The Decree-holder- a foreign entity, was the seller and the
Judgment-debtor- an Indian Company was the buyer. The consignment of
materials were loaded from the port of China. The port of discharge was
Mumbai-India. The Bankers were from both the countries. The Banking
documents were; letters of credit, bill of loading, commercial invoices and
shipping advice. There arose dispute. There was no specific agreed
governing law of the contract dated 28.04.2010. The suit is filed by the
Judgment-debtor in this Court. It will be governed by Indian laws. The
matter was referred to the agreed Arbitral Tribunal, outside India. The
award is in favour of the seller.
2 The applicant, who is decree-holder has taken out the
Chamber Summons for various reliefs/orders, pending the Execution
Application in view of Award dated 30th August, 2011 passed by the
3/39 CHS12.2013
Arbitral Tribunal, consists of three Arbitrators (including Chief Arbitrator
and two Arbitrators), constituted under the China International Economic
and Trade Arbitration Commission (for short "China Trade Commission").
3 The operative part of the Award is as under :
"(I) The Respondent shall compensate the Applicant's loss of
reselling price difference at the amount of USD 1,685.801.58
and its interest loss (calculated at an annual interest rate for
bank loans of 6% from October 7, 2010 to the date of actual
payment);
(II) The Respondent shall compensate the Applicant's interest
loss for the delayed collection of price at the amount of USD
122,543.06;
(III) The Respondent shall compensate the Applicant's interest
loss of the deposit USD 918,127.54 paid by the Applicant to
Standard Chartered Bank, Hong Kong for its issuance of the
Bank Draft to Mumbai Higher Court (calculated at the annual
interest rate of 6% from September 16, 2010 to the day when
the Bank Draft is returned);
(IV) The Respondent shall compensate the lawyer's fee of USD
41,729.26 paid by the Applicant for dealing with the situation in
India caused to the Applicant from the detention of the
Applicant's goods because of the Respondent's breach of
contract and breach of the arbitration clauses, the Bank
Guarantee fee of USD 13,538.86, and the travel accommodation
and other expenses at the amount of USD 19,779.43;
(V) the Respondent shall compensate the lawyer's fee of USD
29,823.17 paid by the Applicant dealing with this case;
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(VI) the rest arbitration requests of the Applicant are rejected;
(VII) the arbitration fee of this Case is USD 36,720, the
Applicant shall bear 5% i.e. USD 1,836, and the Respondent
shall bear 95%, i.e. USD 34,884. The abovementioned
arbitration fee has been written off by the advance payment of
the arbitration fee at the same amount paid by the Applicant to
CIETAC; therefore, the Respondent shall pay the Applicant USD
34,884 for its part of the arbitration fee. The amounts that the
Respondent should pay the Applicant stipulated in Items (I),
(II), (III), (IV), (V) and (VII) of the Arbitral Award should be
paid up within 30 days after the date when the Arbitral Award
is made. If the Respondent delays the payment, an interest shall
be calculated at the annual interest rate of 12% (the interest
accrual period is from the due date of the actual payment by the
Respondent). This Arbitral Award is final and shall enter into
force as of the date when it is made."
4 The judgment-debtor have filed Suit No.2358 of 2010 in the
High Court of Judicature at Bombay (O.O.C.J.) against the decree holder.
The Motion was taken out by the decree-holder under Section 8 of
Arbitration and Conciliation Act (for short "Arbitration Act") to refer the
matter to the arbitration in accordance with the arbitration agreements
between the parties as stipulated in Sale Contract dated 28 th April, 2010
and further that the suit proceeding be terminated. The suit was for a
recovery of an amount of Rs.4.19 Crores with interest. The bankers were
also party to the suit.
5 The relevant arbitration clause is as under :
All disputes in connection with this contract or the execution
thereof shall be settled by friendly negotiation. If no
settlement can be reached, the case may be submitted for
arbitration to the China International Economic and Trade
Commission in accordance with the provisional rules of
procedures promulgated by the said Arbitration
Commission. The arbitration shall take place in Beijing.
The decision made by the Arbitration Commission shall be
accepted as final and binding upon both parties. The fees
for arbitration shall be borne by the losing party."
6 The parties agreed to resolve the disputes by the
arbitral tribunal subject to the China Trade Commission
Procedure/Rule. The agreed place of arbitration was in Beijing.
This Court, by order dated 11th/14th March, 2011 granted the
Motion by observing that
evidently, there are disputes between
the plaintiffs and first defendant, which have to be referred to
the arbitration
. All the rights and contentions of the parties
were kept open.
7 The plaintiffs/judgment debtor preferred an Intra-
Court Appeal against the order passed by the Single Judge. The
objection was raised to the maintenability of such appeal under
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the Arbitration Act. The matter is pending before a larger bench
of this Court, for final adjudication on the issue of
maintenability of appeal against the order passed by Single
Judge on Section 8 of Arbitration Act.
As per decree-holder, award dated 30 th August, 2011
has attained finality, as it was passed after giving notice to the
judgment-debtor. The Arbitral Tribunal by rejecting the issue of
jurisdiction so raised by the judgment-debtor, proceeded and
passed the award. The award on the date of filing of Execution
Application has attained finality. There is nothing placed on
record to show that the award is challenged as per procedure of
the China Trade Commission at China Cartor and/or as per the
law of Arbitration in India.
9 The decree-holder/ claimant, therefore filed an
application for enforcement of Award under 36 of the
Arbitration Act read with Order 21, Rule 11(2) of the Code of
Civil Procedure (for short "CPC") on 11 th April, 2012, which is
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further amended and re-verified on 7th November, 2012/ 14th
December, 2012. There are various prayers, for the execution of
the Award in accordance with law. The main prayers are as per
Order 21, Rule 43, 54, 64 of C.P.C. Apart from other prayers in
the Chamber Summons (12 of 2013), under Order 21, Rule
41(1)(2) for direction against the Judgment-debtor to provide
the details of the immovable, as well as, movable properties,
production of documents and details of the assets and the
investments, to be disclosed on an affidavit and also prayed for
interim protection/ direction in dealing with and/or creating
any third party interest and/or transferring the properties, as per
Clause (d).
"d) That pending the final disposal of this Chamber
Summons, the Respondent/ Judgment Debtor
themselves, their servants and agents be restrained by
an order and injunction of this Hon'ble Court in any
way dealing with or disposing of or transferring,
alienating , encumbering or parting with possession of
the debts, cash/ bank balance, bank deposits, stocks/
inventories, investments, loan advances and other such
movable (current) assets of the Respondent/ Judgment
debtor."
10 The supporting affidavit and the documents
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remained uncontroverted as there is no specific reply filed by
the judgment-debtor till these dates. The submission is made to
treat affidavit-in-support of Chamber Summons (L) No. 1588 of
2012 as their reply.
11 The Chamber Summons (L) No.1588 of 2012 is
taken out by the judgment-debtor (applicant) in the same
Execution Application and prayed to raise and set aside the
attachment as levied in respect of the properties by warrant of
attachment (Schedule "A") dated 13th September, 2012 and also
prayed for various interim reliefs.
12 The judgment-debtor has filed an affidavit-in-
support of Chamber Summons, thereby objected even to the
maintenability of present Execution Application in this Indian
Court. By raising various grounds including challenge to the
Award, for the first time, on merits of the matter also. The
averments are also made about the pendency of the matter
before the larger Bench. It is also averred that Award dated 30 th
August, 2011, is a "Foreign Award", therefore, it is enforceable
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in India, in terms of Sections 44 to 49 of Arbitration Act and the
related laws. The averments are also made that the Award is
not enforceable in India as the China is not a reciprocating party
to the Convention and as there is no notification issued by the
Central Governement in the official gazette under Section 43(3)
(b) of the Arbitration Act declaring China to be a Territory to
which New York Convention applies. Therefore, it is also
averred and submitted that the Execution Application so filed is
contrary to the provisions contained in part II of the Arbitration
Act, as it is applicable to enforcement of the "Foreign Award" in
India. Therefore, the averments are also made that the warrant
of attachment dated 13th September, 2012 and all actions
initiated by decree-holder of attaching movable as well as
immovable properties is against the law. It is also averred that
the attached properties are mortgaged/hypothecated with the
banks / financial institutions, who hold first party lien. The
prayers are made accordingly and so also the submissions.
to this Chamber Summons taken out by the judgment-debtor on
a footing that the averments, as well as, the documents placed
on record in support of Execution Application and their
Chamber Summons are sufficient to resist the
contentions/averments so made by the judgment debtor in their
Chamber Summons.
14 This Court, by order dated 13th August, 2012
permitted the applicant/judgment creditor to proceed with the
execution as notice contemplated under Order 21, Rule 22 was
not necessary.
15 The matter listed again on 15th April, 2013. None
appeared for the respondents. On 22nd April, 2013, the matter
was adjourned for service uopn counsel appearing for the
respondent-debtor. The court has directed to serve the Chamber
Summons again and to file an affidavit of service. The matter
was ultimately listed on 3rd May, 2013. The respondent
appeared, after hearing both the parties on 8th May, 2013, the
matter was closed for order.
2013. The learned counsel appearing for the judgment-debtor
relied upon the Supreme Court Judgment in Videocon v/s
Union of India, 1 and Bhatia International Vs. Bulk Trading
S.A. 2. The reliance was also placed on Venture Global
Engineering Vs. Satyam Computer Services Ltd. 3 by the
counsel appearing for the decree-holder.
17 It is clear from the Arbitration Clause itself that the
parties have decided to settle their disputes if negotiations fails,
through the Arbitration procedure promulgated by the China
Trade Commission. It means parties have agreed that the
provisional rules of procedure of China Trade Commission will
govern their arbitration procedure. They agreed that the
arbitration commission's decision shall be final and binding
upon both the parties. They specifically agreed that the
arbitration shall take place in Beijing. This itself means the
1 A.I.R. Supreme Court 2011, pg. 2040
2 (2002) 4 SCC 105
3 (2008)4 SCC 190
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arbitration procedures as applied to the China Trade
Commission will govern the arbitration procedures before the
Tribunal. It is clear even from the plain reading of arbitration
clause that the parties have not specifically and/or impliedly
excluded any provisions of Indian laws, including the Arbitration
Act. The plaintiffs/respondents themselves filed the suit in India
in this Court. The Court as recorded above, thereafter, referred
the matter in view of Section 8 of Arbitration Act to the China
Trade Commission.
18 Section 28 of Arbitration Act is reproduced as under:
"28. Rules applicable to substance of dispute-
(1) Where the place of arbitration is situate in
India,-
(a) in an arbitration other than an
international commercial arbitration, the
arbitral tribunal shall decide the dispute
submitted to arbitration in accordance with the
substantive law for the time being in force in
India;
(b) in international commercial arbitration,-
(i) the arbitral tribunal shall decide the dispute
in accordance with the rules of law designated
by the parties as applicable to the substance of
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the dispute;
(ii) any designation by the parties of the law
or legal system of a given country shall be
construed, unless otherwise expressed, as
directly referring to the substantive law of that
country and not to its conflict of laws rules;
(iii) failing any designation of the law under
clause (a) by the parties, the arbitral tribunal
shall apply the rules of law it considers to be
appropriate given all the circumstances
surrounding the dispute.
(2) The arbitral tribunal shall decide ex aequo et
bono or as amiable compositeur only if the parties
have expressly authorised it to do so.
(3) In all cases, the arbitral tribunal shall decide in
accordance with the terms of the contract and shall
take into account the usages of the trade applicable
to the transaction".
The parties have decided to follow the procedural rule of
the China commercial arbitration. As defined under Clause (f)
of Section (1) of Arbitration Act, the decree-holder is a foreign
entity /person. It is a International Commercial Arbitration.
19 The question, therefore is in the present facts and
circumstances, whether the parties have specifically excluded
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and/ or even by implication, in part or in full, Part I and Part II
of the Arbitration Act. Part I covers Sections 1 to 43. Part II
covers Sections 44 to 60. Part II deals with the aspect of
enforcement of certain Foreign Awards covering New York
Convention Awards and Geneva Convention Awards. Part 'I'
deals with the domestic award and the finality and enforcement
of such arbitral award.
20 We are concerned with the enforcement of the award
in question. The following Sections are read and referred by
the parties.
35. Finality of arbitral awards. -Subject to this Part
an arbitral award shall be final and binding on the
parties and persons, claiming under them respectively.
36. Enforcement. - Where the time for making an
application to set aside the arbitral award under
section 34 has expired, or such application having
been made, it has been refused, the award shall be
enforced under the Code of Civil Procedure, 1908 (5
of 1908) in the same manner as if it were a decree of
the court.
44. Definition.- In this Chapter, unless the context
otherwise requires, "foreign award" means an arbitral
award on differences between persons arising out of
legal relationships, whether contractual or not,
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considered as commercial under the law in force in
India, made on or after the 11th day of October,
1960-
(a) In pursuance of an agreement in writing for
arbitration to which the Convention set forth in the
First Schedule applies, and
(b) In one of such territories as the Central
Government, being satisfied that reciprocal provisions
have been made may, by notification in the Official
Gazette, declare to be territories to which the said
Convention applies.
45. Power of judicial authority to refer parties to
arbitration. -Notwithstanding anything contained in
Part I or in the Code of Civil Procedure, 1908 (5 of
1908) a judicial authority, when seized of an action in
a matter in respect of which the parties have made an
agreement referred to in section 44, shall, at the
request of one of the parties or any person claiming
through or under him, refer the parties to arbitration,
unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.
46. When foreign award binding. - Any foreign
award which would be, enforceable under this Chapter
shall be treated as binding for all purposes on the
persons as between whom it was made, and may
accordingly be relied on by any of those persons by
way of defence, set off or otherwise in any legal
proceedings in India and any references in this
Chapter to enforcing a foreign award shall be
construed as including references to relying on; an
award.
16/39 CHS12.2013
48. Conditions for enforcement of foreign awards. -
(1) Enforcement of a foreign award may be refused, at
the request of the party against whom it is invoked,
only if that party furnishes to the court proof that-
(a) The parties to the agreement referred to in section
44 were, under the law applicable to them, under
some incapacity, or the said agreement is not valid
under the law to which the parties have subjected it or,
failing any indication thereon, under the law of the
country where the award was made; or
(b) The party against whom the award is invoked was
not given proper notice of the appointment of the
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(c) The award deals with a difference not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated from those
not so submitted, that part of the award which
contains decisions on matters submitted to arbitration
may be enforced; or
(d) The composition of the arbitral authority or the
arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country
where the arbitration took place; or
(e) The award has not yet become binding on the
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parties, or has been set aside or suspended by a
competent authority of the country in which, or under
the law of which, that award was made.
(2) Enforcement of an arbitral award may also be
refused if the court finds that-
(a) The subject-matter of the difference is not capable
of settlement by arbitration under the law of India; or
(b) The enforcement of the award would be contrary
to the public policy of India.
Explanation. -Without prejudice to the generality of
clause (b) of this section, it is hereby declared, for the
avoidance of any doubt, that an award is in conflict
with the public policy of India if the making of the
award was induced or affected by fraud or corruption.
(3) If an application for the setting aside or suspension
of the award has been made to a competent authority
referred to in clause (e) of sub-section (1) the court
may, if it considers it proper, adjourn the decision on
the enforcement of the award and may also, on the
application of the party claiming enforcement of the
award, order the other party to give suitable security.
49. Enforcement of foreign awards. -Where the court
is satisfied that the foreign award is enforceable under
this Chapter, the award shall be deemed to be a decree
of that court.
21 It is relevant to note that the decree-holder has filed
Arbitration Petition No.1062 of 2011 under Section 9 of the
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Arbitration Act against the judgment debtor for an interim
protection and/or security in view of the Award passed in their
favour. By order dated 22nd December, 2011, the Court has
directed judgment debtor not to finalise any transaction for the
sale of any of it's immovable property and further directed to file
affidavit to disclose all the immovable properties showing their
rights, title and interest.
22 By order dated 19th March, 2012, as even the appeal
period against the award as contemplated under Section 34 was
over, interim order dated 22nd December, 2011, directed to be
continued till the enforcement of the award. All the points were
kept open. The statement is made that these interim orders with
regard to the immovable properties has attained finality. There is
no further challenge raised and/or made by the judgment debtor
till these dates.
23 The statement is made by the learned counsel
appearing for the parties that so far as New York Convention
(NYC) as contemplated under Section 44 is concerned, it is
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applicable to both the parties i.e. India and China, but the
statement is also made that there was no reciprocal provisions
notified by the Central Government in the official gazette except
a notification dated 19th March, 2012. (date of publication 24th
March, 2011), whereby Ministry of Law and Justice, Department
of Legal Affairs declared as under :
"Declares People's Republic of China to be a territory
to which the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards applies.
S.O. 580(E).-- In exercise of the powers conferred by
Clause (b) of Section 44 of the Arbitration and
Conciliation Act, 1996 (26 of 1996), the Central
Government, being satisfied that reciprocal provision
have been made, hereby declares the People's
Republic of China (including Hongkong Special
Administrative Region and the Macao Special
Administrative Region of the People's Republic of
China) to be a territory to which the Convention on
the Recognition and Enforcement of Foreign Arbitral
Awards, set forth in the First Schedule to the said Act,
applies for the purpose of any award of the nature
referred to in that section made on or after the 19 th
day of March, 2012".
This means on the date of the agreement between the
parties, the date of award, the reciprocal provisions as
20/39 CHS12.2013
contemplated in Clause "B" of Section 44 of Arbitration clause,
was not in existence, but on the date of filing of the Execution
Petition on 11th April, 2012, in view of notification dated 19 th
March, 2012 / 24th March, 2012 Peoples Republic of China has
been declared to be a territory, to which the Convention on the
Recognition of Enforcement of Foreign Arbitral Award applies.
24 Section 44(A) of C.P.C. as relevant is reproduced as
under:
" 44A.Execution of decrees passed by Courts in
reciprocating territory.-
(1) Where a certified copy of a decree of any of the
superior Courts of {***} any reciprocating territory has
been filed in a District Court, the decree may be
executed in [India] as if it had been passed by the
District Court.
(2) Together with the certified copy of the decree shall
be filed a certificate from such superior Court stating
the extent, if any, to which the decree has satisfied or
adjusted and such certificate shall, for the purposes of
proceedings under this section, be conclusive proof of
the extent of such satisfaction or adjustment.
(3) The provisions of section 47 shall as from the filing
of the certified copy of the decree apply to the
proceedings of a District Court executing a decree
under this section and the District Court shall refuse
execution of any such decree, if it is shown to the
satisfaction of the Court that the decree falls within
21/39 CHS12.2013
any of the exceptions specified in clauses (a) to (f) of
section 13.
[Explanation 1.- "Reciprocation territory " means any
country or territory outside India which the Central
Government may, by notification in the Official
Gazette, declare to be a reciprocating territory for the
purposes of this section ; and "superior Courts", with
reference to any such territory, means such Courts as
may be specified in the said notification.
Explanation 2.- "Decree" with reference to a superior
Court means any decree or judgment of such Court
under which a sum of money is payable, not being a
sum payable in respect of taxes or other charges of a
like nature or in respect of a fine or other penalty, bur
shall in no case include an arbitration award, even if
such an award is enforceable as a decree or
judgment.]]
25 The definition of Foreign judgment and Foreign
Court as per C.P.C.:-
"Definitions.- In this Act, unless there is anything
repugnant in the subject or context,-
[(5) "foreign Court" means a Court situate outside
India and rot established or continued by the authority
of the Central Government: ]
(6) " foreign judgment " means the judgment of a
foreign Court".
26 The contention, therefore, was made by the learned
counsel appearing for the decree-holder that in view of clear
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provisions on the date of passing of award apart from the date
from the agreement between the parties, the award in question
though it is a "Foreign Award" but in view of undisputed
position on record and in view of specific notification about the
reciprocity, which was on/or after 19 th March, 2012, Part II of
Arbitration Act is not applicable. The Award so passed cannot
be treated as a Foreign Decree / foreign judgment as
contemplated under Section 44(A) of C.P.C. or Section 44 of the
Arbitration Act. The formalities as contemplated in C.P.C. are
not necessary, as sought to be contended by the learned counsel
appearing for the judgment debtor.
27 The agreement to govern their disputes settled by
China Trade Commission was for procedure to be followed by
the Arbitral Tribunal while deciding the dispute between the
parties. There was no specific agreement of exclusion of any
provisions of India Law and/or any agreement governing law.
The place/seat of arbitration in no way takes away the rights of
the parties and cannot be the foundation to decide the
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applicable laws. There was no agreement, except the procedural
rules as recorded above, which was specifically excluded to
decide the disputes. The judgment-debtor filed the suit for
recovery in this Court as cause of action arose in this Court's
jurisdiction.
The decree-holder, therefore invoked the provsions
of Indian Laws (C.P.C.) by treating the same award as domestic
award, which is executable in India as per Part I of Arbitration
Act, including Sections 35 and 36 read with C.P.C. Therefore,
the Law of Execution in India will govern the present execution
action and all proceedings arising out of the same.
29 The Supreme Court in Bhatia International
(Supra) has dealt with the aspect of applicability of Part I and
Part II of Arbitration Act, in national or international commercial
arbitration, held outside India. The aspect of domestic award as
contemplated under Section 2(7) of Arbitration Act and Foreign
Award have been elaborated in following words :-
" 23. That the Legislature did not intend to exclude the
applicability of Part I to arbitrations, which take place
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outside India, is further clear from certain other
provisions of the said Act. Sub-section (7) of Section 2
reads as follows:
"2(7) An arbitral award made under this Part shall be
considered as a domestic award."
As is set out hereinabove the said Act applies to
(a) arbitrations held in India between Indians (b)
international commercial arbitrations. As set out
hereinabove international commercial arbitrations may
take place in India or outside India. Outside India an
international commercial arbitration may be held in a
convention country or in a non-convention country.
The said Act however only classifies awards as
"domestic awards" or "foreign awards". Mr. Sen admits
that provisions of Part II makes it clear that "foreign
awards" are only those where the arbitration takes
place in a convention country. Awards in arbitration
proceedings which take place in a non- convention
country are not considered to be "foreign awards"
under the said Act. They would thus not be covered by
Part II. An award passed in an arbitration which takes
place in India would be a "domestic award". There
would thus be no need to define an award as a
"domestic award" unless the intention was to cover
awards which would otherwise not be covered by this
definition. Strictly speaking an award passed in an
arbitration which takes place in a non-convention
country would not be a "domestic awards". Thus the
necessity is to define a "domestic award" as including
all awards made under Part I. The definition indicates
that an award made in an international commercial
arbitration held in a non-convention country is also
considered to be a "domestic award".
24. Section 5 provides that a judicial authority shall not
intervene except where so provided in Part I. Section 8
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of the said Act permits a judicial authority before
whom an action is brought in a matter to refer parties
to arbitration. If the matters were to be taken before a
judicial authority in India it would be a Court as
defined in Section 2(e). Thus if Part I was to only apply
to arbitrations which take place in India the term
"Court" would have been used in Sections 5 and 8 of
the said Act. The Legislature was aware that, in
international commercial arbitrations, a matter may be
taken before a judicial authority outside India. As Part I
was also to apply to international commercial
arbitrations held outside India the term "judicial
authority" has been used in Sections 5 and 8.
25. The beginning part of Section 28 reads as follows:
"28. Rules applicable to substance of dispute.- (1)
where the place of arbitration is situate in India,-
xxx xxx xxx
xxx xxx xxx"
Section 28 is in Part I. If Part I was not to apply to an
arbitration which takes place outside India there would
be no necessity to specify that the rules are to apply
"where the place of arbitration is situate in India". It
has been held in the case of National Thermal Power
Corporation vs. Singer Company and others reported in
(1992) 3 SCC 551 that in international commercial
arbitrations parties are at liberty to choose, expressly
or by necessary implication, the law and the procedure
to be made applicable. The procedure or the rules
governing such arbitration may be of the country
where the arbitration is being held or the body under
whose aegis the arbitration is being held. All bodies
which conduct arbitrations and all countries have rules
and laws governing arbitrations. Thus Section 28 does
not provide for rules where the place of arbitration is
out of India.
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26. Thus Sections 44 in (Chapter I) and Section 53
(in Chapter II) define foreign awards, as being awards
covered by arbitrations under the New York
Convention and the Geneva Convention respectively.
Part II then contains provisions for enforcement of
"foreign awards" which necessarily would be different.
For that reason special provisions for enforcement of
foreign awards are made in Part II. To the extent that
Part II provides a separate definition of an arbitral
award and separate provisions for enforcement of
foreign awards, the provisions in Part I dealing with
these aspects will not apply to such foreign awards. It
must immediately be clarified that the arbitration not
having taken place in India, all or some of the
provisions of Part I may also get excluded by an express
or implied agreement of parties. But if not so excluded
the provisions of Part I will also apply to "foreign
awards". The opening words of Sections 45 and 54,
which are in Part II, read "notwithstanding anything
contained in Part I". Such a non-obstante clause had to
be put in because the provisions of Part I apply to Part
II.."
32. To conclude we hold that the provisions of Part I
would apply to all arbitrations and to all proceedings
relating thereto. Where such arbitration is held in India
the provisions of Part I would compulsory apply and
parties are free to deviate only to the extent permitted
by the derogable provisions of Part I. In cases of
international commercial arbitrations held out of India
provisions of Part I would apply unless the parties by
agreement, express or implied, exclude all or any of its
provisions. In that case the laws or rules chosen by the
parties would prevail. Any provision, in Part I, which is
contrary to or excluded by that law or rules will not
apply.
Engineering (Supra), in paragraph 33 observed as under:
"33. The very fact that the judgment holds that it
would be open to the parties to exclude the
application of the provisions of Part I by express or
implied agreement, would mean that otherwise the
whole of part I would apply. In any event, to apply
Section 34 to foreign international awards would not
be inconsistent with Section 48 of the Act, or any
other provisions of Part II as a situation may arise,
where even in respect of properties situate in India
and where an award would be invalid if opposed to
the public policy of India, merely because the
judgment-debtor resides abroad, the award can be
enforced against properties in India through personal
compliance of the judgment-debtor and by holding
out the threat of contempt as is being sought to be
done in the present case. In such an event, the
judgment-debtor cannot be deprived of his right
under Section 34 to invoke the public policy of India,
to set aside the award. As observed earlier, the
public policy of India includes - (a) the fundamental
policy of India; or (b) the interests of India; or (c)
justice or morality; or (d) in addition, if it is patently
illegal. This extended definition of public policy can
be bypassed by taking the award to a foreign country
for enforcement."
31 In Videocon Industries Limited (Supra), the
Supreme Court after referring to the Bhatia International
28/39 CHS12.2013
(Supra), Venture (supra) has reiterated the position in
following words:-
"19 In the present case also, the parties had agreed that
notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by laws of
England. This necessarily implies that the parties had
agreed to exclude the provisions of Part I of the Act. As a
corollary to the above conclusion, we hold that the Delhi
High Court did not have the jurisdiction to entertain the
petition filed by the respondents under Section 9 of the
Act and the mere fact that the appellant had earlier filed
similar petitions was not sufficient to clothe that High
Court with the jurisdiction to entertain the petition filed
by the respondents.
32 I have also in J.S. Ocean Liners Inc. Vs. S.K.
Shipping (Singapore) Pte Ltd. 4 while dealing with the exclusive
agreement with regard to Part "I" held that the parties having
agreed to exclude the provisions of Part I of the Arbitration Act,
any proceedings based upon the provisions, which falls within
Part "I" of the Act , cannot be invoked. They will be governed by
their agreed clauses and the respective court's jurisdiction.
Paragraph Nos. 14 and 15 read as under:-
"14 The Apex Court in (Venture Global
Engineering v. Satyam Computer Services Ltd. &
4 2010(2) Bom. C.R. 52
29/39 CHS12.2013
Anr), 2008 DGLS (soft) 36: (2008) 4 S.C.C. 190,
while dealing with the challengeable aspect of foreign
award under Section 34 of the Act in India, has also
reiterated that provisions of Part I could be applicable
to International Commerce Arbitration held out of
India, "unless any or all such provisions have been
excluded by agreement between the parties, expressly
or by implication".
15
igTherefore, in view of the present facts and
circumstances, as the parties have consented and
agreed that the Court at London have the jurisdiction
and further that the English Act would govern the
arbitration proceedings and in fact the parties have
acted accordingly throughout, in my view, this
amounts to permitted commercial agreement whereby
the parties have agreed to be governed by the English
law. It also means that the parties have agreed and
consented to the exclusion of provisions of Part I of
the Act which is permissible under the law. The Apex
Court in (Rajasthan State Electricity Board Vs.
Universal Petrol Chemicals Ltd.) 2009 DGLS (soft) 14
: (2009) 3 S.C.C. 107, specifically recognised and
accepted such agreement of having exclusive
jurisdiction to a particular Court and the law. The
Apex Court has also recognised in (Indian Oil
Corporation Limited Vs. Raja Transport (P) Ltd.)
(2009) 8 S.C.C. 520, that such arbitration agreement
between the parties need to be accepted.
33 In the present case, as noted above, there is no
specific exclusive and/or agreement between the parties except
30/39 CHS12.2013
the procedural rule as noted above, agreed to decide their
disputes. The parties are always free to decide the rules to be
followed and/or procedure to be adopted to adjudicate their
disputes before the nominated Arbitral Tribunal. Both parties
are bound by the same, so also the Arbitral Tribunal. The
adoption of China Commission/ procedure/rules itself cannot be
read and/or means that the parties have agreed to exclude the
provisions of part "i" of arbitration act as arbitration held
outside India. Therefore, in view of specific agreement between
the parties, I am inclined to observe that there is no such
agreement even by implication to exclude the provisions of Part
"I" of the arbitration act of india governing laws of the contract.
34 The submission that on the date of filing of the
present Execution Application, in April, 2012, by which the
notification under Clause "B" of Section 44 was declared in the
government gazette, thereby the Republic of China has been
recognized to be territory, to which the Convention on the
recognition of enforcement of Arbitral Awards applies, debars
31/39 CHS12.2013
the decree-holder to put this execution by treating the award as
domestic award. I am inclined to observe in the present case
that in view of agreement date and the award date, apart from
clear provision mentioned in the Notification which is applicable
on and after 19th March, 2012, the award in question need to be
governed by the provisions of laws prior to 19 th March, 2012.
Therefore, there was no question of any formalities or
requirement as contemplated under Section 44 of Part II of
Arbitration Act and as well as Section 44(A) of C.P.C. The
award in question, in my view, cannot be treated as Foreign
Award, which required to be executed only by following the
procedure of Part II of Arbitration Act.
35 The constitution Bench of Supreme Court on 6
September 2012, in Bharat Aluminium Company Vs. Kaiser
Aluminium Technical Services Inc. 5 while dealing with the
correctness of the Judgments of Bhatia International (supra),
Videocon(Supra) and Venture Global engineering (supra)
declared that, as those Judgments have been in the field since
5 (2012) 9 SCC 552
32/39 CHS12.2013
long, will govern the agreements between the parties as made
prior to the date of this judgment. The judgment so declared
will be applicable prospectively. Therefore, all earlier
transactions/ litigations will be governed by the laws and
regulation, which have been in existence prior to the date of the
judgment. In the present case, in view of clear notification, the
disputes arising out of agreements and awards so passed, based
upon the same situation. The agreement, prior to 19th March,
2012, would be governed by the then prevailing law by treating
Republic of China as non reciprocal territory/country. The
present case, therefore, also will govern by the decisions of
Supreme Court in Bhatia International (supra),
Videocon(Supra) and Venture Global engineering (supra).
36 By section 85 of Arbitration Act, 1996, the Foreign
Awards (Recognition and Enforcement) Act, 1961 stood
repealed and so also the Arbitration Act, 1937. The provisions
of those Acts are not applicable to the present facts and
circumstances of the case, as cause of action also arose after
33/39 CHS12.2013
1/1/1996. There is no such case pleaded even by the parties.
The Arbitration Act though has a foundation of UNCITRAL
model, but in view of specific provisions, will be governed by the
indian arbitration act only, unless agreed otherwise by the
parties. Part II, which deals with the foreign award and its
enforcement, therefore, needs to be considered in this
background. In the present case, admittedly pursuant to the
agreement between the parties, arbitration held outside India
based upon the procedural rule of China Trade Commission.
The important element to enforce the award in question is that
it was not made in the reciprocal territory, though, the
agreement was in writing and it was arising out of commercial
relationship. It is relevant to note that even Article I(a) of the
NYC Provides that to seek enforcement of an award rendered
outside India as a foreign award, in accordance with Sections 48
and 49 of the Arbitration Act, it is necessary that the award must
be rendered in a reciprocated country and not otherwise.
Articles, it is clear that for want of reciprocity, the convention
and all it's provisions shall not be extended and/or made
applicable to the alleged foreign award. The
reservation/exception of reciprocity and/or its mandate, in the
present facts and circumstances, make the position clear that the
award though rendered in a foreign country, based upon the
China Trade Commission procedure, is not enforceable as a
foreign award, as contemplated under Part II of the Arbitration
Act.
38 The parties cannot be rendered remediless. In the
present case, as noted, and in view of the clear declaration/
decision given by the Supreme Court of India, considering the
Arbitration Act, such award is executable/ enforceable in India,
as contemplated under Part I of the Arbitration Act. The
procedure of actual enforcement/execution is nowhere
contemplated and/or provided in Chapter II of the Arbitration
Act and/or in any of the convention and/or the international
35/39 CHS12.2013
treaties, the party- decree-holder, national and/or international
entity has no choice but to invoke the provisions of C.P.C., as
contemplated under Sections 35 and 36 of the Arbitration Act.
39 In Arbitration Act, there are three provisions for
enforcement of arbitral award. Section 36 contemplates an
enforcement of domestic award or the foreign award if not
covered by Part II of the Arbitration Act. Section 49 deals with
the enforcement of foreign award and so also Section 58, based
upon the respective conventions.
40 In Bangladesh Air Service (Pvt.) Ltd. vs. British
Airways PLC 6, the Appellate Division Bench, refused to enforce
a foreign award in a country, which had acceded to the
convention but had not passed implementing legislation by
observing that
I can only say that Sections 12, 13 and 44(A) of
C.P.C. do not apply in foreign award in Bangladesh
. The
point is that it is internationally recognised that such convention
and the related proceedings for enforcement of arbitral award
6 (1998) 23 Year Book Commercial Arbitration (Bangladesh
36/39 CHS12.2013
and or alleged foreign award, is not permissible unless award is
made in a territory and/or country, on which the NYC applies on
reciprocity basis. In India, therefore, the said reciprocity clause/
provisions/ Notification by the Central Government is
mandatory and therefore, in view of the admitted position prior
to the date of agreement between the parties and the arbitral
award in question, the provisions of Part II, as sought to be
contended, are not applicable and therefore the arbitral award is
executable/ enforceable in India as contemplated in Part I of the
Arbitration Act.
41 In view of above, the preliminary objections so
raised by the learned counsel appearing for the judgment-
debtor that this Court has no jurisdiction is untenable. The
application for enforcement of Award dated 30th August 2011
under Section 36 of Arbitration Act read with provisions of
C.P.C. is maintainable in India. Rule 801 (Chapter XLIII) of the
Bombay High Court (Original Side) Rules, which prescribed the
procedure for enforcement of foreign award, is also not
37/39 CHS12.2013
applicable to the arbitral award in question.
42 As recorded above, this court has already directed
that the execution to proceed in accordance with law by order
dated 13th August, 2012 itself. The interim protection with
regard to the immovable property is concerned, has been in
force since long.
43 Now considering the continuation of the order so passed
and the fact that the Arbitral Award has attained finality and
considering the averments so made by the decree-holder, which
remained uncontroverted, except the issue of jurisdiction so
raised and decided, the attachment order so passed by this Court
on 30th September, 2012, will continue till the disposal of the
execution proceedings.
44 The Chamber Summons (L) No. 1588 of 2012 as
filed, therefore, is dismissed. However, all points are kept open
for final decision of execution proceeding, which to be
continued in accordance with law.
concerned, for the reason recorded above and there is no
contravention or contra material placed on record and as
admittedly the award has attained finality, I am inclined to grant
prayer clause (c ).
46 The judgment-debtor to comply prayer clause (c)
within six weeks.
47 So far as prayer clause (d) is concerned, I am
inclined to observe that in view of interim order/ protection
already granted by this Court referring to immovable property,
that has been continued till this date, i.e. till the enforcement of
the award and further as Chamber Summons taken out by the
judgment debtor to release and or vacate the warrant of
attachment is rejected., I am not inclined to prayer clause (d)
without details of movable as well as immovable properties.
However, liberty is granted to the decree-holder to pray for
appropriate orders by providing details.
debtor submitted to stay the effect and operation of this order.
Considering the reason so provided, I am inclined to grant stay
for six weeks. However, the interim order already passed, shall
continue till further order.
(ANOOP V. MOHTA, J.)