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Emmanuel Cashew Industries, by its Proprietor Jameson Abraham v/s CHI Commodities Handlers Inc., Canada represented by S. Anilkumar

    W.P.(C) Nos. 36054 & 36055 of 2016
    Decided On, 17 February 2017
    At, High Court of Kerala
    For the Petitioner: Rajiv Abraham George, Eapen Abraham George, Advocates. For the Respondent: T.R. Aswas, Advocate.

Judgment Text
1. The captioned writ petitions are filed challenging the order of the III Addl. District Judge, Kollam dated 04.10.2016 in E.A.No.69 of 2016 in E.P.No.131 of 2013 and E.A.No.68 of 2016 in E.P.No.129 of 2013 respectively, filed by the petitioners in the writ petitions. The subject matter of the writ petitions are offshoot of execution proceedings of Foreign Arbitration Awards filed under Sec.49 of the Arbitration and Conciliation Act, 1996 [for short, 'Act, 1996']. The execution applications are filed by the judgment debtor under Order XVI, Rule 10 read with Sec.151 of the Code of Civil Procedure, and Rules 3 and 11 of the Kerala Arbitration and Conciliation (Court) Rules, 1997, seeking direction to the Association of Food Industries Inc., USA to produce the entire file relating to the final award dated 07.02.2012 in Arbitration Index #2561 and 2562 respectively, to furnish proof in contemplation of Sec.48 of Act, 1996.

2. The registry of this Court has noted a defect that the challenge is not maintainable under Article 226 of the Constitution of India. However, the petitioners sought the matters to be placed before the Court, on the basis of the judgment of the Apex Court in 'M.S. Kazi v. Muslim Education Society and others' [2016 (9) SCC 263]. When the matter was so placed, it was informed by learned counsel appearing for the petitioners that an arrest warrant was issued against the petitioners without issuing any notice and therefore, the subject matter is to be considered under Article 226 of the Constitution of India. Therefore, I directed the registry to number the writ petitions and ordered stay of operation of the arrest passed by the court below in the respective execution applications for a short period, which was being extended periodically. Therefore, learned counsel for the respondent sought to consider the said question as a preliminary point, especially stating that the afore-quoted judgment has no bearing to the issue.

3. True, under normal circumstances, proceedings of this nature can only be challenged invoking Article 227 of the Constitution of India, especially in view of the peculiar nature of the provisions of Part-II, Chapter I of the Arbitration and Conciliation Act, 1996. Anyhow, when it was brought to my notice that arrest warrant was issued without issuing notice to the writ petitioners, in order to avoid any consequential action on the same, taking into account the larger aspects of the rights and liberties conferred under Part-III of the Constitution of India, I thought that the matter can be heard invoking the power under Article 226 of the Constitution of India. Learned counsel for the petitioners has invited my attention to the judgment of the Apex Court in 'Surya Dev Rai v. Ram Chander Rai and others' [AIR 2003 SC 3044], wherein a similar question was considered. Paragraph 25 of the said judgment is relevant to the issue, which read thus:

'25. Upon a review of decided cases and a survey of the occasions wherein the High Courts have exercised jurisdiction to command a writ of certiorari or to exercise supervisory jurisdiction under Article 227 in the given facts and circumstances in a variety of cases, it seems that the distinction between the two jurisdictions stands almost obliterated in practice. Probably, this is the reason why it has become customary with the lawyers labelling their petitions as one common under Articles 226 and 227 of the Constitution, though such practice has been deprecated in some judicial pronouncement. Without entering into niceties and technicality of the subject, we venture to state the broad general difference between the two jurisdictions. First, the writ of certiorari is an exercise of its original jurisdiction by the High Court; exercise of supervisory jurisdiction is not an original jurisdiction and in this sense it is akin to appellate revisional or corrective jurisdiction. Secondly, in a writ of certiorari, the record of the proceedings having been certified and sent up by the inferior court or tribunal to the High Court, the High Court if inclined to exercise its jurisdiction, may simply annul or quash the proceedings and then do no more. In exercise of supervisory jurisdiction the High Court may not only quash or set aside the impugned proceedings, judgment or order but it may also make such directions as the facts and circumstances of the case may warrant, may be by way of guiding the inferior court or tribunal as to the manner in which it would now proceed further or afresh as commended to or guided by the High Court. In appropriate cases the High Court, while exercising supervisory jurisdiction, may substitute such a decision of its own in place of the impugned decision, as the inferior court or tribunal should have made. Lastly, the jurisdiction under Article 226 of the Constitution is capable of being exercised on a prayer made by or on behalf of the party aggrieved; the supervisory jurisdiction is capable of being exercised suo motu as well.'

4. Taking into account the principles of law laid down by the Apex Court and the foundational aspect that led me to entertain the matters under Article 226 of the Constitution of India, I am of the considered opinion that petitioners need not be non-suited on that ground. Therefore, I proceed to consider the subject matter of the issue on merits. Material facts for the disposal of the writ petitions are as follows:

5. Petitioners in the writ petitions have entered into various contracts with M/s. Bright & Associates for export of cashew kernel of various grades by the petitioners to the respondent. Petitioners received letter dated 07.12.2011 from Association of Food Industries Inc., USA, along with demands for arbitration in respect of certain disputes arisen. On 23.12.2011, petitioners requested Association of Food Industries Inc. to furnish copy of the statements of claims and demands filed before it to enable the petitioners to file an effective reply. On 20.01.2012, even though the claims and demands were not furnished, submitted defence statement to Association of Food Industries Inc. Thereafter, according to the petitioners, there was no intimation. However, on 07.02.2012, award signed and executed before a Notary Public of the State of New York by the Arbitral Tribunal published bearing Index 2561 and 2562 were received by the petitioners on 31.03.2012.

6. Aggrieved by the award dated 07.02.2012, petitioners filed O.P.(Arbitration) No.130 of 2012 and O.P. (Arbitration) No.87 of 2012 on 09.04.2012 and 05.03.2012 respectively, before the District Court, Kollam, raising serious grounds including fraud and forgery. Respondent filed E.P.No.131 of 2013 and E.P.No.129 of 2013 on 30.03.2013 and 22.03.2013 respectively. According to the petitioners, later petitioners received copy of award dated 29.02.2012 with same index numbers, which were exactly similar in all respects of the award dated 07.02.2012, dealing with the same disputes except the signature of the same arbitrators which were glaringly different. Petitioners have filed detailed objections to the Execution Petitions.

7. While so, the respondent herein filed preliminary objections to O.P.(Arb.) No.130 of 2012 and O.P.(Arb.) No.87 of 2012 filed under Sec.34 of the Arbitration Act, challenging the maintainability of the Original Petitions. On 12.03.2015, the III Addl. District Judge, Kollam, after considering the preliminary objection, ordered that the Original Petitions cannot be thrown away at the threshold without an enquiry, and that the question of maintainability requires evidence. Aggrieved by the same, respondent preferred Original Petition (C) Nos.903 and 904 of 2015 and Original Petition (C) No.821 of 2015, and this Court set aside the order dated 12.03.2015 of the District Court. It is revealed from the records that petitioners have taken up the said issue before the Apex Court by filing Special Leave Petitions, which are dismissed. Accordingly, the Original Petitions filed by the petitioners challenging the arbitration award under Sec.34 of the Arbitration and Conciliation Act, 1996 ended up in dismissal.

8. On 15.06.2016, E.A.No.69 of 2016 in E.P.No.131 of 2013 and E.A.No.68 of 2016 in E.P.No.129 of 2013 were filed by the petitioners praying to call for the records leading to the award dated 07.02.2012, from the Association of Food Industries Inc. On the same day, additional objections/Rejoinder also were filed by the petitioners to the reply affidavit dated 10.04.2014 filed by the respondent. On 31.08.2016, E.A.Nos.69 and 68 of 2016 were heard by the court below. On 04.10.2016, the Execution Applications were dismissed by the court below, holding that the said applications are not maintainable as per the provisions of Sec.48 of the Arbitration and Conciliation Act, 1996.

9. According to the petitioners, on 27.10.2016, petitions to accept Statement of Account and for arrest of petitioners/judgment debtors served on the counsel for the petitioners and filed by the respondent in the court below on 28.10.2016. It is the contention of the petitioners that, on 31.10.2016, an arrest warrant was issued to arrest the petitioners even without issuing notice to the petitioners, while notice on the petition to accept Statement of Account issued to the petitioners and matter posted to 08.11.2016.

10. Pausing here for a moment, it was the said issue pointed out by the learned counsel for the petitioners compelled the petitioners to file the writ petitions under Article 226 of the Constitution of India. It is thus aggrieved by the orders passed by the court below in E.A.Nos.69 and 68 of 2016 dated 04.10.2016, these writ petitions are filed.

11. Separate detailed counter affidavits are filed by the respondent in both the writ petitions, refuting the allegations and claims and demands raised by the petitioners. According to the respondent, petitioners did not produce the judgments in the Original Petitions passed by this Court in the challenge made by the respondent against the award under Sec.34 of the Act, 1996. It is also contended that, petitioners have failed to produce the judgment of this Court in O.P.(C) Nos.341 and 342 of 2016 rendered in the context of a Transfer Petition, in order to suppress the findings rendered thereunder with respect to the delay willfully caused by the petitioners. Other contentions are also raised traversing through Sections 47, 48 and 49 of Act, 1996. Therefore, the respondent seeks dismissal of the writ petitions.

12. Heard learned counsel for the petitioners and the learned counsel appearing for the respondent. Perused the documents on record and the pleadings put forth by the respective parties.

13. The subject matter of the issues, discussed above, are confined to Sections 47 to 49 of Act, 1996. Sec.47 of the Act deals with the production of evidence by a party applying for enforcement of a foreign award at the time of application. Sec.47 stipulates production of the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; the original agreement for arbitration or a duly certified copy thereof, and such evidence as may be necessary to prove that the award is a foreign award. Other conditions are stipulated in sub-section (2) of Sec.47, dealing with the translation if the foreign award is rendered in a foreign language. The Explanation thereto, as it stood originally, stipulates that, when the award was submitted for execution, the court in Sec.47 means the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its original civil jurisdiction. However, the Explanation is later amended with effect from 23.10.2015, which is not having a bearing to the fact scenario of these cases. Petitioners have no case that respondent has not complied the stipulations and parameters provided under Sec.47 of the Act, 1996.

14. Sec.48 deals with the conditions for enforcement of foreign awards, which may be refused by the court, at the request of the party against whom it is invoked, only if that party furnishes to the court, proof that the parties to the agreement referred to in Sec.44, were under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties are subjected it or, failing which, any indication thereon, under the law of the country where the award was made; or the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings; or was otherwise unable to present his case, etc. etc. It was based on Sec.48 of Act, 1996, petitioners have filed E.A.Nos.69 and 68 of 2016 respectively, to call for the records in order to oppose the enforcement. According to the learned counsel for the petitioners, Sec.48 of Act, 1996 enables the petitioners to seek for production of records by issuing appropriate direction by the execution court in order to establish non-enforceability of a foreign award. The foundational contention of the counsel for the petitioners is that, in order to establish proof as contemplated under Sec.48 of Act, 1996, the execution applications were filed, and as of right, the petitioners are entitle to do so, and therefore, the dismissal of the applications by the court below were not correct.

15. On the other hand, learned counsel for the respondent submitted that, on a reading of Sec.48, it is clear, petitioners ought to have furnished to the court proof to establish the contentions raised. It is also submitted that evidence and proof, are different in the legal context. When the section makes an imperative condition of furnishing proof, petitioners are not entitled to call for evidence in order to establish proof. Learned counsel for the respondent has also invited my attention to the following judgments of various High Courts:

1. 'Alcatel India Limited & Anr. v. Koshika Telecom Limited & Ors. [2004 (3) Arb. LR 107 (Delhi)]

2. 'Sial Bioenergie, Decree Holder v. Sbec Systems, Judgment Debtors' [AIR 2005 DELHI 95]

3. 'Compania Naviera Sodnoc SA v. Bharat Salt Refineries Ltd. and Anr.' [2008 (1) Arb. LR 344 (Madras)]

4. 'Glencore Grain Rotterdam B.V v. Shivnath Rai Harnarain India Co.' [LAWS (DLH) - 2008-11-189]

5. 'Jindal Exports Ltd. v. Fuerst Day Lawson Ltd.' [2010 (1) Arb. LR 1 (Delhi)]

6. 'Penn Racquet Sports v. Mayor International Ltd.' [2011 (1) Arb. LR 244 (Delhi)]

16. Taking note of the respective submissions made across the Bar, and reckoning the legal and factual circumstances, I am of the considered opinion that the question to be decided in these cases centers around 'proof' prescribed under Sec.48 of Act, 1996. On a reading of Sec.48, what could be gathered is, in order to refuse enforcement of a foreign award, petitioners were duty bound to furnish proof to establish that they were incapacitated in any manner envisaged under sub-section (1)(a) to (e) of Sec.48. Petitioners have no case that they have produced any such proof before the Court. The methodology adopted by the petitioners were to make an attempt to establish proof after securing documents from the arbitrator.

17. In my considered opinion, under Sec.48 of Act, 1996, the Court is provided with the liberty to refuse enforcement of a foreign award at the request of the party against whom it is invoked, only if the party furnishes to the court proof with respect to the parameters provided thereunder. On a reading of the said provision, what is significant is 'furnishing proof' by the party objecting to the enforcement of foreign award. The court is not duty bound to aid the petitioners to establish proof by calling records from an arbitrator under Sec.48. Proof evinces high degree of evidence established by the party to convince the court to rely on it to sustain the contentions raised in accordance with the requirement of law in question. Under Sec.48, it is the duty of the petitioners to introduce substantive, convincing and sufficient proof to satisfy the court to decide the enforcement of the award, which thus also means, a legal duty is cast upon the petitioners to provide proof in order to persuade the court to arrive at a definite conclusion the way law demands. Moreover, surmises and conjunctures created to prejudice the mind of the court is neither evidence nor proof. That apart, when proof is the requirement under law, it should be adduced in a clear, cogent and convincing manner. I am also of the view that, deliberate and clear expression of 'furnishing proof' is employed in Sec.48 to eliminate any action of protracting the proceedings in order to have efficacy and finality to a foreign award with the objective of ensuring that other countries recognize the provisions of Act, 1996. What is imperative is 'furnishing proof', the burden of which never shifts from the objector to anyone at any point of time. If it was 'proof' alone, provided under Sec.48, burden may shift in accordance with the facts and circumstances of a case. But, under Sec.48 of Act, 1996, there is no such scope since the burden is to 'furnish proof' by the objector. When law casts a particular manner of proof available at the threshold of the proceedings to consider the objection, the rigor insisted upon law can never be diluted or watered down. 'Furnishing of proof' also means 'production of proof'. Black's Law dictionary (Ninth Edn.) defines 'burden of production' to mean 'a party's duty to introduce enough evidence on an issue to have the issue decided by the fact-finder, rather than decided against the party in a peremptory ruling such as a summary judgment or a directed verdict'. So also, 'burden of proof' is defined to mean, 'a party's duty to prove a disputed assertion or charge, which includes both the burden of persuasion and the burden of production'. Therefore, filing of objections can never be termed as substitute for proof under Sec. 48 of Act, 1996.

18. In this context, it is relevant to deal with, the significance of the Arbitration and Conciliation Act, 1996. The Act was brought into force to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards, as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. The paramount relevance of Act, 1996 is ensuring finality to a dispute in a speedy manner. It is bearing in mind the requirement of speedy disposal of claims, under Sec.48, a duty is cast upon the judgment debtor to furnish proof to sustain consideration of objection against enforcement of foreign awards. Any manner of laxity in that regard would defeat the intention of the Legislature.

19. Therefore, in my considered opinion, petitioners failed to furnish proof in order to establish the objections raised by them. The provisions of the Act do not permit the petitioners to explore the possibility of creating proof through the process of court in an enforcement proceedings of a foreign arbitration award. The contentions advanced by the petitioners mainly were in respect of the initial proceedings that are undertaken by the respondent for conducting the arbitration. Learned counsel for the petitioners was trying to impress upon me various intricacies of the arbitration agreement entered into by and between the petitioners and the respondent, to make an attempt to establish that calling for records is inevitable to consider the objection as per the provisions of Sec.48. One of such contention is that in the purchase and sales contract even though against Column, Arbitration AFI (Association of Food Industries, Inc.) is mentioned as the arbitrator, there is no explanation to the nature and character of the same. However, I find from the latter part of the said document that, any controversy, claim or breach arising out of or relating to the contract, the same shall be settled in New York City by arbitration. Therefore, the said contention advanced by learned counsel for the petitioner falls to the ground.

20. Yet another contention raised is that, the award is seen passed by the arbitrator on 07.02.2012 and executed before the Notary Public and it was received by the petitioners on 01.03.2012. However, the same was seen modified on 28.02.2012. According to the learned counsel for the petitioners, before making any such modification, there was no notice issued to the petitioners. It is also submitted, even though on 23.03.2011, petitioners requested the arbitrator to furnish copies of the statements of claims and demands, the same were not provided to the petitioners. Learned counsel has also invited my attention to the Civil Practice Law and Rules of New York, which deals with the Rules to be followed by the arbitrators. The sum and substance of the contentions advanced by the petitioners is that, the award was secured by the respondent by employing fraud on the petitioners and therefore, the court below had a duty to call for the records. However, in my considered opinion, these are all matters to be agitated by the petitioners by making a suitable challenge against the awards in accordance with the law of the country where the arbitration was conducted. Petitioners have not cared to do so. It is also evident from sub-clause (c) of Clause 7503 of Article 75 of New York Civil Practice Law and Rules, if petitioners were not agreeable or had objection to proceed with the arbitration, they ought to have made suitable objections to it before the court as provided under the Rules within 20 days after service of a notice of intention to arbitrate. Having not done so, petitioners cannot turn around and defend on those aspects as proof to object enforcement of the foreign award.

21. A short survey to the view expressed by the apex court in this regard, in its judgments, would be worthwhile. Confirmation of the award under the U.S. law is not required before its execution in India as held in 'Escorts Ltd. v. Universal Tractor Holding LLC' [(2013) 10 SCC 717]. So also, it is held in 'Shri Lal Mahal Ltd. v. Progetto Granos PA' [(2014) 2 SCC 433], that Sec.48 does not permit review of foreign awards on merit and there is no scope for a second look at the merits during the course of enforcement of foreign award. Again, in 'Konkan Railway Corporation Ltd. and others v. Mehul Construction Co.' [(2000) 7 SCC 201], held that:

'To attract the confidence of the international mercantile community and the growing volume of India's trade

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and commercial relationship with the rest of the world after the new liberalization policy of the Government, Indian Parliament was persuaded to enact the Arbitration and Conciliation Act of 1996 on the UNCITRAL Model and, therefore, in interpreting any provisions of the 1996 Act, courts must not ignore the objects and purpose of its enactment. A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of the Arbitration and Conciliation Act, 1996 would unequivocally indicate that the 1996 Act limits intervention of court with an arbitral process to the minimum and it is certainly not the legislative intent that each and every order passed by an authority under the Act would be a subject-matter of judicial scrutiny of a court of law.' 22. A strict interpretation to Sec.48 is a necessary corollary to maintain recognition to Indian law among the comity of nations. Moreover, international trade relations are progressing day by day, and the inevitable consequence is disputes and litigations. Therefore, speedy disposal of cases and execution of awards without being saddled by procedure, is vital to sustain and develop trade relations. The intention, extent and scope of Sec.48 cannot be frustrated, by resorting to an unorthodox or casual approach. 23. Upshot of the above discussion is, I do not find any reason to interfere with the order passed by the court below in E.A.No.69 of 2016 in E.P.No.131 of 2013 and E.A.No.68 of 2016 in E.P.No.129 of 2013, dated 04.10.2016, especially due to the fact, I am convinced, there is no illegality, arbitrariness, or any other legal infirmity warranting interference under Article 226 of the Constitution of India. Therefore, the writ petitions fail, accordingly they are dismissed. 24. At this point of time, it was pointed out by learned counsel for the respondent that orders are passed under Sec.49 of Act, 1996 to the effect that the court is satisfied that the foreign award is enforceable under Chapter II of Act, 1996, and the award shall be deemed to be a decree of that court. The orders so passed are not subject matter of challenge in these writ petitions. So, I make it clear that, I have not considered the said issue. Learned counsel for the petitioners also have a case that even if the applications were rejected, still the petitioners are entitled to prove before the execution court that they have produced sufficient proof objecting to the enforceability of the foreign award. The said questions are all left open.