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2014 DIGILAW 1721 (MAD)

SIMS Metal Management Limited v. Sabari Exim Pvt. Ltd.

2014-06-26

R.SUDHAKAR

body2014
Judgment : 1. This Original Petition is filed under Sections 44, 47 and 49 of the Arbitration and Conciliation Act, 1996 to enforce the Arbitral Award dated 28.2.2013 made in Case No.201271 by the Australian Maritime and Transport Arbitration Commission (for brevity “AMTAC”). 2.1. The brief facts of the case are as follows: The petitioner and the respondent entered into a contract dated 7.5.2012, whereby the petitioner undertook to sell to the respondent 30,000 MT of Steel Scrap plus or minus 5% at the petitioner's option. 2.2. As per Clause 5 of the contract, the respondent was to establish 100% irrevocable Letter of Credit for the contract value on or before 14.5.2012. The respondent failed to open the Letter of Credit and breached the terms of the contract. Therefore, the petitioner invoked the arbitration clause contained in Clause 12 of the Contract to recover damages for the losses suffered by the petitioner due to sale of the goods, subject matter of the contract, to third party. 2.3. In terms of Clause 12 of the Contract, arbitration was conducted in Sydney, Australia by referring the matter to AMTAC. The AMTAC was inclined to accept the reference made by the petitioner and issued a notice to the respondent on 4.10.2012 by email addressed to sk@sabarigroup.com and anandhi@sabrigroup.com, apart from sending the original notice by courier, clearly indicating that the petitioner has moved for arbitration. The AMTAC required the respondent to state whether they are agreeable for the appointment of Arbitrator as proposed by the petitioner or any other person and such response of the respondent was requested to be sent to AMTAC on or before 9.10.2012. 2.4. The statement of defence as required under Article 18 of the AMTAC Rules was not filed by the respondent. However, it is seen that on 17.10.2012, the Commission appointed one Lawrence Boo as the Sole Arbitrator. 2.5. The Arbitral Tribunal, after detailed analysis of the terms of the contract and the rival contentions, held the respondent did not fulfill its obligation under the Contract and passed an award on 28.2.2013 as follows: I. The Respondent shall pay to the Claimant USD$1,950,000. II. 2.5. The Arbitral Tribunal, after detailed analysis of the terms of the contract and the rival contentions, held the respondent did not fulfill its obligation under the Contract and passed an award on 28.2.2013 as follows: I. The Respondent shall pay to the Claimant USD$1,950,000. II. The Respondent shall pay to the Claimant simple interest- (a) on the sum of USD1,950,000 at the rate of 0.13% p.a. accruing as from 23 June 2012 until the date of this Award amounting in aggregate to USD$1,736.30; and (b) on the sum of USD 14,485.00 at the rate of 0.13% p.a. accruing as from 18 May 2012 to 22 June 2012 amounting in aggregate to USD 1,805.66. III. The Respondent shall bear and pay the Claimant's costs and expenses incurred in this arbitration fixed at AUD$140,186.58. IV. If the Claimants shall have paid the whole (AUD$34,323.00) or any part of the Respondent's share of the costs of arbitration in the first instance, it shall be entitled to full reimbursement from the Respondent of the amount so paid. V. The sums awarded or directed to be paid by the Respondent shall be paid within 21 days from date of this Award. If the Respondent fails to make payment within such period, the Claimant shall be entitled to interest from the day immediately following the due date at the rate of 6.013% p.a. on any sum remaining unpaid at the rate of 6.013% p.a. until the same is finally and fully paid. 2.6. To enforce the above said award, the present Original Petition is filed, as stated above. 3. Mr. J. Sivanandaraaj, learned counsel for the petitioner submitted that the requirements of Sections 47 of the Arbitration and Conciliation Act have been satisfied and hence, the award passed by the Arbitral Tribunal should be enforced. In support of the said plea, he referred to the duly authenticated copies of the award dated 28.2.2013 and the contract dated 7.5.2012 entered into between the parties, which are available on record before this Court. 4.1. Per contra, Mr. A. Thiyagarajan, learned Senior Counsel appearing for the respondent contended that the respondent was not given proper notice of the appointment of the arbitrator as contemplated under Section 48(1)(b) of the Arbitration and Conciliation Act, 1996 and, therefore, the award is bad. 4.2. 4.1. Per contra, Mr. A. Thiyagarajan, learned Senior Counsel appearing for the respondent contended that the respondent was not given proper notice of the appointment of the arbitrator as contemplated under Section 48(1)(b) of the Arbitration and Conciliation Act, 1996 and, therefore, the award is bad. 4.2. The learned Senior Counsel appearing for the respondent further contended that one PEC Limited, a Government of India Enterprise, through whom the Letter of Credit was to be opened, expressed their inability to process the respondent's request for opening the Letter of Credit by their letter dated 16.5.2012 and, therefore, in terms of Clause 14 of the Contract relating to force majeure, the respondent is relieved of the liabilities and obligations under the contract and hence, the award is unsustainable. To bolster the said argument, the learned Senior Counsel laid emphasis on the words “actions and/or restrictions of Government (or agencies thereof)” found in Clause 14 of the Contract, which reads as under: “14) FORCE MAJEURE: Force Majeure, as used herein, shall mean a cause or causes beyond the will or control of any of the parties to this contract as the case may be, which wholly or in part, prevents performance by the claiming party of its obligations hereunder (except for buyer's obligation to pay for the cargos hereunder). Examples of force majeure include without limitation: Acts of God, insurrections, blockage of the loading port and/or the discharge port, declared or undeclared war, riotes, strikes, lockouts, breakdown of or damages to or destruction of installations and/or machinery and/or plant fires, accidents, epidemics, floods natural or man-made disasters, actions and/or restrictions of Government (or agencies thereof), or any like contingency beyond the reasonable control of seller or buyer. If, because of force majeure, any party or parties to this agreement are unable to carry out their obligations, and if such party or parties immediately gives the other parties hereto written notices of such force majeure, then the obligations and liabilities of the party or parties giving such notice shall be relieved, but after the expiration of sixty (60) days, the party not claiming excuse under this provision may cancel the contract without liability to the other party.” (emphasis supplied) 5. I have heard the submissions of Mr. J. Sivanandaraaj, learned counsel for the petitioner and Mr. A. Thiyagarajaan, learned Senior Counsel appearing for the respondent and perused the documents filed. 6. I have heard the submissions of Mr. J. Sivanandaraaj, learned counsel for the petitioner and Mr. A. Thiyagarajaan, learned Senior Counsel appearing for the respondent and perused the documents filed. 6. It is beyond any cavil that the petitioner, on its part, has complied with the requirements of Section 47 of the Act. Once the requirements of Section 47 of the Act are complied with by the petitioner, it is for the respondent to prove that the award is unenforceable as per Section 48 of the Act. 7.1. The first limb of the argument of the learned Senior Counsel for the respondent is that the respondent was not given proper notice of the appointment of arbitrator or of the arbitral proceedings. The learned Senior Counsel pleaded that the letters of the Commission dated 4.10.2012 and 17.10.2012, sent by courier as well as by email to the respondent, have not been received. It is further stated that in the email address anandhi@sabrigroup.com, the letter “a” between “b” and “r”, as in “sabarigroup”, is missing and, therefore, the email would not have been delivered to them. However, the existence of the other email address sk@sabarigroup.com is not denied by the learned Senior Counsel for the respondent. 7.2. It is evident from the records that the respondent company has two email addresses, namely anandhi@sabarigroup.com and sk@sabarigroup.com. The email address sk@sabarigroup.com reflects in the email dated 10.5.2012 addressed to PEC Limited by the respondent for providing Letter of Credit facility and in the subsequent emails dated 16.5.2012 and 18.5.2012. All correspondence between the parties has been through email and that is evident from the email correspondence dated 23.5.2012, 30.5.2012, etc. All along the respondent has been communicating with the petitioner extensively through emails addressed to sk@sabarigroup.com and to the very same email address AMTAC as well as the Arbitral Tribunal have sent notices. Therefore, the respondent cannot complain about non receipt of arbitration notices. 7.3. In any event, in paragraphs (15) to (19) of the award, the details of the notices given to the parties informing them about the conduct of the arbitration proceedings have been specified and the parties were also directed to put forth their objections or grounds to challenge the jurisdiction of the Tribunal or any other preliminary issues, which may require determination of the Tribunal. For better clarity, paragraphs (15) to (19) of the award are extracted hereunder: “15. For better clarity, paragraphs (15) to (19) of the award are extracted hereunder: “15. After the constitution of the Tribunal, the Tribunal set out directions by email of 18 October 2012 enclosing the Tribunal's letter for the conduct of the proceedings setting forth, among other things, for parties to let the Tribunal know whether any party has any objection or grounds to challenge the jurisdiction of the Tribunal or whether any party may have preliminary issues which may require the determination of the Tribunal. 16. By its letter of 17 October 2012 to the parties and considering the geographical distance between the parties, AMTAC Secretariat had sought the parties' confirmation whether they agree, for purpose of Rule 4.1 of the AMTAC Rules, that notices sent in relation to these proceedings will be deemed to have been received if it is sent by email, without need for physical delivery to the parties. The Claimant had agreed to the same while no response was forthcoming from Respondent. 17. As such, the Tribunal's letter of 18 October 2012 with annexes were also sent by fax and by courier to the Respondent's numbers and address as follows : Fax: +91 44 2841 4714 Address; Sabari Exim Private Limited Trade Centre, 2nd Floor No.114 & 115 Wallajah Road Chennai 600 002 Tamil Nadu, India. 18. The Tribunal had attempted to fax copies of their letter of 18 October 2012 with annexes to the Respondent's fax number provided in the Notice on 23, 24 and 25 October 2012 without success. An internet search on the website of Respondent shows another fax number, +91 44450 30021 beside the name of Mr. Shashi Kumar. An attempt to fax therein was successfully made. 19. The same set of correspondence had also been sent by courier and was acknowledged received at Respondent's address in paragraph 17 on 24 October 2012.” 7.4. From the above facts it is apparent that the Arbitral Tribunal has proceed to take all reasonable steps to inform the respondent about the proceedings. The AMTAC even before appointing the Arbitrator has sent communication by email to sk@sabarigroup.com, which email address was used by the respondent all along for communicating with PEC Limited and, therefore, in my considered opinion, the respondent cannot take shelter under Section 48(1)(b) of the Act. 7.5. The AMTAC even before appointing the Arbitrator has sent communication by email to sk@sabarigroup.com, which email address was used by the respondent all along for communicating with PEC Limited and, therefore, in my considered opinion, the respondent cannot take shelter under Section 48(1)(b) of the Act. 7.5. For the foregoing reasons, the first objection raised by the learned Senior Counsel does not hold water and the same is rejected. 8.1. The next limb of the argument of the learned Senior Counsel for the respondent is regarding the applicability of Clause 14 of the Contract relating to force majeure to the case on hand. 8.2. All that this Court is able to discern from the argument of the learned Senior Counsel appearing for the respondent is that as PEC Limited, a Government of India Enterprise, expressed its inability to process the request of the respondent for granting Letter of Credit, the respondent could not open the Letter of Credit and, therefore, the force majeure clause is attracted. 8.3. At this juncture, it is apposite to refer to the letter dated 16.5.2012 of PEC Limited addressed to the respondent, which reads as under: “Please refer your letter dated 8.5.2012 regarding L/C for import of 30,000 MT Steel Scrap from M/s. Sims Metal Management Limited, Australia. We regret out inability to process your request at the moment because of the volatility of Indian currency and the resultant affect of currency on the Scrap demand/price in India. As a matter of fact, PEC is already over-exposed on Scrap at the moment. We, therefore, have decided not to open any fresh Letter of Credit for Steel Scrap till the currency stabilizes and inventories in hand are reduced to an acceptable level.” The letter clearly states that PEC Limited is unable to process the request of the respondent for Letter of Credit at that moment in view of the currency fluctuation and as PEC Limited was over-exposed on scrap. 8.4. It appears that PEC Limited is a facilitator for opening Letter of Credit for import of scrap and that is an arrangement between the respondent and PEC Limited. The understanding between the respondent and PEC Limited for opening Letter of Credit is not the subject matter of the contract between the petitioner and the respondent for supply of goods. 8.4. It appears that PEC Limited is a facilitator for opening Letter of Credit for import of scrap and that is an arrangement between the respondent and PEC Limited. The understanding between the respondent and PEC Limited for opening Letter of Credit is not the subject matter of the contract between the petitioner and the respondent for supply of goods. Therefore, the question of taking shelter under the inability of PEC Limited to open Letter of Credit does not arise and force majeure clause will not come into play. 8.5. That apart, there is no material to come to the conclusion that PEC Limited is a body of the Government which has got the power to restrict the grant of Letter of Credit to the respondent. That apart, there is no evidence supporting the plea of the respondent that there was some foreign exchange fluctuation or restriction that had prevented the issuance of Letter of Credit. It is always open to the respondent to approach any other bank for opening of Letter of Credit to honour the contract. There is no material to show that dehors PEC Limited, the respondent cannot open Letter of Credit from any other source. Therefore, the inability of PEC Limited to process the request of the respondent to open Letter of Credit is not an event that falls within the meaning of force majeure as defined in Clause 14 of the Contract. 8.6. In such view of the matter, the second objection raised by the learned Senior Counsel appearing for the respondent also fails. 9. Section 49 of the Act postulates that where the Court is satisfied that a foreign award is enforceable under Chapter I of Part II of the said Act, the award shall be deemed to be a decree of that Court. The parameters that need to be considered for enforcement of foreign award have been enunciated by the Supreme Court in a recent decision in Shri Lal Mahal Ltd. v. Progetto Grano Spa, (2014) 2 SCC 433 , wherein it was held as under : "29. We accordingly hold that enforcement of foreign award would be refused under Section 48 (2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. We accordingly hold that enforcement of foreign award would be refused under Section 48 (2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression “public policy of India” occurring in Section 34(2)(b)(ii) in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b)." 10. In my considered opinion, the guidelines laid down by the Supreme Court in the decision referred supra for refusing to order enforcement of foreign award are not attracted to the facts of the present case. The Court is satisfied that the award is not against (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. The terms of the Contract are pure and simple and, in my considered opinion, they have been rightly interpreted by the Arbitrator. 11. Resultantly, this Original Petition is allowed and the foreign award dated 28.2.2013 passed by Arbitral Tribunal is held enforceable and same shall be deemed to be a decree of this Court. The respondent is directed to make payment to the petitioner as per the award dated 28.2.2013 within four weeks, falling which the matter is to be posted before the learned Master for proceeding with the execution. Since the respondent is directed to make payment within four weeks and in default, the petitioner is permitted to proceed with execution, no further order need be passed in A.No.550 of 2014 filed to direct the respondent to furnish bank guarantee. Consequently, A.No.550 of 2014 is closed. No costs.