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IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH
B.P. DHARMADHIKARI, A.S. CHANDURKAR, JJ.
Integrated Sales Services Limited - Appellant
Versus
Arun Dev s/o Govindvishnu Uppadhyaya & Ors. - Respondents
Arbitration Appeal No. 3 of 2016 In Misc. Civil Application No. 1319 of 2015
Decided On : 04-01-2017
Under Section 47(1) of the Arbitration and Conciliation Act, the party applying for enforcement of a foreign award is required to produce before the Court amongst other things stipulated therein, such evidence as would be necessary to prove that the award was a foreign award.
The provisions of Section 48(1) of the said Act on the other hand contemplate refusal to enforce a foreign award only if the party against whom it is invoked furnishes to the Court proof that requirements of sub-clauses (a) to (e) therein are satisfied. Thus, while the party applying for enforcement of a foreign award is required to give evidence as would be necessary to prove that the award was a foreign award, the party resisting its enforcement is required to give proof to the Court that the grounds stipulated have been duly made out.
The distinction between evidence and proof is that proof stands on a higher degree or pedestal than evidence. Thus, a party resisting enforcement of a foreign award is expected to furnish proof of a somewhat higher degree and thus casts a greater burden on such party than the burden on the party who seeks enforcement of a foreign award who is only expected to produce necessary evidence. 2010 (1) Mh LJ 547-Referred.
Arbitration & Conciliation Act, 1996 - Section 48-Enforcement of Foreign Award.-Enforcement of a Foreign Award in India cannot be refused merely by pleadings without any proof.
The award has been shown to have been passed after due notice to the parties against whom it was sought to be invoked. This exercise could be undertaken only against non-signatory parties. The non-signatory parties have suffered the award on merits. The signatory to the Representation Agreement has not challenged the award. Though it has been observed by the Delhi High Court in Marina World Shipping Corporation Ltd., (supra) that failure to challenge the foreign award under the applicable law would not preclude a losing party from resisting its enforcement under Section 48 of the said Act, grounds stipulated by Section 48 are required to be made out. From the grounds enumerated in Section 48 of the said Act, it can be clearly gathered that it is the intention of the Parliament to honour private agreements and international adjudication through arbitration.
Effort appears to be to ensure least interference to the extent possible. Hence, the requirement of furnishing proof of specified grounds at the instance of the party seeking avoidance of enforcement of a foreign award. Scope for avoiding enforcement of a foreign award appears to have been kept deliberately narrow. Thus, errors which can be corrected under Delaware law in appeal against such award cannot by themselves constitute grounds to assail the execution of the award under Section 48 of the said Act. The submissions based on subrogation and alleged breach at the instance of DMC MCL being wrongly imputed to all the respondents are without any proof and touch the merits of the findings of the International Arbitral Tribunal.
Arbitration & Conciliation Act, 1996 - Sections 48(1)(a)(b)-Scope of. - Section 48(1)(a) of Act refers to parties to agreement referred to in Section 44 of Act and Section 48(1)(b) makes reference to a party against whom award is invoked.
While Section 48(1)(a) of Arbitration and Conciliation Act refers to parties to the agreement referred to in Section 44 of the said Act, Section 48(1)(b) of the said Act makes reference to a party against whom the award is invoked. the distinction between a party to an agreement and a party against whom the award is invoked is relevant inasmuch as while the provisions of Section 48(1)(a) are relatable to signatories to the arbitration agreement, the object of Section 48(1)(b) is to take within its compass parties against whom the award is sought to be invoked which may include non-signatories to the arbitration agreement.
In other words, a non-signatory to the agreement could also be a party against whom the award is sought to be invoked. thus, enforcement of a foreign award against a party who is a non- signatory to the agreement but a party to the award is also statutorily recognized. The distinction though subtle in nature, the same appears to have been deliberately made to indicate the areas intended to be covered by said provisions.
Arbitration & Conciliation Act, 1996 - Section 48(1)(b)-Enforcement of Foreign Award.-International Arbitral Tribunal has jurisdiction to enforce Foreign Award is India.
In Integrated Sales Services Ltd., Hong Kong v. DMC Management Consultants Ltd., New Delhi, 2016 (6) Mh LJ 195, while considering challenge to the enforcement of a foreign award it was held that Arbitral Tribunals whether domestic of international cannot assume jurisdiction in respect of the subject-matter to be arbitrated and pass an award against non-signatories to the arbitration agreement. In appeal against aforesaid adjudication it was held.
The provisions of Section 48(1)(a) of the Arbitration and Conciliation Act refers to parties to the agreement referred to in Section 44 of the said Act while Section 48(1)(b) refers to a party against whom the award is invoked. If the provisions of Section 48(1)(b) of the said Act are construed to include a party against whom the award is sought to be invoked in contrast with parties to an agreement as referred to in Section 48(1)(a) of the said Act, Section 48(1)(b) contemplates an award being passed against a non-signatory party.
If that be so, the International Arbitral Tribunal in a given case would have the jurisdiction to pass an award against a non- signatory party by applying the alter ego doctrine. In that context, therefore, the International Arbitral Tribunal would have the necessary authority to decide the question of its jurisdiction including the question of existence and validity of an arbitration agreement. To hold otherwise would result in curtailing the scope of the provisions of Section 48(1)(b) of the said Act.
The absence of any provision like Section 16 of the said Act in Part-II of the said Act is, relevant for the purposes of Section 45 of the said Act. In a case where international arbitration takes place outside India and there is no occasion to invoke provisions of Section 45 of the said act, it would not be practically feasible nor desirable to start with a presumption that the jurisdiction of an International Arbitral Tribunal to rule on its own jurisdiction as well as to rule on the existence and validity of an arbitration agreement stands excluded. The International arbitrator could, thus, be the first Judge while deciding the question of its jurisdiction and as regards existence/validity of the arbitration agreement. Moreover, Article 15 of the International Centre for Dispute Resolution Arbitration Rules specifically empowers the Arbitral Tribunal to rule on its own jurisdiction including on the objections with regard to the existence, scope or validity of the arbitration agreement. (2013) 1 SCC 641, Ref., 2016 (6) Mh LJ 195-Reversed.
Arbitration & Conciliation Act, 1996 - Section 48(2)-Enforcement of Foreign Award.-While considering challenge to a Foreign award, review on merits of dispute is prohibited.
It is, however, to be noted that the provisions of Section 48(2) of the said Act have been amended by Act No. 3 of 2016, which amendment has come into force on 23rd October, 2015.
Judicial interpretation of the expression "fundamental policy of Indian law" as laid down in the decisions referred to herein above has now become part of the statutory provision itself. The explanations being clarificatory in nature and for avoidance of doubt, it is obvious that same would have to be treated as being in existence since the enactment of the principal provision itself. Explanation 2 as added now prohibits a review on the merits of the dispute while considering a challenge to the enforcement of a foreign award on the ground that it is in contravention with the fundamental policy of Indian law.
Arbitration & Conciliation Act, 1996 - Section 50(1)(b)-Powers of Appellate Court.-Appellate Court has power to examine whether enforcement of a Foreign Award liable to be refused under Section 48 of Act or not.
The modalities for seeking enforcement of a foreign award as well as grounds on which such enforcement can be refused by the Court have been laid down therein. After the Court arrives at the satisfaction that the foreign award is enforceable under Chapter I, the award is deemed to be a decree of the Court.
The provisions of Section 48 of the said Act now stand judicially interpreted as per various decisions of the Honourable Supreme Court of India to which Court shall refer to a bit later. Suffice it to say that as Section 50(1)(b) of the said Act provides for an appeal from an order of the Court refusing to enforce a foreign award under Section 48 of the said Act, the Appellate Court would be required to examine the challenges to such order in the light of the scope of the provisions of Section 48 of the said Act. While undertaking such exercise, the Appellate Court can examine whether the enforcement of a foreign award deserves to be refused on the touchstone of Section 48 of the said Act or not.
A.S. Chandurkar, J.
1. This appeal filed under Section 50(1)(b) of the Arbitration & Conciliation Act, 1996 [hereinafter referred to as “the said Act”] takes exception to the judgment of learned Single Judge dated 18th April, 2016 in Misc. Civil Application No. 1319 of 2015 to the extent it holds that the Award dated 28th March, 2010 passed by the International Arbitration Tribunal is not enforceable in India against the respondents herein.
Facts
2. On 18th September, 2000, a Representation Agreement was entered into between Integrated Sales Services Ltd. [ISSL], a Company based in Hongkong – the appellant herein and DMC Management Consultants Ltd [DMC MCL], a Company whose principal business address was stated to be at Nagpur. As per this Agreement, ISSL as the Representative was to assist DMC MCL – the Company to sell its goods and services to prospective customers and in consideration thereof, was to receive commission. This Agreement was made subject to laws of the State of Missouri, USA. As per Clause 8(d)(ii) of the Representation Agreement, in case of disputes, the same were to be referred to a sole arbitrator to be appointed by agreement between the parties or failing such agreement, to be appointed according to the rules of the American Arbitration Association. This Agreement was signed by Mr. Terry L. Peteete as Director of ISSL and Mr. Rattan Pathak as Managing Director of DMC MCL. This Agreement, which came into force on 3rd October, 2000, came to be subsequently amended by the parties. As per said amendment, the rates of commission were varied and the amended agreement was to be adjudicated under Hongkong law. This amended agreement was signed by Mr. Terry L. Peteete on behalf of ISSL and Mr. Arun Dev Upadhyaya on behalf of DMC MCL - respondent no.1 herein. Thereafter, there was a further amendment to the Representation Agreement and it was agreed that the first amendment had become null and void and that the original agreement executed between the parties would continue to operate. It was further agreed that the agreement would be subject to laws of the State of Delaware, USA, by amending Clause 8(d)(1) of the Representation Agreement.
3. Thereafter certain disputes arose between the parties. According to the appellant, ISSL had brought two prospective customers, namely Med Quist Transcriptions Ltd. and Assist Med Inc. According to ISSL, the respondent no.1 had formed DMC Global Inc [DMCG] as a Corporation for getting tax advantages. With a view to avoid payment of commission to ISSL, DMC MCL executed contracts with Gemini Bay Consulting Ltd [GBC] and Gemini Bay Transcription Pvt. Ltd [GBT]. On this basis, ISSL invoked the arbitration clause and claimed various reliefs against DMC MCL, DMCG, the respondent no.1 herein, GBT and GBC. In response to the aforesaid proceedings, the respondent no.1 submitted his statement taking the stand that the respondent no.1 was not a signatory to any agreement entered into between DMC MCL and ISSL. It was stated by the respondent no.1 that only in his capacity as a Director of DMC MCL, there was a dealing with ISSL. It was stated that the respondent no.1 could not be identified as “alter ego” of DMC MCL.
4. The arbitration proceedings took place outside India. The Sole Arbitrator on 23rd December, 2009 determined four issues pertaining to jurisdiction of the International Arbitration Tribunal. It was held that the Representation Agreement would be governed by Delaware law. However, the decision with regard to piercing of corporate veil was postponed till the parties led evidence. It was further held that the International Arbitration Tribunal had jurisdiction to decide whether a non-signatory party to the Representation Agreement would be subject to its jurisdiction. It was observed that the parties to the proceedings were free to contest the claims and that their decision not to participate in the arbitration proceedings could expose them to an adverse award. Thereafter, on
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