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2016 Supreme(Mad) 2658
IN THE HIGH COURT OF JUDICATURE AT MADRAS
A. SELVAM and P. KALAIYARASAN, JJ.
M/s. Sabari Exim Pvt., Ltd. - Appellant
Vs.
SIMS Metal Management Limited - Respondent
O.S.A. No. 199 of 2015
Decided On : 18-08-2016
For the Appellant : Mr. S.R. Rajagopal
For the Respondent: Ms. Anitha Thomas for M/s. V.J. Mathew & Co.,
The main legal point established in the judgment is the requirement to comply with the provisions of the Arbitration and Conciliation Act, 1996 for the enforcement of foreign awards, and the court's reliance on the principles of natural justice and the terms of the contract in determining the enforceability of the award.
Headnote:
Foreign Award Enforcement - International Commercial Arbitration - Arbitration and Conciliation Act, 1996 - Section 47, Section 48 - AMTAC Arbitration Rules - UN Convention - Force Majeure - Letter of Credit - Public Policy
Fact of the Case:
The case involved a contract between an Australian company and an Indian company for the import of steel scrap. The Indian company failed to open a letter of credit as required by the contract, leading to the Australian company initiating international commercial arbitration to recover damages for the breach of contract.
Finding of the Court:
The court found that the arbitration tribunal had followed the principles of natural justice, the appellant had participated in the proceedings, and the award was passed in accordance with the contract and the AMTAC Arbitration Rules. The court also held that the appellant's contentions regarding force majeure, notice of appointment of arbitrator, and inducement were not sustainable.
Issues: The issues included the enforceability of the foreign award under the Arbitration and Conciliation Act, 1996, the appellant's objections under Section 48 of the Act, and the applicability of force majeure and inducement in the case.
Ratio Decidendi: The court relied on the principles of natural justice, the terms of the contract, the AMTAC Arbitration Rules, and the provisions of the Arbitration and Conciliation Act, 1996 to determine the enforceability of the foreign award and the appellant's objections.
Final Decision: The court dismissed the appeal and confirmed the order of the learned single Judge, allowing the original petition for the enforcement of the foreign award.
P. KALAIYARASAN, J.
This Original Side Appeal is directed against the Order of the learned single Judge, dated 26.06.2014 in O.P. No. 56 of 2014, allowing the original petition, holding that the Foreign Award, dated 28.02.2013 is enforceable.
2. The facts of the case in nutshell are as follows :
(i) The respondent, Sims Metal Management Ltd., (for brevity Sims), a company domiciled in Australia and the appellant, Sabari Exim Pvt., Ltd., (for brevity Sabari), a company registered under the Companies Act, 1956 entered into a contract, dated 07.05.2012 for sale by the Sims to the Sabari for import of 30000 MT steel scrap plus/ minus 5 percent at the sellers option.
(ii) As per Clause 5 of the Contract, the appellant company (Sabari) was to establish 100% irrevocable Letter of credit for 100% of the contract value latest by 14.05.2012 and the same was extended to 18.05.2012. The appellant completely failed to open the letter of credit as required and thereby breached the terms of the contract. The respondent company (SIMS) initiated International Commercial Arbitration in line with the Arbitration clause contained in the contract to recover damages for the loss suffered by the respondent company.
(iii) The Arbitration was conducted in Sydney in Australian Maritime and Arbitration Commission (AMTAC) Arbitration Rules in line with Clause 12 of the Contract. The appellant was duly intimated about the initiation of the Arbitral Proceedings and they participated in the proceedings.
(iv) The Arbitral Tribunal, after analysing the terms of the contract between the parties and the rival contentions passed an Award in favour of the respondent company directing the appellant company to pay a sum of USD 19,50,000 towards compensation for losses owing to the breach of the contract with interest and costs.
3. The appellant as respondent before the learned single Judge contended in its objection filed under Section 48 of the Arbitration and Conciliation Act, 1996, that the appellant was not issued with statutory notice for appointment of Arbitrator; that agreement was made under inducement and Award was passed fraudulently denying the respondent from contesting the same in free and fair manner; that the Tribunal did not consider the Clause of Force Majeure and that the Award is not enforceable as it has applied the UN convention, not in accordance with law of the country of Arbitration.
4. The respondent company contended that the Arbitrator consistently applied the principles of natural justice in the conduct of Arbitral Proceedings; that the appellant fully participated in Arbitral Proceedings and the Award is passed in terms of the clauses in the contract and procedure was adopted, as per AMTAC Arbitration Rules.
5. The learned single Judge after analysing the contentions of both sides, allowed the Original Petition.
6. For the enforcement of Foreign Award, the applicant should comply with the requirements of Section 47 of the Arbitration and Conciliation Act, 1996. If there is any reason as provided under Section 48 of the Act, for not enforcing the foreign Award, the appellant is bound to plead and establish the same.
7. The learned counsel appearing for the appellant argued in vehemence that there was no proper notice about appointment of Arbitrator and the appellant was not given fair opportunity in the Arbitral Proceedings. He further contends that the class of Force Majeure was not considered by the Arbitrator, which is against public policy.
8. The Hon'ble Supreme Court in Shri Lal Mahal Ltd., v. Progetto Grano Spa, reported in (2014) 2 SCC 433, held in paragraph 29 as follows :
"29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interest of India; or (3) justice or morality. The wider meaning given to the expression "public policy of India" occurring in Section 34(2) (b) (ii) in Saw Pipes (
