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High Court Of Delhi
C.O.S.I.D INC. - Appellant
Versus
STEEL AUTHORITY OF INDIA - Respondent
Suit 973 of 1982
Decided On : 07/12/1985
FOREIGN AWARDS (RECOGNITION AND ENFORCEMENT) ACT, 1961 - SECTION 2, 4, 5, 6, 7, 9(B) - SCHEDULE - NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS, 1958 - ARTICLE I, II, V - ARBITRATION ACT, 1940 - SECTION 34 - CONTRACT ACT, 1872 - SECTION 23 - IMPORTS AND EXPORTS (CONTROL) ACT, 1947 - EXPORT (CONTROL) ORDER, 1977 - GOVERNMENT OF INDIA (ALLOCATION OF BUSINESS) RULES, 1961 - ARTICLE 77(3) OF THE CONSTITUTION OF INDIA - COMPANIES ACT, 1956 - SECTION 617 - LEGAL GLOSSARY PREPARED BY MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS, GOVERNMENT OF INDIA, NEW DELHI (1983 EDITION) - CUSTOMS ACT, 1962 - SECTION 11 - HAND-BOOK OF IMPORT EXPORT PROCEDURES - ARTICLES OF ASSOCIATION OF SAIL - ARTICLE 38 - FOREIGN AWARDS (RECOGNITION AND ENFORCEMENT) RULES, 1962 - RULE 2 - CIVIL PROCEDURE CODE, 1908 - ORDER 21, RULE 32 - NEW YORK ARBITRATION CONVENTION OF 1958 (TOWARDS A UNIFORM JUDICIAL INTERPRETATION) BY ALBERT JAN VAN DEN BERG (1981 EDITION) - LEGAL DOCTRINE OF PUBLIC POLICY - ENFORCEMENT OF FOREIGN ARBITRAL AWARDS - VALIDITY OF ARBITRATION AGREEMENT - INTERPRETATION OF VARIOUS PROVISIONS OF LAW - CONDITIONS FOR ENFORCEMENT OF FOREIGN AWARDS - DISTINCTION BETWEEN DOMESTIC AND INTERNATIONAL PUBLIC POLICY - AWARD CONTRARY TO PUBLIC POLICY.
Fact of the Case:
COSID INC. (COSID) entered into a contract with SAIL for supply of 25,000 M/t (10%) of Hot Rolled Steel Sheet Coils (HR Coils). SAIL failed to deliver the balance quantity. COSID claimed damages. Under the terms of arbitration agreement the parties went in for arbitration and the arbitrator upheld the claim of the COSID. SAIL informed COSID that in view of a ban imposed on exports of HR Coils by the Government of India, it was excused from performing the contract bases on force majure clause in the contract. COSID disputed this contention and claimed damages. The arbitrator held that there was repudiation of the contract by the SAIL and COSID thus entitled to damages. SAIL challenged the award on various grounds.
Finding of the Court:
The court held that the award was a foreign award within the meaning of Section 2 of the Act and the provisions of the Act, which is a complete Code in itself, in respect of foreign award would apply. The court further held that the enforcement of the award would be contrary to public policy as the Government of India had banned the export of HR Coils due to acute shortage of HR Coils existing in the country at the relevant time.
Issues: 1. Whether the petition under Sections 5 and 6 of Foreign Awards (Recognition and Enforcement) Act, 1961 by plaintiff No. 2 is maintainable? 2. Whether provisions of Foreign Awards (Recognition and Enforcement) Act, 1961 are applicable in the present case? 3. Whether the award is not enforceable for the reasons stated in the objection petition? 4. Whether the petition under Sections 5 and 6 of Foreign Awards (Recognition and Enforcement Act) 1961 is competent in view of the averments contained in paragraph 3 of the objections petition? 5. Relief.
Ratio Decidendi: The court held that the enforcement of the award would be contrary to public policy as the Government of India had banned the export of HR Coils due to acute shortage of HR Coils existing in the country at the relevant time. The court also held that the award was a foreign award within the meaning of Section 2 of the Act and the provisions of the Act, which is a complete Code in itself, in respect of foreign award would apply.
Final Decision: The petition was dismissed.
( 2 ) UNDER the award the arbitrator awarded a sum of US $1,647,495. 9 as damages to COSID Inc. , petitioner No. 1 ("cosid" for short) and also awarded interest at the rate of twelve per cent per annum on this amount from the date of the award till payment. The arbitrator also awarded costs of the arbitration proceedings to COSID.
( 3 ) THE award has been challenged on various grounds by the respondent Steel Authority of India Ltd.
( 4 ) ON pleas of the parties following issues were framed :- 1. Whether the petition under Sections 5 and 6 of Foreign Awards (Recognition and Enforcement) Act, 1961 by plaintiff No. 2 is maintainable? 2. Whether provisions of Foreign Awards (Recognition and Enforcement) Act, 1961 are applicable in the present case? 3. Whether the award is not enforceable for the reasons stated in the objection petition? 4. Whether the petition under Sections 5 and 6 of Foreign Awards (Recognition and Enforcement Act) 1961 is competent in view of the averments contained in paragraph 3 of the objections petition? 5. Relief.
( 5 ) FACTS are quite brief.
( 6 ) SAIL entered into a contract with COSID for supply of 25,000 M/t ( 10%) of Hot Rolled Steel Sheet Coils (HR Coils ). This was by means of two letters, one dated August 10, 1977 of SAIL to COSID and the other dated September 20,1977 of COSID to SAIL. Conditions 12 and 15 of the Terms and Conditions mentioned in the letter dated August 10, 1977 of SAIL would be relevant :- 12. If the Seller and/or the Buyer be prevented from discharging its or their obligation under this agreement by reason of arrests or restraints of princes or Rulers, Government of People, War, Blocked, Revolution, Insurrection, Mobilisation Strikes, Lockouts, Civil Commotions, Riots, Accidents, Acts of God, Plague or other epidemics destruction of the material by fire or floods or other natural calamity or on account of any other cause beyond the Seller s or the Buyer s control and interfering with the production and/or delivery as hereinabove contemplated, the time for delivery shall be postponed by the time or times during which production and/or delivery is prevented by any such causes as hereinabove mentioned, provided that in the event of such delay exceeding ninety days either the Seller or the Buyer may at their option cancel this agreement by notice in writing in respect of the undelivered quantity of the material without, however, any right against or being responsible to the other party for such cancellation. 15. Any dispute arising in connection with this agreement shall, unless amicably settled between the parties hereto, be referred to arbitration and shall be settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The venue of the arbitration proceedings shall be London, England.
( 7 ) UNDER the terms of the contract supplies were to be effected in two instalments. Half of the quantity approximating 25,000 M/t against the first instalment was shipped but it is alleged that SAIL failed to deliver the balance quantity. The plea of the SAIL was that it was excused from performing the contract bases on force majure clause (Clause-12) in the contract because of a ban
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