ESCORTS LTD. Vs UNIVERSAL TRACTOR HOLDING LLC
Bench: H.L. GOKHALE,DIPAK MISRA
Case number: SLP(C) No.-035092-035092 / 2012
Diary number: 34747 / 2012
Advocates: CHANCHAL KUMAR GANGULI Vs
MEERA MATHUR
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NO. 35092 OF 2012
ESCORTS LTD. Petitioner(s)
VERSUS
UNIVERSAL TRACTOR HOLDING LLC Respondent(s)
O R D E R
This special leave petition seeks to
challenge the judgment and order dated 13th July,
2012 passed by the learned Single Judge of the Delhi
High Court in Execution Petition No.372 of 2010.
2. The short facts leading to this petition
are this wise: The respondent herein and Escorts
Agri Machinery Inc., (“Escorts AMI”) which was a
subsidiary of the petitioner, were holding following
percentage of shares in another company, by name,
Beever Creek Holdings (“BCH”). The respondent held
49% of shares and Escorts AMI held 51%. There was an
agreement between the two parties whereby the
respondent sold its shareholding in BCH for a price
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of Rs.1.2 Million Dollars which was to be paid in
four installments. The Escorts AMI paid the first
two installments but defaulted in the payment of the
other two. This led to a suit being filed by the
respondent in the Wake Country Superior Court in the
State of North Carolina, USA. A consent order was
passed therein on 19th June, 2009, wherein both the
parties agreed to refer the matter to arbitration.
The arbitration was followed by an award in favour
of the respondent herein. The respondent sought the
execution of that award by filing the aforesaid
execution petition in India, since the Escorts AMI
has subsequently merged with the petitioner herein.
The execution was objected to by the petitioner, and
those objections have been rejected by the impugned
order. Therefore, this special leave petition has
been preferred by Escorts Limited.
3. The main submission of Mr. Parag Tripathi,
learned senior counsel appearing for the petitioner
is that under the terms of agreement, it was
necessary for the respondent to go for confirmation
of the award in the concerned Court in United
States. He relied upon paragraphs 2 and 8 of the
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consent order dated 19th June, 2009. These two
paragraphs read as under:
“2. The case will be stayed from the date and
time of entry of this Order until completion of
arbitration between plaintiff and EAMI. Upon
the issuance of a decision by the arbitrators,
this Court may confirm and enter judgement upon
such decision in accordance with the Federal
Arbitration Act and may conduct such further
proceedings as are necessary to resolve
plaintiff's claims against Escorts Limited.”
“8. The plaintiff agree that entry of this order
resolves defendants motion to dismiss. The Court
shall retain jurisdiction for the purposes of
entering an order confirming the arbitration
decision pursuant to the Federal Arbitration
Act.”
4. The submission of Mr. Tripathi is that unless
a confirmation of the award by the foreign Court was
obtained, the award could not be executed in India.
He relied upon Section 9 of the Federal Arbitration
Act of U.S. which reads as follows:
“ & 9. Award of arbitrators; confirmation;
jurisdiction; procedure
If the parties in their agreement have agreed that a
judgment of the court shall be entered upon the
award made pursuant to the arbitration, and shall
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specify the court, then at any time within one year
after the award is made any party to the arbitration
may apply to the court so specified for an order
confirming the award, and thereupon the court must
grant such an order unless the award is vacated,
modified, or corrected as prescribed in sections 10
and 11 of this title. If no court is specified in
the agreement of the parties, then such application
maybe made to the United States court in and for the
district within which such award was made. Notice of
the application shall be served upon the adverse
party, and thereupon the court shall have
jurisdiction of such party as though he had appeared
generally in the proceeding. If the adverse party is
a resident of the district within which the award
was made, such service shall be made upon the
adverse party or his attorney as prescribed by law
for service of notice of motion in an action in the
same court. If the adverse party shall be a
nonresident, then the notice of the application
shall be served by the marshal of any district
within which the adverse party may be found in like
manner as other process of the court.”
5. Mr. Tripathi submitted that ultimately what
one has to see is whether the consent award was a
binding one as required under Section 48(1)(e) of
the Arbitration and Conciliation Act, 1996 and that
unless a confirmation of the award was obtained, the
award could not be said to be binding and,
therefore, not executable in India. Mr. Tripathi
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referred to and relied upon paragraph 15 of the
judgment of this Court in Oil and Natural Gas
Commission Vs. Western Company of North America,
(1987) 1 SCC 496, wherein this Court held that
recognition and enforcement of the award will be
refused if the award has not become binding on the
parties.
6. Mr. Rautray, learned counsel appearing for
the respondent, on the other hand, pointed out that
the relevant Section of the Federal US Law is
concerning the domestic awards and when it comes to
foreign awards, there is a separate chapter under
the US Law and in that behalf he referred to Section
202 of the said Act which reads as follows:
“202. Agreement or award falling under the
Convention
An arbitration agreement or arbitral award
arising out of a legal relationship, whether
contractual or not, which is considered as
commercial, including a transaction, contract, or
agreement described in section 2 of this title,
falls under the Convention. An agreement or award
arising out of such a relationship which is entirely
between citizens of the United States shall be
deemed not to fall under the Convention unless that
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relationship involves property located abroad,
envisages performance or enforcement abroad, or has
some other reasonable relation with one or more
foreign states. For the purpose of this section a
corporation is a citizen of the United States if it
is incorporated or has its principal place of
business in the United States.”
7. He pointed out that the requirement of this
double excequatur has been removed in view of the
provisions of the New York Convention which has been
now adopted under the Arbitration and Conciliation
Act, 1996. He further pointed out that even in
England, this has been accepted. He referred to and
relied upon the judgment in the case of Russeel N.V.
V. Oriental Commercial & Shipping Co. (U.K.) Ltd.
and Others, reported in (1991) Vol. 2 Lloyd's Law
Reports 625. He referred to and relied upon an
American judgment in the case of Florasynth, Inc. V.
Alfred Pickholz, 750 F. 2d 171, to the same effect.
8. The Oriental Commercial & Shipping Company's
judgment (supra) refers to the commentary of Dr.
Albert Jan van den Berg which noted the features
emerging out of the New York Convention. It records
that the burden of proving that the award is not
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enforceable lies on the party which has raised the
issue. It also points out that if any such
additional procedure is required to be followed,
this will be a proceeding of no consideration or any
substance. It will be a procedural addition
resulting into further delay into getting the fruits
of the award of the party which has succeeded.
9. He also drew our attention to certain
observations of this Court in paragraph 33 in
Harendra H. Mehta an Ors. Vs. Mukesh H. Mehta and
Ors., reported in (1995) 5 SCC 108. It was in a
situation where a judgment had, in fact, been
obtained before going for execution. However, the
Court also observed that it was not material for the
purpose of enforcement of a foreign award under the
Foreign Awards Act that the award in any country
other than India is made enforceable by a judgment.
10. We have noted the submissions of both the
counsel appearing for the parties. It is also
material to note that even as per the requirement of
the US Law, a notice of three months is required to
be given in case a party does not want the award to
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be enforced. In the instant case, paragraph 7 of the
consent order clearly recorded that the award given
by the arbitrator shall be final and binding on the
parties. If the petitioner wanted to dispute it, it
was required of them to have issued necessary notice
which they had not done. The submission of Mr.
Tripathy, which was emphasised, was that the
respondent ought to proceed for confirmation of the
award under the US Law and then come to India for
execution. In our considered view, the said
submission is not tenable in view of the changed law
and doing away of the rule of double excequatur. We,
therefore, see no error in the order passed by the
learned Single Judge of the High Court. The special
leave petition is, therefore, dismissed.
.........................J (H.L. GOKHALE)
...........................J (DIPAK MISRA)
New Delhi; March 13, 2013.