1956 Supreme(Cal) 115

HIGH COURT OF CALCUTTA
P. B. MUKHARJI
MURY EXPORTATION - Appellant
Versus
D. KHAITAN AND SONS LTD. - Respondent
Special Suit 6  Of  1955
Decided On : JUNE 29, 1956

An arbitration award made in a foreign country will be enforced in India if the arbitration agreement is valid under the law of the country where it was made, the award is final under the law of the country where it was made, the arbitration proceedings were conducted in accordance with the rules of the arbitration institution chosen by the parties, and the award is not against public policy or the law of India.

Headnote:

ARBITRATION - FOREIGN AWARD - ENFORCEMENT - CONDITIONS - VALIDITY OF ARBITRATION AGREEMENT - FINALITY OF AWARD - COMPLIANCE WITH ARBITRATION RULES - NOTICE OF SUIT - EFFECT - PUBLIC POLICY - LIMITATION - SCOPE OF ARBITRATION CLAUSE.

Fact of the Case:

A French company, Mury Exportation, S. A. R. L., entered into an agreement with D. Khaitan and Sons Limited, an Indian company, appointing Khaitan as the agent for the sale of Mury's perfumery products in India. The agreement contained an arbitration clause providing for arbitration in Paris according to the rules of the International Chamber of Commerce. Khaitan dishonored three bills of exchange issued for the price of goods delivered by Mury. Mury initiated conciliation proceedings before the International Chamber of Commerce, which were later converted into arbitration proceedings. Khaitan filed a suit in the Calcutta High Court seeking a declaration that the agreement was void due to fraudulent misrepresentation and an injunction restraining Mury from acting upon the agreement. Mury applied to the High Court to stay the suit on the ground that arbitration was proceeding before the International Chamber of Commerce, but the stay was refused. The arbitration resulted in an award in favor of Mury. Mury then applied to the High Court to file the award under the Arbitration (Protocol and Convention) Act, 1937.

Finding of the Court:

The High Court held that the arbitration award was valid and enforceable. The court found that the arbitration agreement was valid under French law, the award was final under French law, and the arbitration proceedings were conducted in accordance with the rules of the International Chamber of Commerce. The court rejected the argument that the award was invalid because Khaitan had given notice of the suit to the arbitrator and Mury, holding that Section 35 of the Indian Arbitration Act, 1940, which provides for the nullification of an arbitration award if notice of a suit is given, did not apply to arbitrations governed by the Arbitration (Protocol and Convention) Act, 1937. The court also rejected the argument that the award was against public policy or the law of India, holding that the Indian law of limitation did not apply to the claim because it was not barred under French law and that the arbitration clause was wide enough to include the question of limitation. Finally, the court rejected the argument that the dispute was not covered by the arbitration clause, holding that the word "litigation" in the clause meant "dispute" and that the contract provided for arbitration of all disputes.

Issues: 1. Whether the arbitration agreement was valid under French law? 2. Whether the arbitration award was final under French law? 3. Whether the arbitration proceedings were conducted in accordance with the rules of the International Chamber of Commerce? 4. Whether Section 35 of the Indian Arbitration Act, 1940, applied to arbitrations governed by the Arbitration (Protocol and Convention) Act, 1937? 5. Whether the award was against public policy or the law of India? 6. Whether the Indian law of limitation applied to the claim? 7. Whether the arbitration clause was wide enough to include the question of limitation? 8. Whether the dispute was covered by the arbitration clause?

Ratio Decidendi: 1. The validity of the arbitration agreement is governed by the law of the country where the agreement was made, in this case, France. 2. The finality of the arbitration award is governed by the law of the country where the award was made, in this case, France. 3. The arbitration proceedings must be conducted in accordance with the rules of the arbitration institution chosen by the parties, in this case, the International Chamber of Commerce. 4. Section 35 of the Indian Arbitration Act, 1940, does not apply to arbitrations governed by the Arbitration (Protocol and Convention) Act, 1937, because the latter Act provides a specific framework for the enforcement of foreign awards. 5. An award will not be enforced if it is against public policy or the law of the country where enforcement is sought, but this exception is narrowly construed and will not be applied to invalidate an award simply because it is contrary to the local law of limitation. 6. The law of limitation of the country where the arbitration is held applies to the claim, unless the arbitration clause provides otherwise. 7. An arbitration clause that is broad enough to encompass the dispute in question will be upheld, even if the dispute arises out of a matter that is not specifically mentioned in the clause.

Final Decision: The High Court allowed Mury's application to file the arbitration award and entered judgment in favor of Mury in the amount of Rs. 1,23,651-12-10, with interest at 6% per annum.