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The Arbitrator Is In Control Of The Arbitral Proceedings & Procedural Orders Which Give Time Limits Must Be Strictly Adhered To: SC

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The Supreme Court has today given its judgement allowing the appeal by a U.S. Corporation, M/S. Centrotrade Minerals and Metals Inc. and upholding the arbitral award made in its favour. This judgement has followed multiple previous orders from different Benches of the High Court and also the Supreme Court.

S. Centrotrade Minerals and Metals Inc. is a a U.S. Corporation, that had entered into a contract for sale of 15,500 DMT of copper concentrate to be delivered at the Kandla Port in the State of Gujarat, the said goods to be used at the Khetri Plant of the respondent Hindustan Copper Ltd. After all consignments were delivered, and payments were made a dispute arose between the parties regarding the quantity of dry weight of copper concentrate delivered. Clause 14 of the agreement contained a two-tier arbitration agreement by which the first tier was to be settled by arbitration in India, if either party disagreed with the result, that party will have the right to appeal to a second arbitration to be held by the ICC in London. 

Centrotrade invoked the arbitration clause and arbitrator appointed by the Indian Council of Arbitration made a Nil Award, following which Centrotrade invoked second part of the arbitration agreement. The ICC in London appointed Jeremy Cook QC as the arbitrator who delivered an award in favour pf Centrotrade directing HCL to pay a certain amount to Centrotrade. This was followed by petitions by HCL before Courts in India challenging the arbitration clause. 

Centrotrade had to then move to the Calcutta High Court to get the award dated September 29th,2001 executed. While a single Bench of the Court upheld the arbitration agreement and declared the award to be executable in India, the Division Bench set aside the order of the Single Bench. According to the Division Bench since the Indian award and the London Award, being arbitration awards by arbitrators who had concurrent jurisdiction, were mutually destructive of each other, neither could be enforced

When HCL had appealed before division Bench of the Supreme Court there was difference of opinion between the two judges. Justice Sinha had held that out the facts of the case, held that a two tier clause contained in the agreement was non est in the eye of law and was invalid under Section 23 of the Indian Contract Act. Therefore, the foreign award could not enforced in India. 

Justice Chaterjee had held that the two-tier arbitration process was valid and permissible in Indian law, the ICC arbitrator sat in appeal against the award of the Indian arbitrator, the ICC award was a foreign award, but since HCL was not given a proper opportunity to present its case before the ICC arbitrator, Centrotrade’s appeal would have to be dismissed and HCL’s appeal allowed.

When the case was referred to a three-judge bench of the Supreme Court, the Court had held that a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties was permissible under the laws of India.  The Court also observed that the question of whether that a two-tier arbitration procedure is permissible under the laws of India, and whether the award rendered in the appellate arbitration being a “foreign award” is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade, should be listed again before the Court.

A three judge bench of the Apex Court comprising of Justice RF Nariman, Justice Ravindra Bhat and Justice Ramasubramanian therefore heard and decided the question which relates to the enforcement of the appellate award. 

The Bench has noted that despite being informed time and again to appear before the Tribunal and submit their response and evidence in support, it was only after the arbitrator indicated that he was going to pass an award that HCL’s attorneys woke up and started asking for time to present their response which was also granted by the arbitrator, by not only granting extension of time, but by extending this time even further. Finally, when the legal submissions of 75 pages were sent even beyond the time that was granted, the learned Arbitrator took this into account and then passed his award. Therefore the arbitrator was extremely fair in the proceeding and there was no fault whatsoever with the conduct of the arbitral proceedings.

According to the Bench, HCL chose not to appear before the arbitrator, and thereafter chose to submit documents and legal submissions outside the timelines granted by the arbitrator. 

The Court also noted that remanding the matter to the ICC arbitrator to pass a fresh award was clearly outside the jurisdiction of an enforcing court under Section 48 of the 1996 Act. 

Therefore, the foreign arbitral award, dated 29.09.2001, is eligible to be enforced.

Read the judgement here;

19375-2004-34-1501-22350-Judgement-02-Jun-2020

-India Legal Bureau

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