The Supreme Court decides on the issue of the enforceability of the Foreign Award u/s 48 of Arbitration and Conciliation Act, 1996 that has been long disputed.
Brief Facts of the Case
Pre-2001
The appellant, Centrotrade Minerals and Metals Ltd. entered into a contract for the sale of Copper Concentrate with Hindustan Copper Ltd., an Indian company. Clause 14 of this contract had a two-tier arbitration agreement to solve disputes. The first-tier was ArbitrationArbitration in India by the Indian Council of Arbitrators (ICA). Moreover, the second tier was for an appeal if any of the parties had disagreements with the result of the first tier. The ICC would hold the appeal to the second tier of Arbitration in London.
A dispute arose about the quantity of dry weight of copper concentrate delivered. The appellant, Centrotrade, invoked the arbitration clause. The arbitrator by the ICA passed an award rejecting the claims made by Centrotrade. Then, Centrotrade went in appeal to the ICC in London for the second-tier of ArbitrationArbitration.
The arbitrator appointed by the ICC, Jeremy Cook QC passed an award in favour of Centrotrade. In addition to that, it ordered HCL to pay Centrotrade. Nevertheless, before the delivery of the award, HCL filed a suit in the Court at Khetri, in the State of Rajasthan. It was for challenging the arbitration clause.
The Rajasthan H.C., in the revision petition filed against the order of the Khetri Cour. It restrained Centrotrade from taking further steps in the London arbitration. It was until the disposal of the revision application. Finally, the Supreme Court vacated this stay granted by the High Court in 2001.
Post -2001
The award dated was sought by Centrotrade in India. The Calcutta High Court, after hearing HCL’s Section 48 Application, dismissed it. Thus, the award became enforceable in India. However, a Division Bench of the Calcutta High Court, held that the award could not be a Foreign Award. Also, the two-tier clause is valid.
In an appeal to S.C., a two-judge bench of S.B. Sinha, J. and Tarun Chatterjee, J. delivered a split verdict. As Sinha, J. held Clause 14 to be non-est in the eyes of the law and violative of Section 23 of the Indian Contract Act. (Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd., {(2006) 11 SCC 245}
The issue of the validity of the two-tier clause was settled. It was done in the 3-judge bench judgment. The bench had Justices M.B. Lokur, R.K.Agarwal, and D.Y. Chandrachud. They held that the clause is valid, and parties can opt for a two-tier arbitration mechanism. (Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd., {(2017) 2 SCC 228}
The issue of the enforceability of this Foreign Award u/s 48 of Arbitration and Conciliation Act, 1996 came before Justices R.F. Nariman, V. Ramasubramaniam, and S. Ravindra Bhat.
Arguments before the Court
Centrotrade relied on Vijay Karia v. Prysmian Cavi E Sistemi SRL [2020 (3) SCALE 494]. Furthermore, they referred in detail to the portions of the award which dealt with natural justice. He then contented that HCL got ample opportunity by the arbitrator to present its case. Nevertheless, that HCL, having an Indian award in its pocket, wanted somehow to abort the London arbitration proceedings.
HCL argued that it was not given ample time and opportunity for presenting its case. In addition to that, they called the award as “one-sided”. It was further argued that even though an Indian court had granted an injunction on the ICC Proceedings, the Arbitrator continued with the arbitral proceedings.
Court’s Decision
The Court observed the issue as HCL denied the opportunity to present itself as per Article V(1)(b) of the New York Convention. The Article states that “parties against whom the award is invoked must have been given proper notice, failing which recognition and enforcement of the award may be refused.”
Furthermore, the Court found that HCL had an adequate opportunity to present its case by its Counsel Fox and Mandal. Thereafter, the Court considered authorities from all over the world. Finally, they held that the award would be enforceable in India under Section 48.
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