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M/s. International Nut Alliance LLC, Represented by its Authorised Signatory S. Anilkumar v/s M/s. Johns Cashew Company, Represented by its Proprietor Binu John

    ARB.A No. 25 of 2019

    Decided On, 09 December 2021

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE P.B. SURESH KUMAR & THE HONOURABLE MRS. JUSTICE C.S. SUDHA

    For the Appellant: T.R. Aswas, Advocate. For the Respondent: N.D. Premachandran, D. Ajithkumar, Advocates.



Judgment Text

P.B. Suresh Kumar, J.

1. This arbitration appeal is directed against the judgment dated 28.02.2019 in E.P.(ICA) No.1 of 2018, in terms of which the learned Single Judge dismissed an application instituted by the appellant against the respondent for enforcement of a foreign arbitral award. Documents are referred to in this judgment, as they appear in the proceedings from which the appeal arises.

2. The undisputed facts are the following:

The appellant, a company incorporated in the USA entered into a contract with the respondent for purchase of 700 cartons of W320 grade cashew kernels on terms negotiated and finalised through a broker as per the trade practice. Pursuant to the contract, the respondent exported the goods and received payment on cash against document basis. According to the appellant, the goods received by them were not conforming to the standard prescribed in the contract. They therefore raised a claim against the respondent. The respondent did not honour the claim. The appellant, in the circumstances, served on the respondent a Demand for Arbitration of the dispute by the Association of Food Industries Inc. (the AFI), an institution administering arbitration process in the USA. Annexure-7 is the Demand for Arbitration served by the appellant on the respondent. In terms of Annexure-7 Demand for Arbitration, the appellant has also informed the respondent that they will be precluded from raising any objection as regards the existence of a valid arbitration agreement, if they do not apply for stay of arbitration within 20 days from the date of service of the Demand for Arbitration. The respondent has not applied for stay of arbitration as required in terms of Annexure-7 Demand for Arbitration. On 07.01.2010, the AFI issued Annexure-8 Notice of Arbitration to the appellant and the respondent calling upon them to attend the arbitral proceedings with their witnesses on 16.02.2010 and present their proofs. As per Annexure-8 notice, the AFI has also informed the appellant and the respondent that a panel of eight arbitrators selected by the Arbitration Board of the AFI will arbitrate the dispute. Though the respondent received Annexure-8 notice on 22.01.2010, they did not attend the arbitral proceedings. Instead, the respondent sent a reply to the AFI contending that the AFI does not have jurisdictional competence to entertain the dispute, for Annexure-1 contract does not contain any provision for submission to the arbitration by the AFI. Annexure-10 is the communication addressed by the respondent to the AFI in this regard. In Annexure-10, it is stated by the respondent that the contract, on the basis of which the appellant has raised the claim against them is one altered by the appellant without the consent of the respondent to make it appear that the respondent has agreed to the arbitration of the AFI. In terms of Annexure-10, the respondent has, therefore, requested the AFI to consider the question of competence of the AFI to arbitrate the dispute, before proceeding to resolve the dispute on merits. On 24.03.2010, the AFI sent Annexure-11 communication to the respondent in reply to their Annexure-10 stating that the appellant had e-mail correspondence with the broker as regards the need for a revised contract to reflect the arbitration of the disputes by the AFI and it is that revised contract that was signed by the appellant. In terms of Annexure-11, the AFI has also informed the respondent that they will proceed with the hearing of the matter on 11.05.2010, and directed the respondent to be present for the hearing in person or submit their stand in the matter in writing. The respondent did not appear for the hearing or submit their stand on the merits of the matter in writing before the AFI as required in Annexure-11 communication. Instead, they claimed to have sent Annexure-12 communication to the AFI reiterating the stand taken in Annexure-10. While so, on 11.05.2010, the panel of Arbitrators appointed by the AFI to arbitrate the dispute passed Annexure-A1 award in favour of the appellant allowing them to realize USD 10,225 from the respondent. The respondent challenged Annexure-A1 award in India in a proceeding under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act). The said application was though allowed, the decision therein was reversed by this Court in Arbitration Appeal No.61 of 2017 holding that the competent authority to set aside an arbitral award in the nature of Annexure- A1 is the competent authority of the country in which and as per the laws of which the award was made, viz, the USA. E.P.(ICA) No.1 of 2018 was instituted by the appellant thereafter for enforcement of Annexure-A1 arbitral award.

3. The respondent filed objections to the application for enforcement of the arbitral award contending, among others, that the AFI was never appointed by the parties to the contract as the arbitral institution to resolve the disputes arising out of the contract; that the appellant has altered the contract by striking off the name of the institution CENTA shown therein as the arbitral institution and mentioning the name of the institution, the AFI in its place, without the knowledge or consent of the respondent and that since the making of the award is induced and affected by fraud, the award is not enforceable. It was also contended by the respondent in their objections that even assuming that there is a contract between the parties to submit to the arbitration of the AFI, since they were not given any opportunity to challenge the composition of the arbitral tribunal and since the arbitral proceedings was not even in accordance with the rules of the AFI, the award is not enforceable.

4. A reply has been filed by the appellant to the objections raised by the respondent pointing out, among others, that the respondent has not produced proof to substantiate any of the grounds made mention of in Section 48 of the Act and that insofar as the respondent has not applied for stay of arbitration as provided for in Annexure-7 Demand for Arbitration and insofar as the objection raised by the respondent before the AFI as to their competence to arbitrate the dispute has been repelled by them, the respondent is precluded from raising any of the objections raised by them in the proceedings.

5. The learned Single Judge accepted the case of the respondent that the contract was altered by the appellant by striking off the name of the institution CENTA shown therein as the arbitral institution and by mentioning the name of the institution AFI in its place, without the knowledge or consent of the respondent and dismissed the application on that premise, holding that the making of the arbitral award sought to be enforced was induced and affected by fraud.

6. The learned counsel for the appellant submitted that the contentions that the arbitration agreement is vitiated by fraud; that there is no arbitration agreement in existence; that the composition of the arbitral tribunal is not in accordance with the arbitration agreement etc., are not contentions that could be taken in a proceedings for enforcement of a foreign arbitral award and that contentions of this nature ought to have been raised before the arbitral tribunal and if the arbitral tribunal does not accept the same, the award has to be challenged as per the law applicable at the seat of the arbitration. Similarly, it was submitted by the learned counsel that contentions concerning the alleged procedural injustice suffered by parties also cannot be raised at the time of enforcement of the arbitral award, for they had a remedy under the law at the seat of the arbitration for redressal of the same. It was also submitted by the learned counsel that a challenge to the validity of an arbitral agreement has to be determined with reference to the substantive law governing the contract and that insofar as the seat of arbitration in the case on hand being New York, the challenge to the arbitral agreement is one to be decided as per the law applicable at the seat of arbitration and not as per the law at the place of its enforcement. The learned counsel has relied on several judgments of the Apex Court and High Courts including that of this Court, in support of the said propositions. In short, the submission of the learned counsel was that none of the objections raised by the respondent against enforcement of the foreign arbitral award is sustainable in law.

7. Per contra, the learned counsel for the respondent, placing reliance on Annexure-1 contract entered into by the respondent with the broker on the strength of which the respondent claimed to have exported the goods and Annexure-9 contract, on the basis of which the arbitral proceedings have been initiated by the appellant, submitted that in the absence of any material to indicate that the alteration in Annexure-9 contract to make it appear that the agreement of the parties as regards the dispute resolution mechanism was by way of arbitration of the AFI is with the knowledge and consent of the respondent, it has to be inferred that the contract, insofar as it relates to arbitration by the AFI, is vitiated by fraud. It was pointed out by the learned counsel that in terms of the provisions in Section 48(1)(b) and the Explanation 1(i) to Section 48(2) of the Act, the respondent is entitled to object to the enforcement of the foreign arbitral award on the aforesaid ground. It was also argued by the learned counsel that though the respondent has raised the said objection as to the competence of AFI to arbitrate the dispute in Annexure-10 reply sent to Annexure-8 Notice of Arbitration, the same was repelled by the AFI as per Annexure-11 communication placing reliance on the e-mail correspondence stated to have been made between the appellant and the broker, behind the back of the respondent. According to the learned counsel, the enforcement of the arbitral award which was passed thereupon would be contrary to the public policy of India inasmuch as it is in conflict with the most basic notions of justice and the respondent is therefore entitled to object to the enforcement of the award in terms of Explanation 1(iii) to Section 48(2) of the Act. It was also argued by the learned counsel placing reliance on Annexure-8 Notice of Arbitration that in terms of the said notice, the respondent was entitled to raise objections as to the panel of Arbitrators before 18.01.2010 and Annexure-8 notice was in fact served on the respondent only thereafter. Similarly, it was argued by the learned counsel, placing reliance on the Arbitration Rules of AFI that the arbitration in the case on hand is not one conducted in accordance with the said rules. According to the learned counsel, the respondent is, therefore, entitled to object to the enforcement of the arbitral award on the aforesaid grounds in terms of Section 48(1)(d) of the Act. In short, the submission of the learned counsel for the respondent was that the decision of the learned Single Judge in refusing to enforce the arbitral award sought to be enforced in the proceedings does not call for any interference. The learned counsel has relied on the decisions of the Apex Court in Chloro Controls India Private Ltd. v. Severn Trent Water Purification Inc. and Others, (2013) 1 SCC 641, Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131, Japan Travel Services v. All Nippon Airways Company Limited and Others (2009) 4 ArbLR 432 (Delhi), Vijay Karia v. Prysmian Cavi E Sistemi SRL, (2020) 11 SCC 1 and Satluj Jal Vidyut Nigam v. Raj Kumar Rajinder Singh and others (Civil Appeal No.9871 of 2018), in support of the contentions put forward by him. On a query from the Court as to whether the respondent could disown the contract entered into by the broker with the appellant, the learned counsel has pointed out, placing reliance on the commentaries of the Indian Contract and Specific Relief Acts by Pollock and Mulla that a broker bringing about a contract has no authority in law to substitute a clause in the contract without the consent of the seller. The learned counsel has relied on the decision of the Calcutta High Court in Lalchand Dharamchand v. Alliance Jute Mills Co.Ltd., AIR 1973 Cal 243, in support of the said proposition.

8. We have meticulously perused the pleadings of the parties and the materials on record. We have also considered anxiously the contentions put forward by the learned counsel for the parties on either side.

9. It is well known that the arbitration itself is meant for speedy resolution of disputes and in international commerce, arbitration is resorted to in order to ensure that the disputes relating to international commerce are resolved at the earliest so as to protect the commercial interests of not only parties to the commerce but also the countries involved. It is also well known that schedules fixed by arbitral tribunals abroad for completion of arbitral proceedings and for enforcement of arbitral awards are strictly adhered to, having regard to the adverse impact the delay would have on international commercial dealings. It is thus clear that there is a need for enforcement of foreign arbitral awards in a time bound manner and if a country is not able to ensure the same, that country will not be regarded as an equal partner in international commerce [See Kandla Export Corporation v. OCI Corporation, (2018) 14 SCC 715]. The Act is aiming at the said objective and it is a fact that despite various experiments made in our country in the law relating to arbitration, especially in the recent times by way of amendments to the Act, we are yet to achieve this object, and as observed by the Apex Court in Voestalpine Schienen GmbH v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665, time has come to send positive signals to the international business community that we have a healthy arbitration culture and environment, if at all we need to protect the interests of our country in international commerce. The contentions of the parties to this case, according to us, need to be examined keeping in mind the aforesaid objectives of the Act.

10. There cannot be any doubt that the enforcement of a foreign arbitral award could be refused only if the party against whom the award is sought to be enforced furnishes to the Court proof of the existence of the limited grounds made mention of in Section 48 of the Act. Section 48 reads thus:

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—

(a) the parties to the agreement referred to in section 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 have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) 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; or

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place ; or

(e) 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.

(2) Enforcement of an arbitral award may also be refused if the Court finds that—

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]

(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.

In Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd., AIR 2021 SC 3836, the Apex Court has held that the expression “proof” in Section 48 would only mean “established on the basis of the record of the arbitral tribunal”. It was also held by the Apex Court in the said case that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which the Act has adopted, has a pro-enforcement bias and therefore unless a party is able to show that its case comes clearly within Section 48(1) or 48(2) of the Act, the foreign award must be enforced and that the said statutory provisions are not to be construed expansively, but only narrowly. In Vijay Karia, the Apex Court has held that the scheme of the Act is that there ought to be only extremely narrow grounds for opposing the enforcement of a foreign arbitral award and those who are securing foreign arbitral awards must be in a position to get the same recognised and enforced in India expeditiously. In Vijay Karia, it was also held that the foreign arbitral awards must be read as a whole, fairly and without nitpicking and if it is found that the award has addressed the basic issues raised by the parties and has, in substance, decided the claims and counter claims of the parties, the enforcement must follow. It was also held in the said case that even if existence of one or other grounds in Section 48 of the Act is proved, the court still has a discretion to overrule the defence and grant enforcement of foreign arbitral awards in appropriate cases. Paragraphs 58 and 59 of the judgment in Vijay Karia dealing with the said position, read thus:

“58. When the grounds for resisting enforcement of a foreign award under Section 48 are seen, they may be classified into three groups — grounds which affect the jurisdiction of the arbitration proceedings; grounds which affect party interest alone; and grounds which go to the public policy of India, as explained by Explanation 1 to Section 48(2). Where a ground to resist enforcement is made out, by which the very jurisdiction of the Tribunal is questioned — such as the arbitration agreement itself not being valid under the law to which the parties have subjected it, or where the subjectmatter of difference is not capable of settlement by arbitration under the law of India, it is obvious that there can be no discretion in these matters. Enforcement of a foreign award made without jurisdiction cannot possibly be weighed in the scales for a discretion to be exercised to enforce such award if the scales are tilted in its favour.

59. On the other hand, where the grounds taken to resist enforcement can be said to be linked to party interest alone, for example, that a party has been unable to present its case before the arbitrator, and which ground is capable of waiver or abandonment, or, the ground being made out, no prejudice has been caused to the party on such ground being made out, a court may well enforce a foreign award, even if such ground is made out. When it comes to the “public policy of India” ground, again, there would be no discretion in enforcing an award which is induced by fraud or corruption, or which violates the fundamental policy of Indian law, or is in conflict with the most basic notions of morality or justice. It can thus be seen that the expression “may” in Section 48 can, depending upon the context, mean “shall” or as connoting that a residual discretion remains in the court to enforce a foreign award, despite grounds for its resistance having been made out. What is clear is that the width of this discretion is limited to the circumstances pointed out hereinabove, in which case a balancing act may be performed by the court enforcing a foreign award.”

In Minmetals Germany GmbH v. Ferco Steel Ltd., [1999] C.L.C. 647, the Queen's Bench held that the question whether an enforcee of a foreign arbitral award was acting reasonably in not invoking the remedial jurisdiction against the adverse decision is also one of the relevant considerations while enforcing a foreign arbitral award. With these principles in mind, let us examine the case on hand.

11. As noted, the enforcement of Annexure-A1 foreign arbitral award was objected to by the respondent mainly on the ground that the making of the award was induced and affected by fraud. The case set out by the respondent to substantiate the said ground is that the appellant has manipulated the contract by mentioning the institution AFI for arbitration, after striking off the name of the institution CENTA shown therein as arbitral institution, without the knowledge or consent of the respondent. The learned Single Judge accepted the said case of the respondent and it is on that basis that the learned Single Judge dismissed the application for enforcement of the arbitral award. Paragraphs 14 to 19 and 41 of the impugned judgment dealing with the said relevant findings read thus:

“14. In this case it is evident that there was a contract entered into by the parties. It is also evident that there was an agreement to arbitrate. The dispute is with respect to the arbitration body. Annx.A1 is an arbitration award passed by the AFI. The enforceability of the award is objected by the Seller filing proof affidavit producing Exts.B1 to B12 documents -the contract entered into and the correspondence between the parties/in connection with the contract. His primary contention is that the award is resulted out of fraud and forgery. This contention requires to be examined in the light of the provisions contained in Section 48. The award is passed by the AFI. The Seller has filed affidavit, producing Ext.B1 broker contract entered into by and between the broker on behalf of the Buyer and the Seller on 25.06.2009, in which 'CENTA' was notified as the arbitration body. But in Ext.B9 copy of the broker contract dated 26.06.2009 there are alterations effected including that of the arbitral body, where 'CENTA' is struck off and 'AFI' is written with a signature of the Buyer only putting a date there. A perusal of the date written below the signature of the Buyer near the handwritten word 'AFI' scoring off typewritten/printed word 'CENTA' would appear to be “4/26/09”; it does not appear to be 6/26/09”. Apart from that there is difference in the service charges mentioned in Exts.B1 and B9. In Ext.B1 it is “Our service charges 0.50% of the invoice value” whereas in Ext.B9 it is “Our service charges usc 1 per lb”. There is no signature of Seller in it. Thus the contention is that there is no agreement between the parties with respect to the arbitral body and AFI has passed the award on account of the fraud played by the Buyer. The Buyer has not produced any material to show that there was any consensus to have the arbitration through AFI.

15. The contention of the Buyer that Seller cannot raise any contention since he did not go to the American courts and got a stay within 20 days on receipt of Ext.B7 notice can be accepted only if the Seller had at any time agreed to submit himself to the jurisdiction of AFI in respect of the contract in question. Similar is the contention relating to filing of appeal against the award in American courts. The contention with respect to the requirement of stay of proceedings within 20 days is raised on the basis of Article 7503 of the New York Civil Practice Law and the Rules reads as follows:

Application to compel or stay arbitration: Stay of action : notice of intention to arbitrate:

(a) Application to compel arbitration : stay of action: A party aggrieved by the failure of another to arbitrate can apply for an order compelling arbitration. Where there is no substantial question whether a valid agreement was made or complied with and the claim sought to be arbitrated is not barred by limitation under sub division

(b) of Section 7502, the Court shall direct the parties to arbitrate and when any such question is raised, it shall be tried forthwith in said court. If an issue claimed to be arbitrated is involved in an action pending in a court having jurisdiction to hear a motion to compel arbitration, the application shall be made by motion in that action. If the application is granted, the order shall operate to stay a pending or subsequent action.

(b) Application to stay arbitration: Subject to the provisions of subdivision(c) a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration, may apply to stay arbitration on the ground that a valid agreement was not made or has not been complied with or that the claim sought to be arbitrated is barred by limitation under subdivision (b) of section 7502.

(c) Notice of intention to arbitrate: a party may serve upon another party a demand for arbitration or a notice of intention to arbitrate specifying the agreement pursuant to which arbitration is sought and the name and address of the party serving the notice or of an officer or an agent thereof if such party is an association or corporation and stating that unless the party served applies to stay the arbitration within twenty days after such service he shall thereafter be precluded from objecting that a valid agreement has not been made or has not been complied with and from asserting in court the bar of limitation of time.

Such notice of demand shall be served in the same manner as as a summons or registered or certified mail return receipt requested. An application to stay arbitration must be made by the party within twenty days after service upon him of the notice or demand or he shall be so precluded. Notice of such application shall be served in the same manner as a summons or registered or certified mail return receipt requested. Service of application shall be made upon the adverse party or upon his attorney if attorneys name appears on the demand for arbitration or notice of intention to arbitrate. Service of the application by mail shall be timely if such application is posted within the prescribed period. Any provision in an arbitration agreement or arbitration rules which waives the right to apply for stay of arbitration is hereby declared null and void.

16. But that question will arise only if the seller had agreed to have the dispute resolved through AFI governed by the law of New York. It is not a case where no arbitration body was mentioned. The only contract in which the signature of the Seller is available is Ext.B1 where CENTA is not scored off. Rules of CENTA and AFI are not the same.

17. Section 1 of Arbitration Rules of the AFI reads as follows:

Section 1: Any party to a written contract which contains a provision for arbitration of any future dispute by or under the auspices of this Association, shall, when a controversy arises thereunder, file with the President of this Association a copy of the demand for arbitration made upon the other part and the fee to cover the cost of the arbitration as specified in Section X of these Rules. Such filing shall constitute a request for the institution of proceedings under these rules.

2. The clause providing for arbitration by the Association of Food industries must appear on the front of the contract or at least on the side which is signed by both the parties and the following minimum wording is required

3. ARBITRATION: Any controversy or claim aarising out of this contract shall be settled in binding arbitration by the Association of Food industries. Inc, of New York in accordance with its rules then obtaining [see addendum for recommended arbitration clause] New York law at New York.

18. Section V of those rules provides that arbitration would be conducted at New York in accordance with New York State Law. Thus as per the AFI Rules, what is precluded is from raising the question of validity of an agreement for arbitration or existence of contract. In this case the contract does not contain any recitals as required in Section 2 of the AFI Rules. There is not even a word AFI and then the minimum wording required under its rules.

19. As per Section 48(2)(b)of the Act, read with its explanation, an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud. The Seller has by his proof affidavit on record substantiated his contentions as to fraud and forgery. From the alterations effected in Annx.A2/Ext.B9 contract read with the affidavit of Seller it is evident that change of arbitral body is effected without the consent of the Seller. In the absence of any other material the plea raised by him is liable to be accepted.

x x x x x x

41. In none of these cases the question of fraud or forgery has come up for consideration as in the present case. A perusal of Annx.A2 itself would be sufficient to substantiate the objection of the Seller, even without going to Ext.B1 or B9. In order to determine that issue it is not necessary to go into the merits of the case. The applicant is seeking enforcement of Annx.A1 award which is passed on the basis of Annx.A2 contract in which the arbitral body originally printed/typed is scored off and name of E.P.(ICA) No.1 of 2018 :43: another body is written with signature of Buyer alone that too with a different date of 4/26/09. Even assuming the date is 6/26/09, the alteration is unilateral. It is thereafter the arbitral body incorporated such alteration passed the award. On analysis of the material on record, I am of the considered view that Annx.A1 award is in conflict with public policy of India as it is seen passed on being induced by fraud. As fraud vitiates everything it is not necessary for me to go into other contentions raised by the respondent.”

Having found that the making of the award was induced and affected by fraud, the learned Judge did not go into the various other grounds, on the basis of which the enforcement of the arbitral award was objected to by the respondent.

12. The fact that there was a concluded contract between the appellant and the respondent for purchase of 700 cartons of W320 grade cashew kernels is not in dispute. Similarly, the terms on which the said contract was concluded including the term that the disputes arising in connection with the contract are to be resolved by recourse to arbitration are not in dispute. Again the fact that the respondent has exported the goods and received payment from the appellant as per the terms of the contract is also not in dispute. The only dispute between the parties is as regards the term in the contract as to the institution which is to manage the arbitration in the event of dispute and the said dispute arose only when the appellant raised a quality claim against the respondent in respect of the goods purchased. According to the respondent, they have not consented to appoint the AFI as the institution to manage the arbitration and they have consented to appoint only CENTA, another institution for the said purpose and that the appellant has altered the contract by mentioning the AFI as the arbitral institution, after striking off the name of the institution CENTA without the knowledge or consent of the respondent. It is their case that since the award sought to be enforced is one secured by the appellant on the basis of such a manipulated contract, the same is to be treated as induced and affected by fraud.

13. The respondent does not dispute the fact that there was no contract between them and the appellant for sale of cashew kernels. It is their case that they have entered into the contract for sale of the goods with the broker, viz, M/s.Agro Trade International who was acting as the agent of the appellant. They have produced the said contract along with the objection as Annexure-1. The respondent admits that there was a similar contract by M/s.Agro Trade International with the appellant and it is on the basis of the said contract that the appellant has purchased the goods. Annexure-A2 is the said contract. The specific case of the respondent is that Annexure-A2 contract is one manipulated by the appellant with a view to bring the AFI as the institution to manage the arbitration in respect of the contract. It is alleged by the respondent in the objection that for the said purpose, they have inserted the name of the institution, AFI in Annexure-A2 contract after striking off the name of the institution CENTA shown therein as the institution to manage the arbitration. In other words, the case of the respondent is only that the appellant has forged Annexure-A2 contract and obtained Annexure-A1 award on the basis of the said document. The first and foremost question is whether such a case would bring the arbitral award within the scope of Explanation 1(i) to Section 48(2) of the Act. What is provided for in the said provision is that if it is shown from the records of the arbitral tribunal that the making of an arbitral award, not the award, is induced or affected by fraud, the same would be unenforceable. In other words, in order to attract the said provision, it has to be shown that the fraud alleged should be one which has a bearing on the making of the award by the Arbitral tribunal. Had the expression in the provision been “the award was induced or affected”, the position would have been different. As noted, the respondent has no case that the fraud alleged by him has any bearing on the making of the award secured by the appellant. On the other hand, their case is only that the appellant has secured an award based on a false document. They do not attribute any role to the AFI in the alleged falsification of document. According to us, in the absence of any material to indicate that the fraud alleged has any bearing on the making of the award, the respondent cannot be heard to contend that making of the award is induced or affected by fraud. If the case of the respondent is accepted as a case of fraud in the making of the award, the consequence would be that the court enforcing the foreign arbitral awards would be required to decide the question whether the documents, on the basis of which the award is obtained, are genuine. We have no doubt in our mind that questions of this nature are to be raised before the arbitral tribunal itself as in any other case and one cannot bring such a case as one involving fraud in the making of the award. The contention of the respondent that there is fraud in the making of the award is therefore, without substance and liable to be rejected.

14. No doubt, the contention of the respondent that there is no valid arbitration agreement, is one affecting the competence of the arbitral tribunal to adjudicate the dispute. As noted, the AFI has given the respondent an opportunity to obtain stay of arbitration on such grounds before the commencement of the arbitration proceedings in terms of Annexure-7 Demand for Arbitration. The relevant portion of Annexure-7 Demand for Arbitration served on the respondent by the appellant dealing with the said right of the respondent reads thus:

“PLEASE TAKE FURTHER NOTICE, that unless within twenty days after service of this Notice of Intention to Arbitrate, you apply to stay the arbitration herein you shall thereafter be precluded from objecting that a valid agreement was not made or has not been complied with and from asserting in court the bar of a limitation of time.”

The respondent has no case that the law at the seat of arbitration does not provide for such a course of action. The respondent has not chosen to avail the said remedy for reasons best known to them. Be that as it may, there cannot be any doubt that in the light of kompetenz-kompetenz doctrine, the arbitral tribunal has the jurisdiction to decide its competence to adjudicate such a dispute. Although the respondent did not appear before the arbitral tribunal in person, they have raised the contention that the contract, on the basis of which the award is passed in the arbitral proceedings is a false document, and the same was repelled by the AFI holding that the appellant has altered the terms of the contract with the consent of the broker who was dealing with them for selling the goods on behalf the respondent. The question, therefore, is whether the respondent is entitled to object to the enforcement of the arbitral award on the ground that the arbitral tribunal had no competence to decide the dispute, considering the facts that they have failed to avail the remedy available to them to challenge the arbitral proceedings before the commencement of the arbitration itself; have suffered a decision from the arbitral tribunal that it has competence to decide the dispute and have not challenged the said decision of the arbitral tribunal as also the award that followed the said decision in accordance with law at the seat of the arbitration. According to us, the said question needs to be answered in the negative. Identical is the view taken by the Bombay High Court in POL India Projects Limited v. Aurelia Reederei Eugen Friederich GMBH Schiffahrtsgesellschaft & Company KG, 2015 SCC Online Bom 1109. Paragraph 97 of the said judgement reads thus:

“A perusal of the aforesaid provisions of English Arbitration Act makes it clear that the petitioners who had raised an objection about existence of arbitration agreement, composition of arbitral tribunal etc. had a right and remedy of challenging such declaratory arbitration award by filing an appropriate proceedings within the time prescribed under English Arbitration Act on the ground setout therein. Even if according to the petitioners, they were not governed by the English law and that there existed no arbitration agreement or that the composition of the arbitral tribunal was not in accordance with the agreement, once the declaratory arbitration award came to be passed by the arbitral tribunal, the same ought to have been challenged by the petitioners by exercising its remedy available under the provisions of English Arbitration Act and the petitioners not having exercised such remedy under the provisions of English Arbitration Act has lost its right to object the correctness of such declaratory arbitration award in this proceeding filed under section 34 or while raising objection to the enforcement of the foreign award under section 48 In the arbitration petition filed by the respondents.”

Identical view has been taken by this Court in Emmanuel Cashew Industries v. Chi Commodities Handlers Inc, 2017 (1) KLT 850 also. Paragraph 20 of the said judgment reads thus:

“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.”

15. Now we shall deal with the contention of the respondent that even assuming that there is a contract between the parties to submit to the arbitration of the AFI, the award is not enforceable since they were not given opportunity to challenge the composition of the arbitral authority and also since the arbitral proceedings was not in accordance with the rules of the AFI. There cannot be any doubt that the said contention relates to the alleged procedural injustice suffered by the respondent. Good faith principle applied in New York Convention signatory countries requires a party in arbitral proceedings to take all procedural pleas in the course of the arbitral proceedings itself, for procedural pleas taken at the stage of enforcement of arbitral awards are presumed to have been raised without good faith. In the light of the aforesaid principle, there is absolutely no merit in the said contention.

16. That apart, it is the admitted case of the parties that the appellant is an entity in the USA and the contract was for purchase of cashew kernels as per the specifications prescribed by the AFI. Hence, the most competent authority to resolve quality disputes of the said commodity would be the AFI. CENTA is admittedly an organisation in the United Kingdom similar to AFI. The stand of the respondent that in a contract between parties based in India and the USA, that too, in respect of a commodity sold and purchased in terms of the specifications of an institution in the USA, the specification made as regards the institution to manage the administration of arbitration in the event of dispute is an institution in the United Kingdom which has nothing to do with the transaction, is an unreasonable one taken with a view to defeat the claim of the appellant taking advantage of the fact that there was a correction in the contract to set right an explicit mistake. According to us, the case on hand, therefore, is one which this Court is bound to enforce the foreign arbitral award even if there exists any ground in favour of the respondent in terms of Section 48 of the Act.

17. As noted, one of the arguments advanced by the learned counsel for the respondent is that Annexure-11 communication issued by the AFI, rejecting the objection taken by the respondent that they have not agreed to the arbitration of the AFI, is based on the e-mail correspondence between the appellant and the broker behind the back of the respondent and that such a decision by an arbitral tribunal would be in conflict with the most basic notions of justice, and the respondent is, therefore, entitled to object to the enforcement of the award that followed Annexure-11 communication in terms of Explanation (1)(iii) to Section 48(2) of the Act. As noted, the respondent has not appeared in response to Annexure-8 notice issued by the arbitral tribunal. Instead, they have sent a letter to the AFI pointing out that they have not agreed to the arbitration of the AFI. It is in response to the said letter addressed by the respondent to the AFI that Annexure-11 communication has been issued by the AFI. Annexure-11 communication reads thus:

“Thank you for your February 9 letter regarding the demand for arbitration filed by International Nut Alliance. International Nut Alliance has e-mail correspondence between it and Agro Trade referencing the need for a revised contract to reflect AFI arbitration and a revised contr

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act signed by the broker. Therefore, AFI will proceed with a hearing. As previously notified, the hearing has been rescheduled for May 11, 2010. You will have the opportunity to present, in-person or in writing, your company's testimony regarding this dispute.” As explicit from the extracted communication, it is seen that insofar as the respondent had not appeared in the proceedings, the AFI sought the views of the appellant and the said communication has been issued based on the stand disclosed by the appellant as the AFI was convinced about the genuineness of the stand. It is well known that business is transacted by arbitral institutions in arbitral tribunal abroad at much more ease when compared to the similar proceedings in India and unless there exists serious bias against the arbitral institution or the arbitral tribunal, the procedures followed by the arbitral institutions and arbitral tribunal abroad shall be accepted as carried out in the normal course of business. In other words, the respondent cannot be heard to contend the said decision to be bad being in conflict with the basic notions of justice or for non-compliance of principles of natural justice. At the most, such a decision can be regarded only as an incorrect decision on facts and the same cannot, therefore, be a ground at all to object to the enforcement of the arbitral award, especially since it is in relation to a procedural matter. 18. Another contention raised by the learned counsel for the respondent is that although the respondent was given an opportunity in terms of Annexure-8 notice to challenge the panel of arbitrators appointed for adjudicating the claim of the appellant, they could not avail the said opportunity, for Annexure- 8 notice was served on them only after the time limit prescribed for the same had expired. This again, according to us, being a procedural matter, the respondent is not entitled to raise it in a proceedings for enforcement of the award, especially when they had the opportunity to raise the same in the course of the arbitration proceedings and had chosen not to do so. 19. The decision of the Apex Court in Chloro Controls India Private Ltd. was relied on by the learned counsel for the respondent to contend that it is open to the court enforcing an arbitral award to consider the question whether the arbitral tribunal had the competence to adjudicate the dispute and therefore there is nothing wrong in the decision of the learned Single Judge. Paragraph 84 in the said judgment on which reliance was placed by the learned counsel reads thus: “84. The issue of whether the courts are empowered to review the existence and validity of the arbitration agreement prior to reference is more controversial. A majority of the countries admit to the positive effect of kompetenz kompetenz principle, which requires that the Arbitral Tribunal must exercise jurisdiction over the dispute under the arbitration agreement. Thus, challenge to the existence or validity of the arbitration agreement will not prevent the Arbitral Tribunal from proceeding with hearing and ruling upon its jurisdiction. If it retains jurisdiction, making of an award on the substance of the dispute would be permissible without waiting for the outcome of any court action aimed at deciding the issue of the jurisdiction. The negative effect of the kompetenz kompetenz principle is that arbitrators are entitled to be the first to determine their jurisdiction which is later reviewable by the court, when there is action to enforce or set aside the arbitral award. Where the dispute is not before an Arbitral Tribunal, the court must also decline jurisdiction unless the arbitration agreement is patently void, inoperative or incapable of being performed.” It cannot be inferred from the extracted paragraph that the Apex Court has taken the view that in a case where a party has raised the contention that the arbitral tribunal does not have competence to decide a dispute and suffered an adverse order and a consequent award which have become final and binding, for having not been challenged at the seat of the arbitration in accordance with the law of that country, is entitled to raise that question again in a proceedings for enforcement of the award. 20. We have perused the various other judgments cited by the learned counsel for the respondent referred to above meticulously and we do not find that the said judgements would advance the case of the respondent in any manner. 21. For the aforesaid reasons, the impugned judgment of the learned Single Judge is liable to be set aside, and the matter needs to be remitted for enforcement of the arbitral award. In the result, the appeal is allowed, the impugned judgment is set aside and the application preferred by the appellant for enforcement of the foreign arbitral award is remitted to the learned Single Judge for proceeding with the enforcement of the award in accordance with law with utmost expedition.
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