# OIL & NATURAL GAS COMMISSION v. WESTERN COMPANY OF NORTH AMERICA

- **Citation:** [1987] 1 S.C.R. 1024
- **Court:** Supreme Court of India
- **Decided:** 1987-01-16
- **Case number:** Civil Appeal No. 1557 of 1986
- **Bench:** M.P. Thakkar, K.N. Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oil-natural-gas-commission-v-western-company-of-north-america-9318
- **Pages:** 30

## Headnote

Arbitration Act, 1940-Sections 2(e), 14, 17, 30 and 33A ward-Only when transformed into a judgment and decree under
Section 17 becomes enforceable-New York Convention-Article
V(l)(e)-Expression 'not yet become binding on the parties'-lnterpretation and significance of-Test applicable-Enforceability as per law
C of the country which governs the award-Arbitration proceedings between American Company and ONGC~Award rendered in favour of
American Company-ONGC invoking juri5diction of Bombay High
Court under Sections 30 & 33 to set aside award-Held Indian Court
alone has jurisdiction to pronounce on validity/enforceability of award.
D
E
Arbitration (Protocol and Convention) Act, 1937-Section 7Conditions for enforcement of foreign awards-New York Convention-Article V( I )(e)-Efject of expression 'not yet become binding on
the parties'-The clause-Recognition and enforcement of awardWhen arises.
Specific Relief Act 1963-Section 4/(b)-Conditions for applicability.
Word< & Phrases-'Not yet become binding on the parties'.
F
A drilling contract was entered into by the appellant and the
respondent which provided that in the case of differences arising out of
the aforesaid contract, the matter shall be referred to arbitration, that
the arbitration proceedings shall be held in accordance with the provisions of the Indian Arbitration Act, 1940, and that the validity and
interpretation thereof shall be governed by the laws of India. The
G agreed venue for hearing was London.
A dispute arose between the parties and it was referred to Arbitration. Consequent upon the inability of the two Arbitrators to agree on
the matters outstanding in the reference, the Umpire entered upon the
arbitration and straight away rendered his interim award, without
H affording any hearing to the parties and the same was lodged in the .
1024 _,
/
0.N.G.C. v. WEsTERN COMPANY
1025
High Court at the instance of the respondent. Subsequently, the Umpire A
rendered a final award relating to costs.
About a month after the lodging of the award in the High Court,
the respondent filed a plaint in the U.S. District Court seeking an order
confirming the interim and final awards and a judgment against the
appellant for the payntent of a sum of $ 256,815.45 by way of· interest
B
until the date of judgment and costs etc.
The appellant, however, instituted a Petition under Sections 30
and 33 of the Arbitration Act for setting aside the aforesaid awards and
for an interim order restraining the respondent from pr,oceeding
further with the action instituted in the U.S. Court.
A Single Judge of the High Court granted exparte interim
restraint order but vacated the same after hearing the parties. The High
Court.held that the action to enforce the award as a foreign award in the
U.S. Court was quite in order and that the mere fact that a Pl'tition to
c
set aside the award had already been instituted in the Indian Court and
D
was pending at the time of the institution of the action in the V .s. Court
was a matter of no consequence for the purposes of consideration of the
question as to whether or not the respondent should be restrained from
-+
proceeding further with the action in the U.S. Court, that it was open to
the respondent to enforce the award in the V .S. Court and, therefore, it
would not be appropriate to grant the injunction restraining enforceE
ment, and that it was open to the appellant to contend before the U.S. Court
J
that the petition for setting aside the award cannot be said to be vexatious or oppressive.
In the appeal to this Court it was submitted on behalf of the
appellant that the award sought to be enforced in the V .S. Court may
F
itself be set aside by the Indian Court and in that event, an extremely
anomalous situation would be created, that since the validity of the
award in question and its enforceability have to be determined by an
Indian Court which alone has jurisdiction under the Indian Arbitration. Act of 1940, the American Court would have no jurisdicti

## Text

_Characters 0–39,853 of 71,932. This is a partial read: ask again with offset=39853 for what follows._

OIL & NATURAL GAS COMMISSION
A
V.
WESTERN COMPANY OF NORTH AMERICA
JANUARY 16, 1987
B
[M.P. THAKKAR AND K.N. SINGH, JJ.)
Arbitration Act, 1940-Sections 2(e), 14, 17, 30 and 33A ward-Only when transformed into a judgment and decree under
Section 17 becomes enforceable-New York Convention-Article
V(l)(e)-Expression 'not yet become binding on the parties'-lnterpretation and significance of-Test applicable-Enforceability as per law
C of the country which governs the award-Arbitration proceedings between American Company and ONGC~Award rendered in favour of
American Company-ONGC invoking juri5diction of Bombay High
Court under Sections 30 & 33 to set aside award-Held Indian Court
alone has jurisdiction to pronounce on validity/enforceability of award.
D
E
Arbitration (Protocol and Convention) Act, 1937-Section 7Conditions for enforcement of foreign awards-New York Convention-Article V( I )(e)-Efject of expression 'not yet become binding on
the parties'-The clause-Recognition and enforcement of awardWhen arises.
Specific Relief Act 1963-Section 4/(b)-Conditions for applicability.
Word< & Phrases-'Not yet become binding on the parties'.
F
A drilling contract was entered into by the appellant and the
respondent which provided that in the case of differences arising out of
the aforesaid contract, the matter shall be referred to arbitration, that
the arbitration proceedings shall be held in accordance with the provisions of the Indian Arbitration Act, 1940, and that the validity and
interpretation thereof shall be governed by the laws of India. The
G agreed venue for hearing was London.
A dispute arose between the parties and it was referred to Arbitration. Consequent upon the inability of the two Arbitrators to agree on
the matters outstanding in the reference, the Umpire entered upon the
arbitration and straight away rendered his interim award, without
H affording any hearing to the parties and the same was lodged in the .
1024 _,
/
0.N.G.C. v. WEsTERN COMPANY
1025
High Court at the instance of the respondent. Subsequently, the Umpire A
rendered a final award relating to costs.
About a month after the lodging of the award in the High Court,
the respondent filed a plaint in the U.S. District Court seeking an order
confirming the interim and final awards and a judgment against the
appellant for the payntent of a sum of $ 256,815.45 by way of· interest
B
until the date of judgment and costs etc.
The appellant, however, instituted a Petition under Sections 30
and 33 of the Arbitration Act for setting aside the aforesaid awards and
for an interim order restraining the respondent from pr,oceeding
further with the action instituted in the U.S. Court.
A Single Judge of the High Court granted exparte interim
restraint order but vacated the same after hearing the parties. The High
Court.held that the action to enforce the award as a foreign award in the
U.S. Court was quite in order and that the mere fact that a Pl'tition to
c
set aside the award had already been instituted in the Indian Court and
D
was pending at the time of the institution of the action in the V .s. Court
was a matter of no consequence for the purposes of consideration of the
question as to whether or not the respondent should be restrained from
-+
proceeding further with the action in the U.S. Court, that it was open to
the respondent to enforce the award in the V .S. Court and, therefore, it
would not be appropriate to grant the injunction restraining enforceE
ment, and that it was open to the appellant to contend before the U.S. Court
J
that the petition for setting aside the award cannot be said to be vexatious or oppressive.
In the appeal to this Court it was submitted on behalf of the
appellant that the award sought to be enforced in the V .S. Court may
F
itself be set aside by the Indian Court and in that event, an extremely
anomalous situation would be created, that since the validity of the
award in question and its enforceability have to be determined by an
Indian Court which alone has jurisdiction under the Indian Arbitration. Act of 1940, the American Court would have no jurisdiction in this
behalf, that the enforceability of the award must be determined in the
G
context of the Indian Law as the Arbitration proceedings are subject to
the Indian Law and are governed by the Indian Arbitration Act of 1940,
and that if the award in question is permitted to be enforced in U.S.
Court without its bein_g confirmed by a court in India or U.S. Court it
would not be in conformity with law, justice or equity.
H
1026
SUPREME COURT REPORTS
(1987] 1 S.C.R.
..I.
A
On behalf of the respondent ii was contended that the action in the
U.S.A. Court could not be considered as being oppressive lo the appellant and that even if it is so, the Hi.gh Court has no jurisdiction to grant
such a restraint order, and that the appellant had suppressed the fact
that it had appeared in the USA ~ourt and succe•ded in pursuading the
USA Court to vacate the seizure order obtained by the respondent and
)
B thereby disentitled itself to seek any equitable order.
Allowing the appeal, this Court,
HELD:!.! Under the Indian law, an arbitral award is unenforce- f
able until it is made a rule of the Court, and a judgment and consec
quential decree are passed' in terms of the award. Till an award is
1
transformed into a judgment and decree under Section 17 of the Indian
Arbitration Act, it is altogether lifeless, from the point of enforceability. Life is infused into the award in the sense of its becoming enforce-·
able only after it is made a rule of the Court upon the judgment and
decree in terms of the award being passed. [ 1042D-E]
D
!. 2 In the instant case, the arbitratioo proceedings are governed
by the Indian Arbitration Act of 1940 and a proceeding under the Act
for affirming the award and making it a rule of the Court or for setting
.+
it aside can be instituted only in an Indian Court. The expression
"Court" as defined by Section 2(e) of the Act leaves no room for doubt
E on this score and the Indian Court alone has the jurisdiction to pronounce on the validity or enforceability of the awilrd. [1038A-B]
2.1 Article V(l)(e) of the New York Convention provides that
-~
recognition and enforcement of the award will be refused if the award
"has not yet become binding on the parties or has been set aside or
F suspended by a competent authority of tbe country in which or under
the law of which that award was made." [ tt43A-B]
2.2 The singnificance of the expression "not yet become binding
on the parties" employed in Article V(l)(e) cannot be lost sight of. The
expression postulates that the Convention has visualised a time later
G than the making of the award. [1044A-B]
>-
2.3 The award which is sought to be enforced as foreign award
will have to be tested with reference to the key words contained in
Article V(l)(e) of the Convention and the question will have to be answered whether the award bas become binding on the parties or bas
H not yet become binding on the parties. The test has to be applied in 'the
O.N.G.C. v. WESlERN COMPANY
1027
~ context of the law of the country governing the arbitration proceedings
or the counb1' under the law of which the award bas been made. [1044C-D]
A
2.4 The enforceability must be determined as per the law applicable to the award. French, German and Italian Courts have taken the
view that the enforceability as per the law of the country which governs
the award is the essential pre-condition for asserting that it has become
B
binding under Article V(l)(e). [10478-C]
2.5 India has acceded to the New York Convention. One of the
Objects of the New York Convention was to evolve consensus amongst
the covenanting nations in regard to the execution of foreign arbitral
awards in the concerned Nations. The necessity for such a consensus
was felt with the end in view to facilitate international trade and comC
merce by ·removing technical and legal bottlenecks which directly or
indirectly impede the smooth How of the river of international commerce. Since India has acceded to this Convention it would be reasonable to assume that India also subscribes to the philosophy and ideology
of the New York Convention as regards the necessity for evolving a
0
suitable formula to overcome this problem. The Court dealing with the
matters arising out of arbitration agreements of the nature envisioned
by the New. York Convention must, therefore, adopt an approach informed by the spirit underlying the Convention. [lOSOG-H; lOSlA-8]
3. Section 41(b) of the Specific Relief Act will be attracted only in
E
a fact-situation where an injunction is sought to restrain a party from
instituting or proseq1ting any action in a Court in India which is either
of co-ordinate jurisdiction or is higher to the Court from which the
injunction is sought in the hierarchy of Courts in India. [10498-C]
4.1 There cannot be any doubt that the respondent can institute
F
an action in the U.S. Court for the enforcement of the award in question
notwithstanding the fact that the application for setting aside the award
had already been instituted and was already pending before the Indian
Court and that the appellant can approach the U.S. Court for seeking a
stay of the proceedings initiated by the respondent for procuring a
judgment in terms of the award in question. Merely on this ground the
G
·relief claimed by the appellant cannot be refused. [10358-D]
4.2 As per the contract, while the parties are governed by the
Indian Arbitration Act and the Indian Courts have the exclusive jurisdiction to affirm or set aside the award under the said act, the respondent is seeking to violate the very arbitration clause on the basis of H
A
1028
SUPREME COURT REPORTS
(1987] 1 S.C.R.
which the award has been obtained by seekin'g confirmation of the
award in the New York Court under the American Law. This amounts
to an improper use of the forum in American in violation of the stipulation lo he governed by the Indian law which by necessary implication
means a stipulation to exclude the USA Court to seek an affirmation
and to seek it only under the Indian Arbitration Act from an Indian
B Court. If the restraint order is not granted, serious prejudice would be
occasioned and a party violating the very arbitration clause on the
basis of which the award has come into existence will have secured an
order enforcing the order from a foreign court in violation of the very
clause. [10380-G]
5. I The respondent has prayed for confirmation of award. The
C American Court may still proceed to confirm the award, and in doing so
it would take into account the American law and not the Indian law or
the Indian Arbitration Act of 1940. The American Court will be doing
so at the behest and at the instance of the respondent which has in terms
agreed that the arbitration proceedings will be governed by the Indian
o Arbitration Act of 1940. Not only the matter will be decided by a court
other than the court agreed upon between the parties hut it will be
decided by a court under a law other than the law agreed upon. Such an
unaesthetic situation should not be allowed. Even though_ it was conceded by the respondent that the American Court has no jurisdiction to
confirm the award in view of the New York Convention, in the event of
E the award rendered by the Umpire, the validity of which is not tested
either by an American Court or an Indian Court, being enforced by an
American Court, it will he an extremely uphill task to pursuade the
Court to hold that a foreign award can he enforced on the mere making
of it without it being open to challenge in either the country of its origin
or the country where it was sought to he enforced. [1041H; 1042A, B-CI
F
5.2 In the event of the award rendered by the Umpire being set
aside by the Indian Court, an extremely anomolous situation would arise
inasmuch as the successful party may well have recovered the amount
awarded as per the award from the assets of the losing party in the USA
after procuring a judgment in terms of the award from the USA Court,
G which would result in an irreversible the damage being done to the
losing party for the Court in USA would have enforced a non-existing
award under which nothing could have been recovered. It would also
result in the valuable court time in the USA being invested in a nonissue and the said Court would have acted on and enforced an award
which did not exist in the eye of law. The USA Court would have done
H something which cou!d not have been done if the respondent company
+
O.N.G.C. v. WESTERN COMPANY
1029
had waited during the pendency of the proceedings in the Indian Court.
The losing party in that event would he ohliged to initiate fresh proA
ceedings in the USA Court for the amount already recovered from it,
pursuant to the judgment rendered by the USA Court in enforcing the
· award which is set aside by the Indian Court. All this would happen if
the restraint order as prayed by the losing party is not granted and this
can be avoided if it is granted. [1037D-H]
B
5.3 The American Court would have enforced an award which is
a lifeless award in the country of its origin and under the law of the
country of its origin which law governs the award by choice and
consent. [1042E-F]
6. l It would neither be just nor fair on the part of the Indian
Court to deny relief to the appellant when it is likely to be placed in such
an awkward situation if the relief is refused. It would be difficult to
conceive of a more appropriate case for granting such relief. [1042G-H]
6.2 The facts of this case are eminently suitable for granting a
restraint order. No doubt, this Court sparingly exercises the jurisdiction to restrain a party from proceeding further with an action in a
foreign court. However, the question is whether on the facts and circumstances of this case it would not be unjust and unreasonable not to
restrain the respondent from proceeding further with the action in the
American Court. This is'one of those rare cases where the Court would
be failing in its duty if it hesitated in granting the restraint order, for, to
obHge the appellant to face the aforesaid proceedings in the American Court
would be oppmwive in the facts and circnmstances of the case. [1048C-F]
6.3 It would be unfair to refuse the restraint order in a case like
c
D
E
the present one for the action in the foreign court would be oppressive
F
in the facts and circumstances of the case and in such a situation the
courts have undoubted jurisdiction to grant such a restraint order,
whenever the circumstances of the case make it necessary or expedient
to do so or the ends of justice so require. [10490-E)
6.4 There was no deliberate suppression by the appellant, and it
G
would, therefore, not be proper to refuse relief to the appellant on this
account. [10508-C)
6.5 While this Court is inclined to grant the restraint order, fairness demands that it should not be unconditional. There are good and
valid reasons for making the restraint order conditional in the sense
H
103()
SUPREME COURT REPORTS
(1987] I S.C.R.
A lh11t the appellant should be required to pay the charges payable In
A
respect of the user of rig belonging to the respondent Company at the
lllldispllled rate regardless of the outcome of the petition instituted by it
Ill the High Court for setting aside the award rendered by the Umpire.
ltliSOE-G] .
6.6 It Is no doubt true thai if the arbitral award is set aside by the
):
a lndiilh Coilrt no amount would be recoverable under the said award.
that, however, does not mean that the liability to pay the undisputed
llliiolillt which hiis already been incurred by the appellant disappears. It
would not be fair on the part of the appellant to withhold the amount
which In any case Is admittedly due and payable. The respondent can
a«ept the amount without prejudice to its rights and contentions, to
C claim 11 larger amount. No prejudice will be occasioned to the appellant
b)" illaklill! the payment of the admitted amount regardless of the fact
'f
that the resjMllident is claiming a larger amount. In any case the appelb1nt which seeks an equitable relief cannot be heard to say that it is not
prepared to act in a manner just and equitable regardless of the niceties
0 and nuances of legal arguments. [IOSIB-E]
(the order passed by the High Court on April 3, 1986 set aside,
and the l!lirlier order passed by it on January 20, 1986 restortd subject
tii certaill tllnditlons imposed by the Court.]
Cotton Cotpotation of India v. United Industrial Bank, (1983] 3
E Stit 96:21 V!O Ttactoroexport, Moscow v• M Is Tarapore & Company
lltlit Anr., (l911i] 3 S.t.R. 53; Halsbury's Laws of England Vol. 24 page
5~ para !0391 referred to.
·
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1557
of 1986
Fium the lodgment and Order dated 3.4.1986 of the Bombay
lti~ Court in Interim Petition No. 11 of 1986.
K. Parasaran, Attorney General, B. Datta, Additional Solicitor
Gt!neral, S.S. Shroff, S.A. Shroff, R.K. Joshi, Mrs. P.S. Shroff, Anil
(i K Sharma ilnd Mohan Parasaran for the Appellant.
F.S. Nariman, S,N. Thakkar, lhvi11der Narain, Gulam Vahamwatl, S. Sukumaran, D.N. Mishra, Adittiya Narain, Mrs. A.K. Venna
and Miss Lira Goswami for the Respondent.
H
The Judgment of the Court was delivered by
I'
O:N.G.C. v. WESTERN COMPANY [THAKKAR, J.]
1031
THAKKAR, J.
Was the High Court 'right' in granting the
restraint order earlier. and ·wrong· in vacating the said order later''
By the order in question the Respondent. Western Company of
North America (Western Company). was restrained from proceeding
further with an action instituted by it in a USA Court against the
appellant. Oil and Natural Gas Commission (ONGC). The said action
was targeted at se~king a judgment from the concerned court in
U.S.A. on the basis of an arbitral award rendered by an Umpire in
arbitration proceedings held in London but governed by the Indian
Arbitration Act. 19~0. which was the law of choice of the parties as per
the arbitration clause contained in the drilling contract entered into
between the parties. The Western Company has moved the USA
Court for a judgment in terms of the award notwithstanding the fact
that:•
I) ONGC had already initiated proceedings in an Indian
Court to set aside the award and the said proceeding was as
A
B
c
yet pending in the Indian Court.
o
2) The said award was not as yet enforceable in India as a
domestic award inasmuch as a Judgment in accordance
with the Indian law had yet to be procured in an Indian
Court, by the Western Company.
The events culminating in the order under appeal may be briefly
and broadly recounted. The appellant, ONGC and the Respondent
Western Company, had entered into a drilling contract. The contract
provided for any differences arising out of the agreement being refer·
red to arbitration, The arbitration proceedings were to be governed by
E
the lndain Arbitration Act 1940 read with the relevant rules. A dispute
F
had arisen between the parties. It was referred to two Arbitrators and
an Umpire was also appointed. The Arbitrators entered on the reference in London which was the agreed venue for hearing as per the
Arbitration Clause contained in the contract. On October !, 1985 the
Arbitrators informed the Umpire that they were unable to agree on
the matters outstanding in the reference. Consequently the Umpire
G
entered upon the arbitration and straightaway proceeded to declare
his non-speaking award (styled as interim award) on October 17, !985
without affording any hearing to the parties on the matters outstanding
in the reference. The Umpire did not afford a hearing subsequent to
his entering upon the arbitration presumably because even when the
-matter was within the domain of the Arbitrators (and not of the H
A
B
1032
SUPREME COURT REPORTS
(1987] I S.C.R.
Umpire), and the Arbitrators were seized of the matter, the Umpire
used to remain present at the hearings conducted by the Arbitrators.
Having been present throughout the proceedings whilst the Arbitrators were in charge of the same. the Umpire presumably considered
it unnecessary to hear the parties or their counsel after he was seized of
the matter and it came within his domain in the wake of the disagreement between the two Arbitrators. And the Umpire straightaway proceeded to declare the interim award on October J7, 1985. Thereafter,
on November 5, 1985, the Respondent, Western Company, requested
ttie Umpire to authorise one Shri D.C. Singhania to file the award dated
October 17, 1985 in the appropriate Court in India. The Umpire
accordingly authorised the said Shri Singhania in this behalf. And
C pursuant to the said authority the award rendered by the Umpire was
lodged in the Bombay High Court on November 22, 1985. Subsequently, on November 28, 1985 the Umpire rendered a supplementary award relating to costs which has been termed as 'final' award.
About a month after the lodging of the award in the High Court of
Bombay by the Umpire at the instance of the Responde'nt, Western
O Company, the latter lodged a plaint in the U.S. District Court, inter
alia, seeking an order (I) confirn1ing the two awards dated October 17,
1985 and November 28, 1985 rendered by the Umpire (2) a Judgment
against the ONGC, (Appellant herein) in the amount of$ 256,815.45
by way of interest until the date of he Judgment and costs etc.
E
F
G
H
On January 20, 1986, appellant ONGC on its part instituted an
Arbitration Petition No. tO of 1986 under Sections 30 & 33 of the
Indian Arbitration Act 1940 for setting aside the awards rendered by
the Umpire. Inter alia the challenge was rooted in the following.
reasoning. While as per the Indian Arbitration Act 1940 which admittedly governed the arbitration proceedings the Umpire ·:.ould come on
the scene.only provided and only when the Arbitrators gave him notice
in writing that they were unable to agree, and the Umpire would enter
upon the reference in lieu of the Arbitrators only subsequent thereto,
in the present case the Umpire had neither held any proceedings nor
had afforded any opportunity of being heard to the ONGC after entering upon the reference. The appellant, ONGC, also prayed for an
interim order restraining the Western Company from proceeding
further with the action instituted in the U.S. Court. The learned Single
Judge granted an ex-parte interim restraint order on January 20, 1986
but vacated the same after hearing the parties by his impugned order'
giving rise to the present appeal by Special Leave.
1. Interim Order No. 11 of 1986 passed on April 3, 1986 in Arbitration Petition No.
ID of 1986.
+
0.N.G.C. v. WESTERN COMPANY ['IHAKKAR, J.)
1033
In order to confine the dialogue strictly within the brackets of
the scope of the.problem, four points deserve to be made at the outset
before adverting to the impugned order rendered by the High Court.
1) We are not concerned with the merits of the main dispute between the parties which was the subject-matter of
arbitration and which pertains to the charges payable for a
jack-up drilling unit and related services provided by Western Company to ONGC. The equipment was utilised
beyond the period stipulated in the contract. In regard to
the employment of the equipment beyond the contractual
period Western Company claimed payment at US $ 41,600
per operating day which was the rate stipulated for the user
of the equipment for the stipulated time-frame, The ONGC
on the other hand has contended that in the context of the
correspondence between the parties pertaining to the employment of the equipment beyond the stipulated period the
Western Company is entitled to claim only US$ 18,500 per
day. The dispute concerns the claim for payment for the
user of the equipment for the extended period ( 136 days
and 16 hours). We are however not concerned with the
merits of the claim giving rise to the dispute and differences
which was referred to the Arbitrators.
2) We are not concerned with the merits of the contentions
raised in the petition instituted by ONGC in the High
Court of Bombay in order to challenge the arbitral award
rendered by the Umpire except to the limited extent of
examining whether ONGC has a prima facie case.
A
B
c
D
E
3) We are not concerned with the question as to how an
F
arbitral award which is not a domestic award in India can
be enforced in a Court in India in the context of the Indian
legislation enacted in that behalf namely the Foreign
Awards (Recognition and Enforcement) Act, 1961. The
said Act was enacted in order to give effect to an international convention known as New York Convention to G
which India has acceded. The provisions of the said Act
would be attracted only if a foreign award is sought to be
enforced in an Indian Court. We are not concerned with
such a situation. The award which is the subject-matter of
controversy in the present case is admittedly a domestic
award for the purposes of the Indian Courts, governed by
H
A
B
c
D
E
F
G
1034
SUPREME COURT REPORTS
[1987] l S.C.R.
the provisions of the Indian Arbitration Act of 1940. When
the Western Company seeks to enforce the award in question in the US Court they do so on the premise that it is a
foreign award in the US Court. In considering the question
as regards the proce.eding initiated by the Western Company in the US Court, there is no occasion to invoke the
provisions of the aforesaid Act. The provisions of the said
Act can be invoked only when an award which is not a
domestic award in India is s0ught to be enforced in India.
Such is not the situation in the present case. We are therefore not at all concerned with the provisions of the said
Act.
4) We are not directly concerned with the law governing
the enforcement of the foreign award in an USA Court. We
would be undertaking an inappropriate exercise in being
drawn into a discussion in depth as regards the law governing enforcement of foreign awards in USA, the procedure
to be followed, or as to the interpretation of the relevant
provisions as made by the US Court. So also it would be
inappropriate to speculate on the view that is likely to be
taken by the American Court or to anticipate its interpretation or its verdict in regard to the relevant matters at that
end.
The order under appeal may now be subjected to scrutiny. The
High Court has vacated the interim order granted by it earlier on the
following grounds:-
1) That it was open to the Western Company to enforce
the award in the US Court and that accordingly it would
not be appropriate to grant the injuction restraining them
from enforcing the same at that end.
2) That it was open to the ONGC to contend before the US
Court that the petition for setting aside the award which was
sought to be enforced in the US Court was already pending
in the Indian Court.
3) That the proceeding in. the US Court cannot be said to
be vexatious or oppressive.
H
The High Court has examined the question as to wheth~r the
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O.N.G.C. v. WES1ERN COMPANY [lHAKKAR, J.]
1035
action insti.tuted by the. Western Company against ONGC was mainA
tainable in the context of the New York Convention in the light of the
relevant Articles of the Convention and has come to the conclusion that
an action to enfoce the award in question as a foreign award in the US
Court was quite in order. The view is expressed that the mere fact that
a petition to set aside the award had already been instituted in the
Indian Court and was pending in the Indian Court at the time of the
institution of the action in the US Court was a matter of no consequence, for the purposes of consideration of the question as to whether
or not Western Company should be restrained from proceeding
further with the action in the US Court. Now, there cannot be any
doubt that the Western Company can institute an action in the US
Court for the enforcement of the award in question notwithstanding
the fact that the application for setting aside the award had already
been instituted and was already pending before the Indian Court. So
also there would not be any doubt or dispute about the proposition
that the ONGC can approach the US Court for seeking a stay of the
proceedings initiated by the Western Company for procuring a judgment in terms of the award in question. But merely on this ground
the relief claimed by ONGC cannot be refused. To say that the Court
in America has the jurisdiction to entertain the action and to say that
the American Court can ·be approached for staying the action is
tantamount to virtually cold-shouldering the substantial questions
raised by ONGC and· seeking an escapist over-simplification of the matter. The points urged by the ONGC are of considerable importance
and deserve to be accorded serious consideration.
Prominence deserves to be accorded to the following factors
which appear to be of great significance:
1) It is not in dispute that the arbitration clause contained
in the contract which has given rise to the disputes and
differences between the parties in terms provides that:
"The arbitration proceedings shall be held in accordance
with the provisions of the Indian Arbitration Act, 1940 and
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c
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the rules made thereunder as amended from time to time.··
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(Vide clause 14 of the Contract)
2) There is also an agreement between the parties that the
validity and interpretation' thereof shall be "governed by
the laws of India" ( vide clause 18 of the contract)
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1036
SUPREME COURT REPORTS
(19871_ 1 S.C.R.
3) Under the Indian Law, having regard to the scheme of
the Arbitration Act of 1940, an arbitral award as such is not
enforceable or executable. It is only after the award is filed
in the Indian Court and is made a rule of the Court by
virtue of a judgment and decree in terms of the award that
life in the sense of enforceability is infused in the lifeless
award. (Vide Sections 14 'and 17 'of the Arbitration Act)
The situation which emerges is somewhat ah incongrous one.
The arbitral award rendered by the Umpire may itself be set-aside and
become non-existant if the ONGC is able to successfully assail it in the
petition under section 30/33 for setting aside the award in question in
India. The High Court does not hold that the petition is prima facie
liable to fail. We do not wish to express any opinion on the merits of
the petition as in our opinion it would be improper to do so and might
occasion prejudice one way or the other. We are however not prepared to assume for the purpose of the present discussion that th~
petition is liable to fail. The question is wide open.The final decision of
the Court cannot and need not be anticipated.
In the light of the foregoing discussion, the following submissions,
pressed into service by the appellant, ONGC, require to be examined.
( l) The award sought to be enforced in the USA Court
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may itself be set aside by the Indian Court and in that
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1. 14(1) & (2):
"14.( l) When the arbitrators or umpire have made their award, they shall sign it and
sh.all give notice in writing to the parties of the making and signing thereof and of the
amount of fees and charges payable in respect of the arbitration and award.
2) The arbitrators or umpire shall, at the request of any party to the arbitration
agreement or any person claiming under such party or if so directed by the Court and
upon payment of the fees and charges due in respect of the arbitration and award and
oft.he costs and charges of filing, the award cause the award or·a signed copy of it,
together-with any depositions and documents which nlay have been taken and proved
before them, to be filed in Court, and the Court shall thereupon give notice to the
parties of the filing of the award.
3, x x x"
2. 17. Judgment in terms of award-Where theCourt sees no cause to remit the award or
any of the matters referred to arbitration for reconsideration or to set aside the
award, the Court shall, after the tirne for maK.ing an application to set aside the
award has expired, or such applic~tion having been made, after refusing it, proceeded to pronounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow, and no appeal shall lie from such decree except on
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the ground that it is in excess of, or not otherwise in accordance with, the award."
O.N.G.C. v. WESTERN COMPANY [THAKKAR, J.l
1037
A
event, an anomalous situation would be created.
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(2) Since the validity of the award in question and its enforceability have to be determined by an Indian Court,
which alone has jurisdiction under the Indian Arbitration
Act of 1940, the American Court would have no jurisdiction in this behalf.
8
(3) The enforceability of the award must be determined in
the context of the Indian Law as the arbitration proceed_,
ings are admittedly subject to the ln~ian Law and are
governed by the Indian Arbitration Act of 1940.
r
(4) If the award in question is permitted to be enforced in c
USA without its being affirmed by a Court in India or a
USA Court, it would not be in conformity with law, justice
or equity.
There is considerable for_ce in the argument advanced in the D
context of the possibility of the award rendered by the Umpire being
set aside by the Indian Court. In that event an extremely anomalous
situation would arise inasmuch as the successful party (Western Com-
+ pany) may well have recovered the amount awarded as per the award
from the assets of the losing party in the USA after procuring a judgment in terms of the award from USA Court. It would result in an
E
irreversible damage,being done to the losing party (ONGC) for the
Court in the USA would have enforced a non-existent award under
which nothing could have been recovered. It would result in the valuable Court time of the USA Court being invested in a non-issue and
the said Court would have acted on and enforced an award which did
not exist in the eye of law. The U.S.A. Court would have done someF
thing which it would not have done if the Western Company had
waited during the pendency of the proceedings in the Indian Court.
The parties would also be obliged to spend large amounts by way of
costs incurred for engaging counsel and for incidental matters. The
losing party in that event would be obliged to initiate fresh proceedings
in the USA Court for restitution of the amount already recovered from
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it, pursuant to the judgment rendered by the USA Court in enforcing
the award which is set aside by the Indian Court. Both the sides would
have to incur huge expenditure in connection with the attendent legal
proceedings for engaging counsel and for incidental matters once
again. All this would happen if the restraint order as prayed by the
losing party is not granted. And all this can be avoided if it is granted.·
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1038
SUPREME COURT REPORTS
(1987) 1 S.C.R.
Equally forceful is the plea urged in the context of the argument
that the concerned Court in India alone would have jurisdiction to
determine the question regarding enforceability or otherwise of the
award in question, for, admittedly, the arbitration proceedings are
governed by the Indian Arbitration Act of 1940. And that a proceeding under the Indian Arbitration Act for affirming the award and
making it a rule of the Court or for setting aside can be instituted only
in an Indian Court. The expression "Court" as defined by Section
2(e) 1 of the Arbitration Act leaves no room for doubt on this score.
Thus the Indian Court alone has the jurisdiction to pronounce on the
validity or enforceability of the award in question. But the successful
party (Western Company) has invoked the jurisdiction of the USA
Court to seek affirmation of the award. In fact reliefs Nos. I and 2
C claimed by the Western Company in the USA Court are in the following terms.
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I) An order confirming the interim award dated October
17, 1985.
2) An order confirming the final award dated November
28, 1985.
}
Thus, while as per the contract, parties are governed by the Indian
~
Arbitration Act and the Indian Courts have the exclusive jurisdiction to
E affirm or set aside the award under the said Act, the Western Company
is seeking to violate the very arbitration clause on the basis of which the
award have been obtained by seeking confirmation of the award in the
New York Court under the American Law. Will it not amount to an
improper use of the forum in America in violation of the stipulation to
be governed by the Indian law which by necessary implication means a
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stipulation to exclude the USA Court to seek an affirmation and to seek
·it only under the Indian Arbitration Act from an Indian Court? If the
'restraint order is not granted, serious prejudice would be occasioned
and a party violating the very arbitration clause on the. basis of which
the award has come into existence will have secured an order enforcing
the order from a foreign court in violation of that very clause. When
this aspect was pointed out to the learned counsel for the Western
Company in the context of another facet of this very question namely
the possibility of the Indian Court taking one view and the American
1. "2(e) "Court" means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject:-m::i.tter of
suit, but does not, except for the purpose of arbitration proceedings under section 21
include a Small Cause Court."
0.N.G.C. v. WESTERN COMPANY (THAKKAR, J.l
1039
Court taking a contrary view, counsel stated that though the Western
Company had made a prayer for confirmation of the award, the New
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Yark Court had no jurisdiction under the Convention to confirm or set aside
tile award. It is not appropriate on the part of this Court to anticipate
the decision of the New York Court. If the Western Gompany is aware
of the legal position and is sure of the legal position that the New York
Court has no jurisdiction to confirm the award, pray why has the
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Western Company prayed for the said relief in the New York Court?
We cannot proceed on the basis of the assertion made on behalf of the
Western Company that the ;'1ew York Court has no such jurisdiction.
For ought we know the prayer made by the Western Company may
well be granted and the legal positi_on propounded by the counsel
before us may not prevail with the New York Court. Surely, the Western Company itself is not going to contend before the New York Court C
that even though it has sought this relief the Court has no jurisdiGtion
to grant it. In any case, the Western Company could have amended the
plaint lodged in the New York Court by deleting this prayer which it has
not done so far. Be that as it may, as the matter presently stands the
appellant has invoked the jurisdiction of the New York Cour_t to pro' O
nounce on the same question which is rcqu.ired to be pronounced upoq
by the Indian Court notwithstanding the fact that only an Indian Court
has the jurisdiction to pronounce upon this vital question in view of the
stipulation contained in the arbitration agreement itself. The appellant
has invoked the jurisdiction of the New York Court in a matter which
it could not have invited the New York Court to decide. The Western I::
Company has also invoked the jurisdiction of a Court other than tile
Court which as per the arbitration agreement has the jurisdiction in
the matter. And there is a likelihood of conflicting decisions on the
very vital issue resulting in legal chaos. The apprehension about legal
chaos is more than well-founded. Assuming that the American Court
decides that it has jurisdiction to confirm the award and confirms the f
award, whereas the Indian Court forms the opirtion that the award is
invalid and sets it aside, what will happen? The Western Company
would have recovered the amount as per the award in question by
obtaining a judgment in the American Court upon the award being
confirmed by the said Court.