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2016 Supreme(Del) 4283
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
VIRGOZ OILS & FATS PTE LTD. - Decree Holder
Versus
NATIONAL AGRICULTURAL CO-OPERATIVE MARKETING FEDERATION OF INDIA LTD. - Judgment Debtor
EX.P. 149 of 2015 & EA(OS) No.66 of 2016
Decided on : 05-12-2016
Advocate Appeared:
For the Decree Holder : Mr Mahfooz Nazki, Mr Kumar Visalaksh and Mr Rohan Dhiman.
For the Judgment Debtor : Mr A.K. Thakur and Mr R.K. Mishra.
The main legal point established in the judgment is the requirement for a valid arbitration agreement to be in writing and signed by the parties or contained in an exchange of letters or telegrams, as per the provisions of the Arbitration and Conciliation Act, 1996.
Headnote:
Foreign Award Enforcement - Contracts Existence - Arbitration and Conciliation Act, 1996, Section 48
Fact of the Case:
Virgoz filed a petition to enforce a foreign award against NAFED based on three contracts for the sale of palm oil. NAFED objected to the enforcement under Section 48 of the Arbitration and Conciliation Act, 1996, claiming that the contracts were not finalized.
Finding of the Court:
The court found that the contracts between Virgoz and NAFED were not finalized and that there was no binding arbitration agreement between the parties. The court declined to enforce the award based on the absence of a valid arbitration agreement.
Issues: The principal issue was whether an arbitration agreement existed between the parties based on the disputed contracts for the sale of palm oil.
Ratio Decidendi: The court held that in order to recognize an award as a foreign award, it is necessary for the same to have been rendered in respect of differences between the persons arising out of legal relationships in pursuance of an agreement in writing for arbitration. The court also emphasized the requirement for an arbitration agreement to be in writing and signed by the parties or contained in an exchange of letters or telegrams.
Final Decision: The court allowed NAFED's objection under Section 48 of the Act and declined to enforce the award, dismissing the petition.
VIBHU BAKHRU, J
1. Virgoz Oils & Fats Pte Ltd. (hereafter 'Virgoz') -a company incorporated under the laws of Singapore -has filed the present petition to enforce a foreign award dated 05.04.2012 (hereafter 'the award') published by an Arbitral Tribunal constituted under the Palm Oil Refiners Association of Malaysia Rules of Arbitration and Appeal, 2005 (hereafter 'the PORAM Rules'). The award was rendered in respect of the claims made by Virgoz against the respondent (hereafter 'NAFED').
2. NAFED has filed its objections -EA(OS) 66/2016 -to the above captioned petition praying that the enforcement of the foreign award be refused under Section 48 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act').
3. Virgoz claims to have entered into three separate contracts -titled as Sales Contract Nos. SG/08/0437/06B01, SG/08/0442/06B01 and SG/08/0445/06B01 -for sale of a total of 4500 metric tonnes of crude palm oil (edible grade) to NAFED (hereafter referred to as 'the Contracts'). The Contracts, except as to the quantity of Palm Oil, are similarly worded.
4. NAFED disputes the existence of the Contracts and claims that the bargain between the parties was never finalised so as to fructify into a binding contract between the parties. The award has been rendered pursuant to Virgoz invoking the arbitration clause in the Contracts. Thus the principal question to be addressed is whether an arbitration agreement existed between the parties.
5. Virgoz had based its claims on the terms and conditions of the Contracts. The Contracts are a form of communications addressed to NAFED, which Virgoz claims embodies the agreement between the parties for sale and purchase of an aggregate of 4500 metric tonnes of palm oil. In terms of the Contracts, the shipment was to be made in August, 2008 and the payment was agreed to be made by irrevocable letter of credit (L/C).
6. The Contracts are signed by Virgoz as well as Ashok Bansal and Co. (broker) but are not signed on behalf of NAFED.
7. On 29.07.2008, NAFED sent a letter to Ashok Bansal and Co. (hereafter 'the Broker'), inter alia, with a request that certain shipments (including in reference to the Contracts) be deferred by the sellers from August to September, 2008. Virgoz claims that on 13.08.2008, it sent an email to the Broker agreeing to defer the shipment to September, 2008 and also issued amended contracts. All the terms as recorded in the amended sales contracts (hereafter 'the Amended Contracts') are identical to the Contracts except that the shipment period is reflected as September, 2008. It is claimed that thereafter Virgoz nominated the vessel "MT PROCESS" with a laycan of 5th to 11th September, 2008 to lift the cargo. Thereafter, Virgoz claims that it sent a letter on 02.09.2008 to NAFED through the Broker pointing out that despite the nomination of vessel, NAFED had failed to establish the L/C and further requesting NAFED to open the L/Cs. Virgoz further claims that it made repeated requests to NAFED to establish L/Cs but, NAFED did not do so and, consequently on 23.09.2008, Virgoz declared NAFED to be in default. The vessel MT PROCESS arrived at Kandla Port on 30.09.2008.
8. On the basis of the aforesaid, Virgoz made a claim of the difference between the contract price and market price of palm oil to be supplied under the Contracts, as well as demurrages. The same was disputed and, therefore, Virgoz invoked the arbitration clause under PORAM Rules in accordance with the arbitration clause contained in the Contracts.
9. Virgoz nominated its arbitrator, but NAFED did not do so. Accordingly, the acting Chairman of PORAM appointed an arbitrator and the arbitrators so appointed, appointed the third arbitrator. Thereafter, the arbitrator appointed by acting Chairman of PORAM withdrew from the arbitration and was substituted by the acting Chairman of PORAM with another arbitrator.
10. Virgoz made the following claims, before the Arbitral Tribunal as constituted above:-
"(i) The d
