TaxTMI 
TaxTMI 
2015 (4) TMI 1167
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....the sake of brevity in this order M/s.POL India Projects Limited are described as the petitioners and Aurelia Reederei Eugen Friederich GmbH Schiffahrtsgesellschaft & Company KG, is described as the respondents. 2. In so far as Arbitration Petition No.12 of 2012 is concerned, the said petition has been filed under sections 44 to 48 of the said Arbitration Act inter alia praying for a declaration that the foreign award dated 15th September, 2011 is enforceable as a decree of this court and seeks injunction restraining the respondent, its servants and/or agents and/or assigning from transferring, utilizing, operating and removing in any manner, funds lying in its bank accounts in Mumbai and elsewhere in India to the extent of USD 870,059.24 and GBP 13,400 and for other reliefs. By consent of parties, both the petitions were heard together and are being disposed of by a common order. 3. In so far as Arbitration Petition No. 76 of 2012 is concerned, Mr.Andhyarujina, learned counsel for the respondents in the said petition has raised a preliminary objection about maintainability of this petition under section 34 of the Arbitration Act. Some of the relevant facts for the purpose of dec....
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.... case of the respondents that the said D.B.Shipping LLC committed default in their performance of the voyage charter party resulting in the respondents suffering losses. The respondents raised various invoices against the said D.B.Shipping LLC in relation to its wrongful repudiation of the voyage charter party. However the said D.B.Shipping LLC failed and/or neglected to pay under the invoice issued by the respondents. The respondents therefore commenced arbitration proceedings against the said D.B.Shipping LLC. The respondents nominated the arbitrator in respect of the said arbitration. D.B.Shipping LLC appointed Mr.Ashwin Shankar, Advocate of this court as their arbitrator. The arbitrators appointed by the respondents and the said D.B.Shipping LLC appointed Mr.Edward Mocatta as a chairman of the arbitral tribunal. 8. The respondents simultaneously commenced the arbitration proceedings against the petitioners herein by appointing Mr.Alan Oakley as their nominee arbitrator. The petitioners appointed Mr.Ashwin Shankar, Advocate of this court as their arbitrator. The nominee arbitrators of the parties appointed Mr.Ben Horn as a chairman of the arbitral tribunal. 9. On 13th October,....
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....ioners gave dissenting reasons. 11. On 15th September, 2011 the arbitral tribunal passed and published its final award inter alia holding that the petitioners were liable to pay to the respondents USD 870,059.24 together with interest at the rate of 5.5% per annum compounded at three monthly from 24th October, 2008 to the date of payment. 12. In the meanwhile, the respondents filed an application under section 9 of the Arbitration Act in this court (Arbitration Petition No.524 of 2011) for interim measures. The said arbitration petition filed by the respondents was opposed by the petitioners on various grounds including maintainability of the said petition. By an order dated 8th November, 2011 this court held that Arbitration Petition No.524 of 2011 was not maintainable as the parties by choosing English law as substantive law and curial law of the contract of guarantee had excluded Part I of the Arbitration and Conciliation Act, 1996 in view of the judgment of Supreme Court in case of Videocon Industries Ltd. vs. Union of India and another,. Relevant part of the said order is extracted as under :- 2. The petition can be disposed of only on the ground of maintainability. Mr.Nar....
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....ents. Relevant portion of the said letter is extracted as under : Quote : Mumbai 19-09-08 "The owners m.v.Merc Mihintale Without prejudice Shipment of scrap Ex.Malabo - Ref CP dtd 13-09-08. This is to confirm, though D.B. Shipping LLC Dubai is the charterer of the above vessel for carriage of scrap as per terms of the referenced CP (based Gencon) POL INDIA PROJECT INDIA LIMITED - MUMBAI, joins DB SHIPPING LLC DUBAI in guaranteeing the performance of the voyage. This letter of guarantee of performance is issued without prejudice and carries with it all the rights, liabilities and exceptions of the said charter party. Yours faithfully For POL India Projects Ltd. Mumbai Sd/- Copy : D.B.SHIPPING LLC - DUBAI". unquote 19. Mr.Makhija, learned counsel appearing for the petitioners submits that the said letter of guarantee dated 19th September, 2008 did not contain any arbitration agreement between the petitioners and the respondents. In the said letter it was only stated that all the rights, liabilities and exceptions of the said voyage charter party would attach to the letter of guarantee issued by the petitioners and it did not incorporate the arbitration clau....
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.... Arbitration and Conciliation Act, 1996 are applicable to the international commercial arbitration held outside India which mandates that arbitration agreement must be by both parties and submits that since there was no arbitration agreement under the said Arbitration Act, no award made under Part II of the said Arbitration Act can be enforced in India. Learned counsel submits that the said letter dated 19th September, 2008 addressed by the petitioners can be considered atmost as an assurance that the said D.B.Shipping LLC would perform their part of the charter party and could never be read to mean that the petitioners were liable as party charter party or liable under guarantee. 23. Learned counsel submits that even if the petitioners had not challenged the declaratory arbitration award rendered by the arbitral tribunal which was nullity and void and initio, the petitioners are not prevented from challenging the final award under section 34 of the Arbitration and Conciliation Act, 1996. He submits that since the respondents had proposed to file a petition for enforcement of foreign award in Mumbai and since the respondents had filed a petition under section 9 of the Arbitration ....
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....rned, learned counsel submits that the arbitration agreement is an independent agreement and was not incorporated in the letter of guarantee. It has to be specifically incorporated otherwise arbitration agreement would not exist and would not be binding on the parties. The petitioners had also confirmed and had guaranteed performance of the contract as contemplated by the brokers of the respondents by a letter dated 18th September, 2008. In support of the submission, the arbitration agreement in the charter party agreement between the respondents and D.B. Shipping LLC was not incorporated in the letter of guarantee, learned counsel placed reliance on the following judgments :- (a). Judgment of the Supreme Court in the case of M.R. Engineers and Contractors Private Limited vs. Som Datt Builders Limited, (2009) 7 SCC 696 and in particular paragraphs 14 to 24 and 33 to 35. (b). Judgment of the Court of Appeal in the case of Federal Bulk Carriers INC vs. C. Itoh & Co. Ltd. & Ors., (1989) 1 Lloyd's Law Reports, 103 : (c). Judgment of the Court of Appeal in the case of Skips A/S Nordheim & Others. vs. Syrian Petroleum Co. Ltd. & Petrofina S.A.,(1983) 2 Lloyd's Law Reports, ....
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..... Since the London Arbitration Council was not in existence, the court only could have appointed arbitral tribunal. Merely because the petitioners had also nominated their arbitrator and had appeared under protest before the arbitral tribunal, the defect in appointment of the arbitral tribunal by parties was not cured. There was no waiver on the part of the petitioners. 30. Learned counsel for the petitioners placed reliance on the judgment of this Court in the case of Jimmy Construction Pvt. Ltd.,Nagpur vs. Union of India and others, (2008) 3 Mah.L.J.141 and in particular paragraphs 8, 9 and 11 and it is submitted that if the composition of the arbitral tribunal is improper and not in accordance with the arbitration agreement, the entire proceedings would be nullity and the award would fall under section 34(2)(ii)(b) of the Arbitration & Conciliation Act, 1996. 31. Learned counsel for the petitioners placed reliance on the judgment of the Andhra Pradesh in the case of Chinoy Chalani & Co. & Ors. vs. Y. Anjiah, AIR 1958 Andhra Pradesh 384 (Vol.45,C.113) (1) and it is submitted that the petitioners had raised an objection before the arbitral tribunal about their composition not be....
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....curing the performance on behalf of D.B. Shipping LLC. Letter dated 18th September, 2008 was not even signed by the respondents but was signed by their broker. Merely on the basis of these two letters, the arbitral tribunal could not have come to the conclusion that the arbitration agreement forming part of the charter party agreement between the respondents and D.B. Shipping LLC would stand incorporated in the letter of guarantee executed by the petitioners. 36. Learned counsel submits that the appointment of the arbitrator had to be by consent of both the parties. Unilateral appointment of the arbitrator by the respondents was nullity and was illegal. The petitioners had appointed the arbitrator under protest on the ground that the London Arbitration Council had no authority to appoint any arbitrator. 37. Learned counsel submits that since the petitioners were not party to the arbitration agreement, the impugned award rendered by the arbitral tribunal against the person who was not a party to the agreement, the award is illegal. In support of this submission, learned counsel placed reliance on the judgment of the Supreme Court in the case of Sukalu Ram Gond vs. State of M.P. & ....
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.... by the petitioners was improper, illegal and contrary to the provisions of the Foreign Exchange Management (Guarantees) Regulation, 2000 (FEMA) and in particular Regulations 3 and 5, which read thus : "Regulation - 3 : Prohibition Save as otherwise provided in this regulations, or with the general or special permission of the Reserve Bank, no person resident in India shall give a guarantee or surety in respect of or undertake a transaction by whatever name called, which has the effect of guaranteeing a debt, obligation or other liability owed by a person resident in India to, or incurred by, a person resident outside India. Regulation - 5 : Guarantees which may be given by persons other than an authorised dealer : A person other than an authorised dealer may give a guarantee in the following namely : a) a person resident in India being an exporting company may give a guarantee for performance of a project outside India, or for availing of credit facilities, whether fund based on non fund based, from a bank or a financial institution outside India in connection with the execution of such project : Provided that the previous approval for undertaking the project has b....
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.... vs. D.P. Kingsley, Madras Law Journal Reports 96 and in particular paragraphs 20 to 22, 36, 37, 43 and 47 and on the judgment of the Division Bench of this Court in the case of Sakuma Exports Ltd. vs. Louis Dreyfus Commodities & Uisse S.A., (2013) 6 Bom.C.R.218. 44. The next submission of learned counsel for the petitioner is that since the respondents did not obtain any leave to enforce the arbitral tribunal as contemplated under section 66 of the English Arbitration Act, the respondents could not have filed the petition under section 48 of the Arbitration & Conciliation Act, 1996 in this Court for seeking enforcement of a foreign award. In support of this submission, learned counsel placed reliance on the judgment of the Queen's Bench Division (Commercial Court) in the case of African Fertilizers & Chemicals Nig Ltd. vs. BD Shipsnavo GMBH & Co Reederi KG, (2011) 2 Lloyd's Law Reports, 531 and in particular paragraphs 13 to 28. Learned counsel also placed reliance on the judgment of Queen's Bench Division (Commercial Court) in the case of West Tankers INC vs. Allianz Spa & Another, (2011) 2 Lloyd's Law Reports 117 which has been upheld before the Court of Appeal.....
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..... Reliance is also placed on copy of the standard form of Gencon charter party which was applicable to the parties. Clause 19 of the said Gencon charter provides for the arbitration agreement. He submits that even the letter of guarantee dated 19th September, 2008 issued by the petitioners refers to Gencon i.e. General Conditions of Contract which stood incorporated in the said letter of guarantee in toto. Though an opportunity was given by the arbitral tribunal which was adjudicating the claims of the respondents against D.B.Shipping LLC to continue the said proceedings in view of the said D.B.Shipping LLC not appearing in the arbitration proceedings though served, the petitioners did not appear in those proceedings. 49. Even in the arbitration proceedings initiated by the respondents against the petitioners, after the arbitral tribunal rendered an declaratory arbitration award, the petitioners stopped appearing before the arbitral tribunal. He states that the petitioners had already raised an issue about existence of the arbitration agreement and about the constitution of the arbitral tribunal by filing interim reply before the arbitral tribunal. The arbitral tribunal has alread....
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....party had not taken any part in the proceedings could still question whether there was a valid arbitration agreement or not and also about the improper constitution of the arbitral tribunal or that the matter had not been submitted in accordance with the arbitration agreement by proceeding in the court for declaration, injunction or for other appropriate relief. Such party could also challenge the award by an application under section 67 on the ground of lack of substantive jurisdiction in relation to him or by an application under section 68 on the ground of all serious irregularity having affected him. 52. Learned counsel submits that since the petitioners have not challenged the declaratory arbitration award in accordance with the provisions of English Arbitration Act, 1996, the petitioners have lost their right to object and cannot be permitted to raise such objection at the later stage to the substantive jurisdiction of the arbitral tribunal on any ground which was the subject of the ruling. In support of the aforesaid submissions, learned counsel placed reliance on the judgment of this court delivered on 9th May, 2014 in case of Perma Container (UK) Line Limited vs.Perma Con....
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....and judgment of this court in case of HSBC PI Holdings (Mauritius) Limited (supra) Arbitration Petition No.1062 of 2012. 57. In so far as submission of Mr.Makhija, learned counsel for the petitioners that the petition for enforcement of the foreign award is not maintainable on the ground that the respondents did not obtain any leave of the English Court under section 66 of the English Arbitration Act is concerned, learned counsel submits that the said provisions under section 66 of the English Arbitration Act does not apply and no leave of the English Court was required to be obtained by the respondents for filing application for enforcement of the foreign award in this court under section 46 of the Arbitration and Conciliation Act, 1996. Learned counsel distinguished the judgment relied upon by Mr.Makhija on this issue. He submits that there is no bar for enforcement for foreign award under the New York Convention. He submits that under section 66 of the English Arbitration Law, a discretion is given to the parties to apply for leave of the English Court for the purpose of enforcement of such award in the English Court and it does not affect the enforcement of an award to which t....
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....nt and stood incorporated in the letter of guarantee. It is submitted that the bill of lading is a document of title. In support of this submission, learned counsel placed reliance on the judgment of Supreme Court in case of Alimenta S.A. vs. National Agricultural Co-operative Marketing Federation of India Ltd. and Another (1987) 1 SCC 615 and in particular paragraph (12) thereof. He submits that the petitioners were fully aware of the contract between the respondents and the said D.B.Shipping LLC. The petitioners had admittedly signed the said contract on behalf of the D.B.Shipping LLC which admittedly contained arbitration agreement. The said arbitration agreement stood incorporated in the letter of guarantee. 61. Learned counsel for the respondents placed reliance on the judgment of Supreme Court in case of Groupe Chimique Tunisien SA vs. Southern Petrochemicals Industries Corpn. Ltd. (2006) 5 SCC 275 and in particular paragraph (7) in support of this submission that the arbitration agreement recorded in the charter party agreement between the respondents and the said D.B.Shipping LLC stood incorporated under section 7(5) of the Arbitration and Conciliation Act, 1996 in the let....
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....with the agreement arrived at between the parties and in accordance with the provisions of the English Arbitration Act. He submits that in any event, the court has to interpret the arbitration agreement in business like manner in case the clause is alleged to be vague. He submits that the arbitral tribunal had been constituted as already provided in clause 19(a) of the charter party. The findings rendered by the arbitral tribunal is final and binding. The arbitral tribunal has interpreted clause 19(a) Gencon 1994 in the declaratory arbitration award. The petitioners had not shown any proof that under the English Law, there was no such procedure for appointment of arbitrator as followed by the parties. 65. Learned counsel submits that whether arbitration agreement existed or not, whether composition of arbitral tribuanl was proper or not are not the grounds of objection provided under section 48 of the Arbitration and Conciliation Act, 1996. Learned counsel submits that scope of objections provided under section 48 of the Act is very limited. In support of this submission, learned counsel for the respondents placed reliance on the judgment of Supreme Court in case of Shri Lal Mahal....
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....e petitioners, it would not amount to breach of any fundamental policy of India. In support of this submission, learned counsel invited my attention to section 13 of FEMA which provides for imposition of penalty for violation. Learned counsel submits that the provisions of FERA considered by the Supreme Court in case of Renusagar Power Co. Ltd. vs. General Electric Company & Anr. (supra) were totally different than the provisions of the FEMA. The judgment of the Supreme Court in case of Renusagar Power Co. Ltd. vs. General Electric Company & Anr. (supra) is thus distinguishable in the facts of this case in so far as the said issue is concerned. 69. In support of the aforesaid submission, learned counsel for the respondents placed reliance on the judgment of this court in case of Vitol S.A. vs. Bhatia International Limited Notice No.618 of 2011 delivered on 15th September, 2014 in Notice and in particular paragraphs 23, 24, 42 to 45. Learned counsel placed reliance on the judgment of Delhi High Court in case of SRM Exploration Pvt.Ltd. vs. N & S & N Consultants S.R.O. (2012) 4 Company Law Journal 178 (Delhi) and in particular paragraphs 3, 9 to 11. Learned counsel for the responden....
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....y clause (52), there was no agreement recorded in clause 52. In case of failure of the arbitration procedure, under section 18 of the English Arbitration Act, parties were required to approach the court for the purpose of appointment of arbitration and parties could not appoint arbitrator of their own. The entire proceedings were thus nullity. In support of this submission, learned counsel placed reliance on the commentary of Russel on arbitration. 73. In so far as judgment of this court in case of Vitol S.A.(supra) Notice No.618 of 2011 relied upon by Mr. Andhyarujina is concerned, Mr.Makhija distinguished the said judgment on the ground that the facts in that matter were totally different. He submits that the petitioners do not fall under the category provided under regulations 4 and 5. Under regulation 3, the petitioners could not have given such guarantee at all and the same was prohibited. The judgment of this court in case of Vitol S.A.(supra) is distinguished on the ground that in the said judgment the court has considered the situation where there was a provision for getting permission post-facto and thus the said judgment is not applicable to the facts of this case. 74. ....
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....r, 2008 with D.B.Shipping LLC. The respondents is a company incorporated under the appropriate law of Germany having its office at Germany. The petitioners and the respondents had entered a contract of guarantee dated 19th September, 2008 under which the petitioners guaranteed the performance of D.B.Shipping LLC under the voyage charter party. In the Column No.25 of the charter party, clause 19(a) of the voyage charter party was referred to which provided for arbitration in London in accordance with the Arbitration Act, 1950 and 1979 and/or any statutory modification or re-inactment thereof. In the said Column No.25, respondents and the said D.B.Shipping LLC had filled up the place as "London". The Gencon charter was made applicable to the said contract including clause 19(a). 79. The said charter party dated 13th September, 2008 was thereafter amended by a rider. The said rider was signed by the petitioners on behalf of the said D.B.Shipping LLC. Clause 52 of the said rider provided as under :- "GA/arbitration in London as per London Arbitration Council". 80. The dispute arose between the respondents and the said D.B.Shipping LLC and also between the respondents herein. The re....
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....ns, 2000 (for short the said Regulations of 2000). The petitioners also did not admit that they were acting as guarantors of the charterers obligation. 83. On 3rd March, 2010, the majority of the arbitrators rendered a declaratory award. The arbitrator nominated by the petitioners rendered dissenting reasons. In the said declaratory arbitration award majority of the arbitrators after referring to the agreement entered into between the parties and also the charter party between the respondents and the said D.B.Shipping LLC and after considering the objections raised by the petitioners held that the words 'without prejudice' mentioned on the letter of guarantee were misplaced on the ground that they were relevant only to settlement discussion between the parties following commencement of legal proceedings otherwise they had no effect under English Law when included in an agreement. They after considering the correspondence and the documents rendered a finding that it was clear from the e-mail of the petitioners dated 9th September, 2008 that whilst they purported to be the charterers' brokers they were also the managers of the said charterers'. 84. The tribunal held....
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.... guarantee. 87. The arbitral tribunal also held that the defence of the petitioners that their liability was limited to that of their brokerage was misplaced. Their role as guarantor was entirely separate to that of a broker. It is held that by agreeing to become the guarantors for the charterers' performance of the charterers, the petitioners accepted different responsibilities and liabilities to those of a broker. In the said interim declaratory award, the arbitral tribunal held that the guarantee issued by the petitioners was valid. The guarantee provided for arbitration in accordance with English law. The tribunal had been properly constituted and had jurisdiction to determine all and any disputes arising under and/or out of the guarantee. The declaration made by the arbitral tribunal was by way of the declaratory arbitration award. It is not in dispute that the petitioners did not challenge the said declaratory arbitration award in any proceedings. 88. The respondents had filed a petition (524 of 2011) under section 9 for interim measures in this court after the arbitral tribunal had rendered the said interim declaratory arbitration award. In the said arbitration petitio....
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..... 90. A perusal of the averments made by the petitioners in Arbitration Petition No.76 of 2012, clearly indicates that the respondents company is incorporated under the law of Germany and having its registered office at Germany. It is also not in dispute that the declaratory arbitration award and final award rendered by the arbitral tribunal are foreign awards. The arbitration proceedings were international commercial arbitration within the meaning of section 2(1)(f) of the Arbitration and Conciliation Act, 1996. Even in the affidavit in reply filed by the petitioners in the proceedings under section 9 which were filed by the respondents, it was the case of the petitioners that the said declaratory arbitration award was a foreign award and was falling under Part II of the Act. The submission of the learned counsel for the petitioners however is that since it was the case of the respondents themselves in the said petition filed under section 9 of the Arbitration and Conciliation Act, 1996 that Part I of the said Act was applicable to the said proceedings and therefore Arbitration Petition No.76 of 2012 filed under section 34 of the Arbitration and Conciliation Act, 1996 also which ....
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....glish Arbitration Act, the party to the arbitration proceedings may also file an appeal to the court on a question of law arising out of an award made in the proceedings. In such appeal, the court has power to confirm vary, remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination or set aside the award in whole or in part. Under section 70 of the English Arbitration Act an application or appeal has to be filed within 28 days from the date of the award on the grounds setout therein. Section 71 provides for the effect of the order passed by the court under sections 67, 68 or 69 with respect to an award. 95. Section 72 of the English Arbitration Act provides that a person alleged to be a party to the arbitration proceedings but takes no part in the proceedings may question (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted or (c) what matters have been submitted to arbitration in accordance with the arbitration agreement, by proceedings in the court for a declaration or injunction or other appropriate relief. He also has the same right as a party to the arbitral proceeding....
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....ion award came to be passed by the arbitral tribunal, the same ought to have been challenged by the petitioners by exercising its remedy available under the provisions of English Arbitration Act and the petitioners not having exercised such remedy under the provisions of English Arbitration Act has lost its right to object the correctness of such declaratory arbitration award in this proceeding filed under section 34 or while raising objection to the enforcement of the foreign award under section 48 in the arbitration petition filed by the respondents. 98. Division Bench of this court in case of Sakuma Exports Limited (supra) (2013) 6 Bom.C.R.218, after adverting to the judgment in case of Bhatia International vs. Bulk Trading S.A. (2002) 4 SCC 105 and several other judgments including the judgment of Supreme Court in case of Bharat Alluminium Company vs. Kaiser Alluminium Technical Services (BALCO) (2012) 9 SCC 552, in case of Videocon Industries Ltd. (supra) AIR 2011 SC 2040, in case of Yograj Infrastructure Limited vs. Ssang Yong Engineering and Construction Company Limited (2011) 9 SCC 735 has held that if the party had accepted the English law as the governing law of the cont....
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....ngland wherever the domicile, residence or place of business of parties to the contract may be or become. Moreover, for the purposes of all proceedings in arbitration, the contract shall be deemed to have been made in England and England shall be regarded as the place of performance. The seat of the arbitration shall be England and all proceedings shall take place in England. On the basis of these provisions, it has been submitted that parties have, by the terms of their agreement, impliedly excluded the provisions of Part-I. We find merit in the submission. It is clear from the terms and conditions which have been accepted by the parties in the purchase contract, read with Rule 8 that parties have accepted English law as the governing law of the contract; that the seat of the arbitration would be London; that disputes shall be settled according to the law of England which would include the resolution of disputes and that all proceedings shall take place in England. Alternatively, even if it were to be held that parties have not provided for the curial law governing the arbitration, the decision in Bhatia International does not prohibit the exclusion of the application of Part-I on....
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.... in England, Arbitration Act 1996 (English Arbitration) would apply which provides for a remedy to impugn the arbitral award, unsuccessful party having failed to avail of such remedy under English Arbitration Act, the petition filed under section 34 of the Arbitration and Conciliation Act, 1996 was not maintainable and is rejected. Paragraphs 103 to 105 of the said judgment read thus :- 103. In my view the judgment of Division Bench of this Court in case of Sakuma Exports Ltd. (supra) which is rendered after considering the judgments of Supreme Court in various judgments referred to aforesaid is squarely applicable to the facts of this Case. It is not in dispute that the arbitration was held at London and the main agreement as well as arbitration agreement was subject to laws of England. In my view, the parties by implied agreement have excluded applicability of enitre Part-I of Act including Section 34. In my view, arbitration petition filed by the respondent under Section 34 for impugning the foreign award is thus not maintainable in this Court. 104. This Court in its judgment delivered on 22/01/2014 in case of HSBC PI Holdings (Mauritius) Ltd Vs. Avitel Post Studioz Ltd., af....
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.... agreement. In this case also the express choice of the parties was that seat of the arbitration would be at Singapore and thus in my view, the seat of the arbitration would govern by law of agreement i.e. law of Singapore and not Indian law in this case. I am respectfully bound by the judgment of the Supreme Court in case of Sumitomo Heavy Industries Ltd. (supra), in case of National Thermal Power Corporation (supra) and judgment of the Division Bench of this court in case of Konkola Copper Mines (PLC) (supra) which in my view squarely apply to the facts of this case. 74. In my view judgment of Supreme Court in case of National Thermal Power Corporation (supra) is of no assistance to the respondents but assist the case of the petitioner. In view of the aforesaid reasons, I am of the view that there is no merits of the submission of the learned senior counsel for the respondents that clause 16.4 of the agreement does not oust Indian law. In my view issue of arbitrability has to be decided under the law of arbitration agreement which is law of Singapore in this case and thus whether dispute raised by the petitioner was arbitrable or not would have been decided as per law of Singap....
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.... arbitration agreement, which in this case, is law of England, would apply to the application for impugning the foreign arbitral award. The Arbitration Act 1996 (English Arbitration) would apply also since the seat of arbitration was in England at Wales and Northern Ireland which provides for a remedy to impugn an arbitral award, which the respondent has failed to avail of. This petition is thus not maintainable in this Court and deserves to be rejected. 102. This court in case of HSBC PI Holdings (Mauritius) Limited (supra) Arbitration Petition No.1062 of 2012 has held that since the arbitration proceedings were held at Singapore in accordance with Singapore arbitration rules, the party having agreed that seat of arbitration should be at Singapore, the arbitration agreement would be governed by the law of Singapore and not Indian law. It is held that the express choice of the parties that the seat of arbitration would be at Singapore and seat of arbitration would be governed the law of arbitration i.e. law of Singapore and not Indian law. This court also considered the effect of the parties not challenging the declaratory arbitration award in the said judgment. This court held th....
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....ns of fraud, forgery and fabrication in arbitration proceedings. In my view, Dr. Tulzapurkar, learned senior counsel for the petitioner is right in his submission that the subject matter of difference in the arbitration proceedings before the arbitral tribunal was claim for damages made by the petitioner which was capable of settlement by arbitration even under law of India. The learned senior counsel is right in his submission that the subject matter of the difference if not capable by settlement of arbitration under the laws of India cannot be enforced in India and not the allegations of fraud, fabrication and forgery etc. In my view there is no merit in the submission of Mr.Rohatgi that under law of Singapore, allegations of fraud, forgery and fabrication was not capable of settlement by arbitration. I am of the view that the subject matter of the reference was whether petitioner was entitled to claim damages from the respondents which was capable of settlement by arbitration even under laws of India. Be that as it may, since no application is made by the petitioner for enforcement of the jurisdictional award, submission of the learned counsel for the respondents that conditions....
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....aw laid down by the Supreme Court and this court in various judgments referred to aforesaid by the petitioner are squarely applicable to the facts of this case and are binding on this court. In my view there is no merit in the submission of Mr.Rohatgi, learned senior counsel that the issue raised by the respondents was a pure question of law and the doctrine of the estoppel could never apply to such question of law or to a jurisdictional question. In my view the principles of issue estoppel is issue applicable in case of question of fact or a question of law or to a mixed question of fact and law. The estoppel operates against the respondents and not against any law. 103. The Division Bench of this court in appeal (196 of 2014) arising out of the judgment delivered by the learned Single Judge in case of HSBC PI Holdings (Mauritius) Limited (supra) Arbitration Petition No.1062 of 2012 has upheld the issue of law decided by the learned Single Judge. It is held that the law of arbitration shall be laws of Singapore. 104. The learned Single Judge of this court in case of Mitsui OSK Lines Ltd. (Japan) (supra) Arbitration Petition No.842 of 2009 has considered a similar situation and a....
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....s for appointment of arbitrators. By letter dated 14th August 2002, petitioner informed the respondent that they would apply to Japanese Court for nomination of an arbitrator on behalf of the respondent. Since respondent did not appoint any arbitrator, petitioner applied to the Tokyo District court for nomination of an arbitrator as per the terms of agency agreement and provisions of Code of Civil Procedure of Japan 1890 regarding arbitration proceedings. The respondent appeared through their advocate in those proceedings. Tokyo District Court nominated Mr Hiroki Okabe as arbitrator on behalf of the respondent by an Order and Judgment dated 9th February 2005. Respondent impugned the said Order and Judgment dated 9th February 2005 passed by the Tokyo District Court in the Tokyo High Court. By an order dated 22nd June 2005, the Tokyo High Court upheld the order of Tokyo District Court. Respondent challenged the order of Tokyo High Court before the Supreme Court of Japan. By an Order dated 25th October 2012, the Supreme Court of Japan upheld the order passed by the Tokyo High Court. 20. Mr Zaiwala, learned senior counsel placed reliance on section 792, 797, 800 to 802 of the Arbitra....
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....e preceding Sub-Section. Section 802. * (1) Execution by virtue of an award can be carried out only if it is pronounced to be allowed by an execution judgment. * (2) No such execution-judgment as is referred to in the preceding Sub-Section shall be given, if there exists any ground upon which application for setting aside an award can be made. 30. It is not in dispute that the respondent has not challenged the said award dated 2nd February 2009 in the country in which it was made. It is the case of the petitioner that since the said award has achieved finality, petitioner is entitled to seek enforcement of the said award in this Court since the properties of the respondent are situated within the territorial jurisdiction of this Court. Petitioner has annexed a certified copy of the agency agreement dated 1st April 1964 with addendum to this petition. Petitioner has annexed the original award dated 2nd February 2009 which is duly signed and authenticated by the learned arbitrators and Secretary of the Tokyo Maritime Arbitration Commission. Petitioner has also filed an affidavit of Mr Masahiro Amemiya, a lawyer practicing in Japan. In the said affidavit, the lawyer practicing....
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....red from the agency agreement. The parties had agreed at the time of concluding addendum that all terms and conditions of the agency agreement remained unchanged in almost all the addendum and thus arbitration agreement remained in force upto the date of passing the said order. It is held by the Tokyo District Court that it was clear that all the addendum of evidence from KO9-1 to KO9-10 were concluded with reference to agency agreement from their wordings and there was no evidence of duress of the petitioner and the argument of the respondents could not be accepted on that point. The Tokyo District court also rejected the submission of the respondents that the practice of the transaction between the parties considerably changed after 1981 would mean that the agency agreement had come to an end. It is held that the parties continued the transaction based on the agency agreement inspite of the change of the practice and thus argument of the respondent could not be accepted. The Tokyo District Court also dealt with the submission of the respondents that the said proceedings should be stayed because the suit regarding the same dispute is now pending in India. It is held that where the....
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....ts of India or (III) justice or morality. It is held that the wider meaning given to the expression 'public policy of India' occurring in section 34 (2) (b) (II) in case of Saw Pipes decided by the Supreme Court is not applicable where objection is raised to the enforcement of the foreign award under section 48 (2) (b). Supreme Court has held that for the purposes of section 48 (2) (b), the expression public policy of India must be given narrow meaning and the enforcement of foreign award would be refused on the ground that it is contrary to public policy of India if it is covered by one of the three categories enumerated in Renusagar Power Co. Limited v. General Electric Co. It is held that although the same expression 'public policy of India' is used both in section 34 (2) (b) (ii) and section 48 (2) (b) and the concept of 'public policy in India' is same in nature in both the sections but its application refers in degree in so far as these two sections are concerned. The application of public policy of India doctrine for the purpose of section 48(2) (b) is more limited than the application of the same expression in respect of the domestic arbitral award. ....
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....ards Act. We have no hesitation in holding that Renusagar Power Co. Limited v. General Electric Co. MANU/SC/0195/1994 : 1994 Supp (1) SCC 644 must apply for the purposes of Section 48(2)(b) of the 1996 Act. Insofar as the proceeding for setting aside an award Under Section 34 is concerned, the principles laid down in Oil and Natural Gas Corporation Limited v. Saw Pipes Limited MANU/SC/0314/2003: (2003) 5 SCC 705 would govern the scope of such proceedings. 27. We accordingly hold that enforcement of foreign award would be refused Under Section 48(2)(b) only if such enforcement would be contrary to (i) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression "public policy of India" occurring in Section 34(2)(b)(ii) in Oil and Natural Gas Corporation Limited v. Saw Pipes Limited MANU/SC/0314/2003: (2003) 5 SCC 705 is not applicable where objection is raised to the enforcement of the foreign award Under Section 48(2)(b). 28. It is true that in Phulchand Exports Limited v. O.O.O. Patriot MANU/SC/1217/2011: (2011) 10 SCC 300, a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) accep....
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....dly not having challenged the said declaratory arbitration award and also the final award, both the awards have become final. In my view, the petitioners are estopped from challenging the said award. Since Part I of the Arbitration and Conciliation Act, 1996 is not applicable to the parties, the arbitration petition filed under section 34 of the Arbitration and Conciliation Act, 1996 is thus not maintainable. The law on this issue is not longer res-integra. In my view, the learned counsel for the respondents has rightly placed reliance on the above referred judgments of the Supreme Court and this court which are squarely applicable to the facts of this case. I am respectfully bound by the law laid down by the Supreme Court and this court. 107. In so far as submission of the learned counsel for the petitioners that the respondents having filed a petition in this court under section 9 of the Arbitration and Conciliation Act, 1996 under Part I and thus the petition filed by the petitioners under section 34 is maintainable in this court is concerned, in my view there is no merit in this submission of the learned counsel. A perusal of the affidavit in reply filed by the petitioners in ....
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....rs. The petitioners thus could not have filed the petition under section 34 of the Arbitration and Conciliation Act, 1996 on the premise that the petition under section 9 was filed by the respondents in this court under Part I of the Arbitration and Conciliation Act, 1996. In these circumstances in my view there is thus no merit in this submission of the learned counsel for the petitioners. 111. The next question that arises for consideration of this court is whether the petitioners can be allowed to agitate the issue of there being no arbitration agreement between the petitioners and the respondents or that the composition of the arbitral tribunal was not in accordance with the alleged arbitration agreement or not either under section 34 or while raising the objections under section 48 to the enforcement of the foreign award in the Arbitration Petition No.12 of 2012 filed by the respondents or not. In my view both these issues were raised by the petitioners in the objections filed before the arbitral tribunal and have been negatived by the arbitral tribunal by rendering declaratory arbitration award which could be challenged only by adopting remedy provided under sections 67 and ....
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....ferent, unless, however, the incorporation of the arbitration clause would be insensible or unintelligible. In my view, judgment of Supreme Court in case of Alimenta S.A. (supra) would apply to the facts of this case. 114. In this case also the petitioners had played a major role in negotiations of the agreement between the respondents and the said D.B.Shipping LLC and had acted not only as a broker but also a manager. The petitioners were the signatory to the rider to the charter party agreement which included arbitration agreement and stood incorporated in the letter of guarantee. In my view, thus there is no substance in the submission of the learned counsel for the petitioners that the arbitration clause incorporated in the charter party agreement was not incorporated in the letter of guarantee. 115. In so far as submission of the learned counsel for the petitioners that the respondents were not a signatory to the charter party agreement which contained arbitration agreement and thus the arbitration agreement in the said charter party agreement would not be an arbitration agreement within the meaning of section 7 of the Arbitration and Conciliation Act, 1996 is concerned, the....
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....se of M.R.Engineers and Contractors Private Limited (supra) relied upon by the learned counsel for the petitioners is concerned, in my view the judgment of Supreme Court is clearly distinguishable in the facts of this case. In this case, there is reference to the entire contract of charter party including Gencon which includes arbitration agreement. The petitioners were also fully aware of the said arbitration agreement as signatory to the rider to the charter party agreement. The judgment of the Supreme Court in case of M.R.Engineers and Contractors Private Limited (supra) (2009) 7 SCC 696 thus does not assist the petitioners. 119. In so far as submission of the learned counsel for the petitioners that since there was no arbitration agreement between the petitioners and the respondents, the entire arbitration arbitration proceedings were without jurisdiction and nullity and thus even if the declaratory arbitration award is not challenged by the petitioners, the petitioners can challenge the final award is concerned, in my view there is no merit in this submission of the learned counsel. The findings and conclusion rendered by the arbitral tribunal that there existed arbitration a....
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....d upon by the petitioners is concerned, a perusal of the said judgment indicates that the appointment of the arbitrator by the Union of India was illegal and contrary to the terms of the contract. The petitioner in that matter had raised an objection about the constitution of the arbitral tribunal and having not succeeded in that challenge had challenged the same in the petition under section 34. In my view the provisions of English Arbitration Act in so far challenge to the declaratory arbitration award and provisions under section 16 read with section 34 of the Arbitration and Conciliation Act, 1996 are different. Under section 16 of the Arbitration and Conciliation Act, 1996 if plea of jurisdiction is not accepted by the learned arbitrator, the petitioner has a right to challenge the said order alongwith the final award under section 34 of the Arbitration and Conciliation Act, 1996. However, under the provisions of English Arbitration Act if the jurisdictional or declaratory award is not challenged within the time prescribed before the appropriate court, such award becomes final and the party looses right to challenge said award in future. The reliance placed by the learned coun....
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....gment of the Supreme Court in case of Shin-Etsu Chemical Co.Ltd.(supra) AIR 2005 SC 3766 is thus misplaced. 128. In so far as submission of the learned counsel for the petitioners that since the petitioners had raised an objection about the lack of arbitration agreement and about the composition of the arbitral tribunal being illegal, there was no waiver on the part of the petitioners and thus the findings of the arbitral tribunal in the declaratory arbitration award would not amount to res judicata or that the condition of section 11 of the Code of Civil Procedure not having been satisfied, there would be no res judicata and/or estoppel is concerned, under the provisions of English Arbitration Act since the petitioners have failed to challenge the declaratory arbitration award as well as final award within the time prescribed, both the awards have become final and binding and the petitioners have lost their right to challenge the said awards. 129. The next submission of the learned counsel for the petitioners is that in view of the rider to the original charter party agreement and in view of the inconsistency between the arbitration clause in the Gencon, which was a printed clau....
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....in such a way that the parties are encouraged to refer their disputes to arbitration. Court has to consider the intention of parties. In my view thus there is no substance in the submission of the learned counsel for the petitioners that there was no arbitration agreement or that such agreement could not be construed as an arbitration agreement in view of there being no London Arbitration Council in existence. 132. In so far as second submission of the learned counsel that since there was no London Council of Arbitration, the parties could not have nominated their arbitrator and that the tribunal could be constituted only by the court is concerned, it is not in dispute that both the parties had nominated their arbitrator and those two nominee arbitrators had appointed the chairman of the arbitral tribunal. The appointment of the arbitral tribunal was in consonance with the arbitration agreement and under the provisions of the English Arbitration Act. The arbitral tribunal has already rendered a finding on that issue in the declaratory arbitration award which has achieved finality. Be that as it may, since there was no London Arbitration Council, the arbitral tribunal could be appo....
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....n the respondents and D.B.Shipping LLC including arbitration agreement stood incorporated in the letter of guarantee, the judgment relied upon by the petitioners in the aforesaid four cases do not assist the petitioners. The fact of those cases are even otherwise totally different and are clearly distinguishable with the facts of this case. 136. In so far as submission of the learned counsel for the petitioners that the findings of the arbitral tribunal on their jurisdiction is not final and is subject to the final order of the court is concerned, the petitioners have placed reliance on the judgment of the Supreme Court in case of Renusagar Power Co. Ltd. vs. General Electric Company & Anr. (supra) AIR 1985 SC 1156(1). The Supreme Court in the said judgment has held that there is nothing in the general law of arbitration either in English or Indian which prevents the arbitrators or an umpire from deciding questions of their own jurisdiction provisionally or tentatively and to proceed to make their awards on that basis, though it is clear that their provisional or tentative decision on questions of their own jurisdiction would be subject to the final determination by the court and ....
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....on the judgment of the Supreme Court in case of Fuerst Day Lawson Ltd.(supra) (2001) 6 SCC 356 and in particular paragraph (31) thereof in support of his submission that a separate proceedings for enforceability of the foreign award and for making it a rule of the court or decree is not warranted. 139. The next submission of Mr.Makhija, learned counsel for the petitioners is that under the provisions of Foreign Exchange Management (Guarantees) Regulations, 2000 and in particular Regulation (3) thereof, the petitioners could not have executed any such letter of guarantee in favour of respondents without any prior permission of the Reserve Bank of India whereby any of the obligation or liability of the said D.B.Shipping LLC could have been guaranteed by the petitioners. He submits that such guarantee without prior permission of the Reserve Bank of India is specifically prohibited under regulation (3) of the Foreign Exchange Management (Guarantees) Regulations, 2000. In the hearing held on 13th March, 2015, learned counsel however submitted that under Regulation (3), such guarantee itself could not have been executed by the petitioners at all. It is submitted that since the said docu....
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....is privatorum publico juri non derogatur means that private agreements cannot alter the general law. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect. (See Mellis v. Shirley L.B.) What is done in contravention of the provisions of an Act of the legislature cannot be made the subject of an action. 141. Learned counsel for the petitioners also placed reliance on the judgment of Madras High Court in case of Mrs.Shoba Viswanathan (supra) 1996 Madras Law Journal Reports 96 and in particular paragraphs 20, 22, 36, 37, 43 and 47 of the said judgment which read thus :- 20. Submission No. 2: Admittedly, the defendant is a foreign national long before 1981. Plaintiff is also aware of the same. The schedule immovable property which belongs to a noncitizen can be conveyed only after obtaining permission of the Reserve Bank of India. Sec.31(1) of the Foreign Exchange Regulation Act, 1973 (for short, FERA) reads thus:- "No person who is not a citizen of India and no company (other than a banking company) which is not incorporated under any law in force in India shall, except with the previous genera....
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....d also the national interest. 37. The learned counsel for the defendant also brought to our notice a decision of the Delhi High Court reported in Ajit Prashad Jain v. N.K.Widhani and others, A.I.R. 1990 Delhi 42, corresponding (1990) 26 E.C.C.284. Paragraph 26 of the judgment was read before us. In that case it was held that Sec.31 of FERA is not a bar for granting a decree for specific performance and the question whether there was any violation of the Act will arise only at the time of execution of the sale deed. The learned Judge held in the said decision that under Sec.54 of the Transfer of Property Act, an agreement itself will not create an interest in the property and, therefore, the agreement cannot be termed as void and the provisions of Sec.31 of FERA do not bar the grant of relief of specific performance and the question of permission of Reserve Bank of India will arise only at the time of execution. With due respect to the learned Judge, we cannot agree with the view taken by the learned Judge. No Court shall pass a decree which cannot be executed. While exercising the discretion, the Court will also see whether it could pass an executable decree and if, ultimately, t....
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....amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. (2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contraventions or any part thereof, shall be brought back into India or she l be retained outside India in accordance with the directions made in this behalf. Explanation.- For the purposes of this sub-section, "property" in respect of which contravention has taken place, shall include- (a) deposits in a bank, where the said property is converted into such deposits; (b) Indian currency, where the said property is converted into that currency; and (c) any other property which has resulted out of the conversion of that property. 143. Mr. An....
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....nd guarantee for the same. The world is a shrinking place today and commercial transactions spanning across borders abound. We have wondered whether we should be dissuaded for the reason of the transaction for which the appellant Company had stood surety/guarantee being between foreign companies. We are of the opinion that if we do so, we would be sending a wrong signal and dissuading foreign commercial entities from relying on the assurances/guarantees given by Indian companies and which would ultimately restrict the role of India in such international commercial transactions. 144. Learned counsel placed reliance on the judgment of this court in case of Noy Vallesina Engineering Spa (supra) (2006) 5 Bom.C.R.155 and in particular paragraphs 51, 52 and 53 which read thus :- 51. The next challenge to the award on merits is that enforcement of the award will be contrary to the prevalent Foreign Exchange Laws. It is submitted that the respondent had invoked the arbitration clause under ECAAP. In the same arbitration proceedings the Petitioner filed a counter claim, which has been awarded by the arbitral tribunal in favour of the Petitioner. So far as ECAAP is concerned, it has not b....
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....anted conditionally or unconditionally by the Reserve Bank. The submission is that in view of the earlier order of the Government of India dated August 1, 1969 refusing to approve rescheduling of payments the bar of Section 9 will operate and no order for enforcement of the award can be made. The High Court in this regard has placed reliance on the provisions of Section 47(3) of FERA which provides as follows:- "Neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal proceedings being brought in India to recover any sum which, apart from the said provisions and any such term would be due, whether as debt, damages or otherwise, but- (a) the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums; (b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as ....
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....d to enable the defendant to retain the money in his pocket but to control its reaching its destination, namely, the plaintiff" (p.253). 53. It is clear from the above quoted paragraphs of the judgment of the Supreme Court that an award cannot be set aside because at the time of entering into the contract, permission of the Reserve Bank of India was not obtained. If such a permission is necessary, it can be obtained by the party concerned before he receives actual payment. The contention, therefore, has no force and is, therefore, rejected. I have not been pointed out any law which prevents the Arbitral Tribunal from making an award for payment of money to a foreigner pursuant to a contract, which has not been approved by the R.B.I. In the absence of any such provision, no fault can be found with the award on this count. 145. Learned counsel placed reliance on the judgment of this court delivered on 15th September, 2006 in case of Vitol S.A. (supra) Notice No.618 of 2011 in Notice No.618 of 2011 and in particular paragraphs 42 to 45 and 49 which read thus :- 42. It would, therefore, be material to see the precedents under Section 16 itself. The case of Texmaco Ltd. & Anr. Vs. ....
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....on the failure to get FE receivable in India repatriated within the reasonable time after the right to receive the same accrues. It is observed that the reasonable time would depend upon the circumstances of each case and cannot depend upon any general formula. It is observed that if the delay in repatriation was not unreasonable there would be no contravention of Section 10 (1) (a) of FERA. In this case the delay in receiving the amount due is of 7 weeks with a corresponding consideration of payment of lesser amount if the negotiations fructified and the amended contract or new contract was executed. There would, therefore, be no contravention of Section 8 of FEMA. 44. Later in the case of SRM Exploration Pvt. Ltd., Vs. N & S & N Consultants S R O, MANU/DE/2056/2012, considering the provisions of FERA as well as FEMA, the Supreme Court has held that Section 3 of FEMA prohibits dealing with or contravening FE without the general or special permission of RBI. However, the transactions cannot be declared void if they are in contravention thereof. The Court has considered Section 47 (3) of FERA which prohibited entering into any contract or agreement directly or indirectly for e....
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....that the award was enforceable and on that basis a decree in terms of the award was drawn. Renusagar filed an intra-court appeal but that was dismissed as not maintainable. It was from these orders that the matter reached this Court. On behalf of the parties, multifold arguments were made. A three-Judge Bench of this Court noticed diverse provisions, including Section 7(1) (b)(ii) of the Foreign Awards Act which provided that a foreign award may not be enforced if the court dealing with the case was satisfied that the enforcement of the award would be contrary to public policy. 23. Of the many questions framed for determination in Renusagar, the two questions under consideration were: (i) "Does Section 7(1)(b)(ii) of the Foreign Awards Act preclude enforcement of the award of the Arbitral Tribunal, GAFTA for the reason that the said award is contrary to the public policy of the State of New York?", and (ii) "what is meant by public policy in Section 7(1)(b)(ii) of the Foreign Awards Act?". This Court held that the words "public policy" used in Section 7(1)(b)(ii) of the Foreign Awards Act meant public policy of India. The argument that the recognition and enforcement of the....
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....the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality." (emphasis supplied) 25. In Saw Pipes the ambit and scope of the Court's jurisdiction under Section 34 of the 1996 Act was under consideration. The issue was whether the court would have jurisdiction under Section 34 to set aside an award passed by the Arbitral Tribunal, GAFTA which was patently illegal or in contravention of the provisions of the 1996 Act or any other substantive law governing the parties or was against the terms of the contract. This Court considered the meaning that could be assigned to the phrase "public policy of India" occurring in Section 34(2) (b)(ii). Alive to the subtle distinction in the concept of "enforcement of the award" and "jurisdiction of the court in setting aside the award" and the decision of this Court in Renusagar, this Court held in Saw Pipes that the term "public policy of India" in Section 34 was required to b....
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....he same expression "public policy of India" is used both in Section 34(2)(b)(ii) and Section 48(2)(b) and the concept of "public policy in India" is same in nature in both the sections but, in our view, its application differs in degree insofar as these two sections are concerned. The application of "public policy of India" doctrine for the purposes of Section 48(2)(b) is more limited than the application of the same expression in respect of the domestic arbitral award. 28. We are not persuaded to accept the submission of Mr Rohinton F. Nariman that the expression "public policy of India" in Section 48(2)(b) is an expression of wider import than the "public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act. We have no hesitation in holding that Renusagar must apply for the purposes of Section 48(2)(b) of the 1996 Act. Insofar as the proceeding for setting aside an award under Section 34 is concerned, the principles laid down in Saw Pipes would govern the scope of such proceedings. 45. Moreover, Section 48 of the 1996 Act does not give an opportunity to have a "second look" at the foreign award in the award enforcement stage. The scope of inquiry under Section 48 does not....
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....he hearing for pronouncement of the judgment. However, during the course of dictation of the judgment, this court came across the judgment of Division Bench of this court in case of Videocon Industries Limited vs. Intesa Sanpaolo S.P.A. 2014 SCC Online Bom.1276 delivered on 19th July, 2014. This court accordingly placed the matter on board for directions and invited the attention of the learned counsel to the judgment of Division Bench this court on the issue raised by the petitioner whether prior permission of Reserve Bank was mandatory before executing any letter of guarantee in favour of the respondent. This court thereafter heard both the learned counsel on this issue. Mr. Andhyarujina, learned counsel appearing for the respondent strongly placed reliance on the said judgment of the Division Bench and would submit that the law laid down by the Division Bench would squarely applies to the facts of this case. On the other hand, Mr.Makhija, learned counsel appearing for the petitioner would submit that the said judgment is clearly distinguishable in the facts of this case. He submits that the Division Bench has not considered the submission that under regulation (3) of Foreign Exc....
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.... up petition. At the hearing of the winding up petition before the learned Company Judge, Videocon had not abandoned the said defence but at the hearing Videocon was not in a position to substantiate its defence. The fact that the defence was not abandoned would also be clear from the written submissions submitted after conclusion of the arguments and, therefore, this Court may not proceed on the basis that Videocon had abandoned its defence that issuance of Patronage Letter was illegal as in violation of the statutory provisions of FEMA. In view of such illegality, the Bank is not entitled to prosecute the winding up petition, even if it were to be held that the winding up petition is based on the Patronage Letter and not merely on the basis of the decree of the Turin Court. 28. Section 3 of the FEMA by itself does not contain any prohibition against issuance of any letter of guarantee without permission of RBI. However, the statutory regulations being Foreign Exchange Management (Guarantees) Regulations, 2000 provide as under: "Reg. 3 : Save as otherwise provided in these regulations, or with the general or special permission of the Reserve Bank, no person resident in India s....
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....suance of guarantees by an Indian party to step down subsidiary of a joint venture or wholly owned subsidiary under general permission in the following terms: "Issue of guarantee by an Indian Party to step down subsidiary of JV/WOS under general permission: (a) Currently Indian Parties are permitted to issue corporate guarantees on behalf of their first level step down operating JV/WOS set up by their JV/WOS operating as a special Purpose Vehicle (SPV) under the Automatic Route, subject to the condition that the financial commitment of the Indian party is within the extant limit for overseas direct investment. As a measure of further liberalization, it has been decided that irrespective of whether the direct subsidiary is an operating company or a SPV, the Indian promoter entity may extend corporate guarantee on behalf of the first generation step down operating company under the Automatic Route, within the prevailing limit for overseas direct investment. Such guarantees will have to be reported to the Reserve Bank in Form ODI, as hitherto, through the designated AD concerned. (b) Further, it has also been decided that issue of corporate guarantee on behalf of second generati....
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....con on 5 June 2007 was within its permissible financial commitments would be a question of fact or at the most a mixed question of law and fact. It is, therefore, not open to Videocon now to contend that even after having abandoned the defence before the learned Company Judge, it is still entitled to raise such a defence on the ground that it is a pure question of law. As indicated above, neither in the affidavit in reply nor at the hearing before the learned Company Judge, Videocon had given any justification for raising its defence that issuance of the Patronage letter in 2007 was in breach of the statutory requirements or that it was not within its financial commitments. Since Reserve Bank itself had permitted issuance of such guarantees for the step down subsidiaries directly by Indian party, it cannot be said that there was any breach of any statutory requirements, much less any inherent illegality. 34. In any view of the matter, it is also necessary to know that Videocon had never contended in any of its correspondence between 2007 till giving reply to the statutory notice that the Patronage Letter was issued in contravention of the provisions of FEMA or in breach of any ot....
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....14 SCC Online Bom.1276 makes it clear that the Division Bench had considered the similar issue in the said judgment. The appellant before the Division Bench had issued a patronage letter which was in the nature of a deed of guarantee. The respondent in the said proceedings had filed a winding up petition against the appellant based on such deed of guarantee against the appellant. One of the issue raised by the appellant in those proceedings was that the said letter of guarantee patronage letter was issued in breach of the statutory provisions under the Foreign Exchange Management Act, 1999 and the said Foreign Exchange Rules 2000, no such letter of guarantee could have been enforced by the respondent. Considering these arguments and the issue raised by the parties, the Division Bench of this court has after dealing with section (3) of FEMA and also regulation 3 of the Foreign Exchange Management (Guarantees) Regulation, 2000, has categorically held that the word "or with the general or special permission of Reserve Bank" cannot be construed as prior permission of the Reserve Bank. It is held that where the Regulations contemplate that prior permission or prior approval of the Reser....
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....ught to his notice that even such letter of guarantee could not have been executed at all and the same was in violation of the provisions of the said Foreign Exchange Management (Guarantees) Regulation, 2000 is concerned, in my view the petitioner had never raised such issue at any stage earlier. Be that as it may, the petitioner not having raised any such objection for last several years after executing the letter of guarantee in favour of the respondent and was fully aware of the provisions of Indian law and had acted upon such letter of guarantee cannot be allowed to raise such issue at this stage. I am thus not inclined to accept the submission of Mr.Makhija, learned counsel that no such guarantee could have been executed by the petitioner at all under any of the provisions of the said Foreign Exchange Management (Guarantees) Regulation, 2000. 154. In case of Noy Vallesina Engineering Spa (supra) (2006) 5 Bom.C.R.155 while dealing with the provisions of Foreign Exchange Regulations Act this court has considered a similar situation and has held that the award cannot be set aside because at the time of entering into the contract, permission of the Reserve Bank of India was not o....
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....ognition and enforcement of a foreign award. It is held that merely because a monetary award has been made against an Indian entity on account of its commercial dealings, would not make the award either contrary to the interests of India or justice or morality. In my view the said judgment in case of Penn Racquet Sports (supra) squarely applies to the facts of this case. I am in agreement with the views expressed by the Delhi High Court. 158. Supreme Court in case of Renusagar Power Co. Ltd. (supra) AIR 1985 SC 1156(1) has held that since the Foreign Awards Act was concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression 'public policy' in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. ....
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.... expressed by the Delhi High Court. In my view the petitioner not having raised any objection about the validity and enforcement of such guarantee at any point of time before filing objection before the learned arbitrator and had acted upon such guarantee, if such objection is allowed to be raised at such belated stage, it will be contrary to the principles laid down by the Supreme Court and by Delhi High Court. I am thus not inclined to accept this submission of the learned counsel for the petitioner. 160. In so far as judgment of Supreme Court in case of Mannalal Khetan & Others (supra) (1977) 2 SCC 424 relied upon by the learned counsel for the petitioner is concerned, it is held by the Supreme Court that a contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void, because such a penalty implies a prohibition. It is held that in every case where the statute inflicts a penalty for doing an act, though the act be not prohibited, yet the thing is unlawful, because it is not intended that a statute would inflict a penalty for a lawful act. In my view since Foreign Exchange Management (Guarantees) Regulation, 2000 does no....