Board vide e-mail dated 22.03.2022 granted period of 28 days to the respondent to submit its defence submissions to the claims raised by the petitioner and further granted period of 21 days to the petitioner to file its reply to the respondent's defence.
Since the respondent failed to file its defence, order dated 29.04.2022 was passed recording that despite service, the respondent had not submitted its defence. However, the respondent was granted further time to file the same on or before 30.05.2022. E-mail was also issued on 23.05.2022 directing the respondent to file its submissions along with supporting documents. It was stated in the email that in absence of the defence statement, the arbitral Tribunal would close the proceedings and proceed to pass award based on the submissions and documents filed by the petitioner / claimant.
As the respondent still failed to file its defence, the Tribunal granted final opportunity of seven days vide email dated 06.06.2022 for filing its submissions and documents. The tribunal thereafter further extended the opportunity, directing the respondent to submit its defence by 04.07.2022. Despite repeated opportunities, the respondent failed to file any submissions before the arbitral Tribunal. Consequently, vide e-mail dated 14.07.2022, the Tribunal recorded that since the respondent has failed to file any response, the proceedings are closed and the Tribunal shall proceed to draft the award on the basis of the material available on record.
Accordingly, on 26.08.2022 the arbitral Tribunal passed the award, enforcement of which has been sought by the petitioner.
The Tribunal in its award found that the respondent had breached the express terms of the contract, resulting in loss to the petitioner. Thus, it awarded damages to the tune of USD 1,764,000/- along with interest at the rate of 2% per annum compounded quarterly from 15.01.2022 until the date of payment. Additionally, the expenses of the proceedings were also imposed upon the respondent.
The petitioner vide notice dated 20.01.2023, called upon the respondent to pay the amount awarded by the Arbitral Tribunal along with legal costs. In addition, the GAFTA Board sent two separate e-mails dated 26.01.2023 and 16.02.2023 informing the respondent of its liability to pay the awarded amount. However, the respondent failed to comply with the award, hence, the present application for enforcement has been filed.
Objections under Section 48 by the Respondent:
This Court issued notices to the respondent 20.08.2024. After service of notice upon the respondent, objections have been filed vide Document No.8476 of 2024. The respondent under Section 48 of the Arbitration and Conciliation Act, 1996, has raised several objections to the enforceability of the foreign award, the main objection of the respondent is that the award is not executable as it is against the public policy of India. It is stated to be in contravention of the fundamental policy of Indian laws and in conflict with the most basic notions of morality and justice. The respondent has raised these objections based on various grounds, which are as under:
(i) Force majeure as APEDA Certificate was not available:
The respondent has admitted the execution of the contract dated 29.01.2021 between the petitioner and the respondent and the fact that under the said contract, the goods were to be supplied as mentioned therein. It is further stated that the agreement was signed by the authorised signatory of the respondent Mr. Dhirendra Shrivastava.
The respondent states that as per Article 4 of the agreement, scanned copies of the documents were to be sent ten days before the shipping upon which 100% payment for the goods was to be made by the petitioner / claimant. According to the said Article 4, the most important document was the certificate, to be issued by the APEDA approved certifying body.
The respondent has further stated in its objections that immediately after execution of the agreement, it made preparations for shipment of the goods by making various purchases and speeding up the production of organic soybean oil. However, when these preparations were put in motion, the country witnessed insurmountable crash in business activities due to the onset of the second wave of COVID-19 Pandemic. The business activities relating to organic soybean production, procurement and distribution came to complete standstill and area wise lockdowns put into place.
In such circumstances, the respondent through its official signatory Mr. Dhirendra Shrivastava informed the claimant about the situation and its inability to export organic soybean. The respondent vide its e-mail dated 24.03.2021 also informed the claimant that the Agricultural and Processed Food Products Export Development Authority (APEDA) was getting stricter with respect to certifying bodies responsible for granting transaction certificates for organic export goods.
It is stated in the objections that the petitioner / claimant was further informed through e-mail that supply would be started once the situation eased by September 2021.
When the situation of the COVID-19 Pandemic in India began to ease, the respondent in May 2021 made attempts to obtain the transaction certificate from certifying body namely Vedic Organic which is the custodian of the export account of the respondent. However, it was informed that the said Vedic Organic had been placed under ban by APEDA due to regulatory violations.
In such circumstances, multiple communications ensued between the petitioner and the respondent wherein the respondent reiterated its assurance to deliver the goods in accordance with the agreement, while simultaneously bringing to the petitioner's attention about the prevailing situation in India including the fact that ban had been imposed on the certifying body responsible for issuing transaction certificates.
It is further stated in the objections that during the months of September-October, when COVID-19 induced, restrictions were still prevailing in India, the respondent made all necessary arrangements to supply the goods as per agreement. At that time, the decision of APEDA was made public for the first time to the effect that Vedic Organic, the certifying body, had been banned by NAB for not adhering to APEDA norms. As per the respondent, its entire export business of organic goods was being conducted through the said certifying body.
In these circumstances, the respondent was not able to do any export transactions of organic goods to buyers outside India.
Apart from this, it has also been stated that the award is not enforceable for the reason that in view of the above-said circumstances, performance of the contract had become impossible and was excused due to force majeure.
It is further submitted that, in view of the settled position of law as rendered by the Hon'ble Apex Court in the case of Delhi Development Authority vs Kennith Builders reported in AIR 2016 SC 3026 as well as National Agricultural Cooperative Marketing Federation of India vs. Alimenta S.A. reported in (2020) 19 SCC 260 , the award is not liable to be enforced.
Damages are not claimed on actual loss:
The respondent further contents that the arbitral award cannot be enforced on the ground that the damages as calculated by the petitioner are based merely on notional figures and wrongful assumptions, without proof of any actual loss having been suffered by the petitioner.
No concluded contract is in existence:
It is further argued that the sale agreement dated 29.01.2021 executed between the parties is not concluded contract and is merely in the nature of memorandum of understanding.
It provides for delivery of goods without any penalties arising from failure to perform any part of the agreement, therefore, it cannot be enforced for payment of damages.
No notice of Arbitration:
The respondent has stated in its objections that it came to know of the arbitral award and the arbitral proceedings for the first time only upon receipt of notice in the present proceedings on 11.09.2024.
The counsel for the respondent submits that the respondent was not put to notice regarding appointment of the Arbitrator or the arbitral proceedings. It has been stated that Mr. Dhirendra Shrivastava was the authorised person responsible for the day-to-day activities of the respondent and for follow-up to the transactions with the petitioner.
The said person had resigned from his position on 01.01.2022 and was relieved with effect from 01.02.2022. Thus, e-mails sent to Mr.Dhirendra Shrivastava were no longer received by the respondent. It is thus contended that the entire proceedings were conducted behind the back of the respondent, resulting in denial of the opportunity of hearing and hence the foreign award is not enforceable against the respondent.
The Arbitral Tribunal was constituted in breach of clause 3 of GAFTA Arbitration Rules:
The next objection raised is that the award is not enforceable as the composition of the arbitral Tribunal is not in accordance with GAFTA Arbitration Rules No.125. As per Clause 3, disputes are to be heard and determined by Tribunal of three Arbitrators, unless both parties agree to sole Arbitrator. It is contended that in absence of any notice to the respondent, no consent was given for the appointment of sole Arbitrator. Thus, in view of Clause 3 of the GAFTA Rules, the arbitral Tribunal ought to have consisted of three Arbitrators. Thus, it is submitted that the award passed by sole Arbitrator is not enforceable.
Reply by the petitioner:
Responding to the objections of the respondent, the petitioner has filed its rejoinder. With respect to the lack of proper composition of the arbitral Tribunal, it is stated that the said objection goes to the merits of the arbitral award. The award having been passed in London, the seat of arbitration in London, United Kingdom and therefore any challenge to the award ought to have been made before the competent Court in the United Kingdom, as the curial Law of that country is applicable to the arbitral proceedings.
Since the respondent failed to challenge the award in the said country United Kingdom, it is now barred from raising such objections on merits, in view of the principles of transnational issue estoppel.
With respect to service of proper notice, it is stated that it has wrongly been stated in the application that the respondent did not receive notice of the arbitration proceedings.
It is stated in the rejoinder that in fact the default notice and the communication of the commercial claim were sent to the respondent vide e-mail dated 31.01.2022. The claim for arbitration was also served by e-mail dated 31.01.2022. The said e-mails were sent not only to Mr. Dhirendra Shrivastava at dhirendra@mittalagritech.com but also to shrey_m999@yahoo.com and info@mittalagritech.com. Those mails were never bounced back and significantly, the respondent has mentioned them in all of its correspondence. This indicates that these e-mail accounts were operational and under the respondent's control.
The e-mail dated 31.01.2022 was replied to by the respondent vide its e-mail dated 01.02.2022. It is thus clear that the respondent had come to know about filing of the claim for arbitration as early as 31.01.2022. The respondent also responded on 01.02.2022; however, thereafter it deliberately avoided participation in the arbitral proceedings.
It has further been stated that all correspondences between the petitioner and the respondent were done on above-mentioned three 3 e-mail IDs and none of the e-mails were bounced back undelivered, thereby confirming that the respondent was aware about the receipt of said communications.
Apart from this, it is also stated that although the respondent claims in its objections that two email IDs i.e. info@mittalagritech.com and dhirendra@mittalagritech.com, are not functional, however, this assertion is demonstrably false for the reason that the respondent has consistently till date provided on all the relevant documents. These two e-mails for example on Annexure P/2 appended to the present petition, the very same email IDs have been provided. It is not the case of the respondent that any alternative email IDs were ever provided for correspondence.
It is further submitted that the contention of the respondent that Mr. Dhirendra Shrivastava had resigned from his position in January 2022 and was relieved with effect from 01.02.2022 is factually incorrect. The said false statement has been made only to avoid enforcement of the foreign award.
In support of this submission, it is stated that Mr. Dhirendra Shrivastava in relation to another contract, while operating his official e-mail, sent e-mail dated 01.08.2022. In this email he claimed that he has resigned from his position four months back which would mean counting from 1.08.2022 (the date of email), he purportedly resigned in the month of April, 2022 however, the respondent is claiming that he resigned in the month of January, 2022. He submits that in fact the month of January, 2022 is being mentioned only for the reason that from 31.01.2022 the arbitration commenced, to avoid the same this fictitious date is being asserted however, there is complete absence of any concrete material to establish this claim. He further submits that the fact that he sent email from the same ID on 01.08.2022 indicates that although he claims to have allegedly resigned but that is false, as he continued using the said e-mail account on behalf of the company.
It has also been stated that the excuse of Vedic Organisation was banned and thus the export certificate was not available is incorrect as in another transaction, during the same period, the respondent exported organic goods.
Submission of the learned Senior Counsel for the respondent / objector :
Learned senior counsel appearing for the respondent has broadly reiterated the objections mentioned in the reply / objections filed under Section 48 of the Arbitration and Conciliation Act, 1996. In addition, he has argued that the award is not enforceable as it is not properly stamped. According to the learned senior counsel, the arbitral award is required to be duly stamped, which requirement is not fulfilled in the present case.
His second contention is that single application for both enforcement and execution of the foreign award is not maintainable. It is submitted by learned senior counsel for the respondent that only application for enforcement of foreign award can be filed and once the Court holds the award to be enforceable, it attains the status of decree, which must thereafter be executed before the District Court. Accordingly, it is argued that the present application in its current form is not maintainable.
The third submission of the learned counsel is that the case has been registered as arbitration case, whereas it ought to have been registered as MCC. For this reason also, it is contended that the award is not enforceable.
The fourth objection of the learned senior counsel is that neither the award nor the agreement is original or properly certified copy of the original. Thus, the same cannot be accepted in view of the provisions of Section 47 of the Arbitration and Conciliation Act, 1996.
It is further submitted that as per the Rule 3 of the GAFTA Arbitration Rules, notice for appointment of the Arbitrator was required to be served; however, the same was never properly served. It is contended that the e-mail sent to the email ID of Mr. Dhirendra Shrivastava cannot be termed as proper service of notice as he had already resigned in January 2022.
Learned senior counsel further submits that the total contract value was Rs.6 crores, however, the award is for amount of more than Rs.14 crores along with interest which is ex facie illegal.
Learned senior counsel submits that as per Clause 8 of the Agreement, Government certificate was required. However, the regulatory body APEDA suspended the licence of Vedic Organic, which was the agency required to issue the certificate to the respondent.
In absence of the certificate, the respondent was not permitted to export the organic goods. Thus, it is clear case of force majeure and the provisions of Section 56 of the Contract Act will apply.
Learned senior counsel further submits that in so far as the export of goods to some other person is concerned, the food grains involved in the said supply were different, thus, no parallel can be drawn between the two supplies.
He submits that the e-mails of respondent were available to the petitioner and GAFTA, however, they sent e-mails to Mr. Dhirendra Shrivastava.
Lastly, learned senior counsel submits that as per Section 78 of the Contract Act, actual damages must be pleaded and then only they can be awarded. However, in the present case, instead of awarding actual damages, only notional damages have been calculated and awarded, which is not permissible in view of the clear provisions of Section 78 of the Contract Act.
He thus submits that the award is not enforceable and prays for rejection of the application.
In support of his submissions, learned senior counsel has placed reliance on the judgment of the Hon'ble Apex Court in the cases of Messer Griesherim GmbH (now called Air Liquide Deutshland GambH) vs. Goyal MG Gases Pvt. Ltd. reported in (2022) 11 SCC 549.
Submissions by learned counsel for the petitioner:
Learned counsel for the petitioner in reply to the submissions of the learned senior counsel submits that there is no law requiring the filing of two applications i.e. one for enforcement and after decision on the same finding the award enforceable, another for execution by treating it as decree. He submits that it has long been settled by the Hon'ble Apex Court that two separate proceedings are not required for enforcement of foreign award.
Learned counsel for the petitioner submits that it is also settled position of law that foreign awards are not required to be stamped.
As regards the question of certification of award, learned counsel submits that certification by GAFTA as well as notarisation of the award has properly been done and properly certified and notarised copy of the arbitration award has been placed on record. Thus, the objection with respect to the certified copy is not sustainable.
As regards the non-communication of the appointment of Arbitrator and the arbitral proceedings, learned counsel submits that the e-mails appended to the petition as Annexures P-5, P-7 and P-8 shows that they were sent not only to Mr.Dhirendra Shrivastava at dhirendra@mittalagritech.com but also to shrey_m999@yahoo.com and info@mittalagritech.com.
As far as Rule 3 is concerned, learned counsel submits that GAFTA appointed sole Arbitrator and this is pure question on the merits of the award, which cannot be raised in the present proceedings.
Learned counsel for the petitioner further submits that although the learned senior counsel for the respondent has raised several objections, a perusal of the application filed under Section 48 raising objections would show that no objection regarding non-compliance of Rule 3 of the Arbitration Rules of GAFTA, absence of properly certified copy of the award and the frustration of the agreement or force majeure have been raised. In absence of any such plea in the written objections filed under Section 48, the respondent cannot be permitted to raise the same during the course of the arguments.
In support of his submissions, learned counsel for the petitioner has placed reliance on the following judgments of the Hon'ble Apex Court: Fuerst Day Lawson Ltd. vs. Jindal Exports Ltd. reported in (2001) 6 SCC 356, LMJ International Limited vs. Sleepwell Industries Company Limited in (2019) 5 SCC 302 , PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Private Limited reported in (2021) 7 SCC 1 , Django Navigation Ltd. vs. Indo Ferro Metal Private Limited reported in 2018 SCC OnLine Raj 225, Mercator Ltd. vs. Dredging Corporation of India Ltd. Debtor reported in 2024 SCC OnLine Del 3075, Cereales Y. Servicios Agricolas De Burgs S.L. vs. Sethi Agritech Private Limited reported in 2024 SCC OnLine MP 4762 , Gemini Bay Transcriptions Pvt. Ltd. vs. Integrated Sales Services Ltd. reported in (2022) 1 SCC 753 and Las Ground Force Pvt. Ltd. and Another vs. Airports Authority of India and Others reported in 2021 SCC OnLine Del 5063.
Rejoinder submissions by respondent's counsel:
In rejoinder submissions, learned senior counsel for the respondent submits that the Arbitration and Conciliation Act, 1996 relates only to arbitral proceedings and cannot be invoked for the purposes of execution. He submits that execution must be made under the provisions of the Code of Civil Procedure once enforcement of the award is permitted.
He submits that it is only on pronouncement by this Court that the award becomes enforceable; it assumes the status of decree and becomes executable before the competent civil Court.
He further submits that this Court has no original jurisdiction and thus execution cannot be done by this Court.
Learned counsel further submits that there is no process to verify that the e-mails were sent to the other e-mail addresses, apart from the e-mail sent to Mr. Dhirendra Shrivastava.
As regards the issued of raising objections not specifically taken in the applications filed under Section 48, learned counsel submits that legal objections may be raised at any stage of the proceedings and need not be pleaded in writing.
Analysis and conclusions by the Court:
Heard learned counsel for the parties and perused the case file. The objections raised by the respondent against the enforceability of the award are being dealt with in different heads for the sake of clarity.
(i) The present petition has not been filed in accordance with the rules.
It has been contended by the learned senior counsel for the respondent that the present case has been registered as arbitration case. However, as per Chapter 2(1)(b) of the M.P. High Court Rules, only those applications which are filed under Section 11 of the Arbitration and Conciliation Act, 1996 can be registered as arbitration case. Since the present case is not an application under Section 11 of the said Act, it could not have been so registered. Thus on this ground alone, the application deserves to be dismissed.
This Court has noted that initially there was considerable confusion about the registration of cases filed under Section 47 of the Act of 1996 for enforcement of foreign award. Several cases were registered as arbitration case and there was no clarity about the same. Later on, many cases have been re-categorised and registered afresh as MCC.
In the considered view of this Court, it is only a ministerial mistake, which would not entail dismissal of the application. Even if the case would have been registered as MCC it would have come before the same roster bench. The categorisation of the case can be corrected by the Registry at any stage of the proceedings. As such, the objection raised by the respondent is hereby rejected.
(ii) Frustration of the contract due to force majeure :
Learned counsel for the respondent has stressed that due to the COVID-19 Pandemic, a stringent regulatory framework was put in place. The export of organic produce in India is controlled by the Agricultural and Processed Food Products Export Development Authority (APEDA), wherein 'provisional transaction certificates' and transaction certificates are prerequisites for export consignments. The certification ecosystem was suffered several setbacks, including the banning of the certifying agency of the respondent namely Vedic Organic. Thus, in view of the ban imposed on Vedic Organic, which was responsible for issuing certificates to the respondent, the respondent was not able to proceed with exports.
The respondent could not export its material not only to the petitioner but also to any of its clients as the certification chain required for lawful export was disrupted. As such, the sale contract between the parties was hit by force majeure as provided under Article 8 of the said contract and also frustrated.
The petitioner controverting this claim stated that the plea of frustration of contract due to inability to perform ought to have been raised by invoking Clause 8 of the contract before the appropriate forum. However, this remedy was never availed of by the respondent.
A perusal of the e-mail dated 31.01.2022 (Annexure-P/4) shows that the petitioner issued commercial claim and notice of default to the respondent expressing its grievances towards non-compliance with the contract and requesting payment within seven days. It was expressly mentioned in the said notice that failing such payment, the petitioner would be compelled to initiate arbitration proceedings before GAFTA.
The respondent replied to the said notice vide e-mail dated 01.02.2022. A perusal of this reply (Annexure-P/5) shows that no such plea was raised therein. It is for the first time in the present enforcement proceedings of the foreign award that this issue has been raised.
There is another relevant aspect of the matter. The respondent has heavily relied on the ban imposed upon its certifying agency. However, the material fact to be considered is the date on which such ban was imposed. The agreement between the parties was executed on 29.01.2021, whereas the ban on Vedic Organic (VOCA) was imposed by the APEDA, New Delhi on 05.06.2020. By the said order, the accreditation granted to VOCA was terminated w.e.f. 01.05.2020 and it was further stipulated that the accredited certification body would be barred from reapplying for accreditation for a period of two years. The respondent itself has filed this document on record as Annexure-R/3.
The reliance as placed by the learned Senior Counsel on the provisions of section 56 of the Contract Act is misplaced, the said section provides as under:
56.Agreement to do impossible act .—An agreement to do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.
As such, there can be two contingencies, first the act for which the agreement was entered into was impossible on the date of agreement itself or second, it became impossible after execution of the agreement. In the present case, the license of VOCA was terminated w.e.f. 01.05.2020 and the agreement was executed on 29.01.2021, as such on the date of execution of agreement the termination of license of VOCA had already taken place, now it is not the case of the respondent that VOCA is the only agency in India which could have provided the certificate to the respondent. The respondent entered into agreement with petitioner after about 8 months of termination of license of VOCA thus it was the responsibility of the respondent to ensure availability of certifying agency and if needed, get itself affiliated with some other certifying agency before entering into agreement with petitioner but the respondent in a very casual manner entered into agreement with the petitioner and now the defence of impossibility is being raised, which in fact, is not available to it. Also significant is the fact that before entering into the agreement for supply of organic produce, it was for the respondent to ensure that it had arranged all the required wherewithal for performance of the contract. The respondent cannot raise as a defence, an act that occurred before the execution of the agreement particularly when event took place about 8 months before the execution of the contract.
It is thus clear that on the date of execution of the agreement for supply of goods, VOCA had already been banned and its accreditation had been terminated long back on 05.06.2020. Thus, this defence is not available to the respondent at this stage of the proceedings. In any case, such plea ought to have been raised before the arbitral tribunal or at least in response to the notice issued by the petitioner. However, at no stage of the proceedings was any such plea taken by the respondent.
There is yet another aspect of the matter, the respondent, on one hand, submits that it became impossible for it to supply the goods in view of the ban imposed on Vedic Organisation (VOCA). On the other hand, it undisputedly supplied organic produce i.e. certified organic rapeseed meal on 08.06.2021. Thus, it is clear that even after the ban on VOCA w.e.f. 01.05.2020, the respondent continued to supply organic produce by exporting the same to consignee located in Canada.
This clearly shows that the objection raised by the respondent on the ground of force majeure has no substance at all. In any case, this objection ought to have been raised by the respondent during the arbitration proceedings. It cannot be accepted that in each and every case, the COVID-19 Pandemic would automatically apply.
In fact, the respondent seeks to apply force majeure retrospectively in as much as it cites an event that happened before the execution of the agreement under which the supply was to be made, In the considered view of this Court, such plea is not sustainable in the eyes of law.
As regards the judgments relied upon by the learned counsel for the petitioner namely Kennith Builders (supra) and Alimenta S.A. (supra) for applying the theory of force majeure, the facts of those cases are completely different. In those cases, not only were there specific contractual clauses provided for frustration of contract in the case of government imposed ban but such bans were imposed subsequent to the execution of the agreements. In the present case, no such circumstance exists.
As far as the question of COVID-19 Pandemic is concerned, it was for the respondent to explain the relevant circumstances before the arbitral tribunal. However, that is not even the case of the respondent before this Court. The respondent does not claim that it was unable to supply goods due to the COVID-19 Pandemic itself, rather its case is that, owing to the pandemic, the regulatory framework became stringent and the accreditation of VOCA was terminated. However, as already mentioned, such termination occurred prior to the execution of the agreement.
Thus, the respondent cannot derive any benefit from the COVID-19 Pandemic as excuse for not performing of its responsibility under the contract with the petitioner. As such, this objection is also discarded.
(iii) Lack of proper notice of appointment of arbitrator :
It has been contended by the learned senior counsel for the respondent that it was only on receipt of notice of the present proceedings on 11.09.2024 that the respondent became aware about the arbitral proceedings, which according to it, were initiated and concluded by the arbitral tribunal behind its back.
It is further submitted that communication done by the petitioner as well as by the arbitral tribunal including GAFTA were addressed to one Mr. Dhirendra Shrivastava, who was no longer employee of the respondent at the relevant time.
On this basis, it is contended that the entire arbitral proceedings were conducted behind the back of the respondent.
In the considered view of this Court, the objections as raised by the learned senior counsel are not supported by any material on record. On the contrary, the very documents relied upon by the learned senior counsel goes against the respondent.
The petitioner first raised its claim and initiated arbitration by issuing notice dated 31.01.2022 (Annexure-P/4). It is not the case of the respondent that the notice was not received. On the contrary, it replied to the notice on 01.02.2022 (Annexure-P/5), wherein it assured performance and attributed its failure to supply goods to prevailing market conditions and shipping line conditions.
It is thus clear that the respondent was aware of the initiation of arbitration and duly responded to the same. However, based on the purported resignation of Mr. Dhirendra Shrivastava, the respondent now contends that it was not noticed and was denied proper opportunity of hearing .
A perusal of the e-mail dated 31.01.2022, by which the notice invoking arbitration was served, reveals that it was sent not only to Mr.Dhirendra Shrivastava at dhirendra@mittalagritech.com but also to shrey_m999@yahoo.com and info@mittalagritech.com. Thus, the notice was sent to three e-mail IDs belonging to the respondent. And response was also duly given to the said e-mail.
Apart from this, a perusal of Annexure R/5, which is relieving letter purportedly issued on 05.02.2022 to Mr. Dhirendra Shrivastava, provides that his resignation letter dated 01.01.2022 was acknowledged and he was relieved from service w.e.f. 01.02.2022. It is pertinent to note that 01.02.2022 is also the date on which the respondent Company sent its reply to the petitioner's e-mail dated 31.01.2022 invoking arbitration.
Thus, it appears that this date has been taken and relied upon by the respondent to explain that no communication was received thereafter. However, the said relieving letter itself provides at the bottom, above mentioned e-mail addresses, significantly GAFTA as well as the petitioner sent mails to this info@mittalagritech.com also.
As such, it is clear, that the respondent had access to all relevant communications through the said e-mail address. Apart from it, the relieving letter and second (Annexure-R/5) is not reliable at all. The respondent has failed to place on record the alleged resignation letter and there is no dispatch number on the relieving letter. Furthermore, while all other correspondence in the present case were effected through e-mail, this relieving letter is stated to have been sent physically. Thus, there are serious doubts about the genuineness of this claim of the respondent.
In any case, irrespective about the genuineness of Annexure-R/5, once the respondent had come to know about the invocation of arbitration vide e-mail dated 31.01.2022, it was incumbent upon it to respond appropriately. At the very least, the respondent ought to have informed the petitioner that Mr.Dhirendra Shrivastava had resigned and that future communications should be addressed to alternative e-mail address. There is no such plea raised or document placed on record to provide that any such intimation was ever given.
The doubts raised on the genuineness of Annexure-R/5 are further fortified by the fact that the said Mr. Dhirendra Shrivastava in his e-mail dated 01.08.2022 addressed to the petitioner claimed that he had already resigned four months prior, which would place the date of resignation in or around the month of April, 2022 and not January, 2022.
Thus, in any case, the notice of arbitration was sent on 31.01.2022, which was duly communicated to the respondent. Thus, the objection that there was no proper notice of appointment of the arbitrator is not sustainable.
(iv) Composition of arbitral authority not as per GAFTA Rules and no concluded contract:
It has been contended by the learned senior counsel that in absence of proper notice for appointment of arbitrator, there was no valid consent for such appointment. Thus, in terms of the GAFTA Rules, panel of three arbitrators ought to have been appointed. However, in the present case, sole arbitrator was appointed. It is thus submitted that the constitution of the arbitratral tribunal was not in accordance with law.
In the present case, the award was made in London, thus, the curial law of that country would apply. As such, this objection is not tenable in the present proceedings as the same relates to the merits of the case which cannot be seen in these proceedings filed for enforcement of the award.
In the considered view of this Court, the said objection pertains to the merits of the arbitral award and cannot be entertained in view of the clear provisions of Section 48 of the Arbitration and Conciliation Act, 1996. The challenge to the award in terms of Section 48(1)(e) of the Act of 1996, lies before the competent authority of the country under the law of which the award was made.
However, prima facie what can be seen is the fact that e-mail dated 31.01.2022 (Annexure P/4) was sent to the respondent in which consent for arbitration was sought, though the respondent replied to the same but it did not respond to the arbitration, neither consent was given nor objections were raised. Thus, now the same cannot be permitted to be raised in these proceedings.
As far as the issue that the contract (Annexure P-2) is not a concluded contract is concerned, again, this issue goes to the merits of the arbitral award. It was for the arbitral tribunal to consider whether the arbitration clause was invoked pursuant to a concluded contract or whether the document was merely memorandum of understanding, lacking the trappings of a concluded contract.
In proceedings for enforcement of foreign arbitral award, such issue cannot be considered. The arbitral tribunal had already satisfied itself about the existence of arbitration agreement and the binding nature of the contract obliging the parties to perform their respective obligations.
The co-ordinate Bench of this Court in the cases of Cereales Y. Servicios Agricolas De Burgs S.L. vs. Sethi Agritech Private Limited reported in 2024 SCC Online MP 4762 as well as the Hon'ble Apex Court in the case of Gemini Bay Transcriptions Private Limited vs. Integrated Sales Services Limited reported in (2022) 1 SCC 753 have considered this aspect.
As such, in the considered view of this Court, the objection is not tenable and cannot be entertained in proceedings of enforcement of the arbitral award. Thus, the same is therefore rejected.
(v) Damages must be pleaded as per Section 78 of the Contract Act :
Learned senior counsel while raising this objection submits that Section 78 of the Contract Act provides that damages must be pleaded and awarded based on actual loss and that asserting notional damages is not permissible. It is thus contended that the arbitral award is in breach of Indian law and does not sustainable.
This issue also pertains to the merits of the arbitral award. However, even otherwise, a perusal of the manner in which the arbitral tribunal has awarded damages shown that they were calculated on reasonable basis. In cases of this nature, where damages cannot be precisely quantified, pre-estimated sum agreed between the parties is required to be considered as reasonable compensation.
The Hon'ble Apex Court in the case of Gemini Bay Transcriptions Private Limited vs. Integrated Sales Services Limited reported in (2022) 1 SCC 753 considered this aspect and held that where damages are awarded on the basis of fair estimation in absence of any specific evidence or reasonable basis for approximations, such award cannot be refused to be enforced. The Hon'ble Apex Court has held as under:
"77.The arbitrator correctly held that as nothing was forthcoming from any of the appellants, he would have to make a best judgment assessment for damages. In making that assessment, he took into account the commission that was being earned by GBT from the two clients of DMC and arrived at a figure of 100,000 USD per month and then found, on a reasonable estimate, that they would continue to be clients for a period of four years, as a result of which the figure of 6,948,100 USD was reached.
78.That such “guesstimates” are not a stranger to the law of damages in the US and other common law tradition nations has been established very early on in a judgment of Asutosh Mookerjee, J. reported as Frederick Thomas Kingsley v. Secy. of State for India [Frederick Thomas Kingsley v. Secy. of State for India, AIR 1923 Cal 49] . In this judgment, a learned Division Bench of the Calcutta High Court put it thus:
“It may be conceded that though every breach of duty arising out of a contract gives rise to an action for damages, without proof of actual damage, Marzetti v. Williams [Marzetti v. Williams, (1830) 1 B & Ad 415 : 109 ER 842 : 35 RR 329] , Embrey v. Owen [Embrey v. Owen, (1851) 6 Ex 353 : 155 ER 579 : 86 RR 331] , the amount of damages recoverable is, as general rule, governed by the extent of the actual damage sustained in the consequence of the defendant's act, Hiort v. London & North West Railway Co. [Hiort v. London & North West Railway Co., (1879) 4 Exch Div 188] In cases admitting proof of such damage, the amount must be established with reasonable certainty, Commerce, In re [Commerce, In re, (1850) 3 W Rob 286 : 166 ER 969] . But this does not mean that absolute certainty is required, nor in all cases, is there a necessity for direct evidence as to the amount. Damages are not uncertain for the reason that the loss sustained is incapable of proof with the certainty of mathematical demonstration or is to some extent contingent and incapable of precise measurement. As Harlan, J. observed in delivering the judgment of the Supreme Court of the United States in Hetzel v. Baltimore & O.P. Co. [Hetzel v. Baltimore & O.P. Co., 1898 SCC OnLine US SC 12 : 42 L Ed 648 : 169 US 26 (1898)] , US at p. 38 certainty to reasonable extent is necessary, and the meaning of that language is that the loss of damage must be so far removed from speculation or doubt as to create in the minds of intelligent and reasonable men the belief that it is most likely to follow from the breach of the contract and was a probable and direct result thereof. To the same effect is the decision in Morris v. United States [Morris v. United States, 1899 SCC OnLine US SC 105 : 43 L Ed 946 : 174 US 196 (1899)] that where absolute certainty is impossible, judgment of fair men as to damages directly resulting governs.”
79.Significantly, this judgment referred to and relied upon the US Supreme Court judgments to arrive at this conclusion.
80.However, Shri Viswanathan relied upon Agritrade International Pte. Ltd. v. National Agricultural Coop. Mktg. Federation of India Ltd. [Agritrade International Pte. Ltd. v. National Agricultural Coop. Mktg. Federation of India Ltd., 2012 SCC OnLine Del 896] , and para 24 in particular, which states : (SCC OnLine Del)
“24.There is also merit in the submissions made on behalf of Nafed that there was no material produced before the Arbitral Tribunal by Agritrade to show that it had, in fact, suffered any loss as a result of Nafed not opening an L/C for the quantity of 5000 MT of CPO. In its final award dated 14-1-2008, the Arbitral Tribunal merely accepted the default date as 7-10-2004 and proceeded to determine the “close out price” to assess the damage. Unless there was actual proof of loss suffered by Agritrade, awarding of any differential between the contracted price and close out price must also be held to be based on no evidence.”
81.The facts in this case are far removed from the facts in the aforesaid High Court judgment [Agritrade International Pte. Ltd. v. National Agricultural Coop. Mktg. Federation of India Ltd., 2012 SCC OnLine Del 896] . There can be no doubt whatsoever that as a result of the machinations of Upadhyaya and Pathak, as found by the Arbitral Tribunal, ISS was deprived of commission legitimately due to it under the representation agreement. This being so, there can be no doubt that, on facts as proved before the Arbitral Tribunal, actual loss can be said to have been occasioned to ISS.
82.In any case, the damages so awarded in the facts of this case cannot even remotely be said to shock the conscience of this Court so as to clutch at “the basic notion of justice” ground contained in Section 48(2) Explanation 1(iii).
In the present case, the respondent has not even whispered about the incorrectness of the estimation done by the Arbitrator. As such, this objection is also rejected.
(vi) The Certified copy of the award and agreement is not filed :
The learned senior counsel for the respondent submitted that the foreign award has not been certified and the certificate of the notary enclosed with the award provides that it certified the certificate issued by the GAFTA and not the award, thus it is not proper compliance with the provisions of section 47 of the Act of 1996. On perusal of the certificate issued by the notary public of the city of London, England namely Mr. Martin Emil Buchner would show that he certified the certificate annexed with notary's certificate was signed by the proper and competent officer of GAFTA, now the certificate of GAFTA provides that the attached document is a true and correct copy of the award of arbitration No. 18-634 dated 26.08.2022 on the official form of the Grain and Feed Trade Association (GAFTA) made by Ms J Hawkins the Sole Arbitrator duly appointed in a dispute that had arisen between Robert Mosher Transport Inc. and .... Shri Mittal Agritech Pvt. Ltd. with further details about the award.
The requirement in terms of the provisions of Section 47 is that the party applying for the enforcement of a foreign award shall at the time of application produce before the Court original award or a copy thereof duly authenticated in the manner duly required by the law in the country in which it was made. As regards agreement, Section47 provides that original agreement for arbitration or a duly certified copythereof has to be filed. Before adverting to this objection of the respondent,it is to be noted that the respondent has not questioned the correctness of the award or even the agreement. It is not the case of the respondent that the foreign award which is sought to be enforced is not the correct copy or even the agreement which is being relied upon is not the correct agreement. However, the objection is merely with respect to the absence of the original/certified copies. As recorded above, the award would show that it is duly certified.
Learned counsel for the petitioner has referred to Office Memorandum dated 18.11.2020 issued by the Ministry of External Affairs whereby it has been provided that the Hague Apostille Convention, 1961 abolishes the requirement of legalization of foreign document for use in any member country once an apostille certificate (including e-apostille) has been issued by a competent authority of the country where the document originates. It provides that in order to avoid unnecessary hassle caused to general public by demand of further legalization or attestation of an apostille document, this information is being issued that an apostille document should be treated as legalized document in India by all concerned, which is in accordance with the International obligation under the Hague Apostille Convention. It is thus clear that as per the abovesaid memorandum, once adocument is certified in the manner abovestated, no further attestation of an apostille document is needed. The Hon’ble Apex Court has considered this aspect in the case of Lakshmi Kant Pandey (supra) and held in para 5 as under :
“5.We also see that along with the application, Annexure 1-A dated 14-5-2008 has been filed whereby the Ministry of External Affairs has issued directions to its High Commissions and Embassies that as India was a signatory to the Convention with effect from 29.08.2007, the procedure prescribed therein should be followed for authenticating documents. We see absolutely no reason that as to why documents executed under this procedure should not be acceptable to courts in India and taken into evidence for the purpose of adoption.”
The learned counsel for the respondent has also referred to Section 14 of the Notaries Act, 1952 and submitted that reciprocal arrangement for recognition of notarial acts done by foreign notaries are to be made and in the present case, there is no such notification under Section14 by the Central Government with respect to notarial acts in USA.
As India and the United Kingdom are signatories to the Hague Apostille Convention thus, there is reciprocity between the two countries regarding notarial acts of Notaries. This facts is clear from the memorandum of Ministry of External Affairs dated 18.11.2020 itself. Thus, as Section 14 only requires reciprocal arrangements and as in the present case, India and UK being signatories of the Hague Apostille Convention, in the considered view of this Court, the reciprocity as required under Section14 of the Notaries Act, 1952 is very much there. In view of the above analysis and the law as laid down by the Hon’ble Apex Court in the case of Lakshmi Kant Pandey (supra), the objection regarding absence of original award / agreement and inadmissibility of notarised award and agreement is hereby rejected.
(vii) Composite application for enforcement and execution of foreign award :
The issue that whether a composite application for enforceability of foreign arbitral award and its execution can be filed and whether this Court can execute the award, once it is held to be enforceable, despite not exercising ordinary original civil jurisdiction.
In fact, this issue has already been decided by the Hon'ble Apex Court as early as in the year of 2001 in the case of Fuerst Day Lawson Limited vs. Jindal Exports Limited reported in (2001) 6 SCC 356 . The Hon'ble Apex Court held in paras 31 and 32 as under :
"31.Prior to the enforcement of the Act, the law of arbitration in this country was substantially contained in three enactments, namely, (1) the Arbitration Act, 1940, (2) the Arbitration (Protocol and Convention) Act, 1937, and (3) the Foreign Awards (Recognition and Enforcement) Act, 1961. A party holding a foreign award was required to take recourse to these enactments. The Preamble of the Act makes it abundantly clear that it aims at consolidating and amending Indian laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The object of the Act is to minimize supervisory role of the court and to give speedy justice. In this view, the stage of approaching the court for making the award a rule of court as required in the Arbitration Act, 1940 is dispensed with in the present Act. If the argument of the respondent is accepted, one of the objects of the Act will be frustrated and defeated. Under the old Act, after making award and prior to execution, there was a procedure for filing and making an award a rule of court i.e. a decree. Since the object of the Act is to provide speedy and alternative solution to the dispute, the same procedure cannot be insisted upon under the new Act when it is advisedly eliminated. If separate proceedings are to be taken, one for deciding the enforceability of a foreign award and the other thereafter for execution, it would only contribute to protracting the litigation and adding to the sufferings of a litigant in terms of money, time and energy. Avoiding such difficulties is one of the objects of the Act as can be gathered from the scheme of the Act and particularly looking to the provisions contained in Sections 46 to 49 in relation to enforcement of a foreign award. In para 40 of Thyssen [(1999) 9 SCC 334] judgment already extracted above, it is stated that as a matter of fact, there is not much difference between the provisions of the 1961 Act and the Act in the matter of enforcement of foreign award. The only difference as found is that while under the Foreign Awards Act a decree follows, under the new Act the foreign award is already stamped as the decree. Thus, in our view, a party holding a foreign award can apply for enforcement of it but the court before taking further effective steps for the execution of the award has to proceed in accordance with Sections 47 to 49. In one proceeding there may be different stages. In the first stage the court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that the foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award a rule of court/decree again. If the object and purpose can be served in the same proceedings, in our view, there is no need to take two separate proceedings resulting in multiplicity of litigation. It is also clear from the objectives contained in para 4 of the Statement of Objects and Reasons, Sections 47 to 49 and the scheme of the Act that every final arbitral award is to be enforced as if it were a decree of the court. The submission that the execution petition could not be permitted to convert as an application under Section 47 is technical and is of no consequence in the view we have taken. In our opinion, for enforcement of a foreign award there is no need to take separate proceedings, one for deciding the enforceability of the award to make it a rule of the court or decree and the other to take up execution thereafter. In one proceeding, as already stated above, the court enforcing a foreign award can deal with the entire matter. Even otherwise, this procedure does not prejudice a party in the light of what is stated in para 40 of Thyssen [(1999) 9 SCC 334] judgment.
32.Part II of the Act relates to enforcement of certain foreign awards. Chapter 1 of this Part deals with New York Convention awards. Section 46 of the Act speaks as to when a foreign award is binding. Section 47 states as to what evidence the party applying for the enforcement of a foreign award should produce before the court. Section 48 states as to the conditions for enforcement of foreign awards. As per Section 49, if the court is satisfied that a foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court and that court has to proceed further to execute the foreign award as a decree of that court. If the argument advanced on behalf of the respondent is accepted, the very purpose of the Act in regard to speedy and effective execution of foreign award will be defeated. Thus none of the contentions urged on behalf of the respondent merit acceptance so as to uphold the impugned judgment and order. We have no hesitation or impediment in concluding that the impugned judgment and order cannot be sustained."
Again, the same position was reiterated by the Hon'ble Apex Court in the case of LMJ International Limited vs. Sleepwell Industries Company Limited reported in (2019) 5 SCC 302. The Hon'ble Apex Court held in Para 17 as under :-
"17.Be that as it may, the grounds urged by the petitioner in the earlier round regarding the maintainability of the execution case could not have been considered in isolation and dehors the issue of enforceability of the subject foreign awards. For, the same was intrinsically linked to the question of enforceability of the subject foreign awards. In any case, all contentions available to the petitioner in that regard could and ought to have been raised specifically and, if raised, could have been examined by the Court at that stage itself. We are of the considered opinion that the scheme of Section 48 of the Act does not envisage piecemeal consideration of the issue of maintainability of the execution case concerning the foreign awards, in the first place; and then the issue of enforceability thereof. Whereas, keeping in mind the legislative intent of speedy disposal of arbitration proceedings and limited interference by the courts, the Court is expected to consider both these aspects simultaneously at the threshold. Taking any other view would result in encouraging successive and multiple round of proceedings for the execution of foreign awards. We cannot countenance such a situation keeping in mind the avowed object of the Arbitration and Conciliation Act, 1996, in particular, while dealing with the enforcement of foreign awards. For, the scope of interference has been consciously constricted by the legislature in relation to the execution of foreign awards. Therefore, the subject application filed by the petitioner deserves to be rejected, being barred by constructive res judicata, as has been justly observed by the High Court in the impugned judgment."
In view of the above, it is clear that there is no need to take separate proceedings : one for deciding the enforceability of the foreign award another for its execution thereafter. These judgments of the Hon'ble Apex Court not only clarify the composite proceeding can be filed but also makes it axiomatic that it is for this Court to execute the foreign award.
Apart from above, Section 49 of the Act of 1996 provides that where the Court is satisfied that the foreign award is enforceable, the award shall be deemed to be decree of that Court. Further, as per Section 2(1)(e)(ii) of the Act in the case of International Commercial Arbitration, the "Court" means the High Court having jurisdiction to hear appeals from decrees of court subordinate to it. As such, when Section 49 provides that the award shall be deemed to be decree of 'that Court', the expression 'that Court' means the High Court. Thus, it is decree of the High Court itself which is to be executed by the High Court in accordance with the scheme of Sections 47, 48, and 49 of the Arbitration and Conciliation Act, 1996.
(viii) The award is not properly stamped :
This issue has already been decided by the Hon'ble Apex Court in several of its judgments. For example in the case of Shriram EPC Ltd. vs. Rioglass Solar S.A. (2018) 18 SCC 313 , the Court has held in unequivocal terms that foreign award does not require stamp duty. The Hon'ble Apex Court has held as under:
"26.It will thus be seen that “award” under Item 12 of Schedule I to the Indian Stamp Act, 1899 has remained unchanged till date. As has been held by us hereinabove, in 1899, this “award” would refer only to a decision in writing by an arbitrator or umpire in a reference not made by an order of the Court in the course of a suit. This would apply only to such award made at the time in British India, and today, after the amendment of Section 1(2) of the Indian Stamp Act, 1899 by Act 43 of 1955, to awards made in the whole of India except the State of Jammu and Kashmir. This being the case, we are of the view that the expression “award” has never included a foreign award from the very inception till date. Consequently, a foreign award not being includible in Schedule I to the Indian Stamp Act, 1899, is not liable for stamp duty. Shri Viswanathan also relied upon the Tamil Nadu Amendment of the Indian Stamp Act, 1899. The Tamil Nadu Amendment contains the identical definition of “award” as given in Item 12 thereof. The only difference is in the figures contained for stamp duty. Consequently, this does not take the matter very much further.
27.Shri Viswanathan then argued, based on Senior Electric Inspector v. Laxminarayan Chopra [Senior Electric Inspector v. Laxminarayan Chopra, (1962) 3 SCR 146 : AIR 1962 SC 159] , that an Act must be construed as on date, despite the fact that the definition contained in an old Act may not literally fit the bill. We are afraid that this judgment is wholly distinguishable in that, in the aforesaid case, the definition of “telegraph line” in the Indian Telegraph Act, 1885, was construed as being wide enough to include electric lines used for the purpose of wireless telegraph. This Court held that in a modern progressive society, it would be unreasonable to confine the intention of the legislature to the meaning attributable to a word used at the time the law was made, and, unless a contrary intention appeared, an interpretation should be given to the words used in the statute to take in new facts and situations, if such words are capable of comprehending them. As stated hereinabove, this judgment is wholly distinguishable in that, given the factual scenario of 1899, and the fact that foreign awards existed even then, in Princely States as well as foreign countries, no new fact situation has arisen subsequently in order to apply the ratio of the said judgment. Further, we must not forget that the Indian Stamp Act, 1899 is a fiscal statute which must be construed literally. Any ambiguity in the said statute would enure to the benefit of the assessee who has to pay stamp duty. This being the case, Shri Viswanathan's argument based on the aforesaid judgment, must be rejected.
28.We now come to some of the judgments referred to by counsel for the parties. The Punjab and Haryana High Court judgment [Gujrals Co. v. M.A. Morris, 1961 SCC OnLine P&H 179 : AIR 1962 P&H 167] , strongly relied upon by Shri Viswanathan, referred to and relied upon Section 3(c) of the Indian Stamp Act, 1899, and held that an instrument mentioned in the Schedule which is executed out of India, being a foreign award, would relate to a matter or thing done or not to be done in India, and that, therefore, stamp duty would be payable on such an award. It is important to note that this judgment does not refer to the definition of “award” in Item 12 of Schedule I at all. For this reason alone, this judgment cannot take us very much further, as it is clear that a foreign award, as has been held by us, is not contained within the expression “award” in Item 12 of Schedule I and is, therefore, not an “instrument” which is taxable under Section 3(c) of the Indian Stamp Act, 1899.
29.The Delhi High Court judgment [Naval Gent Maritime Ltd. v. Shivanath Rai Harnarain (India) Ltd., 2009 SCC OnLine Del 2961 : (2009) 163 DLT 391] , strongly relied upon by the learned counsel appearing on behalf of the respondent, also does not take us very much further. As has been rightly pointed out by Shri Viswanathan, the said judgment refers to the definition of “foreign award” contained in the 1996 Act, but then goes on to rely upon a Supreme Court judgment, stating that such foreign award would not require registration as it can be enforced as a decree. It further went on to rely upon the Supreme Court judgment in M. Anasuya Devi v. M. Manik Reddy [M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565] , to state that the Court, while deciding enforceability of a foreign award under Sections 47 and 48, cannot hold the award non-enforceable on the ground of it being unstamped. This also, strictly speaking, is incorrect, as M. Anasuya [M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565] merely stated, in the context of a domestic award, that the question as to whether an award is required to be stamped would be relevant only at the enforcement stage under Section 36 of the 1996 Act and not at the stage of challenge, which is governed by Section 34 of the 1996 Act. We cannot forget that there is no challenge stage so far as a foreign award is concerned — so long as none of the grounds in Section 48 are attracted, the award becomes enforceable as a decree. The stage of enforceability, therefore, has arisen in these cases, and it cannot be said that the ratio of M. Anasuya [M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565] would apply so that stamp duty would become payable only at some subsequent stage. This judgment is equally incorrect in stating that Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356] , would apply. One sentence in Fuerst Day Lawson Ltd.[Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356] reads: (SCC p. 371, para 31)
“[T]he only difference as found is that while under the Foreign Awards Act a decree follows, under the new Act, the foreign award is already stamped as the decree.”
This sentence does not lead to the conclusion, following the judgment in Thyssen Stahlunion GmbH v. SAIL [Thyssen Stahlunion GmbH v. SAIL, (1999) 9 SCC 334] , that under the 1996 Act, a foreign award is considered to be stamped already. All that this sentence means is that the foreign award is to be regarded as a decree. The expression “stamped” means “regarded”. This judgment also does not carry us much further.
On the other hand, the Madhya Pradesh High Court judgment [Narayan Trading Co. v. Abcom Trading (P) Ltd., 2012 SCC OnLine MP 8645 : (2013) 2 MP LJ 252] hits nearer home. This judgment, in para 12 thereof, states why foreign awards do not have to suffer stamp duty in the following terms: (SCC OnLine MP)
“12.The law on Arbitration in India was substantially contained in three enactments, namely, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. It was widely felt the 1940 Act, which contains the general law of arbitration, has become outdated. The Arbitration and Conciliation Act, 1996 came into force to consolidate and amend the law relating to domestic arbitrations, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, commission on international trade in short (Uncitral) Model Law and Rules. Apart from other object, the object of the Act is to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court. While the Arbitration and Conciliation Act, 1996 was enforced, no amendment was made in the definition of award given in the Indian Stamp Act. Similarly, the Schedule which lays down the stamp duty payable on award was not amended by including the foreign award. It appears that lawmakers while enforcing the Arbitration and Conciliation Act, 1996 were of the view that foreign award shall be enforceable as if it were a decree of the Court; no amendment was brought either in the definition of award or in the Schedule relating to payment of stamp duty on award. Since the definition of award given at Entry 11 of the Schedule of the Stamp Act does not cover the foreign award and one of the objects to enforce the new Act was to enforce final award as if it was a decree and keeping in view the law laid down by the Hon'ble Apex Court in Fuerst Day Lawson Ltd. [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356] , wherein the Hon'ble Supreme Court has held that under the new Act the foreign award is already stamped as decree, this Court is of the view that the petition filed by the petitioner has no merits and deserves to be dismissed. In view of this, the petition filed by the petitioner is disposed of holding that foreign award is already stamped and is enforceable as decree.”
The reasoning contained in para 12 has our approval, short of the reasoning contained following Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356] which, as we have already stated above, did not indicate that foreign awards can never suffer stamp duty.
The other judgment heavily relied upon by Shri Viswanathan, namely, Gujarat High Court judgment [Orient Middle East Lines Ltd. v. Brace Transport Corpn. of Monrovia, 1985 SCC OnLine Guj 59 : AIR 1986 Guj 62] , merely refers to Article III of the New York Convention to state that so far as procedural aspects relatable to foreign awards are concerned, we must go by the Code of Civil Procedure, and going by the Code of Civil Procedure, the Court at Bhavnagar would have no jurisdiction to enforce the foreign award in the facts of that case. Since Article III of the New York Convention is strongly relied upon by Shri Viswanathan, we need to set it out. It states:
“Article III Each Contracting State shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”
There is no doubt whatsoever that if stamp duties are leviable in India on foreign awards, the imposition should not be substantially more onerous than the stamp duty that is imposed on recognition or enforcement of domestic arbitral awards. For the said Article to apply, stamp duty must first be leviable on a foreign award, which, as we have held earlier in this judgment, is not the case. Equally, reliance upon the 194th Law Commission of India Report, insofar as stamp duty on domestic awards is concerned, would again have little bearing, given our finding that under the present state of the law, foreign awards are not liable to stamp duty under the Indian Stamp Act, 1899.
An argument was made by the learned counsel for the respondent that Section 47 of the Act requires three things and only three things to be produced before the Court for enforcement of a foreign award, and that therefore, stamp duty not being one of the three things required, cannot ever be levied. We are afraid that this again is an extreme argument. All that Section 47 deals with is production before the Court of proof of the fact that a foreign award is sought to be enforced. In no manner does Section 47 interdict the payment of stamp duty if it is otherwise payable in law. This argument must thus be rejected. Equally, the argument that under Section 48(2)(b), even if stamp duty is payable on a foreign award, it would not be contrary to the public policy of India, must be rejected. The fundamental policy of Indian law, as has been held in Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , and followed in Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , makes it clear that if a statute like the Foreign Exchange Regulation Act, 1973 dealing with the economy of the country is concerned, it would certainly come within the expression “fundamental policy of Indian law”. The Indian Stamp Act, 1899, being a fiscal statute levying stamp duty on instruments, is also an Act which deals with the economy of India, and would, on a parity of reasoning, be an Act reflecting the fundamental policy of Indian law. This argument on behalf of the respondent must also, therefore, be rejected.
We, therefore, hold that the learned Single Judge of the Madras High Court is correct, and the fact that a foreign award has not borne stamp duty under the Indian Stamp Act, 1899 would not render it unenforceable for the reasons given in our judgment. The appeal accordingly stands dismissed.
In view of the above pronouncement of law by the Hon'ble Apex Court, this objection is also overruled.
Learned counsel for the respondent lastly placed reliance on the judgment of Messer Griesherim GmbH (now called Air Liquide Deutshland GambH) vs. Goyal MG Gases Pvt. Ltd. reported in (2022) 11 SCC 549 . It is submitted that the decision in the said case squarely covers the issue involved in the present case.
However, a close scrutiny of the said judgment shows that the same was passed in completely different set of facts.
In the said case, share purchase and cooperation agreement was executed between the parties, pursuant to which certain disputes arose. The appellant in that case, instituted proceedings before the English Court seeking recovery of amounts paid under guarantee. The respondent did not enter appearance and consequently, the English Court passed default judgment directing payment of the amounts claimed along with interest.
Thereafter, the appellant therein issued statutory notice in terms of Sections 433(e) read with Section 434(1)(a) of the Companies Act, 1956 seeking winding up of the respondent company. The respondent replied contending that the foreign judgment was not enforceable in India as it was passed ex parte and did not constitute judgment on merits under Indian law.
Faced with this situation, the appellant applied for setting aside the default judgment before the English Court and sought summary judgment on merits as per the rules of the U.K. High Court. The respondent was duly served and contested the proceedings before the English Court, contending that it had valid defences on merits and that the matter should not be decided under summary jurisdiction.
The English Court declined the request and passed summary judgment against the respondent. In these circumstances, the Delhi High Court refused to enforce the decree of the foreign court, which was affirmed by the Hon'ble Apex Court. The Hon'ble Apex Court in Paras 52 and 53 observed that the respondents ought to have been permitted to lead evidence and that summary judgment should not have been granted, as it resulted in denial of meaningful opportunity to establish their defence.
However, in the present case, due notice was issued to the respondent, as analysed above, though it initially replied to the notice however, it did not participate in the Arbitration proceedings. As such, the facts of the said case are clearly distinguishable from the facts of the present case.
In the considered view of this Court, the present case is squarely covered by the judgment of the Hon'ble Apex Court passed in the case of Nagraj vs. Mylandla passed in Special Leave Petition (Civil) Nos.31866-68 of 2025 wherein the Hon'ble Apex Court held in Para 76 as under :-
" 7 6 . The application of the doctrine of ‘transnational issue estoppel’ would effectively curb the propensity of parties to relitigate settled factual issues taking advantage of the fact that they are before a different court in a different jurisdiction, viz., the enforcement court in a country other than the situs of the seat court. This would invariably narrow the scope of interference by the enforcement court with an arbitral award that has already passed muster with the seat court. This would add value and augment the efficiency of arbitration as a dispute resolution mechanism to settle trans-border commercial disputes. However, as noted by the Singapore Court of Appeal in Republic of India (supra), opposition to enforcement of a foreign arbitral award on ‘public policy’ violation grounds would necessarily stand on a different footing. Notwithstanding the decision of the seat court upholding an arbitral award, the same can still be subjected to examination by the enforcement court against the parameters of the ‘public policy’ of the State in which enforcement of such award is sought. In the case on hand, we may note that the arbitral tribunal specifically noted in the award that it had carefully and fully considered the applicable law, i.e., Indian law, and one of the members of the arbitral tribunal is an eminent senior counsel of this Court. Despite the same, it cannot be gainsaid that the enforcement court necessarily had to consider the challenge to the award in the context of the ‘public policy of India’ grounds urged before it. However, in the guise of mounting such an attack, it is not open to a party whose contentions on the merits of a particular issue on facts have been rejected by the seat court to seek review thereof by the enforcement court. Such a ‘merits-based’ evaluation is beyond the scope of the enforcement court’s jurisdiction under Section 48 of the Arbitration Act and would be barred by application of the doctrine of ‘transnational issue estoppel’."
As such, in view of the above, the objections raised by the respondent against enforcement of the arbitral award are hereby rejected. It is hereby held that this Court is satisfied that the foreign award (Annexure-P/1) dated 26.08.2022 is enforceable and the same is hereby deemed to be the decree of this Court.
List this case for further consideration and proceedings for execution of the award after six weeks.