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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NO. 540   OF  2018

LMJ International Ltd.      …..Petitioner(s)   

:Versus: Sleepwell Industries Co. Ltd.    ....Respondent(s)

WITH

SPECIAL LEAVE PETITION (CIVIL) NO. 5493 OF  2019 (D. No.42537/2018)

Sri Munisuvrata Agri International Ltd.     …..Petitioner(s)   

:Versus: Sleepwell Industries Co. Ltd.    ....Respondent(s)

J U D G M E N T

A.M. Khanwilkar, J.

1. These special leave petitions emanate from the judgment

and orders dated 22nd August, 2017 passed by the High Court

at Calcutta in G.A. No.3306/2016 in E.C. No.487/2013 and

dated 9th  July, 2018 in G.A. No.3307/2016 in E.C.

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No.488/2013, respectively. The special leave petitions pertain

to two  execution  petitions filed  by the respondent –  award

holder concerning two separate foreign awards. Since the

questions raised in both these petitions are overlapping, the

same are being answered together.  

2. The parties had entered into separate contracts for

sale of Non Basmati Parboiled Rice, Thailand origin, on

the terms and conditions specified in the contracts. The

contract contained a stipulation that the quantity would

be final at the Port of loading as per the official weight

certificate issued by SGS at the cost of the seller,

meaning thereby the respondent. The consignments were

shipped by the seller as per the said contract. The

contract was an FOB contract and the goods were meant

for the Government of People’s Republic of Bangladesh.

The contract in “other terms” envisage that on terms and

conditions  not in contradiction with the stipulated terms

of contract shall be governed by GAFTA 48 and disputes

to be resolved by Arbitration 125 as per GAFTA 125   in

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London. The buyer had opened letters of credit on

different  dates  and  the  consignments  were  shipped by

the seller. For each single shipment, invoices had been

issued by the seller in accordance with the addendum to

the contract.  Shorn of unnecessary details,  be  it noted

that some dispute arose regarding the inferior quality of

rice and non­release of the payment towards the invoices

raised by the seller in respect of certain shipment, which

eventually became the subject matter of arbitration

proceedings. The respondent, on 28th July, 2011, invoked

the arbitration clause and eventually appointed Mr.  R.

Barber as its Arbitrator. As the petitioner failed to

respond, the respondent requested GAFTA to appoint an

arbitrator on their behalf in accordance with GAFTA

Arbitration Rules 125. GAFTA duly appointed  Mr. R.

Eikel as the second Arbitrator on 22nd September, 2011.

On 25th June, 2012 GAFTA appointed Mr. C. Debattista

as the third Arbitrator and Chairman of the Tribunal.   

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3. The respondent filed its claim submissions  dated

11th  May, 2012 in the two independent arbitration

proceedings, concerning contract­I and contract­II,

respectively.  These claim submissions came to  be  filed

after giving various opportunities to the petitioner.

Resultantly, the  Arbitral  Tribunal  passed two  separate

awards in relation to the concerned contracts, being

Arbitration Case No.14/456 (pertaining to contract­I) and

Arbitration  Case  No.14/457 (pertaining to contract­II).

Be it noted that the Arbitral Tribunal proceeded ex­parte

against the  petitioner  as,  despite  notice, the  petitioner

refused to participate in the arbitration proceedings.

Neither did it file any statement of defence or

counterclaim nor did it adduce any evidence.  

4. On 19th  November, 2013, the respondent filed two

execution cases, being Execution Case No.487/2013

(pertaining to contract­I) and  Execution  Case  No.488/2013

(pertaining to contract­II), under Part­II of the Arbitration and

Conciliation Act, 1996 (for short “the Act”),  before the High

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Court at Calcutta for enforcement of the foreign arbitral

awards. The learned Single Judge of the High Court passed a

common order in the said execution cases rejecting the

objection purportedly regarding the maintainability of the

subject foreign awards vide judgment and order dated 4th

December, 2014. The learned  Single Judge noted that the

petitioner  did  not file  any  affidavit  or formal  application to

oppose the execution case, but chose to raise objections orally,

only through his counsel, before the Court. The Single Judge

noted the objections of  the petitioner.  The Court also noted

that the Court ought to be satisfied that the foreign award was

enforceable  and must  record  its  satisfaction  in  that  regard,

consequent to  which, in  view of  Section 48 of the  Act, the

award shall be deemed to be a decree of the Court. The

learned Single Judge then went on to record the five objections

taken on behalf of the petitioner through its counsel, which

read thus:

“The first objection raised is that no prayer for declaration has been made in the application that the foreign award is enforceable. It is submitted that unless prayer is made seeking a declaration as to the enforcement of the award, the Court cannot assume jurisdiction. In this regard the learned

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Senior Counsel has referred to a Single Bench decision of the Bombay High Court in the case of Toepfer International Asia Pvt. Ltd. versus Thapar Ispat Ltd., reported in 2000 (1) Arb. LR 230 (Bombay) paragraph 19.  

The second objection is that a civil suit is pending between the parties in which there is a categorical observation both by the learned Single Judge as well as the Division Bench that any action taken by the parties to the suit during the pendency of the suit  shall be subject to and abide by the result of the suit. It  is submitted that a cross appeal was preferred by the decree­holder and this observation of the learned Single Judge was not interfered with and accordingly the execution application is premature and unless the suit is decided, the award does not attain its finality.  

The  third  objection  is that the  arbitration clause  has  not been properly invoked. It is submitted that arbitration clause is a two­tier clause. Before the arbitration clause could be invoked, the parties are required to first make an attempt to amicably settle their disputes and only  upon failure, the parties could refer their disputes to the arbitration as per GAFTA clause for rice and arbitration rules 125. It is submitted that there is  no averment in the  petition that before invoking the arbitration clause there was any attempt to settle the disputes amicably. Since this stage has not been reached, the invocation of Arbitration Clause is void ab initio. In this regard, the learned Senior Counsel has referred to an unreported decision of a single Bench of this Court in AP 112 of 2008 [Waidhan Engineering & Industries Private Limited vs. The Board Of Trustees For The Port Of Kolkata] decided on 5th May 2010.   

The fourth objection is that even if it is assumed for the sake of argument that this amicable settlement was not followed, even then  Rule 3.1  was not followed  with regard to the appointment of the sole Arbitrator. It is submitted that it was incumbent upon the decree­holder to inform the respondent about the appointment of a sole arbitrator and it was only on refusal to accede to such request that other procedures prescribed under the rules shall follow.  

The fifth and the last objection appears to be that the nominee arbitrator of the respondent was appointed de hors the provisions of GAFTA Rules and accordingly the

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procedure adopted is irregular from the very beginning and the award is not enforceable.”

5. After considering the rival submissions, the Court

rejected the aforementioned objections on the finding that the

legislative intent underlying the Act was to circumscribe the

supervisory role of the Court in arbitral proceedings and that

it predicated limited interference. Further, it went on to

observe that the objections raised by the petitioner were in a

quagmire of despondency and a desperate attempt to resist the

enforceability of an enforceable award rather than being any

real challenge thrown towards the maintainability of the said

petition. These observations would assume relevance because

in the special leave petitions  filed against the said common

judgment dated 4th December, 2014, the questions of law and

grounds articulated resonate with the objections taken by the

petitioner regarding the subject foreign awards being

enforceable or otherwise. To  wit, the questions of law and

grounds urged in Special Leave Petition (Civil) No.5612 of 2015

(pertaining to contract­I) read thus:

“QUESTIONS OF LAW :

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That the following questions of law of general and public importance arise for consideration of his Hon’ble Court :­ i)  Whether any order in an execution proceeding can be passed before the Court is called upon to decide and declare that the award is enforceable? ii)  Whether any declaration as to the enforceability of a foreign award  is to be sought by  the award holder  before seeking to enforce the foreign award? iii) Whether a foreign award which arises out of an arbitration agreement which is under challenge in a properly instituted civil suit, can be put to execution before the suit is heard and disposed of? iv)  Whether  valid  and proper invocation of the  arbitration clause is a pre­requisite before seeking to enforce the foreign award arising out of the arbitration agreement between the parties? v) Whether in a two­tier arbitration mechanism, it is necessary to exhaust the first­tier (i.e.  negotiation)  before proceeding to formally commence the reference? vi)  Whether the executing  Court can assume jurisdiction without there being a declaration as to the enforcement of the foreign award? vii) Whether the execution of the foreign award was premature before the outcome of the civil  suit filed by the appellant? viii)  Whether the invocation  of the  arbitration clause  was properly done by the award­holder? ix) Whether the Arbitral Tribunal rightly applied the rules, principles and practice of  GAFTA  Arbitration  Rules  while delivering the foreign award? x)  Whether an award­holder can seek to apply for execution of a foreign award without first complying with the conditions laid down in Section 48 of the 1996 Act? xi) Whether a foreign award can be said to be enforceable merely upon production of original award and a duly certified copy of the arbitration agreement? xii) Whether it is necessary to file a formal application under Section 48 of the 1996 Act to resist the  foreign award or objections as to the enforceability of a foreign award can be made even otherwise? xiii)  Whether recourse to Section 49 of  the Arbitration & Conciliation Act, 1996 can be taken without satisfying the test laid down in Section 48 of the 1996 Act?

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xiv)  Whether the executing court can pass any order in aid of  execution despite  the pendency of  a  properly  instituted civil suit  which challenges the very  basis of a purported foreign award? xv) Whether the executing court an substantive pass orders in the execution ignoring the pendency of the civil suit and the observation of the Division Bench of the Calcutta High Court to the effect that “any action taken by the parties to the suit during its pendency shall be subject to and abide by the result of the suit? xvi)  Whether the executability of the foreign award can be decided without allowing the award debtor to file its affidavit or its objection in  writing to defend a purported foreign award? xvii)  Whether any interim order can be passed in favour of a party relying upon a purported foreign award without going into at all the objections raised by the petitioner?

GROUNDS a) For that the impugned order is untenable in law and facts of the present case. b)  For that the impugned order  has  been passed without giving any opportunity to the petitioner to file its affidavit or put its objection in writing to the executability of the foreign award. c) For that the impugned order has been passed by a Single Judge of the Calcutta High Court totally ignoring the effect of the observation and finding of an order passed by another Single Judge of the Hon’ble High Court duly affirmed by the Division Bench arise out of a previously instituted civil suit. d) For that there was no prima facie case in favour of the respondent and no interim order could have been granted to the respondent. e)  For that the High Court erred in failing to call upon the petitioner to file its affidavit on merits and to raise its objection in writing to the executability of the foreign award? f)  For that the  High Court erred in holding that the affidavit disclosing the Bank Accounts filed by the petitioner in terms of the order dated 18.09.2014 gave a very bleak picture about the financial condition of the petitioner. g) For that the  High  Court failed to appreciate that the decree­holder/respondent had not met or satisfied the test laid down in Sections 47 and 48 of the Arbitration & Conciliation Act, 1996.

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h) For that the High Court failed to appreciate the purport and the scope of the Arbitration & Conciliation Act,  1996 and misdirected itself in law and in fact. i) For that the High Court failed to appreciate that the impugned order will cause create hardship and inconvenience and would affect the day­to­day business of the petitioner. j)  For that the High Court erred  in holding that sufficient opportunity  was given to the petitioner to deal  with the maintainability of the execution proceeding.”

6. The aforementioned special leave petition came to be

dismissed on 27th February, 2015. Similarly, the special leave

petition filed by the petitioner, being SLP(C) No.6682 of 2015

(pertaining to contract­II involving similar questions and

grounds), was dismissed on 17th August, 2015.  

7. Later on,  when the matter proceeded before the Single

Judge of the High Court in the execution petition, the Court

noted that it  had already held  in  its  earlier  order dated 4th

December, 2014, that the subject foreign awards were deemed

to be decrees and hence enforceable, whilst rejecting the

objections of the petitioner in both the cases with regard to the

maintainability of the execution petition.  The learned Single

Judge directed the petitioner to examine its Principal Officer.

The petitioner preferred an appeal against the said decision

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dated 17th March, 2015 which came to be disposed of by the

Division Bench vide common order dated 1st December, 2015.

These orders have been allowed to attain finality. The

petitioner then filed a review application in the execution case.

The same was dismissed by the learned Single Judge of the

High Court on 8th  June, 2015, holding that the review

application was a ploy to reopen the matter which had

attained finality after the rejection of the special leave

petitions. After the rejection of the review application, the

petitioner was advised to file G.A. Nos.3306/2016 and

3307/2017  in  the  respective  execution cases,  purporting to

raise objections regarding the enforceability of the foreign

awards in terms of Section 48 of the Act. We may refer to the

application filed in G.A. No.3306/2016 as to the grounds on

which the objection regarding enforceability of the foreign

awards came to be resurrected. The relevant extract thereof

reads thus:  

“74. The said purported award dated April 10, 2013 is not enforceable, interalia, being vitiated by fraud and/or corruption as  morefully stated above. The particulars of fraud and corruption are,  without prejudice to the order

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challenges to enforceability of the purported award, summarized hereinbelow:­

(a) The award holder with intent to deceive and/or to perpetrate fraud on the petitioner actively concealed the factum of filing the suit being C.S.No.196 of 2011 (Sleepwell Industries Ltd. Vs. Bank of Baroda) for  US$ 382,348.90 before the Arbitral Tribunal and procured the purported Award including the said sum for, Arbitral Tribunal.

(b) The award holder with an intent to deceive the petitioner, made a promise without any intention of performing it.

(c) By its letter and mail both dated February 14, 2011 the award holder accepted that it has sent inferior quality of rice and promised that it will send its inspectors to Bangladesh for joint inspection of the inferior quality of rice sent by it and forwarded the passports of its inspectors for obtaining VISA and agreed   that it will accept 90% payment provisionally against their export bill of exchange and that balance 10% will be paid after joint inspection and settlement of claim towards the inferior goods supplied by the award holder.  

(d) However, as soon as the 90% payment was released by the petitioner, as agreed between the parties, the award holder refused to send its representative for joint inspection and finalization of the claim and allegedly claimed that the inspection held at loading port was final and with an intent to deceive and/or to perpetrate fraud on the petitioner demanded the balance 10% amount of the bill of exchange.

(e) The award holder made a suggestion as to a fact that if the  petitioner  accept the  Bill of  Exchange for the inferior quality  of  goods and pays 90% of the bill  amount, it  will depute its representatives for joint inspection and the balance 10% will be settled after such joint inspection and finalization of the claim, which was not true and which the award holder did not believe it to be true.

(f) The award holder with an intent to deceive the petitioner procured  the  purported award  in respect  of  2.22% of the total amount due under the three consignments actively concealing that it has neither raised any invoice on the petitioner for all the three consignments nor did it make any claim under the subsisting Letters of Credit through which

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the entire payments   were made in respect of the first two consignments and further that it has not raised any Bill of Exchange for the balance 2.22% in respect of the third consignment sent through vessel M.V. Tu Man Gang.

(g) The award holder with an intent to perpetrate fraud on the  petitioner  gave  a  wrong  email  address to  GAFTA and correct email address was given by its mail dated January 11, 2013 and February 12, 2013 after close of arbitration proceedings by the arbitral tribunal by its mail dated December 17, 2012.

(h) The award holder with an intent to perpetrate fraud on the petitioner suggested as a fact, which was not true and which the award holder did not believe to be true that the balance 2.22% or US$ 10/­ per MT shall be payable on the basis that “certificate  of inspection at the time of loading shall be final as to quality” by suppressing the addendum to the contract dated December 7, 2010, which provided that “the balance amount at the rate of US$ 10/­ per MT will be payable after receipt of quality inspection report at destination port and in the process, the award holder procured a purported award for the amount US$ 137,148.20.

(i) The award holder with an intent to perpetrate fraud on the petitioner actively concealed from the arbitral tribunal that in respect of the third consignment being the consignment sent through the vessel MV Tu Man Gang, the balance 10% of their invoice amounting to  US$  382,348.90  was to be settled after inspection and finalization and by doing so, the award holder  procured a purported award  for the sum of US$ 382,348.90.

(j) The award holder with an intend to deceive the petitioner and to perpetrate fraud on the petitioner deliberately suppressed from the purported  Arbitral tribunal that the award holder in its letters dated June 10, 2011 and July 11, 2011 had admitted its liability and agreed to pay demurrage charges on vessel Tu Man Gang to the extent of US$ 20,921,88. The petitioner is unable to disclose other particulars of fraud till disclosure of fuller and better particulars by the award holder. The petitioner craves leave to file a supplementary affidavit  upon such  disclosure of fuller and better particulars by the award holder.

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75. In the  premises, the purported award  holder  was in conflict  with the  Public Policy of India as the same  was induced or affected by fraud and hence enforcement of the purported award holder be refused and/or the same should be held as unenforceable.

76.  Without  prejudice  to the  aforesaid  and/or in addition thereto, the purported award is not enforceable, interalia, on the following grounds:­

A­1 The contract between the parties dated 25th  October 2010 provides as follows:

“All other terms and conditions not in contradiction with the above as  per  GAFTA  48  Arbitration  as  per  GAFTA  12 in London.

ARBITRATION

All disputes in connection with this contract or the execution thereof shall be settled amicably by friendly negotiations between the two parties. If no settlement can be reached, the case in dispute shall then be submitted GAFTA, LONDON for arbitration as per GAFTA clause for rice and amendment if any and Arbitration Rule 125”.

A copy  of the GAFTA 125  is  annexed hereto and marked “OO”.

A copy of the GAFTA No.48 is annexed hereto and marked “PP”.

A­2. On a perusal GAFTA No.48, it is apparent that it is a standard form of contract to be filled up in detail and is to be signed by the parties. In the instant case, the petitioner did not sign any contract with the award holder in GAFTA No.48. In view  of the  above, there  was  no contract  between the parties  herein in terms of  and/or  on  the basis  of  GAFTA Form No.48.

A­3 However, the purported award was passed on the basis of GAFTA No.48. Therefore, the arbitral procedure was not in accordance with the agreement of the parties and the award is not enforceable under Section 48 (1)(d) of the said Act.  

B­1.  Assuming  but  not admitting that  GAFTA  No.48  was applicable, the same could not be applied if in contradiction

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with the agreement dated October 25, 2010. The agreement as amended  by the  Addendum dated  December  7,  2­010 provided that “….. balance amount of US$10 Per Mt will be payable after receipt of quality inspection report of destination port.”

B­2. However, the purported award was passed on the basis of clause 5 of GAFTA No.48 providing “Certificate of Inspection at time of loading shall be final as to quality”.

B­3. Therefore, the arbitral procedure was not in accordance with the agreement of the parties and hence, the said purported award is not enforceable.  

C­1. By a mail dated September 19, 2011, the Award holder informed the petitioner to appoint its arbitrator within three days therefrom and informed that on failing to do so, they will request GAFTA to appoint an Arbitrator on behalf of the petitioner. However, by a communication dated February 29, 2012  Mr.  Bardia  on  behalf of the  award  holder informed GAFTA that he has received a purported letter dated September 22, 2011 from GAFTA appointing one Mr. R. Eikel as arbitrator on behalf of the petitioner in case No.14­456 and requested to appoint Arbitrator in Case No.14­457.

C­2. The time to appoint arbitrator by the petitioner was to expire on September 22, 2011. Only after that, the award holder  was entitled to  make an application to  GAFTA to appoint an Arbitrator. Appointment of Mr. R. Eikel by GAFTA on September 22, 2011 without any application by the award holder was irregular and not binding on the petitioner. In any event and as the award holder by its letter dated September 19, 2011 wanted the petitioner to appoint its Arbitrator within 3 days therefrom and as in computing the 3 days period the date of issuance being September 19, 2011 was to be excluded, no appointment of any Arbitrator, either of Mr. R. Eikel or otherwise, could not be made by GAFTA on September 22, 2011 and such alleged appointment is bad being contrary to the agreement between the parties and is not and cannot be binding on the petitioner.

C­3. Since the Arbitrator on behalf of the petitioner was not appointed in accordance with the procedure agreed, the composition of the arbitral tribunal was not in accordance

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with the agreement of the parties and the purported award cannot be enforced and its enforcement should be refused.

D­1. The purported award provides that –

“6.20 : The Tribunal THEREFORE FINDS THAT Buyers, with respect to Cl.6.1 of the GAFTA Sampling Rules No.124 were obliged to provide a certificate of analysis latest 14 days after that  message  dated 5  February 2011, therefore, latest  20 February 2011.  

6.21: The date of default shall therefore, be one day later, the 21 February, 2011 and SO WE DO FIND”.

D­2. The GAFTA Arbitration Rules provide that a claimant can give a notice of his intention to refer a dispute to arbitration within the time limits prescribed therein. In the case of non­payment of amount, a Notice of Reference cannot be issued beyond 60 days from the  date the  dispute  has arisen. A claimant can initiate arbitration proceeding or appoint an Arbitrator before expiry of the time limit.

D­3. The Notice of Arbitration was given and Arbitrator on its behalf was appointed by the award holder by two letters both dated July 28, 2011. Therefore, the Notice of Arbitration and appointment of Arbitrator was ex facie time barred under the Arbitration Rules of GAFTA and/or Agreement between the parties.

D­4.  Further,  GAFTA 124 does  not find any  place in the agreement between the parties and is wholly inapplicable in the instant case.  

D­5. Therefore, the arbitral procedure and also appointment of arbitrators was not in accordance with the agreement of the parties and also not in accordance with law applicable, and hence, the said purported Award was not enforceable.

E­1 By a mail dated September 19, 2012, the arbitral tribunal  allowed the award holder to  file its further  claim submissions till close of business of that date. No opportunity  was  given to the  petitioner to file its  defence submission.  By a  mail dated  November  23, 2012  GAFTA requested the  award holder  as to  whether  address  of the petitioner submitted by the award holder was correct. By a mail dated December 17, 2012, the Tribunal closed arbitration proceedings.  By mails dated January 11, 2013

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and February 12, 2013 the award holder submitted the correct email address of the petitioner to GAFTA, i.e. after close of arbitration proceedings.  

E­2.  Therefore, the petitioner  herein was not  given proper notice of the appointment of the arbitrator.  The petitioner was not given proper notice of the arbitral proceedings. The petitioner was unable to present its case. In the premises, the purported award is not enforceable.  

F­1. From the mail of GAFTA dated September 26, 2012, it is clear that GAFTA can only accept hardcopies towards pleadings. From the  mail dated September 25, 2012 of GAFTA,  it  appears  that  hardcopy of the claim submission was filed by the award holder on September 24, 2012, though the time limit was September 19, 2012.

F­2. In the premises, the arbitral procedure was not in accordance with the law applicable and enforcement of the purported award should be refused.

G­1.  A  Civil suit  being  C.S.  No.185 of 2011 filed  by the petitioner against the award holder challenging the purported  notices  both  dated  July  28,  2011  referring the alleged disputes to Arbitration and appointment of Arbitrator is pending disposal. In the said suit an order dated September 9, 2011 was passed by an Hon’ble Single Judge directing  that  any action taken by the parties to the  suit shall be subject to and abide by the result of the suit. The said order was upheld by the Hon’ble Division Bench dismissing the  Cross­Objection  by the  Award  holder. The suit is still pending. The award holder did not challenge the order dated September 28, 2012 passed by a Division Bench of this Hon’ble Court dismissing both the appeals and the two cross objections. Having not done so, the award holder accepted that the observations made by the learned Single Judge to the effect that “any action taken by the parties to the suit shall be subjected to and abide by the results of the suit” would affect the enforcement of any award, which would be passed by the Arbitral Tribunal.

G­2. In the premises, the purported award did no and could not attain finality and hence not yet enforceable.”

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8. The learned Single Judge of the High Court (Executing

Court) was once again called upon to consider the objections

regarding enforceability of the subject foreign awards. At the

outset, it has noted that such a challenge was not

maintainable after the rejection of the objections in the first

round had attained finality with the dismissal of the special

leave petitions by this Court. It held that the objections now

taken would be hit by the principles of  res judicata. Despite

that, the Court proceeded to examine the objections on merit

and opined that the same were not falling within the purview

of conflict with the public policy of India as such. On the other

hand, it was an attempt to invite the Court to have a second

look at the foreign awards. That could not be countenanced in

view of the  limited jurisdiction under Section 48 of the Act,

considering the decisions cited at the Bar by both sides

highlighting the distinction between the approach to be

adopted while examining the question of enforceability of the

foreign award and the domestic award, as delineated by this

Court in  Shri  Lal  Mahal  Ltd.  Vs.  Progetto  Grano  SPA1, 1  (2014) 2 SCC 433

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Renusagar Power Company Ltd. Vs. General Electric Co.2,

and  Oil  & Natural  Gas Corporation Ltd.  Vs.  Saw Pipes

Ltd.3. In addition, the High Court went on to observe that the

petitioner, having failed to participate in the arbitration

proceedings  despite the opportunity given to it and  having

notice  of such  proceedings, could  not  be  heard to  make  a

grievance that the respondent ­ award holder did not produce

the relevant documents before the Arbitral Tribunal. On the

other hand, the Court held that the respondent ­ award holder

had placed all the relevant  documents/materials  before the

Arbitral Tribunal and more particularly, because the

subsequent correspondence between the parties disclosed very

clearly that the respondent had categorically denied its

obligation to produce any quality inspection report at the Port

of  destination. It  also  noted that the  Arbitral  Tribunal  had

jurisdiction to decide the issue one way or the other and in the

present case,  it  had so decided. The High Court also noted

that the petitioner had not alleged any fraud or bias against

2  1994 Supp. (1) SCC 644 3  (2003) 5 SCC 705

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the Arbitral Tribunal as such. From the grievance of the

petitioner, even if taken at its face value, it did not warrant

interference under Section 48 of the Act. In substance, the

learned Single Judge after adverting to the settled legal

position and the factual matrix of the case on hand, concluded

that the objections of the petitioner, regarding enforceability of

the subject foreign award, were devoid of  merit and thus

rejected the same.  

9. Aggrieved, the petitioner has once again approached this

Court  by way of the  instant special leave petitions,  broadly

reiterating the objections taken before the High Court. In that,

the subject foreign awards are vitiated by fraud; the awards

are contrary to the terms of the contract and thus violative of

Section 28(3) of the Act; the Arbitral Tribunal has considered

an issue in respect of which there is no pre­existing dispute;

the Arbitral Tribunal has made out a new case which was not

even made out by the claimant in the statement of claim; the

subject foreign awards are not supported by reason and are in

violation of natural justice and in contravention of   the

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fundamental  policy  of Indian  law;  and  the  Executing  Court

considering the application under Section 48 of the Act has

acted as a First Court of appeal and assumed powers under

Order 41 Rule 33 of CPC and sustained the arbitral award by

supplying new reasons and facts, which is not the basis on

which the impugned awards have been passed.   10. The respondent, on the other hand, has urged that the

application filed by the petitioner was not maintainable as it

was hit by the principles of  res judicata,  issue estoppel and

cause of action estoppel and principles analogous thereto. The

respondent has also invited our attention to the conduct of the

petitioner which was indicative of an attempt to overreach the

Court.   In that,  after the interim order  was  passed  by the

Court on  20th  October,  2018,  permitting the respondent to

withdraw part of the amount deposited in the High Court in

relation  to the  execution of the  subject foreign awards, the

petitioner changed its  name  on  23rd  April, 2018 from LMJ

International Ltd. to Sri Munisuvrata Agri International

Limited. It then changed  its  registered office from Hemanta

22

Basu Sarani to  British  India  Street  on or  about  26th  April,

2018. The petitioner then, without any compunction,

proceeded to file a petition under Section 10 of the Insolvency

and  Bankruptcy  Code, 2016 before  NCLT,  Kolkata on 27th

April, 2018 so as to invoke a moratorium against the release of

any further amount to the respondent, in the event the

respondent succeeded in the present petitions.  The purpose

for which the petitioner invoked NCLT proceedings is, in fact,

manifest from the averments in the petition filed by the

petitioner before the NCLT itself, claiming that the objective of

initiating the corporate insolvency process was to prevent the

respondents from receiving the proceeds. All these

developments have been brought on record by the respondent.

The  same were  not  disclosed  by the  petitioner  on its  own,

which it  was obliged to do in law. For this reason alone,

contends the respondent, no indulgence should be shown to

the petitioner.   11.   On merits, it is submitted that the grounds urged by the

petitioner would not come within the purview of Section 48 of

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the Act, which is very narrow and does not require the Court

to have a second look at foreign awards. The grounds, at best,

could be  urged  by the petitioner in the appeal to be filed

against the foreign award governed by English Laws (UK

Arbitration  Act, 1996). The  petitioner  has allowed the said

awards to attain finality having failed to file such appeal. Even

the argument of fraud on the basis of the allegation that the

relevant documents  were not brought to the notice of the

Arbitral Tribunal by the respondent – award holder, is

baseless and only a subterfuge for protracting the recovery of

dues. In that, the respondent had produced a swift message

dated 3rd  June, 2011 sent from the respondent bank to the

petitioner bank and the subsequent correspondence between

the parties to which reference has been made by the Arbitral

Tribunal while deciding the matter. There is no allegation that

the respondent concealed the stated correspondence between

the parties with a view to obtain an arbitral award through

fraud. The specific ground taken by the petitioner was that the

award holder, with intent to deceive,  perpetuated fraud on the

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petitioner. That is not enough to hold that the subject foreign

awards were unenforceable within the meaning of Section 48

of the Act. The petitioner had sufficient notice of the

arbitration proceedings but it chose not to participate in the

said proceeding for reasons best known to it. Therefore, now it

cannot turn around and make a grievance about non­

consideration of any document. More so, the grievance is in

the nature of inviting the Executing Court to have a second

look at the award which is not the scope of Section 48 of the

Act.  The respondent  has  also refuted the  ground urged  on

behalf of the petitioner regarding awarding of compound

interest at the rate of 4% per annum calculated at quarterly

rests, being in conformity with the governing laws. The

respondent has also relied on the dictum in Shri Lal Mahal

Ltd.  (supra) and  Renusagar Power Company Ltd., (supra).

The respondent has also distinguished the judgments cited by

the petitioner on the scope of interference in domestic awards

on the ground of its enforceability as opposed to the foreign

awards in the  present cases.  The respondent submits that

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these petitions be dismissed with exemplary costs and while

doing so, appropriate directions be issued to the  Registrar

(OS), High Court at Calcutta to forthwith encash the FDs of

approximately Rs.2 crores, in the credit of both the execution

cases  and  forthwith remit the  entire receipts, including the

accrued interest in  US  Dollars, to the respondent, as  was

ordered earlier vide orders dated 5th January, 2018, 5th March,

2018 and 20th  April, 2018, respectively, after obtaining prior

permission of the Reserve Bank of India in that regard. The

respondent also seeks direction against the petitioner for

securing the deficit amount, which would remain after

appropriation of the  amount  under the  FDs, lying with  the

Registrar (OS),  Calcutta  High  Court.  The respondent  would

contend that such direction is necessary in the peculiar facts

of the present case and to obviate  any complication due to

moratorium, as the petitioner has invoked proceedings under

the Insolvency and Bankruptcy Code.

26

12. We have heard Mr.  A.K.  Sinha,  learned senior counsel

appearing for the  petitioner  and Mr.  Shyam Divan, learned

senior counsel appearing for the respondents.  

13. We first proceed to examine the preliminary issue as to

whether it was open to the petitioner to raise grounds

regarding enforceability of the foreign awards despite the

judgment of the High Court dated 4th  December, 2014,

rejecting the objections in the context of maintainability of the

execution  petition  and  which  decision  had  attained finality

consequent to rejection of the special leave petitions by this

Court and including the review petition by the High Court. The

petitioner contends that on the earlier occasion, the objections

were limited to the questions of maintainability of the

execution case on grounds as were urged at the relevant time

and not in reference to the enforceability of the subject foreign

awards as such. This argument, to say the least, is an attempt

to indulge in hair­splitting and nothing more. It is an

argument in desperation only to protract the execution of the

foreign award  on  untenable  grounds. Indeed, the  petitioner

27

had not filed any formal application to raise the issue of

maintainability of the execution case but the Court had

permitted the petitioner to orally urge “all available grounds”.

The learned Judge had then reproduced the five points, which

alone were orally urged on behalf of the petitioner through its

counsel, as extracted in paragraph 4 above. The High Court

examined the said grounds which, obviously, were

transcending in the realm of enforceability of the subject

foreign awards. In the special leave petitions filed before this

Court, the petitioner had articulated questions of law and the

grounds also in reference to the scope of Section 48 of the Act

which included the enforceability of the subject foreign

awards. That can be discerned from the close reading of

Questions and Grounds in the previous SLPs, reproduced in

paragraph 5 above. Additionally, the learned Single Judge of

the High Court vide order date 17th March, 2015 had made it

amply clear that the subject foreign awards were deemed to be

decrees, which presupposes that the same were enforceable.

That order came to be upheld by the Division Bench whilst

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disposing of the appeals preferred  by the petitioner. These

orders have become final and have not been challenged by the

petitioner. The petitioner thereafter unsuccessfully resorted to

the remedy of review before the High Court. Even the order

passed in review petition has become final.   

14. Be that as it may, the grounds urged by the petitioner in

the   earlier round regarding the maintainability of the

execution case  could  not  have  been  considered in isolation

and de hors   the issue of enforceability of the subject foreign

awards. For, the same was intrinsically linked to the question

of enforceability of the subject foreign awards. In any case, all

contentions available to the petitioner in that regard could and

ought to  have  been raised  specifically  and, if raised, could

have been examined by the Court at that stage itself. We are of

the considered opinion that the scheme of Section 48 of the

Act does not envisage piecemeal consideration of the issue of

maintainability  of the execution case concerning  the  foreign

awards, in the first place; and then the issue of enforceability

thereof.  Whereas, keeping in  mind the legislative intent of

29

speedy disposal of arbitration proceedings and limited

interference by the courts, the Court is expected to consider

both  these  aspects  simultaneously  at the threshold.  Taking

any other  view would  result in  encouraging  successive  and

multiple round of proceedings for the execution of foreign

awards. We cannot countenance such a situation keeping in

mind the avowed object of the Arbitration and Conciliation Act,

1996, in particular, while dealing  with the enforcement of

foreign awards. For, the scope of interference has been

consciously  constricted  by the legislature in relation to the

execution of  foreign awards. Therefore, the subject application

filed by the petitioner deserves to be rejected, being barred by

constructive  res judicata, as has been justly observed by the

High Court in the impugned judgment.

15. There is  an  additional reason  which dissuades  us to

show any  indulgence to the petitioner. We find  force  in the

grievance  made  by the respondent that the  conduct  of the

petitioner is indicative of an attempt to overreach this Court.

For, after an interim order was passed in favour of the

30

respondent, permitting  withdrawal of part of the deposited

amount, the petitioner lost no time in changing   the name of

the company within three days thereafter on 23rd April, 2018.

The petitioner also changed its registered office address on 26th

April,  2018 and had no  compunction  in  moving the  NCLT,

Kolkata on 27th  April,  2018 to prevent  the respondent  from

enjoying the fruits of the subject awards, and saying so

brazenly in the petition filed by it under Section 10 of the I & B

Code. Strikingly, attention of this Court was invited to these

facts by the respondent by moving a formal application. The

petitioner has not offered any explanation, much less a

plausible one. On this count also, the special leave petitions

deserve to be rejected.

16. Having said this, we do not wish to examine any other

argument of the petitioner, including on merits of the

enforceability of the subject foreign awards. Even if we were to

do so,  we would have agreed with  the High Court that  the

grounds urged by the petitioner to question the enforceability

31

of the subject foreign awards are untenable, not being within

the purview of Section 48 of the Act. Be that as it may, we find

that the High Court has considered every aspect of the

grounds  urged by the petitioner; and the view so expressed by

the High Court in reference to each of the points considered by

it is a possible view. The High Court has correctly noted the

limited scope for interference in the matter of foreign awards

under Section 48 of the Act,  keeping  in view the principles

enunciated by this  Court.  The High Court  has justly  noted

that the attempt of the petitioner was to call upon the

executing court to have a re­look at the award. That cannot be

countenanced. We would also agree with the High Court that

all the relevant documents submitted to buttress the claim of

the respondent before the Arbitral Tribunal, have been

adverted to in the award and the findings reached in the

award are based on the interpretation and meaning given to

the said documents. That can be discerned from the

discussion and findings recorded by the Arbitral Tribunal in

32

the award under consideration.  The relevant extract thereof

reads thus:            

“6. DISCUSSION AND FINDINGS

6.1  The disputed issues submitted for our determination concern three different aspects first of all, the question whether the contractual quality had been delivered by sellers and received by Buyers. Secondly, the matter of the balance to the full contractual quantity and thirdly, and subsequently to the first two issues, the  payment of the invoices.

6.2  As  respondents  elected not to  participate in the round of submissions  the  Tribunal is  bound  to  base its  discussion and subsequently its findings on the submission and evidence filed by claimants only.  

6.3 As a starting point on the first issue, whether the contractual quality had been delivered by sellers and received by buyers, the tribunal focuses on the provisions of the governing contract and, as far as relevant, to its amendments.

6.4 The contract agreed between the parties was for the sale and purchase of 15000 metric tons of Thai Non­basmati Parboiled Rice on FOB Bangkok terms.

6.5. The contract provided in his context under the quality clause that:­

“Rice to be supplied ‘Rice to be supplied shall be 15000MT (5 percent more or less) of Non­basmati Parboiled rice 15 percent (Maximum) Broken. Latest Clop of 2009­2010 Thailand origin In good condition, ‘fit for human consumption without any unpleasant odour, free from any sign or mould, fermentation or deterioration and free from obnoxious and deleterious matters and poisonous weed

33

seeds. Rice must be  free  from insect  infestation and shall have the following specification”.

i) Moisture (Maximum): 13 PCT

ii)  Broken Grains (Maximum): 15 PCT (Rice size of 3/4th  and below  will be considered as broken and less than 1/4th

Broken should not be more than 2 percent

iii) Foreign Mater (Maximum) :  0.3 Percent

iv) Dead, Damaged and Discoloured Grains

(Maximum): 3 Percent in Total

iv)  Radio Activity (Maximum) : 50 DO/KG 01 737 SC/134 CS (Relaxable for the  Crop of SAARC and South­East Asian Country)

6.6   In relevance to this dispute and under consideration of the Quality Clause of the Contract, same was amended on 7th

December 2010 and altered:

“2. Specifications: Clause II – to be amended to 17 Pct Max I/0 15 Pct. Clause IV – to be amended to 6 Pct. Max I/0 3 Pct in Total.

All other specifications will be remain unchanged.”

6.7  Three partial shipment had been performed by claimants as follows:­

1. 1,610.00  mt on board of MV Sturdy Falcon on 27th

December 2010

2. 3,430.00  mt on board of  MV  Genius  Mariner on 31st

December 2010

3.   8,689.55 mt on board of MV Tuman Gang (sic) on 17 th

January 2011

6.8  Subsequently, 133,729.55 metric tons had been delivered by Sellers to  Buyers  and  Sellers  provided for each  shipment various documents under the Contract, including so­called “pre­shipment Inspection Certificates issued by SGS” as under the Payment Clause, yet altered by Amendment to the Contract  dated  7  December  2010  to  same  issued now by “ISC”.

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6.9  Those pre­Shipment inspection Certificates were indeed Issued by ISC for all three shipments displaying the following analysis results:

1. Certificate No.11000(2) 22010/4 dated 27th  December 2010 for MV Sturdy Falcon

Mositure: 12.80% Total broken Kernels: 15.00% Small Broken: 0.59% Dead, damaged and discoloured kernels:  3.00% Foreign Matter.  0.07%

2.  Certificate No.11038/2010/4 dated 31st  December 2010 for MV Genius Manner

Mositure: 12.80% Total broken Kernels: 12.60% Small Broken: 0.46% Dead, damaged and discoloured kernels:  3.00% Foreign Matter. 0.16%

3.  Certificate No.11039/2010/2 dated 17th January 2011 for MV Tu Man Gang

Mositure: 12.80% Total broken Kernels: 14.79% Small Broken: 0.23% Dead, damaged and discoloured kernels:  3.00% Foreign Matter. 0.29%

6.10  If we disregard the alterations envisaged by the Amendment to the Contract dated 7th December 2010, granting an even higher level for “Broken Grains”  end “Dead,  damaged and Discoloured Grains”, the results provided by ISC were well Within the  parameters foreseen for the  quality  under the Contract.

6.11 The Tribunal therefore FINDS THAT the quality of the cargo shipped on the three vessels was within the amended contractual specifications.

6.12. In addition to the above, the provision DI the Quality Clause 5 of GAFTA Contract  No.48, being Tale  Quale contract as such, states, Inter alia:

35

“Certificate of Inspection at time o/ loading –shall be final as to quality”.

6.13  Consequently, and under consideration of the Payment Term of the­ Contract providing for payment  

“on receipt 01 the shipping documents’, inter alia the above Pre­Shipment Certificates as issued by ISC and provided by Sellers, Sellers were duty entitled to trigger payment under the Contract.  

6.14  WE THEREFORE FIND THAT Sellers’ claim for payment of IJSD 440.00 per metric ton all three partial shipments succeeds.

6.15 In reference with the balance of USD 10.00 per metric ton for each partial shipment, as agreed under the Amendment dated 7th December 2010, the Amendment Provided that the “Balance amount@ US$10.00 per MT will be payable after receipt of quality inspection report of destination port”.

6.16  This indeed establishes an alteration to the original provision of the Contract that the quality would be final at the port of  loading, at  least as far as the balance of USD 10.00 per  metric ton  is concerned.  On  interpretation and construction of the Contract itself and its Amendment dated 7th December 2010, the Tribunal  notes that the Amendment itself defines in  

“1. Quantity” that the weight in accordance with the Contract would be still “final at loading” while the amended payment term now states  that “a  balance amount of  US$ 10.00 per  MT  would only “be payable after receipt of a quality inspection report of destination port.”

6.17 WE THEREFORE FIND THAT  the Contract had been validly altered to the provision that Sellers could only have triggered payment of the balance of USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination, i.e. Bangladesh.

6.18  As no such quality Inspection had been presented by Buyers, despite various reminders from  Sellers,  until the present day, the GAFTA Sampling Rules No.124, cl. 6:1 provide that a “certificate of analysis should be sent to the other party “within 14 consecutive days” after dispatch of the samples to the analyst.

36

6.19  Buyers in their message of 5th  February 2011 firstly explained that the quality of the cargo on the last vessel i.e. MV Tu man Gang, was inferior.  

6.20  The Tribunal Therefore finds that buyers, with respect Tribunal THEREFORE FINDS THAT with respect to cl. 6:1 of the GAFTA Sampling Rules No.124 were obliged to provide a certificate of analysis Latter that message dated 5th February 201 1 therefore latest 20th February 2011.

6.21.   The date of default shall therefore be one day later, the 21st

February 2011 and SO WE DO FIND.

6.22   As Buyers failed to forward the certificate within this limit of 14 days, any claim for rejection or for an allowance in respect of any matters dealt with under the Contract, and its Amendments.  shall be deemed to be waived and absolutely barred, AND SO WE DO FIND.

6.23  THE TRIBUNAL THEREFORE FINDS THAT Sellers’ claim for payment of  balance  invoices of  USD 10,00 per metric  ton succeeds.

6.24   There is no apparent disputes as far as the quantity of the shipment under the contract  is concerned as the contract provided  for the  shipment  of  15000 metric tons,  +­5%  in buyers option and sellers only shipped 13,729.55  metric tons.

6.25   Buyers nevertheless informed Sellers 5th February 2011 that the original Letter of Credit as foreseen for payment under the Contract not be extended and Buyers therefore planned to “establish Fresh LC for the balance quantity of 2000 ton in the old contract”.

6.26  The Tribunal has not seen any new letter of credit for this purpose  and as Buyers have  not filed  such, the  Contract came to its end,

6.27  WE THEREFORE FIND THAT Sellers’ calculations for sums and interest due should be based on a quantity of 13,729.55 metric tons.

6.28   WE FIND AND DECLARE THAT:

37

1) Sellers’ claim for payment of balance of USD 10.00 per metric ton  for each  of the three  shipments  amounting to USD 137,148.20 succeeds.  Interest to run from 29th  June 2011. The date of Buyers’ email stating that they would not be “obliged and/or liable to pay any sum” to Sellers.

2)  Sellers’ claim  for the  balance  of  as  deducted from  the invoice in reference to the shipment on board of MV Tuman Gang amounting to USD 382,348.90 succeeds. Interest to run from  20th  February  2011, the  date  by  which  Buyers should have provided a ‘quality inspection report at destination port’.

Buyers shall  pay compound interest  on the above sum of USD 137,148.20 at the rate of 4% (four per cent) per annum calculated at quarterly rests, from 29th June 2011 to the date of payment.

7.2  Buyers shall forthwith pay to Sellers USD 382,348.90 (three hundred & eighty­two  thousand, three  hundred  and  forty eight United States dollars and ninety cents).

Buyers, shall  forthwith pay to sellers USD 332,348.90 at the rate of 4% (four percent) per annum calculated at quarterly rests, from 20th February 2011 to the date of payment.  

7.3   WE THEREFORE AWARD THAT Buyers shall pay the fees, costs and expenses of this arbitration as per the attached schedule.”   

17. Suffice it to observe that the Arbitral Tribunal has

considered all aspects of the matter and even if it has

committed any error, the same could, at best, be a matter for

correction by way of appeal to be resorted to on grounds as

may be permissible under the  English Law, by  which the

subject arbitration proceedings are governed. We may not be

38

understood to have expressed any opinion on the correctness

of those issues.  

18. In view of the  above, these special leave  petitions  are

dismissed  with exemplary costs, quantified  at  an  aggregate

amount of  Rs.20,00,000/­ (Rupees  Twenty  Lakh  only). The

amount towards costs be paid to the respondent within six

weeks from today.

19. Although we are dismissing the special leave petitions,

we accede to the request of the respondent to pass a specific

order to direct the Registrar (OS), Calcutta  High  Court to

forthwith encash the FDs lying deposited in the credit of the

concerned stated execution case and, after obtaining the

Reserve Bank of India’s permission forthwith, remit the entire

amount, including the interest accrued in US Dollars, to the

respondent. That shall be done within eight weeks from today

and compliance  report  be  submitted  in the  Registry  of this

Court within two weeks thereafter. We further clarify that the

above directions shall be complied with by the Registrar (OS),

Calcutta High Court, irrespective of any order passed by any

39

other Court/Tribunal in India. We are required to pass such a

directions in the peculiar facts of the present case.  

…………………………..….J.           (A.M. Khanwilkar)

…………………………..….J.        (Ajay Rastogi) New Delhi; February 20, 2019.