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Supreme Court upholds relevance of Arbitration Act

Our Legal Correspondent

NEW DELHI, May 20

IN a significant judgment, the Supreme Court has held that a foreign award, given after the commencement of the Arbitration and Conciliation Act, 1996, can be enforced only under the Act.

The ruling was given by a Division Bench comprising Mr Justice D.P. Mohapatra and Mr Justice Shivraj V. Patil while allowing an appeal in the case of Fuerst Day Lawson Ltd vs Jindal Exports Ltd.

An agreement was entered into between the appellant and the respondent on August 1, 1994 under which the respondent was to supply certain goods to the appellant during the period January 1995 to June 1996.

Certain disputes cropped up in the course of execution of the agreement. The agreement provided for arbitration. The appellant filed a claim petition before the International General Produce Association (IGPA), a body nominated by the appellant as arbitr ator. The arbitrators, after entering into reference, received evidence and thereafter passed an award on August 13, 1996, allowing the claims of the appellant.

An appeal filed by the respondent against the award before the IGPA appellate board was dismissed on November 14, 1998. Further, the appeal filed by the respondent before the Queen's Bench Division of the High Court of Justice at London was also dismisse d on January 29, 1999.

The appellant filed an execution application in August 1999 before the Delhi High Court for enforcement of the foreign award dated August 13, 1996. An order of attachment was issued by the High Court against the respondent.

The respondent filed an application under Section 151 of the Civil Procedure Code (CPC), seeking dismissal of the execution petition. The respondent also filed a petition under Section 48 of the Arbitration and Conciliation Act, 1996.

The High Court varied its order of attachment and ordered the respondent to lodge a security. A single judge of the High Court held that the execution application filed by the appellant for enforcement of the foreign award dated August 13, 1996 was not m aintainable under the Act as the arbitration proceedings were commenced prior to the coming into force of the Act and dismissed the execution petition. Consequently, the High Court released the security of Rs 1.74 crore, furnished by the respondent.

The appellant filed a special leave petition before the apex court, challenging the order passed by the single judge of the High Court. The Supreme Court disposed of the SLP observing that the order of the single judge was appealable under Section 50(1)( b) of the Act.

The appellant, therefore, filed an appeal before the High Court. A Division Bench of the High Court by the impugned judgment and order dismissed the appeal saying that there was no fallacy in the reasoning of the single judge. Hence the appeal before the apex court.

The Supreme Court, in its judgment, said that a foreign award passed on August 13, 1996 could be enforced with the same vigour under the Ordinance as it could be under the Act. ``May be that is a reason why this point was not raised by the respondent bef ore the High Court.''

The Arbitration and Conciliation Ordinance, 1996, the court noted, was originally promulgated by the President on January 16, 1996 and was made effective from January 25, 1996. The second ordinance came in its place on March 26, 1996, which was again rep laced by the third ordinance on June 26, 1996.

These ordinances were issued, necessitated by the circumstances for continuing the operation of the new law. The new Act of 1996 received the President's assent on August 16, 1996 and was published in the gazette on August 19, 1996.

``There is no alteration or change in the legal position and effect in relation of enforcement of a foreign award including one made between the period January 25, 1996 till August 22, 1996, the date on which the Act came into force in terms of Section 1 (3) read with the gazette notification in as much as the first ordinance was operative with the same force and effect from January 25, 1996,'' the court observed.

Even in the impugned judgment, the court said, it is stated that the said Act commenced from January 26, 1996. The point that the date of commencement of the Act was August 22, 1996 and not January 25, 1996 was neither raised nor contested.

This makes the position clear that although the Act came into force on August 22, 1996, for all legal purposes it shall be deemed to have effective from January 25, 1996, particularly when the provisions of the Ordinance and the Act are similar and there is nothing in the Act to the contrary so as to make the ordinance ineffective as to either its coming into force on January 25, 1996 or its continuation up to August 22, 1996.

``Thus, we conclude that the Act was brought into force with effect from August 22, 1996 vide the notification dated August 22, 1996 published in the gazette of India and that the Act being a continuation of the ordinance is deemed to have been effective from January 25, 1996 when the first ordinance came into force,'' the court observed.

The court noted that the Arbitration and Conciliation Ordinance, 1996 was promulgated with the object to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of the foreign arbitral award an d to define the law relating to conciliation and for matters connected therewith or incidental thereto.

``In our opinion, for enforcement of a foreign award, there is no need to take separate proceedings -- one for deciding the enforceability of the award to make it a rule of the court or pass a decree and the other to take up execution thereafter. In one proceeding, the court enforcing a foreign award can deal with the entire matter,'' the judges said while setting aside the impugned High Court judgment.

The court remitted back the case to the single judge of the High Court for proceeding with enforcement of the award in the light of the observations made in the judgment.