A foreign arbitral award that has not attained formal enforceability under the relevant legislative framework does not trigger the doctrine of merger to extinguish the underlying cause of action or bar a civil suit.

JUDGMENT :

ANIL KSHETARPAL, J.

1. The issue which arises for consideration in the present Appeal is whether a civil suit can be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908 on the premise that the cause of action has merged into a foreign arbitral award, when such award has neither attained enforceability under Part II of the Arbitration and Conciliation Act, 1996 nor resulted in a decree of an Indian court.

2. The present Appeal, filed by the Appellant [Plaintiff before the learned Single Judge], assails the correctness of judgment and order dated 03.10.2024 [hereinafter referred to as ‘Impugned Order’] passed by the learned Single Judge in CS(COMM) No. 1173/2018, whereby the Plaint filed by the Plaintiff came to be rejected at the threshold.

FACTUAL MATRIX

3. The relevant facts, in brief, are required to be noticed in order to appreciate the controversy involved in the present Appeal. For the sake of convenience, the parties are being referred to as they were arrayed before the learned Single Judge.

4. The Plaintiff claims to be a U.S. based entity. It is alleged that during the year 2015, four separate and independent contracts were entered into between the Plaintiff and Defendant No.1 (three contracts) and Defendant No.2 (one contract) for the supply of Non-Pareil In-Shell Almonds [‘NPIS’]. Pursuant thereto, NPIS almonds were supplied to the Defendants. However, according to the Plaintiff, the entire consideration payable in respect thereof has not been paid. While instituting the suit, the Plaintiff disclosed that a foreign arbitral award dated 25.07.2016 had been passed in its favour. The said award was sought to be enforced in India in accordance with Part II of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as the ‘1996 Act’] by filing a petition under Sections 48 and 49 thereof.

5. In support of the suit, the Plaintiff pleaded its cause of action in paragraph 46 of the plaint, which reads as under:

“46.The cause of action is constituted by the entire bundle of facts specified above. The cause of action inter alia arose when upon expiry of the period of credit i.e. from 04.11.2015 onwards, the Defendant failed to make payment of goods. The cause of action further arose when the Plaintiff had to sell the consignments to third parties on the failure of the Defendants to keep their end of the bargain and the contract. The cause of action further arose when the Plaintiff agreed conditionally to not claim damages on losses from sales to third parties, subject and contingent and conditional on the Defendants making full payments on the consignments which the Defendants had duly taken possession of, within the time frame offered. The cause of action further arose when the Defendants further breached even this condition, and did not pay the full contracted value even for these 5 consignments within the times lines offered, thus entitling the Plaintiff to then sue for all losses. The cause of action further arose when the Plaintiff issues legal notices dated 19 February 2016 seeking payment of dues, and when the Defendant issued response legal notice on 11.03.2016 and 01.04.2016. The cause of action arose the various dates the Defendants committed breach of their contractual obligations. The cause of action continues since the payments have not yet been made by the Defendants. The suit is within limitation. In any event, Plaintiff is entitled to the benefit of Section 14 of the