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1989 Supreme(Del) 218

High Court Of Delhi
LUDWING WUNSCHE AND COMPANY - Appellant
Versus
RAUNAQ INTERNATIONAL LIMITED - Respondent
Suit 113A of 1981
Decided On : 05/11/1989

Advocates Appeared:
ALOK MAHAJAN, G.N.AGGARWAL, Naresh Markanda, O.P.POPLI, SHAILENDRA PAUL

The non-supply of a statement of claim and documentary evidence to the opposite party in arbitration proceedings is a violation of the principles of natural justice and renders the award unenforceable.

Headnote:

FOREIGN AWARDS (RECOGNITION AND ENFORCEMENT) ACT, 1961 - SECTION 7 - ENFORCEMENT OF FOREIGN AWARDS - CONDITIONS - PROPER NOTICE OF ARBITRATION PROCEEDINGS - SUPPLY OF STATEMENT OF CLAIM AND DOCUMENTARY EVIDENCE - PRINCIPLES OF NATURAL JUSTICE - VIOLATION.

Fact of the Case:

Plaintiff, a foreign company, filed a suit under the Foreign Awards (Recognition and Enforcement) Act, 1961, for the enforcement of an award made in the United Kingdom. Defendant No. 1, the seller, and plaintiff, the buyer, had entered into a contract for the sale of goods. A dispute arose, and the parties agreed to arbitration in accordance with the Grain and Feed Trade Association Ltd. (GEFTA) Arbitration Rules. The arbitrators made an award in favor of the plaintiff. Defendant No. 1 objected to the enforcement of the award, arguing that it was not given proper notice of the arbitration proceedings and that the principles of natural justice were violated.

Finding of the Court:

The court held that the plaintiff had not supplied its statement of claim and documents to defendant No. 1, despite defendant No. 1's specific requests for the same. The court also found that the arbitrators did not supply the statement of claim and documentary evidence to defendant No. 1. The court held that the non-supply of these documents was a violation of the principles of natural justice and that defendant No. 1 was unable to present its case before the arbitrators. The court further held that the defendant No. 1 was not informed of the amount of damages being claimed by the plaintiff, which prejudiced the defendant No. 1.

Issues: 1. Whether the foreign award is not liable to be enforced on the grounds taken in the objection petition? 2. What is the effect of the order passed on 22-8-79 by this court in Suit No. 714/79 on the arbitration proceedings in question?

Ratio Decidendi: The court held that the enforcement of a foreign award may be refused if the party against whom the award is sought to enforce proves that it was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present its case (Section 7(1)(a)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961). The court also held that the requirement of proper notice of arbitration proceedings implies the requirement to supply a statement of claim and documentary evidence to the opposite party. The court further held that the non-supply of these documents is fatal to the case of the plaintiff seeking enforcement of the award.

Final Decision: The court dismissed the plaintiff's suit for enforcement of the award and allowed the defendant No. 1's objection petition.

Y. K. Sabharwal

( 1 ) PLAINTIFF Ludwing Wunsche and Company, a foreign company has filed this suit under the provisions of Foreign Awards (Recognition and Enforcement) Act, 1961 for the enforcement of an award made on September, 1979. Plaintiff is engaged in the business at Hamburg, West Germany and deals, inter-alia, in grain and cattle feed. Defendant No. 1 Raunaq International Limited, New Delhi, as seller and the plaintiff as buyer entered into a contract dated 15th January, 1979. Defendant No. 2 Wllhelmn Meinschausen GMBH is a firm of brokers carrying on business at Hamburg, West Germany, and in its capacity of broker negotiates contracts between buyers in general and sellers in the exporting countries. Defendant No. 2 acted as a broker in the transaction between plaintiff and defendant No. 1. Defendant No. 2 has been added as performa defendant.

( 2 ) PLAINTIFF s case is that defendant No. 1 failed to deliver the goods under the contract and committed a breach thereof and consequently the plaintiff made a demand by a letter dated 1-3-1979 claiming $ 50. 000 as dead freight and sent a debit note to defendant No. 1 for the payment of that amount. The contract was subject to an arbitration agreement which is as follows:

"any disputes arising out of or under the contract shall be settled by arbitration in accordance with shall the arbitration rules No. 125 of Grain and Feed Trade Association Ltd. such rules forming part of this contract and of which both the parties hereto shall be deemed to be cognisant".

( 3 ) THE plaintiff by telex dated 20-3-79 called upon defendant No. 1 for settlement of the invoice for a $ 50,000 and further notified that in the event of non settlement, on or before 27-3-79. the plaintiff would crave arbitration. Further notice was given by the plaintiff defendant No. 1 that in case of arbitration it would also claim the difference between the contract price and the market price. On 3-5-79 plaintiff drew the attention of defendant No. 1 to its earlier telex message dated 20-3-79 and informed defendant No. 1 about plaintiff s having appointed its arbitrator and called upon the defendant No. 1 to appoint its arbitrator in terms of the arbitration agreement. It was Further stated that in the event of its failure to nominate an arbitrator the plaintiff would ask the Grain and Feed Trade Association Ltd. (for short gefta ) to nominate and appoint an arbitrator on behalf of the defendant No. 1 the terms of the arbitration agreement. Plaintiff by its letter dated 15th May, 1979 wrote to GEFTA requesting it to appoint an arbitrator on behalf of defendant No. 1 in terms of the arbitration rules. By a letter dated 1-6-79 GEFTA appointed one Mr. P. B. Kersey, to act as arbitrator for defendant No. 1. The hearing of the arbitration was fixed for 11 -7-79 and defendant No. 1 was called upon to put in a written statement by 5. 7-79. The plaintiff filed a claim before the arbitrators on or about 14-6-79 enclosing various documents.

( 4 ) THE arbitrators appointed in terms of the arbitration agreement made their award on 5th September 1979 inter-alia as follows :

(A) A valid contract was entered into by the parties in GEFTA Form No. 119; (b) The Defendant No. 1 was in default and shall pay to the plaintiff as buyer within 14 days from the date of the award a sum of $ 38,000 as damages together with interest thereon at the rate of 10% p a. from 23-2-79 to the date of the award. (c) Defendant No. 1 shall pay $ 550 as fees and expenses of arbitration.

( 5 ) THE plaintiff claims that award dated 5-9-79 has been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed. The said award was made by the arbitrators constituted in the manner agreed upon by the parties and had confirmed to the agreed arbitration procedure No appeal has been filed against the said award, the same has become final in the UK, the country in which it was made. The said award is in respect of damages for































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