IMPORTANT POINT
The foreign award made by the arbitrators or decree passed pursuant to it does not call for any modification as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for the Court to interfere with the same.

Headnote:(i) Foreign Awards (Recognition and Enforcement) Act, 1961-Section 2(a) read with Paras 1 and 2 of Article II of the Schedule-Enforcement of foreign award-Dispute-Whether there is an agreement in writing between the parties in this regard ? (Yes).
       Held : What needs to be understood in this context is that the agreement to submit to arbitration must be in writing. What is an agreement in writing is explained by para 2 of Article II. If we break down para 2 into elementary parts, it consists of four aspects. It includes an arbitral clause (1) in a contract containing an arbitration clause signed by the parties, (2) an arbitration agreement signed by the parties, (3) an arbitral clause in a contract contained in exchange of letters or telegrams, and (4) an arbitral agreement contained in exchange of letters or telegrams. If an arbitration clause falls in any one of these four categories, it must be treated as an agreement in writing. In the present case, we may advert to the fact that there is no letter or telegram confirming the contract as such but there is certain correspondence which indicates a reference to the contract in opening the letters of credit addressed to the Bank to which we shall presently refer to. There is no correspondence between the parties either disagreeing with the terms of the contract or arbitration clause. Apart from opening the letters of credit pursuant to the two contracts, the appellant also addressed a telex message on 23.4.1990 in which there is a reference to two contracts bearing Nos. S-142 and S-336 in which they stated that they want to invoke force majeure and the arbitration clauses in both the contracts which are set forth successively and thus it is clear that the appellant had these contracts in mind while opening the letters of credit in the bank and in addressing the letters to the bank in this regard. May be, the appellant may not have addressed letters to the respondent in this regard but once they state that they are acting in respect of the contracts pursuant to which letters of credit had been opened and they are invoking the force majeure clause in these two contracts, it obviously means that they had in mind only these two contracts which stood affirmed by reason of these letters of credit. If the two contracts stood affirmed by reason of their conduct as indicated in the letters exchanged, it must be held that there is an agreement in writing between the parties in this regard. (Para 6)
       (ii) Arbitration Act, 1940-Section 33-Foreign award-Prayer for declaration that there is no valid agreement between the parties and that arbitration before the London Metal Exchange was void-Can appellant challenge the existence of an arbitration agreement between the parties on the ground that such an agreement was not covered by the New York connection ? (No).
       Held : In the light of this discussion, we are firmly of the view that the appellant cannot any longer challenge the existence of an arbitration agreement between the parties and such an agreement was not covered by the New York Convention. This Court in Renusagar s case (supra), examined the scope of enquiry in proceedings for recognition and enforcement of foreign award under the Act and after referring to the concepts in private international law, Geneva Convention of 1927 and the New York Convention on Arbitration of 1958, held that it is limited to the grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. (Paras 10 & 11)
       (iii) Foreign Award-Prayer for interference on ground of force majeure-Whether sustainable ? (No) -Whether interest awarded by arbitrators needs any interference ? (No) -Whether award needs any modification? (No)-Result-Appeal dismissed.
       Held : The view taken by the arbitrators on the effect of the force majeure clause in the light of the Reserve Bank of India directives is a plausible view and cannot be ruled out as impossible of acceptance, and, therefore, question of substituting our view for that of the arbitrators would not arise. Question of public policy would have arisen if there was complete restriction on the implementation of the terms of the contract. There was no such restriction imposed. But, on the other hand, certain restrictions were imposed which could have been worked out by resorting to appropriate measures in terms of the contract as held by the arbitrators. In that view of the matter, we do not think any question of public policy as such arises for consideration in a situation of this sort. The argument is almost a red-herring and does not constitute a valid reason for interference with the award. Therefore, we reject the contentions raised on behalf of the appellant. It is lastly contended that the interest awarded by the arbitrators needs interference and gave a break-up of the details. Interest has been awarded from period prior to reference in 1991 and after reference till termination of the proceedings before the arbitrators, pendente lite and after decree. This Court in Renusagar s case (supra), held that award of such interest after the Interest Act, 1978 is permissible, however, on the facts of the case the High Court not having given a direction to the payment of interest pendente lite did not modify that part of the order. We do not find that it is appropriate to modify the award made by the arbitrators or decree passed pursuant to it as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for us to interfere with the same. The appellant having failed on all points we dismiss this appeal, however, with no order as to costs. (Paras 15 to 18)

JUDGMENT

Rajendra Babu, J.-A contract [bearing No. S. 142] for supply of aluminium rods of 2400 metric tones @ 200 MT per shipment every month from January to December 1991 was proposed by the respondent to the appellant on 31.8.1990 containing an arbitration clause. In the letter accompanying the contract, it was stated to sign and return copy for sake of good order. The appellant did not sign nor return the said contract. Reminders were sent in this regard from time to time. On 4.2.1991, letter from the respondent enclosing the amendment to the contract was sent to the appellant but without any result. On 25.2.1991, another contract [bearing No. S-336] was proposed by the respondent to the appellant for supply of 2,000 MT of aluminium rods @ 500 MT per shipment. In the first contract, initially there was no arbitration clause. However, on 18.3.1991, the contract bearing the same number, i.e., S-142, was sent containing the arbitration clause with certain amendment for signature and return of the second copy. But the contract was not signed and sent by the appellant. On the basis of certain irrevocable letters of credit for US$ 243, 250 opened by the appellant, shipments were made in January, February and March 1991. In the meanwhile, a circular was issued on 19.3.1991 by the Reserve Bank of India [for the sake of brevity referred to as RBI ] to all scheduled commercial banks placing restrictions on import of goods. It was followed up by another letter of the same date addressed by the Executive Director, RBI to the Chairmen of all commercial banks explaining the circulate dated 19.3.1991 in relation to the foreign exchange reserve. On 22.4.1991, one more circular was issued by the RB1 modifying the margins for opening letters of credit as prescribed by circular dated 19.3.1991. The appellant sent a telex on 30.4.1991 to the respondent to the effect that severe restrictions had been imposed by the RBI due to unprecedented foreign exchange crisis and the RBI had not cleared the application for letter of credit. Therefore, the appellant wanted to invoke the force majeure clause cancelling April shipment for both the contracts. The respondent wrote to the appellant on 30.5.1991 to the effect that they had closed their position and initiated arbitration proceedings with reference to both the contracts. When the appellant did not respond to the same, letter was received by the appellant from London Metal Exchange appointing the second arbitrator in terms of the arbitration clause.

2. On 30.8.1991, a suit [bearing No. 2963/91] was filed by the appellant seeking a declaration that there is no valid agreement between the parties and that arbitration before the London Metal Exchange was void. The learned Single Judge of the Bombay High Court did not grant any interim order and recorded a statement that the appellant would participate in the arbitration proceedings under protest. The appeal filed against it stood dismissed by an order on 18.12.1991. In the meanwhile, suit was treated as a petition under Section 33 of the Arbitration Act, 1940 which stood dismissed on the ground that the arbitration clause bound the parties. The arbitrators published an award on 29.7.1992 awarding damages amounting to US$ 676,000 including pre-award interest but did not award post-award interest. The appellant filed an appeal to the Appeal Board of the London Metal Exchange seeking to set aside the award as also dispensation of deposit. Since the London Metal Exchange rejected the request for waiver of deposit, the appeal could not be pursued. Thereafter, a petition was filed in the Bombay High Court by the respondent under the Foreign Awards (Recognition & Enforcement) Act, 1961 [hereinafter referred to as the Act ] for enforcement of the award. The High Court allowed the petition and granted the certificate under Article 134-A of the Constitution. The High Court, while disposing the petition, awarded interest @ 15 per cent for the post-

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2001 Supreme(SC) 1195

IMPORTANT POINTThe foreign award made by the arbitrators or decree passed pursuant to it does not call for any modification as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for the Court to interfere with the same.

IMPORTANT POINT
The foreign award made by the arbitrators or decree passed pursuant to it does not call for any modification as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for the Court to interfere with the same.