# HARENDRA H. MEHTA AND ORS v. MUKESH H. MEHTA AND ORS

- **Citation:** [1999] 3 S.C.R. 562
- **Court:** Supreme Court of India
- **Decided:** 1999-05-13
- **Case number:** Civil Appeal No. 4006 of 1995
- **Bench:** D.P. Wadhwa, Santosh Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/harendra-h-mehta-and-ors-v-mukesh-h-mehta-and-ors-17197
- **Pages:** 32

## Headnote

Foreign Awards (Regulation and Enforcement) Act. 1961-Section 2(b),
7-Enforcement of foreign award-Conditions for-Parties, brothers having
business both in India and in United States of America-Disputes of
C commercial nature-Arbitration proceedings held in United States of
America-Whether it could be held as an award under the Foreign Awards
Act-Held, Yes.
The appellant's and respondents, two brothers families appointed their
D elder brother as an arbitrator to divide their vast businesses and properties
both in the United States of America and India. The arbitrator gave his award
in New York incorporating the settlement between the parties. Respondents
applied to the Bombay High Court under the provisions of the Foreign
Awards (Regulation and Enforcement) Act 1961, for enforcing the award.
Single Judge of the High Court pronounced1judgment according to the award
E as required u/s 6 of the Foreign Awards Act. This appeal had been filed
challenging the judgment of the Bombay High Court enforcing the foreign
award. The appellants submitted that the High Court could not order the
award to be filed and give judgment in terms thereof as it was not an arbitral
award as there was no dispute on the basis of which the arbitrator could give
F
his award; that it was not an award under the Foreign Awards Act as the
award was merely effecting a family settlement and dispute did not arise out
of any international· trade;· that a fraud had been committed in getting the
award and certain schedule which formed the part of the agreement to refer
the dispute to arbitration, had been fraudulently substituted and that chapter
XX-C of the Income Tax Act 1961 had been violated and the enforcement of
G the award in violation of the law of this country would be against the public
policy.
Dismissing the appeal, this Court
HELD : 1.1. In the instant case all the ingredients of a foreign award
H were there. Parties were having business both in India and in the United
562
_J
-.. -
.•
H.H. MEHTA v. M.H. MEHTA
563
States of Amrica as a joint venture and they also acquired properties. A
Differences that arose between the parties were out of legal relationships
and certainly of commercial nature under the laws of this country. Agreement
to refer the disputes to Arbitration, in writing, was made in the United States
where arbitration proceedings were held and award given. United States is
a country to which clause (b) of section 2 of the Foreign Awards Act applies. B
In the present case, the parties were related to each other but that could not
take the award outside the ambit of the Foreign Awards Act.
(574-G-H; 575-A)
1.2. The parties entered into the settlement during tendency of the
arbitration proceedings. Appellant himself approached the courts in the C
United States never complaining that it was not an award. It cannot be held
that the agre~ment stood revoked when the parties during the course of
arbitration proceedings entered into a settlement among themselves and yet
wanted the arbitrator to give his award in terms thereof. It is nobody's case
that authority of the arbitrator was revoked at any time. [576-C-EJ
1.3. A competent court in the State of New York rejected appellants' D
case that any fraud had been committed. Therefore, sub-section (2) of Section
7 of the Foreign Act would not be applicable. No conditions now exist under
sub-section (1) of Section 7 of the Foreign Award Act not to enforce the
award on the alleged ground of fraud. (576-H; 577-AJ
1.4. Foreign Awards Act is a complete Code in itself providing for all E
the possible contingencies in relation to foreign awards. Once it is held that
an award is a foreign award, the provisions of the Foreign Award Act would
apply and where the conditions for enforcement of such an award exist as
mentioned in Section 1 of this Act, the Court shall order the award to be filed
and shall proceed to pronounce judgment granting ward and upon the judgment F
so pronounced, decree shall follow. It is not

## Text

_Characters 0–39,791 of 77,868. This is a partial read: ask again with offset=39791 for what follows._

A
HARENDRA H. MEHTA AND ORS.
v.
MUKESH H. MEHTA AND ORS.
MAY 13, 1999
B
(D.P. WADHWA AND SANTOSH HEGDE, JJ.]
Foreign Awards (Regulation and Enforcement) Act. 1961-Section 2(b),
7-Enforcement of foreign award-Conditions for-Parties, brothers having
business both in India and in United States of America-Disputes of
C commercial nature-Arbitration proceedings held in United States of
America-Whether it could be held as an award under the Foreign Awards
Act-Held, Yes.
The appellant's and respondents, two brothers families appointed their
D elder brother as an arbitrator to divide their vast businesses and properties
both in the United States of America and India. The arbitrator gave his award
in New York incorporating the settlement between the parties. Respondents
applied to the Bombay High Court under the provisions of the Foreign
Awards (Regulation and Enforcement) Act 1961, for enforcing the award.
Single Judge of the High Court pronounced1judgment according to the award
E as required u/s 6 of the Foreign Awards Act. This appeal had been filed
challenging the judgment of the Bombay High Court enforcing the foreign
award. The appellants submitted that the High Court could not order the
award to be filed and give judgment in terms thereof as it was not an arbitral
award as there was no dispute on the basis of which the arbitrator could give
F
his award; that it was not an award under the Foreign Awards Act as the
award was merely effecting a family settlement and dispute did not arise out
of any international· trade;· that a fraud had been committed in getting the
award and certain schedule which formed the part of the agreement to refer
the dispute to arbitration, had been fraudulently substituted and that chapter
XX-C of the Income Tax Act 1961 had been violated and the enforcement of
G the award in violation of the law of this country would be against the public
policy.
Dismissing the appeal, this Court
HELD : 1.1. In the instant case all the ingredients of a foreign award
H were there. Parties were having business both in India and in the United
562
_J
-.. -
.•
H.H. MEHTA v. M.H. MEHTA
563
States of Amrica as a joint venture and they also acquired properties. A
Differences that arose between the parties were out of legal relationships
and certainly of commercial nature under the laws of this country. Agreement
to refer the disputes to Arbitration, in writing, was made in the United States
where arbitration proceedings were held and award given. United States is
a country to which clause (b) of section 2 of the Foreign Awards Act applies. B
In the present case, the parties were related to each other but that could not
take the award outside the ambit of the Foreign Awards Act.
(574-G-H; 575-A)
1.2. The parties entered into the settlement during tendency of the
arbitration proceedings. Appellant himself approached the courts in the C
United States never complaining that it was not an award. It cannot be held
that the agre~ment stood revoked when the parties during the course of
arbitration proceedings entered into a settlement among themselves and yet
wanted the arbitrator to give his award in terms thereof. It is nobody's case
that authority of the arbitrator was revoked at any time. [576-C-EJ
1.3. A competent court in the State of New York rejected appellants' D
case that any fraud had been committed. Therefore, sub-section (2) of Section
7 of the Foreign Act would not be applicable. No conditions now exist under
sub-section (1) of Section 7 of the Foreign Award Act not to enforce the
award on the alleged ground of fraud. (576-H; 577-AJ
1.4. Foreign Awards Act is a complete Code in itself providing for all E
the possible contingencies in relation to foreign awards. Once it is held that
an award is a foreign award, the provisions of the Foreign Award Act would
apply and where the conditions for enforcement of such an award exist as
mentioned in Section 1 of this Act, the Court shall order the award to be filed
and shall proceed to pronounce judgment granting ward and upon the judgment F
so pronounced, decree shall follow. It is not material for the Foreign Award
Act that in any other country than India, a judgment has already been passed
by a court of competent jurisdiction in terms of the award. A party may have
other remedy for filing a suit passed on a foreign judgment but that will oust
jurisdiction of the Court to enforce a foreign award under the Foreign
Awards Act. [583-B-C]
G
1.5. A mere look at the agreement shows that it is not an agreement
for transfer as understood in clause (a) of Section 269 UA of Chapter XXC of the Income Tax Act. The settlement agreement also does not stipulate
exchange of any immoveable property. It rather divides equally business and
properties between appellants and respondents. In the present case, there is H
564
SUPREME COURT REPORTS
[1999] 3 S.C.R.
A no transfer of any immoveable property under the settlement agreement. The
settlement agreement on the award did not require filing of any declaration
under Chapter XX-C of the Income Tax Act. Moreover, in the case of a
foreign award, provisions of Chapter XX-C of the IT Act are not attracted.
A foreign award under the Foreign A ward Act does not require registration
B under the Registration Act. [592-C-F; 593-A]
R.M Investment and Trading Co. Pvt. Ltd. v. Boeing Co. & Anr., [1994)
4 SCC 541;. K.K. Modi v. K.N. Modi & Ors., [1998) .3 SCC 573, Badat &
Co. v. East India Trading Co., [1964) 4 SCR 1~; Baldevdas Shiv/al &Anr.
v. Filmistan Distributors (India) Pvt. Ltd., AIR (1970) SC 406; Ruby Sales
C and Services (P) Ltd. & Anr. v. State of Maharashtra & Ors., [1994) 1 SCC
531 and Lachman Das v. Ram Lal, [1989) 3 SCC 99, distinguished.
D
E
F
Renusagar Power Co. Ltd. v. General Electric Co. & Anr., (1984) 4
SCC 679 and Tehmi Sidhwa & Ors. v. Shiv Banerjee & Sons Pvt. Ltd., [1974]
2 sec 574, relied on.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4006 of
1995.
From the Judgment and Order dated 24.2.95 of the Bombay High Court
in Arbitration Petition No. l 02 of 1991.
S. Ganesh, P.S. Sudheer, P. Venugopal and K.J. John for the Appellants.
S.K. Dholakia, Bhargava V. Desai and Siddharth Choudhary for the
Respondents.
The Judgment of the Court was delivered by
D.P. WADHWA, J. The Appellants (Harendra H. Mehta & Ors.) are
challenging the judgment dated February 24, 1995 of the Bombay High Court
enforcing the 'foreign award' dated October 31. 1990 on a petition filed by
the Respondents .(Mukesh H. Mehta & Ors., ). It was, however, directed that
the enforcement of the same or execution of the decree shall be subject to
G the respondents' obtaining the necessary permission under Foreign 'Exchange
Regulations Act, 1973 ('FERA', for short) as regards the enforcement part in
India is concerned. The matter came to this Court on a certificate granted by
the· High Court under Article 134A read with Article 134(l)(c) of the
Constitution. The impugned judgment had been rendered by a single Judge.
H· There was some controversy if a single Judge could grant such a certificate.
I
'·
H.H. MEHTA v. M.H. MEHTA [D.P. WADHWA, J.]
565
However, considering the importance of the issue involved, this Court admitted A
the appeal. The controversy, therefore, does not survive in the present appeal.
For convenience, we refer to the appellants as 'Harendra' and respondent
as 'Mukesh'. Both Harendra and Mukesh are brothers. Harendra is elder to
Mukesh. They appointed thei~ older brother Lalit Mehta as arbitrator to
divide their businesses and properties both in the United States of America B
(USA) and India. Lalit Mehta gave his award in New York. Some proceedings
arising out of the arbitration agreement and the award were held there in the
courts. Arbitration agreement was entered into at New York where arbitration
proceedings held and award given. Mukesh applied to the Bombay High
Court here under the provisions of the Foreign Awards (Regulation and. C
Enforcement) Act, 1961 (for short, the 'Foreign Awards Act') for enforcing the
award. High C~urt after contest ordered the award to be filed and pronounced
judgment according to the award as required under Section 6 of the Foreign
Awards Act. Harendra finds himself aggrieved by the judgment. That is how
the matter before us.
D
We may now consider the controversy between the brothers in detail.
Harendra and Mukesh were having vast businesses in the USA and India.
They also acquired properties in both the countries. bisputes having arisen,
they decided to divide and distribute their jointly held assets. Both have
equal share in all the properties and businesses. On October 25, 1989, they E
entered into an agreement to refer their disputes to their elder brother Lalit
Mehta. Their submission to the arbitrator is in the following terms:
"Lalit Mehta,
48 Arobor Lane,
Roslyn Hts.,
N.Y.11577.
Dear Lalitbhai,
We, Harendra Mehta and Mukesh Mehta hereby appoint you as our
sole arbitrator for the following difference of opinions.
They are related to :
1. All our business in USA & India
F
G
H
566
SUPREME COURT REPORTS
[1999] 3 S.C.R.
A
2. Social relationship.
Your award in the matter shall be binding on both of us and our legal
heirs.
In areas where you need any assistance of any lawyers and/or technical
B
or outside persons you are fully authorised to take such assistance.
c
On our part we agree to offer our fullest co-operation in giving you
all the document, papers and any information you call for from time
to time.
We shall ensure full participation in the meetings and clarify whatever
explanations and clarification you may-seek.
we shall be prepared to sign any papers in advance that you ask for
before the beginning of the arbitration proceedings which will remain
solely in your custody.
- D
If you require the signatures of our wives and any of our
representatives we shall give you the same as may be called for by
you.
Yours sincerely,
E
Sd/-
Harendra Mehta
Sd/-
Mukesh Mehta
F
Sd/-
Witness"
Thereafter a formal agreement dated November 17, 1989 to refer the
G disputes to Arbitrator Lalit Mehta was entered into by the parties. It was
signed by Harendra, his wife Arnita Mehta and Harendra Mehta as Manager
(Karta) of his HUF on the one part and Mukesh Mehta his wife Daksha Mehta
and Mukesh Mehta as Manager (Karta) of his HUF on the other. This
agreement gave the details of the businesses carried on by the parties and
their properties in USA and India. The agreement was entered into in New
H York and was duly notorised there. It would appear that the formal agreement
H.H. MEHTA v. M.H. MEHTA [D.P. WADHWA, J.)
567
dated November 17, 1989 to refer the disputes to Arbitrator superseded the A
earlier agreement dated October 25, 1989.
Harendra challenged the agreement dated November 17, 1989 in the
Supreme Court of the State of New York, Nassau County Court by motion
dated February 16, 1990 on the ground that it was unconscionable, against
public policy, entered under duress and coercion and that the arbitrator is B
biased and cannot be fair and impartial. this challenge was negatived by
judgment dated March 12, 1990. It will be seen that the challenge to the
agreement was made after the arbitrator had entered into reference. The court
observed that Harendra was a seasoned businessman, having managed
numerous successful businesses both in USA and in India. He signed not
just one but two submission agreements. Court wondered why did he consent C
on two occasions that Lalit Mehta be chosen arbitrator if he allegedly had
strained relations with him. There was nothing to show that any duress or
coercion was caused. In short, the Court negatived all the pleas of Harendra
and said that the agreement could not be declared invalid on a motion under
Article 7503 ofCPLR (Civil Practice Law Rules) and, therefore, "an application D
to declare the agreement invalid must await a trial and, therefore, was
premature."
During the pendency of the arbitration proceedings, parties settled their
differences by entering into a detailed agreement on March 20, 1990. The
agreement was to be retroactively effective as on March I, 1999. The agreement E
detailed various properties and businesses which the parties were having.
Harendra was to draw four packages 'A', 'A-1', 'B' and 'B-1' as under:
" 'A' - USA properties and businesses
'A- l' - U.S.- Note for payment. In US $ and share in jointly held in
US properties and businesses.
F
'B ' - Indian properties and businesses
'B'- Indian Note for payment in Indian rupees and certain India
properties and share and interest in jointly held Indian properties and
businesses."
It was agreed that one party would choose A+B-1 or B+A-l. First
choice was to be exercised by Mukesh. The arbitrator was to make his award
in accordance with the selection of packages. Parties were to execute transfer
G
and closing documents in terms of the award. The forms in which the documents
were to be executed were also prescribed. It was also agreed that the parties H
568
SUPREME COURT REPORTS
[1999] 3 S.C.R.
A shall execute, from time to time, any and all further documents that may be
required at any time to effectuate the award made in pursuance to the
agreement. On refusal of any of the parties to execute the transfer and closing
documents, it was agreed that Mr. Vinod Mehta shall be duly appointed
attorney of each of the parties to execute the transfer and closing documents.
B There was also a penalty clause in case of failure or feusal to execute the
transfer and closing documents. That was irrespective of any other remedy
open to the parties. Mukesh opted for the package B+A-1. On March 20, 1990
itself, the arbitrator rendered his award after the proceedings were held under
CPLR 7507 incorporating the aforesaid settlement agreement of the same date.
CPLR 7507 provides that the award shall be in writing, signed and
C acknowledged by the arbitrator making it within the time fixed by the agreement,
or if the time is not fixed, within such time as the court orders. There is also
provision for delivering a copy of the award to each of the parties.
In proceedings under CPLR 7507 which were held on March 20, 1990
Arnita Mehta, wife of Harendra, represented her husband as his attorney and
D appeared in-person. Both Mukesh and his wife Daksha Mehta were present.
They all waived notice of the hearing. They agreed that they had entered into
and executed an agreement involving all the issues of the arbitration
proceedings. Judge Ralph diamond, before whom the proceedings under
CPLR 7507 were held, examined the parties who were present along with their
E counsel as to the execution of the settlement agreement by each of the parties
and thereafter the award made by the arbitrator. It was recorded that Mukesh
had given the choice of packages Al with B. It was also recorded that the
arbitrator had two fold functions (1) to make the award and (2) to implement
the award.
F
Now, Mukesh Mehta brought a motion for an order pursuant to CPLR
751 O for confirmation of the award in the Nassau Country Court in the State
of New York. Harendra also filed cross motion for an order pursuant to CPLR
7511 (b) for vacating the award or in the alternative seeking modification of
the award on the grounds mentioned in the cross motion. By judgment dated
October 22, 1990, the Court confirmed the award granting the motion of
G Mukesh Mehta with certain modifications. It observed that Harendra failed to
demonstrate that the award either dealt with matters beyond the scope of
what had been submitted or that he gave a completely irrational construction
to the settlement agreement between the parties which was incorporated in
the award and formed part of the award. There were certain typographical
H errors in the judgment which were corrected by Order dated October 31, 1990.
--
H.H. MEHTA v. M:H. MEHTA [D.P. WADHWA, J.]
569
A formal order was drawn on January 14, 1991 which read as under:
A
"ORDERED AND ADJUDGED, pursuant to CPLR 7510 and 7514
that the award of the arbitrator, Lalit Mehta, dated October 31, 1990
is hereby confirmed and shall constitute a judgment of this court,
provided however, that payments by A.D. Development Ltd. to Mukesh
Mehta for the purchase of his shares of A.O. Development Ltd. shall B
be limited pursuant to Business Corporation Law s. 514 to the
availability of surplus, and it is further,
ORDERED AND ADJUDGED, that the branch of the motion ofMukesh
Mehta and Daksha Mehta seeking reargument of this court's order
and decision dated October 22, 1990 be, and the same hereby is C
granted, and it is declared that the limitation of payments by A.D.
Development Ltd. for the repurchase of shares to years in which the
Corporation has a surplus is not applicable to others obligated to
make such payments, and it is further,
ORDERED, that the cross-motion ofHarendra pursuant to CPLR 751 l(b) D
for an order vacating such arbitration award on grounds of fraud or
for modification of the award to substitute a different neutral party to
determine certain matters be, and the same hereby is, denied without
a hearing, and it is further,
ORD ERE~, that the branch of Harendra 's cross-motion pursuant to E
CPLR 7514 seeking to compel Mukesh Mehta to comply with certain
obligations pursuant to such arbitration award, and conditioning
enforcement of any judgment against Harendra upon Mukesh Mehta' s
first fully complying therewith be, and the same hereby is, denied, and
it is further,
F
ORDERED AND ADJUDGED, that other remedies to enforce the award
flow from this judgment and enforcement proceedings may be brought
in an appropriate forum; and it is further,
ORDERED, that the branch of Harendra's cross-motion pursuant to
CPLR 6302 and 6311 to enjoin Mukesh Mehta and Daksha Mehta from G
taking any additional action concerning certain Indian documents
released to them by the law firm. ofD.M. Harish & Co., and compelling
Mukesh Mehta to deliver such documents to the court pending further
proceedings be, and the same hereby is denied, and it is further,
ORDERED AND ADJUDGED, that pursuant to the provisions of H
570
A
B
SUPREME COURT REPORTS
· [ 1999] 3 S.C.R.
paragraphs "12", "15" and ".J 7" of the Settlement Agreement dated
March 20, 1990 incorporated into the award of the arbitrator, Mukesh
Mehta, residing at 48 Arbor Lane, Roslyn Heights, New York 11577
shall recover from A.O. Development Ltd., a New York Corporation
having its principal place of business located at 22, Athex Drive, Glen
Cove, New York 11542 the sum of$ 265,000 less the sum of $146.293
paid on account thereof, making the net sum of $188, 706.21, with
interest upon $ 68706.3 l of said sum from October 31, 1990 to December
31, 1990 at the rate of 9% per annum, in the amount of $1,030.59; and
interest on $25,000 from November 1, 1999 to December 31, 1990 at the
rate of9% per annum, in the amount of$375; with interest on $25,000
C
from December 1, 1990 to December 31, 1990 at the rate of 9% per
annum, in the amount of $187.50; and making in all a judgment of
$120,299.30 as of December 31, 1990; and it is further ... "
Objections of Harendra to the award were, thus, rejected by the Nassau
County Court. It, however, modified the award limiting and restricting the
D payment to be made to Mukesh by the US company for his share and passed
judgment confirming the award so modified.
In those proceedings under CPLR 7 510, the Court noticed that arbitration
proceedings were recorded under oath held before a Court Reporter and
Notary Public and though language of the award showed that the arbitrator
E had signed and affirmed the award but, in fact, he did not actually sign the
award or deliver a copy to each party as required by CPLR 7507. The Court,
however, observed that the parties agreed that the failure of the arbitrator
to issue an award shall not affect the validity or binding effect of settlement
agreement. The Court, therefore, permitted to the arbitrator to sign and affirm
F the award in compliance with CPLR 7507 and serve a copy on the parties or
their attorneys. Liberty was then granted to Mukesh to renew his application
to confirm the signed award. In pursuance with this direction by the Court,
the arbitrator signed his award on October 31, 1990.
Arnita Mehta then filed an affidavit on February 13, 1992 in Nassau
G County Court alleging that duly initiated schedules A and B of the Settlement
Agreement had been fraudulently substituted by other non-initialed schedules
which contained some entirely new clauses. By order dated September 20,
1993, the Supreme Court of New York Appellate Division rejected her plea
regarding fraudulent substitution of schedules.
H
Now, the scene shifted to India when Mukesh moved the Bombay High
H.H. MEHTA v. M.H. MEHTA [D.P. WADl:IWA, J.]
571
Court under provisions of the Foreign Awards Act for enforcement of the A
Award dated October 31, 1990 of Lalit Mehta the arbitrator, contending the
same to be a foreign award. Harendra raised various pleas in opposition
thereto. High Court after elaborate discussion rejected all of them and ordered
that the award be filed and proceeded to pronounce judgment according to
the award and thereafter decree followed.
Mr. Ganesh, learned counsel for the appellant, submitted that the High
Court could not order the award to be filed and give judgment in terms
thereof. His objections to the impugned judgment were :
1.
It is not an arbitral award inasmuch as there was no dispute on
B
the basis of which the arbitrator could give his award. The C
arbitrator merely acted as a rubber stamp.
2
It is not an award under the Foreign Awards Act as the award
is merely effecting a family settlement. It is not of commercial
nature. Dispute did not arise out of any international trade.
3.
Chapter XX-C of the Income Tax Act, 1961 has been violated
and the enforcement of the award in violation of the law of this
country would be against the public policy.
D
4.
The award merged in the foreign judgment of a New York Court
which modified the award. So only the judgment could be E
enforced.
5.
A fraud has been committed in getting the award and further
that certain schedules which formed part of the agreement to
refer the disputes to arbitration have been fraudulently
substituted.
F
6.
Supreme Court of the State of New York had already passed
judgment on June 6, 1995 directing enforcement of the award
which would now be foreign judgment. The respondent has, in
fact, filed a suit in the Bombay High Court on the basis of the
foreign judgment which suit was filed in 1996 and service was G
effected on the appellant only in 1997.
Detailing his' objections Mr. Ganesh said :
He read the objects and reasons of the Foreign Awards Act. Definition
of 'foreign Award' is given in Section 2 of that Act and also Articles l and
ll of the New York Convention of Recognition and Enforcement of Foreign H
572
SUPREME COURT REPORTS
(1999] 3 S.C.R.
A Awards which is schedule to the Foreign Awards Act. Argument was that
Foreign Awards Act is inapplicable as it is not a 'foreign award'.
Section 2 of the Foreign Awards· Act defines the "foreign award" to
mean an award on differences between persons arising out of legal relationship,
whether contractually or not considered as commercial under the law in force
B in India, made on or after the 11th day of October, 1960-
(a) in pursuance of an agreement in writing for arbitration to which the
Convention set forth in the Schedule applies, and
(b) in one of such territories as the Central Government ~eing satisfied
C that reciprocal provisions have been made, may by notification in the Official
Gazette, declare to be territories to which the said Convention applies .
D
E
F
G
•
Article l of the New York Convention is as under :
"Article I
l. This convention shall apply to the recognition and enforcement of
arbitral awards made in the territory of a State other than the State
where the recognition and enforcement of such awards are sought,
and arising out of difference between persons, whether physical or
legal. It shall also apply to arbitral awards not considered as domestic
awards in the State where their recognition and enforcement are
sought.
2. The term "arbitral awards" shall include not only awards made by
arbitrators appointed for each case but also those made by the
permanent arbitral bodies to which the parties have submitted.
3. When signing, ratifying or acceding to this Convention, or notifying
extension under article X hereof, any State may on the basis of
reciprocity declare that it will apply the Convention to the recognition
and enforcement of awards made only in the territory of another
Contracting State. It may also declare that it will apply the Convention
only to differences arising out of legal relationships, whether
contractual or not, which are considered as commercial under the
national law of the State making such declaration."
!
Article II of the Convention is in somewhat similar terms as the expression
H
1 'foreign award' under Section 2 ofthe Foreign Awards Act and it is as under:
H.H. MEHTA v. M.H. MEHTA [D.P. WAOHWA, J.]
573
"Article II
A
1. Each Contracting State shall recognise an agreement in writing
under which the parties undertake to submit to arbitration all or any
differences which have arisen or which may arise between them in
respect of defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by arbitration.
B
2. The term "agreement in writing" shall include an arbitral clause in
a contract or an arbitration agreement, signed by the parties or
contained in and exchange of letters or telegrams.
3. The Court of a Contracting State, when seized of an action in a C
matter in respect of which the parties have made an agreement within
the meaning of this article, shall, at the request of one of the parties,
refer the parties to arbitration, unless it finds that the said agreement
is null and void, inoperative or incapable of being performed."
Submission of Mr. Ganesh was that it is not a foreign award because D
(i) there was no commercial dispute arising out of any international trade; (ii)
award does not relate to any commercial dispute arising in the course of
international trade; and (iii) legal relationship betw.een the parties was of
family members having equal shares in the properties and businesses who
merely sought separation and partition of their respective shares. He said that E
mere fact that some of the properties happened to be derived form the
business done by the parties could not convert the award into foreign award.
To support his submission, he referred to two decisions of this Court in R.M
Investment and Trading Co. Ltd. v. Boeing Co. and Anr., [1994] 4 SCC 54
and Renusagar Power Co. Ltd v. General Electronic Co. & Anr., [1984] 4
sec 679. In our view these two judgments do not help the appellants. Rather F
the stress in these judgments is that broad and not restricted construction
should be given to the word "commercial" appearing in Section 2 of the
Foreign Awards Act. In R.M Investment and Trading Companies Pvt. Limited's
case, terms of the agreement required the petitioner to play an active role in
promoting the sale and to provide "commercial and managerial assistance and G
information" which may be helpful in respondents sales efforts. It was held
that relationship between the appellants and respondents was of commercial
nature. This Court said that the word "commercial" under Section 2 of the
Foreign Awards Act should be liberally construed. In Renusagar's case no
doubt this Court observed that the Foreign Awards Act was calculated and
designed to subserve the cause of facilitating international trade and promotion H
574
SUPREME COURT REPORTS
(1999] 3 S.C.R.
A thereof by providing for speedy settlement of disputes arising in such trade
through arbitration and also said that any expression or phrase occurring
therein should receive consistent with its literal and grammatical sense a
liberal construction.
B
c
D
E
F
In ordinary parlance "commercial means"
"1. of, engaged in, or concerned with, commerce. 2 Having profit as
primary and rather than artistic etc. value; philistine." (the Concise
Oxford Dictionary).
In Black's Law Dictionary, "commercial" is defined as:
"Relates to or is connected with trade and traffic or commerce in
general; is occupied with business and commerce. Anderson v. Humble
Oil & Refining Co., 226 Ga. 174 S.E. 2d 415, 416."
The word "trade" is also defined in the Black's Law Dictionary. It is :
"the act or the business or buying and selling for money; traffic;
barter. May v. Sloan, 101U.S.231, 25, L.Ed. 797. Purchase and sale
of goods and services between businesses, states or nations. Trade
is not a technical word and is ordinarily used in three senses: (I) in
that of exchanging goods or commodities by barter or by buying and
selling for money; (2) in that of a business occupation generally; (3)
in that of a mechanical employment, in contradistinction to the learned
professions, agriculture, of the liberal arts. People v. Volar vort of
America, Inc., IO Misc. 2d 378, 174 N.Y. S. 2d 789, 793.
An occupation or regular means of livelihood and is business one
practices other work in which one engages regularly. One's calling;
occupation; gainful employment; means of livelihood. People v. Carr.,
163 Cal. App. 2d 568, 329 P. 2d 746, 752."
We do not understand as to how it could be said that the award was
G not a foreign award. All the ingredients of Foreign award were there. Parties
were having business both in India and in the United States of America as
a joint venture and they also acquired properties. Differences that arose
between the parties were out of legal relationships and certainly of commercial
nature under the laws of this country. Agreement to refer the disputes to
arbitration, in writing, was made in the United States where arbitration
H proceedings held and award given. It is not disputed that United States is a
H.H. MEHTA v. M.H. MEHTA [D.P. WADHWA, J.]
575
country to which clause (b) of Section 2 of the Foreign Awards Act applies. A
In the present case, the parties are no doubt related to each other but that
could not take the award outside the ambit of the Foreign Awards Act. We
asked Mr. Ganesh as to what would happen if there were two strangers
having businesses both in India and in United States or when there was a
joint venture between an Indian and a US national having properties both B
moveable and immovable in both the countries and disputes having arisen
and award given in the United States. Mr. Ganesh, in spite of his
resourcefulness, was unable to give any convincing reply. There is no merit
in the objection of the appellant that the award is not a foreign award and
that it is outside the Foreign Awards Act.
That the award is not an arbitral award, submission of Mr. Ganesh was
that tqe arbitration agreement which was entered into on November 17, 1989
stood revoked after the parties arrived at the settlement agreement dated
March 20, 1990. Earlier agreement dated October 25, 1989 to refer the disputes
c
to arbitration stood superseded by the agreement dated November 17, 1989. D
Mr. Ganesh read in detail the terms of the settlement agreement to contend
that parties themselves had resolved their disputes and that agreement was
to take effect irrespective of the fact whether the arbitrator gave his award
in terms thereof or not. He said arbit_rator was to act merely as a rubber stamp
after parties had opted for various packages containing their businesses and
properties. Submission in brief was that unless there was dispute or difference, E
there could be no arbitration. The arbitrator was not only not required to act
judicially after the agreements dated November 17, 1989 had been arrived at
between the parties but, in fact, he was prevented from acting judicially and
giving any decision whatsoever affecting the fights of parties. He was not
expected to hear or apply his mind or perform any of the arbitration functions. F
In such a situation, even though there was in existence an arbitration agreement
that stood revoked for one basic and simple reason that at that time there
existed no dispute. The agreement was straightaway made into the award. In
support of his submissions, Mr. Ganesh referred to a decision of this Court
in K.K. Modi, v. K.N. Modi & Ors., [1983] 3 SCC 573 to contend that when G
a person has been authorised to decide a certain dispute between the parties
but he has no function to perform as arbitrator, he could not give an award.
But in that case, under clause (9) of the Memorandum of Understanding
between the parties there were different contentions; one contending that the
clause constituted arbitration agreement, the other contending to the contrary.
This clause (9) was as follows :
H
576
SUPREME COURT REPORTS
(1999] 3 S.C.R.
A
"Implementation will be done in consultation with
the financial
institutions. For all disputes, clarifications etc. in respect of
implementation of this agreement, the same shall be referred to the
Chairman, IFCI or his nominees whose decisions will be final and
binding on both the groups".
B
It was in this context that this Court said. that looking at the nature of
the functions expected to be performed by the Chairmen, IFCI, his decision -
i~ not arbitration award. This judgment hardly helps Mr. Ganesh in his
submissions. In the present case, the parties entered into the settlement
during pendency of the arbitration proceedings. Appellant himself approacJled
C the courts. in the Unit~d States never complaining that it was not an award.
In proceedings uqder CPLR 1507 and CPLR 7510, Harendra had even accepted
the execution of the settlement agreement and the award made by the arbitrator.
We find that no ·such plea was taken either in the High Court or in the
grounds of appeal to this Court. Nassau County Court noticed the functions
to be performed by the arbitrator in the settlement agreement. We do not find
D any merit in the argument of Mr. Ganesh that arbitration agreement· stood
revoked when the parties during the course of arbitration proceedings entered
into a settlement among themselves and yet wanted the arbitrator to give his
award in terms thereof. It is nobody's case that authority of the arbitrator was
revoked at any time. This argument of Mr.. Ganesh seems to us to be made
E in more desperation.
Nassau County Court did not modify the award as such it merely
corrected the award so as to conform to the law of the State of New York.
Contention of the appellants that fraud was committed substituting
F schedules in , the award which schedules formed part of the settlement
agreement referring disputes to arbitration was also a subject matter of
·challenge in Nassau County Court by the appellants which was rejected.
G
Section 7 of the Foreig11 A ward Act details the circumstances under
which a foreign award may not be enforced. These are :
"7. Conditions for enforcement of foreign awards . - (I) A foreign
award may not be enforced under this At:t --
(a) if the party against whom it is sought to enforce the award proves
to the Court dealing with the case that -- ·
H
(i)
the parties to the agreement were under the law applicable to
...
H.H. MEHTA v. M.H. MEHTA [D.P. WADHWA, J.]
577
them, under some incapacity, or the said agreement is not valid A
under the law to which the parties have subjected it, or failing
any indication thereon, under the law of the country where the
award made; or
(ii)
the party was not given proper notice of the appointment of the
arbitrator or of the arbitration proceedings or was 'otherwise B
unable to present his case; or
(iit) the award deals with questions not referred or contains decisions
on matter beyond the scope of the agreement :
Provided that if the decisions on matter submitted to arbitration .can
be separated from those not submitted, that part of the award which C
contains decisions on matter submitted to arbitration may be enforced;
or
(iv) the composition of the arbitral authority or the arbitra! authority
or the arbitral procedure was not in accordance with the
agreement of the parties or failing such agreement,. was not in D
accordance with the law of the country where the arbitration
took place; or
(v) the award has not yet become binding on the parties or has been
set aside or suspended by a competent authority of the country
in which, or under the law of which, that award was made; or E
(b)
if the Court dealing with the case is satisfied that -
(i)
the subject-matter of the difference is not capable of settlement
by arbitration under the law of India; or
(it)
the enforcement of the award will be contrary to public policy; F
(2) If the' court before which a foreign award is sought to be relied
upon is satisfied that an application for the setting aside of suspension
of the award has been made to a competent authority referred to in
sub-clause (v) of clause (a) of sub-section (1 ), the court may, if it
deems proper, adjourn the decision on the enforcement of the award G
and may also, on the application of the party claiming enforcement of
the away, order the other party to furnish suitable security."
Supreme Court of New York, Appellate Division rejected the appellants
plea regarding fraudulent substitution of the schedules to the award. It will
be seen that a competent court in the State of New York rejected the contention H
578
SUPREME COURT REPORTS
[1999] 3 S.C.R.
A of the appellants that any fraud had been committed. Therefore, sub-section
(2) of Section 7 of the Foreign Awards Act would not be applicable. There
are no conditions now exist under sub-section (I) of Section 7 of the Foreign
Awards Act not to enforce the award on the alleged ground of fraud. We find
no merit in the plea of the appellant that schedules to the award were
B substituted. This contention of the appellants must fail.
It was then submitted by Mr. Ganesh that it was the case of the
respondents themselves that the foreign award had already merged into
judgment dated January 8, 1991 of the Nassau County Court of the New York
State. Under CPLR 7 514, a judgement shall be entered upon the confirmation
C of an award. CPLR 7514 of the New York Arbitration Law is as under:
"7514, Judgement on an Award
(a) Entry. A judgment shall be entered upon the confirmation of an
award.
D
(b) Judgment-roll, The judgement-roll consists of the original or a
copy of the agreement and each written extension of time within which
to make an award; the statement required by section seventy-five
hundred eight [7508] where the award was by confession; the award;
each paper submitted to the court and each order of the court upon
E
an application sections 7510 and 7511; and a copy of the judgment."
He said the respondents filed a suit in the Bombay High Court on its
original side (Suit No. 3787/96) on the basis of the judgment of Nassau
County Court dated 8.1.1991 and that suit is pending of which service was
effected on the appellants only in August 1996. A copy of plaint in the suit
F filed by the respondents was shown to us during the course of hearing.
G
Respondents in that prayed as under :
(a) That the Hon'ble Court be pleased to order and declares that the
said foreign judgment dated 8th January, 1991 delivered by the Supreme
Court of Nassau. USA as confirmed by the Appellate Division of the
Supreme Court of New York dated 20th September 1993 is final,
conclusive and binding upon the plaintiffs as well as the Defendants
herein;
(b) That this Hon'ble Court be pleased to pass a decree in terms of
the said Foreign Judgment dated 8th January, 1991 delivered by the
Supreme Court of Nassau, USA as confirmed by the Appellate Division
--
'
H.H. MEHTA v. M.H. MEHTA [D.P.