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Madhya Pradesh High Court · body

2012 DIGILAW 943 (MP)

Narayan Trading Co. v. Abcom Trading Pvt. Ltd.

2012-09-28

N.K.MODY

body2012
JUDGMENT : Being aggrieved by the orders dated 8-7-2011 and 29-8-2011 passed by 4th Addl. District Judge, Indore in Case No. 0/2010, whereby objections filed by the petitioner under Order XXI Rule 58, CPC was dismissed and thereafter application filed under Section 47, CPC was also dismissed, present petition has been filed. 2. Short facts of the case are that respondent filed a petition for enforcement of the award dated 8-5-2007, which was passed by Grain and Feed Trade Association, Singapore for short GAFTA, whereby petitioner was directed to pay a sum of Rs. 1,78,441.92 along with interest @ 5% per annum. Objections were filed by the petitioner under Order XXI Rule 58, CPC alleging that since the petitioner is not a party to the agreement, therefore, award cannot be enforced against the petitioner. It was also alleged that since the award is not duly stamped, therefore, also award cannot be executed. It was prayed that application for enforcement of award be dismissed. Learned Court below dismissed the objections filed by the petitioner vide order dated 8-7-2011. Thereafter, another application under Section 47, CPC was filed, wherein it was alleged that objections relating to unstamped award has not been taken into consideration by the learned Court below, therefore, the same be taken into consideration and the petition filed by the respondent for enforcement of the award be dismissed. This application was also dismissed, hence this petition. 3. Mr. S.C. Bagadia, learned Senior Advocate appearing on behalf of petitioner submits that the impugned orders passed by the learned Court below are illegal, incorrect and deserve to be set aside. It is submitted that in the objections which were filed by the petitioner before the learned Court below by way of application under Order XXI Rule 58, CPC were in two folds, firstly that the petitioner was not a party to the arbitration agreement, therefore, the arbitration award passed by the GAFTA is not executable against the petitioner and secondly the award passed by GAFTA is not duly stamped, therefore, the same is not enforceable. Learned Counsel concedes that the application was wrongly titled as the application under Order XXI Rule 58, CPC, which ought to have been under Section 48 of Arbitration & Conciliation Act (which shall be referred l.ereinafter as an "A & C Act")- It is submitted that after filing of the present petition, petitioner has separately filed an application under Section 48 of A & C Act, wherein this ground has been raised, therefore, the petitioner is not raising that ground before this Court. So far as other ground is concerned, which relates to the stamp duty payable on the award is concerned, learned Counsel placed reliance on the clause (bb) of proviso to Section 3 of Indian Stamp Act and submits that the instrument is chargeable with duty mentioned in Schedule 1-A of Indian Stamp Act. Learned Counsel further submits that as per Article 11 of Schedule 1-A of Indian Stamp Act the award is required to be stamped @ Rs. 20/- for every one thousand rupees or part thereof, of the amount, or value of the property to which the award relates. Proviso (bb) of Section 3 of Indian Stamp Act reads as under :- 4. 3. Instruments chargeable with duty. 20/- for every one thousand rupees or part thereof, of the amount, or value of the property to which the award relates. Proviso (bb) of Section 3 of Indian Stamp Act reads as under :- 4. 3. Instruments chargeable with duty. - Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say- (a) *** *** *** (b) *** *** *** (c) every instrument (other than a bill of exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person; is executed out of India on or after that day, relates to any property situated, or to any matter or thing done, or to be done, in India and is received in India : Provided that, except as otherwise expressly provided in this Act, and notwithstanding anything contained in clause (a), clause (b) or clause (c) of this section or in Schedule I, the amount indicated in Schedule I-A to this Act shall, subject to the exemptions contained in that Schedule, be the duty chargeable on the instruments mentioned in clauses (aa) and (bb) of this proviso, as the proper duty thereof, respectively,- *** *** *** (bb) every instrument mentioned in Schedule I-A as chargeable with duty under that Schedule, which not having been previously executed by any person, is executed out of Madhya Pradesh on or after the commencement of the Central Provinces and Berar Indian Stamp (Amendment) Act, 1939, and relates to any property situated, or to any matter or thing done or to be done, in Madhya Pradesh and is received in Madhya Pradesh. 5. Learned Counsel submits that Stamp Duty is payable as per Clause 11 of Schedule I-A of Indian Stamp Act, 1899, which reads as under :- "11. Award, that is to say, any decision in writing by an Arbitrator or Umpire, on a reference made otherwise then by an order of the Court in the course of a suit, being an award made as a result of a written agreement to submit present or future difference to arbitration and not being an award directing a partition. Award, that is to say, any decision in writing by an Arbitrator or Umpire, on a reference made otherwise then by an order of the Court in the course of a suit, being an award made as a result of a written agreement to submit present or future difference to arbitration and not being an award directing a partition. Twenty Rupees for every one thousand rupees or part thereof, of the amount, or value of the property to which the award relates." 6. Learned Counsel further placed reliance on a decision in the matter of M/s Universal Imports Agency Vs. The Chief Controller of Imports and Exports, AIR 1961 SC 41 , wherein Hon'ble Apex Court had a occasion to deal with the words "Things done" and held that the words "things done" are comprehensive enough to take in a transaction effected before the merger, though some of its legal effects and consequences projected into the post merger period. Applying the said principles to an import sale it may be stated that a purchase import involves a series of integrated activities commencing from the contract of purchase with a foreign firm and ending with the bringing of the goods into the importing country and that the purchase and resultant import from parts of a same transaction. If so, in the present case the bringing of the goods into India and the relevant contracts entered into by the petitioners with the foreign dealers from parts of a same transaction. The imports, therefore, were the effect or the legal consequences of the 'things done', i.e., the contracts entered into by the petitioners with the foreign dealers. Learned Counsel submits that since the award was not duly stamped, therefore, the same is un-enforceable. It is submitted that the learned Court below committed error in dismissing the objections filed by the petitioner. It is submitted that in the facts and circumstances of the case, petition filed by the petitioner be allowed and the impugned order passed by the learned Court below be set aside. 7. Mr. Vijay Asudani, learned Counsel for the respondent submits that the award which is filed by the petitioner for enforcement is a foreign award and the same is not required to be stamped as per Schedule I-A of the Indian Stamp Act. 7. Mr. Vijay Asudani, learned Counsel for the respondent submits that the award which is filed by the petitioner for enforcement is a foreign award and the same is not required to be stamped as per Schedule I-A of the Indian Stamp Act. For this contention, reliance is placed on Section 44 of A & C Act, which lays down the definition of "foreign award", according to which 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, made on or after the 11th Day of October, 1960. It is submitted that since the award was passed at Singapur, therefore, as per clause (c) of Section 3 of Indian Stamp Act the award is required to be stamped as the instrument is executed out of India and the matter or things are not required to be done in India and is received in India. It is submitted that since it is a foreign award, therefore, it will govern by Part II of A & C Act and is enforceable without payment of any stamp duty. It is submitted that the petition filed by the petitioner has no merits and the same be dismissed. 8. From perusal of the record, it is evident that upon raising of the dispute the matter was referred to GAFTA and on 16-5-05 original award was passed, against which an appeal was preferred by the* petitioner and the appellate award was passed on 8-7-05. After the appellate award, a petition was filed by the respondent before the learned Court below under Section 49 of A & C Act on 6-5-2010, in which the application in shape of objection was filed by the petitioner on 28-2-2011 wherein objection is raised to the effect that the award passed in Appeal No. 4112 is not properly stamped. It was alleged that as per Indian Stamp Act, the award is required to be stamped. In absence of such proper stamp duty the said award is not executable and enforceable because the award is not in accordance with the law applicable in India. Another objection was raised in the said application was that the petitioner is not party to the agreement. In absence of such proper stamp duty the said award is not executable and enforceable because the award is not in accordance with the law applicable in India. Another objection was raised in the said application was that the petitioner is not party to the agreement. These objections were decided by the learned Court below vide order dated 8-7-11 whereby it was held that since the petitioner has participated in the arbitration proceedings and filed the appeal against the original award dated 16-5-05, therefore, it cannot be said that the petitioner is not party to the agreement. So far as other objection relating to stamp duty is concerned, learned Court below observed that it cannot be held that the order is in-executable in view of Section 48 of the A & C Act. Thereafter, another application was filed by the petitioner under Section 47 of CPC, wherein again the objection was raised that the award is not properly stamped and in absence of stamp duty the award is not enforceable in India. This objection has been decided vide order dated 29-8-11, wherein it was held that the award is passed at Singapur and there is no specific provision under the Indian Stamp Act that the stamp duty is payable on a foreign award, therefore, the objection raised by the petitioner is having no force and the same was dismissed. 9. First part of the A & C Act deals with "General Provisions". Subsection (c) of Section 2 of the A & C Act lays down the definition of "Arbitral Award", according to which it includes an interim order. Sub-section (7) of Section 2 lays down that an arbitral award made under this part shall be considered as domestic award. Part II of the A & C Act deals with enforcement of foreign awards. Chapter 1 of Part II of A & C Act, which starts from Section 44 and goes upto Section 52 deals with the awards as per New York Convention. Section 44 of A & C Act lays down the definition of "Foreign Award" which reads as under :- "44. Chapter 1 of Part II of A & C Act, which starts from Section 44 and goes upto Section 52 deals with the awards as per New York Convention. Section 44 of A & C Act lays down the definition of "Foreign Award" which reads as under :- "44. Definition.- In this Chapter, unless the context otherwise requires, 'foreign award' means an arbitral award on differences between persons arising out of legal relationship, whether contractual or not, considered as commercial under the law in 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 First 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." 10. In the matter of Harendra H. Mehta Vs. Mukesh H. Mehta, (1999) 5 SCC 108 , wherein objection was raised was that the award was bad and unenforceable as it was not properly stamped nor was it a registered one and as such could not be made the rule of the Court, Hon'ble Apex Court while dealing with the other objection relating to registration of award held that an award creating or declaring right or interest in immovable property of the value of Rs. 100 would require registration, but then that award would be an award under the Arbitration Act, 1940 and certainly not a foreign award. In the matter of M/s Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., AIR 2001 SC 2293 , Hon'ble Apex Court held that 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 contribute to protracting the litigation and adding to the sufferings of a litigant in terms of money, time and energy. 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 contribute to protracting the litigation and adding to the 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. 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. 11. The word 'Award' is also defined in Schedule I-A of Indian Stamp Act, at Sr. No. 11, according to which any decision in writing by an Arbitrator or Umpire, on a reference made otherwise than by an order of the Court in the course of a suit, being an award made as a result of a written agreement to submit present or future differences to arbitration and not being an award directing a partition. 12. The Law on Arbitration in India was substantially contained in three enactments namely, The Arbitration Act, 1940, The Arbitration (Protocol & Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It was widely felt the 1940 Act, which contains the General Law of Arbitration, has become outdated. 12. The Law on Arbitration in India was substantially contained in three enactments namely, The Arbitration Act, 1940, The Arbitration (Protocol & Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It was widely felt the 1940 Act, which contains the General Law of Arbitration, has become outdated. The Arbitration & Conciliation Act, 1996 came in force to consolidate and amend the Law relating to Domestic Arbitrations, International Commercial Arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, commission on international trade in short (UNCITRAL) Model Law and Rules. Apart from other object, the object of the act is to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court. While Arbitration & Conciliation Act, 1996 was enforced, no amendment was made in the definition of award given in the Indian Stamp Act. Similarly, the Schedule which lays down the stamp duty payable on award was not amended by including the foreign award. It appears that law makers while enforcing the Arbitration & Conciliation Act, 1996 was of the view that foreign award shall be enforceable as if it were a decree of the Court, no amendment was brought either in the definition of award or in the Schedule relating to payment of stamp duty on award. Since the definition of award given at Sr. No. 11 of the Schedule of the Indian Stamp Act does not cover the foreign award and one of the object to enforce the new Act was to enforce final award as if it was a decree and keeping in view the law laid down by the Hon'ble Apex Court in the matter of MA. Fuerst DayLawson Ltd. (supra), wherein the Hon'ble Supreme Court has held that under the pew Act the foreign award is already stamped as decree, this Court is of the view1 that the petition filed by the petitioner has no merits and deserves to be dismissed. In view of this, the petition filed by the petitioner is disposed of holding that foreign award is already stamped and is enforceable as decree. No order as to costs.