Oil
& Natural Gas Commission Vs. Western Company of North America [1987] INSC 13 (16 January 1987)
Thakkar,
M.P. (J) Thakkar, M.P. (J) Singh, K.N. (J)
CITATION:
1987 AIR 674 1987 SCR (1)1024 1987 SCC (1) 496 JT 1987 (1) 160 1987 SCALE (1)67
CITATOR
INFO : D 1989 SC 818 (12)
ACT:
Arbitration
Act, 1940---Sections 2(e), 14, 17, 30 and 33Award-Only when transformed into a
judgment and decree under Section 17 becomes enforceable--New York
Convention--Article V(1)(e)--Expression 'not yet become binding on the
parties'--Interpretation and significance of--Test applicable--Enforceability
as per law of the country which governs the award--Arbitration proceedings'
between American Company and ONGC--Award rendered in favour of American
Company--ONGC invoking jurisdiction of Bombay High Court under Sections 30
& 33 to set aside award--HeM Indian Court alone has jurisdiction to
pronounce on validity/enforceability of award.
Arbitration
(Protocol and Convention) Act, 1937--Section 7Conditions for enforcement of
foreign awards--New York Convention-Article V(1)(e)--Effect of expression 'not
yet become binding on the parties'--The clause--Recognition and enforcement of
award-When arises.
Specific
Relief Act 1963--Section 41(b)--Conditions for applicability.
Words
& Phrases--'Not yet become binding on the parties'.
HEAD NOTE:
A
drilling contract was entered into by the appellant and the respondent which
provided that in the case of differences arising out of the aforesaid contract,
the matter shall be referred to arbitration, that the arbitration proceedings
shall be held in accordance with the provisions of the Indian Arbitration Act,
1940, and that the validity and interpretation thereof shall be governed by the
laws of India. The agreed venue for hearing was London.
A
dispute arose between the parties and it was referred to Arbitration.
Consequent upon the inability of the two Arbitrators to agree on the matters
outstanding in the reference, the Umpire entered upon the arbitration and
straight away rendered his interim award, without affording any hearing to the
parties and the same was lodged in the 1025 High Court at the instance of the
respondent. Subsequently, the Umpire rendered a final award relating to costs.
About
a mouth after the lodging of the award in the High Court, the respondent filed
a plaint in the U.S. District Court seeking an order confirming the interim and
final awards and a judgment against the appellant for the payment of a sum of $
256,815.45 by way of interest until the date of judgment and costs etc.
The
appellant, however, instituted a Petition under Sections 30 and 33 of the
Arbitration Act for setting aside the aforesaid awards and for an interim order
restraining the respondent from proceeding further with the action instituted
in the U.S. Court.
A
Single Judge of the High Court granted exparte interim restraint order but
vacated the same after hearing the parties. The High Court held that the action
to enforce the award as a foreign award in the U.S. Court was quite in order
and that the mere fact that a petition to set aside the award had already been
instituted in the Indian Court and was pending at the time of the institution
of the action in the U.S. Court was a matter of no consequence for the purposes
of consideration of the question as to whether or not the respondent should be
restrained from proceeding further with the action in the U.S. Court, that it
was open to the respondent to enforce the award in the U.S. Court and,
therefore, it would not be appropriate to grant the injunction restraining
enforcement, and that it was open to the appellant to contend before the U.S.
Court that the petition for setting aside the award cannot be said to be
vexatious or oppressive.
In the
appeal to this Court it was submitted on behalf of the appellant that the award
sought to be enforced in the U.S. Court may itself be set aside by the Indian
Court and in that event, an extremely anomalous situation would be created,
that since the validity of the award in question and its enforceability have to
be determined by an Indian Court which alone has jurisdiction under the Indian
Arbitration Act of 1940, the American Court would have no jurisdiction in this
behalf, that the enforceability of the award must be determined in the context
of the Indian Law as the Arbitration proceedings are subject to the Indian Law
and are governed by the Indian Arbitration Act of 1940, and that if the award
in question is permitted to be enforced in U.S.
Court
without its being confirmed by a court in India or U.S. Court it would not be in conformity
with law, justice or equity.
1026
On behalf of the respondent it was contended that the action in the U.S.A.
Court could not be considered as being oppressive to the appellant and that
even if it is so, the High Court has no jurisdiction to grant such a restraint
order, and that the appellant had suppressed the fact that it had appeared in
the USA Court and succeed in pursuading the USA Court to vacate the seizure
order obtained by the respondent and thereby disentitled itself to seek any
equitable order.
Allowing
the appeal, this Court,
HELD:
1. I Under the Indian law, an arbitral award is unenforceable until it is made
a rule of the Court, and a judgment and consequential decree are passed' in
terms of the award. Till an award is transformed into a judgment and decree
under Section 17 of the Indian Arbitration Act, it is altogether lifeless, from
the point of enforceability. Life is infused into the award in the sense of its
becoming enforceable only after it is made a rule of the Court upon the
judgment and decree in terms of the award being passed. [1042D-E]
1.2 In
the instant case, the arbitration proceedings are governed by the Indian
Arbitration Act of 1940 and a proceeding under the Act for affirming the award
and making it a rule of the Court or for setting it aside can be instituted
only in an Indian Court. The expression "Court"
as defined by Section 2(e) of the Act leaves no room for doubt on this score
and the Indian Court alone has the jurisdiction to
pronounce on the validity or enforceability of the award. [1038A-B]
2.1
Article V(1)(e) of the New York Convention provides that recognition and
enforcement of the award will be refused if the award "has not yet become
binding on the parties or has been set aside or suspended by a competent
authority of the country in which or under the law of which that award was
made." [1043A-B]
2.2
The significance of the expression "not yet become binding on the
parties" employed in Article V(1)(e) cannot be lost sight of. The expression
postulates that the Convention has visualised a time later than the making of
the award. [1044A-B]
2.3
The award which is sought to be enforced as foreign award will have to be
tested with reference to the key words contained in Article V(1)(e) of the
Convention and the question will have to be answered whether the award has
become binding on the parties or has not yet become binding on the parties. The
test has to be applied in the 1027 context of the law of the country governing
the arbitration proceedings or the country. under the law of which the award
has been made. [1044C-D]
2.4
The enforceability must be determined as per the law applicable to the award.
French, German and Italian Courts have taken the view that the enforceability
as per the law of the country which governs the award is the essential
pre-condition for asserting that it has become binding under Article V(1)(e).
[1047B-C]
2.5 India has acceded to the New York
Convention. One of the Objects of the New York Convention was to evolve
consensus amongst the covenanting nations in regard to the execution of foreign
arbitral awards in the concerned Nations.
The
necessity for such a consensus was felt with the end in view to facilitate
international trade and commerce by removing technical and legal bottle necks
which directly or indirectly impede the smooth flow of the river of
international commerce. Since India has
acceded to this Convention it would be reasonable to assume that India also subscribes to the philosophy
and ideology of the New York Convention as regards the necessity for evolving a
suitable formula to overcome this problem. The Court dealing with the matters
arising out of arbitration agreements of the nature envisioned by the New York
Convention must, therefore, adopt an approach informed by the spirit underlying
the Convention. [1050G-H; 1051A-B]
3.
Section 41 (b) of the Specific Relief Act will be attracted only in a
fact-situation where an injunction is sought to restrain a party from
instituting or prosecuting any action in a Court in India which is either of
co-ordinate jurisdiction or is higher to the Court from which the injunction is
sought in the hierarchy of Courts in India. [1049B-C]
4.1
There cannot be any doubt that the respondent can institute an action in the
U.S. Court for the enforcement of the award in question notwithstanding the
fact that the application for setting aside the award had already been
instituted and was already pending before the Indian Court and that the
appellant can approach the U.S. Court for seeking a stay of the proceedings
initiated by the respondent for procuring a judgment in terms of the award in
question. Merely on this ground the relief claimed by the appellant cannot be
refused. [1035B-D]
4.2 As
per the contract, while the parties are governed by the Indian Arbitration Act
and the Indian Courts have the exclusive jurisdiction to affirm or set aside
the award under the said act, the respondent is seeking to violate the very
arbitration clause on the basis of 1028 which the award has been obtained by
seeking confirmation of the award in the New York Court under the American Law.
This amounts to an improper use of the forum in American in violation of the
stipulation to be governed by the Indian law which by necessary implication
means a stipulation to exclude the USA Court to seek an affirmation and to seek it only under the Indian Arbitration
Act from an Indian
Court.
If the
restraint order is not granted, serious prejudice would be occasioned and a
party violating the very arbitration clause on the basis of which the award has
come into existence will have secured an order enforcing the order from a
foreign court in violation of the very clause. [1038D-G]
5.1
The respondent has prayed for confirmation of award.
The American Court may still proceed to confirm the
award, and in doing so it would take into account the American law and not the
Indian law or the Indian Arbitration Act of 1940. The American Court will be doing so at the behest and
at the instance of the respondent which has in terms agreed that the
arbitration proceedings will be governed by the Indian Arbitration Act of 1940.
Not only the matter will be decided by a court other than the court agreed upon
between the parties but it will be decided by a court under a law other than
the law agreed upon. Such an unesthetic situation should not be allowed. Even
though it was conceded by the respondent that the American Court has no
jurisdiction to confirm the award in view of the New York Convention, in the
event of the award rendered by the Umpire, the validity of which is not tested
either by an American Court or an Indian Court, being enforced by an American
Court, it will be an extremely uphill task to pursuade the Court to hold that a
foreign award can be enforced on the mere making of it without it being open to
challenge in either the country of its origin or the country where it was
sought to be enforced. [1041H; 1042A, B-C]
5.2 In
the event of the award rendered by the Umpire being set aside by the Indian
Court, an extremely anomolous situation would arise inasmuch as the successful
party may well have recovered the amount awarded as per the award from the
assets of the losing party in the USA after procuring a judgment in terms of
the award from the USA Court, which would result in an irreversible the damage
being done to the losing party for the Court in USA would have enforced a
non-existing award under which nothing could have been recovered. It would also
result in the valuable court time in the USA
being invested in a non issue and the said Court would have acted on and
enforced an award which did not exist in the eye of law. The USA Court would have done something which
could not have been done if the respondent company 1029 had waited during the pendency
of the proceedings in the Indian Court.
The losing party in that event would be obliged to initiate fresh proceedings
in the USA Court for the amount already recovered
from it, pursuant to the judgment rendered by the USA Court in enforcing the award which is set
aside by the Indian
Court. All this would
happen if the restraint order as prayed by the losing party is not granted and
this can be avoided if it is granted. [1037D-H]
5.3
The American Court would have enforced an award which is a lifeless award in
the country of its origin and under the law of the country of its origin which
law governs the award by choice and consent. [1042E-F]
6. I It
would neither be just nor fair on the part of the Indian Court to deny relief to the appellant
when it is likely to be placed in such an awkward situation if the relief is
refused. It would be difficult to conceive of a more appropriate case for
granting such relief. [1042G-H]
6.2
The facts of this case are eminently suitable for granting a restraint order.
No doubt, this Court sparingly exercises the jurisdiction to restrain a party
from proceeding further with an action in a foreign court. However, the
question is whether on the facts and circumstances of this case it would not be
unjust and unreasonable not to restrain the respondent from proceeding further
with the action in the American
Court. This is one of
those rare cases where the Court would be failing in its duty if it hesitated
in granting the restraint order, for, to oblige the appellant to face the aforesaid
proceedings in the American
Court would be
oppressive in the facts and circumstances of the case. [1048C-F]
6.3 It
would be unfair to refuse the restraint order in a case like the present one
for the action in the foreign court would be oppressive in the facts and
circumstances of the case and in such a situation the courts have undoubted
jurisdiction to grant such a restraint order, whenever the circumstances of the
case make it necessary or expedient to do so or the ends of justice so require.
[1049D-E]
6.4
There was no deliberate suppression by the appellant, and it would, therefore,
not be proper to refuse relief to the appellant on this account. [1050B-C]
6.5
While this Court is inclined to grant the restraint order, fairness demands
that it should not be unconditional.
There
are good and valid reasons for making the restraint order conditional in the
sense 1030 that the appellant should be required to pay the charges payable in
respect of the user of rig belonging to the respondent Company at the
undisputed rate regardless of the outcome of the petition instituted by it the
High Court for setting aside the award rendered by the Umpire. [1050E-G].
6.6 It
is no doubt true that if the arbitral award is set aside by the Indian Court no amount would be recoverable
under the said award. That, however, does not mean that the liability to pay
the undisputed amount which has already been incurred by the appellant
disappears. It would not be fair on the part of the appellant to withhold the
amount which in any case is admittedly due and payable. The respondent can
accept the amount without prejudice to its rights and contentious, to claim a
larger amount. No prejudice will he occasioned to the appellant by making the
payment of the admitted amount regardless of the fact that the respondent is
claiming a larger amount. In any case the appellant which seeks an equitable
relief cannot be heard to say that it is not prepared to act in a manner just
and equitable regardless of the niceties and nuances Of legal arguments.
[1051B-E] [The order passed by the High Court on April 3, 1986 set aside, and
the earlier order passed by it on January 20, 1986 restored subject to certain
conditions imposed by the Court.] Cotton Corporation of India v. United Industrial Bank, [1983] 3
SCR 962;V/O Tractoroexport, Moscow v. M/s Tarapore
England
Vol. 24 page 579 para 1039 referred to.
&
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1557 of 1986 From the Judgment
and Order dated 3.4.1986 of the Bombay High Court in Interim Petition No. 11 of
1986.
K. Parasaran,
Attorney General, B. Datta, Additional Solicitor General, S.S. Shroff, S.A. Shroff,
R.K. Joshi, Mrs. P.S. Shroff. Anil K. Sharma and Mohan Parasaran for the
Appellant.
F.S. Nariman,
S.N. Thakkar, Ravinder Narain, Gulam Vahamwati, S. Sukumaran, D.N. Mishra, Adittiya
Narain, Mrs. A.K. Verma and Miss Lira Goswami for the Respondent.
The
Judgment of the Court was delivered by 1031 THAKKAR, J. Was the High Court
'right' in granting the restraint order earlier, and 'wrong' in vacating the
said order later'? By the order in question the Respondent, Western Company of North America (Western Company), was restrained
from proceeding further with an action instituted by it in a USA Court against the appellant. Oil and
Natural Gas Commission (ONGC). The said action was targeted at seeking a
judgment from the concerned court in U.S.A. on the basis of an arbitral award
rendered by an Umpire in arbitration proceedings held in London but governed by
the Indian Arbitration Act, 194.0, which was the law of choice of the parties
as per the arbitration clause contained in the drilling contract entered into
between the parties. The Western Company has moved the USA Court for a judgment
in terms of the award not withstanding the fact that:1) ONGC had already
initiated proceedings in an Indian Court to set aside the award and the said
proceeding was as yet pending in the Indian Court.
2) The
said award was not as yet enforceable in India as a domestic award inasmuch as a Judgment in accordance with the
Indian law had yet to be procured in an Indian Court, by the Western Company.
The
events culminating in the order under appeal may be briefly and broadly
recounted. The appellant, ONGC and the Respondent Western Company, had entered
into a drilling contract. The contract provided for any differences arising out
of the agreement being referred to arbitration. The arbitration proceedings
were to be governed by the Indian Arbitration Act 1940 read with the relevant
rules. A dispute had arisen between the parties. It was referred to two
Arbitrators and an Umpire was also appointed. The Arbitrators entered on the
reference in London which was the agreed venue for
hearing as per the Arbitration Clause contained in the contract. On October 1,
1985 the Arbitrators informed the Umpire that they were unable to agree on the
matters outstanding in the reference. Consequently the Umpire entered upon the
arbitration and straightaway proceeded to declare his non-speaking award
(styled as interim award) on October 17, 1985
without affording any hearing to the parties on the matters outstanding in the
reference. The Umpire did not afford a hearing subsequent to his entering upon
the arbitration presumably because even when the matter was within the domain
of the Arbitrators (and not of the 1032 Umpire), and the Arbitrators were
seized of the matter, the Umpire used to remain present at the hearings
conducted by the Arbitrators. Having been present throughout the proceedings
whilst the Arbitrators were in charge of the same, the Umpire presumably
considered it unnecessary to hear the parties or their counsel after he Was
seized of the matter and it came within his domain in the wake of the
disagreement between the two Arbitrators. And the Umpire straightaway proceeded
to declare the interim award on October 17, 1985. Thereafter, on November 5, 1985, the Respondent, Western
Company, requested the Umpire to authorise one Shri D.C. Singhania to file the
award dated October 17, 1985 in the appropriate Court in India. The Umpire
accordingly authorised the said Shri Singhania in this behalf. And pursuant to
the said authority the award rendered by the Umpire was lodged in the Bombay
High Court on November 22, 1985. Subsequently, on November 28, 1985 the Umpire
rendered a supplementary award relating to costs which has been termed as
'final' award. About a month after the lodging of the award in the High Court
of Bombay by the Umpire at the instance of the Respondent, Western Company, the
latter lodged a plaint in the U.S. District Court, inter alia, seeking an order
(1) confirming
the two awards dated October
17, 1985 and November 28, 1985 rendered by the Umpire
(2) a
Judgment against the ONGC. (Appellant herein) in the amount of $ 256,815.45 by
way of interest until the date of he Judgment and costs etc.
On January 20, 1986, appellant ONGC on its part
instituted an Arbitration Petition No. 10 of 1986 under Sections 30 & 33 of
the Indian Arbitration Act 1940 for setting aside the awards rendered by the
Umpire. Inter alia the challenge was rooted in the following. reasoning. While
as per the Indian Arbitration Act 1940 which admittedly governed the
arbitration proceedings the Umpire would come on the scene only provided and
only when the Arbitrators gave him notice in writing that they were unable to
agree, and the Umpire would enter upon the reference in lieu of the Arbitrators
only subsequent thereto, in the present case the Umpire had neither held any proceedings
nor had afforded any opportunity of being heard to the ONGC after entering upon
the reference. The appellant, ONGC, also prayed for an interim order
restraining the Western Company from proceeding further with the action
instituted in the U.S. Court. The learned Single Judge granted an ex-parte
interim restraint order on January 20, 1986 but vacated the same after hearing
the parties by his impugned order giving rise to the present appeal by Special
Leave.
1.
Interim Order No. 11 of 1986 passed on April 3, 1986 in Arbitration Petition
No. 10 of 1986.
1033
In order to confine the dialogue strictly within the brackets of the scope of
the problem, four points deserve to be made at the outset before adverting to
the impugned order rendered by the High Court.
1) We
are not concerned with the merits of the main dispute between the parties which
was the subject-matter of arbitration and which pertains to the charges payable
for a jack-up drilling unit and related services provided by Western Company to
ONGC. The equipment was utilised beyond the period stipulated in the contract.
In regard to the employment of the equipment beyond the contractual period
Western Company claimed payment at US $ 41,600 per operating day which was the
rate stipulated for the user of the equipment for the stipulated time-frame.
The ONGC on the other hand has contended that in the context of the
correspondence between the parties pertaining to the employment of the
equipment beyond the stipulated period the Western Company is entitled to claim
only US $ 18,500 per day. The dispute concerns the claim for payment for the
user of the equipment for the extended period (136 days and 16 hours). We are
however not concerned with the merits of the claim giving rise to the dispute
and differences which was referred to the Arbitrators.
2) We
are not concerned with the merits of the contentions raised in the petition
instituted by ONGC in the High Court of Bombay in order to challenge the
arbitral award rendered by the Umpire except to the limited extent of examining
whether ONGC has a prima facie case.
3) We
are not concerned with the question as to how an arbitral award which is not a
domestic award in India can be enforced in a Court in India in the context of
the Indian legislation enacted in that behalf namely the Foreign Awards
(Recognition and Enforcement) Act, 1961. The said Act was enacted in order to
give effect to an international convention known as New York Convention to
which India has acceded. The provisions of the said Act would be attracted only
if a foreign award is sought to be enforced in an Indian Court. We are not
concerned with such a situation. The award which is the subject-matter of
controversy in the present case is admittedly a domestic award for the purposes
of the Indian Courts, governed by 1034 the provisions of the Indian Arbitration
Act of 1940. When the Western Company seeks to enforce the award in question in
the US Court they do so on the premise that it is a foreign award in the US
Court. In considering the question as regards the proceeding initiated by the
Western Company in the US Court, there is no occasion to invoke the provisions
of the aforesaid Act. The provisions of the said Act can be invoked only when
an award which is not a domestic award in India is sought to be enforced in
India. Such is not the situation in the present case. We are therefore not at
all concerned with the provisions of the said Act.
4) We
are not directly concerned with the law governing the enforcement of the
foreign award in an USA Court. We would be undertaking an inappropriate
exercise in being drawn into a discussion in depth as regards the law governing
enforcement of foreign awards in USA,
the procedure to be followed, or as to the interpretation of the relevant
provisions as made by the US Court. So
also it would be inappropriate to speculate on the view that is likely to be
taken by the American
Court or to
anticipate its interpretation or its verdict in regard to the relevant matters
at that end.
The
order under appeal may now be subjected to scrutiny.
The
High Court has vacated the interim order granted by it earlier on the following
grounds:1) That it was open to the Western Company to enforce the award in the
US Court and that accordingly it would not be appropriate to grant the injuction
restraining them from enforcing the same at that end.
2)
That it was open to the ONGC to contend before the US Court that the petition
for setting aside the award which was sought to be enforced in the US Court was
already pending in the Indian Court.
3)
That the proceeding in the US Court cannot be said to be vexatious or
oppressive.
The
High Court has examined the question as to whether the 1035 action instituted
by the Western Company against ONGC was maintainable in the context of the New
York Convention in the light of the relevant Articles of the Convention and has
come to the conclusion that an action to enforce the award in question as a
foreign award in the US Court was quite in order. The view is expressed that
the mere fact that a petition to set aside the award had already been
instituted in the Indian Court and was pending in the Indian Court at the time
of the institution of the action in the US Court was a matter of no
consequence, for the purposes of consideration of the question as to whether or
not Western Company should be restrained from proceeding further with the
action in the US Court. Now, there cannot be any doubt that the Western Company
can institute an action in the US Court for the enforcement of the award in
question notwithstanding the fact that the application for setting aside the
award had already been instituted and was already pending before the Indian
Court. So also there would not be any doubt or dispute about the proposition
that the ONGC can approach the US Court for
seeking a stay of the proceedings initiated by the Western Company for
procuring a judgment in terms of the award in question. But merely on this
ground the relief claimed by ONGC cannot be refused. To say that the Court in
America has the jurisdiction to entertain the action and to say that the
American Court can be approached for staying the action is tantamount to
virtually cold-shouldering the substantial questions raised by ONGC and'
seeking an escapist over-simplification of the matter. The points urged by the
ONGC are of considerable importance and deserve to be accorded serious
consideration.
Prominence
deserves to be accorded to the following factors which appear to be of great
significance:
1) It
is not in dispute that the arbitration clause contained in the contract which
has given rise to the disputes and differences between the parties in terms
provides that:
"The
arbitration proceedings shall be held in accordance with the provisions of the
Indian Arbitration Act, 1940 and the rules made thereunder as amended from time
to time." (Vide clause 14 of the Contract) 2) There is also an agreement
between the parties that the validity and interpretation thereof shall be
"governed by the laws of India" (vide clause 18 of the contract) 1036
3) Under the Indian Law, having regard to the scheme of the Arbitration Act of
1940, an arbitral award as such is not enforceable or executable. It is only
after the award is filed in the Indian Court and is made a rule of the Court by
virtue of a judgment and decree in terms of the award that life in the sense of
enforceability is infused in the lifeless award. (Vide Sections 141 and 172of
the Arbitration Act) The situation which emerges is somewhat an incongrous one.
The arbitral award rendered by the Umpire may itself be set-aside and become
non-existant if the ONGC is able to Successfully assail it in the petition
under section 30/33 for setting aside the award in question in' India. The High
Court does not hold that the petition is prima facie liable to fail. We do not
wish to express any opinion on the merits of the petition as in our opinion it
would be improper to do so and might occasion prejudice one way or the other.
We are however not prepared to assume for the purpose of the present discussion
that the petition is liable to fail. The question is wide open.The final
decision of the Court cannot and need not be anticipated.
In the
light of the foregoing discussion, the following submissions, pressed into
service by the appellant, ONGC, require to be examined.
(1)
The award sought to be enforced in the USA Court may itself be set aside by the Indian Court and in that 1. 14(1)&(2):
"14.(1)
When the arbitrators or umpire have made their award, they shall sign it and
shall give notice in writing to the parties of the making and signing thereof
and of the amount of fees and charges payable in respect of the arbitration and
award.
2) The
arbitrators or umpire shall, at the request of any party to the arbitration
agreement or any person claiming under such party or if so directed by the
Court and upon payment of the fees and charges due in respect of the
arbitration and award and of the costs and charges of filing, the award cause
the award or a signed copy of it, together with any depositions and documents
which may have been taken and proved before them, to be filed in Court, and the
Court shall thereupon give notice to the parties of the filing of the award.
3. x x
x" 2.17. Judgment in terms of award-Where the Court sees no causc to remit
the award or any of the matters referred to arbitration for reconsideration or
to set aside the award, the Court shall, after the time for making an
application to set aside the award has expired, or such application having been
made, after refusing it, proceeded to pronounce judgment according to the
award, and upon the judgment so pronounced a decree shall follow, and no appeal
shall lie from such decree except on the ground that it is in excess of, or not
otherwise in accordance with, the award." 1037 event, an anomalous
situation would be created.
(2)
Since the validity of the award in question and its enforceability have to be
determined by an Indian Court, which alone has jurisdiction under the Indian
Arbitration Act of 1940, the American Court would have no jurisdiction in this
behalf.
(3)
The enforceability of the award must be determined in the context of the Indian
Law as the arbitration proceedings are admittedly subject to the Indian Law and
are governed by the Indian Arbitration Act of 1940.
(4) If
the award in question is permitted to be enforced in USA without its being affirmed by a Court in India or a USA Court, it would not be in conformity with law, justice or equity.
There
is considerable force in the argument advanced in the context of the
possibility of the award rendered by the Umpire being set aside by the Indian Court. In that event an extremely
anomalous situation would arise inasmuch as the successful party (Western
Company) may well have recovered the amount awarded as per the award from the
assets of the losing party in the USA
after procuring a judgment in terms of the award from USA Court. It would result in an irreversible
damage being done to the losing party (ONGC) for the Court in the USA would have enforced a non-existent award under which
nothing could have been recovered. It would result in the valuable Court time
of the USA Court being invested in a non-issue and
the said Court would have acted on and enforced an award which did not exist in
the eye of law. The U.S.A.
Court would have done
something which it would not have done if the Western Company had waited during
the pendency of the proceedings in the Indian Court. The parties would also be obliged to spend large amounts
by way of costs incurred for engaging counsel and for incidental matters. The
losing party in that event would be obliged to initiate fresh proceedings in
the USA Court for restitution of the amount
already recovered from it, pursuant to the judgment rendered by the USA Court in enforcing the award which is set
aside by the Indian
Court. Both the sides
would have to incur huge expenditure in connection with the attendent legal
proceedings for engaging counsel and for incidental matters once again. All
this would happen if the restraint order as prayed by the losing party is not
granted. And all this can be avoided if it is granted.
1038
Equally forceful is the plea urged in the context of the argument that the
concerned Court in India alone would have jurisdiction to
determine the question regarding enforceability or otherwise of the award in
question, for, admittedly, the arbitration proceedings are governed by the
Indian Arbitration Act of 1940. And that a proceeding under the Indian
Arbitration Act for affirming the award and making it a rule of the Court or
for setting aside can be instituted only in an Indian Court. The expression "Court" as defined by Section 2(e)1
of the Arbitration Act leaves no room for doubt on this score. Thus the Indian Court alone has the jurisdiction to
pronounce on the validity or enforceability of the award in question. But the
successful party (Western Company) has invoked the jurisdiction of the USA Court to seek affirmation of the award.
In fact reliefs Nos. 1 and 2 claimed by the Western Company in the USA Court are in the following terms.
1) An
order confirming the interim award dated October 17, 1985.
2) An
order confirming the final award dated November 28, 1985.
Thus,
while as per the contract, parties are governed by the Indian Arbitration Act
and the Indian Courts have the exclusive jurisdiction to affirm or set aside
the award under the said Act, the Western Company is seeking to violate the
very arbitration clause on the basis of which the award have been obtained by
seeking confirmation of the award in the New York Court under the American Law.
Will it not amount to an improper use of the forum in America in violation of the stipulation to
be governed by the Indian law which by necessary implication means a
stipulation to exclude the USA Court to
seek an affirmation and to seek it only under the Indian Arbitration Act from
an Indian Court? If the restraint order is not
granted, serious prejudice would be occasioned and a party violating the very
arbitration clause on the basis of which the award has come into existence will
have secured an order enforcing the order from a foreign court in violation of
that very clause. When this aspect was pointed out to the learned counsel for
the Western Company in the context of another facet of this very question
namely the possibility of the Indian Court
taking one view and the American
1.
"2(e) "Court" means a Civil Court having jurisdiction to decide the questions forming the
subject-matter of the reference if the same had been the subject-matter of
suit, but does not, except for the purpose of arbitration proceedings under
section 21 include a Small
Cause Court."
1039 Court taking a contrary view, counsel stated that though the Western
Company had made a prayer for confirmation of the award, the New York Court had
no jurisdiction under the Convention to confirm or set aside the award. It is
not appropriate on the part of this Court to anticipate the decision of the New
York Court. If the Western Company is aware of the legal position and is sure
of the legal position that the New York Court has no jurisdiction to confirm
the award, pray why has the Western Company prayed for the said relief in the
New York Court? We cannot proceed on the basis of the assertion made on behalf
of the Western Company that the New York Court has no such jurisdiction. For
ought we know the prayer made by the Western Company may well be granted and
the legal position propounded by the counsel before us may not prevail with the
New York Court. Surely, the Western Company itself is not going to contend
before the New York Court that even though it has sought this relief the Court
has no jurisdiction to grant it. In any case, the Western Company could have
amended the plaint lodged in the New York Court by deleting this prayer which
it has not done so far. Be that as it may, as the matter presently stands the
appellant has invoked the jurisdiction of the New York Court to pronounce on
the same question which is required to be pronounced upon by the Indian Court
notwithstanding the fact that only an Indian Court has the jurisdiction to
pronounce upon this vital question in view of the stipulation contained in the
arbitration agreement itself. The appellant has invoked the jurisdiction of the
New York Court in a matter which it could not have invited the New York Court
to decide. The Western Company has also invoked the jurisdiction of a Court
other than the Court which as per the arbitration agreement has the
jurisdiction in the matter. And there is a likelihood of conflicting decisions
on the very vital issue resulting in legal chaos.
The
apprehension about legal chaos is more than well-founded. Assuming that the
American Court decides that it has jurisdiction to confirm the award and
confirms the award, whereas the Indian Court forms the opinion that the award
is invalid and sets it aside, what will happen? The Western Company would have
recovered the amount as per the award in question by obtaining a judgment in
the American Court upon the award being confirmed by
the said Court. And the losing party, ONGC, would be helpless to recover the
amount notwithstanding the fact that the award has been set aside by the Indian
Court, for, the amount would then not be recoverable under the American law in
the American Court, the latter having held the award to be valid. The questions
posed to the counsel for the Western Company in this behalf and his answers
relevant to the material extent, in his own words, along with the questions
deserve to be quoted:
1040
QUESTIONS ANSWERS It is an award under Indian law Yes: this is precisely what
regardless of the fact that it the convention contemplates was rendered by the
umpire while The N.Y.proceedings is not sitting in London.Since law in a
parallel proceeding but India does not make it enforcean independent concurrent
able on mere filing of the award one permissible under US but only on it being
made a rule Law and under Art. 1 of the (subject to its being correctedN.Y.
Convention acceded to varied-annulled or modified) by the U.S. the N.Y. Court should a parallel proceeding be will
take into consideratipermitted for its enforcement on the pendency of the prooutside
India before it has becceedings in India; but it ome enforceable in India? Partiis for that Court to so c ularly
when the Indian Court is exercise its discretion already
seized of the matter and under Art. VI parties are bound by Indian law? Western
company has prayed for:
1. An
order confirming the The proceedings in New York Iterim award dated and Bombay do not involve October 17,1985. "the very matters which
will" have to be death with Now these are the very matters by the Bombay High
Court" which will have to be dealt with The Bombay Court will not by the
Bombay High Court in the have to consider whether to matter arising out of the
filing issue an order of enforcemof the award-The award may be ent against
assets of ONGC, confirmed (or set aside) decree as will the New York Court.
may be
passed (or refused). Can Moreover, the New York Cothese very matters be
permitted urt will not have to decito be agitated in the parallel de, as the
Bombay Court proceedings under "American Law" will, whether to set
aside when parties have in express terms the award. While the coagreed to be goverend
by the law mplaint in the New York in India? And what will happen if case does
make a prayer the Indian
Court and the
American to confirm (as well as Court take conflicting views ? enforce) the
awards, the Which view will prevail? Will New York Court is without
jurisdiction under the convention to confirm or set aside an award; it is only
competent 1041 there not be legal chaos? to "recognised and enforce"
foreign awards, as stated in paragraph 13 of the New York complaint. Thus, whatever the prayer for relief, the Bombay Court alone will decide the issues of
confirmation/set aside,and there will not be any conflicting jurisdiction.
There
is no question as to which Court decision would prevail in the event of a
conflicting result: the Indian
Court judgment
setting aside the awards. In that event ONGC could take the Indian Court decision to a court in the United States to have it recognized and enforced
so as to recover any monies that Western may have obtained pursuant to an American Court order.
The
possibility of conflicting act comes in parallel proceedings such as these does
not mean that one court must assert exclusive jurisdiction in order to prevent
"legal chaos".
The
submission that while the validity of the award is required to be tested in the
context of the Indian Law if the Western Company is permitted to pursue the
matter in the American
Court, the matter
would be decided under a law other than the Indian Law, by the American Court. Admittedly, Western Company has
prayed for confirmation of the award. The American Court may still proceed to confirm the award. And in doing so the
American Court would take into account the
American law and not the Indian law or the Indian Arbitration Act of 1940. And
the American Court would be doing so at the behest and
the instance of Western Company which has in terms agreed that the arbitration
proceedings. will be governed by the Indian Arbitration Act of 1940. Not only
the matter will be decided by a Court other than the Court agreed upon between
the parties but it will 1042 be decided by a Court under a law other than the
law agreed upon. Should or should not such an unaesthetic situation be
foreclosed? The last submission is also quite impressive. If the Western
Company is right in the posture assumed by it in this Court at the time of the
hearing that the American Court has no jurisdiction to confirm the award in
view of the New York Convention is correct, the resultant position would be
this: The award rendered by the Umpire, the validity of which is not tested
either by an American Court or an Indian Court will have been enforced by an
American Court.
It
will be an extremely uphill task to persuade the Court to hold that a foreign
award can be enforced on the mere making of it without it being open to
challenge in either the country of its origin or the country where it was
sought to be enforced. And that its validity may perhaps be tested for academic
purposes in the country of origin after the award is enforced and for seeking
restitution later on if possible and if there are assets which can be proceeded
against in the country where the award has been enforced. It is essential to emphasise
at this juncture and in this context that under the Indian law, an arbitral
award is unenforceable until it is made a rule of the Court and a judgment and
consequential decree are passed in terms of the award. Till an award is
transformed into a judgment and decree under Section 17 of the Arbitration Act,
it is altogether lifeless from the point of view of its enforceability. Life is
infused into the award in the sense of its becoming enforceable only after it
is made a rule of the Court upon the judgment and decree in terms of the award
being passed. The American
Court would have
therefore enforced an award which is a lifeless award in the country of its
origin and under the law of the country of its origin which law governs the
award by choice and consent.
We are
of the opinion that the appellant, ONGC, should not be obliged to face such a
situation as would arise in the light of the aforesaid discussion in the facts
and circumstances of the present case. To drive the appellant in a tight comer
and oblige it to be placed in such an inextricable situation as would arise if
the Western Company is permitted to go ahead with the proceedings in the American Court would be oppressive to the ONGC. It
would be neither just nor fair on the part of the Indian Court to deny relief to the ONGC when it
is likely to be placed in such an awkward situation if the relief is refused.
It would be difficult to conceive of a more appropriate case for granting such
relief. The reasons which have been just now articulated are good and sufficient
for granting the relief and accordingly it appears unnecessary to examine the
meaning and content of the relevant arti1043 cles of the New York Convention
for the purposes of the present appeal. All the same we will briefly indicate
the questions which were debated in the context of the Convention since
considerable debate has centred around the interpretation and scope of some of
the articles of the Convention. Article V(1)(e) provides that recognition and
enforcement of the award will be refused if the award "has not yet become
binding on the parties or has been set aside or suspended by a competent
authority of the country in which or under the law of which that award was
made." It was contended on behalf of Western Company that the legislative
history of the New York Convention discloses that under the Geneva
Protocol--given effect to by the Arbitration (Protocol and Convention) Act,
1937--it was provided that an award would not be enforced if it was not
considered as 'final' and it was not 'final' if it is proved that any
proceedings for the purpose of contesting the validity of the award were
pending. This provision aroused a great deal of controversy as it was felt that
the requirement of the Geneva Convention that the award has become final in the
country in which it has been made was considered to be burdensome and
inadequate and that the New York Convention has accordingly changed the format
and the word "final" was replaced by the word "binding" in
Art. V(1)(e) .In these premises it was argued that for the purposes of the
Convention the award should be considered as binding if no further recourse to
another arbitral tribunal was open and that the possibility of recourse to a
Court of law should not prevent the award from being binding. On the other hand
it was contended on behalf of ONGC that an award should be treated as binding
only when it has become enforceable in the country of origin. It was argued
that the word "binding" was used in the sense of an award from which
the parties could not wriggle out. So far as the present matter is concerned it
is unnecessary to examine this aspect at length or in depth for we are not
resting our decision on the question as to whether the American Court is likely
to refuse enforcement or not. As we indicated at the outset, it would be
improper for us to anticipate the decision of the American Court on this aspect. We are inclined to
rest our decision on the reasoning which we have indicated a short while ago.
We would there
1.
"V(1)(d) Recognition and enforcement of the award may be refused, at the
request of the party against whom it is invoked, only if that party furnishes
to the competent authority where the recognition and enforcement is sought,
proof that:
(e)
The award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of
which, that award was made." 1044 fore consider it appropriate to refrain
from getting drawn into an academic debate on this issue. We however consider
that it is desirable to bring into focus certain aspects of the matter in the
context of the debate on this point. The significance of the expression
"not yet become binding on the parties" employed in Article V(1)(e)
cannot be lost sight of. The expression postulates that the Convention has visualised
an award which becomes binding at a point of time later than the making of the
award. In other words the provision has in its contemplation the fact that an
award in some cases may become binding on the mere making of it and in some
cases may become binding only at a later stage. If this was not so there was no
point in using the expression "not yet become binding". The award
which is sought to be enforced as foreign award will have thus to be tested with
reference to the key words contained in Article V(1)(e) of the Convention and
the question will have to be answered whether the award has become binding on
the parties or has not yet become binding on the parties. It is evident that
the test has to be applied in the context of the law of the country governing
the arbitration proceedings or the country under the law of which the award was
made. This conclusion is reinforced by the views expressed by Albert Jan Van
den Berg in his treatise--The New York Arbitration Convention of 1958--Towards
a Uniform Judicial Interpretation at page 341 as under:
"Most
of the authors are also of the opinion that the moment at which an award
becomes binding within the meaning of Article V(1)(e) is to be determined under
the law governing the award. However, they also differ at which moment this
should be assumed under that law.' He has also referred to a judgment rendered
by the Italian Supreme Court which supports this proposition. Says the author:
"Furthermore,
whilst declaring that the Convention has eliminated the "double
Exequatur", the Italian Supreme Court held that the Court of Appeal has
correctly ascertained that the award in question, made in the United States,
had become binding under the relevant law of the United States." (Corte di
Cassazione (Sez. 1), April
1, 1980 no. 2448, Lanificio
Waiter Banci S.a.S. v. Bobbie Brooks Inc. (Italy no. 40) affirming Corte di Appello
of Florence, October 8, 1977 (Italy no. 29).
1045
The author has also adverted to this dimension of the matter at pages 338 to
340 of his treatise in the following passage:"Furthermore, the Courts have
unanimously held that the party against whom the enforcement is sought has to
prove that the award has not become binding. It still happens in some cases
that a respondent merely asserts that the award has not become binding. In
these cases the courts have invariably held that the respondent should furnish
proof to this effect.
The
above interpretation of the term "binding" is also almost unanimously
affirmed by the authors. To this extent there exists a uniformity of
interpretation.
The
uniformity of the interpretation begins to waver, however, when it comes to the
question at which moment an award can be considered to have become binding
under Article V(1)(e).
Although
in no case has it been held hitherto that the award in question was to be
considered as not having become binding, the various reasonings are diverse. If
this situation continues, it may occur that an award will not be considered as
binding by one court, whilst the same award would have been considered as
binding by another court.
In
finding the answer to the question at which moment the award can be considered
binding, the prevailing judicial interpretation seems to be that this question
is to be determined under the law applicable to the award. The law applicable
to the award is according to Article V(1)(e), the law of the country in which,
or under the law of which, that award was made (the country of origin). Several
courts appear to search under the applicable law for the moment at which the
award can be considered to be inchoate for enforcement in the country of
origin. Others attempt to find an equivalent of the term "binding"
under the arbitration law of the country of origin.
Before
the Court of Appeal of Naples, the Italian respondent had
resisted to request for enforcement of an award made in London, alleging that the award should
have been declared.
enforceable
in England. The Court rejected the 1046 defence,
reasoning that the legal effect of the award was not to be determined under
Italian law, according to which an award becomes binding only upon an
enforcement order of the Pretore, but should be assessed under English law
according to which the leave for enforcement is not necessary in order to
confer binding force upon the award.
Another
example is the Court of First Instance of Strasbourg before which the French
respondent had asserted that the enforcement of an award made in F.R. Germany
could not be granted because a leave for enforcement had not been issued by a German Court. Whilst observing that the
Convention has abolished the "double exequatur", the Court reasoned
that the award had become binding when it had been deposited with the German Court. The latter is indeed a
prerequisite for the binding force (verbhindliehkeit) of an award under German
law.
The
binding force of an award under German law was also considered by the Court of
Appeal of Basle. The Court referred to the Report
of the Swiss Federal Council (Conseil federal) accompanying the implementation
of the Convention in Switzerland, in which it is stated that "an award is
binding within the meaning of Article V(1)(e) when the award complies with the
conditions required for being capable for being declared enforceable in the
country in which it was made." The Court held that the award was binding
on the ground that a declaration of enforceability of the award had been issued
by the Court of First Instance of Hamburg.
This
decision might create the impression that in order to be binding under Article V(1)(e),
an award made in F.R. Germany must have been declared enforceable by a German Court. However, the Swiss Consell federal
merely meant to say that "binding" should be understood as
"ready for enforcement" and not as "enforced".
If the
Court had followed this interpretation, it would probably have reached the same
conclusion as the above-mentioned Court of First Instance of Strasbourg which
considered the award to be binding under German law once it had been deposited
with the German Court.
Nevertheless,
both courts have in common that they considered the ques1047 tion at which
moment an award becomes binding within the meaning of Article V(1)(e) under the
law applicable to the award.
Following
propositions emerge from the passage quoted hereinabove.
(1)
That the enforceability must be determined as per the law applicable to the
award.
(2)
French, German and Italian Courts have taken the view that the enforceability
as per the law of the country which governs the award is essential
pre-condition for asserting that it has become binding under Article V(1)(e).
The
aforesaid passages and the propositions emerging there from thus buttress and
reinforce the view which has been expressed by us.
It was
next contended on behalf of Western Company that in the five cases decided
under the New York Convention involving parallel proceedings, in no case did a
Court decide that an injunction such as sought by ONGC was necessary. In two of
these five cases, Norsolor v. Pabalk (France), and Fertilizer Corporation of
India v. IDI Management (US) the Courts, concerned about the possibility of
conflicting results, ordered a stay of their enforcement proceeding; in the FCI
case the court did so only upon the providing of a guarantee to secure the
amount of the award at issue. In the other three cases, the court declined to
exercise their discretion to stay an enforcement proceeding (Gutaverken (Sweden), Southern Pacific Properties v. Egypt (The Netherlands), and St. Gobain (France). The Court in SPP did so only
because the respondent refused to provide security, thus demonstrating its bad
faith. In SPP there was in fact a conflicting result when the Dutch Court entered an enforcement order on the
very same day as a French
Court annulled the
award. Such is the argument. We are afraid that this argument loses sight of
the fact that in the present matter we are not concerned with the question as
to whether a foreign court should adjourn the decision on the enforcement of
the award under Article VI. 1 We are not enforcing any foreign award and the
question
1.
"Article VI--If an application for the setting aside or suspension of the
award has been made to a competent authority referred to in Article V(1)(e) the
authority before which the award is sought to be relied upon may, if it
considers it proper, adjourn the decision on the enforcement of the award and
may also, on the application of the party claiming enforcement of the award,
order the other party to give suitable security." 1048 is not whether or
not a decision on enforcement should be adjourned. It is the American Court which will have to address itself
to that question if an occasion arises.
The
decisions relied upon by the counsel for the Western Company have relevance
from the perspective of the problem faced by a Court enforcing a foreign award
before which a prayer for adjournment of the. decision is made. In so far as we
are concerned, the question is whether the Western Company should be restrained
by us from proceeding with the action instituted in the American Court. We are therefore not persuaded by
the aforesaid submission urged by learned counsel for the Western Company.
In the
result we are of the opinion that the facts of this case are eminently suitable
for granting a restraint order as prayed by ONGC. It is no doubt true that this
Court sparingly exercises the jurisdiction to restrain a party from proceeding
further with an action in a foreign court.
We
have the utmost respect for the American Court. The question however is whether on the facts and
circumstances of this case it would not be unjust and unreasonable not to
restrain the Western Company from proceeding further with the action in the American Court in the facts and circumstances
outlined earlier. We would be extremely slow to grant such a restraint order
but in the facts and circumstances of this matter we are convinced that this is
one of those rare cases where we would be failing in our duty if we hesitate in
granting the restraint order, for, to oblige the ONGC to face the aforesaid
proceedings in the American Court would be opperssive in the facts and
circumstances discussed earlier. But before we pass an appropriate order in
this behalf, we must deal with the plea that the High Court does not have the
jurisdiction to grant such a restraint order even if the proceeding in the
foreign court is considered to be oppressive. Counsel for the-Respondent has
placed reliance on Cotton Corporation of India v. United Industrial Bank, [1983] 3 S.C.R. 962 in support of this plea.
In Cotton Corporation's case, the question before the Court was whether in the
context of Section 41(b) of the Specific Relief Act, the Court was justified in
granting the injunction. The said provision runs thus:
"41.
An injunction cannot be granted:( a )
...................................................
....
(b) to
restrain any person from instituting or prosecuting 1049 any proceeding in a
court not subordinate to that from which the injuction is sought;
...................................................."
(Emphasis added) This provision, in our opinion, will be attracted only in a
fact-situation where an injuction is sought to restrain a party from
instituting or prosecuting any action in a Court in India which is either of ordinate
jurisdiction or is higher to the Court from which the injuction is sought in
the hierarchy of Courts in India. There
is nothing in Cotton Corporation's case which supports the proposition that the
High Court has no jurisdiction to grant an injunction or a restraint order in
exercise of its inherent powers in a situation like the one in the present
case. In fact this Court had granted such a restraint order in V/O Tractoroexport,
Moscow v. M/s Tarapore & Company and Anr., [1970] 3 S.C.R, 53 and had
restrained a party from proceeding with an arbitration proceedings in a foreign
country (in Moscow). As we have pointed out earlier, it would be unfair to
refuse the restraint order in a case like the present. one for the action in
the foreign Court would be oppressive in the facts and circumstances of the
case. And in such a situation the Courts have undoubted jurisdiction to grant
such a restraint order whenever the circumstances of the case make it necessary
or expedient to do so or the ends of justice so require. The following passage
extracted from paragraph 1039 of Halsbury's Laws of England Vol. 24 at, page
579 supports this point of view:"With regard to foreign proceedings the
court will restrain a person within its jurisdiction from instituting or
prosecuting proceedings in a foreign court whenever the circumstances of the
case make such an inter-position necessary or expedient. In a proper case the
court in this country may restrain person who has actually recovered judgment
in a foreign court from proceeding to enforce that judgment. The jurisdiction
is discretionary and the court will give credit to foreign courts for doing
justice in their own jurisdiction." It was because this position was fully
realized that it was argued on behalf of the Respondent that the action in the U.S.A. Court could not be considered as being
oppressive to the ONGC. We have already dealt with this aspect and reached a
conclusion adverse to Western Company. There is thus no merit in the submission
that the High 1050 Court of Bombay has no jurisdiction in this behalf.
It was
also urged that the ONGC had suppressed the fact that it had appeared in the
U.S.A. Court and had succeeded in persuading the U.S.A. Court to vacate the
seizure order obtained by the Western Company and had thereby disentitled
itself to seek an equitable order. In our opinion in the first place there was
no deliberate suppression, and in any case it was not necessary to apprise the
Court about the said development. It would therefore not be proper to refuse
relief to the ONGC on this account. We are therefore unable to accede to this
submission either.
Before
we conclude we consider it necessary to place on record the fact that it is
perhaps on account of some understanding gap that it is observed by the High
Court in its judgment:
"It
was also not disputed that an award could be enforced in the USA without the Respondents obtaining a decree in terms
of the award from this Court." The learned Additional Solicitor General
has solemnly stated before us that no such concession was made by him. The
learned counsel for the Western Company, with the fairness expected of him, has
confirmed that the learned Additional Solicitor General had not made any such
concession. Whilst nothing turns on it, we are adverting to this aspect for the
sake of fairness to the learned Additional Solicitor General.
And
now we come to the conclusion. While we are inclined to grant the restraint
order as prayed, we are of the opinion that fairness demands that we do not
make it unconditional but make it conditional to the extent indicated
hereafter. There are good and valid reasons for making the restraint order
conditional in the sense that ONGC should be required to pay the charges
payable in respect of the user of the rig belonging to the Western Company at
the undisputed rate regardless of the outcome of the petition instituted by the
ONGC in the High Court for setting aside the award rendered by the Umpire. India has acceded to the New York
Convention. One of the objects of the New York Convention was to evolve
consensus amongst the covenanting nations in regard to the execution of foreign
arbitral awards in the concerned Nations. The necessity for such a consensus
was presumably felt with the end in view to facilitate international trade and
commerce by removing technical and legal bottle necks which directly or
indi1051 rectly impede the smooth flow of the river of international commerce.
Since India has acceded to this Convention it
would be reasonable to assume that India also subscribes to the philosophy and ideology of the New York
Convention as regards the necessity for evolving a suitable formula to overcome
this problem. The Court dealing with the matters arising out of arbitration
agreements of the nature envisioned by the New York Convention must therefore
adopt an approach informed by the spirit underlying the Convention.
It is
no doubt true that if the arbitral award is set aside by the Indian Court, no amount would be recoverable
under the said award. That however does not mean that the liability to pay the
undisputed amount which has already been incurred by ONGC disappears. It would
not be fair on the part of ONGC to withhold the amount which in any case is
admittedly due and payable. The Western Company can accept the amount without
prejudice to its rights and contentions to claim a larger amount. No prejudice
will be occasioned to ONGC by making the payment of the admitted amount
regardless of the fact that the Western Company is claiming a larger amount.
And in any case, ONGC which seeks an equitable relief cannot be heard to say
that it is not prepared to act in a just and equitable manner regardless of the
niceties and nuances of legal arguments. These are the reasons which make us
take the view that the restraint order deserves to be made conditional on the
ONGC paying the undisputed dues at an early date subject to final adjustment in
the light of final determination of the dispute.
We
accordingly allow this appeal and direct as under: The appeal is allowed. The
order passed by the Bombay High Court on April 3, 1986 is set aside. The order passed by
the Bombay High Court on January
20, 1986 is restored
subject to the conditions engrafted hereafter.
II The
appellant ONGC shall pay to the Respondent Western Company, in the manner
indicated hereinafter, the amount payable at the undisputed rate of $ 18,500
per day for the period as computed by the Umpire in his award amounting to $
2,528,339 along with interest at 12% till the date of payment.
1052
III The said amount will be paid to the Respondent, Western Company, by wire
transfer to their Bank Account No. 144-033008 at Manufacturers Hanover Trust
Company, New York, U.S.A. within four weeks of the Respondent filing an
undertaking (without prejudice to their rights and contentions) in this Court
in the terms indicated here in below, namely, (a) to accept the said amount
subject to the final outcome of Arbitration Petition No. 10 of 1986 pending in
the High Court of Bombay or the appeal, if any, arising from the order passed
by the High Court in the said matter and (b) further provided the Respondent
files an undertaking in this Court to treat the said payment by way of protanto
satisfaction in respect of (i) the Award in question, in case it stands
confirmed or (ii) a fresh award, if any, that may be passed in future in
connection with the original cause of action or (iii) in respect of the
original claim giving rise to the arbitration proceedings in question.
IV In
case the Respondent, Western Company, files undertakings in this Court as
contemplated in Clause III hereinabove and yet the appellant ONGC fails to make
the payment in the manner indicated in Clause II hereinabove within four weeks
of the date of filing of the said undertakings the order of stay granted as per
Clause I hereinabove shall stand vacated.
V The
learned Single Judge before whom the Arbitration Petition No. 10 of 1986 is
pending shall refer the matter to a Division Bench having regard to the fact
that
(1) it
raises important and complex questions and
(2) that
it is desirable that the matter is expeditiously disposed of and a Letters
Patent Appeal is avoided and
(3) that
the matter concerns a commercial transaction of international character.
The
learned Chief Justice of Bombay High Court may constitute a Division Bench to
hear this matter with a request to the Division Bench to dispose of the same
expeditiously.
1053
VII The Division Bench constituted by the Chief Justice will afford reasonable
opportunity to the parties to file their statements of claims, affidavits etc.
and shall post the matter for directions within two weeks of the statements,
affidavits etc. being filed. The Division Bench will direct that the matter is
posted for hearing at the earliest and will hear the matter from day to day and
dispose it of expeditiously, preferably within six months (excluding the time
granted at the joint request of the parties or at the instance of the
Respondent) of the commencement of the arguments.
VIII
There will be no order regarding costs.
IX
Parties will be at liberty to apply to this Court for further directions from
time to time in case of necessity.
N.P.V.
Appeal Allowed.
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