# MIS. CENTROTRADE MINERALS & MET AL INC v. HIND UST AN COPPER LTD

- **Citation:** [2006] Supp. 2 S.C.R. 146
- **Court:** Supreme Court of India
- **Decided:** 2006-05-09
- **Case number:** Civil Appeal No. 2562 of 2006
- **Bench:** S.B. Sinha, Tarun Chatterjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-centrotrade-minerals-met-al-inc-v-hind-ust-an-copper-ltd-21514
- **Pages:** 69

## Headnote

Arbitration and Conciliation Act, 1996--Sections 34. 35. 36, 48(1)(bF·
Arbitration agreement providing that at first instance disputes to be settled
by arbitration in Indian and if either party was in disagreement with the
arbitration result therein they had right to appeal to a second arbitration
in London, U.K. results of which were to be binding on both parties--
Arbitrator in the Indian arbitration making a NIL award-.()n appeal to
Arbitrator in London, award passed directing one of the parties to pay the
other the amounts quantified therein--High Court rejecting execution of
award-- Validity of arbitration agreement-·On appeal. difference of opinion--·
Matter referred lo larger bench-Section 2 3 of Contract Ad, 1872
Appellant entered into contract with respondent for supply of goods.
The contract had an arbitration agreement which provided that all
disputes between the parties relating to the contract were to be settled
by arbitration in India through the arbitration panel of the Indian
Council of Arbitration in accordance with the Rules of Arbitration of the
Indian Council of Arbitration, and if either party was in disagreement
with the arbitration result in India, they had the right to appeal to a
second arbitration in London, U.K. in accordance with the rules of
conciliation and arbitration of the International Chamber of Commerce,
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and the results of this second arbitration were to be binding on both the
parties.
Disputes arose between the parties. Appellant invoked the arbitration
clause. The Arbitrator appointed by the Indian Council of Arbitration
made a NIL award. Appellant thereupon invoked the second part of the
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said arbitration agreement whereupon Arbitrator held his sittings in
London. Respondent in a series of letters to the International Court of
Arbitration and to the Arbitrator, maintained that the arbitration
agreement was void being opposed to public policy. However, they received
copies of all correspondence passed between appellant and the arbitrator
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and of all submissions made. When no defence submission or supporting
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CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
14 7
evidence was produced by respondent within the time prescribed,
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Arbitrator gave them one last opportunity to inform him any intention
on their part to put in a defence and to seek an extension of time for doing
so. A further fax was sent to them whereby the Arbitrator informed the
parties that he was proceeding with the award. On 1 lth August, 2001,
the Arbitrator received a fax from firm representing the respondent
requesting for extension of time for one month to put in a defence,
pursuant whereto on 16th August, 2001 it was directed that submissions
in support of an application for extension of time for a defence and on
the substantive merits of the dispute together with any evidence relied
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in relation thereto should be received by him by 31st August, 2001 in
absence whereof he would not give any consideration thereto. On 27th
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August, 2001, the firm again sought for a further three weeks' extension
of time for making their submissions and serving supporting evidence,
pursuant whereto time for filing those submissions of evidence was
extended till 12th September, 2001. However, the submissions were
received by the Arbitrator on 13th September, 2001. In l,Jis award,
arbitrator directed the respondent to pay appellant sums quantified by
him.
Respondent filed an application under Section 48(1)(b) of the
Arbitration and Conciliation Act, 1996 stating that the arbitrator did not
give them sufficient opportunity to present their case. They also filed a
suit before Civil Judge praying for a declaration that the award was void
and a nullity, as also for permanent injunction and damages. Appellant,
on the other hand filed an application for enforcement of the award in
the Court of the District Judge, which was considered as Execution Case.
However, on application of appellant, these proceedings were transferred
to

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MIS. CENTROTRADE MINERALS & MET AL INC.
v.
HIND UST AN COPPER LTD.
MAY 9, 2006
[S.B. SINHA AND TARUN CHATTERJEE, JJ.]
Arbitration and Conciliation Act, 1996--Sections 34. 35. 36, 48(1)(bF·
Arbitration agreement providing that at first instance disputes to be settled
by arbitration in Indian and if either party was in disagreement with the
arbitration result therein they had right to appeal to a second arbitration
in London, U.K. results of which were to be binding on both parties--
Arbitrator in the Indian arbitration making a NIL award-.()n appeal to
Arbitrator in London, award passed directing one of the parties to pay the
other the amounts quantified therein--High Court rejecting execution of
award-- Validity of arbitration agreement-·On appeal. difference of opinion--·
Matter referred lo larger bench-Section 2 3 of Contract Ad, 1872
Appellant entered into contract with respondent for supply of goods.
The contract had an arbitration agreement which provided that all
disputes between the parties relating to the contract were to be settled
by arbitration in India through the arbitration panel of the Indian
Council of Arbitration in accordance with the Rules of Arbitration of the
Indian Council of Arbitration, and if either party was in disagreement
with the arbitration result in India, they had the right to appeal to a
second arbitration in London, U.K. in accordance with the rules of
conciliation and arbitration of the International Chamber of Commerce,
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and the results of this second arbitration were to be binding on both the
parties.
Disputes arose between the parties. Appellant invoked the arbitration
clause. The Arbitrator appointed by the Indian Council of Arbitration
made a NIL award. Appellant thereupon invoked the second part of the
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said arbitration agreement whereupon Arbitrator held his sittings in
London. Respondent in a series of letters to the International Court of
Arbitration and to the Arbitrator, maintained that the arbitration
agreement was void being opposed to public policy. However, they received
copies of all correspondence passed between appellant and the arbitrator
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and of all submissions made. When no defence submission or supporting
146
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
14 7
evidence was produced by respondent within the time prescribed,
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Arbitrator gave them one last opportunity to inform him any intention
on their part to put in a defence and to seek an extension of time for doing
so. A further fax was sent to them whereby the Arbitrator informed the
parties that he was proceeding with the award. On 1 lth August, 2001,
the Arbitrator received a fax from firm representing the respondent
requesting for extension of time for one month to put in a defence,
pursuant whereto on 16th August, 2001 it was directed that submissions
in support of an application for extension of time for a defence and on
the substantive merits of the dispute together with any evidence relied
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in relation thereto should be received by him by 31st August, 2001 in
absence whereof he would not give any consideration thereto. On 27th
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August, 2001, the firm again sought for a further three weeks' extension
of time for making their submissions and serving supporting evidence,
pursuant whereto time for filing those submissions of evidence was
extended till 12th September, 2001. However, the submissions were
received by the Arbitrator on 13th September, 2001. In l,Jis award,
arbitrator directed the respondent to pay appellant sums quantified by
him.
Respondent filed an application under Section 48(1)(b) of the
Arbitration and Conciliation Act, 1996 stating that the arbitrator did not
give them sufficient opportunity to present their case. They also filed a
suit before Civil Judge praying for a declaration that the award was void
and a nullity, as also for permanent injunction and damages. Appellant,
on the other hand filed an application for enforcement of the award in
the Court of the District Judge, which was considered as Execution Case.
However, on application of appellant, these proceedings were transferred
to the High Court. A Single Judge of the High Court allowed the execution
of the award. Aggrieved therewith, respondent preferred an appeal which
was allowed by a Division Bench, Appellant and respondent are both
questioning the correctness of the said judgment in the present appeal.
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Appellant contended that (i) the second arbitration proceedings
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having taken place in London, the award was a foreign award within
the meaning of Section 44 of the Act (ii) that the respondent was able
to present his case in the arbitration proceedings within the meaning
. of Section 48(1)(b) of the Act, and even otherwise refusal of an
adjournment by an Arbitrator was not a ground for challenging an
arbitral award.
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SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.
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Respondent contended that (i) the arbitration agreement was void
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and of no effect being opposed to public policy and having regard to the
fact that the first award was made in terms of the Indian law, reference
to the second arbitrator was impermissible inasmuch as the 1996 Act
envisages only one award (ii) the Arbitrator prepared the award without
the pleadings of the parties before him and considering only the first part
of the written statement without waiting for the second part; neither any
issue was raised, nor any date was fixed for hearing and, as the parties
were not given an opportunity to examine the witnesses, the award was
liable to be set aside in terms of Section 48(1 )(b) of the Act.
Referring the matter to larger Bench the Court
HELD : Per S.B. Sinha, J. ·
I. The High Courts judgment cannot be sustained. Though the
reasons assigned by it, are not agreed with, the conclusion thereof are
upheld on different grounds. (195-G-Hf
2. The 1996 Act contains a coherent and model framework. It
envisages only one award under one set of rules. It does not contemplate
multi-layer awards governed by different sets of rules. Section 34 of the
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Act provides for the mode and manner in which an arbitral award can
be questioned. Such a course can be taken only by filing an application
which shall be in accordance with sub-section (2) and sub-section (3). An
award in the Indian part of the award, thus, could be set aside only by
filing an application. The law, therefore, does not contemplate that despite
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the rigour of Section 34 of the Act, an award which although not challenged
and becomes enforceable and executable still can be subject matter of a
foreign award. An award as soon as it becomes enforceable, it becomes
final and binding in terms of Section 35 of the Act. (174-D, 176-G-H)
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2.2. By reason of Section 36 of the 1996 Act, a legal fiction has been
created to the effect that on expiry of the period prescribed for setting
aside an award as envisaged under Section 34 of the Act, the award
becomes capable of being executed and enforced. The concept of provision
for an appeal before another forum from an award and that too when
a part of the award would be a domestic award and another part would
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be a foreign award is not contemplated under the 1996 Act. (177-B-Cj
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CENTROTRADE MINERALS AND MET AL INC. '" HINDUSTAN COPPER LID.
J 49
2.3. Throughout the provisions nowhere it is mentioned that an
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appeal can be made or an application can be filed against the award to
a separate arbitration board or forum. So, the finality and legality has
to be determined by the Court if it is so challenged. Otherwise, reference
to a second arbitration panel would consume more time as arbitrators
would decide the matter after listening the dispute afresh. Presuming
that the reference to the arbitrator is made for second time and
subsequently arbitrator gives an award, it would be more time consuming
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and complex if validity of the first award is challenged along with
second award. So, following the scheme of the 1996 Act, it is more
viable and convenient to accept the first award without opting for
second time arbitration and then to decide it, if the award is challenged.
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[178-F-H)
Hanskumar Kishan Chand v. Union of India, AIR (1958) SC 947;
Hirata/ Agarwal/a & Co. v. Jakin Nahopier & Co. Ltd, AIR (1927) Cal 647;
Fazalally Jivaji Raja v. Khimji Poonji and Co., AIR 1934 Born 476 and
MA. Sons v. Madras Oil & Seeds Exchange Ltd & Anr., AIR (1965) Mad.
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392, held inapplicable.
'The Law of Arbitration' 7th Edition by S.D. Singh at page 359,
referred to.
2.4. Even the principles analogous to Order XLI, Rule l of the Code
of Civil Procedure envisages that filing of an appeal shall automatically
not mean stay of the operation of the decree. In that view of the matter,
mere filing of an appeal would not make the award unenforceable. No
prayer for stay of the operation of the award had been prayed for nor
the appellate arbitrator had directed stay of the operation of the award.
The 1996 Act does not contemplate that the arbitrator would be entitled
to sit in appeal over an executable decree. Even the doctrine of merger
shall not apply inasmuch as the said doctrine contemplates an appellate
authority who can pass the same type of order which could be passed by
the original authority. If by fiction of law an award becomes a decree
without the intervention of the court, the nature of an award which can
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be passed by the appellate arbitrator, would lose the character of an
award. The doctrine of merger, therefore, would not apply. A decree,
whether by reason of a statute or a legal fiction created under the statute,
would have different and distinct connotation vis-a-vis an award. By
agreement of the parties, a private adjudicator cannot sit in appeal over
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.
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an enforceable decree. A decree passed by a court of law may be set aside
by that court itself in exercise of its review jurisdiction or by an appellate
court created in terms of a statute. A private adjudicator, it will bear
repetition to state, cannot overturn a decree created by a legal fiction.
A legal fiction, it is well settled, must be given its full effect. 1179-B-FI
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Bhavnagar University v. Palitana Sugar Mill (P) Ltd., (20031 2 SCC
111; Ashok Leyland ltd. v. State of TN., (20041 3 SCC 1 and Bharat
Petroleum Corporation ltd. v. P. Kesavan and Another, (20041 9 SCC 772,
relied on.
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2.5. A domestic award, in view of the statutory scheme, is subject
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to the supervision of a court of law. Its jurisdiction encompasses within
its purview over the entire process of arbitration. An award is finally
subject to a part agreeing to take recourse to the provisions of Section
34 of the 1996 Act and it becomes a decree. An award can be set aside
only if the court comes to the conclusion that one or the other grounds
contained in Section 34 of the Act exist. A challenge to the domestic
award can, thus, be made only before a national court designated by
the Act itself and on the grounds specified in Section 34 of the Act. A
fortiori, the validity ofa domestic award cannot be questioned before any
other forum including the forum chosen by the parties, if any.
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[179-G-H, 180-AJ
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Liverpool & London SP. & I Asson. Ltd. v. M. V. Sea Success I, (20041
9 SCC 512; Pratap Singh v. State ofJharkhand, [20051 3 SCC 551 and
Zee Telefilms Ltd. v. Union of India, [2005] 4 SCC 649 referred to.
2.6. If the first award was to be enforced (although no occasion
arose therefor), it could have been done only in terms of Part I of the Act.
Despite invocation of second part of the arbitration agreement, it would
not cease to be a decree in terms of Section 36 of the Act unless the
operation thereof was directed to be stayed. In other words, the first
award of the arbitral tribunal, on the expiry of the period specified for
challenging the award, became a decree despite invocation of the second
part thereof. It is difficult to comprehend that despite a part of the award
becoming a decree of the court, the same would not be bin<ling upon the
arbitral tribunal. Section 34 of the 1996 Act provides for setting aside
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a domestic Indian award. It unlike the English Arbitration Act does not
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CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
151
permit the parties to limit or avoid the operation of the statutory
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provisions. [195-D-E)
3.1. 1996 Act puts domestic awards and foreign awards in two
different and distinct compartments, subject of course to certain
overlapping provisions. It may not, therefore, be possible to hold that the
1996 Act contemplates that an arbitration award can be an admixture
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of domestic award and foreign award. [180-H, 181-A)
3.2. A multi-tier arbitration may be held to be operative and valid
when it was goverened solely by the 1940 Act or the 1961 Act inasmuch
as in such an event, the procedure laid down therein could have been
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followed. The 1996 Act, however, on the other hand, repeals and replaces
not only the 1940 Act but also the 1961 Act and provides for different
forums and different procedure for resolution of a dispute through an
arbitrator. It is inconceivable that one part of the arbitration agreement
shall be enforceable as a domestic award but the other part would be
enforceable as a foreign award. An award made in terms of one arbitration
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agreement can either be a domestic award or a foreign award; wherefor
different procedures have been laid down, even when the consequences
from such award are different and when the grounds thereof are also
different and distinct. The fundamental legislative policy brought out by
the 1996 Act, thus, being not in consonance with having two tier arbitration
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which had two different statutes governed by two different provisions
and would be subject to different procedures is not valid. (181-C-E)
3.3. The Indian law would be applicable in reason to the first part
of the arbitration, namely, the India Council of Arbitration, whereas ·
second part thereof would be governed by International Chamber of
Commerce, Paris Rules. Both parts of the arbitration proceeding,
therefore, have not been carried out under the same institution. An
arbitration agreement envisioning different procedures at different stages
cannot be countenanced under the 1996 Act. Had the appeal been provided
within the set-up of Indian Council of Arbitration, subject to the
compliance of time frame, probably the agreement would have been
valid. But, it is not so. [181-F-G]
Bhatia International v. Bulk Trading SA., [2002] 4 SCC 105 and
Furest Day Lawson Ltd. v. Jindal Exports Ltd., [200IJ 6 SCC 356, referred
to.
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SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.
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4.1. A person may waive his right. Such waiver of right is permissible
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even in relation to a benefit conferred under the law. But it is trite that
no right can be waived where public policy or public interest is involved.
Jurisdiction on a tribunal/ court is a creature of statute. Jurisdiction on
Arbitration can be conferred by agreement between the parties. But, the
contract between the parties must be in obedience to law and not in
derogation thereof. [182-A-Bf
4.2. Contracting out is permissible provided it does not deal with a
matter of public policy. An agreement under no circumstances can violate
the Public Policy. [182-B[
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4.3. In terms of the laws of India governing the field, the parties
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cannot contract out of the statute and take recourse to such a procedure
which would for all intent and purport make the provisions of Section
34 and 36 of the 1996 Act nugatory by entering into contractual
arrangement or otherwise. The 1996 Act does not postulate that the
parties can contract out of the provisions thereof. The arbitration
agreement of the parties, therefore, must be made strictly in terms of the
provisions of the 1996 Act. [ 183-C]
4.4. Indian statute, i.e., the 1996 Act does not provide such
"contracting out" provision so that parties can fix/determine, by their
terms of agreement, the procedure of appeal after the award is made.
[184-AJ
4.5. Such a contractual arrangement, having regard to the provisions
contained in Section 23 of the Indian Contract Act shall be void being
opposed to public policy. The parties, it is trite, cannot by contract or
otherwise confer jurisdiction on a forum which is prohibited by law in
force in India. The law in force in India does not permit to limit or avoid
the operation of the statutory provisions. [ 184-BJ
5. Even if it is held that two tier arbitration is permissible, under
the 1996 Act it might lead to an incongruity. A two tier arbitration is
invalid in law in the context of the 1996 Act having regard to Section 23
of the Contract Act as statutory jurisdiction cannot be waived by contract.
It is, thus, amply clear that the very scheme of the 1996 Act does not
contemplate a two tier arbitration agreement of this nature. [194-Ff
6. Condition~ as regard non-existence or invalidity of an arbitration
agreement can be raised while resisting enforcement of a foreign award.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
15 3
Section 4 of the 1996 Act contemplates existence of an arbitration
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agreement which would mean a valid arbitration agreement. If the
arbitration agreement is void and of no effect, it is non est in the eye of
law and, thus, cannot be enforced. An arbitrator derives its jurisdiction
from a reference which would mean a dispute and difference to be
adjudicated upon in pursuance of or in furtherance of a valid arbitration
agreement. It is not in dispute that the parties agreed that the Indian law
shall apply. The validity or legality of a contract, thus, must be judged
on the touchstone of Section 23 of the Indian Contract Act. If a contract
is opposed to a public policy, the same is void and of no effect.
1194-G-H, 195-A]
National Thermal Power Corporation v. The Singer Company and, AIR
(1993) SC 998, referred to .
7.1. The expression 'public policy' in India has been used for three
different situations, namely, (i) an arbitral award may be set aside under
Section 34(2)(b) of the 1996 Act if it is in conflict with the public poilcy
of India; (ii) enforcement of a foreign award (New York Convention
Award) may be refused under Section 48(2)(b) if the enforcement of the
award would be contrary to the public policy oflndia; and (iii) a foreign
award (Geneva Convention Award) may be enforceable under Section
57(J)(b) if the enforcement of the award is not contrary to the public
policy or law of the India. [184-C-D)
Sumitomo Heavy Industries Ltd. v. ONGC Ltd, [1998] 1 SCC 305,
referred to.
7.2. The expression 'public policy' will have the same connotation
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in respect of an arbitration agreement or an award. The doctrine of
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public policy must be held to be a ground for setting aside an arbitration
agreement and consequently an award. [184-E, 189-G]
7.3. Such patent illegality, however, must go to the root of the
matter. The public policy, indisputably, should be unfair and unreasonable
so as to shock the conscience of the court. Where the arbitrator, however,
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has gone contrary to or beyond the expressed law of the contract or
granted relief in the matter not in dispute would come within the purview
of Section 34 of the Act. 1189-H; 190-A)
7.4. What would be a public policy would be a matter which would
again depend upon the nature of transaction and the nature of statute.
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.
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For the said purpose, the pleadings of the parties and the materials brought
on record would be relevant so as to enable the court to judge the concept
of what was a public good or public interest or what would otherwise be
injurious to the public good at the relevant point as contradistinguished
by the policy of a particular Government. [ 190-B-C)
8
Renusagar Power Co. Ltd. v. General Electric Co .. [ 19941 Supp I SCC
644; Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd .. [2003[ 5 SCC
705; Central Inland Water Transport Corporation Ltd. v. Brojo Nath Gunguly,
[1986) 3 SCC 156; Godawat Pan Masala Products l.P Ltd v. Union of
India, (2004[ 7 SCC 68; Gherulal Parakh v. Mahadeodas Maiya, [1959)
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Supp 2 SCR 406; Zoroastrian Coop. Housing Society Ltd v. District Registrar,
Coop. Societies (Urban}, [2005) 5 SCC 632; State of Rajasthan and Uthers
v. Basant Nahata, (2005) 12 SCC 77; Dharma Prathishthanam v. Mudhok
Construction Pvt. Ltd., (2005) 9 SCC 686 = (2004) 3 Arb. LR 432 {SC);
Bennett Coleman and Co. (P) Ltd v. Punya Priya Das Gupta, [ 1969) 2 SCC
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1 and Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle
East Lines ltd, Saudia Arabia and Others, AIR (1994) SC 1715, referred
to.
Harbour Assurance Co. (UK) ltd v. Kansa General lnternutional Co.
Ltd., (1993) 3 All ER 897 and Montrose Canned Foods Ltd. v. Eric Wells
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(Merchants) Ltd., (1965) Lloyd's Rep 597, referred to.
The Law and Practice of Arbitration and Conciliation by OP. Malhotra,
Second edition, page 1174, referred to.
Russell on Arbitration, 22nd edition, 2003, page 389, para 8-046 and
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Chitty on Contract, 29th edition, 2004, page 961, para 16-045. referred
to.
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8.1. A jurisdictional issue can be raised in two ways. A party to an
arbitration proceedings may take part in arbitral proceedings and raise
the question of jurisdiction before the arbitral tribunal. He may also
challenge the jurisdiction of the arbitrator without participating in the
arbitral proceedings. 1182-DI
8.2. Under the English Arbitration Act, an appeal on jurisdiction
would involve rehearing of the matter by the court at which the party
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can adduce evidence and reargue the entire issue of evidence. There is
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CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
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absolutely no reason as to why the said principle shall not apply to India.
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If a jurisdictional issue can be raised before the court even for the first
time, the court would be entitled to take on records even the fresh
hearing, it goes without saying that it would also be entitled to determine
the jurisdictional fact. (182-E-FJ
Salvant N. Viswamitra v. Yadav Sadashiv Mule (Dead) Through LRS.,
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[2004) 8 sec 706, referred to.
Smith v. East Elloe Rural District Council, [1956) l All ER 85S'and
Primetrade AG v. Ythan Ltd., (2006] 1 All ER 367, referred fo.
8.3. Respondent from the beginning contended that the provision
contained in the second part of the arbitration is void ab i11itio and of no
effect. They even filed a suit prior to entering into the reference by the
Arbitrator. Even after the award was passed, proceedings before
appropriate courts had been initiated. In its written statement filed
before the arbitral tribunal, the question as regards the jurisdiction of
the arbitrator was questioned by it. The arbitrator had held that such
an arbitrator agreement is valid in law. In terms of Section 16 of the 1996
Act, the arbitrator, keeping in view the fact that the question as regard
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his jurisdiction had been raised was bound to decide the same before
entering into the merit of the matter. Only in the event, it came to the
conclusion that the arbitral tribunal had the requisite jurisdiction, it
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could have proceeded to determine the merit of the matter. In view of
the fact that in the event an arbitrator was of the opinion that he had
no jurisdiction in the matter, the arbitration clause being invalid in law,
appellant could have preferred an appeal in terms of sub-secti6i (2) of
Section 37 of the 1996 Act. The question as regard lack of inherent
jurisdiction on the part of the arbitrator in view of the second part of
the arbitration clause being opposed to the public policy could have been
raised by respondent in terms of Section 34 of the 1996 Act. [194-A-E)
Per Tarun Chatterjee, J:
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1.1.
There have been delays in the arbitral proceedings right
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from the beginning when Appellant approached the ICC on 22nd Feb.
2000. Most of the delays were due to refusal of respondent to participate
in the proceedings. However, there were some delays which cannot be
related to their conduct. The whole arbitral proceeding was conducted
in a manner indicative of lack of urgency. Further, there is merit in
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SUPREME COURT REPORTS [2006] SUPP. '1. S.C.R.
A submission of respondent that due to the total dislocation of air traffic
caused by the terrorist attack of 11th September 2001, the materials sent
by them to the ICC arbitrator reached late. Under these circumstances
a delay of few days in serving their submissions with supporting evidence,
after having accepted to participate in the arbitral proceedings, seems
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excusable and should have been excused. Considering the overall picture
of the circumstance and the delays, refusal of the arbitrator to consider
material received by him after 13th September and before 29th September,
2001, seems to be based on frivolous technicality. The arbitrator ought
to have considered all the materials received by him before he made the
award on 29th September 2001. It is true that where a party is refused
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and adjournment and where it is not prevented from presenting its case,
it cannot normally claim violation of natural justice and denial of a fair
hearing. However, in the light of the delays, some of which were not
attributable to conduct of respondent, it was only fair to excuse their
lapse in filing the relevant material on time. Therefore, it can be said that
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respondent did not get a fair hearing and could not effectively present
its case. 1213-H, 214-A-B]
Hariom Maheshwari v. Vinit Kumar Parikh, (20051 l SCC 379,
distinguished.
Minimetal Germany GmBH v. Fl!rco Steel Ltd., I 199911 All ER Comm.
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315, referred to.
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1.2. In view of the above, enforcement of the ICC award should be
refused in view of Section 48 of the Act. Accordingly, the judgment of
the Division Bench and also the judgment of the Single Judge of the
Calcutta High Court must be set aside and matter remitted back to the
ICC arbitrator for fresh disposal of the arbitral proceedings in accordance
with law after giving fair and reasonable opportunity to both the parties
to present their case. [214-C-D]
2.1. There is nothing under the 1996 Act prohibiting the parties
from entering into and agreement whereunder the first arbitration
proceeding is conducted under Part I of the 1996 Act and the appeal
therefrom is conducted under Part II of the 1996 Act. In fact, earlier, two
separate legislations i.e. the 1940 and 1961 Acts dealt with domestic
awards and foreign awards respectively. However, the legislature keeping
in mind the necessity to have similarity in administration of domestic
H
awards as well as foreign awards, has consolidated the laws relating to
'\--
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
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domestic and foreign awards in the 1996 Act, in effect making both the
types of awards enforceable under the same Act. Keeping this in mind,
and also that parties' autonomy is paramount, it is not impermissible
under the 1996 Act to have one part of the award governed by Part I
and the other part by Part II. Further, an appeal is an intrinsic part of
the original proceeding and it is the final award that comes out after an
appeal is preferred from the first awards, that is relevant for the purpose
of 1996 Act. Thus it follows that nothing in the 1996 Act prohibits the
parties from providing a two tier arbitration wherein one tier is dealt
with under Part I and the other under Part II of the 1996 Act. Such an
agreement does not violate the provisions of Section 34 and 36 of the 1996
Act and it cannot be said to be invalid as being orumsed to public policy
Of India. Therefore, the second part of clause 14 of the agreement and
the ICC arbitration in its furtherance are not invalid as being opposed
to public policy of India. (204-D-H, 205-A]
Hanskumar Kishan Chand v. Union of India, AIR (1958) SC 947,
relied on.
Hirata! Agarwalla & Co. v. Jakin Nahopier & Co. Ltd, AIR (1927)
Cal. 647; Fazalally Jivaji Raja v. Khimji Poonji and Co., AIR (1934) Born.
476 and MA. Sons v. Madras Oil & Seeds Exchange Ltd & Anr., AIR (1965)
l\fad. 392, approved.
2.2. The relevant section of 1996 Act is Section 35 which only
provides that 'subject to this part of the arbitral award shall be final and
binding on the parties and persons claiming under them respectively.'
Similarly, condition no. 7 of the First Schedule of the 1940 Act provided
that 'the award shall be final and binding on the parties and persons
claiming under them respectively'. Section 35 is not a bar to appellate
arbitration. This section only comes into operation once the arbitration
proceedings as a whole which must include appellate arbitrations, if any
have ended. Allowing the appellate arbitrations is fully in consonance
with the objects of the 1996 Act. (203-D-E, 204-B-CJ
2.3. It is well recognized that autonomy is a paramount consideration
of the 1996 Act subject only to such safeguards as are necessary in the
public interest. Therefore, so long as an agreement between the parties
to enter into an appellate arbitration does not derogate from the public
interest, it is always permitted. The object of Section 35 of the Act is to
limit the ambit of court intervention in arbitral awards and this object
is not affected by allowing appellate arbitrations. [205-B-C)
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Russel on Arbitration 22nd Edition page 393, referred to.
2.4. Respondent submitted that use of the word 'only' in section 34
of the Act would show the legislative intendment that the domestic award
cannot be challenged in any manner except in the manner provided by
Section 34 of the Act. This is not the position in the present case in view
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of the Second part of clause 14 of the agreement. In this case, the parties
consciously agreed to have the domestic award followed by the foreign
award. In any view of the matter, the provisions of Section 34 of the Act
are not intended to curtail the powers of the contracting parties to
contract in the manner they desire. [202-D-EJ
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3.1. Two tier arbitrations wherein the original arbitration proceeding
is domestic and thus governed by Part I of 1996 Act, and the appellate
proceeding is foreign and thus governed by Part II of the Act can be
permitted. The doctrine of merger equally applies in cases of appellate
arbitrations, such that on the issuance of appellate award, the original
award merges with it and only the appellate award is valid and capable
of enforcement. This was also the intention of the parties while
incorporating Part II of Clause 14 of the agreement, which clearly says
that only the award that would be passed by the ICC arbitrator would
be binding on the parties and the judgment upon that award may be
entered in any court of jurisdiction. (205-D-FJ
3.2. It is now well settled that original and appellate proceedings are
not distinct legal proceeding, but only constitute stages of the same legal
proceedings, which are connected by an intrinsic unity. (207-A-BI
4.1. lt appears that the first part of the arbitration agreement deals
with arbitration in accordarce with the Rules of Arbitration of the
Indian Council of Arbitration. This part of Clause 14 of the arbitration
agreement does not say that the results of the arbitration agreement will
be binding on both the parties. Nor it says that the judgment upon the
award of the first arbitration may be entered in any court of jurisdiction.
On the other hand, the second part of clause 14 of the agreement clearly
states that if a part is in disagreement with the arbitration result in India
then the aggrieved party would have a right to appeal to a second
arbitration in London. The word 'appeal' in this part of Clause 14 of the
agreement has significance. If the phrase 'in disagreement with the
arbitration agreement in India' and the word 'appeal' are read together,
inevitable conclusion is that ICC arbitrator would act as an appellate
....
. '
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CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD.
159
arbitrator based in London. Moreover, if the second arbitration is not
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treated as an appeal, then it would be pointless for a party dissatisfied
with a 'Nil' award in India to refer the matter for a second arbitration
in London, as the 'Nil' award would always prevail over the ICC awards.
Accordingly, this would defeat the object of the provisions in the second
part of the clause 14 which clearly states that 'the result of this second
arbitration will be binding on both the parties'. [206-E-H, 207-A]
B
4.2. While passing the Award, the ICC arbitrator in his award had
observed that the award passed by the Indian Arbitrator was wrong. The
ICC arbitrator dealt with the correctness of the first award and was not
acting as a mere second arbitrator but rather as an appellate forum.
(207-B, H]
5.1. Under the repealed Foreign Awards (Recognition and
Enforcement) Act, 1961Section9(b) expressly provided that its provisions
would not be applicable to any award made on an agreement governed
by the law of India. However, on repeal of this 1961 Act, by Section 85
of the Act, no corresponding provision to Section 9(b) of the 1961 Act
has been made. In other words, the position of law under Section 9(b)
of the Foreign Awards (Recognition and Enforcement) Act, 1961 was
deliberately not incorporated in the present Act. Therefore, under the
present Act, an award in pursuance ofan arbitration agreement governed
by Indian Law. if the conditions under Section 44 are satisfied, will not
cease to a foreign award, merely because the arbitration agreement is
governed by law of India. (209-G-H, 210-A]
Sumitomo Heavy Industries Ltd. v. ONGC Ltd., [1998] 1 SCC 305 and
National Thermal Power Corporation v. The Singer Company, AIR (1993)
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SC 998, held inapplicable.
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5.2. It cannot be disputed that the conditions specified in Section 44
of the Act were satisfied, that is to say there exists a commercial relationship
between the parties, the ICC award was made in pursuance of an
agreement in writing between the parties and the award was made in a
Convention Country, UK. Section 44 of the Act makes award foreign if
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the above mentioned criteria are fulfilled, 'unless the context requires
otherwise'. (209-C-D]
. 5.3. Production of proof that such an award 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, cannot change a foreign award to
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be a domestic award, but merely makes it a foreign award which may
not be enforced. [210-E-F)
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5.4. Sub-Section (2) of Section 2 of the Act clearly says that Part of
the Act shall apply where the place of arbitration is in India. Sub-section
(7) of Section. 2 of the Act says that an arbitral award made under Part
I shall be considered as a domestic award. In view of sub-section (2) and
(7) of Section 2 of the Act read with Section 44, there cannot be any doubt
that the Division Bench was wrong in its conclusion that the award
passed by the ICC arbitrator was a domestic award. It should be kept
in mind that Section 9(b) of the Foreign Award (Recognition and
Enforcement) Act, 1961 which provided that it did not apply to an
arbitral award made pursuant to an arbitration agreement governed by
law of India, has been clearly omitted by Section 51 of the 1996 Act.
(211-E-G)
5.5. The phrase 'or under the law of which that award was made'
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used in Section 48(1)(e) refers to the law of the country in which the
arbitration had its seat rather than the country whose law governs the
substantive contract. It is true that the contract and the agreement clause
in governed by the substantial law of India. It is an admitted position that
the seat of the second arbitration was in UK. Therefore, the relevant
country was UK under the procedural law of which the award was made.
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Thus, Section 48(1)(e) does not by itself contemplate attracting first part
of Section 44 of the Act. (210-G-H, 211-AI
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 2562 of
2006.
p
From the Judgment/Order dated 28.7.2004 of the High Court at
Calcutta in A.P.O.T. No. 182 of 2004.
WITH
Civil Appeal No. 2564 of 2005.
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S. Sarkar, Krishendu Datta, K.V. Mohan, Kalyan Vadlamani and S.S.
Jauhar for the Appellant.
Debabrata Ray Choudhary, Ms. Nandini Mukherjee and Deba Prasad
Mukherjee for the Respondent.
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The Judgment of the Court was delivered by
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CENTROTRADE MINERALS AND METAL INC."- HINDUSTAN COPPER LTD. [SINHA, J.)
i 61
S.B. SINHA, J : Leave granted.
A
Interpretation of an agreement containing a two tier arbitration vis-avis the applicability of Part I or Part II of the Arbitration and Conciliation
Act, 1996 (for short, "the 1996 Act") is in question in these appeals which
arise out of a judgment and order dated 28.07 .2004 passed by a Division
Bench of the Calcutta High Court in A.P.O.T. No. 182 of 2004.
B
FACTS:
Mis. Centrotrade Minerals and Metal Inc. (for short, "Centrotrade"),
Appellant in SLP (C) No. 18611 of 2004 and the Hindustan Copper Limited
(for short "HCL''), Appellant in SLP (C) No. 21340 of 2004 entered into a
C
contract for sale of 15,500 DMT of Copper Concentrate to be delivered at
Kandla Port in the State of Gujarat in two separate consignments.
The said goods were ultimately required to be used at the Khetri Plant
ofHCL situated in the State ofRajasthan. The seller in terms of the contract
was required to submit a quality certificate from an internationally reputed
assayer, mutually acceptable to the parties. After the consignments were
delivered, the payments therefor had been made. However, a dispute arose
between the parties as regard the dry weight of concentrate copper.
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Clause 14 of the contract contained an arbitration agreement which
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reads as under:
"All disputes or differences whatsoever arising between the parties
out of, or relating to, the construction, meaning and operation or
effect of the contract or the breach thereof shall be settled by
arbitration in India through the arbitration panel of the Indian
Council of Arbitration in accordance with the Rules of Arbitration
of the Indian Council of Arbitration. If either party is in disagreement
with the arbitration result in India, either party will have the right
to appeal to a second arbitration in London, UK in accordance with
the rules of conciliation and arbitration of the International Chamber
of Commerce in effect on the date hereof and the results of this
second arbitration will be binding on both the parties. Judgment
upon the award may be entered in any court in jurisdiction,"
Centrotrade invoked the arbitration clause. The Arbitrator appointed
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by the Indian Council of Arbitration made a NIL award.
Centrotrade
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thereupon invoked the second part of the said arbitration agreement on or
about 22nd February, 2000. An award was made pursuant thereto.
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SUIT BY HCL:
HCL, during pendency of the proceedings before the arbitrator, filed
a suit in the court at Khetri in the State of Rajasthan questioning initiation
of the second arbitration proceeding before International Chamber of
Commerce inter alia contending that the provision for second arbitration was
void and a nullity. No interim order was passed therein despite having been
prayed for, whereupon an appeal was preferred by HCL before the District
Judge, which was also dismissed. In a revision filed by HCL, the High Court
granted an injunction. In the meanwhile the sole arbitrator had commenced
arbitration proceedings. Centrotrade filed a special leave application before
this Court questioning the said order of injunction passed by the Rajasthan
High Court and by an order dated 8th February, 2001, the said order of
interim injunction was vacated.
ARBITRATION PROCEEDING:
Mr. Jeremy Cooke, Arbitrator held his sittings in London.