# LMJ INTERNATIONAL LTD v. SLEEPWELL INDUSTRIES CO. LTD

- **Citation:** [2019] 4 S.C.R. 617
- **Court:** Supreme Court of India
- **Decided:** 2019-02-20
- **Bench:** A. M. Khanwilkar, Ajay Rastogi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lmj-international-ltd-v-sleepwell-industries-co-ltd-33497
- **Pages:** 31

## Headnote

Arbitration and Conciliation Act, 1996 - s. 48 - Parties entered
into separate contracts for sale of Non-Basmati Parboiled Rice,
Thailand origin- Contract governed by GAFTA 48 and disputes
were to be resolved by Arbitration 125 as per GAFTA 125 in London
- Dispute arose - Arbitral Tribunal passed two separate awards -
Respondent filed two execution cases (pertaining to contract-I and
contract-II) u/Part-II of the 1996 Act before the High Court for
enforcement of the foreign arbitral award - Petitioner's objection
regarding the maintainability of the subject foreign awards rejected
- Special Leave Petitions (pertaining to contract-I & II) filed by the
petitioner- Dismissed- Single Judge in the execution petition held
that the subject foreign awards were deemed to be decrees and hence
enforceable -Order upheld by the Division Bench - Petitioner then
filed review application in the execution case - Dismissed -
Petitioner filed G.As. in the respective execution cases, objecting
the enforceability of the foreign awards - Rejected - On appeal,
held: 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 - Scheme of s.48 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 - Subject application
filed by the petitioner deserves to be rejected, being barred by
constructive res judicata - After an interim order was passed in favour
of the respondent permitting withdrawal of part of the amount
deposited in the High Court in relation to the execution of the subject
foreign awards, the petitioner lost no time in changing the name of
the company within three days thereafter-Petitioner also changed
its registered office address and had no compunction in moving the
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NCLT, Kolkata to prevent the respondent from enjoying the fruits
of the subject awards, and saying so brazenly in the petition filed
by it u/s.10 of the I & B Code - Conduct of the petitioner is indicative
of an attempt to overreach this Court - High Court considered every
aspect of the grounds urged by the petitioner and the view so
expressed is a possible view - Exemplary costs, quantified at
Rs.20,00,000/- be paid to the respondent - Registrar (OS), Calcutta
High Court to encash the FDs lying deposited in the credit of the
concerned stated execution case and, after obtaining the RBI's
permission forthwith, remit the entire amount, including the interest
accrued in US Dollars, to the respondent - Principles of res judicata
- Insolvency & Bankruptcy Code, 2016 - s.10.
Dismissing the Special Leave Petitions, the Court
HELD: 1.1 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 hair-splitting and nothing more.
It is an argument in desperation only to protract the execution of
the foreign award on untenable grounds. Indeed, the petitioner
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 Judge
had then reproduced the five points, which alone were orally urged
on behalf of the petitioner through its counsel. 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

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LMJ INTERNATIONAL LTD.
v.
SLEEPWELL INDUSTRIES CO. LTD.
(Special Leave Petition (Civil) No. 540 of 2018)
FEBRUARY 20, 2019
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act, 1996 - s. 48 - Parties entered
into separate contracts for sale of Non-Basmati Parboiled Rice,
Thailand origin- Contract governed by GAFTA 48 and disputes
were to be resolved by Arbitration 125 as per GAFTA 125 in London
- Dispute arose - Arbitral Tribunal passed two separate awards -
Respondent filed two execution cases (pertaining to contract-I and
contract-II) u/Part-II of the 1996 Act before the High Court for
enforcement of the foreign arbitral award - Petitioner's objection
regarding the maintainability of the subject foreign awards rejected
- Special Leave Petitions (pertaining to contract-I & II) filed by the
petitioner- Dismissed- Single Judge in the execution petition held
that the subject foreign awards were deemed to be decrees and hence
enforceable -Order upheld by the Division Bench - Petitioner then
filed review application in the execution case - Dismissed -
Petitioner filed G.As. in the respective execution cases, objecting
the enforceability of the foreign awards - Rejected - On appeal,
held: 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 - Scheme of s.48 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 - Subject application
filed by the petitioner deserves to be rejected, being barred by
constructive res judicata - After an interim order was passed in favour
of the respondent permitting withdrawal of part of the amount
deposited in the High Court in relation to the execution of the subject
foreign awards, the petitioner lost no time in changing the name of
the company within three days thereafter-Petitioner also changed
its registered office address and had no compunction in moving the
 [2019] 4 S.C.R. 617
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NCLT, Kolkata to prevent the respondent from enjoying the fruits
of the subject awards, and saying so brazenly in the petition filed
by it u/s.10 of the I & B Code - Conduct of the petitioner is indicative
of an attempt to overreach this Court - High Court considered every
aspect of the grounds urged by the petitioner and the view so
expressed is a possible view - Exemplary costs, quantified at
Rs.20,00,000/- be paid to the respondent - Registrar (OS), Calcutta
High Court to encash the FDs lying deposited in the credit of the
concerned stated execution case and, after obtaining the RBI's
permission forthwith, remit the entire amount, including the interest
accrued in US Dollars, to the respondent - Principles of res judicata
- Insolvency & Bankruptcy Code, 2016 - s.10.
Dismissing the Special Leave Petitions, the Court
HELD: 1.1 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 hair-splitting and nothing more.
It is an argument in desperation only to protract the execution of
the foreign award on untenable grounds. Indeed, the petitioner
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 Judge
had then reproduced the five points, which alone were orally urged
on behalf of the petitioner through its counsel. 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 Arbitration and Conciliation Act,
1996, which included the enforceability of the subject foreign
awards. Additionally, the 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 disposing of the appeals
preferred by the petitioner. These orders have become final and
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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. [Para 13] [638-D-H; 639-A]
1.2 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. 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 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. Such a situation cannot be countenanced
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. [Para 14]
[639-B-F]
1.3 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 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
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD.
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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.
[Para 15] [639-G-H; 640-A-B]
1.4 Any other argument of the petitioner not examined,
including on merits of the enforceability of the subject foreign
awards. Even if it were to be done so, we would have agreed with
the High Court that the grounds urged by the petitioner to
question the enforceability of the subject foreign awards are
untenable, not being within the purview of Section 48 of the Act.
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 re-look
at the award. That cannot be countenanced. 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 the award under consideration.
[Para 16] [640-B-F]
1.5 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. Court
may not be understood to have expressed any opinion on the
correctness of those issues. In view of the above, the amount
towards the exemplary costs, quantified at an aggregate amount
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of Rs.20,00,000/- (Rupees Twenty Lakh only) be paid to the
respondent within six weeks from today. The Registrar (OS),
Calcutta High Court is directed 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. The above directions shall be complied with by the
Registrar (OS), Calcutta High Court, irrespective of any order
passed by any other Court/Tribunal in India. [Paras 17-19]
[646-D-H; 647-A]
Shri Lal Mahal Ltd. v. Progetto Grano SPA (2014) 2
SCC 433 : Renusagar Power Company Ltd. v. General
Electric Co. (1994) 1 Suppl. SCC 644 : [1993] 3 Suppl.
SCR 22; Oil & Natural Gas Corporation Ltd. v. Saw
Pipes Ltd. (2003) 5 SCC 705 : [2003] 3 SCR 691 -
referred to.
 Case Law Reference
 (2014) 2 SCC 433 referred to Para 8
 [1993] 3 Suppl. SCR 22 referred to Para 8
 [2003] 3 SCR 691 referred to Para 8
CIVIL APPELLATE JURISDICTION : Special Leave Petition
(Civil) No. 540 of 2018.
From the Judgment and Order dated 22.08.2017 of the High
Court at Calcutta in G.A. No. 3306 of 2016
WITH
Special Leave Petition (Civil) No. 5493 of 2019.
 A.K. Sinha, Sr. Adv., Vikas Sethi, Sanandha Mukherjee, Deepak
Goel, Advs. for the Petitioner.
Shyam Divan, Sr. Adv., Rakesh Sinha, Pinaki Addy, Shailendra
Jain, Chira Ranjan Addy, Advs. for the Respondent.
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD.
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The Judgment of the Court was delivered by
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. 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 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 non-release
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.
3. The respondent filed its claim submissions dated 11th May, 2012
in the two independent arbitration proceedings, concerning contract-I
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and contract-II, 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
contract-I) and Arbitration Case No.14/457 (pertaining to contract-II).
Be it noted that the Arbitral Tribunal proceeded ex-parte 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 contract-I) and
Execution Case No.488/2013 (pertaining to contract-II), under Part-II
of the Arbitration and Conciliation Act, 1996 (for short "the Act"),
before the High 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 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
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD. [A. M. KHANWILKAR, J.]
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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 decree-holder 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
two-tier 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
decree-holder 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 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
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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
contract-I) read thus:
"QUESTIONS OF LAW :
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 pre-requisite before seeking to enforce the foreign award
arising out of the arbitration agreement between the parties?
v) Whether in a two-tier arbitration mechanism, it is necessary to
exhaust the first-tier (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?
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD. [A. M. KHANWILKAR, J.]
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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 award-holder?
ix) Whether the Arbitral Tribunal rightly applied the rules,
principles and practice of GAFTA Arbitration Rules while
delivering the foreign award?
x) Whether an award-holder 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?
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?
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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
decree-holder/respondent had not met or satisfied the test laid
down in Sections 47 and 48 of the Arbitration & Conciliation Act,
1996.
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 day-to-day 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."
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD. [A. M. KHANWILKAR, J.]
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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 contract-II
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
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 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.
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(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 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
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD. [A. M. KHANWILKAR, J.]
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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.
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:-
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A-1 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".
A-2. 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.
A-3 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.
B-1. Assuming but not admitting that GAFTA No.48 was
applicable, the same could not be applied if in contradiction with
the agreement dated October 25, 2010. The agreement as
amended by the Addendum dated December 7, 2-010 provided
that "..... balance amount of US$10 Per Mt will be payable after
receipt of quality inspection report of destination port."
B-2. 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".
B-3. Therefore, the arbitral procedure was not in accordance with
the agreement of the parties and hence, the said purported award
is not enforceable.
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
CO. LTD. [A. M. KHANWILKAR, J.]
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C-1. 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.14-456 and requested to appoint Arbitrator in Case
No.14-457.
C-2. 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.
C-3. 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 with
the agreement of the parties and the purported award cannot be
enforced and its enforcement should be refused.
D-1. 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".
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D-2. 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 non-payment 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.
D-3. 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.
D-4. Further, GAFTA 124 does not find any place in the agreement
between the parties and is wholly inapplicable in the instant case.
D-5. 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.
E-1 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 and February 12,
2013 the award holder submitted the correct email address of the
petitioner to GAFTA, i.e. after close of arbitration proceedings.
E-2. 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.
F-1. From the mail of GAFTA dated September 26, 2012, it is
clear that GAFTA can only accept hardcopies towards pleadings.
LMJ INTERNATIONAL LTD. v. SLEEPWELL INDUSTRIES
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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.
F-2. In the premises, the arbitral procedure was not in accordance
with the law applicable and enforcement of the purported award
should be refused.
G-1. 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
Cross-Objection 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.
G-2. In the premises, the purported award did no and could not
attain finality and hence not yet enforceable."
8.