2023 Supreme(Del) 5054

IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, J.
Nuovopignone International SRL – Appellant
Versus
Cargo Motors Private Limited & Anr. – Respondents
O.M.P.(EFA)(COMM.) 11 of 2021
Decided On : 30-05-2023

Consent awards are enforceable under the New York Convention and are not contrary to the public policy of India.

Headnote:

ENFORCEMENT OF FOREIGN AWARD - CONSENT AWARD - RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS - NEW YORK CONVENTION - SECTION 48 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - ECONOMIC DURESS - Held, consent awards are enforceable under the New York Convention and are not contrary to the public policy of India.

Fact of the Case:

The enforcement petitioner and respondent no. 2 entered into an Equipment Purchase Agreement for the sale of Steam Turbine Generator Package for a consideration of 6.7 million Euros which roughly translates to INR 60 crores. The respondent no. 1 executed a Parent Company Guarantee in favour of the enforcement petitioner and stood in the position of a guarantor for the second respondent which was its subsidiary. The EPA is stated to have been amended to include additional services to be provided by the petitioner to respondent no. 2 for a consideration of 1,082,140 Euros (INR 9.52 crores approximately). Consequent to disputes having arisen between parties and on a failure on the part of the respondents to make payments in respect of the goods which formed part of the EPA, the enforcement petitioner submitted a request for referral of all disputes to arbitration as contemplated under Clause 26.2 of the EPA. The proceedings which ensued before the Arbitral Tribunal may be gathered from the ultimate Award which came to be rendered. The Arbitral Tribunal records that the request for arbitration was received by the ICC International Court of Arbitration, on 22 November 2019. The ICC Secretariat acknowledged receipt of that request on 25 November 2019. On 15 February 2020, counsel for the respondents confirmed to the ICC Secretariat that they have been duly engaged to represent them in the matter and also enclosed their letters of authority. In terms of a communication of 18 February 2020, the ICC Secretariat called upon the respondents to provide their comments on the constitution of the Arbitral Tribunal. In terms of their communication of 19 February 2020, the respondents agreed to the appointment of a sole arbitrator and requested ICC to proceed further. On 26 March 2020, parties were informed that appropriate steps were being taken for the appointment of a sole arbitrator and were also apprised of the costs payable in advance. The appointment of the sole arbitrator was communicated to parties on 17 April 2020 whereafter the records were transmitted to the named arbitrator. On 23 April 2020, the Arbitral Tribunal circulated a draft of the Terms of Reference to the parties as well as the procedural time frame and directions for inviting their comments. The Statement of Claim together with its exhibits came to be filed on 22 May 2020. The respondents served their Statement of Defence together with exhibits on 13 July 2020. By an email of 17 August 2020, the Arbitral Tribunal was informed by the claimant/enforcement petitioner that parties had settled the matters in dispute. Consequently, the Tribunal proceeded to forward a draft consent award to the parties for their review and comments on 20 August 2020. Both the respondents as well as the claimant are stated to have provided their comments vide emails dated 01 September 2020 and 04 September 2020 respectively. The Tribunal specifically records that the respondents had not raised any objection to the request made by the claimant that a duly authenticated copy of the Settlement Agreement dated 13.08.2020 be included and made part of the consent Award. The Arbitral Tribunal also records that until 19 June 2020 the respondents were represented by a set of counsels whose particulars are recorded in paragraph 12 of the Award. However, by an email of 19 June 2020, a partner in Khaitan & Co. apprised the Arbitral Tribunal of the change in representation. In view of the aforesaid, the Tribunal issued revised Terms of Reference recording that change on 23 June 2020 and those revised terms were duly signed by the enforcement petitioner on 26 June 2020 and the respondents on 29 June 2020. The Tribunal consequently proceeded to draw up the consent Award in the following terms:

Finding of the Court:

The Court, consequently, comes to the firm conclusion that the argument of a consent award not falling within the scope of the Convention merits rejection. There clearly appears to be unanimity across jurisdictions to accept the possibility of awards being rendered based upon a settlement that may be arrived at between the parties. The only distinction that the decisions in Albtelecom and Transocean recognise is of settlements entered into prior to initiation of arbitration proceedings and those which may be arrived at during the course thereof. There thus appears to be no legal justification to hold that consent awards are either not liable to be recognised or are unenforceable. In light of unanimity of opinion on the subject across jurisdictions and which has been duly adopted and incorporated in the 1996 Act, the Court finds that the Award cannot possibly be said to be contrary to the public policy of India.

Issues: Whether a consent award is enforceable under the New York Convention and is not contrary to the public policy of India.

Ratio Decidendi: The Court held that consent awards are enforceable under the New York Convention and are not contrary to the public policy of India. The Court noted that there is unanimity across jurisdictions to accept the possibility of awards being rendered based upon a settlement that may be arrived at between the parties. The Court also noted that the 1996 Act adopts and incorporates this principle. The Court further held that the allegation of economic duress and coercion is clearly an afterthought and a feeble attempt to renege from the terms of the consent Award.

Final Decision: The Court rejected the objections to the recognition and enforcement of the foreign award and directed that the Award be placed before the appropriate Court for taking further steps for execution of the Award.