Ralli Brothers & Coney v. Ashok Textiles — 1999 DIGILAW 475 (KER)

Judgment :- M.R. Hariharan Nair, J. The revision petitioners are defendants 1 and 2 in O.S.404 of 1995 of the Sub Court, Kochi. The 1st revision petitioner is a company based in Liverpool U.K. and the 2nd revision petitioner is the company's agent in India having office at Bombay. The respondent herein who is the plaintiff in the suit entered into an agreement with the 1st revision petitioner for the purchase and import of cotton. According to this agreement cotton is to be despatched to India in three consignments, Even when the first consignment arrived, there arose disputes between the parties with regard to the quality of the goods. It appears that the disputes were settled to the mutual satisfaction through negotiation. However, when the 2nd and 3rd consignments arrived, the plaintiff again felt that there was deficiency in quality and based thereon a suit was filed. The 1st revision petitioner then filed I. A. 171 of 1996 seeking stay of the suit under S.3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. The Court below considered the said request and dismissed the petition as per the impugned order. 2. The learned counsel for the revision petitioner submits that the Court below has dismissed the application only for the reason that the required Gazette Notification was not available. It is pointed out that this Notification has no w been produced before this Court and in view of this the impugned order might be set aside. 3. Even though notice was given to the respondent, it has chosen to remain exparte. The revision is being disposed of based on the arguments of the learned counsel for the petitioner and on a perusal of the available records. 4.It will be useful to quote S.3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 here which reads as follows: "Stay of proceedings in respect of matters to be referred to arbitration. The revision is being disposed of based on the arguments of the learned counsel for the petitioner and on a perusal of the available records. 4.It will be useful to quote S.3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 here which reads as follows: "Stay of proceedings in respect of matters to be referred to arbitration. notwithstanding anything contained in the Arbitration Act, 1940, or in the Code of Civil Procedure, 1908, if any party to an agreement to which Art. II of the Convention set forth in the Schedule applies, commences any legal proceedings in any court against any other party to the agreement, in respect of any matter agreed to be referred to arbitration in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other step in the proceedings, apply to the Court to stay the proceedings, and the Court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings." 5. The conditions required to be fulfilled for invoking the section have been summarised by the Supreme Court in the decision in Renusagar Power Co. Ltd. v. General Electric Co. (AIR 1985 SC 1156) as follows: (i) there must be an agreement to which Art. II of the Convention set forth in the Schedule applies. (ii) a party to that agreement must commence legal proceedings against another party thereto. (iii) the legal proceedings must be "in respect of any matter agreed to be referred to arbitration" in such agreement. (iv) the application for stay must be made before filing the written statement or taking any other step in the legal proceedings. (v) the Court has to be satisfied that the agreement is valid, operative and capable of being performed, this relates to the satisfaction about the' existence and validity' of the arbitration agreement. (vii) the Court has to be satisfied that there are disputes between the parties with regard to the matters agreed to be referred; this relates to effect (scope) of the arbitration agreement touching the issue of arbitrability of the claims. 6. (vii) the Court has to be satisfied that there are disputes between the parties with regard to the matters agreed to be referred; this relates to effect (scope) of the arbitration agreement touching the issue of arbitrability of the claims. 6. The Court below has considered the applicability of the Section to the facts of the present case and found in paras 16 to 19 that all the required conditions except that the agreement involved here comes under Art.2 of the covenant set forth in the Schedule of the Act applies here, have been established by the plaintiff. The question of applicability of the agreement involved here was considered in para 21 of the impugned order. The Court rightly noted that under S.2 the two conditions required to be established are conjunctive and not disjunctive. S.2 defines 'Foreign Award' as follows: "6.2: In this Act, unless the context otherwise requires, "foreign award" means an award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law is force in India, made on or after the 11th day of October, 1960 (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the schedule applies, and (b)in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may by notification in the Official Gazette, declare to be territories to which the said Convention applies." 7. In order to succeed the plaintiff has therefore to establish that the award to be passed in this case is one as notified by the Central Government in the Official Gazette in respect of a territory to which covenant of the Recognition and Enforcement of Foreign Arbitral Awards applies. The revision petitioner has produced before this Court, through C.M.P. 1755 of 1996 a copy of the Government of India Gazette dated 13.11.1976 wherein the following Notification dated 25.10.1976 is published as S.O.4302. It reads as follows: " S.O.4302 - In exercise of the power conferred by clause (b) of S.2 of Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) the Central Government, being satisfied that reciprocal provisions have been made, hereby declares the United Kingdom to be territories to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, set forth in the Schedule to the said Act, applies." 8. The impact of production of this Notification is that all the conditions required to be established for stay of O.S.404 of 1995 applies here. In view of this, dismissal of the petition through the impugned order is certainly defective. The order is set aside. The suit is stayed under S.3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. The C.R.P. is disposed of as above.