TaxTMI 
TaxTMI 
2020 (6) TMI 117
X X X X Extracts X X X X
X X X X Extracts X X X X
....ho is the appellant in the other Civil Appeal No.2564 of 2006. After all consignments were delivered, payments had been made in accordance with the contract. However, a dispute arose between the parties as regards the quantity of dry weight of copper concentrate delivered. Clause 14 of the agreement contained a two-tier arbitration agreement by which the first tier was to be settled by arbitration in India. If either party disagrees with the result, that party will have the right to appeal to a second arbitration to be held by the ICC in London. The appellant M/s Centrotrade Minerals and Metals Inc. (hereinafter referred to as "Centrotrade"/ "the appellant") invoked the arbitration clause. By an award dated 15.06.1999 the arbitrator appointed by the Indian Council of Arbitration made a Nil Award. Thereupon, Centrotrade invoked the second part of the arbitration agreement, as a result of which Jeremy Cook QC, appointed by the ICC, delivered an award in London, dated 29.09.2001, in which the following amounts were awarded: "27. For the above reasons I THEREFORE AWARD and ADJUDGE that (1) HCL do pay Centrotrade the sum of $152,112.33, inclusive of interest to the dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....either could be enforced, as a result of which the appeal was allowed and the judgment of the learned single Judge was set aside. 5. At this juncture, the matter came to a Division Bench of this Court. Two separate judgments were delivered by S.B. Sinha, J. and Tarun Chatterjee, J. reported in Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245. After setting out the facts of the case, S.B. Sinha,J. held that a two tier clause of the kind contained in clause 14 of this agreement is non est in the eye of law and would be invalid under Section 23 of the Indian Contract Act. In this view of the matter, the foreign award could not enforced in India and Centrotrade's appeal was therefore dismissed, the appeal filed by HCL being allowed. Tarun Chatterjee, J. set out four questions in paragraph 134 as follows: "134. We have heard Mr Sarkar, learned Senior Counsel appearing for Centrotrade and Mr Debabrata Ray Choudhury, learned Senior Counsel for HCL. I have also examined the entire material on record including the arbitration agreement, the awards and judgments of the Division Bench as well as the learned Single Judge. Before us, the following issues....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Registry of this Court shall place the matter before the Hon'ble the Chief Justice for constitution of a larger Bench. The decisions rendered by Sinha and Chatterjee, JJ. are reported as Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. [Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245]" Paragraph 5 of the aforesaid judgment set out the two questions that arose in this case as follows: "5. The issues that have arisen for our consideration, as a result of the difference of opinion between the learned Judges, are as under: (1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India? (2) Assuming that a two-tier arbitration procedure is permissible under the laws of India, whether the award rendered in the appellate arbitration being a "foreign award" is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade? If so, what is the relief that Centrotrade is entitled to? For the presen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dgment in Vijay Karia (supra), he relied upon the approach to a Section 48 proceeding by quoting from Redfern and Hunter on International Arbitration 6th Edn. and Merkin and Flannery on the Arbitration Act, 1996. 10. Shri Harin P. Raval, learned senior counsel appearing on behalf of HCL, has taken a preliminary submission that the only point of difference between S.B. Sinha,J. and Tarun Chatterjee,J. was on whether the two-tier arbitration clause was valid in law. Once that point had been answered, the question of being unable to present one's case, not having been decided by S.B. Sinha, J., was not referred to the larger bench as there was no difference of opinion between the learned Judges on this aspect and therefore this aspect cannot now be adjudicated upon. Even otherwise, he argued, basing his submissions on a list of dates and a paper book of documents filed before this Court for the first time, to show that as a matter of fact once the arbitrator had extended time, the last extension being till 12.09.2001, he ought to have allowed further time in which, apart from legal submissions furnished, documents could have been furnished in support of HCL's case. This is particul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a clear timetable. When no Defence Submissions or supporting evidence was served by HCL within the time prescribed, I sent them a fax on 30th July 2001,giving them one last opportunity to inform me by return of any intention on their part to put in a Defence and to seek an extension of time for doing so. 8. Following a further fax on 9th August 2001, in which I informed the parties that I was proceeding with the Award, on 11th August I received a fax from Fox & Mandal requesting an extension of time of one month to put in a defence. On 16th August I ordered that any submissions in support of an application for an extension of time for a defence and any submissions on the substantive merits of the dispute, together with any evidence relied on in relation to the application and any submissions should be received by me by 31st August 2001, in the absence of which I would not give them any consideration. On 27th August Fox & Mandal sought a further 3 weeks' extension of time for making their submissions and serving supporting evidence. I allowed a final extension for these submissions and evidence until 12th September 2001. Seventy - five pages of submissions were received by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the arbitrator does not militate against the arbitration agreement. I find that the petitioner approached the ICC International Court of Arbitration on February 22nd, 2000. The respondent filed a suit in the Court of Civil Judge, Junior Division, Khetry on March 28th 2000; it wanted to stop the second arbitration in terms of the arbitration agreement. The arbitrator was appointed on June 7th, 2000. Till August 2001 the respondent maintained that the second part of the arbitration agreement being against the public policy of India, the arbitration through the ICC International Court of Arbitration was not permissible. On this ground the respondent refused to participate in the arbitral proceeding. It took the matter upto the Apex Court. Ultimately when it failed to obtain any order to stop the arbitration, it filed its submissions running into seventy-five pages. Though the papers reached the arbitrator beyond the stipulated date, he has considered such submissions. He, however, did not find any merit in the case made out by the respondent. The arbitrator has recorded that at every stage he consulted the procedural aspects with the solicitors representing the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 166. It is true, in his award, Mr Jeremy Lionel Cooke, the ICC arbitrator has noted that he was appointed by ICC on 7-6-2000 and that HCL refused to participate in the arbitral proceedings on the ground that the second arbitration clause in the contract was null and void. He directed Centrotrade and HCL to file submissions and supporting evidence through orders dated 20-12-2000, 19-1-2001 and 3-5-2001. However, HCL did not comply with these orders. On 30-7-2001, he sent a fax to HCL to find out whether they intended to file their defence. He sent a further fax on 9-8-2001 informing them that he was proceeding with the award. (emphasis supplied) Then on 11-8-2001, the ICC arbitrator received a reply seeking extension of time. He granted time till 31-8-2001. He received another request from HCL's representatives on 27-8-2001 for further extension of time. He granted extension till 12-9-2001. He received the first set of submissions filed by HCL, without supporting evidence, on 13-9-2001. He considered those submissions and took them into account while making the award. He has further recorded in his award that: "I made plain in my orders that no further material provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erall picture of the circumstances and the delays, refusal of the arbitrator to consider the material received by him after 13-9-2001 and before 29-9-2001, seems to be based on a frivolous technicality. The arbitrator ought to have considered all the material received by him before he made the award on 29-9-2001. Considering the decisions in Hari Om Maheshwari v. Vinitkumar Parikh [(2005) 1 SCC 379] and Minmetal Germany GmbH v. Ferco Steel Ltd. [ (1999) 1 All ER (Comm) 315] it is true that where a party is refused an adjournment and where it is not prevented from presenting its case, it cannot, normally, claim violation of natural justice and denial of a fair hearing. However, in the light of the delays, some of which were not attributable to HCL's conduct, it was only fair to excuse HCL's lapse in filing the relevant material on time. Therefore, it can be said that HCL did not get a fair hearing and could not effectively present its case. 169. For the reasons aforesaid, I am of the view that HCL could not effectively present its case before the ICC arbitrator and therefore enforcement of the ICC award should be refused in view of Section 48(1)(b) of the Act. Accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the said award in the country of its origin, must then be able to get such award recognised and enforced in India as soon as possible. This is so that such person may enjoy the fruits of an award which has been challenged and which challenge has been turned down in the country of its origin, subject to grounds to resist enforcement being made out under Section 48 of the Arbitration Act. Bearing this in mind, it is important to remember that the Supreme Court's jurisdiction under Article 136 should not be used to circumvent the legislative policy so contained. We are saying this because this matter has been argued for several days before us as if it was a first appeal from a judgment recognising and enforcing a foreign award. Given the restricted parameters of Article 136, it is important to note that in cases like the present - where no appeal is granted against a judgment which recognises and enforces a foreign award - this Court should be very slow in interfering with such judgments, and should entertain an appeal only with a view to settle the law if some new or unique point is raised which has not been answered by the Supreme Court before, so that the Supreme Court judgment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... an adverse inference being drawn against the party that does not produce the document in question in compliance with an order. The tribunal will of course consider all the relevant facts and circumstances, and the submissions by the parties before the tribunal decides whether or not to draw an adverse inference for the non-production. Dongwoo also had the liberty to apply to the High Court to compel production of the documents under s 13 and 14 of the IAA, if it was not content with merely arguing on the question of adverse inference and if it desperately needed the production by M+H of those documents for its inspection so that it could properly argue the point on drawing an adverse inference. However, Dongwoo chose not to do so. 146. Further, the present case was not one where a party hides even the existence of the damning document and then dishonestly denies its very existence so that the opposing party does not even have the chance to submit that an adverse inference ought to be drawn for non-production. M+H in fact disclosed the existence of the documents but gave reasons why it could not disclose them. Here, Dongwoo had the full opportunity to submit that an advers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 48(1)(b) and cited a Constitution Bench judgment of this Court in Kavalappara Kottarathil Kochuni v. States of Madras and Kerala (1960) 3 SCR 887, for the proposition that the expression "otherwise" cannot be read ejusdem generis with words that precede it. 17. Kochuni's case (supra) was concerned with the constitutional validity of the Madras Marumakkathayam (Removal of Doubts) Act, 1955. Section 2(b) of the aforesaid Act reads as follows: "2. Notwithstanding any decision of Court, any sthanam in respect of which: (b) the members of the tarwad have been receiving maintenance from the properties purporting to be sthanam properties as of right, or in pursuance of a custom or otherwise" The Constitution Bench then held: "The word "otherwise" in the context, it is contended, must be construed by applying the rule of ejusdem generis. The rule is that when general words follow particular and specific words of the same nature, the general words must be confined to the things of the same kind as those specified. But it is clearly laid down by decided case that the specific words must form a distinct genus or category. It is not an inviolable rule of law....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rge number of judgments referred to in Vijay Karia (supra). Kochuni's case (supra) dealing with an entirely different Act with a different object cannot, therefore, possibly apply to construe this word in the setting in which it occurs. 19. As a matter of fact, three earlier judgments of this Court, all under the Arbitration Act, 1940, are also instructive. The ground on which a domestic award could be set aside under Section 30 of the 1940 Act, inter alia, was if the arbitrator misconducted himself or the proceedings. It will be seen that "misconduct" as a ground for setting aside an award is conceptually much wider than a party being unable to present its case before the arbitrator, which is contained in Section 48(1)(b). Thus, in Ganges Waterproof Works (P) Ltd. v. Union of India (1999) 4 SCC 33, this Court was faced with the legality and validity of the arbitration proceedings, three grounds being raised as follows: "2. Challenge to the legality and validity of the arbitration proceedings has been laid on three grounds: firstly, that the claimant-Union of India (respondent herein) filed an additional statement accompanied by documents before the arbitrator on 11-8-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt. That was not done. No timely protest was raised before the arbitrator. The hearing was concluded on 11-8-1982 and the award was made on 23-8-1982. During these 12 days also, the petitioner-Company never urged before the arbitrator that submissions on its behalf were not permitted to be made by the arbitrator. The learned Single Judge, as also the Division Bench, have arrived at a finding that the plea was an afterthought and certainly not substantiated. We also do not find any reason to take a view different from the one taken by the High Court." 20. In Sohan Lal Gupta v. Asha Devi Gupta (2003) 7 SCC 492, this Court dealt with the arbitrator misconducting the proceedings as follows: "27. The arbitrator, as appears from the minutes of the meeting, proceeded only on the documentary evidence. No party appears to have presented oral evidence. Thus, the question of cross-examination of the witnesses appearing on behalf of the other parties did not arise. Submissions must have been made by the parties themselves. Ghanshyamdas Gupta does not say that he had difficulty in appearing on 15-6-1976 or any subsequent date and he had asked for an adjournment. Even otherwise, a p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out that in Reference Case No. 313 of 1995 pertaining to Deepa Jain the evidence had already concluded and the explanation given by the respondent for not leading evidence on 10-5-1999 was frivolous and the arbitrators rightly did not entertain a prayer for granting a further opportunity for leading evidence. Such a denial of a further opportunity by the arbitrators would not be a ground contemplated under Section 30 of the Act to set aside the award. Hence, the courts below have gone beyond the scope of Section 30 of the Act while allowing petitions to set aside the arbitration awards." The learned Single Judge's finding in the aforesaid case, which was accepted by the Division Bench judgment on the facts of the case, is set out in paragraph 12 of the said judgment as follows: "12. It is the above award that was challenged under Section 30 of the Arbitration Act, 1940 before the learned Single Judge by the respondent which came to be allowed by the learned Single Judge. While doing so learned Single Judge observed: "the cross-examination of M/s D. Jain and Co. was over in 1997, the cross-examination of witness examined in Shri Maheshwari's reference was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the subsection contemplates that the enforcee has been prevented from presenting his case by matters outside his control, which will normally cover the case where the procedure adopted has been operated in a manner contrary to the rules of natural justice. In Kanoria v Guinness [2006] EWCA Civ 222 Lord Phillips CJ held in the Court of Appeal that, on the ordinary meaning of section 103(2)(c), a party to an arbitration is unable to present his case if he is never informed of the case he is called upon to meet. He referred to the statements in Minmetals referred to above with approval. xxx xxx xxx 34. The general approach to enforcement of an award should be pro-enforcement. See eg Parsons & Whittemore Overseas Co Inc v Société Générale 508 F 2d 969 (1974) at 973: "The 1958 Convention's basic thrust was to liberalize procedures for enforcing foreign arbitral awards ... [it] clearly shifted the burden of proof to the party defending against enforcement and limited his defences to seven set forth in Article V." In IPCO (Nigeria) v Nigerian National Petroleum [2005] 2 Lloyd's Rep 326, Gross J said at para 11, when consid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an, or to make submissions as to why they needed to get evidence from some other identified person in order to respond to the submissions made. Instead they chose to seek to challenge the decision on the basis that they should be allowed to put in new evidence which covered all issues, not simply in response to Large 3. This decision to challenge on one basis and not the other is a matter which was entirely within VCL's control. 99. In those circumstances too I accept the submission that the admission of Large 3 (or failure to allow responsive evidence) would not have had an impact on the result of the arbitration. The liability decision was based on the earlier reports of Mr Large and other witnesses. That is common ground. In relation to quantum, the arbitrator's reliance upon Large 3 had the effect of reducing the quantum awarded to EEEL (by some EUR9 million). It therefore cannot be said that VCL was prejudiced by Large 3. If it was prejudiced it was by its failure to avail itself of the opportunity given it to respond." (emphasis supplied) 24. Jorf Lasfar (supra), referred to in paragraph 61 of Vijay Karia (supra), is also instructive. This case deals with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Convention requires that "an arbitrator must provide a fundamentally fair hearing." Generica Ltd., 125 F.3d at 1130. "A fundamentally fair hearing is one that `meets "the minimal requirements of fairness" adequate notice, a hearing on the evidence, and an impartial decision by the arbitrator.'" Id. "[P]arties that have chosen to remedy their disputes through arbitration rather than litigation should not expect the same procedures they would find in the judicial arena." Id. Essentially, in exchange for the convenience and other benefits obtained through arbitration, parties lose "the right to seek redress from the court for all but the most exceptional errors at arbitration." Dean v. Sullivan, 118 F.3d 1170, 1173 (7th Cir.1997). 28. Consistent with the federal policy of encouraging arbitration and enforcing arbitration awards, the defense that a party was "unable to present its case" raised pursuant to article V(1) (b) of the Convention is narrowly construed. Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier, 508 F.2d 969, 975 (2d Cir.1974). 29. In the instant case, the Court finds that Briggs of Cancun was not "unable to pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dentiary hearing, the proceeding governing the issuance of the Final Award, in an attempt to preserve its right to contest jurisdiction, was futile. Consorcio's withdrawal was thus ineffective to preserve its right to contest jurisdiction or the anti-suit injunction in the appeal of the Partial Arbitration Award or in this action to confirm the Final Award. Given that Consorcio's withdrawal from the arbitration proceeding was unnecessary to preserve its rights Consorcio was not precluded from or unable to present its case. Even if Consorcio's decision to withdraw from the proceeding was taken based on a good faith subjective belief that such action was necessary to preserve its rights on appeal, such a misgiving did not render Consorcio unable to present its case within the meaning of Article V(1)(b). Therefore, Consorcio has not met its burden of proving that Article V(1)(b) applies as a defense." 27. Shri Banerji then referred to a judgment of the Supreme Court of Hong Kong, reported in Nanjing Cereals v. Luckmate Commodities XXI Y.B. Com. Arb. 542 (1996). In paragraph 5 of the judgment the court held: "5. However, it appeared that the Defendants had had ampl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate either the arbitrator's appointment or the arbitral proceedings, which makes it impossible to present one's case, is a ground for refusing enforcement of the award. De Maio maintains that it was unable to present its case because it was given only fourteen days to appoint an arbitrator. [6] "This Court deems that there was no violation of due process as alleged by De Maio, and that one or more missing pages on this issue in the Court of Appeal's decision do not make this decision invalid. Since this is a procedural defect, we can settle the issue directly, independent of whether the lower decision failed to give reasons on this issue, the more so as we deal here exclusively with the interpretation and the application of a procedural provision. [7] "Art. V(1) provides that the party against whom the award is invoked has the burden to prove the ground for refusal of enforcement under letter (b), as well as the other grounds in that paragraph. Further, we must consider that, according to the spirit of the Convention, the recognition of arbitral awards depends on specific requirements which must be interpreted narrowly. [8] "Since in the prese....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een raised earlier, and has been raised by Shri Raval here for the first time. Even otherwise, and even if we were to go by the documents that were submitted to us for the first time by Shri Raval, the fax sent on 20.12.2000 by the arbitrator to the parties is incomplete. Even otherwise, it speaks of issues of jurisdiction and Indian law having to be addressed as a primary question before matters of substance relating to the dispute on the contract. None of this clearly and unequivocally shows that the learned arbitrator sought to take up the plea as to jurisdiction as a preliminary objection which should be decided before other matters. This plea of Shri Raval, being taken here for the first time and for the reasons given by us, is devoid of substance. 31. Shri Raval then argued that HCL was unable to present its case as the learned arbitrator did not heed the stay order of the Rajasthan High Court dated 27.04.2000. First and foremost, the stay order of the Rajasthan High Court was not and could not be directed against the arbitrator - it was directed only against the parties to the proceeding. Secondly, the learned arbitrator initially began the proceedings, after the green si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugust 2001, it may be stated that respondent did not participate in the arbitral proceedings, even though invited to do so. It is only on 09.08.2001, when the learned arbitrator informed the parties that he is proceeding with the award, that on 11.08.2001, the learned arbitrator received a fax from Fox & Mandal, Attorneys for HCL, requesting for an extension of one month's time to put in their defence. This was acceded to by the learned arbitrator on 16.08.2001, giving time upto 31.08.2001. However, on 27.08.2001, Fox & Mandal sought for a further three weeks' extension of time, which was also granted by the learned arbitrator, allowing a final extension of time until 12.09.2001. Despite the fact that the legal submissions running into 75 pages were submitted beyond time, that is only on 13.9.2001, in view of the 11.09.2001 attack in New York, the learned arbitrator received the same and took the same into account despite being beyond time. It was only on 29.09.2001 that the learned arbitrator then passed his award. Given the aforesaid timeline, it is clear that the learned arbitrator was extremely fair to the respondent. Having noticed that the respondent wanted to stall the arbit....