Madras High Court
Olam International Limited vs Manickavel Edible Oils Private Limited on 28 August, 2024
Author: C.Saravanan
Bench: C.Saravanan
E.P.Nos.68 and 69 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 06.03.2024
Pronounced On 28.08.2024
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
E.P.Nos.68 and 69 of 2021
Olam International Limited,
Represented by its Authorized Representative
Anil Shamrao Jadhav ... Petitioner in both E.Ps.
Vs.
Manickavel Edible Oils Private Limited ... Respondents in E.P.No.68 of 2021
Yentop Manickam Edible Oils
Private Limited ... Respondents in E.P.No.69 of 2021
Prayer in both E.Ps: Execution Petition is filed under Sections 47 and 49 of the
Arbitration and Conciliation Act, 1996 and Order XXI Rule 46 of the Code of
Civil Procedure, 1908, for granting recognition to the Arbitral Award as
enforceable and deeming it a decree and for attachment of movable and
immovable properties under Order XXI Rules 43, 46 and 54 of the Code of
Civil Procedure, 1908 as mentioned in the schedule hereunder, and thereafter by
issuing warrant of sale under Order XXI Rule 64 of the Code of Civil
Procedure, 1908.
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In both E.Ps.
For Petitioner : Mr.Amitava Majumdar
for M/s.Deepika Murali
For Respondents : Mr.S.R.Rajagopal
Senior Counsel
for Mr.Suhrith Parthasarathy
COMMON ORDER
By this Common Order, both the Execution Petitions filed by the
Petitioner/Award Holder to enforce the respective Awards dated 04.02.2021 are
being disposed of. Respective Awards read identically. Operative Portion of the
respective Awards both dated 04.02.2021 reads as under:-
“5.0 Discussion and Findings:
5.1 As a result of Buyers’ failure to participate in this
arbitration and in the absence of any challenge to the facts,
WE ACCEPT Sellers’ submission and supporting evidence
of the factual matrix.
5.2 The issues we have been asked to determine are:
a. Whether a contract was concluded and on
what terms;
b. Whether there is a valid and binding
arbitration agreement providing for the FOSFA Rules of
Arbitration and Appeal,c. Whether there was a default by Buyers in
failing to open a letter of credit and the damages resulting
from any such default.
5.3 We are satisfied by Sellers’ explanation and
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Sellers and Buyers and the terms and conditions contained
therein. While the initial agreement reached between the
parties was entered into on 13 January 2020, the final
terms and conditions were not finalised until on or about 29
February 2020. WE THEREFORE FIND THAT a contract
was entered into between Sellers and Buyers under
reference EO/S/00246/20 and with the terms and
conditions set out in this award at 1.0 and 2.0 above.
5.4 Having established that a contract was entered
into, we now turn to the issue addressed to us regarding the
primacy of the law of the Contract, the governing
arbitration terms and our jurisdiction.
5.5 The Contract made reference to the inclusion of
FOSFA Contract No 81 terms in two places: once in the
Pre-Amble and once under other terms. In addition, an
express Arbitration Clause referred to arbitration in
accordance with PORAM contracts. All three have been
recited in full above.
5.6 FOSFA Contract No 81 is a joint FOSFA-
PORAM contract along with MEOMA and Sellers
advanced the position that by referring to “PORAM
contracts” in the Arbitration Clause, on a natural and true
construction, the generic reference to “PORAM contracts”
includes FOSFA Contract No 81. The parties were thus
referring to FOSFA Contract No 81 as the specific contract
which they have agreed to incorporate, including its
arbitration clause.
5.7 In particular, Clause 32 of FOSFA Contract No
81 requires both parties to expressly agree to arbitration in
Malaysia in accordance with the Malaysian arbitration laws
in accordance with the PORAM Rules of Arbitration and
Appeal. In all other cases, any dispute arising out of the
Contract, including any question of law shall be shall be
referred to arbitration in London in accordance with the
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Rules of Arbitration and Appeal of the Federation of Oils
Seeds and Fats Association Limited.
5.8 Sellers submitted to us that there was no express
agreement between the parties for disputes to be referred to
arbitration in Malaysia. Therefore, Sellers argued that the
right forum is London arbitration under FOSFA Rules of
Arbitration and Appeal.
5.9 We agree with this submission and FIND THAT
there is a binding and valid arbitration agreement between
Sellers and Buyers to arbitrate any and all disputes
according to the FOSFA Rules of Arbitration and Appeal
and that we accordingly have jurisdiction in this reference.
5.10 It follows that the law governing the Contract
and the seat of this arbitration are, respectively, English and
England. As the seat of the arbitration is England and the
Award is subject to English procedural and substantive
laws, it therefore follows that it is an English Award for the
purposes of recognition and enforcement under the terms of
the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, AND WE SO
FIND.
5.11 We note that Buyers have initiated proceedings
in India. Sellers have stated in submissions that this is a
breach of the arbitration agreement but did not ask us to
make a finding on this issue. We therefore make no
comment on these proceedings.
5.12 Turning now to the question of Buyers’ breach
of contract. Payment is a fundamental condition which
goes to the root of a contract and if breached gives the
innocent party the right either to terminate or to claim
damages. In this case, Sellers and Buyers had agreed an
express term for payment, quoted in full at 2.1 above,
which essentially provided that Buyers would open an
operable letter of credit in Sellers’ favour. The Payment
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Clause was lengthy and gave rise to conflicting timelines by
when Buyers were to have established their Letter of
Credit. Indeed, Sellers’ submission to us attempted to
bridge those disparities by summarising that, on a natural
and true construction of the payment provision, Buyers
must issue a letter of credit at the time of receipt of the
vessel’s nomination and in any event by no later than three
days before the vessel’s ETA at the port of dischage.
5.13 Pausing there, Sellers were entitled to receive an
operable letter of credit before loading the cargo in
Indonesia. In the event that Buyers failed to do so, the
Contract contemplated that Buyers would be responsible
for the consequences. From the submissions and evidence,
Sellers proceeded to load their vessel without a letter of
credit in hand and sailed for India notwithstanding.
Instead, Sellers’ fallback position was to receive a letter of
credit three days before the Vessel’s arrival at the discharge
port of Tuticorin. We note this as Sellers have included a
claim for demurrage incurred at the load port. We will
return to this issue in the award section below.
5.14 Ultimately, Buyers failed to comply with the
payment term of the Contract and were consequently in
repudiatory breach of the Contract AND WE SO FIND.
5.15 Therefore, when Sellers held Buyers to be in
default on 17 March, the Contract was brought to an end
and Buyers were liable to Sellers for damages. WE
ACCEPT AND FIND THAT Buyers were in default and
WE FIND THAT the date of default was the first business
day thereafter, being 18 March 2020.
5.16 Sellers submitted that they sold the cargo on
board the MU YUE YOU to Adani Wilmar on 19 March at
US$542.50 per metric ton CFR Mangalore Port, India and
claimed the difference between the contract price and the
re-sale price as damages in accordance with the Default
Clause 29 of FOSFA Contract No 81 plus associated costs
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that flowed from Buyers’ default.
5.17 Turning firstly to the difference between the
Contract price and the re-sale of the goods to Adani
Wilmar.
5.18 The Contract quantity and price were 4,000
metric tons at US$779.00 per metric ton CFR Tuticorin.
The re-sale contract to Adani Wilmar was for a greater
quantity of 8,000 metric tons, of which 4,000 metric tons
was appropriated from the subject contract. The balance
4,000 metric tons derived from the Contract with Buyers’
associated company subject to a parallel arbitration.
5.19 The price difference due to Sellers is US$779.00
– US$542.50 = US$236.50 per metric ton calculated on the
mean contract quantity of 4,000 metric tons. The sum due
to Sellers as damages is therefore US$946,000.00, AND
WE SO FIND.
5.20 The re-sale contract was to a different discharge
port of Mangalore, India for which Sellers advanced a claim
for the cost of extra freight to call additionally at Mangalore
of US$6.00 per metric ton. Sellers supported this claim by
providing evidence of an invoice from Jiang Xin Shipping
Company, who appear as owners of the MV YUE YOU in
the Bills of Lading, for a net sum of US$38,000.00 for a
charter minimum of 10,000 metric tons.
5.21 Prima facie the invoice failed to reconcile with
Sellers’ claim of US$24,000.00. Sellers provided no
explanation for the deduction of US$22,000.00 for
“Manager Fee” although Sellers did submit that 2,000
metric tons of cargo on board the MV YUE YOU which
made up the charter party minimum of 10,000 metric tons
was destined for Chennai, India. We accept that
submission and accept that the invoice from owners
reflected the change of destination from Tuticorin to
Mangalore for the cargo of 8,000 metric tons, of which the
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subject contract was 4,000 metric tons.
5.22 We agree that the cost of the change of
destination to Mangalore is a cost that flowed directly from
Buyers’ breach and WE SO FIND.
5.23 Drawing these two strands together, we are
satisfied that Sellers are entitled to recover half of the
additional freight paid for the call at Mangalore of
US$19,000.00, and WE SO FIND.
5.24 Sellers’ final head of claim for damage was for
US$14,175.00 corresponding to a pro-rate sum of
demurrage incurred at the load port of Padang, Indonesia.
This, Sellers submitted, was due to the absence of a letter
of credit from Buyers, that caused delays in obtaining
certificates of origin from local authorities at the port of
loading as a result of Sellers being unable to issue their
necessary invoice to the shippers of the cargo. This claim
was supported by a Laytime Statement of unknown
provenance and made no reference to a delay in obtaining
shipping documents.
5.25 We were not assisted by Sellers’ evidence that,
on 12 March, one day after the Vessel had disconnected
hoses, proforma documents were sent to Buyers that
included an invoice dated 11 March for US$725.83 per
metric ton, instead of the contract price of US$779.00 per
metric ton. This was omitted from Sellers’ pleaded case.
Given the inconclusive laytime statement and no proof that
demurrage had been accrued or paid by Sellers as a
consequence of a breach by Buyers’ in failing to establish a
letter of credit before loading. WE DISMISS this claim for
demurrage at the loadport.
5.26 Turning now to Sellers’ claim for interest. By
virtue of Section 49 of the Arbitration Act, 1996, we may
award simple or compound interest from such dates, at
such rates and with such rests as we consider meet the
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justice of the case, either on part or of the whole of any
amount awarded. As Sellers have succeeded in their
claims, WE FIND THAT interest on the sums awarded at
the rate of 4% per annum, compounded quarterly is
payable by Buyers to Sellers from 18 March 2020 until the
date of settlement.
5.27 Finally Sellers have claimed the costs of the
arbitration. The nature of this dispute was straightforward
as pleaded by Sellers. The general rule is that costs follow
the event, and we see no reason to depart from that. WE
THEREFORE FIND THAT Sellers succeed in their claim
for costs and those costs are the fees and expenses of this
award and shall be for Buyers’ account.
6.0 AWARD
6.1 WE AWARD THAT Sellers’ claim SUCCEEDS.
6.2 WE FURTHER AWARD THAT Buyers shall pay
to Sellers default damages of US$946,000.00 (Nine
Hundred and Forty-Six Thousand United States Dollars).
6.3 WE FURTHER AWARD THAT Buyers shall pay
to Sellers US$19,000,00 (Nineteen Thousand United States
Dollars) being the costs of additional freight.
6.4 WE FURTHER AWARD THAT Buyers shall pay
interest on the above sums at the rate of 4% (Four per
Cent) per annum pro-rate from 18 March 2020 until the
date of settlement of this award.
6.5 WE FURTHER AWARD THAT the fees, costs and
expenses of this award amounting £13,597.50 (Thirteen
Thousand, Five Hundred and Ninety-Seven Pounds Sterling
and Fifty Pence) shall be paid by Buyers. If Sellers have
paid any or all such costs, the shall be entitled to immediate
reimbursement.”
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2. The documents and pleadings are almost identical in both the
Execution Petitions.
3. The Petitioner/Award Holder in the respective Execution Petitions are
one and the same. The Respondents/Award Debtor in the respective Original
Petitions are two sister companies from Virudhunagar District, Tamil Nadu.
4. Details of the respective Awards and the Execution Petitions filed for
enforcement of the respective Awards are as under:-
Sl.No. E.P.Nos. Case Nos. Date of Award
1. 68 of 2021 891 M/s.Manickavel 04.02.2021
Edible Oils Private Limited
Arbitration Award
No.4647
2. 69 of 2021 892 M/s.Yentop 04.02.2021
Manickam Edible Oils
Private Limited.
Arbitration Award
No.4648
5. The Petitioner/Award Holder is seeking to enforce the respective
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Awards passed by the Arbitral Tribunal on 04.02.2021 in these Execution
Petitions.
6. The respective Awards are sought to be enforced by the
Petitioner/Award Holder on the ground that the Awards satisfies the definition of
“Award” as required under Section 47 of the Arbitration and Conciliation Act,
1996 and conditions stipulated under Section 48 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred as “the Act”).
7. The Arbitral Tribunal has passed the respective Awards both dated
04.02.2021 under auspices of Federation of Oils, Seeds and Fats Associations
Limited (FOSFA) and awarded amounts to the petitioner. To enforce a Foreign
Award, the Petitioner who is Award Holder is required to satisfy that the
requirements of Sections 47 and 48 of the Act are satisfied.
8. Opposing the maintainability and enforceability of the Execution
Petition against the Respondents/Award Debtors, the learned counsel for the
Respondents/Award Debtors, at the outset, submitted that Petitioner/Award
Holder failed to satisfy the provisions of Section 47(1)(a) and 47(1)(b) of the
Arbitration and Conciliation Act by not producing the original signed Award or
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a certified copy thereof in the manner as required by the laws of the United
Kingdom. The Petitioner/Award Holder produced only a supposedly certified
copy of the purported Award dated 04.02.2021 which is not in conformity with
Section 47(1)(a) and 47(1)(b) of the Act. Now, during the course of the
proceedings before this Court, the Petitioner/Award Holder produced a
supposedly signed copy of the Award containing three signatures of the three
Arbitrators. Evidently, this copy is dated 04.02.2021 signed by the three
Arbitrators not on 04.02.2021 but on some other unknown date. It is
perceivable that the three Arbitrators could not have signed the Award on the
same day given that they are from different continents of the World. In such
event, the Petitioner/Award Holder ought to have produced an affidavit from the
members of the Tribunal vouching to the fact that the Arbitrators had physically
signed the Award on 04.02.2021, but it is not forthcoming. In this regard,
reliance was placed on the decision of the Delhi High Court in the case of
Agritrade International Pte Limited Vs. National Agricultural Co-
operative Marketing Federation of India, 2012 (128) DRI 371 wherein, it
was held that in the given facts of the case, the plea for enforcement of Foreign
Award cannot be granted as it would amount to recognizing the existence of an
Arbitration Agreement on surmises. The learned Senior counsel also invited the
attention of this Court that in compliance of Section 65B of the Indian Evidence
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Act, 1872, the Petitioner/Award Holder has not filed an affidavit attesting to
these purported electronic communications and such failure vitiates the entire
execution proceedings.
9. The Respondents/Award Debtors have raised a preliminary objection to
the maintainability of these proceedings under Sections 47 and 48 of the Act.
10. The enforcement of the Award is opposed by the Respondents/Award
Debtors on the ground that neither the “certified copy” of the Award was filed at
the time of institution of these petitions nor was there a binding contract
between the Petitioner/Award Holder and the respective Respondent/Award
Debtor. It is therefore submitted that the Awards that have been presented
before this Court for being recognized and enforced against the
Respondents/Award Debtors in the respective execution petitions are a nullity.
11. It is further submitted that since there were no contract signed
between the Petitioner/Award Holder and the respective Respondent/Award
Debtor, question of the Respondents/Award Debtors breaching the terms of the
contract also cannot be countenanced.
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12. Arguing the case on behalf of the Respondents/Award Debtors, the
learned Senior Counsel for the Respondents/Award Debtors would submit that
the so called Awards both dated 04.02.2021 were not signed on the date of
filing of the petition for enforcing the respective Award in the above Execution
Petitions.
13. It is submitted that as per Section 47(1)(a) of the Act, the
Petitioner/Award Holder who applies for enforcing Foreign Awards is required
to produce the original copy of the Award or copy thereof duly authenticated in
the manner required by the law in the Country in which it was made.
14. It is submitted that at the time of filing of the respective Execution
Petitions, the Petitioner/Award Holder has enclosed only a photocopy of the so
called Awards dated 04.02.2021 bearing the signatures of the respective
Arbitrators and the Presiding Arbitrator (Chairman) together with a Certificate
of the respective Arbitrators and the Presiding Arbitrator.
15. It is submitted by the learned Senior Counsel for the
Respondents/Award Debtors that although the filing of the original can be
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deferred in terms of the decision of the Hon’ble Supreme Court in PEC Limited
Vs. Austbulk Shipping SDN BHD, 2019 (11) SCC 620, the Awards should be
a signed copy of the Award that is available.
16. The learned Senior Counsel for the Respondents/Award Debtors
would submit that the originals of the Award that was filed later ought to have
been filed later whereas, what has been filed is a fresh copy with the original
signature of the Arbitrators.
17. It is submitted that the Certificate of the respective Arbitrators and the
Presiding Arbitrator states that it was issued in the light of outbreak of Covid-19
pandemic and due to which the original documentation with signature was not
possible. It is submitted that the Awards are contrary to the provisions of the
Arbitration Act, 1996 of the United Kingdom (England, Wales and Northern
Ireland).
18. Specifically, a reference is made to Section 52(3) of the aforesaid Act,
wherein it has been stated that an Award shall be in writing signed by all the
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Arbitrators or all those signing to the Award.
19. It is submitted that mere affixture of the digital image of the signature
of the respective Arbitrators and the Presiding Arbitrator would not satisfy the
requirements of Section 52(3) of the Arbitration Act, 1996 of the United
Kingdom.
20. It is submitted that unless such procedure was sanctioned either by
the parties under a contract or under the law in United Kingdom, question of the
Award satisfying the requirements of Section 52 of the Arbitration Act, 1996 of
the United Kingdom cannot be countenanced for the purpose of enforcing it
under Part-II of the Arbitration and Conciliation Act, 1996.
21. In this connection, the learned Senior Counsel for the
Respondents/Award Debtors has drawn attention to the decision of the Hon’ble
Supreme Court rendered in Commissioner of Agricultural Income Tax, West
Bengal Vs. Keshab Chandra Mandal, 1950 SCC Online SC 15.
22. Specifically, the learned Senior Counsel for the Respondents/Award
Debtors would submit that a principle has been clearly laid down that if on a
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construction of a statute, signature by an agent is not found permissible then the
writing of the name of the principal by the agent however clearly he may have
been authorised by the principal cannot possibly be regarded as the signature of
the principal for the purposes of that statute. It is submitted that if a statute
requires personal signature or a mark, it must be that of the person himself or
herself. It is submitted that there must be physical contact between that person
and the signature or the mark put on the document. He would therefore submit
that mere affixing of an image or impression of the signature digitally by the
Registrar of FOSFA was not sufficient.
23. The learned Senior Counsel for the Respondents/Award Debtors
would draw attention to Section 3(56) of the General Clauses Act, 1897, as per
which expression “sign”, with its grammatical variations and cognate
expressions, shall, with reference to a person who is unable to write his name,
include “mark”, with its grammatical variations and cognate expressions.
24. It is submitted that what has been filed subsequently pursuant to the
directions of this Court dated 15.11.2023 by the Petitioner/Award Holder
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together with affidavit is a copy of the respective Awards both dated 04.02.2021
does not meet the requirements and therefore the respective Awards both dated
04.02.2021 can neither be recognised nor enforced.
25. It is submitted that the copies of respective Awards both dated
04.02.2021 with the signatures that have been filed subsequently pursuant to
the aforesaid order of this Court cannot be construed to be a Original of the
signed copy of the respective Awards and therefore, these objections go to the
root of the maintainability of these two Execution Petitions to enforce the
aforesaid Award.
26. The learned Senior Counsel for the Respondents/Award Debtors
would further argue that as per Rule 6 of the Rules of Arbitration and Appeal of
FOSFA International, prescribes the procedures under the Federation of Oils,
Seeds and Fats Associations Ltd., (FOSFA), then an Award has to be in writing
on the official form of the Federation and when an Award has been signed, it is
the duty of the federation to date them and give notice to the other party named
in the Award. It is to be disbursed upon payment of fees and acceptance of
Arbitration.
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27. It is submitted that only on payment of the fees, the Federation could
send the Original of the signed copy of the Award to the other party who has
paid. In this case, what has been transmitted earlier on 11.02.2021 was merely
a draft of the Award purportedly sent by the Arbitrators with digital
image/impression of their respective signatures which have been affixed by the
Registrar of FOSFA in the copy of the respective draft copy of the Award.
28. It is submitted that the said copy would not constitute as the original
of the Award for the purpose of Section 47(1)(a) of the Indian Arbitration and
Conciliation Act, 1996.
29. It is submitted that even on the date of hearing, the so called
Certificate of the respective Arbitrators dated 04.02.2021 which were sent along
with the email dated 11.02.2021 had not been filed. Therefore, the defect has
not been cured.
30. Anticipating the arguments of the Petitioner/Award Holder to over
rule the objection, the learned Senior Counsel would submit that even though an
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objection was raised by the Registrar on four grounds at the time of filing of the
above mentioned Execution Petitions, the objection of the Registry was over
ruled and the matter taken before the Hon’ble Division Bench of this Court in
O.S.A.Nos.81 & 82 of 2022. The objection was merely confined only to the
Registry’s objection. It is submitted that merely because the Registrar’s
objection was over ruled ex parte by the Court on 09.02.2021 would not
preclude the Respondents/Award Debtors from raising objection regarding
maintainability of these two Execution Petitions on the ground that the Original
of the Arbitral Awards dated 04.02.2021 has not been filed.
31. It is therefore submitted that on this count alone, the preliminary
objection of the Respondents/Award Debtors may be accepted by the Court and
the Execution Petitions are liable to be dismissed.
32. The learned Senior Counsel for the Respondents/Award Debtors also
drew attention to a decision of the Hon’ble Supreme Court rendered in the
context of domestic arbitration and the requirement of the Arbitration Award to
be signed. In this connection, he drew attention to the following passages from
the decision of the Hon’ble Supreme Court in Dakshin Haryana Bijli Vitran
Nigam Limited Vs. Navigant Technologies Private Limited, (2021) 7 SCC
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657. It is submitted that the Hon’ble Supreme Court has underscored mistake of
signature. A reference is made to Paragraph Nos.25 to 27, which read as
under:-
“25. The legal requirement of signing the arbitral
award by a sole arbitrator, or the members of a tribunal
is found in Section 31 of the 1996 Act, which provides the
form and content of an arbitral award. Section 31
provides that:
“31. Form and contents of arbitral award.-(1) An
arbitral award shall be made in writing and shall be
signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral
proceedings with more than one arbitrator, the signatures
of the majority of all the members of the arbitral tribunal
shall be sufficient so long as the reasons for any ommitted
signature is stated.
…..
(4) The arbitral award shall state its date and the
place of arbitration as determined in accordance with
Section 20 and the award shall be deemed to have been
made at that place.
(5) After the arbitral award is made, a signed copy
shall be delivered to each party.
26. Section 31(1) is couched in mandatory terms, and
provides that an arbitral award shall be made in writing
and signed by all the members of the arbitral tribunal . If
the arbitral tribunal comprises of more than one
arbitrator, the award is made when the arbitrators acting
together finally express their decision in writing, and is
authenticated by their signatures. An award takes legal
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effect that only after it is signed by the arbitrators, which
gives it authentication. There can be no finality of the
award, except after it is signed, since signing of the
award gives legal effect and validity to it. The making
and delivery of the award are different stages of an
arbitration proceeding. An award is made when it is
authenticated by the person who makes it. The statute
makes it obligatory for each of the members of the
tribunal to sign the award, to make it a valid award. The
usage of term “shall” makes it a mandatory
requirement. It is not merely a ministerial act, or an
empty formality which can be dispensed with.
27. Sub-section (1) of Section 31 read with sub-
section (4) makes it clear that the Act contemplates a
single date on which the arbitral award is passed i.e., the
date on which the signed copy of the award is delivered
to the parties. Section 31 (5) enjoins upon the
arbitrator/tribunal to provide the signed copy of the
arbitral award to the parties. The receipt of a signed
copy of the award is the date from which the period of
limitation for filing objections u/S.34 would commence.
This would be evident from the language of sub-Section
(3) of Section 34 (3) which reads:
“34.Application for setting aside arbitral award.
…
…
(3) An application for setting aside may not be
made after three months have elapsed from the date on
which the party making that application had received the
arbitral award or, if a request had been made under
section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the
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the application within the said period of three months it
may entertain the application within a further period of
thirty days, but not thereafter.”
33. The learned Senior Counsel for the Respondents/Award Debtors
would vociferously contend that there is no Arbitration Agreement between the
parties in terms of Section 48(1)(a) of the Act, which the Petitioner/Award
Holder could enforce. The Sale Contract dated 13.01.2020, which formed the
basis for initiation of arbitration proceedings has not been executed mutually by
either of the parties. Referring to Section 44 of the Act, learned Senior Counsel
for the Respondents/Award Debtors submitted that a Foreign Award means an
Arbitral Award on differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under the law in force in
India. Also by referring to Paragraph 2 of Article II of the Convention on the
Recognition and Enforcement of Foreign Arbitral awards, the learned Senior
Counsel submitted that the term “agreement in writing” shall mean and include
an arbitral clause in a contract or an Arbitration Agreement signed by parties or
contained in an exchange of letters or telegrams.
34. It is the contention of the learned Senior counsel for the
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fulfilled in this case and therefore, it has to be held that there is no Arbitral
Award at all between the parties, which the Petitioner/Award Holder can enforce
against the Respondents/Award Debtors. For this purpose, the learned Senior
Counsel for the Respondents/Award Debtors placed reliance on the decision of
the Delhi High Court in Viroz Oils and Fats Ptd. Ltd. Vs. National
Agricultural Co-operative Marketing Federation of India, 2016 SCC Online
Delhi 6203 and contended that in identical circumstances, the Delhi High Court
refused to enforce a Foreign Award.
35. With respect to composition and constitution of the Arbitral Tribunal,
it is submitted that it is against the provisions of Section 48(1)(d) of the Act.
According to the learned Senior Counsel, the Respondents/Award Debtors
received a Letter dated 01.10.2020 from Palm Oil Refiners Association of
Malaysia (PORAM) intimating that the Petitioner/Award Holder requested that
the arbitration proceedings, including the constitution of the Tribunal, be put on
hold till 30.11.2020. In fact, in the said Letter, it was stated that Arbitral
Tribunal is yet to be constituted. However, the Petitioner/Award Holder now
contends that the Arbitral Tribunal was constituted on 09.09.2020 itself and the
Petitioner/Award Holder appears to have filed the Claim Statement on
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09.10.2020. Thus, it is clear that the constitution of the Arbitral Tribunal itself
is improper. Consequently, the Award passed by the Arbitral Tribunal cannot be
enforced or binding on the Respondents/Award Debtors. Even though the
Petitioner/Award Holder produced an Award said to have been passed by the
Arbitral Tribunal, purportedly signed by the members of the Arbitral Tribunal,
such Award, soon after signing, has to be sent to both parties in the manner
known to law for the Award to become binding, but it was not done in this case.
The copy of the Award has not been sent to the Respondents/Award Debtors,
while so, the Respondents/Award Debtors are not in a position to assail the
Award. There must be an Award duly signed and served on the
Respondents/Award Debtors without which it cannot be expected that the
Respondents/Award Debtors could challenge it.
36. Referring to Paragraph No.5.2 of the Award, it is contended by the
learned Senior Counsel for the Respondents/Award Debtors that the Tribunal
framed issues as to (i) whether the contract was concluded and on what terms
(b) whether there is a valid and binding Arbitration Agreement providing for the
FOSFA Rules of arbitration and appeal and (iii) whether there was a default by
buyers in failing to open a Letter of Credit and damages resulting from any such
default. In Paragraph No.1.6, the Tribunal recorded that there was no contract
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signed and stamped among the parties, however, it was held in Paragraph
No.5.3 that it is satisfied by the Seller’s explanation and evidence in relation to
the existence of the terms and conditions among them. The Tribunal has not
recorded any independent reason to determine the issue (a) in favour of the
claimant. Above all, the jurisdictional pre-condition for reference to arbitration
is the intention between the parties to refer a dispute. In the absence of such a
requirement, it has to be held that there was no valid and legally binding
Agreement exist between the parties. It is also contended by the learned Senior
Counsel for the Respondents/Award Debtors that the members of the Arbitral
Tribunal were ineligible to be appointed in terms of Section 12 read with
Clauses 22 and 24 of the Fifth Schedule of the Act inasmuch as the same
Arbitral Tribunal has been nominated by the Petitioner/Award Holder in respect
of another arbitration. Accordingly, the learned Senior Counsel for the
Respondents/Award Debtors prayed for dismissal of the Execution Petitions as
devoid of merits.
37. The enforcement of the Award is questioned. That apart, it is
submitted that the Award that has been presented for enforcement under Part II
(Enforcement of Certain Foreign challenge) Chapter-I (New York Convention
challenge) of the Act is in violation of Sections 47(1)(A), 47(1)(B), 48(1)(A),
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48(1)(D) and Section 48(2)(B) of the Act.
38. By way of reply, the learned counsel for the petitioner would submit
that the objection regarding maintainability of these two Execution Petitions
were available to the Respondents/Award Debtors at the earliest point of time
after they entered appearance.
39. It is submitted that the Respondents/Award Debtors took a chance
before the Hon’ble Division Bench of this Court in O.S.A.Nos.81 & 82 of 2022
and therefore, it is not open for the Respondents/Award Debtors to raise a plea
regarding maintainability under Section 47 of the Indian Arbitration and
Conciliation Act, 1996, particularly when the original of the respective Awards
were duly signed by the respective Arbitrators along with the Presiding
Arbitrator which has been filed pursuant to order dated 15.11.2023 of this
Court.
40. It is submitted that the Hon’ble Division Bench of this Court by its
order dated 21.06.2021 had made it clear that the issue regarding
maintainability of the Execution Petition may be taken up before the learned
Single Judge and that issue was once again considered by the learned Single
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Judge while passing order dated 19.10.2022 regarding the jurisdiction issue and
answered against the Respondents/Award Debtors. It is submitted that SLP
filed by the Respondents/Award Debtors before the Hon’ble Supreme Court in
S.L.P.Nos.20428 & 20429 of 2022 was also dismissed.
41. It is submitted that there is no scope for dismissing the respective
Execution Petitions filed by the Petitioner/Award Holder to execute the Award
particularly in the light of the fact that the Originals of the respective Awards
duly signed by the respective Arbitrators and the Presiding Arbitrator are before
this Court.
42. That apart, the learned counsel for the Petitioner/Award Holder would
submit that the Award that was filed along with the respective Execution
Petitions was also transmitted to the Respondents/Award Debtors on
11.02.2021 after necessary payments were made by the Petitioner/Award
Holder in accordance with the provisions of the Arbitration and Application
Rules of FOSFA International.
43. Hence, it is submitted that the Award has to be enforced and the
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amount has to be recovered from the Respondents/Award Debtors.
44. The learned Senior Counsel for the Respondents/Award Debtors
further drew attention to the requirements of original Agreement for Arbitration
has also not been filed and therefore, on this count also the Award is not
maintainable. The learned Senior Counsel for the Respondents/Award Debtors
submits that even otherwise there were no Agreement between the parties to
refer the dispute to Arbitration under the ages of FOSFA International.
45. The learned Senior Counsel for the Respondents/Award Debtors also
drew attention to Section 54 of UK Arbitration Act, 1996. Specifically, it was
submitted that as per Section 54(2), the date of Award shall be taken as the date
on which it is signed by the Arbitrator or where more than one Arbitrator has
signed by last them. In this case, the originals which have been filed
subsequently are all dated 04.02.2021.
46. Alternatively, the learned Senior Counsel would submit that if the
Award has been signed post facto, the correct date ought to have been given in
the Award and that date is the date of recording limitation for the purpose of
Section 7 of the UK Arbitration Act, 1996. In this connection, the learned
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Senior Counsel drew attention to Section 54 of the UK Arbitration Act, 1996,
which reads as under:-
“54.Date of award.
(1) Unless otherwise agreed by the parties, the tribunal
may decide what is to be taken to be the date on which the
award was made.
(2) In the absence of any such decision, the date of the
award shall be taken to be the date on which it is signed by the
arbitrator or, where more than one arbitrator signs the award,
by the last of them.”
47. For this purpose, a reference was made to FOSFA 81 at Clause 32
(AT 41) which provides that all cases other than those which are agreed to take
place in Malaysia are to be governed by the Rules of Arbitration and Appeal of
the Federation of Oils, Seeds and Fats Association Limited. Even as per Section
4(1) of the English Arbitration Act, 1996, the mandatory provisions are
provided in Schedule I and Section 4 (2) of the Act which allows parties to make
their own arrangement by Agreement for non-mandatory sections.
48. Similarly, Section 4(3) of the English Arbitration Act, 1996,
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provides that such arrangement may be made by agreeing to the application of
institutional Rules. Section 52 of the English Arbitration Act provides for Form
of Award. As per Schedule I appended to Section 52 non-mandatory provision
and therefore, Section 4 (2) and (3) can be reckoned from by parties making
their own arrangements in terms of Section 52 (1) of the Act, which states that
the parties are free to agree on the form of an Award. Section 52 (2) (5) will
come into play only where the parties do not make such Agreement.
49. It is submitted that in this case, the parties agreed to institution
rules of FOSFA as provided under Section 4 (3) read with 52 (1) of the English
Arbitration Act, 1996. Rule 6 of the FOSFA Rules provide for “procedure for
Arbitration Award”, hence, the Award is to be in terms with the FOSFA Rules
and not Section 52 (2) to (4) of The English Arbitration Act, 1996. However, it
is contended by the Respondents/Award Debtors that it was not bound by the
terms of the contract, including the arbitration clause and they could not be
compelled to participate in the arbitration. Accordingly, the Respondents/Award
Debtors did not participate in the arbitration proceedings.
50. The learned counsel further submitted that during March 2020 due to
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outbreak of Covid-19 pandemic, the system of digital signing of Awards
electronically was introduced and it is also recognized under Section 7 (2) of the
English Electronic Communications Act, 2000. The learned counsel for the
petitioner therefore submitted that the Awards passed by the Arbitral Tribunal
were strictly in accordance with FOSFA 81 and the Rules of Arbitration. It is
submitted that the respective Awards were also in compliance with Section 47 of
the said Act. Notwithstanding the same, an objection as regards maintainability
of the Execution Petition was raised on the ground that the Award was not an
original signed Award.
51. After considering the Awards as filed along with the certificates of the
Arbitral Tribunal, this Court had overruled the objections of the
Respondent/Award Debtor on 09.12.2021.
52. Thereafter, the Respondents/Award Debtors filed counter in which,
reference was made to Section 48 of the Arbitration and Conciliation Act, 1996.
In order to buttress this submission, reliance was made to the decision of the
Hon’ble Supreme Court in (i) P.E.C. Limited Vs. Austbulk Shipping SDN
BHD, 2018 SCC Online 2549 and (ii) Gemini Bay Transcription Private
Limited Vs. Integrated Sales Services Limited, (2022) 1 Supreme Court
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Cases 753.
53. The learned counsel for the Petitioner/Award Holder submitted that
absence of a formal signed copy of the contract is not a sine quo non for
initiating arbitration proceedings or it does not mean there was no agreed
contract at all. It is submitted that Section 7(4)(b) of the Indian Arbitration and
Conciliation Act, 1996, recognizes that an Arbitration Agreement can be derived
from exchange of letters, telegrams or other modes of communications and an
Arbitration Agreement need not be in a specified form.
54. It is submitted that incorporation of arbitration clause by general
reference to a standard form of contract between the parties is a valid
incorporation of arbitration clause. Section 7(5) of the Indian Arbitration and
Conciliation Act, 1996 recognizes incorporation by reference and arbitration
clause in another document would be deemed to be incorporated into the
contract by reference, if the contract provides standard form of terms and
conditions of an independent trade or professional institution.
55. The learned counsel for the Petitioner/Award Holder also invited the
attention of this Court to the email dated 05.03.2020 of the Respondents/Award
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Debtors and contended that it confirmed that there was an Agreement for two
parcels of 4,000 Metric Tonnes on the vessel setting out the price for each
shipment being US Dollar 779 and 755 respectively and this goes to show that
there was an Agreement between the parties and the breach of the contract
would entail initiation of arbitration proceedings.
56. The learned counsel for the Petitioner/Award Holder further submitted
that the Arbitral Tribunal had afforded sufficient opportunities to the
Respondents/Award Debtors to put for their defence, however, the
Respondents/Award Debtors did not raise any defence before the Tribunal. The
Tribunal, on appreciation of the material evidence concluded that there was a
valid contract between the parties. The Arbitral Tribunal, on considering the
facts leading to the dispute, the calculation of damage, mitigation etc., held that
the Respondents/Award Debtors were in breach of the terms of the contract and
proceeded to consider the claim for damages. Admittedly, the
Respondents/Award Debtors did not challenge the Award passed by the
Arbitrator and therefore, this Court need not go into the merits of the dispute,
which has been decided by the Arbitral Tribunal.
57. According to the learned counsel for the Petitioner/Award Holder, the
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threshold for refusal to enforce a Foreign Award under Section 48 is so narrow
as compared to the grounds available for assailing an Arbitral Award under
Section 34 of the Arbitration and Conciliation Act, 1996. In this context,
reference was made to the decisions in (i) Vijay Karia Vs. Prysmian Cavi E
Sistemi SRL, (2020) 11 Supreme Court Cases 1 (ii) Ssangyong Engg &
Construction Co Ltd., Vs. NHAI, (2019) 15 Supreme Court cases 131 and
(iii) Reliance Industries Limited Vs. Union of India, (2014) 7 Supreme Court
Cases 603 to contend that the scope of interference under Section 48 is very
narrow.
58. The learned counsel for the Petitioner/Award Holder also submitted
that the Execution Petitions filed for enforcement of the Foreign Award dated
04.02.2021 is based on the established principles provided under law. The
Award passed by the Arbitral Tribunal is not contrary to the public policy and it
is enforceable against the Respondents/Award Debtors. The learned counsel for
the Petitioner/Award Holder therefore prayed for allowing the Execution
Petitions as prayed for.
59. Turning to the submissions made under Section 47 (1) of the Act, the
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learned Senior Counsel for Respondents/Award Debtors submitted that
fulfillment of the same requires strict compliance and not substantial
compliance. But in this case, the provisions of Section 47(1)(a) and 47(1)(b)
have not been complied with which goes to the root of the Public Policy of the
country. A failure to comply with those provisions renders a purported Foreign
Award unenforceable. Therefore, notwithstanding the grounds raised under
Section 48 of the Act, based on the preliminary objections raised on behalf of
the Respondents/Award Debtors, the Execution Petitions deserves to be
dismissed.
60. I have considered the arguments advanced by the learned counsel for
the Petitioner/Award Holder and the learned Senior Counsel for the
Respondents/Award Debtors and also perused the materials available on record.
61. The Petitioner/Award Holder seeks to execute the foreign award
dated 04.02.2021 passed by the Arbitral Tribunal under Federation of Oils,
Seeds and Fats Association Limited (FOSFA) Rules. According to the
Petitioner/Award Holder, in terms of the arbitration clause set out in the contract
form – FOSFA 81 Rules, the dispute was referred to the Arbitral Tribunal and it
is maintainable.
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62. The case was heard on 04.02.2024, 11.01.2024 and thereafter on
14.02.2024. After the counsel for the Petitioner/Award Holder has made
previous submissions for enforcing the foreign award and to justify that the
foreign award was to be recognized by this Court, it was felt that the
Petitioner/Award Holder should first satisfy the requirements of Sections 47 and
48 of the said Act.
63. Aggrieved by the same, O.S.A. (CAD) Nos.81 and 82 of 2022 were
filed. The Division Bench of this Court dismissed the appeals and directed the
Respondents/Award Debtors to raise the issue of maintainability before this
Court. It is therefore submitted that the Award is in compliance with Section 47
of the Act and the Execution Petition is maintainable.
64. In the Counter Affidavit, the Respondents/Award Debtors has raised
two grounds namely (i) there is no valid and legally enforceable Arbitration
Agreement between the parties as there was no contract between them and (ii)
the Arbitral Tribunal assumed jurisdiction upon itself erroneously when there
was no Arbitration Agreement and therefore, the Arbitral Tribunal has no
jurisdiction and consequently, the Award passed is in contravention of
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fundamental policy of the laws of India. However, in the application under
Section 48 of the Arbitration and Conciliation Act, the grounds raised by the
Respondents/Award Debtors for setting aside the Award are not valid.
65. The learned counsel for the Petitioner/Award Holder contended that it
was repeatedly harped upon by the Respondents/Award Debtors that there was
no valid substantive contract between the parties and therefore, the arbitration
proceedings as well as the present Execution Petitions are not maintainable.
66. In this context, the learned counsel for the Petitioner/Award Holder
relied on Enercon (India) Limited and others Vs. Enercon GMBH and
another, (2014) 5 Supreme Court Cases 1 wherein, it was held that Arbitration
Agreement is a separate contract in the underlying contract between the parties
and separation of the same from the main contract is essential to infer the
intention between the parties to the dispute. In any event, such underlying
contract does not extinguish the arbitration agreement.
67. The dispute between the Petitioner/Award Holder and the
Respondents/Award Debtors had arisen on account of negotiation between the
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Petitioner/Award Holder and the agents/brokers of the respective
Respondents/Award Debtors.
68. The Hon’ble Supreme Court in Fuerst Day Lawson Ltd. Vs. Jindal
Exports Ltd, (2001) 6 SCC 356 has held that both recognition and
enforcement of the Award under Part II of the Arbitration and Conciliation Act,
1996 can be in a single proceeding. Relevant passage from the said decision
reads as under:-
“31. Prior to the enforcement of the Act, the Law of
Arbitration in this country was substantially contained in
three enactments namely (1) The Arbitration Act, 1940, (2)
The Arbitration (Protocol and Convention) Act, 1937 and (3)
The Foreign Awards (Recognition and Enforcement) Act,
1961. A party holding a foreign award was required to take
recourse to these enactments. The Preamble of the Act
makes it abundantly clear that it aims at to consolidate and
amend Indian laws relating to domestic arbitration,
international commercial arbitration and enforcement of
foreign arbitral awards. The object of the Act is to minimize
supervisory role of court and to give speedy justice. In this
view, the stage of approaching court for making award a rule
of court as required in Arbitration Act, 1940 is dispensed with
in the present Act. If the argument of the Respondents is
accepted, one of the objects of the Act will be frustrated and
defeated. Under the old Act, after making award and prior to
execution, there was a procedure for filing and making an
award a rule of court i.e. a decree. Since the object of the act
is to provide speedy and alternative solution of the dispute,
the same procedure cannot be insisted under the new Act
when it is advisedly eliminated. If separate proceedings are to
be taken, one for deciding the enforceability of a foreign
award and the other thereafter for execution, it would only
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sufferings of a litigant in terms of money, time and energy.
Avoiding such difficulties is one of the objects of the Act as
can be gathered from the scheme of the Act and particularly
looking to the provisions contained in Sections 46 to 49 in
relation to enforcement of foreign award. In para 40 of the
Thyssen judgment already extracted above, it is stated that as
a matter of fact, there is not much difference between the
provisions of the 1961 Act and the Act in the matter of
enforcement of foreign award. The only difference as found is
that while under the Foreign Award Act a decree follows,
under the new Act the foreign award is already stamped as
the decree. Thus, in our view, a party holding foreign award
can apply for enforcement of it but the court before taking
further effective steps for the execution of the award has to
proceed in accordance with Sections 47 to 49. In one
proceeding there may be different stages. In the first stage the
Court may have to decide about the enforceability of the
award having regard to the requirement of the said provisions.
Once the court decides that foreign award is enforceable, it
can proceed to take further effective steps for execution of
the same. There arises no question of making foreign award
as a rule of court/decree again. If the object and purpose can
be served in the same proceedings, in our view, there is no
need to take two separate proceedings resulting in
multiplicity of litigation. It is also clear from objectives
contained in para 4 of the Statement of Objects and Reasons,
Sections 47 to 49 and Scheme of the Act that every final
arbitral award is to be enforced as if it were a decree of the
court. The submission that the execution petition could not
be permitted to convert as an application under Section 47 is
technical and is of no consequence in the view we have
taken. In our opinion, for enforcement of foreign award
there is no need to take separate proceedings, one for
deciding the enforceability of the award to make rule of the
court or decree and the other to take up execution thereafter.
In one proceeding, as already stated above, the court
enforcing a foreign award can deal with the entire matter.
Even otherwise, this procedure does not prejudice a party in
the light of what is stated in para 40 of the Thyssen
judgment.”
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69. Under Part II of the Arbitration and Conciliation Act, 1996, Court is
not sitting as an Appellate Court. The Court is merely required to see whether
the successful Award Holder has complied with the requirements of Section 44
read with Article I of the First Schedule of the Arbitration and Conciliation Act,
1996 particularly Article II(2) read with Section 47 of the Arbitration and
Conciliation Act, 1996.
70. The scope of interference in enforcement of the Foreign Award is very
limited as held by the Hon’ble Supreme Court in PEC Limited Vs. Austbulk
Shipping SDN BHD, (2019) 11 SCC 620.
71. If the Award is pursuant to an Agreement in writing for arbitration to
which the convention set forth in the First Schedule is specified and the
successful Award Holder also specifies the requirement of Section 47 of the
Arbitration and Conciliation Act, 1996, the Award has to be not only recognized
but also enforced.
72. Section 48 of the Arbitration and Conciliation Act, 1996 specifies the
circumstances under which enforcement of Foreign Award may be refused.
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They are in two categories namely under Section 48(1) and Section 48(2) of the
Arbitration and Conciliation Act, 1996. For the purpose of discussion, they are
reproduced below:-
Section 48(1) of the Arbitration and Section 48(2) of the Arbitration and
Conciliation Act, 1996 Conciliation Act
(1) Enforcement of a foreign award may (2) Enforcement of an arbitral award may
be refused, at the request of the party also be refused if the court finds that-
against whom it is invoked, only if that (a) The subject-matter of the difference is
party furnishes to the court proof that- not capable of settlement by arbitration
(a) The parties to the agreement referred under the law of India; or
to in section 44 were, under the law (b) The enforcement of the award would
applicable to them, under some be contrary to the public policy of India.
incapacity, or the said agreement is not Explanation 1. – For the avoidance of any
valid under the law to which the parties doubt, it is clarified that an award is in
have subjected it or, failing any indication conflict with the public policy of India,
thereon, under the law of the country only if, –
where the award was made; or (i) the making of the award was induced
(b) The party against whom the award is or affected by fraud or corruption or was
invoked was not given proper notice of in violation of section 75 of section 81; or
the appointment of the arbitrator or of the (ii) it is in contravention with the
arbitral proceedings or was otherwise fundamental policy of Indian law; or
unable to present his case; or (iii) it is in conflict with the most basic
(c) The award deals with a difference not notions of morality or justice.
contemplated by or not falling within the Explanation 2. – For the avoidance of
terms of the submission to arbitration, or doubt, the test as to whether there is a
it contains decisions on matters beyond contravention with the fundamental policy
the scope of the submission to arbitration: of Indian law shall not entail a review on
Provided that, if the decisions on matters the merits of the dispute.
submitted to arbitration can be separated
from those not so submitted, that part of (3) If an application for the setting aside
the award which contains decisions on or suspension of the award has been
matters submitted to arbitration may be made to a competent authority referred to
enforced; or in clause (e) of sub-section (1) the court
(d) The composition of the arbitral may, if it considers it proper, adjourn the
authority or the arbitral procedure was not decision on the enforcement of the award
in accordance with the agreement of the and may also, on the application of the
parties, or, failing such agreement, was party claiming enforcement of the award,
not in accordance with the law of the order the other party to give suitable
country where the arbitration took place; security.
or
(e) The award has not yet become binding
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Section 48(1) of the Arbitration and Section 48(2) of the Arbitration and
Conciliation Act, 1996 Conciliation Act
on the parties, or has been set aside or
suspended by a competent authority of
the country in which, or under the law of
which, that award was made.
73. The law on the subject has also been clarified by the Hon’ble Supreme
Court in the case of Gemini Bay Transcription (P) Ltd., Vs. Integrated Sales
Service Ltd., (2022) 1 SCC 753 and in the case of Ssangyong Engg &
Construction Co Ltd., Vs. NHAI, (2019) 15 Supreme Court cases 131 and the
issue is no longer res integra.
74. Initially, there was a proposal for purchase of Crude Palm Oil from
the Petitioner/Award Holder by the Respondent/Award Debtor in E.P.No.68 of
2021 namely M/s.Manickavel Edible Oils Private Limited. The Purchase
Orders were negotiated on behalf of the Respondents/Award Debtors by two
different agents/brokers namely Mr.Ramamoorthy (HUF) and M/s.A Square
Agencies for 2000 Metric Tonnes and 6000 Metric Tonnes respectively. The
confirmation was given by the said these two agents/brokers on 13.01.2020.
The price was however to be negotiated. Rest of the terms had been agreed
upon. These Purchase Orders appear to have preceded with WhatsApp
Communications from the Petitioner/Award Holder requesting the
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Respondents/Award Debtors to buy Crude Palm Oil from the Petitioner/Award
Holder.
75. In furtherance of the aforesaid confirmation by the two
agents/brokers, the Petitioner/Award Holder had also forwarded copies of draft
contracts both dated 13.01.2020.
76. The draft contracts dated 13.01.2020 are for sale to the
Respondent/Award Debtor in E.P.No.68 of 2021 namely M/s.Manickavel
Edible Oils Private Limited. The draft contracts that were emailed on
20.01.2020 were also signed by the Petitioner/Award Holder on 02.03.2020.
77. The above draft contracts which were emailed by the
Petitioner/Award Holder on 20.01.2020 to the Respondent/Award Debtor in
E.P.No.68 of 2021 namely M/s.Manickavel Edible Oils Private Limited gave
the details of the sale contract number, quantity and the price etc., as below:-
Sale Contract No. Quantity Price
EO/S/00257/20 2,000.000 Metric Tonnes To be price in due
(+/- 2.00% at sellers option on course (For CIF
contract price) delivered weight)
CFR Tuticorin, India.
EO/S/00246/20 6,000.000 Metric Tonnes To be price in due
(+/- 2.00% at sellers option on course (For CIF
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E.P.Nos.68 and 69 of 2021
Sale Contract No. Quantity Price
contract price) delivered weight)
CFR Tuticorin, India.
78. The Respondent/Award Debtor in E.P.No.68 of 2021 namely
M/s.Manickavel Edible Oils Private Limited, however did not sign the contracts.
Under the above draft contracts that were emailed with signature, the
Respondent/Award Debtor M/s.Manickavel Edible Oils Private Limited was
required to open a Letter of Credit in favour of the Petitioner/Award Holder.
The draft contracts which were emailed on 20.01.2020 contains two important
clauses regarding arbitration. Both are identical. The preamble to the contracts
read as under:-
“This contract is made upon the terms, conditions and rules,
including the arbitration clauses of this contract, in contract form
FOSFA 81 Rules of Arbitration and Appeal in force at the date of
this contract, of which the parties admit that they have knowledge
and notice, and the details given below shall be taken as having
been written into such contract form in the appropriate place. Any
special terms and conditions contained herein and/or attached hereto
shall be treated as if writer on such contract form and shall prevail
in so far as if writer of such contract form and shall prevail in so far
as they may be inconsistent with the printed clauses of such contract
form.”
79. Similarly, an Arbitration Clause has also been provided in these two
draft contracts. They read as under:-
“Arbitration Clause:
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E.P.Nos.68 and 69 of 2021Any dispute arising out of or under this contract, including
any question regarding its existence, validity or termination shall be
referred to International Arbitration Centre in accordance with the
terms and conditions as per PORAM contracts. It is also
understood and accepted that these contract terms and conditions
once agreed are final and that there will not be any changing and
negotiating rewards.”
80. The Petitioner/Award Holder had identified the vessel for shipping the
Crude Palm Oil pursuant to the aforesaid negotiations by the agents/brokers of
the Respondent/Award Debtor in E.P.No.68 of 2021. The Petitioner/Award
Holder has also confirmed that the consignments will be shipped in vessel sub
“YUE YOU 902 OOS”.
81. By a communication dated 20.02.2020, the Petitioner/Award Holder
had confirmed the following:
“P.S.- Please note and furnish the following to Olam
– Firstly, Tuticorin has been as the final destination per your
confirmation.
– Secondly, to provide Shipping Instructions (including B/L splits per
disport & BL consignee & notify party) and send us transmitted LC
copy.
Before vessel berth. Fyi, your shipping instructions provided
are back to back to our shipper via an LC open to them 14 days before
vessel eta
loadport. Just for your understanding, we will not be
responsible for any delay should the COO unable to mention loadport
BL no. as required by
Your new policy as well as last minute changes to LC
amendment needed to our shipper. Amendment charges will be borne
by you.
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E.P.Nos.68 and 69 of 2021Therefore, your corporation is greatly appreciated for future
shipments with SI to be given by 14 days before vessel eta loadport.
– Thirdly, ensure Marine Insurance/FOG is added to LC price.
Rgds, Bel.”
82. However, on 27.02.2020, a revised quantum was given by the two
agents/brokers of the Respondent/Award Debtor in E.P.No.68 of 2021. The
consignment was split into two consignments of 4000 Metric Tonnes each for
the Petitioner/Award Holder in E.P.Nos.68 and 69 of 2021 as detailed below:-
E.P.No.68 of 2021
Agent Name Contract No. Seller Buyer Quantity Price
Deepa ASQ/Olam/M M/s.Olam Manickavel 4,000 MT (+/-) USD
Ramakrishnan E/01C/19-20 International Edible Oils 2% 755.00
for A Square (Final) Ltd Pvt. Ltd. CNF
Agencies Tuticorin
E.P.No.69 of 2021
Agent Contract No. Seller Buyer Quantity Price
Name
Ramakrishnan PRAM M/s.Olam Yentop 4,000 MT (+/-) USD
Padmanabhan HUF/Olam/M International Manickam 2% 755.00
HUF E/01B/19-20 Ltd Edible Oils CNF
(Final) Pvt. Ltd. Tuticorin
83. Pursuant to the above, the Petitioner/Award Holder reformatted the
contracts that were earlier mailed on 20.01.2020 and sent a fresh copy of the
draft contracts on 02.03.2020. It specified the same contract numbers as
mentioned above save that they were split between the Respondents/Award
Debtors in E.P.Nos.68 and 69 of 2021. The details of the contracts are as
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E.P.Nos.68 and 69 of 2021
under:-
E.P.No.68 of 2021
Agent/ Sales Product/ Seller Buyer Quantity Price
Broker Contract Commodity
No.
A Square EO/S/0024 Crude Palm Olam Inter Manickavel 4,000.00 USD
Agencies 6/20 Oil in Bulk -national Edible Oils Metric 779.00 per
Limited Pvt. Ltd Tonnes Metric
(+/- 2.00% Tonne
at seller’s CNF
option on Tuticorin
contract
price)
E.P.No.69 of 2021
Agent/ Sales Product/ Seller Buyer Quantity Price
Broker Contract Commodity
No.
P.Rama EO/S/0025 Crude Palm Olam Inter Yentop 4,000.00 USD
krishnan 7/20 Oil in Bulk -national Manickam Metric 755.00 per
HUF Limited Edible Oils Tonnes metric
Pvt. Ltd. (+/- 2.00% tonne CNF
at seller’s Tuticorin
option on
contract
price)
84. The draft contracts which were signed on 02.03.2020 has neither
been signed by the representative of the Petitioner/Award Holder nor by the
Respondents/Award Debtors or their agents/brokers. After the transmission of
the draft contracts on 02.03.2020, the draft contracts were sent to the same
person namely Mr.Ramamoorthy (HUF).
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85. By email dated 06.03.2020, the Petitioner/Award Holder requested
the agent/broker Mr.Ramamoorthy, to arrange for the Letter of Credit without
delay as the vessel had already reached the load port and would be berthing by
07.03.2020 and therefore, the Petitioner/Award Holder required the Letter of
Credit copy with its Banker.
86. Prior to the aforesaid email dated 06.03.2020 requesting for the Letter
of Credit, the agent/broker namely Mr.Ramamoorty of M/s.A Square
Group/Agencies had agreed to furnish the Letter of Credit for 725.83 on the
ground that the Respondents/Award Debtors had opened the Letter of Credit for
bunga lavender and taken a notional value of 767.50 for Letter of Credit
opening while the Respondents/Award Debtors later covered at 690.
87. In the aforesaid email from 05.03.2020, there is a forward of email
from [email protected] purportedly sent by one person who identified himself
as Annachi, beside Ramamoorthy of Annachi giving particulars of the proposed
Letter of Credit in favour of the Petitioner/Award Holder. The
Respondents/Award Debtor however failed to open the Letter of Credit in favour
of the Petitioner/Award Holder.
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88. The Petitioner/Award Holder however appears to have loaded the
consignments on 10.03.2020 on the vessel. The Master of the vessel also issued
separate Bill of Lading No.YYPDGTUT02. Thus, without signing the contract
and without Letter of Credit from the Respondents/Award Debtors, the
Petitioner/Award Holder loaded the consignments in the vessel for the
Respondents/Award Debtors hoping that the Respondents/Award Debtors will
open the Letter of Credit by the time the consignment reaches the port of
destination at Tuticorin.
89. During the interregnum, there was a complete lockdown due to
outbreak of Covid-19 pandemic in India. The vessel appears to have arrived the
port of destination/port of discharge namely Tuticorin on 17.03.2020. The
Respondents/Award Debtors failed to take the delivery of consignments and the
secured payments.
90. According to the Petitioner/Award Holder, the Petitioner/Award
Holder was forced to make distress sale of the consignment to M/s.Adani
Wilmar Limited (AWL) and therefore, issued two separate notices on
24.03.2020 terminating the contract with the respective Respondents/Award
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E.P.Nos.68 and 69 of 2021
Debtors.
91. In the aforesaid letters terminating the contract, the Petitioner’s Legal
Department stated that the Petitioner/Award Holder holds the respective
Respondents/Award Debtors liable for the loss including the interest and costs
while reserving all rights in respect of the contracts.
92. Later, by two separate notices dated 11.06.2020, the Petitioner/Award
Holder has invoked the arbitration clause and nominated Ms.Diane Golloway,
Little Eden, The Heath Hatfield Heath, Essex CM22 7DX, United Kingdom, as
the Nominee Arbitrator and called upon the respective Respondents/Award
Debtors to nominate an Arbitrator to resolve the dispute.
93. In the aforesaid letter/email issued by the counsel for the
Petitioner/Award Holder namely Helmsman LLC also sought to persuade the
Respondents/Award Debtors to consent for appointment of Ms.Diane Golloway
as a Sole Arbitrator within 30 days from the date of the aforesaid notice.
94. On 11.06.2020, the Petitioner/Award Holder invoked arbitration
clause and nominated Ms.Diane Golloway. Threatened by the invocation of the
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E.P.Nos.68 and 69 of 2021
arbitration clause by the Petitioner/Award Holder, the Respondents/Award
Debtors filed O.S.Nos.56 and 65 of 2020 before the Sub Court, Virudhunagar.
In respect of the respective contracts along with the suits, the
Respondents/Award Debtors also filed application for interim injunction.
95. It is in this background, the Respondents/Award Debtors had
proceeded to file O.S.Nos.56 and 65 of 2020 before the District Court at
Virudhunagar. The reliefs sought for in these suits are as under:-
O.S.No.56 of 2020 O.S.No.65 of 2020
a) pass a judgment and decree against the a) pass a judgment and decree against
defendant declaring that the purported the defendant declaring that the
contract bearing number EO/S/00246/20 purported contract bearing number
dated 13.01.2020 is fraudulent, invalid EO/S/00257/20 dated 13.01.2020 is
and unenforceable in law against the fraudulent, invalid and unenforceable in
plaintiff; and law against the plaintiff; and
b) permanent injunction restraining the b) permanent injunction restraining the
defendant and their men, agents, defendant and their men, agents,
representatives and assigns, from representatives and assigns, from
enforcing the above purported contract of enforcing the above purported contract
sale dated 13.01.2020 recorded allegedly of sale dated 13.01.2020 recorded
in long form contract number allegedly in long form contract number
EO/S/00246/20 EO/S/00257/20
c) Costs of the suit c) Costs of the suit
96. In these two suits, the Respondents/Award Debtors have also filed
applications for interim injunction to restrain them from proceeding further with
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the actions on the basis of impugned Contract No.EO/S/00246 and impugned
Contract No.EO/S/00257 both dated 13.01.2020 against the Petitioner/Award
Holder till the disposal of the main suit and also to grant an ad-interim ex parte
injunction to the above effect till the disposal of the petitions.
97. It appears that after invoking the Arbitration Clause 32 of Form 81 of
the FOSFA, the Petitioner/Award Holder also invoked jurisdiction of the
PORAM, Malaysia.
98. Parallelly, the Petitioner/Award Holder had also invoked jurisdiction
of the Arbitral Tribunal in Malaysia namely the Palm Oil Refiners Association of
Malaysia (PORAM).
99. Under these circumstances, after filing the suits, the
Respondents/Award Debtors issued an interim response to the
Petitioner’s/Award Holder’s counsel on 09.07.2020 and requested the
Petitioner/Award Holder to wait for 12 weeks time to issue proper reply in view
of lockdown imposed in India. Thereafter, the Respondents/Award Debtors
filed O.S.Nos.56 and 65 of 2020. In the above suits, the Petitioner/Award
Holder filed an application to stay the suits and also filed an application to refer
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E.P.Nos.68 and 69 of 2021
the parties to arbitration in terms of Section 45 of the Arbitration and
Conciliation Act, 1996.
100. As mentioned above, in the discussion part of this order, the
arbitration clause if applicable to the dispute will apply. In case there is a
consensus for arbitration between the parties, the arbitration has to be in
accordance with the PORAM Rules of Arbitration and Appeal read with Clause
32 of Form 81 of FOSFA International. Relevant Clause reads as under:-
“32. Arbitration:
Where both parties at or subsequent to the date of
the contract agree, any dispute arising out of or in
connection with this contract shall be submitted to
arbitration in Malaysia in accordance with the
Arbitration Act of Malaysia, 1952 (as revised in 1972)
and in accordance with the PORAM Rules of Arbitration
and Appeal in force at the date of the contract.
In all other cases, any dispute arising out of the
contract, including any question of law arising in
connection therewith, shall be referred to arbitration in
London (or elsewhere if so agreed) in accordance with the
Rules of Arbitration and Appeal of the Federation of Oils,
Seeds and Fats Associations Limited, in force at the date
of this contract and of which both parties hereto shall be
deemed to be cognizant.
Neither party hereto, nor any persons claiming
under either of them, shall bring any action or other legal
proceedings against the order of them in respect of any
such dispute until such dispute shall first have been heard
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E.P.Nos.68 and 69 of 2021and determined by the arbitrators, umpire or Board of
Appeal (as the case may be), in accordance with the Rules
of Arbitration and Appeal governing the dispute, and it is
hereby expressly agreed and declared that the obtaining
of an Award from the arbitrators, umpire of Board of
Appeal (as the case may be), shall be condition precedent
to the right of either party hereto or of any person
claiming under either of them to bring any action or other
legal proceedings against the other of them in respect of
any such dispute.”
101. Thus, the Petitioner/Award Holder has approached two forums for
resolving the dispute through arbitration. One before FOSFA international and
the other before PORAM Tribunal in Malaysia.
102. In the letter/communication dated 17.07.2020, the Petitioner/Award
Holder also made it clear that its position is that the suits instituted in
O.S.Nos.56 and 65 of 2020 by the Respondents/Award Debtors constituted a
breach of the arbitration agreements between the parties vide email dated
01.10.2020 of the Legal Counsel of the Petitioner/Award Holder.
103. After the notice was issued on the Respondents/Award Debtors
pursuant to the institution of the suits on 23.07.2020, the notice regarding
institution of the suits to the Petitioner/Award Holder was also sent by the
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E.P.Nos.68 and 69 of 2021Respondents/Award Debtors.
104. In this background, the counsels engaged by the Petitioner/Award
Holder has sent a letter to the Registrar of PORAM, Malaysia to await for
further orders of the District Court at Virudhunagar in O.S.Nos.56 and 65 of
2020.
105. As mentioned above, the Petitioner/Award Holder had also initiated
arbitration proceedings before the PORAM Tribunal and on receipt of notice
from the Respondents/Award Debtors regarding the pendency of O.S.Nos.56
and 65 of 2020 vide letters/notices dated 26.08.2020, the Petitioner/Award
Holder requested the Registrar of PORAM, Malaysia to put the arbitration
proceedings on hold for a period of sixty days up to/including 30.11.2020 and
referring from appointing an Arbitrator on behalf of the parties to constitute an
Arbitral Tribunal.
106. Parallelly, the Petitioner/Award Holder had been persuading
PORAM Tribunal to constitute an Arbitral Tribunal and to proceed further.
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107. The emails indicate that the Petitioner/Award Holder also had
marked copy of the communication dated 17.07.2020 addressed to the Registrar
of FOSFA to constitute an Arbitral Tribunal. Similarly, the email was directly
sent to the PORAM Tribunal indicating that the Respondents/Award Debtors
had failed to appoint an Arbitrator.
108. Since the Respondents/Award Debtors had failed to nominate their
arbitrator, the PORAM Tribunal has intimated the Respondents/Award Debtors
by their communication on 05.08.2020 regarding nomination of Mr.Toeh Beng
Chuan as the Nominee Arbitrator and on behalf of the Respondents/Award
Debtors in accordance with the provisions of the FOSFA Rules of Arbitration
and Appeal.
109. The Registrar of FOSFA in turn appointed Mr.Paul Davies as the
Presiding Arbitrator by a communication dated 09.10.2020. Thus, two parallel
proceedings were initiated by the Petitioner/Award Holder against the
Respondents/Award Debtors so far before the two forums namely, the Tribunal
as per the PORAM Rules of Arbitration and appeal and another in accordance
with the FOSFA Rules of Arbitration and Appeal at London.
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110. The Petitioner/Award Holder has also given ambiguous indications
by writing letters to the PORAM to refrain from constituting the Tribunal by
communication dated 01.10.2020, in response to letter of Chief Executive
Officer of PORAM dated 01.10.2020.
111. Thus, having considered the facts and the objections and the
decisions of the parties, it has to be held that there was no Agreement within the
meaning of Section 44 read with Article I of the First Schedule of the Arbitration
and Conciliation Act, 1996. There was no Agreement in writing for referring the
dispute for Arbitration.
112. The Award passed by the Arbitral Tribunal also indicates that there
is hardly any discussion on the documents filed before the Arbitral Tribunal.
The Arbitral Tribunal has merely accepted the Petitioner/Award Holder versions
and has proceeded to pass the impugned Award. The content of which has been
extracted above.
113. In absence of a binding nature of contract either in the form of
written agreement or written contract (in a communication in form of exchange
of communications/letters) it cannot be said that there was a binding contract
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E.P.Nos.68 and 69 of 2021
for referring the dispute to arbitration.
114. That apart, the Petitioner/Award Holder has invoked the jurisdiction
of two forums one before the FOSFA and the other before the PORAM and has
sent confusing messages to the Respondents/Award Debtors.
115. The Petitioner/Award Holder has also requested the PORAM
Tribunal to refrain from constituting the Tribunal in view of O.S.Nos.56 and 65
of 2020 before the Sub Court, Virudhunagar.
116. Though Paragraph 5.11 of the Impugned Award also states that the
Respondents/Award Debtors have initiated suits before the Sub Court,
Virudhunagar, the Petitioner/Award Holder has merely stated that it was in
breach of the Arbitration Agreement and did not want the Arbitral Tribunal to
give a finding on the issue.
117. The Arbitral Tribunal ought to have given a finding on this issue
before proceeding to pass the Award which is sought to be enforced by the
Petitioner/Award Holder.
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118. The alacrity shown in securing the Award from the Arbitral Tribunal
during Covid-19 pandemic period was unnecessary and unwarranted. It shows
the desperation of the Petitioner/Award Holder to resort to subterfuge by
confusing the Respondents/Award Debtors.
119. Section 48(1)(b) of the Arbitration and Conciliation Act, 1996 also
makes it clear that the enforcement of the Award may be refused if the parties
are unable to present their case. In this case, the travel to the Foreign location
itself was restricted during Covid period when the Arbitral Clause was invoked
under the aforesaid so called unsigned Agreement dated 13.01.2020. The fact
that the suits were filed by the Respondents/Award Debtors and were pending
makes it clear that the Respondents/Award Debtors could not have proceeded
further by participating in the Arbitration proceedings.
120. The Petitioner/Award Holder has also filed applications before the
Sub Court, Virudhunagar in the above suits for dismissing the suits. However,
without awaiting for further orders of the Court, the Petitioner/Award Holder
has proceeded in a hurry to secure favourable Awards which are neither proper
nor speaking Awards.
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121. In my view, the Impugned Award is clearly contrary to the Public
Policy of India/is in conflict with the Public Policy of India as the Award was
induced by playing fraud on the Respondents/Award Debtors. It is also in
conflict with the most basic notions of morality and justice.
122. In view of the above discussion, the Execution Petitions filed by the
petitioner are liable to be dismissed and are accordingly dismissed leaving open
to the Petitioner/Award Holder to initiate appropriate proceedings to recover the
alleged loss suffered from the Petitioner/Award Holder on account of oral
contract between the Petitioner/Award Holder and the Respondents/Award
Debtors.
28.08.2024
Index : Yes/No
Internet : Yes/No
Speaking Order/Non-Speaking Order
Neutral Citation : Yes/No
arb
C.SARAVANAN, J.
arb
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E.P.Nos.68 and 69 of 2021
28.08.2024
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