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2017 DIGILAW 1347 (KER)

Peniel Cashew Company v. Ahcom Sarl Galerie Du Grand Large

2017-10-27

C.K.ABDUL REHIM, K.P.JYOTHINDRANATH

body2017
JUDGMENT : Jyothindranath, J. 1. This is a petition filed under Article 227 of the Constitution of India. The petitioners herein are the respondents and the respondent herein is the petitioner in E.A. 267/2016 in E.P. 97/2013 on the files of the II Additional District Court, Kollam. The challenge is against the order passed by the court below in E.A.267/2016, dated 23rd September 2017. 2. Shorn of unnecessary details, the facts necessary for disposal of this petition are as follows : It is stated that the petitioners are engaged in the business of processing of raw cashew nuts and exporting cashew kernels, whereas the respondent is a seller of raw cashew nuts to processors in Kerala. There was a business transaction in between the petitioners herein and the respondent for supply of raw cashew nuts. There arose some disputes in respect of payments. Earlier there was a proceeding initiated by the respondent herein against the petitioners herein before the II Additional District Court, Kollam as O.P.(Arb)No.324/2012 under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the 'Act”) and the same was finally disposed of on 20.12.2013. In that order, it was stated that, the petitioner therein has no objection if the petition was closed in view of the undertaking filed by the respondent that he would not alienate the property sought to be attached. The undertaking made by the respondent was accepted and recorded. There was also a direction not to alienate the property until further orders from that court. Meanwhile, a Foreign Arbitration Award was passed by the Combined Edible Nut Trade Association (CENTA) in London and an application for enforcement of the said award was moved before the II Additional District Court, Kollam by the respondent herein. The said award was sought to be set aside under Section 34 of the Act, at the instance of the petitioners herein. The said OP (Arb) No.1/2013 was dismissed stating that, being a foreign award it is beyond the provisions of Section 34 of the Act. The dismissal was challenged before this court by the petitioners herein filing Appeal (Arb)No.54/2017. The said appeal was dismissed by this court through judgment dated 25.10.2017. Pending the said appeal before this court, in the execution/enforcement petition, an order dated 23.9.2017 was passed by the court below in EA No.267/2016 directing the petitioners herein to furnish fresh security. The dismissal was challenged before this court by the petitioners herein filing Appeal (Arb)No.54/2017. The said appeal was dismissed by this court through judgment dated 25.10.2017. Pending the said appeal before this court, in the execution/enforcement petition, an order dated 23.9.2017 was passed by the court below in EA No.267/2016 directing the petitioners herein to furnish fresh security. That order is under challenge in this petition. 3. The question to be considered by this court is whether the above said order will sustain. Admittedly, the respondent is a foreign award holder. Part I of the Act ordinarily will not be applicable in a foreign arbitration. Surely, after the amendment brought by the Act 3 of 2016, in the case of foreign award also Section 9, 27 and Clause (a) of sub- section (1) and sub-section (3) of Section 37 are applicable with retrospective effect from 23.10.2015. 4. Now, visualising the schemes in the Act, it can be seen that, for a foreign arbitration award the provisions of Part I of the Act will not be applicable, except the Sections highlighted above. Thus, this being a foreign award, it can be seen that, in this case Part II will be applicable. Admittedly an enforcement petition is now pending before the court below. That is, in compliance of the requirement under Section 47 of the Act, the court is now proceeding with the matter. Whether the stage has been crystallised to treat the award as a decree is the first relevant aspect to be considered. The moment the court is satisfied that the foreign award is enforceable under Part II, Chapter I, the award will be a deemed decree of that court and can be executed as if it is a decree of that court. Admittedly, such a stage has not been reached in this case. 5. Under such circumstances the remedy available for a foreign award holder in such a situation is to be examined. The explicit provision enabling the award holder to get such an impugned order is under Section 48 (3) of the Act. Section 48 (3) of the Act states as follows: “Section 48. 5. Under such circumstances the remedy available for a foreign award holder in such a situation is to be examined. The explicit provision enabling the award holder to get such an impugned order is under Section 48 (3) of the Act. Section 48 (3) of the Act states as follows: “Section 48. Conditions for enforcement of foreign awards.-(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- (2) xxx (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.” Section 48 (1) (e) of the Act states as follows: “the award has not yet become binding 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.” 6. Surely, in this case the petitioners herein has no case that they had taken any steps for setting aside or suspension of the alleged award before a foreign forum as contemplated under Section 48 of the Act. 7. Here, the case seems to be that petitioners had moved a Section 34 petition, which was already found against them. It was challenged before this court by filing Appeal (Arb)No. 54/2017, which was also dismissed by this court as stated earlier. 8. Section 34 of the Act is in Part I of the Act. Thus Section 34 of the Act will not be applicable in the case of a foreign award. This point is made very clear in the decision rendered by the Hon'ble Apex Court in Imax Corporation v. M/s. E-City Entertainment (I) Pvt Limited reported in AIR 2017 SC 1372 . There, in paragraph 4 of the judgment the issue considered is as follows: Para 4: The only issue before us is whether the petition under Section 34 of the Arbitration Act is maintainable before a court in India and in this case, the Bombay High Court. There, in paragraph 4 of the judgment the issue considered is as follows: Para 4: The only issue before us is whether the petition under Section 34 of the Arbitration Act is maintainable before a court in India and in this case, the Bombay High Court. Thereafter the Hon'ble Apex Court held as follows: “Therefore, there is no doubt that Part I has no application because the parties chose and agreed to the arbitration being conducted outside India and the arbitration was in fact held outside India.” When Section 34 of the Act is not applicable in the case of a foreign award, pendency of a petition under Section 34 of the Act cannot be considered as the fulfilment of the requirement under Section 48 (3) of the Act. 9. Further, admittedly the facts reveals that the enforcement petition moved before the court did not reached a stage as contemplated under Section 49 of the Act. Section 49 of the Act states as follows: “49. Enforcement of foreign awards.- Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.” 10. From the above discussion what comes out is that, the award sought to be enforced is a foreign award. Before treating it as a deemed decree of that court, first the requirement under Section 47 of the Act need to be complied with. After considering the same, the court has to consider the proof if any produced under Section 48 of the Act. Then only the stage under Section 49 will come into operation. When there is no proceeding for setting aside or suspension of the award before a competent authority, an application under Section 48 (3) of the Act will not lie or in other words the said provision will not be applicable. The corollary is that the court cannot direct to give suitable security under Section 48 (3) of the Act. Thus, the impugned order is not sustainable under Section 48 (3) of the Act. 11. The corollary is that the court cannot direct to give suitable security under Section 48 (3) of the Act. Thus, the impugned order is not sustainable under Section 48 (3) of the Act. 11. It is to be remembered that in par with the reliefs that can be sought before judgment in a civil proceedings, the provision available in an Indian arbitration proceeding is under Section 17 of the Act, but the common provision for interim orders now available for Indian Arbitration as well as foreign arbitration is one under Section 9 of the Act. As already highlighted, an order has already been obtained by the respondent herein under Section 9 of the Act. It is the case of the respondent that the order was obtained at a prearbitral stage on the strength of the arbitral agreement. The intrinsic question is that, when an enforcement petition is before the court and when there was an order already issued under Section 9 of the Act; and when the said application was finally disposed of after coming into existence of an arbitral award, whether the present impugned order can also be treated as an order passed under Section 9 of the Act. In that respect it can be seen that, in this case the relief was sought when the matter was under consideration of the court below under Part II of the Act. 12. Section 9 of the Act states as follows: A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court- Part II deals with “ENFORCEMENT OF CERTAIN FOREIGN AWARDS”.Part II is in par with Section 36 of the Act, in respect of enforcement of foreign award. In the case of a Foreign award, where an application is filed for enforcement, Section 9 will not be applicable. Section 49 of the Act in isolation to other Sections of Part II cannot be considered as equivalent to Section 36, which mentioned in Section 9 of the Act, in the light of Section 46 of the Act. In Section 46 of the Act it is stated that “ any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award”. In Section 46 of the Act it is stated that “ any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award”. Thus, when a petition to enforce/execute is made before a competent court, Section 9 of the Arbitration Act will become non applicable. It is also made clear that while coming to this conclusion, the fact that under Section 48 of the Act, the burden of proof is squarely on the award debtor (party against whom enforcement is invoked) is also taken into consideration. That is, when there is proof regarding any of the grounds enumerated under Section 48 of the Act, there will be no question of granting a relief under Section 9 of the Act. If there is no such proof and the court is satisfied that the foreign award is enforceable, then all the powers of an executing court will be available to the court to execute/enforce the decree. 13. The gist of the above discussion is that the petitioner in the enforcement petition will not be entitled to get a relief as in the order in EA No.267/2017 in EP No.97/2013. Thus the impugned order marked as Ext.P11 to this petition is hereby set aside. The petitioners herein are entitled to take all or any of the defence available under Section 48 of the Act, but subject to the stage of the proceedings before the II Additional District Court, Kollam. In this case, it is submitted before us that the arbitration award was passed on 20.12.2013. Now, we are in 2017. Actually the parties were opted to a fast track dispute redressal platform. That is, arbitration. But even after the passage of 5 years, the dispute is not yet resolved. Under such circumstances, we direct the II Additional District Court, Kollam to take all endeavour to dispose of the matter as expeditiously as possible. It is also made clear that the respondent is entitled to take all remedies available under Order 21 of CPC to execute a decree, if the court finds that it is an enforceable award under Section 49 of the Act. To expedite the proceedings, we hereby direct that the parties shall appear before the court below on 6.11.2017, i.e. E.P.No.97/2013 will stand advanced to 6.11.2017.