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2012 Supreme(Bom) 1207
High Court of Judicature at Bombay
ANOOP V. MOHTA
Sporting India Limited
Versus
HDFC Bank Limited
ARBITRATION PETITION NO. 1443 OF 2010 WITH NOTICE OF MOTION NO. 1483 OF 2011
Decided on : 06-07-2012
For the Petitioner:Sanjiv Bhansal with Vaibhav Bajpai i/by R.R. Mishra, Advocates.
For the Respondent:Zubin Behram Kamdin with Ms. Shaneen Parikh i/by M/s. Amarchand & Mangaldas & S.A. Shroff & Co., Advocates.
The main legal point established is that valid and binding agreements, even if unilaterally signed, can be enforced, and objections raised to avoid liabilities must be consistent and supported by evidence.
Headnote:
Arbitration Act - Challenge to Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - ISDA Master Agreement - Sections 9 and 11 of the Arbitration Act - Jurisdiction of the Arbitrator - Validity of Agreements and Documents
Fact of the Case:
The Petitioner challenged an Arbitral Award passed by the sole Arbitrator under Section 34 of the Arbitration Act. The dispute arose from derivative transactions and credit exposure between the Petitioner and the Respondent Bank.
Finding of the Court:
The court found that the Arbitrator had jurisdiction to decide the dispute, as there existed valid and binding agreements between the parties. The court rejected the Petitioner's objections regarding the validity of agreements and documents, and upheld the Arbitral Award.
Issues: Validity of agreements, jurisdiction of the Arbitrator, enforceability of documents, and objections raised by the Petitioner.
Ratio Decidendi: The court held that the Arbitrator had rightly considered the nature of commercial documents and transactions, and found that the agreements were valid and binding. The court also noted that the Petitioner's objections were inconsistent and contradictory, aimed at avoiding liabilities.
Final Decision: The Petition was dismissed, and the court upheld the Arbitral Award. The Notice of Motion was disposed of accordingly.
The Petitioner is under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, “Arbitration Act”). The Petitioner has challenged the Arbitral Award dated 30 September 2010 passed by the sole Arbitrator Hon'ble Mr. Justice A.M. Ahmadi (Retired Chief Justice of India).
2. The operative part of the Arbitral Award is as under:-
“The Respondent do pay to the Claimant-HDFC the Principal sum of Rs.5,93,53,892 together with interest of Rs.1,23,37,967 and cost of Rs.2,31,364.58 (if not already paid) on or before 31st December 2010 failing which it will pay interest on the Principal sum of Rs.5,93,53,892 at the rate of 8% per annum from 21st July 2010 until payment/recovery. Having regard to the total number of sittings held I award the claimant cost of the arbitration at Rs.10,00,000 (ten lacs only). The Respondent is given three months time to satisfy the Award, failing which it will pay interest from 21st July 2010 until payment/recovery at the rate of 8% p.a. Award accordingly.
This award is typed on computer and is printed on stamp paper provided by each party and the original so printed is given to each party and I have retained a typed copy thereof for my record.
I am deeply grateful to the learned Counsel and the team of solicitors of both parties for their valuable assistance throughout the hearing.”
3. After due negotiations in January-February 2007 and considering the commercial objects, the Respondent Bank sanctioned a credit limit on 13 March 2007 of Rs.1 Crore for trading in foreign exchange derivative products. The same was enhanced by letter dated 28 August 2007 upto Rs.5 Crores. For the same, alleged undated/blank and unfilled “International Swap Dealers' Association Master Agreement” (for short, “ISDA”) and the schedule annexed to the same, the commercial documents were signed by the Petitioner's Managing Director, at Ludhiyana.
4. On 2 July 2000, the Petitioner company under the advice and instructions of the Bank entered into a one touch option trade/transaction in USD/CHF for imports to the tune of USD 5 million with knock in/knock out levels, for tenure of about one year. Another similar transaction was entered on 6 September 2007. On 20 December 2007, declarations dated 2 July 2007 and 6 September 2007 were also submitted. The Petitioner alleged that because of undue influence he singed the anti dated declarations.
5. The Petitioner received a letter from the Bank on 25 November 2011, whereby it was informed to the Petitioner that there was breach of knock in level of 1.10 on 23 November 2007 and the obligation of the Petitioner to buy the foreign currency at the specified levels on due date.
6. On 29 February 2008, the Respondent Bank conveyed to the Petitioner that the total credit exposure for the two transactions, in question, as on 29 February 2008 was INR 6.63 Crores as against the limit of INR 5 Crores sanctioned to the Petitioner. The Petitioner was accordingly called upon to arrange a fixed deposit of INR 2.88 Crores.
7. The relevant Arbitration Clause 13(b) of the ISDA Master Agreement in question is as under:
“In the event of disputes, differences, claims and questions between the parties hereto arising out of this Agreement or the Schedule hereto, the same shall be referred to the arbitration of a sole arbitrator to be appointed by the Chairman/Managing Director of Party A [the Claimant]. The arbitration shall be held in accordance with the Arbitration and Conciliation Act, 1996, or any statutory modification or reenactment thereof for the time being in force, and shall be held in Mumbai and shall be conducted in the English Language.
The award of the arbitrator shall be final, conclusive and binding upon the parties.”
8. Admittedly, the Petitioner invoked Section 9 of the Arbitration Act and Respondent Bank got ex-parte injunction order dated 12 April 2008. By letter dated 21 May 2008, the Respondent addressed a letter to sole Arbitrator for Arbitration. The willingness was comm
