After taking a step backward through the judgment in National Agricultural Cooperative Marketing Federation of India v. Alimenta S.A  ,recently, the Hon’ble Supreme Court passed a judgment in M/s Centrotrade Minerals and Metals Inc. v. Hindustan Copper Limited  while upholding the enforcement of Award passed under the rules and tribunal set up by the International Chamber of Commerce (hereinafter referred to as ‘ICC’) London on 29.09.2001 . The Hon’ble Supreme Court primarily dealt with theissue of affording fair hearing in the arbitral proceedings as alleged by the Respondent in the said case. The said judgment has been pronounced on account and addition of scrupulous litigations, which were carried out by the parties in different courts including the Hon’ble Apex Court.

FACTS OF THE CASE: HOW CIRCUMSTANCES HAVE UNFOLDED:

M/s. Centrotrade Minerals & Metals  Inc (hereinafter referred to as ‘centrotrade’) is a United States Corporation which entered into a contract of sale with Hindustan Cooper Limited (hereinafter referred to as’ HCL’).The contract was to give effect to the sale of 15,500 DMT of copper concentrate to be delivered to Kandla Port in Gujarat. The said goods were to be used in the Khetri Plant of HCL. The goods were supplied to HCL and payment as per the terms of the contract and against the consignment was made however, dispute arose between the parties with respect to the quantity of the copper concentrate. The agreement between the parties contained a very interesting two-tier arbitration clause wherein the first tier postulated a mechanism to settle the dispute by arbitration in India and, if the parties disagree to the award then, the second tier was to be undertaken by ICC in London. The Centrotrade invoked first tier of the arbitration vide clause 14 of the agreement and the arbitrator appointed by the Indian Council of Arbitration passed a NIL Award dated 15.06.1999 in favour of HCL. Thereafter, the Centrotrade invoked the second tier of the arbitration and as a result of which an award was delivered in London dated 29.09.2001 in favor of Centrotrade.

Interestingly, the HCL during the pendency of the arbitral proceedings challenged the arbitration clause i.e. the second tier of arbitration, which was conducted in London to be non est law and against the natural public policy of India. The Rajasthan High Court while dealing with a revision petition filed by HCL issued directions restraining Centrotrade from taking any further steps in the London based arbitration. The said ad interim ex parte stay granted by the Rajasthan High Court was eventually vacated by the Hon’ble Apex court on 08.02.2001. After the passage of the said award, the High Court of Calcutta allowed the enforcement of the award on a petition filed by Centrotrade. However, on an appeal filed by HCL, a Division Bench of High Court of Calcutta held that the said award cannot be enforced and set aside the order passed by the Single Judge. The Centrotrade, thereafter, moved before the Hon’ble Apex Court challenging the order passed by the Division Bench of High Court of Calcutta. The Hon’ble Apex Court’s judgment was a Division Bench judgment wherein two separate judgments were pronounced by the two judges, although both of them essentially allowed the appeal filed by HCL and did not allow the enforcement of award. The primary preposition set forth by both the judgment was that, HCL was not given a fair opportunity to present their case before the ICC Arbitrator in London. Subsequently, the said case was again referred to a three judge bench of the Hon’ble Apex Court primarily on two issues i.e. whether the two tier system as provided in the agreement is permissible under the laws of India? And whether the award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provision of section 48 of the Arbitration and Conciliation Act, 1996? The first issue was settled and the court held that the two tier system is permissible, however, for the second issue, the directions were issued that the appeal shall be listed again for the consideration of the second issue. The second question was then dealt with in the present appeal by the Hon’ble Apex Court.

BASIS OF PREPOSITION SET FORTH BY THE HON’BLE APEX COURT:

While upholding the enforcement of the award, the Hon’ble Apex court has referred to several authorities, which would be significant to enumerate as under:

Purpose of section 48 of the Arbitration & Conciliation Act, 1996: The purpose of section 48 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘Act’)is to make the enforcement process smooth. In Parsons & Whittemore Overseas  Co. Inc. v. Societe Generale, the court held that ‘The 1958 Convention’s basis thrust was to liberalize procedures for enforcing foreign awards…[it] clearly shifted burden of proof the party defending against enforcement and limited his defences to seven set for in Article V’. The Hon’ble Apex Court in Para 24 of the judgment in Vijay Karia v. Prsymian Cavi  E Sistemi SRL held that ‘……This is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely narrow grounds contained in section 48 of the Act and which have been rejected. This is in consonance with the fact that India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (hereinafter referred to as “New York Convention”) and intends- through this legislation- to ensure that a person who belongs to a Convention country, and who, in most cases, has gone through the challenge procedure to the said award in the country of its origin, must then be able to get the award recognized and enforced in India as soon as possible”.

• Also, further interpreting the “otherwise” conundrum, the Hon’ble Apex Court also referred to Monck v. Hilton and held that ‘As a general rule “otherwise” when following an enumeration, should receive an ejusdem generis interpretation (per CLEASBY, B.Monck v. Hilton, 46 LJMC 167, The words ‘or otherwise, ‘in law, when used as a general phrase following an enumeration of particulars, are commonly interpreted in a restricted sense, as referring to such other matters as are kindred to the classes before mentioned’.

• What does affording fair opportunity mean: The requirement as set out in section 48(1)(b) states that ‘a party against whom an award is invoked was not given proper notice of the appointment of arbitrator or of the arbitral proceedings or otherwise to present his case’. The court referred to the judgment in Vijay Karia (supra), more specifically in Para 24held that ‘before referring to the wide ranging arguments on both sides, it is important to emphasize, that unlike section 37 of the Arbitration Act, which is contained in the Part-I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a ‘domestic’ arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognize and enforce a foreign award but the other way around (i.e. an order recognizing and enforcing an award). Further referring to Para 9 of Vijay Karia (supra), which stated ‘……A party cannot purposefully ignore the procedural directives of a decision-making body, and then successfully claim that the procedures were fundamentally unfair, or violated due process’.

PARTING THOUGHTS:

In our considered view, this judgment comes as a very progressive approach towards narrowing the scope of judicial intervention in enforcement of an award. It will help the Indian Judiciary to cull the perception of enforcement bias which have had perpetuated in the past. The purpose and prospect of the avenues set forth by section 48 of the Act are in sync with Article V of the New York Convention, 1958 and India being a signatory to the said convention; it is of utmost importance to create an environment that is more enforcement friendly..The instant judgment indeed clarifies Section 48 of the Act and discusses in great detail the grounds of enforcement, which parties to the arbitration often find loopholes to defer the trials. The Hon’ble Apex Court has rightly considered reference made in the matter of Consorcio Rive v. Briggs of Cancun wherein it was discussed that article (v)1b of the New York Convention guarantees due process, which means “A fundamentally fair hearing is the one that meets ‘the minimal requirement of fairness’, adequate notice, a hearing on the evidence and an impartial decision by the Arbitrator.”The Vijay Karia (supra) judgment had set the motion right with respect to the enforcement of a foreign award in India however, National Agricultural Cooperative Marketing Federation of India (supra), a recently pronounced judgment had again taken the enforcement mechanism back to square one. But the present judgment comes in as a modest attempt towards maintaining the sanctity of section 48 of the Act and holding it in its true letter and spirit. The judgment rightly interprets the purpose of section 48in consonance with the preposition laid down in Vijay Karia (supra)in Para 103 wherein it stated ‘Nothing in section 48 of The Arbitration Act would permit an enforcing court to add to or subtract from a foreign award that must be either be enforced or rejected by reason of any of the grounds under section 48 being made out to resist enforcement of such foreign award. Court’s power under Article 142 ought not to be used to circumvent the legislative policy contained in section 48 of the Arbitration Act’.

(The above article is written by Authors)