2018 (7) TMI 1873 - HC - Indian Laws

Foreign arbitration award enforcement upheld, objections dismissed. Limited scope for challenge under Section 48.

Sleepwell Industries Co. Ltd. Versus LMJ International Ltd.

Sleepwell Industries Co. Ltd. Versus LMJ International Ltd. - TMI Issues Involved:1. Challenge to the enforcement of a foreign arbitration award.2. Jurisdiction and authority of the Arbitral Tribunal.3. Compliance with contractual terms and Letter of Credit requirements.4. Application of GAFTA Rules.5. Allegations of breach of contract and quality inspection requirements.6. Public policy and natural justice considerations.Detailed Analysis:1. Challenge to the enforcement of a foreign arbitration award:The judgment-debtor company challenged the enforcement of a foreign award under Section 48 of the Arbitration and Conciliation Act. The objections were primarily based on the alleged non-compliance with the contractual terms and the Letter of Credit requirements.2. Jurisdiction and authority of the Arbitral Tribunal:The Arbitral Tribunal was accused of exceeding its jurisdiction by making a new case for the parties and referring to GAFTA Rules, which were allegedly not part of the contract. The court, however, found that the Tribunal acted within its jurisdiction, interpreting the contract and the GAFTA Rules to determine the responsibility for producing the quality inspection certificate.3. Compliance with contractual terms and Letter of Credit requirements:The contract stipulated that 100% of the cargo value would be payable upon receipt of shipping documents by the negotiating bank at 30 days sight. The contract was amended to include a clause that 2.22% of the invoice value would be payable after receipt of a quality inspection report at the destination port. The judgment-debtor argued that the award-holder failed to produce the required quality inspection certificate, thus breaching the terms of the Letter of Credit. The court noted that the validity of the Letter of Credit had expired, and the buyer did not extend it, which affected the payment of the balance 2.22%.4. Application of GAFTA Rules:The Tribunal referred to GAFTA Rules to determine the responsibility for producing the quality inspection certificate. The court upheld this approach, stating that the contract incorporated GAFTA Rules, and the Tribunal's interpretation was within its domain. The Tribunal found that the buyer failed to provide the quality inspection report within the stipulated time, thus waiving any claim for rejection or allowance.5. Allegations of breach of contract and quality inspection requirements:The buyer alleged that the goods were of inferior quality and issued a debit note. However, the buyer did not provide any quality inspection report to substantiate this claim. The Tribunal found that the quality of the goods was certified at the port of loading by the buyer's appointed surveyor, and the buyer's failure to provide the quality inspection report at the destination port led to the conclusion that the seller was entitled to the balance payment.6. Public policy and natural justice considerations:The judgment-debtor argued that the award was contrary to public policy and violated principles of natural justice. The court rejected these arguments, stating that the interpretation of the contract and the evidence by the Tribunal could not be reopened in enforcement proceedings. The court emphasized that the enforcement of a foreign award is limited to specific grounds under Section 48, and the objections raised did not fall within these grounds.Conclusion:The court dismissed the objections to the enforcement of the foreign award, affirming the Tribunal's findings and interpretation of the contract and GAFTA Rules. The judgment emphasized the limited scope of challenging a foreign award under Section 48 and upheld the principles of arbitration and contractual obligations. The application for challenging the enforcement was dismissed with costs assessed at Rs. 1 lakh.