The series of judgments surrounding the long-drawn battle between Centrograde Minerals and Metals and Hindustan Copper Limited finally culminated in a decision by the Supreme Court on June 2, 2020 in the case of Centrograde Minerals and Metals Inc. v. Hindustan Copper Limited, 2020 SCC OnLine SC 479. The Supreme Court, while rendering this landmark judgment, laid down the foundation for enforcement of a foreign award under a two-tier arbitration structure.
Brief background of the Centrograde-Hindustan Copper:
A contract of sale of 15,500 DMT of copper concentrate had been executed between Centrograde Minerals and Metals Inc. (“Appellant”) and Hindustan Copper Limited (“Respondent”). Clause 14 of the agreement covered a two-tier arbitration clause by which the first tier was to be settled by arbitration in India. In an event that any party was dissatisfied with the result, that party would have a right to appeal to a second arbitration in the International Chamber of Commerce (“ICC”) in London.
During the course of transactions between the parties, a dispute arose with regard to the quantity of dry weight of copper concentrate delivered. The Appellant invoked the arbitration clause. By way of an award dated June 15, 1999, the sole arbitrator, appointed by the Indian Council of Arbitration, delivered a nil award, subsequent whereto the Appellant invoked the second portion of the arbitration clause before an arbitrator appointed by ICC. The second award dated September 29, 2001 (“Award”) was sought to be executed in India by the Appellant. The enforcement was opposed by the Respondent. One of the Respondent’s objections was that Respondent was not given a proper opportunity to present its case before the ICC. However, a Single Bench of the Calcutta High Court passed an order for enforcement of the Award dismissing the Respondent’s objections. Consequently, the foreign Award became lawfully executable in India. On appeal thereafter, a Division Bench of the Calcutta High Court held that, since the Indian award and the foreign Award had been pronounced by arbitrators who enjoyed concurrent jurisdiction, they were mutually destructive of each other, consequent whereto the appeal was allowed and the decision of the Single Bench was set aside on July 28, 2004. This was challenged by the Appellant before the Supreme Court.
Two separate judgements were delivered by S.B. Sinha J. and Tarun Chatterjee J. in the case of Centrograde Minerals and Metals Inc. v. Hindustan Copper Limited, (2006) 11 SCC 245. S. B. Sinha J., was of the opinion that such a two-tier arbitration clause was non-est in law and invalid in terms of Section 23 of the Indian Contract Act (“ICA”). On the other hand, Tarun Chatterjee J., proceeded to note that there was no provision under the ICA which prohibited a two-tier arbitration clause where the first arbitration proceedings was to be conducted under Part I of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and an appeal therefrom, was to be conducted under Part II of the Arbitration Act.
The matter was accordingly referred to a larger Bench of the Supreme Court which led to the case of Centrograde Minerals and Metals Inc. v. Hindustan Copper Limited, (2017) 2 SCC 288. The issues that arose before the Bench for consideration were (i) whether the settlement of disputes by way of a two-tier arbitration clause as provided in clause 14 was permissible under the laws of India and (ii) assuming the first issue is answered in the affirmative, whether such a “foreign award” was executable under Section 48 of the Act? While answering the first question in the affirmative, the Supreme Court held that the Arbitration Act did not, implicitly, or explicitly, in this regard, restrict the parties’ autonomy to mutually agree to a procedure for the settlement of disputes. The court further held that party autonomy was upheld to the extent that the parties could mutually agree to a procedure whereby an appeal from the arbitral award would lie with another arbitral tribunal for reconsideration. The matter was then directed to be listed again for consideration of the second issue.
Thereafter, the instant matter arose for consideration of the second issue before the Supreme Court.
Issue:
The issue which arose for consideration before the Supreme Court was whether an award passed by an appellate arbitral tribunal being a “foreign award” is liable to be enforced under Section 48 of the Arbitration Act?
Arguments advanced on behalf of Appellant:
The Appellant placed heavy reliance on Vijay Karia v. Prsymian Cavi E. Sistemi SRL, (2020) 3 SCALE 494 (“Vijay Karia”) rendered by the Supreme Court. The Appellant referred in detail to portions of the award that dealt with the natural justice aspect of the matter, and the judgment of the Single Bench of the Calcutta High Court with regard to the same. Placing the chain of events before the Supreme Court, the Appellant further contended that ample time had been granted by the arbitrator in the appellate arbitration proceedings to the Respondent to present its case, but the Respondent, having the Indian award in its favour, was desirous of aborting the London proceedings. The Appellant disputed the judgment rendered by Tarun Chatterjee J., stating that it was factually incorrect when it was recorded that a fair opportunity had not been granted to the Respondent for presenting its case.
Arguments advanced on behalf of the Respondent:
The Respondent contended that the question that was to be reconsidered by the larger Bench was whether a two-tier arbitration clause was permissible under the law in India. The question of whether the Respondent was given a fair and reasonable opportunity to show cause had not been referred to the larger Bench since there was no difference of opinion in that regard, and therefore, it could not be adjudicated upon. Additionally, basing its submissions on list of dates and a set of documents, the Respondent contended that although the arbitrator had, as matter of fact, extended time, lastly on September 12, 2009, he ought to have permitted more time to the Respondent to file legal submissions and documents. Given the terrorist attack that had taken place in New York at the time, consequent to which there was a global disruption of transport and communication, the Respondent argued that it very difficult to file the required documents in the prescribed time. The Respondent further argued that had the documents reached the arbitrator in time, there was no doubt that the award would have been pronounced in its favour, as a consequence of which serious prejudice had been caused to it.
Decision of the court:
The Supreme Court held that the law on the subject matter of Section 48 (1) (b) of the Arbitration Act had been laid down in the matter of Vijay Karia (supra). The court also proceeded to note that in that particular case, no challenge was made to the award under the English arbitration law, though available, identical to the facts of the present case. Examining the findings in the said pronouncement, the court noted that the legislative policy so far as recognition and enforcement of foreign awards is that, an appeal can be preferred against a judgment in terms of Section 50 of the Arbitration Act for refusing to recognise and enforce a foreign award but not the other way around (i.e. an order recognising and enforcing an award). The Supreme Court observed that the reason for this was because the policy of the legislature was that there ought to be only one bite at the cherry in a case where objections were made to the foreign award on the extremely narrow grounds contained in Section 48 of the Arbitration Act and which had been rejected. The court further observed that it would only be in a very exceptional case of a blatant disregard of Section 48 of the Arbitration Act that the Supreme Court would interfere with a judgment which recognises and enforces a foreign award , however, inelegantly drafted the judgment may be.
On facts after scrutinizing the circumstances and chain of events in depth, the Supreme Court held that the arbitrator had granted numerous chances to the Respondent to file the legal submissions and documents. The Supreme Court also observed that the Respondent up to August 2001, did not participate in the arbitral proceedings, although it was invited and informed time and again to appear before the arbitral tribunal and submit its response and evidence in support thereof. It was only when the arbitrator indicated that he was going to proceed to pronounce the award, that the Respondent requested for further grant of time. Despite the conduct of the Respondent, the arbitrator granted an extension by way of a final opportunity up to September 12, 2001. Although the submissions were submitted beyond the prescribed length and time, owing to the terrorist attack that occurred at the time, the arbitrator accepted and considered the same. Given the timeline of the events that took place, the Supreme Court held that the arbitrator had been extremely fair and granted reasonable opportunities to the Respondent to present its case.
The Supreme Court also reiterated the test laid down in Minmetals Germany Gmbh v. Ferco Steel Limited, 1999 C.L.C 647, which elucidated that where the enforcee has, due to matters within his control, not provided himself with the means of taking advantage of an opportunity given to him to present his case, he does not bring himself within that exception to enforcement. Further, relying on Jorf Lasfar Energy Co. v. AMCI Export Corp, 2008 WL 1228930, the Supreme Court proceeded to lay down that a party cannot purposefully ignore the procedural directives of the decision making body and then successfully claim that the procedures were unfair or violative of due process.
In view of the aforesaid, the Supreme Court held that there was no fault whatsoever with the conduct of the arbitral proceedings and further, directed that the foreign award to be enforced.
Please find a copy of the judgment here.
This update has been contributed by Luckyraj Indorkar (Managing Associate) and Avina Karnad (Associate).
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