1995 Supreme(Bom) 136

IN THE HIGH COURT OF BOMBAY
P.S. Patankar, J.
Mukesh H. Mehta and others.... Petitioners.
Versus
Harendra H. Mehta and others.... Respondents.
Arbitration Petition No. 102 of 1991, decided on 24-2-1995.
Advocates appeared :
Janak Dwarkadas i/b Wadia Gandhy Co., for petitioners.
H.J. Thakkar with Shyam Diwan P.K. Shroff i/b P.K. Shroff Co., for respondents.

Headnote:FOREIGN AWARDS (RECOGNITION & ENFORCEMEET)

       ACT, 1961 Section 2-Non-Resident Indians jointly carrying on business in USA & India.

       They resorting to arbitration for settling disputes regarding business. Arbitrators award in USA. It a foreign award under Section 2 of the Act,

       1961.

       Sections 2, 5, &7-Meaning of Commercial relations.

       Settlement award between two NRI brothers regarding business and properties in India and in U.S.A. cannot be challenged by saying that it domestic matter but not commercial relation under the Act.

       Section 2 (a) and (b)-International business transactions-Two nationals of same country entitled to enter into for attracting the Act.

       The Counsel for the respondents contended that said clause (b) of Section 2 of 1937 Act is not incorporated in Section 2 of 1961 Act because it was well understood that parties should be of two different States as the Act was meant for promotion and smooth running international trade. The object clause of the Act 1961 shows that it is to facilitate smooth running and promotion of international trade or business. But it can easily be envisaged that parties belonging to one State may carryon such international business or trade in some other State and dispute may arise between them in that respect. Specifically to remedy this, the definition is suitably structured first in the New York Convention of 1958 and same is adopted in Act of 1961. If that was not so, suppose in this case the businesses are carried on by the parties in U.S.A. only and properties are also acquired only, then they would be required to come to this country only for resolution of their disputes. This requires to be eschewed. Hence it is held that it is not necessary for treating the Award as a foreign award that the parties should belong to two different states or be subject to the two different national jurisdictions.

       Sections 5 and 7-Income Tax Act, 1961, Sections 269-UA(f)-Foreign Exchange Regulation Act, 1973, Sections 19(1)(b)(c) and 47(3)-Scope of.

       Section 269 UC deals with restrictions on transfer of immovable property. Section 269 UC (1) provides that no transfer of any immovable property worth more that Rs. 10 lacs shall be effected unless the agreement for transfer is entered into between the Transferor and Transferee in accordance with the sub-section (2). Atleast 4 months before the intended transfer, under sub-section (3) the said agreement is required to be submitted to appropriate authority. Under Section 269 UD(1) the appropriate authority can order purchase of the same by Central Government as provided therein . There is first proviso so it which says that no such order shall be passed after the expiration of a period of two months from the end of the month in which the statement (form) is received by the appropriate authority (after 1-6-1993-3 months as per second proviso) Section 269 UE (1) provides that on the date of such order, the property vests in the Central Government. Section 269 UA (b) defines apparent consideration in relation to transfer by way of sale or exchange or lease.

       Section 269 UA(f) defines transfer. It is pointed out that for implementation of the award shares in the Co-operative Society of Urvashi building standing in the joint names of the parties shall be required to be transferred to the names of petitioner Nos. 1 and 2 and hence it is covered by the definition of transfer, It is not possible to accept that any exchange as such is taking place between the parties in this case. Nothing specific is transferred in consideration. There is no surrender of interest for consideration in the said flat. There is therefore no question of black money being generated. It is a part or larger settlement between the parties. The fiat already stands in the name of petitioner Nos. 1 and 2 and respondent Nos. 1 and 2. The effect of implementation of the award would be the name of the respondent No. I and 2 would b. deleted, It cannot come within the Section 269(UA)(f)(ii). It would be under the award of Arbitrator and judgment of the Court and not by volition of the parties. Even assuming that it amount to transfer, the passing of the judgment in terms of the award would not be against the Public Policy of Chapter XXC. The award is passed and judgment can be given in view of Section 6(1) of Arbitration Act, 1951 (sic). Even the decree following under Section 6(2) can be made subject to the interested party following the procedure under Chapter XXC.

       Further it will not be contrary to the Public Policy and the award cannot be said to be enforceable in view of Section 7(1)(b)(ii). It is well accepted that Public Policy is a vague term and of uncertain import. It is necessary to invoke it in clear and incontestable cases of harm to the public.

       The enforcement of a foreign award would be refused on the ground and it is contrary to Public Policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interest of India; or (iii) justice or morality. The Court should be anxious in not defeating the foreign award by finding out some defect and then equating it with the Public Policy of the country. The enforcement should not be denied on this spacious ground because the award is not acceptable to the party against whom enforcement is sought, otherwise this would be defeating the very object of New York Convention 1956 and Act of 1961. Therefore, first there is no violation of Chapter XXC of the Income-tax Act and in any case it cannot be said that the award is against the Public Policy of this country and hence enforceable. The enforcement of the award cannot be defeated on that ground.

       In case of transfer of shares in Indian Companies and for holding or acquiring or disposing of foreign securities by NRI, under Section 19(1)(b) read with Section 19(1)(c) and Section 19(5), prior permission of Reserve Bank of India is required and as the said permission is not obtained the award is against the Public Policy and void. In the affidavit in rejoinder it has been pointed out that such point was raised before State of New York. Country of Nassau, USA Court and before the Court of appeals of State of New York, but was negative and therefore the respondents cannot raise such contention It is also pointed out that appropriate permission shall be obtained by the petitioners at an appropriate stage and in any case it cannot be said that award is against the Public Policy. The necessary permission can be secured before the execution of Award and prior permission is not necessary. In fact I find that the judgment of the Apex Court reported in AIR 1986 SC 1370 considered the scope of Section 19(1)(b) also and came to the conclusion that expression "prior permission" is not used in Section 24. The expression general and special permission does not mean prior permission. Thus provision under Section 29(1)(b) and Section 19(1)(b) is the same. Section 47(3) also used the phrase permission and not prior permission.

       Sections 269-UA (f).

       See Foreign Awards (Recognition & Enforcement) Act, 1961-Sections 5 and 7.