Arbitration; Eitzen Bulk A/S Vs. Ashapura Minechem [Supreme Court of India, 13-05-2016]

Whether Part I of the Arbitration Act is excluded from its operation in case of a Foreign Award where the Arbitration is not held in India and is governed by foreign law –  By Clause 28, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, as observed earlier. It is too well settled by now that where the parties choose a juridical seat of Arbitration outside India and provide that the law which governs Arbitration will be a law other than Indian law, part I of the Act would not have any application and, therefore, the award debtor would not be entitled to challenge the award by raising objections under Section 34 before a Court in India. A Court in India could not have jurisdiction to entertain such objections under Section 34 in such a case.

Arbitration


IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

[FAKKIR MOHAMED IBRAHIM KALIFULLA] AND [S.A. BOBDE] JJ.

MAY 13, 2016

 CIVIL APPEAL Nos. 5131-5133 OF 2016

(Arising out of SLP (CIVIL) Nos. 2210-2212/2011)

EITZEN BULK A/S …. APPELLANT (S)

VERSUS

ASHAPURA MINECHEM LTD. & ANR. …. RESPONDENT(S)

 WITH

 CIVIL APPEAL No. 5136 OF 2016

 (Arising out of SLP (CIVIL) No. 3959/2012)

ASHAPURA MINECHEM LTD. …. APPELLANT (S)

 VERSUS

EITZEN BULK A/S ….RESPONDENT(S)

 WITH

 SLP (CIVIL) No. ………../2016

 (Arising out of CC NO. 3266/2013)

ASHAPURA MINECHEM LTD. …. PETITIONER (S)

 VERSUS

ARMADA (SINGAPORE) PTE LTD. …. RESPONDENT(S)

 WITH

 SLP (CIVIL) No. ………../2016

 (Arising out of CC NO. 3382/2013)

ASHAPURA MINECHEM LTD. …. PETITIONER (S)

 VERSUS

ARMADA (SINGAPORE) PTE LTD. …. RESPONDENT(S)

 WITH

 CIVIL APPEAL Nos. 5134-5135 OF 2016

 (Arising out of SLP (CIVIL) Nos. 7562-7563/2016)

ASHAPURA MINECHEM LTD. …. APPELLANT (S)

 VERSUS

EITZEN BULK A/S ….RESPONDENT(S)

 JUDGMENT

S. A. BOBDE, J.

Leave granted in SLP (C) Nos.2210-2212/2011, SLP (C) Nos.3959/2012 and SLP (C) No.7562-7563/2016.

2. The dispute in these appeals, arises out of the Contract of Affreightment dated 18.1.2008 (hereinafter referred as `the Contract’). Eitzen Bulk A/S of Denmark (hereinafter referred to as `Eitzen’) entered into the contract with Ashapura Minechem Limited of Mumbai (hereinafter referred to as `Ashapura’) as charterers for shipment of bauxite from India to China. The Charter party contains an Arbitration Clause as follows:-

Any dispute arising under this C.O.A. is to be settled and referred to Arbitration in London. One Arbitrator to be employed by the Charterers and one by the Owners and in case they shall not agree then shall appoint an Umpire whose decision shall be final and binding, the Arbitrators and Umpire to be Commercial Shipping Men. English Law to apply. Notwithstanding anything to the contrary agreed in the C.O.A., all disputes where the amount involved is less then USD 50,000/- (fifty thousand) the Arbitration shall be conducted in accordance with the Small Claims Procedure of the L.M.A.A.”

(emphasis supplied)

3. Disputes having arisen between the parties, the matter was referred to Arbitration by a sole Arbitrator. The Arbitration was held in London according to English Law. Ashapura Minechem was held liable and directed to pay a sum of 36,306,104 US$ together with compound interest at the rate of 3.75 % per annum. In addition they were directed to pay 74,135 US$ together with compound interest at the rate of 3.75% per annum and another sum of 90,233.66 Pounds together with compound interest at the rate of 2.5% per annum vide Award of the Sole Arbitrator dated 26.5.2009. Proceedings in Gujarat

4. Before Arbitration had commenced, Ashapura filed a suit alongwith an application for injunction before the Civil Judge at Jam- khambalia, Gujarat praying inter-alia that the Contract and the Arbitration Clause contained therein was illegal, null and void, ab-initio. Though initially an interim injunction was granted, the learned Civil Judge dismissed the suit for want of jurisdiction vide order dated 12.1.2009. The appeal filed by Ashapura before the Gujarat High Court was dismissed as withdrawn on 2.7.2009.

5. In London, Mr. Tim Marshal, who was appointed as Arbitrator, held that Ashapura was in repudiatory breach and awarded Eitzen Bulk an amount of 36,306,104.00 $ plus interest, as stated above.

6. Having failed to stall the Arbitration and then having failed in the Arbitration proceedings, Ashapura resorted to Section 34 of the Arbitration Act and filed objections in India in respect of the Award passed in London. These proceedings were filed before the District Judge, Jamnagar for setting aside the Foreign Award made in London. A Misc. Civil Application No. 101/2009 for injunction restricting Eitzen Bulk from enforcing the Award in foreign jurisdictions outside India was also moved. The District Judge, Jamnagar on 24.8.2009 dismissed the application for injunction seeking restraint on enforcement of the Award.

7. From 14.7.2009 to 3.8.2009 Eitzen applied for enforcement of the Award in the countries of Netherlands, USA, Belgium, UK. The Courts in various jurisdictions have held the Award to be enforceable as a judgment of the Court.

8. On 14th July, 2009, the appellant filed proceedings in Netherlands Court seeking a declaration that the award dated 26th May, 2009 is enforceable as a judgment of the Court. The respondent appeared in the said proceedings and filed their objections. The Netherlands Court, however, declared that the award is enforceable as a judgment of the Court on 17th March, 2010.

9. On 24th July, 2009, the United States District Court for Southern State of New York declared the award dated 26th May, 2009 enforceable as a judgment of that court. The proceedings filed by the appellant were contested by the respondent.

10. On 27th July, 2009, the appellant filed present proceedings under Sections 47 to 49 of Part II of the Arbitration Act for enforcing the award dated 26th May, 2009 on the ground that the respondent was carrying on business within the jurisdiction of this Court and has its registered office and corporate office and assets within the territorial jurisdiction of this Court.

11. On 29th July, 2009, the Antwerp Court declared the award dated 26th May, 2009 enforceable as a judgment of the Court. The said proceedings were contested by the respondent. On 3rd August, 2009, the English High Court declared the award dated 26th May, 2009 enforceable as a judgment of the Court.

12. Against the rejection of the application for injunction Ashapura filed a petition under Articles 226 and 227 of the Constitution of India before the High Court of Gujarat at Ahmadabad for a Writ of Certiorari to quash and set aside the Order dated 24.8.2009 rendered by the District Judge, Jam-Khambalia and for a direction not to enforce the execution of the judgment dated 24.7.2009. Ashapura inter-alia contended that the Award cannot be enforced or executed since their objections under Section 34 were pending. A learned Single Judge who heard the petition however, observed that the issues before him were inextricably connected with the issues of jurisdiction of the Court in the Section 34 application and the contentions of Eitzen opposing the said Section 34 application. The Single Judge, therefore, set aside the Order dated 24.8.2009 and remanded the matter for fresh decision in accordance with law by Order dated 3.9.2009. In Letters Patent Appeal filed by Eitzen the Division Bench of the High Court of Gujarat directed the District Judge to consider all contentions by its Order dated 29.10.2009.

13. Eitzen however questioned the very jurisdiction of a Court in India to decide objections under Section 34 of the Arbitration Act in respect of a Foreign Award by way of a Writ Petition. They prayed for issue of a Writ of Prohibition and an Order restraining the learned District Judge at Jam- Khambhalia from adjudicating Ashapura’s application under Section 34 of the Arbitration and Conciliation Act, 1996 against the Foreign Award dated 26.5.2009.

14. A learned Single Judge issued notice and stayed further proceedings before the Jamnagar Court on 20.11.2009. Ashapura however filed LPA No. 2469 of 2009 challenging the Order of the learned Single Judge dated 20.11.2009. The Division Bench which heard the appeal has held by Judgment and Order dated 22.9.2010, that Ashapura is entitled to challenge the Foreign Award under Section 34 of Part I of the Arbitration Act. It has further held that the territorial jurisdiction is a mixed question of fact and law and is required to be decided by the Trial Court on the basis of the Plaint and Written Statement and Evidence before it. This judgment was questioned by way of SLP (C) Nos. 2210-2212 of 2011 filed by Eitzen.