Back
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
SOUMEN SEN, J.
Sleepwell Industries Co. Ltd. - Award Holder
Vs.
Lmj International Ltd. - Judgment Debtor
GA 3307 of 2016, EC 488 of 2013
Decided On : 09-07-2018
ARBITRATION - FOREIGN AWARD - ENFORCEMENT - SCOPE OF SECTION 48 OF THE ARBITRATION AND CONCILIATION ACT - POWER OF COURT TO SCRUTINIZE FOREIGN AWARD - INTERPRETATION OF CONTRACT - JURISDICTION OF ARBITRAL TRIBUNAL - PUBLIC POLICY OF INDIA - NATURAL JUSTICE - REVIEW OF AWARD ON MERIT.
Fact of the Case:
The judgment-debtor company challenged the enforcement of a foreign award on the grounds that the Arbitral Tribunal had made out a third case for the parties and passed an award disregarding the written terms of the contract. The Tribunal had disregarded the fact that the amounts claimed before the Tribunal representing 2.22 per cent of the invoice value of the goods are to be released only upon presentation of the quality inspection certificate at the port of destination and that being the only source and mode of payment, the award-holder having failed to produce such quality inspection certificate, is not entitled to any amount. There is no obligation on the part of the award-debtor to discharge de hors the terms mentioned in the Letter of Credit. The award-holder has not even alleged that the award-debtor was under an obligation to produce the quality inspection certificate at the port of destination and has acted in breach thereof. In the absence of any such pleading and allegation and having regard to the payment terms in the Letter of Credit, the award-holder could not have maintained an action before the Tribunal. The Tribunal had no jurisdiction to refer to the GAFTA Rules in order to find out ways and means for the award-holder to obtain an award as such rules were never part of the contract.
Finding of the Court:
The Court held that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. It was noted that the dispute with regard to inferior quality was raised by LMJ after 15th January, 2011, that is say, after the expiry of the validity of Letter of Credit. There is nothing on record to show that prior to expiry of the validity of Letter of Credit any such dispute was raised. The debit note was issued only on 12th February, 2011. The claimant had disclosed documents before the Tribunal to show that the claimant had never received any inferior quality claim from LMJ prior to February 15, 2011. In absence of any dispute being raised prior to the expiry to the validity of Letter of Credit it is no more open for LMJ to insist that the agreed mode of payment is through Letter of Credit and LMJ is absolved from liability.
Issues: 1. Whether the Arbitral Tribunal had the jurisdiction to make out a new case or to consider the dispute not raised by the claimant in their claim submission? 2. Whether the award is perverse? 3. Whether the award is contrary to the terms of the agreement to be read with Letters of Credit as required under English Law and, therefore, makes the award contrary to public policy?
Ratio Decidendi: 1. The Court held that the Arbitral Tribunal has no jurisdiction to make out a new case or to consider the dispute not raised by the claimant in their claim submission. The Tribunal has to decide the dispute within the four corners of the claim petition. 2. The Court held that the award is not perverse. The Tribunal has not travelled beyond its jurisdiction and decided a matter contrary to the terms of the contract. It is a possible view taken by the tribunal on the basis of the pleadings and evidence produced before the tribunal. 3. The Court held that the award is not contrary to the terms of the agreement to be read with Letters of Credit as required under English Law and, therefore, does not make the award contrary to public policy.
Final Decision: The Court dismissed the petition challenging the enforcement of the foreign award with costs assessed at Rs.1 lakh.
Soumen Sen, J.
1. This is an application by the judgment-debtor company challenging the enforcement of a foreign award.
2. Before I deal with the scope and ambit of Section 48 of the Arbitration and Conciliation Act with regard to the power of the Court in scrutinizing a foreign award it is necessary to consider the facts of the case and the nature of the objection raised by Mr. Anindya Kumar Mitra, learned senior Counsel in assailing the award in this forum.
3. Briefly stated, the objections are that the Arbitral Tribunal has made out a third case for the parties and have passed an award disregarding the written terms of the contract. The Tribunal has disregarded the fact that the amounts claimed before the Tribunal representing 2.22 per cent of the invoice value of the goods are to be released only upon presentation of the quality inspection certificate at the port of destination and that being the only source and mode of payment, the award-holder having failed to produce such quality inspection certificate, is not entitled to any amount. There is no obligation on the part of the award-debtor to discharge de hors the terms mentioned in the Letter of Credit. The award-holder has not even alleged that the award-debtor was under an obligation to produce the quality inspection certificate at the port of destination and has acted in breach thereof. In the absence of any such pleading and allegation and having regard to the payment terms in the Letter of Credit, the award-holder could not have maintained an action before the Tribunal. The Tribunal had no jurisdiction to refer to the GAFTA Rules in order to find out ways and means for the award-holder to obtain an award as such rules were never part of the contract.
4. These objections without reference to the authorities relied upon by Mr. Mitra are to be considered in juxtaposition to the claim made by the award holder before the Arbitral Tribunal.
5. The award-holder (hereinafter referred to as ‘Sleep well’) has entered into a contract dated 25th October, 2010 for sale of 10,000 MT ±5% by buyer’s option non-basmati par boil rice 15% (maximum) broken, 2009-10 or latest crop, Thailand origin @ USD 450 per MT. The contract contains a stipulation that the quantity would be final at the port of loading as per final net certificate issued by SGS at the costs of the seller namely, Sleepwell. The award-debtor (hereinafter referred to as ‘LMJ’) under the contract was required to open an irrevocable confirmed unrestricted Letter of Credit in USD in favour of Sleep well within seven working days from the date of signing of the contract through a scheduled bank of India which, in this case was the Standard Chartered Bank (India) for the value of the goods to be shipped under the contract.
6. The contract is an FOB contract. The contract stipulates that 100 per cent value of the contracted cargo would be payable on receipt of the shipping documents by the Letter of Credit negotiating bank at 30 days sight. The contract mentions about eleven shipping document to be submitted for receiving payment under the Letter of Credit. The contract in ‘other terms’ provided that all other terms and conditions not in contradiction with the stipulated terms of the contract shall be governed by GAFTA 48 and disputes to be resolved as per GAFTA 125 in London.
7. The goods were meant for the Government of People’s Republic of Bangladesh. The consignment to be shown as “to order” notifying “M/s. Director General of Food, Government of People’s Republic of Bangladesh, 16 Abdul Ghani Road, Dhaka”.
8. The buyer opened a Letter of Credit on 11th November, 2010 through its banker, Standard Chartered Bank, and the same was communicated to the award holder on 12th November, 2010. On a request being made on 5th December, 2010 by the award holder for amendments in the contract and in the Letter of Credit (LC), the terms of the contract were amended on 7th December, 2010 by which the following amendment to the parent
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
