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Report No. 176

2.40.5 Trade usages: suggestion to delete - rejected.

It has been suggested that the sec. 28(3) Act permits "trade usages" to be taken into account and that this provision is vague and has to be omitted. We do not think that this provision is vague. The ordinary Courts in our country do take into account trade usages while deciding commercial causes. In fact, in 'commercial contracts', trade usages do have great significance.

These principles arising from 'trade usages' are part of the 'lex mercatoria'. See in this connection Art.7 of the European Convention, Art. 28(4) of the Model Law, Art. 1496 of French New Code of Civil Procedure, Art. 17(2) of ICC Rules, 1998 (Fouchard para 378, 1447, 1448) which all permit 'trade usages' to be taken into account. This proposal is rejected.

2.40.6 Whether there should be no two stages for deciding enforceability and execution under section 49 for enforcement of foreign awards: question is covered by Supreme Court judgement

This aspect is covered by the recent judgment of the Supreme Court in M/s. Fuerst Day Lawson Ltd. v. Jindal Export Ltd., 2001 (3) SCALE p.708. Therefore, no fresh amendment is necessary. In the same application, both enforceability and execution, can now be decided. A problem under section 49 has been raised. Section 49 which refers to enforcement of 'foreign awards' says:

"where the Court is satisfied that the foreign award is enforceable under the chapter, the award shall be deemed to be a decree of that Court".

First we shall refer to the change in the statutory provisions on this question. We shall then state why, in spite of the change, the suggestion is not feasible.

Under section 6 of the Foreign Awards (Recognition and Enforcement) Act, 1961, the Court had to first pass an order directing the filing of the award and the Court had, therefore, to pronounce judgment in accordance with the award and then draw a decree. There were different stages under the 1961 Act. Section 6 of 1961 Act reads as follows:

"Section 6(1):

Where the court is satisfied that the foreign award is enforceable under this Act, the Court shall order the award to be filed and shall proceed to pronounce judgment according to the award."

(1) Upon the judgment so pronounced, a decree shall follow and no appeal shall be on such decree except in so far as the decree is in excess of it not in accordance with the award." (Section 7 referred to the conditions for enforcement of foreign award)

There is no doubt a clear departure under section 49 of the Act from that procedure. According to Justice Mohta's Commentary (see p. 332), the present section 49 is a departure from section 6 of the 1961 Act.

2.40.7 On the question whether procedure under section 49 of the new Act is to be altered, the answer can only be in the negative.

In Western Shipbreaking Corpn. Vs. Clare Haven 1997(3) Guj. LR 1985, it was held by the Gujarat High Court that there was no difference between 'enforcement' and 'execution'. It was said that once the Court declared that the award was enforceable, separate proceedings were to be taken under the CPC for execution. This must obviously be so.

It is well settled that jurisdiction of Indian Court in regard to foreign decrees is to first to find out if the foreign decrees are enforceable. Sub-clause (3) of section 44A of the C.P.C. requires the Court to be satisfied that the decree conforms to clauses (a) to (f) of section 13. Foreign awards cannot be placed on a higher footing and they must also pass the test of enforceability as specified in section 48 before they are sought to be enforced or executed.

2.40.8 However, enforceability and execution can be dealt with by the court in the same application and two applications are not necessary. (M/s Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.,2001(3) SCALE p.708.

2.40.9 Interest at the stage of execution of award: suggestion rejected. The Bombay High Court in Tueplas International Aria Pvt. Ltd. vs. Thaper Ispat Ltd. (AIR 1999 Bom 417) (2000(1) Arb. L.R. 230) held that there is a lacuna in the Act inasmuch as if the award does not provide for interest 'after the date of award', the Court cannot grant interest and that this 'lacuna has to be cured by the legislature' or that otherwise rules have to be framed by the High Court under section 82 of the Act.

This aspect has already been considered while dealing with section 31(7)(b). The Bombay view is not correct. In the case of ordinary suits, section 34 CPC enables the court to provide for interest from the date of judgment till payment. In a case where the Court is silent as to the grant of interest from the date of judgment till date of realization, it is deemed to be refused and the 'commercial contracts', trade usages do have great significance.

These principles arising from 'trade usages' are part of the 'lex mercatoria'. We leave it to the judicial process to correct the Bombay decision. See in this connection Article 7 of the European Convention, Article 28(4) of the Model Law, Article 1496 of French new Code of Civil Procedure, Article 17(2) of ICC Rules, 1998 (Fouchard para 378, 1447, 1448) which all permit 'trade usages' to be taken into account.



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