# Badat and Company v. East India

- **Citation:** [1964] 4 S.C.R. 19
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/badat-and-company-v-east-india-3034
- **Pages:** 50

## Headnote

-
4 s.c.R.
SUPREME COURT REPORTS
19
into two parts, hearing on a broader view and later, if
necessary, on facts, does not go to make a hearing as perfect as it would be desirable for a proper adjudication of
the appeal. If parties know that once they obtain special
leave without limitations they will be free to argue on
facts, they will come prepared and will present the case as
best a~ possible for their clients, and the Court too would
be in a better position to decide.
Of course, after hearing the appeal fully, this Court
is in the best position as to how to dispose of the appeal.
It can surely dispose of it by merely stating that it sees no
reason to consider the findings of fact to be incorrect or it
may consider those findings and express a different opimon.
I would, however, as stated earlier, not like to express
anything with respect to how such an appeal be heard by
this Court, when it is not doubted that this Court has full
discretion to hear an appeal on facts and law and has, for
similar reason laid down that the High Court has full
power to review evidence when hearing an appeal against
acquittal under s. 423 Cr. P.C.
Appeal dismissed.
BADA T AND
CO.
v.
EAST INDIA TRADING CO.
(K. SuBBA RAo, RAGHUBAR DAYAL AND J. R. MuoHOLKAR,
JJ.)
Foreign Award and /udgment-Suit filed
in
Romhay High
Court-Jurisdiction of Court to entertain the suit based on such
documents.
The respondent company, which
was
incorporated in New
York and carried on business
in
spices, brought a suit in the
original side of the Bombay High Court against the appellant for
recovery of a sum of Rs. 92,884-4-10 on the basis of a judgment
of the Supreme Court of the State of New York affirming two
awards obtained by it and also on the awards in the alternative.
!963
Nihal Singh
and Others
v.
State of
Punjab
Raghubar
Dayal /.
1963
May, HJ
1963
Badat and
Company
v.
East India
Trading
Company
20
SUPREME COURT REPORTS
(1964]
The respondent was a partnership firn1 carrying on import and
export business in Bombay.
By t\vo letters exchanged between
them, the appellant and the respondent agreed to do business in
turmeric fingers on the terms and conditions of the American
Spice Trade Association, one of which was an arbitration clause
which ran as follows :-
"All questions and controversies and all claims arising
under this contract shall be submitted to and settled by Arbitration under the Rules of the Ameri~an Spice Trade Association printed on the reverse side thereof.
This contract is
made as of in l'few York."
The appellant failed to supply turmeric in terms of the t\vo con-
:tracts it entered into with the respondent. The respondent put the
matter into arbitration in pursuance of the arbitration clause. The
appellant took no part in it. The arbitrators gave the two awards
in favour of the respondent for damages.
The appellant did not
pay.
The respondent then took appropriate proceedings and got
the awards confirmed by the judgment of the Supreme Court of
the State of New York.
The single ) udge of the Bombay High
Court \vho tried the suit held that it was not maintainable either
()fl the foreign judgment or on the a\vards and dismissed the suit.
The Division Bench on appeal held that the suit \Vas maintainable on the awards, though not on the judgment, as part of the
cause of action had arisen in Bombay and the rele,·ant facts had
been proved by the Public documents produced by the respondent
.and the admissions made by the appellant and decreed the suit.
Held, (per Dayal and Mudholkar )J.) The decision of the
Single Judge of the High Court that the suit was not maintainable
on the foreign judgment must be affirn1ed but on other grounds.
Apart from the provisions
of
the Arbitration Protocol and
Conventions Act, 1937,
foreign
awards and foreign judg1nents
based upon a-Ward are enforceable in India on the sa1ne grounds
and in the same circumstances in which they are enforceable in
England under the Common. Law on grounds of justice, equity
and good conscience.

## Text

_Characters 0–39,999 of 113,749. This is a partial read: ask again with offset=39999 for what follows._

-
4 s.c.R.
SUPREME COURT REPORTS
19
into two parts, hearing on a broader view and later, if
necessary, on facts, does not go to make a hearing as perfect as it would be desirable for a proper adjudication of
the appeal. If parties know that once they obtain special
leave without limitations they will be free to argue on
facts, they will come prepared and will present the case as
best a~ possible for their clients, and the Court too would
be in a better position to decide.
Of course, after hearing the appeal fully, this Court
is in the best position as to how to dispose of the appeal.
It can surely dispose of it by merely stating that it sees no
reason to consider the findings of fact to be incorrect or it
may consider those findings and express a different opimon.
I would, however, as stated earlier, not like to express
anything with respect to how such an appeal be heard by
this Court, when it is not doubted that this Court has full
discretion to hear an appeal on facts and law and has, for
similar reason laid down that the High Court has full
power to review evidence when hearing an appeal against
acquittal under s. 423 Cr. P.C.
Appeal dismissed.
BADA T AND
CO.
v.
EAST INDIA TRADING CO.
(K. SuBBA RAo, RAGHUBAR DAYAL AND J. R. MuoHOLKAR,
JJ.)
Foreign Award and /udgment-Suit filed
in
Romhay High
Court-Jurisdiction of Court to entertain the suit based on such
documents.
The respondent company, which
was
incorporated in New
York and carried on business
in
spices, brought a suit in the
original side of the Bombay High Court against the appellant for
recovery of a sum of Rs. 92,884-4-10 on the basis of a judgment
of the Supreme Court of the State of New York affirming two
awards obtained by it and also on the awards in the alternative.
!963
Nihal Singh
and Others
v.
State of
Punjab
Raghubar
Dayal /.
1963
May, HJ
1963
Badat and
Company
v.
East India
Trading
Company
20
SUPREME COURT REPORTS
(1964]
The respondent was a partnership firn1 carrying on import and
export business in Bombay.
By t\vo letters exchanged between
them, the appellant and the respondent agreed to do business in
turmeric fingers on the terms and conditions of the American
Spice Trade Association, one of which was an arbitration clause
which ran as follows :-
"All questions and controversies and all claims arising
under this contract shall be submitted to and settled by Arbitration under the Rules of the Ameri~an Spice Trade Association printed on the reverse side thereof.
This contract is
made as of in l'few York."
The appellant failed to supply turmeric in terms of the t\vo con-
:tracts it entered into with the respondent. The respondent put the
matter into arbitration in pursuance of the arbitration clause. The
appellant took no part in it. The arbitrators gave the two awards
in favour of the respondent for damages.
The appellant did not
pay.
The respondent then took appropriate proceedings and got
the awards confirmed by the judgment of the Supreme Court of
the State of New York.
The single ) udge of the Bombay High
Court \vho tried the suit held that it was not maintainable either
()fl the foreign judgment or on the a\vards and dismissed the suit.
The Division Bench on appeal held that the suit \Vas maintainable on the awards, though not on the judgment, as part of the
cause of action had arisen in Bombay and the rele,·ant facts had
been proved by the Public documents produced by the respondent
.and the admissions made by the appellant and decreed the suit.
Held, (per Dayal and Mudholkar )J.) The decision of the
Single Judge of the High Court that the suit was not maintainable
on the foreign judgment must be affirn1ed but on other grounds.
Apart from the provisions
of
the Arbitration Protocol and
Conventions Act, 1937,
foreign
awards and foreign judg1nents
based upon a-Ward are enforceable in India on the sa1ne grounds
and in the same circumstances in which they are enforceable in
England under the Common. Law on grounds of justice, equity
and good conscience.
On the original side of the Bombay High
Court English Co1nmon Law is also applicable under cl. 19 of the
Letters Patent read with cl. XLI of the Charter of that Court.
If the award is followed by a judgment which is rendered in a
proceeding in which the person again.st whom judgn1ent is sought
can take objections as to the validity of the award, the judgement
will be enforceable in England. Even then the plaintiff will have
the right to sue on the original course of action. Secondly, even
a foreign award will be enforced only if it satisfies mutatis mutandis
the tests applicable to the enforcement of foreign judgments on
the ground that it creates a contract~a~ oblig~tion arising o':1t. of
submission · to arbitration.
But there is a difference of op1n1on
in this connection· on two matters, (1) whether an award which
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•
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4 S.C.R.
SUPREME COURT REPORTS
21
is followed by a judgment can be enforced as an award or whether
the judgment "lone can be enforced, and (2) whether an award
which is not enforceable in the country in which it was made
without an enforcement order or a judgment, can be enforced
or in such a case the Ot1ly reri:iedy is to sue on the original cause
of action. Thirdly, both a foreign judgment and a foreign award
n1ay be sued upon provided certain conditions are fulfilled one of
\vhich is that it has become final.
Although, therefore, the respondent could sue on the original
cause of action in the Bombay High Court that cause of action
1uust be distinguished from the one furnished by the judgment
of the New York Supreme Court \vhich n1u£t be held to have
arisen in Ne\\' York and not in Bombay and was a cause of actioa.
independent of the one afforded by the contracts and the Bombay High Court would, consequently, have no jurisdiction to try
the suit based on that judg1nent.
East India 1'rading Co. v. Carmel Exporters & In1porters Ltd.~
(1952) 2 Q. B. 439, Schibsby v. Westenholz., (1870) 6 Q. B. 155
and Re Davidson's Settlement Trust, (1873) L. R. 15 Eq. 383,
referred to.
In a suit based on a foreign award the plaintiff has to prove,
( 1) that the contract between the parties provided for arbitration
by a tribunal in a foreign country, (2) that the award is in accordance with the agreement, (3) that the award is valid according
to the la\V of that country ( 4) that it wa~ final according to that
law and, (5) that it was subsisting award at the date of the suit.
The essential difference between a foreign judgment and a
foreign award is that \vhile the former is a com1nand of the foreign
sovereign and the comity of nationS accords international recognition to it if it fulfils certain basic requirements, the latter is
founded on the contract bet\veen the parties and is not given the
status of a judgment in the country in which it is nlade and cannot claim the same international status as the act of a foreign
sovereign.
-"'
Even though an award may not have obtained the status of
'
7
judgment in the country in which it is made, if it possesses the
essential attribute of a judgment, that is finality, it can be sued
upon in another country.
Union l\Tationaledes Cooperatives Agricoles de Careales v.
Robert Cattmll & Co. Ltd., (1959) 2 Q. B. 44, referred to.
But the finality that r. 15, cl. (E) of the American Spice Trade
Association gives to the awards in question is no more than a
matter of contract between the parties and must be subject to the
law of the State.
A reference to the laws of the State of New York makes it
abundantly clear that the. relevant provisions of the laws of the
1963
Badat and
Company
v.
East India
Trading
Company
1963
Badat and
Company
v.
East India
Trading
Company
22
SUPREME COURT REPORTS
[1964]
State under which alone the awards could become final had not
been complied with and they could not, therefore, provide a cause
of at:tion for the suit.
For an award to furnish a fresh cause of action, it n1ust be
finaL
If the law of the country in which
it was made gives
finality to the judgment based on an award and not to the award
itself, the award cannot furnish a cause of action in India. Although
the High Court of Bombay.
has
jurisdiction to enforce a final
award made in a foreign· country in pursuance of a submission
made within the limits of its original jurisdiction, the awards in
question not being final the suit must fail.
Per Subba Rao J.-The doctrine of non-merger of the original
cause of action with the foreign judgment pronounced upon it is a
well established doctrine.
Popat v. Damodar, (1934) 36 B.L.R. 844, Oppenbeim and Co.
v. Mohmed Haneef, (1922) l.L.R. 45 Mad. 496 and Nil
Ratan
Mukhopadhya v_ Cooch Behar Loan Office, Ltd. l.L.R. (1941) 1
Cal. 171, referred to.
If the contract does not merge in the judgment, by a parity of
reasoning an award on which a foreign judgment is passed cannot also 1nerge in the judgment.
There is no distinction bet\veen a foreign award which would
-require an enforcement order to be enforceable in law and an
award which cannot be enforced except by a judgment.
An enforcement order as well as a judgment on an award serves the
same purpose and they are two different procedures for enforcing
-an award.
Meerifield Ziegler & Co."v. Liverpool Cotton Association Ltd.,
{1911) 105 L.T.R. 97, referred to.
A suit would, therefore, lie on a foreign award completed
.according to the law of that country and before a decree can be
passed on it three things must be proved,
( 1) arbitration agreement, (2) that the arbitration was conducted in accordance with
"the agreement, and ( 3) that the award was valid according to the
law of the country when it \Vas made.
Norske Atlas Insurance Co. Ltd. v. London General Insurance
.Company Limited .. (1927) 43 T.L.R. 541, referred to.
It was not correct to say that the High Court had gone wrong
"in holding that the three necessary conditions had been proved by
-the admission of the appellants in their pleadings.
Rules 3, 4 and 5 of the Order VIII
of
the Code of Civil
Procedure form an integrated code dealing with the manner in
·which the allegations of fact made in a plaint has to be traversed
:and the legal consequences that follow from its non-compliance.
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-t
4 S.C.R.
SUPREME COURT REPORTS
23
The written statement must deal specifically with each allegation
of fact made in the plaint and if th~ defendant denies any such
fact, such denial must not be evasive, he must answer the point
of substance and if he fails to do so the said fact must be taken
to be admitted.
The discretion under the proviso to r. 5 has to be exercised
by the court as justice demands and particularly according to the
nature of the parties, standard of drafting prevailing in the locality and the practice of the court.
There can ~ no doubt that pleadings on the original side
of the Boll:ibay High Court have to be strictly construed in the
light of the said provisions unless the court thinks fit to exercise
it discretion under the proviso.
Tildesley v. Harper, (1878) L.R. 7 Ch. D. 403 and Laxminarayan v. Chimniram Girdharilal,
(1917)
IL.R.
41
Bom.-89,
referred to.
The said three conditions were also proved by the exhibited
record of the proceedings of the Supreme Court of New York
containing the certificate of the Consul General of India in Ne\.v
York and certified copies
of
the
order
and judgment of the
Supreme Court.
While under s. 78(6) of the Indian Evidence Act, proof of the
character of the document according to the law of the foreign
country, is condition precedent to its admission, such admission
is not a condition precedent for drawing the requisite presumption
under s. 86 of the Act.
That presun1ption can be drawn before
the document is admitted. The judgment of the Supreme Court
of New York, therefore, which satisfied the first two conditions
laid down by s. 78(6), could be legitimately admitted into evidence.
The contracts between
the
parties having
been concluded
within the local limits of the original jurisdiction of the Bombay
High Court, a part of the cause of action must have arisen there.
and that court had jurisdiction to try the suit on the awards.
·
C1v1L APPELLATE JuRISDICTION: Civil Appeal No. 39
of 1961.
Appeal from the judgment and decree dated September, 1958 of the Bombay High Court in Appeal No. 13 of
1958.
C.K. Daphtary, Solicitor-General of India, S.N. Andley, Rameshwar Nath, P.L. Vohra and/. B. Dadachanji, for
the appellant.
M. C. Setalvad, Atul Setalvad, V.J. Merchant and G.
~
Gopalkrishnan, for the respondent.
1963
Badat and
Company
v.
East India
Trading
Company
1963
Badat and
Company
v.
East Indis
Trading
Company
Subba Rao f.
24
SUPREME COURT REPORTS
[1964]
May 10, 1%3.-Subba Rao J ., delivered a · dissenting
Opinion. The judgment of Dayal and Mudholkar JJ.,
was delivered by Mudholkar J.
SuBBA RAO J.-I regret my inability to agree with the
judgment prepared by my learned brother Mudholkar J.
This appeal by certificate raises the question of jurisdiction of the Bombay High Court to entertain a suit
on an award in respect whereof a judgment was made
in a foreign court and other incidental questions.
The facts that have given rise to the present appeal
may be briefly stated. I shall only narrate such facts which
are relevant to the question raised, for in the pleadings a
wider field was covered, but it has gradually been narrowed down when the proceedings reached the present
stage. The appellants are Badat & Co., a firm formerly
carrying on business at Bombay. The respondents, East
India Trading Co., are a private limited company incorporated under the laws of the State of New Yark in
the United States of America and having their registered
office in the State of New York. The respondents instituted Suit No. 71 of 1954 against the appellants in the High
Court ·of Judicature at Bombay, in its Ordinary Original
Civil
Jurisdiction, for
the recovery
of
a sum of
Rs. 92,884/4/10 with interest thereon. It was alleged in
the plain that by correspondence, the details whereof were
given in the plaint, the appellants agreed to do business
with the respondents on the terms of the American Spice
Trade Association contract.
Thereafter, by subsequent
correspondence the parties entered into two different contracts whereunder the appellants agreed to sell to the respondents different quantities of Allepey Turm~ric Fingers
on agreed terms.
Though the respondents forwarded
to the appellants in respect of the said transactions
two contracts in duplicate on the standard form issued
by the said Trade Association with a request to the
appellants to send them after having duly signed, the appellants failed to do so. Under the terms and conditions of
the said Trade Association Contract, all claims ansmg
· under the contract should be submitted to, and settled
by, arbitration under the rules of the said Association.
It was stated that pursuant to a relevant rule of the
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I
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4 S.C.R.
SUPREME COURT REPORTS
25
said Association, the dispute was referred to arbitration
and two awards were made in due course i.e., on July
12, 1949.
Following the procedure prescribed for the
enforcement of such awards in New York, the respondents initiated proceedings in the Supreme Court of the:
State of New York to have the said awards confirmed and
a judgment entered thereon in the said Court. In due
course, the said Court pronounced judgment confirming
the said awards.
On those allegations a suit was filed
m the High Court of Bombay for recovery of the
amounts payable under the said two awards by the
appellants to the respondents. The suit was tried, in the
first instance, by Mody J. The learned Judge, inter alia,
held that the suit on the foreign judgment would. not lie
in the Bombay High Court, as there was no obligation
under the said judgment for the appellants to pay any
amount to the respondents at any place within the jurisdiction of the Bombay High Court. Adverting to the claim
ba~d on the agreement resulting m the awards, the
learned Judge observed that there was no proof of such
agreement and that there were no admissions m the
written-statement in regard to the facts sustaining such
an agreement. On those findings he held that the respondents had failed to prove that the Bombay High
Court had jurisdiction to try the suit.
As the suit
w:ts heard on merits also, he considered other issues
and held that there was neither proof nor admissions
m the written-statement in regard to the alleged contracts.
He found that the arbitrators and the umpire
h:td jurisdiction to make the awards, but the said awards
merged m the judgment and that the suit was not
maintainable on the said two awards. It is not necessary
to give the other findings of the learned Judge, as nothing
turns on them in the present appeal. In the result. the
~uit was
dismi~ed with costs.
On appeal, a division
Bench of the said High Court, consisting of Chagla
C.J. and S. T. Des;ii J., disagreed with Mody J., on the
material questions decided by him and allowed the appeal
with costs. The learned Judges held that the awards did
not merge in the judgment, that the suit on the awardi;
was maintainable and that the Bombay High Court had
jurisdiction to entertain the suit as part of the came of
3-2 S. C. India/i~
1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao/.
1963
Badat aad
Company
v.
East ladia
Trading
Company
Subba Rao /.
26
SUPREME COURT REPORTS
[ 1964 J
action arose within its limits. The learned Judges further held that all the facts necessary to sustain the respondents' suit on the awards had been proved either by public documents produced in the case or by the admissions
made by the appellants in the written-statement. The present appeal, as aforesaid, has been preferred by certificate
against the judgment of the division Bench.
The learned Solicitor General, appearing for the appellants, raised before us the following points : ( l) The
awards merged in the judgment made by the Supreme
Court of the State of New York and, therefore, no suit
would lie on the awards.
(2) Even if the suit could be
filed on the awards, it was not proved that any part of the
cause •of action accrued within the jurisdiction of the
Bombay High Court.
To state it differently, the respondents have not proved that the agreements resulting
in the awards were entered into or concluded within
the jurisdiction of the Bombay High Court.
And (3)
the respondents failed to prove the three necessary conditions for the enforcement of the awards namely, (i)
that there was an arbitration agreement,
(ii) that the
arbitration was conducted in accordance with the agreement, and (iii) that the awards were made pursuant
to the provisions of the agreement and, therefore, valid
according to the lex fori of the place where the arbitration was carried out and where the awards were
made.
Mr. Setalvad appearing for the respondents, sought
to sustain the findings of the Division Bench of the High
Court given in favour of the respondents on the said questions raised by the appellants.
The first question is whether the awards merged in
the judgment of the Supreme Court of the State of New
Yark for all purposes; if so, the awards would lose their
individuality or separate existence and no suit could, therefore, be filed to enforce them. In Halsbury's Laws
of England, Vol. 7, 3rd Edn., at p. 141, the relevant
principle is stated under the heading "Foreign Judgments"
thus :
"Since the foreign judgment constitutes a simpie
contract debt only, there is no merger of the original
cause of action, and it is therefore open to the plain-
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4 S.C.R.
SUPREME COURT REPORTS
27
tiff to sue either on the foreign judgment or on the
original cause of action on which it is based, unless the
foreign judgment has been satisfied."
The same
idea is expressed in Dicey's "Conflict of
Laws", 7th edn., at p. 1059:
"For historical and procedural reasons, a foreign
judgment is treated in England as a contractual debt,
and the fact that, in certain instances, it can be enforced by registration does not appear to alter the traditional view."
Though the learned author in the course of his commentary criticizes this view, the passage represents
the
accepted view on the subject.
An interesting discussion of the evolution of the rule of non-merger of the
cause of action in the foreign judgment is found in
Piggott's "Foreign fudgment", Part I at p. 17. The various
steps in its evolution may be stated thus: (1) Action
brought on a foreign judgment was an action brought
to recover the judgment debt : . . . . . . necessarily then,
the judgment must be evidence of the debt.
(2) It
was not made clear which. debt it evidenced, whether
it was the judgment debt or the original debt.
(3)
As it was an action on a debt, an action on the judgment debt soon came to be confused with, and perhaps
looked upon as, an action on the original debt. (4) Having come to that stage, the courts declared that the original debt or cause of action had not merged in the foreign
judgment pronounced upon it. Whatever may he the origin, the doctrine of non-merger of the original cause of
action with the foreign judgment has now been well established in spite of the fact that some text-book writers are
not able to discover a logical basis for the doctrine. In
"Smith's Leading Cases", the learned author says:
"Foreign judgments certainly do not occasion a merger of the original ground of action."
In Cheshire's Private International Law, 5th Edn., the
learned author says in Ch. XVII under the heading
"Foreign Judgments", thus, at p. 598 :
"It is a rule of domestic English law that a plaintiff who has obtained judgment in England against a
defendant is barred from suing again on the original
cause of action. The original cause of action is mer1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao/.
1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao/.
28
SUPREME COURT REPORTS
[ 1964 J
ged in the judgment-transit in rem judicatum-and it
would be vaxatious to subject the defendant to
another action for the purpose of obtaining the same
result. It has been held, however, in a series of authorities, that this is not so in the case of foreign judgments.
Such a judgment does not, in the view of
English law, occasion a merger of the original cause
of action, and therefore the plaintiff has his option,
either to resort to the original ground of action
or to sue on the judgment recovered, provided, of
course, that the judgment has not been satisfied."
The learned author gives the following different reason
for this distinction between a foreign and a domesticjudgment, at p. 599 :
"The most plausible justification for non-merger,
perhaps, is that a plaintiff suing in England on a
foreign judgment, as contrasted with one who sues on
an English, judgment possesses no higher remedy than
he possessed before the foreign action.
The effect
of judgment in English proceedings is that "the
cause of action is changed into matter of record,
which is of a higher nature, and the inferior remedy
is merged in the higher" ; but the view which
English law takes of a. foreign, judgment is that it
creates merely a simple contract debt between the parties. The doctrine of non-merger has, however, been
too often repeated by judges to justify any prospect
of its abandonment."
This doctrine has been accepted and followed by Indian
Courts: see Popat.. v. Damodar('), Oppenheim and Company v. Mahomed Haneef( 2 ) and Nil Ratan Mukliopadhyaya v. Cooch Behar Loan Office, Ltd.(3).
If the contract doe• not merge in a judgment, by
parity of reasoning, the award on which a foreign judgment
is made cannot also merge in the judgment.
While
conceding the said legal position, the learned counsel for
the appellant contends that the award to ,furnish a valid
cause of action shall be one which is legally enforceable
in the country in which it is made. An award made in
(') (1934) 36 B.L.R. 844, 853. (') (1922) l.L.R. ~5 Mad.~%.
( 1 ) l.L.R. (1941) 1 Cal. 171, 175.
t
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4 S.C.R.
SUPREME COURT REPORTS
29
New York, the argument proceeds, by its own force does
not create rights or impose liabilities thereunder and therefore, such an inchoate document cannot afford a cause
of action.
This contention has not been raised for the
first time, but has been noticed in "Russel On Arbitration",
16th Edn. and answered at p.
282.
The
learned author places the following two propositions in
juxtaposition: (1) "An award made by foreign arbitrators, which requires an enforcemei!t order to render
it enforceable by the local law, is not a judgment of
a foreign tribunal which can be enforced by action in
English courts".
(2) "But an award which is complete
and could be enforced in the country where it was
made is enforceable in England at Common Law, quite
apart from any rights given by Part II of the Act."
In Halsbury's Laws of England, Vol. II 3rd edn., the following note is given at p. 52 :
"A foreign arbitration award which is complete
and enforceable in the country in which it was made
is enforceable in England at Common Law."
The learned Solicitor-General seeks to draw a subtle
distinction between an award made by foreign arbitrators
which require an enforcement order to render it enforceable by the local law and an award which could not be
enforced except by obtaining a judgment on its basis. On
this distinction an argument is advanced, namely, that in
the case of the former award, the award has been vitalized
by the enforcement order, while in the case of the latter
the award qua the judgment has not become enforceable,
but it is the judgment that becomes enforceable.
In
support of this contention reliance is placed upon the
following observations found in Dicey's Conflict of Law>,
17th edn., at p. 1059 :
"If the foreign award is followed by judicial proceedings in the foreign country resulting in a judgment of the foreign court which it not merely a formal
order giving leave to enforce the award, enforcement proceedings in England must be brought on
the foreign judgment (or possibly on the original
cause of action), but probably not on the award."·
These observations are not supported by any direct decision; they represent only the author's doubts on the
1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao J.
1963
Badal and
Company
v.
East India
Trading
Company
Subba Rao].
30
SUPREME COURT REPORTS
[1964]
question. On principle I cannot see why a distinction
should be made between the two categories of cases. An enforcement order as well as a judgment on an award
serves the same- purpose : they are two different procedures prescribed for enforcing an award. In the case of
an enforcement order a party applies to a court for
leave to enforce the award ; and on the granting of such
leave, the award can be enforced as if it were a decree of
a court. .In the alternative procedure, an action either in
the shape of a suit or a petition will have to be filed on
an award and a judgment obtained thereon. In that event,
the award, vis-a-vis the country in which it is made,
merges in the judgment and thereafter the judgment
only becomes enforceable.
But, as explained earlier,
there is no merger in the context of its enforcement in another country.
In both the cases the award in the
country of its origin is complete and enforceable. If an
award. gets vitality by a mere enforcement order, it gets
a higher sanctity by the court of its origin making a judgment on it. Both of them afford a guarantee of its vitality
and enforceability in the country of its origin and,
therefore, a different country can safely act upon it.
In both the cases the award is complete in the country
of its origin and if the doctrine of merger cannot be invoked in the case of foreign judgment, as I have held
it cannot, there is no principle on which the distinction sought to be made can be sustained. To sanction the
distinction in the context of a foreign judgment is to
prefer the form to substance and to accept a lesser guarantee and reject a higher one. The decision in Merrifield, Ziegler, and Co., v. Liverpool Cotton Association
Limited (1) does not lay down any different proposition.
There, t!Ie plaintiff brought an action in England against
Liverpool Cotton Association for restraining tl1e said Association from expelling them from membership of the
Association.
The Association filed a counter claim demanding a large amount from the plaintiffs payable
by tl1em under an award made in Germany. The claim
was based on the award and in effect it was a claim to
"enforce the award. By German Law an enforcement order
( 1 ) (1911). 105 L.T.lt. 97, 106.
-
-
!
4 S.C.R.
SUPREME COURT REPORTS
31
was necessary before an award can be enforced. But no
such order was made there.
The High Court rejected
the counter claim.
In doing so, it made the following observations :
"The sole point, therefore, remains whether the
award is a decision which the court here ought to recognize as a foreign judgment. In my opinion it is
not, although as between the parties it is conclusive
upon all matters thereby adjudicated upon, and is
therefore in a different category to the "remate"
judgment dealt with by the House of Lords in
Nouvin v. Framan(') ; it has no further force or
effect unless and until the court determines that
it is an adjudication made in proceedings regularly conducted upon matters really submitted to the
jurisdiction of the tribunal.
It is nor even as
though the award were enforceable unless the court
stays its operation ; the contrary is really the case,
and for all practical purposes it is still born until
vitality is infused into it by the court.
It is then,
for the first time, endowed with one, at least, of
the essential characteristics of a judgment-the right
to enforce obedience to it."
This passage in clear terms brings out the principle
underlying the proposition that an award cannot afford
a cause of action till it is complete in the country of its
origin. The reason of the rule is that unless and until
the appropriate court determines its regularity, it is inchoate and it becomes enforceable only when an enforcement order or judgment puts its seal of approval on it.
For the application of this principle the distinction between
an enforcement order and a judgment ·on the award
is not material.
In either case, the Court approves it.
Indeed, the Judicial Committee in Oppenheim & Co.
v. Mahomed Hanef( 2 )
sanctioned
the maintainability
of a suit to enforce an award which ended in a judgment.
There, in respect of a mercantile dispute that
arose between merchants carrying on business in London and a merchant at Madras, an award was obtained in England. The merchants in England filed a suit on
( 1) (1889) 15 App. Cas. 1.
(') (1922) LLR. 45 Mad. 496.
1963
Badat and
Company
v.
East India
Trading
Company
S_ubba Rao /.
1963
~adat and
Company
v.
East India·
Trading
(;on1pany
Subba Rao/.
32
SUPREME COURT REPORTS
[1964]
the award on the King's Bench Division of the High Court
in England for the amounts payable thereunder and
obtained an ex-parte judgment against the metchant at
Madras.
Thereafter, they brought a suit against the
Madras merchant in the High Court of Judicature at
Madras claiming the sum due under the said
judgment, or in the alternative, for the amount due under the
award.
Coutts Trotter J., who heard the case in the fir.st
instance, held that the suit was not maintainable on the
judgment that was an ex-parte one, and gave a decree on
the award. But on appeal, a Division . Bench of that Court
took a dilfetent view.
On further appeal, the Privy
Council restored the decree made by Coutts Trotter J. :
but they concluded their judgment with the following
caution:
"In order to prevent misconception, it appears
desirable to add that it was not pleaded or contemled
at any stage of the proceedings that the award had
merged in the English judgment, and accordingly
their Lordships do not deal with that point."
This decision is certainly an authority for the position
that on the assumption that an award does not merge
in a foreign judgment, it affords a cause of action in
another country.
I have already indicated earlier on the
same reasoning applicable to the doctrine of non-merger
of a contract in a foreign judgment that an award also will
not merge. For the reasons given by me, I hold that a
suit would lie on the basis of an award in a foreign country, provided it is completed in the manner prescribed by
the law of that country.
I shall now take the third question, for the discussion
thereon would also solve the problem raised by the second
question.
The learned Solicitor-General contends that
there is no proof of the facts to satisfy the afore53id
three conditions and the Division Bench of the High Court
went wrong in holding to the contrary on the basis of tl1e
alleged admissions found in the pleadings. Mr. Setalvad,
learned counsel for the respondents, on the other hand,
while conceding that the said three conditions must be
satisfied before a foreign award can be enforced, argues
that the relevant facts were proved not only by the admissions made by the appellants in the written-statem;nt, ex-
-
-
4 S.C.R.
SUPREME COURT REPORTS
33
pressed or implied, but also by the production of the certified copy of the judgment of the foreign court.
In Norake Atlas Insurance Co. Ltd.
v. London
General Insurance Company Limited('), an award made
in Norway was sought to be enforced in England. Action
was brought not on the contract but on the award. MacKinnon J., laid down in that case that three things had
to be proved for obtaining a decree thereon, namely, (1)
the submission ; (2) the conduct of the arbitration in
accordance with the submission ; and (3) the fact that the
award was valid according to the law of the country where
it was made.
So too, in Hals bury' s Laws of En gland,
3rd edn., Vol. II, in para 116, at p. 53, the said conditions of enforcement are given with further elaboration.
I need not pursue this matter, as there is no dispute on
this aspect of the question.
Have the conditions been proved in the present case?
I shall first take the arguments based on the pleadings. Before doing so, it would be convenient to read the relevant provisions of the Code of Civil Procedure on the
subject, as the arguments turn upon the application of
those provisions to the pleadings.
Order VII of the Code of Civil Procedure prescribes, among others, that the plaintiff shall give in the
plaint the facts constituting the cause of action and when
it arose, and the facts showing that the court has jurisdiction. The object is to enable the defendant to ascertain from the plaint the necessary facts so that he may
admit or deny them. Order VIII provides for the filing
of a written-statement, the particulars to be contained
therein and the manner of doing so ; rules 3, 4 and 5
thereof are relevant to the present enquiry and they read :
Order VIII Rule 3. It shall not be sufficient for
a defendant in his written statement to deny generally
the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact
of which he does not admit the truth, except damages.
r. 4 Where a defendant denies an allegation of fact in
the plaint, he must not do so evasively, but answer the
point of substance. Thus if it
is
alleged that he
( 1) (1927) 43 T.L.R. 541.
1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao J.
1963
Badat and
Company
v.
East India
Trading
Company
Subba Rao/.
34
SUPREME COURT REPORTS
[1964)
received a certain sum of money, it shall not be sufficient to deny that he received that particular amount,
but he must deny that he received that sum or any
part thereof, or else set out how much he received.
And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those
circmrutances.
Rule 5. Every allegation of fact in the plaint, if not
denied specifically, or by necessary implication, or
stat.ed to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a
person under disability.
Provided that the Court may in its discretion require any fact so admitted to be proved otherwise than
by such admission.
These three rules form an integrated code dealing with
the manner in which allegations of fact in the plaint should
be traversed and the legal consequences flowing from its
non-compliance. The written-statement must deal specifically with each allegation of fact in the plaint and when
a defendant denies any such fact, he must not do so evasively, but answer the point of substance. If his denial of
a fact is not specific but evasive, the said fact shall be taken
to be admitted. In such an event, the admission itself
being proof, no other proof is necessary. The first paragraph of r. 5 is a re-production of O.XIX, r. 13, of the English rules made under the Judicature Acts. But in mofussil
Courts in India, where pleadings were not precisely drawn,
it was found in practice that if they were strictly construed
in terms of the said provisions, grave injustice would be
done to parties with genuine claims. To do justice between
those parties, for which Courts are intended, the rigor of
r. 5 has been modified by the introduction of the proviso
thereto. Under that proviso the Court may, in its discretion, require any fact so admitted to be proved otherwise
than by such admission. In the matter of mofussil pleadings, Courts, presumably relying upon the said proviso, tolerated more laxity in the pleadings in the interest of justice.
But on the Original Side of the Bombay High Court, we are
told, the pleadings are drafted by trained lawyers bestowing
serious thought and with precision. In construing such
pleadings the proviso can be invoked only in exceptional
-
..
1
4 S.C.R.
SUPREME COURT REPORTS
35
circumstances to prevent obvious injustice to a party or
to relieve him from the results of an accidental slip or
omission, but not to help a party who designedly made
vague denials and thereafter sought to rely upon them
for non-suiting the plaintiff.
The discretion under the
proviso must be exercised by a Court having regard to the
justice of a cause with particular reference to the nature
of the parties, the standard of
drafting obtaining in a
locality, and the traditions and conventions of a Court
wherein such pleadings are filed. In this context the decision in Tildesley v. Harper(') will be useful. There, in an ·
action against a lessee to set aside the lease granted under
a power the statement of claim stated that the donee of the
power had received from the lessee a certain sum as a
bribe, and stated the
circumstances;
the
statement of
defence denied that that sum had been given, and denied
each circumstance, but contained no general denial of a
bribe having been given.
The Court held, under rules
corresponding to the af<,resaid rules of the Code of Civil
Procedure, that the giving of the bribe was not sufficiently
denied and therefore it must be deemed to have been admitted. Fry J. posed the question thus : What is the point
of substance in the allegations in the statement of claim?
and answered it as follows :
"The point of substance is undoubtedly that a
bribe was given by Anderson to Tildesley, and that
point of substance is nowhere met. ........... no fair
and substantial answer is, in my opinion, given to the
allegation of substance, namely that there was a bribe.
In my opinion it is of the highest importance that this
rule of pleading should be adhered to strictly, and that
the Court should require the Defendant, when putting in his statement of defence, and the Plaintiff,
when replying to the allegations of the Defendant, to
state the point of substance, and not to give formal
denials of the allegations
contained in the previous
pleadings without stating the circumstances.
As far
as I am concerned, I mean to give the fullest effect
to that rule. I am convinced that it is one of the
highest benefit to suitors in the Court."
(1) ( 1878) L.R. 7 Ch. D.