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Fuerst Day Lawson Decree Holder v. Jindal Exports Limited. Judgement Debtor
Factual and Procedural Background
The Decree Holder, M/s. Fuerst Day Lawson, initiated execution proceedings for enforcement of a foreign award dated 13th August, 1996. Initially, this Court issued a warrant of attachment over certain properties on 4th August, 1998. Subsequently, on 9th September, 1998, the warrant was withdrawn at the request of the Judgement Debtor's counsel after the respondent agreed to deposit bonds/certificates as security for due satisfaction of the decree/award upon enforcement. The Court later dismissed the execution proceedings on 19th February, 1999, holding that the foreign award could only be enforced under the Foreign Awards (Recognition & Enforcement) Act, 1961, since arbitration commenced before the Arbitration & Conciliation Act, 1996 came into force. The petitioner’s appeal against this dismissal was rejected by the Division Bench on 27th September, 1999. The petitioner then filed a Special Leave Petition (SLP) to the Supreme Court, which, on 4th May, 2001, held that foreign awards rendered after the commencement of the Arbitration & Conciliation Act, 1996, shall be enforced under its provisions, and that enforcement and execution can proceed in a single proceeding without the need for separate applications. The Supreme Court set aside the earlier orders and remitted the case for enforcement of the award. The present matter concerns whether the interim orders requiring deposit of bonds/certificates as security should be restored.
Legal Issues Presented
- Whether interim orders directing the deposit of bonds/certificates as security for due satisfaction of the decree/award can be restored in enforcement/execution proceedings of a foreign award.
- Whether the Court has jurisdiction and power under Section 151 CPC to pass such interim orders in enforcement proceedings under the Arbitration & Conciliation Act, 1996.
- Whether Section 9 of the Arbitration & Conciliation Act applies or is relevant to the passing of interim orders in enforcement proceedings of foreign awards.
Arguments of the Parties
Respondent/Judgement Debtor's Arguments
- Interim orders for depositing bonds/certificates as security cannot be passed under Section 9 of the Arbitration & Conciliation Act, 1996.
- Reliance on a prior decision (Marriott International Inc. & Ors. v. Ansal Hotels Limited & Another) where it was held that Indian courts lack power to issue interim orders under Section 9 when arbitration is held outside India.
Decree Holder's Arguments
- Interim orders for security deposits are permissible under the Court’s inherent powers and Section 151 of the Code of Civil Procedure in enforcement/execution proceedings.
- Enforcement and execution of foreign awards can be conducted in a single proceeding as per the Supreme Court’s judgement dated 4th May, 2001.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Supreme Court Judgement dated 4th May, 2001 (Civil Appeal No. 3594/2001 arising out of SLP No. 6841/2000) | Foreign awards rendered after commencement of Arbitration & Conciliation Act, 1996, are enforceable under its provisions; enforcement and execution can be done in a single proceeding without separate applications. | Set aside the earlier High Court orders dismissing execution; remitted case for enforcement of the award in one proceeding; emphasized need to satisfy enforceability before execution. |
| Marriott International Inc. & Ors. v. Ansal Hotels Limited & Another (Decision dated 5th July, 2000, FAO(OS) 335/1999) | Court in India lacks power under Section 9 of the Arbitration & Conciliation Act to pass interim orders when arbitration is held outside India. | Distinguished from the present case, as the current Court has jurisdiction over enforcement proceedings; Section 9 not applicable here. |
Court's Reasoning and Analysis
The Court examined the Supreme Court’s authoritative ruling that enforcement and execution of foreign awards under the Arbitration & Conciliation Act, 1996, can be conducted in a single proceeding, with the Court first being satisfied about enforceability under Section 49 before proceeding to execution. The Court found no legal restraint under Section 151 CPC to pass interim orders in enforcement proceedings. The respondent’s reliance on Section 9 of the Act and the Marriott decision was rejected because the present Court has jurisdiction over enforcement proceedings, unlike the jurisdictional deficiency in Marriott. The Court noted that interim orders requiring security deposits are consistent with the Supreme Court’s emphasis on speedy and effective enforcement. The Court also observed that the bonds/certificates had not been alienated but were held in different names by family members, which raised concerns about the respondent’s bonafides. Consequently, the Court concluded that restoring the earlier interim order requiring deposit of bonds/certificates as security was appropriate and lawful.
Holding and Implications
Application EA No. 251/2001 is allowed. The respondent/Judgment Debtor is directed to deposit the bonds/certificates mentioned in the order dated 9th September, 1998 within one week. These shall be kept in sealed cover in safe custody by the Registry as security for due satisfaction of the award/decree upon execution.
The order restores the interim security arrangement without prejudice to the respondent’s rights regarding enforceability. No new precedent is established; the decision applies the Supreme Court’s existing principles to allow interim security measures in enforcement proceedings under the Arbitration & Conciliation Act, 1996.
O.P Dwivedi, J.:— This order shall govern the disposal of EA No. 251/2001 under Section 151 CPC filed by the Decree Holder seeking reviva1.restoration of execution petition.
The Decree Holder M/s. Fuerst Day Lawson has launched these execution proceedings for enforcement of foreign award dated 13th August, 1996. This Court had vide order dated 4th August, 1998 issued warrant of attachment in respect of the properties described in the schedule annexed to the petition as Annexure-F. Later on, vide order dated 9th September, 1998 at the request of counsel for the Judgement Debtor, order for issuance of warrant of attachment was withdrawn because respondent agreed to deposit some bonds/certificates in the court as security for due satisfaction of the decree/award as and when it is enforced. Thereafter this Court passed a detailed order dated 19th February, 1999 on EA No. 347/1998 filed by the judgement debtor/respondent and held that since the arbitration proceedings had commenced before coming into force of Arbitration & Conciliation Act, 1996 (hereinafter referred to as Act) foreign award dated 13th August, 1996 could be enforced only in accordance with the provisions of Foreign Awards (Recognition & Enforcement) Act, 1961 (FARE Act, 1961 for short). It was further held that petitioner could not directly launch execution proceedings without first filing the suit and obtaing an order for filing of the award and making it a rule of the Court. Accordingly vide order dated 19th February, 1999 Dr. M.K Sharma, J. dismissed the execution proceedings being not maintainable and also released the bonds/certificates which were retained as security. The petitioner preferred an appeal against the order dated 19th February, 1999. The appeal was dismissed by the Division Bench vide order dated 27th September, 1999. Petitioner then preferred SLP to the Supreme Court and vide judgement dated 4th May, 2001 passed in Civil Appeal No. 3594/2001 (arising out of SLP No. 6841/2000). Supreme Court held that foreign award rendered after commencing of Arbitration and Conciliation Act, 1996 i.e 25th January, 1996 shall be enforced only in accordance with provisions of the New Act. Supreme Court further held that for enforcement/execution of the award, there is no need to file a separate application under Section 49 of the Act for the Court to hold that the award is enforceable. The observations of the Supreme Court appearing at page 26 of the Judgement read as under:—
“....... Thus, in our view, a party holding 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 Section 847 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 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 as 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 objectives contained in para 4 of the statement of objects and reasons, Section 847 to 49 and 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 foreign award there is no need to take separate proceedings, one for deciding the enforceability of the award to make 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 the Thyssen Judgement.
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 accceptance so as to uphold, the impugned judgement and order. We have no hesitation or impediment in concluding that the impugned judgement and order cannot be sustained.
In the light of discussion made and the reasons stated hereinabove, the impunged judgement and order are set aside. The case is remitted to a learned Single Judge of the High Court for proceeding with enforcement of the award in the light of observations made above. The appeal is allowed in terms indicated above. No costs.”
Thus it is clear from the Supreme Court's judgement dated 4th May, 2001 that for enforcement/execution of the foreign award, the party holding that foreign award need not apply at two different stages. The exercise of Court being satisfied as to the enforceability of the foreign award as envisaged under Section 49 of the Act as well as execution of the award can be done in one single proceeding, although at different stages. Hon'ble Supreme Court has emphasised that satisfaction as to the enforceability of the foreign award envisaged under Section 49 of the Act has to precede the execution of the award.
Right now the question for this Court to decide is whether the interim orders earlier passed by this Court regarding depositing of the bonds/certificates in the Court as a security for due satisfaction of the decree or the award as and when it is enforced should be restored or not. As a Civil Court dealing with the enforcement/execution proceedings, I find no restraint under the law on Court's power to pass such interim orders. Learned counsel for the respondent/Judgement Debtor contented that such interim orders cannot be passed under Section 9 of the Act. Reference was also made to the decision dated 5th July, 2000 of this Court in FAO(OS) 335/1999 titled as Marriott Intemation Inc. & Ors. v. Ansal Hotels Limited & Another wherein it was held that Courts in India have no power to issue interim order under Section 9 of the Act in the matter where the arbitration is held at a place outside India. In that case petitioner had approached this Court under Section 9 of the Act whereas the arbitration proceedings were held at Kuala Lumpur Regional Centre for Arbitration in Malaysia. In para 32 of the judgement. Division Bench of this Court has observed as under:—
Para 32:
“We are not impressed with the arguments of Mr. Desai that in case the provisions of the Act did not apply, the Court has inherent powers under Section 151 of the Code of Civil Procedure to pass an interim order so as to advance the cause of justice. In case this Court, in view of Section 2(2) of the Act, does not have jurisdiction to pass an interim order contemplated by Section 9 of the Act, in our view, the Court cannot exercise inherent powers and thereby confer upon itself a jurisdiction not conferred by law. To exercise any inherent power, the Court must have jurisdiction over the proceedings before it. Power under section 151 of code can be exercised only when the matter is properly before the Court. In case, there is inherent lack of jurisdiction in the Court, the Court cannot exercise inherent powers so as to confer jurisdiction upon itself.”
In the present case, this Court is seized of the enforcement/execution proceedings of a foreign award. It, therefore, cannot be said that there is any inherent lack of jurisdiction to pass appropriate interim orders in such proceedings. Reference to Section 9 of Arbitration and Conciliation Act is uncalled for. Even if the present petition was only under Section 49 of the Act, Court could very well direct the respondent to furnish adequate security till the decision on the question of enforceability of foreign award. As already noticed, in the judgement dated 4th May, 2001 Supreme Court has repeatedly emphasised that there is no need to first decide the question about the enforceability of foreign award and then proceed with execution thereof. It is thus obvious that interim orders asking the respondent to furnish a security for due satisfaction of the decree/award as and when it is enforce, can be passed.
It is important to note that interim order dated 9th September, 1998 was passed by this Court on respondent's offer to deposit bonds/certificates as security. When this case was taken on 17th July, 2001, I directed the respondent/judgment debtor not to alienate bonds whose particulars are mentioned in the order dated 9th September, 1998. At the time of arguments, learned counsel for the decree holder expressed his apprehension that bond/certificates have been alienated in violation of order dated 17th July, 2001. When learned counsel for the respondent was confronted with the court's query in this regard it was intimated that the bond certificates are still held by the family members although in different names. This means that bond/certificates now stand in different names. At this stage I need not comment on the point as to whether this amounts to alienation of bonds/certificates in breach of the order dated 17th July, 2001. Suffice it to say that any tinkering with bonds/certificates in violation of Court's order dated 17th July, 2001 reflects adversely on the respondent's bonafides. I think the order dated 9th September, 1998 for depositing the bonds/certificates in the Court as security for due satisfaction of the awrd/decree as and when it is enforced, can and should be stored.
Accordingly, application being EA No. 251/2001 is allowed. Respondent/Judgment debtor is directed to deposit bonds/certificates mentioned in the order dated 9th September, 1998 within a week from today. The said bonds/certificates may be deposited in the Registry of this Court as security for due satisfaction of the award/decree as and when execution is ordered. Let the bonds/certificates be kept in a sealed cover in safe custody. This will be without prejudice to respondent's rights and contentions regarding the enforceability of the foreign award.
EA stands disposed of.
A.KApplication Allowed
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