The Calcutta High Court (“Calcutta HC”) has, in its judgement dated June 23, 2023, in the matter of Jaldhi Overseas Private Limited v. Steer Overseas Private Limited [(2023) SCC OnLine Cal 1628], held that courts cannot re-appreciate the evidence or substitute its view with that of the arbitrator while considering the issue of enforcement of a foreign award under Section 48 (Conditions for enforcement of foreign awards) of the Arbitration and Conciliation Act, 1996 (“Act”).

Facts

Jaldhi Overseas Private Limited, a company incorporated under the laws of Singapore (“Petitioner”), by way of its e-mail dated December 24, 2009 (“E-mail Correspondence”) addressed to Steer Overseas Private Limited (“Respondent”) offered to carry the Respondent’s cargo of iron ore fines from Haldia and Visakhapatnam ports to a main port in China, in accordance with the terms of the E-mail Correspondence. The Respondent, upon receipt of the E-mail Correspondence, altered the commercial terms therein and returned its counter offer to the Petitioner by way of a separate e-mail and also requested the Petitioner to nominate a vessel to carry the cargo.

The Petitioner prepared a fixture note in furtherance of the terms and conditions of its E-mail Correspondence (“Fixture Note 1”), although this Fixture Note 1 was circulated to the Respondent only on January 27, 2010. The Fixture Note 1 provided for an arbitration clause specifying that arbitration was to be held in Singapore and English law was to apply. The Petitioner had separately circulated a fixture note dated December 24, 2009 (“Fixture Note 2”) to Global Up International Limited, a 100% subsidiary of the Respondent (“Sister Company”) and raised succeeding invoices pertaining to Fixture Note 2 on the Sister Company.

Upon receipt of Fixture Note 1, the Respondent amended two terms pertaining to discharge and detention rates and re-circulated the modified note (“Modified Fixture Note 1”) to the Petitioner on January 29, 2010. However, prior to the Respondent circulating the Modified Fixture Note 1 to the Petitioner, the Petitioner had already nominated the vessel namely; MV Dong Jun (“Vessel”), which first arrived at Haldia on January 21, 2010, loaded the Respondent’s cargo at Haldia and then sailed for Visakhapatnam where the Respondent accepted the notice of readiness to load at Visakhapatnam. Subsequently, the Vessel reached Vishakhapatnam on February 2, 2010, for loading the remaining cargo of the Respondent, however, it did not berth at Visakhapatnam due to non-readiness of the cargo documents. Moreover, the Respondent utilized some days in excess of the lay time at the discharge port of Zhenjiang, China, which resulted in the accrual of demurrage and damages worth $299,047. Additionally, the Respondent through its Sister Company also owed funds to the Petitioner, in relation to fixtures where other vessels were appointed.

In a meeting dated January 24, 2011, the Respondent offered $200,000 to the Petitioner, as a full and final settlement of all dues, however, this settlement was not accepted by the Petitioner. The Petitioner, by way of its letter dated May 4, 2012, initiated arbitral references before the Singapore International Arbitration Centre (“SIAC”) in relation to all the fixtures between the Petitioner, the Respondent and the Sister Company. The SIAC through its letter dated June 25, 2012, informed the Petitioner and the Respondent of the appointment of Mr. Marcus Gordon as the sole arbitrator (“Arbitrator”), in all the arbitral references instituted by the Petitioner. The Petitioner had discontinued all other arbitral references, except the issue pertaining to Fixture Note 1. On January 20, 2017, the Arbitrator issued a partial award in favour of the Petitioner thereby deciding the Respondent’s liability as $12,645.83 and $299,047 on account of detention in Visakhapatnam and demurrage at Zhenjiang, China, respectively (“Award”).

The Petitioner applied to the High Court of the Republic of Singapore (“Singapore HC”) for enforcing the Award in Singapore, which application was contested by the Respondent. The Respondent also preferred an appeal before the Singapore HC to set aside the Award, however the said appeal was dismissed by the Singapore HC vide its judgement dated November 27, 2017. Further, by way of an order dated December 1, 2017, the Singapore HC granted the Petitioner with leave to enforce the Award in Singapore.

In light of the above, the Petitioner approached the Calcutta HC seeking enforcement of the Award in India, by filing an application under Section 46 (When foreign award binding) of the Act (“Application”).

Issue

Whether a court can re-appreciate the evidence or substitute its view with that of the arbitrator while considering the issue of enforcement of a foreign award.

Arguments

Contentions of the Petitioner:

The Petitioner submitted that the Award had been passed in terms of the (Singaporean) International Arbitration Act, 1994 with the arbitral proceedings conducted in consonance with the SIAC rules. Both, India and Singapore, being signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) would make Chapter I (New York Convention Awards) of Part II (Enforcement of certain foreign awards) of the Act relevant, and as such the Petitioner had complied with Section 47 (Evidence) of the Act, by providing the original Award as an annexure to its Application, along with a duly certified copy of the arbitration agreement, the validity of which had not be disputed.

The Petitioner further submitted that foreign awards could not be challenged under the Act, except in the country in which it was made. Further, the Respondent had sought to strike out the leave granted to the Petitioner by the Singapore HC, wherein the Award had been elevated to a decree. However, the Respondent had not made an application to set aside the Award in itself. Moreover, the Respondent sought to challenge the Award under Section 48 of the Act on the same grounds that were put forth by the Respondent before the Singapore HC, albeit already arguing at length before the Arbitrator who had issued a well-reasoned Award after considering oral and documentary evidence submitted by both the Petitioner and the Respondent. Furthermore, the Respondent was seeking to challenge the Award on grounds of merits which was not permissible under the Act.

In order to support its submissions, the Petitioner placed reliance on the judgement passed by the Hon’ble Supreme Court (“SC”) in the case of Shri Lal Mahal Limited v. Progetto Grano Spa [(2014) 2 SCC 433], wherein it was held that Indian courts cannot have a second look at foreign awards at the enforcement stage. Further, reliance was placed by the Petitioner on the judgement passed by the SC in the case of Gemini Bay Transcription Private Limited v. Integrated Sales Service Limited and Another [(2022) 1 SCC 753] (“Gemini Bay Case”), wherein it was held that Indian courts cannot refuse the enforcement of a foreign award when it was found to be contrary to the substantive law agreed to amongst the parties.

The Petitioner concluded its arguments by submitting that while it had on the direction of the Respondent raised invoices pertaining to Fixture Note 2 on the Sister Company and although all arbitral references except the one relating to Fixture Note 1 stood settled, the existence of Fixture Note 2 could not act as an impediment to the enforcement of the Award.

Contentions of the Respondent:

The Respondent submitted that Section 47(1)(b) of the Act requires submission of a duly certified copy of the original arbitration agreement in order to enforce a foreign arbitral award. In relation to this, the Respondent submitted that while the Arbitrator had identified Fixture Note 1 as an arbitration agreement, the certified copy attested by the Petitioner was based on the Modified Fixture Note 1, which did not constitute an arbitration agreement according to the Arbitrator. Since a duly certified copy of Fixture Note 1 has not been provided by the Petitioner, it had not complied with the statutory mandate of Section 47(1)(b) of the Act and therefore the Application filed by the Petitioner was liable to be dismissed.

The Respondent contended that the Petitioner and the Respondent were unable to reach a consensus with respect to certain terms as evidenced by the exchange of Fixture Note 1 and Modified Fixture Note 1 amongst themselves. Hence, there was no valid contract based on the fundamental principles of contract law and consequently, no valid arbitration agreement.

Furthermore, the Petitioner had approached the Sister Company with Fixture Note 2, which was accepted by the Sister Company. Thus, there was consensus ad idem between the Petitioner and the Sister Company and as such there was no privity of contract between the Respondent and the Petitioner, and therefore, an arbitration agreement did not exist between the Respondent and the Petitioner. Hence, the Award could not have been enforced under Section 48(2)(a) of the Act.

Examining the documents relied upon by the Arbitrator, it did not appear to the Respondent that the SIAC (a private body which appoints arbitrators to adjudicate disputes) was chosen by the Petitioner and the Respondent, and that since SIAC had no jurisdiction to adjudicate the dispute, the Award was null and void. The Respondent also submitted that Section 48(2)(b) of the Act empowers courts to refuse enforcement of foreign awards that are contrary to the fundamental public policy of India. In this regard, the Respondent relied on the Delhi High Court’s judgement in the case of Cruz City 1 Mauritius Holdings v. Unitech Limited [2017 SCC OnLine Del 7810], wherein the enforcement of the foreign award was refused under Section 48(2) of the Act owing to the fact that such award was passed without jurisdiction.

Observations of the Calcutta HC

With respect to the Respondent’s contention that the Petitioner had failed to comply with the provisions of Section 47(1)(b) of the Act, the Calcutta HC observed that the procedural deficiency of non-filing of a duly certified copy of the Fixture Note 1 had been cured by the Petitioner during the hearing before the Calcutta HC, and therefore, the objection with regard to non-compliance of Section 47(1)(b) of the Act was infructuous.

The Calcutta HC relied on several judicial precedents of the SC, in order to determine the boundaries of discretion that a court could exercise while determining on enforcement of foreign awards and observed that in the Gemini Bay Case and in the case of Government of India v. Vedanta Limited [(2020) 10 SCC 1], the SC had imposed a bar on courts from (i) re-appreciating evidence; (ii) substituting its own view with that of the arbitrator; or (iii) reviewing the matter afresh.

The Calcutta HC observed that in circumstances where an arbitration agreement is evidently found lacking or there is no concluded contract between parties, the enforcement of an award must be refused under Section 48(2)(b) of the Act. Furthermore, the Calcutta HC observed that there must be consensus ad idem between the parties to an agreement, which must further include an arbitration clause. However, an agreement and an arbitration clause might not be found in a singular document and could be gathered from the correspondence between the parties, which could be further corroborated by the resulting conduct of the said parties.

With respect to the contention of the Respondent that the contract was concluded between the Petitioner and the Sister Company, the Calcutta HC observed that indisputably there was a contract that existed between the parties. Moreover, the Award shed light on which contract constituted the agreement between the Petitioner and the Respondent, rather than whether a contract existed between the said parties. The Calcutta HC observed that to refuse enforcement of an award, the evidence must expressly indicate that there was no concluded contract between the Petitioner and the Respondent and that the Arbitrator had gone completely amiss in his duty.

• The Calcutta HC further observed that the Arbitrator had passed the Award based on the following considerations:
• The conduct of the Petitioner and the Respondent indicated existence of an agreement pursuant to which actions were being undertaken even before Fixture Note 1 was circulated to the Respondent.
• The conduct of the parties indicated that the changes made in the E-mail Correspondence and the Fixture Note 1 were mutually accepted and that they went on with their respective obligations thereafter.
• The conduct of the parties indicated that several actions were undertaken pursuant to mutual understanding thereby indicating the existence of consensus ad idem, even prior to the Fixture Note 2 being circulated by the Petitioner to the Sister Company.

The Calcutta HC observed that the Arbitrator had from appreciation of the evidence concluded that there was in fact an agreement between the Petitioner and the Respondent, owing to communication and subsequent conduct of the said parties. In such a case, the Calcutta HC could not substitute its own views to replace that of the Arbitrator, unless it was manifestly evident that there existed no agreement between the parties.

Decision of the Calcutta HC

The Calcutta HC, keeping in mind the provisions of Section 48 of the Act, held that the concluded contract/ the arbitration agreement entered into between the Petitioner and the Respondent was neither incapable of settlement by arbitration in India, nor did it shock the conscience of the court in light of forceful imposition of a contract. Therefore, the Calcutta HC did not find a reason to tinker with the Award and rejected the Respondent’s objections with respect to the enforceability of the Award and rendered the Award enforceable and executable as a decree.

VA View:

The Calcutta HC has rightly summarised the principles relating to the discretion that courts must apply while deliberating on issues dealing with the enforcement of foreign arbitral awards under Section 48 of the Act. The Calcutta HC has reiterated the principle of minimal intervention over an arbitrator’s decision by emphasising that an arbitrator’s view is sacrosanct and should not be substituted with an alternate opinion that a court may possibly have on re-appreciation of the evidence, particularly in instances where the arbitrator has examined the evidence upon proper application of mind and concluded that there was consensus ad idem between the parties based on an agreement.

Therefore, while considering the issue of enforcement of a foreign award, courts must abstain from (i) re-appreciating evidence; (ii) substituting its own view with that of the arbitrator; or (iii) reviewing the matter afresh. Further, in a case where an arbitrator has rendered a finding that there existed an agreement and an arbitration clause, the court should not substitute its own view, unless it is evident that no concluded and binding contract ever came into existence between the parties.

For any query, please write to Mr. Bomi Daruwala at [email protected]

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