1995 (2) TMI 283 - HC - Companies Law

Enforceability of Foreign Award Confirmed Under Foreign Awards Act 1961

The court determined that the award in question qualified as a 'foreign award' under the Foreign Awards (Recognition and Enforcement) Act, 1961, as it met ... Contracts in evasion of Act Issues Involved:1. Whether the award is a 'foreign award' under the Foreign Awards (Recognition and Enforcement) Act, 1961.2. Whether the award deals with differences that can be considered 'commercial' in nature.3. Whether the award is enforceable given the involvement of NRIs and not citizens of two different countries.4. Whether the award violates Chapter XXC of the Income-tax Act, 1961.5. Whether the award violates the Foreign Exchange Regulation Act, 1973 (FERA).6. Whether the award has merged into a foreign judgment and can only be enforced as a decree with leave of the court.7. Whether the petitioners can enforce only the Indian part of the award.8. Allegations of fraud and misrepresentation in obtaining the award.9. Validity of the gift deed regarding Urvashi flat.10. Suit filed by the minor son of respondent No. 1 challenging the transfer of interest in the Urvashi flat.Detailed Analysis:1. Whether the award is a 'foreign award' under the Foreign Awards (Recognition and Enforcement) Act, 1961:The court examined whether the award met the criteria of a 'foreign award' under section 2 of the Foreign Awards (Recognition and Enforcement) Act, 1961. It was established that the award was made in pursuance of an agreement in writing for arbitration to which the New York Convention applies, and it involved legal relationships considered commercial under Indian law. The award was made on or after October 11, 1960, satisfying all four requirements of the Act.2. Whether the award deals with differences that can be considered 'commercial' in nature:The court held that the relationship between the parties was essentially commercial, despite being brothers. The disputes arose in the course of business, and the parties aimed to divide their joint businesses and properties. The court cited the Supreme Court's interpretation in R. M. Investment and Trading Co. Pvt. Ltd. v. Boeing Co., emphasizing that the term 'commercial' should be construed broadly to include all phases of commercial and business activity.3. Whether the award is enforceable given the involvement of NRIs and not citizens of two different countries:The court rejected the argument that the award could not be considered a 'foreign award' because it involved NRIs and not citizens of two different countries. It noted that the Act of 1961 repealed the requirement from the 1937 Act that the parties must belong to different States. The court emphasized that the definition was updated to align with the New York Convention, allowing for disputes between parties from the same State carrying on international business.4. Whether the award violates Chapter XXC of the Income-tax Act, 1961:The respondents argued that the enforcement of the award would violate Chapter XXC of the Income-tax Act due to the transfer of a flat without a no-objection certificate. The court found that the transfer involved deleting the names of respondents from an already jointly held property, not a new transfer. It held that even if permission was necessary, it could be obtained before execution, and the award was not against public policy.5. Whether the award violates the Foreign Exchange Regulation Act, 1973 (FERA):The petitioners expressed their readiness to obtain necessary permissions under the FERA. The court held that prior permission was not mandatory under sections 19 and 29 of the FERA. It emphasized that enforcement of the award could be subject to obtaining necessary permissions, and the award itself was not against public policy.6. Whether the award has merged into a foreign judgment and can only be enforced as a decree with leave of the court:The court rejected the argument that the award had merged into the foreign judgment and could only be enforced as a decree. Citing previous judgments, the court held that a foreign judgment does not efface the original cause of action, and the award could still be enforced independently.7. Whether the petitioners can enforce only the Indian part of the award:The court found that the petitioners were seeking to enforce the Indian part of the award because the U.S. part had already been implemented. The court held that the petitioners' readiness to execute necessary documents and the respondents' non-cooperation did not render the award unenforceable.8. Allegations of fraud and misrepresentation in obtaining the award:The court noted that allegations of fraud and misrepresentation were outside the scope of its inquiry under section 7 of the Act of 1961. These issues had already been raised and rejected in the U.S. court, and a related suit filed in India was seen as an afterthought to delay enforcement.9. Validity of the gift deed regarding Urvashi flat:The court did not delve deeply into the validity of the gift deed, noting that it was part of the larger settlement agreement. The court emphasized that the main issue was the enforceability of the award, not the specific terms of the gift deed.10. Suit filed by the minor son of respondent No. 1 challenging the transfer of interest in the Urvashi flat:The court noted that a suit filed by the minor son was pending but had no bearing on the enforceability of the award. It viewed the suit as an attempt to delay enforcement.Conclusion:The petition was granted, and the judgment was to follow in terms of the award, subject to obtaining necessary permissions under the FERA for enforcement in India. The court also granted a certificate for appeal to the apex court, recognizing the substantial legal questions involved.