O.M.P. Nos.383, 384/2008 Page 1 of 25 * IN THE HIGH COURT OF DELHI AT NEW DELHI + O.M.P. 383/2008 & IA 10315/2008 JAPAN TRAVEL SERVICES ..... Petitioner Through Mr. Anil K. Kher, Sr. Adv. with Mr. Rishi Manchanda, Adv. versus ALL NIPPON AIRWAYS CO. LTD. & ORS. ..... Respondent Through Mr. Alok Mahajan with Mr. Rajesh Arya and Ms. Anjani Mahajan, Advs. AND + O.M.P. 384/2008 STIC TRAVELS PVT.LTD. AC+ ..... Petitioner Through Mr. Anil K. Kher, Sr. Adv. with Mr. Rishi Manchanda, Adv. versus ALL NIPPON AIRWAYS COMPANY LTD & ORS. ..... Respondents Through Mr. Alok Mahajan with Mr. Rajesh Arya and Ms. Anjani Mahajan, Advs. % Date of Decision : 10th November, 2009 CORAM: HON'BLE MR. JUSTICE MANMOHAN 1. Whether the Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? Yes. 3. Whether the judgment should be reported in the Digest? Yes. J U D G M E N T MANMOHAN, J. (ORAL) 1. The above two petitions have been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, O.M.P. Nos.383, 384/2008 Page 2 of 25 1996”) challenging two similar arbitral Awards dated 5th February, 2008. While one of the arbitral Awards pertains to disputes arising out of Cargo and Mail Bookings, the other pertains to sale and reservation of seats for passengers. 2. Mr. Anil K. Kher, learned senior counsel for petitioners-objectors submitted that the impugned arbitral Awards are liable to be set aside on two grounds. He firstly submitted that the impugned arbitral Awards are vitiated by fraud as the draft awards had been prepared by the foreign solicitor of the respondents-claimants and were only sent for signatures of the Arbitrator, who signed the same without application of mind. 3. In this connection, Mr. Kher drew my attention to the draft arbitral Awards which had been forwarded by the respondents- claimants‟ solicitor to the Arbitrator with a copy to the petitioners- objectors‟ lawyer vide letter dated 29th November, 2007. He contrasted the said draft awards with the impugned final Awards passed by the learned Arbitrator to contend that between these two documents there are no significant/material differences. 4. Secondly, Mr. Kher submitted that the composition of the arbitral tribunal was not in accordance with the agreements executed between the parties. Mr. Kher referred to the arbitration clauses in the O.M.P. Nos.383, 384/2008 Page 3 of 25 Agreements executed between the parties. Clause 13 of one of the Agreements executed between the parties reads as under :- “13. ARBITRATION (A) The Principal and the Agent hereby agree that any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Tokyo, Japan in accordance with the Arbitration Rules of the Arbitration Institute, Ministry of Justice (Japan) for the time being in force, which Rules are deemed to be incorporated by reference into this Clause. There shall be a sole arbitrator to be appointed by the Director of the Arbitration Office. The language of the arbitration shall be the English Language……..” (emphasis supplied) 5. Mr. Kher stated that in accordance with the aforesaid Clause, the disputes, if any, were to be referred to arbitration in accordance with the Arbitration Rules of the Arbitration Institute, Ministry of Justice (Japan) and that too to a sole arbitrator to be appointed by the Director of Arbitration Office of the Ministry of Justice (Japan). He however, pointed out that the impugned Awards had been passed by an arbitral tribunal constituted at the instance of Japan Commercial Arbitration Association (hereafter referred to as “JCAA”). He submitted that the agreements executed between the parties never contemplated submission/reference of disputes between the parties to JCAA and appointment of arbitrator by JCAA. Consequently, Mr. Kher submitted that the impugned Awards were in violation of Sections 34(2)(v) and 48(1) of Act, 1996. O.M.P. Nos.383, 384/2008 Page 4 of 25 6. On the other hand Mr. Alok Mahajan, learned counsel for the respondents-claimants submitted that the Arbitrator had not simply appended his signatures on the draft awards handed over to him by the respondents-claimants‟ counsel. Mr. Mahajan drew my attention to the Arbitrator‟s order dated 1st October, 2007 wherein the Arbitrator had asked counsel for the respondents-claimants to prepare a draft finding of facts and award and submit the same along with adequate supporting evidence. The relevant portion of the Arbitrator‟s order dated 1st October, 2007 is reproduced hereinbelow :- “3. Counsel for the Claimant is requested to prepare a draft Finding of Facts and Award and submit the same, along with adequate supporting evidence not already in the record, to the JCAA on or before the close of business on Friday, November 30, 2007…..” (emphasis supplied) 7. Mr. Mahajan also drew my attention to the order passed by the Arbitrator on 17th December, 2007 wherein the Arbitrator recorded as under :- “……The Arbitrator and Counsel for the Claimant reviewed the draft Arbitral Award prepared by Counsel for Claimant and submitted to the Arbitrator and the JCAA on November 30, 2007, with a confirmed copy having been transmitted to the Counsel for the Respondents. The Arbitrator reviewed the evidence submitted by counsel for Claimant in support of the draft Arbitral Award are amply supported by the evidentiary record duly submitted for and on behalf of the Claimant in these two arbitration cases……. xxxx xxxx xxxx xxxx I. Determinations xxxx xxxx xxxx xxxx O.M.P. Nos.383, 384/2008 Page 5 of 25 2. The Arbitrator has prepared the attached draft Arbitral Awards in Arbitration Case Nos.07-07 and 07- 08, Tokyo. 3. Counsel for both parties shall provide the Arbitrator with written comments, if any, on the form or substance of the draft Arbitral Awards (Counsel for both Parties are particularly requested to confirm the accuracy of all figures and dates), on or before the close of business in Japan on Monday, February 4, 2008. xxxx xxxx xxxx xxxx 5. Failure by Counsel for the Respondents or the Respondents to appear in these Arbitral proceedings will result in the draft Arbitral Award being finalized and signed at the next arbitral hearing.” (emphasis supplied) 8. Mr. Mahajan further stated that a comparison of the draft arbitral awards prepared by counsel for the respondents-claimants and the final arbitral awards as pronounced by the Arbitrator would clearly show that the same were neither identical nor vitiated on account of non- application of mind. 9. As far as reference of disputes to JCAA was concerned, Mr. Mahajan referred to Section 7 of the Act, 1996 which reads as under :- “7. Arbitration agreement. – (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. O.M.P. Nos.383, 384/2008 Page 6 of 25 (4) An arbitration agreement is in writing if it is contained in- (a) A document signed by the parties; (b) An exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) An exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) There reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” 10. Mr. Mahajan also drew my attention to the following correspondence exchanged between the parties. The relevant correspondence referred to by Mr. Mahajan is reproduced herein below:- “A. Legal Notice dated 24.2.2007 by Mahajan & Associates, on behalf of Petitioner:- “….Please note that such Arbitration proceedings will be in accordance with the Commercial Arbitration Rules of the Japan Commercial Arbitration Association, which Rules are, for the time being, in force in Japan, as stipulated in the aforesaid Agreements dated 1.1.2003, entirely at your own cost and risk.” B. Reply dated 16.3.2007 from Manu Nayar & Co. on behalf of Respondent, to the above Legal Notice:- “….If despite this reply, your client chooses to invoke arbitration or take any legal proceedings, the same shall be defended by our client and our client shall be constrained to file a counter claim or a separate Suit for recovery…..” C. Response by Mahajan & Associates dated 2.4.2007 to Reply to Legal Notice:- O.M.P. Nos.383, 384/2008 Page 7 of 25 “….it is evident from your reply that unresolved disputes, differences, claims, and alleged counter-claims, between our respective clients have arisen which are mandatorily required to be referred to the Arbitration of Japan Commercial Arbitration Association (JCAA) as provided for in the two GSA Agreements dated 1st January, 2003, for Passenger and Cargo Sales, and as indicated by us in our Legal Notice dated 24.02.2007. Consequently, our client has initiated the prescribed procedure for Arbitration before JCAA in Tokyo.” D. Letter dated 07.07.2007 from Shri Kapil Kher to JCAA on behalf of Respondent:- “….At the outset we would like to clarify that our client never disputed the existence of an arbitration agreement between All Nippon Airways Co. Limited and Japan Travel Services…..” 11. Mr. Mahajan also referred to the Arbitrator‟s finding in the impugned Awards on this aspect. The observations referred to by Mr. Mahajan in the impugned Awards are as under :- “…In the Determination by Arbitrator dated August 30, 2007, the Arbitrator held as follows: It is the opinion of the Arbitrator, giving due consideration to the clear intention of the parties and the arguments of their Counsel, that to deny the arbitral jurisdiction of the JCAA, in these two cases because of imprecise drafting would be unfair, unreasonable and unjust. The parties bargained for arbitration in Japan as the method of resolving disputes. The JCAA is the only permanent arbitral institute in Japan. Therefore, the Arbitrator has concluded for the reasons set forth above that the parties intended to nominate the JCAA by referring to the Arbitration Institute in the agreements. Both arbitrations shall proceed under the auspices of the JCAA. Counsel for the Respondents has made no arguments, inspite of being given an opportunity to do so, in opposition to this Determination. The Arbitrator continues to maintain that the above Determination and its Reasoning are correct, and in accordance with O.M.P. Nos.383, 384/2008 Page 8 of 25 the virtually universal rule and practice in the field of international commercial arbitration. B. Additional Grounds. Furthermore, there are additional grounds for the arbitral jurisdiction of the JCAA as follows : (1) As mentioned above, in the Legal Notice dated February 24, 2007, Mahajan & Associates informed the Respondents that the claimant will initiate arbitration proceedings in Tokyo, Japan if the Respondents do not pay the claimed amount and that such arbitration proceedings will be in accordance with the Commercial Arbitration Rules of the JCAA (See Exhibit Ko No.28). By sending the Legal Notice, the Claimant clearly specified the JCAA as the arbitral institute in the instant case. (2) In reply to the Legal Notice, Manu Nayar & Co., the attorneys for the Respondents, sent a letter dated March 16, 2007, to Mahajan & Associates. On the last page of the letter, Manu Nayar & Co. state as follows : “If despite this reply, your client chooses to invoke arbitration or take any legal proceedings, the same shall be defended by our client.” (See Exhibit Ko No.29). Clearly, the Respondents did not deny the jurisdiction of the JCAA and the Respondents stated that they would defend the arbitration. (3) By and under letter dated April 2, 2007, addressed to the Counsel for the Respondents, Mahajan & Associates, for and on behalf of the Claimant, reiterated the initiation or arbitration at the JCAA, by the Claimant, in view of the evident unresolved disputes, differences, claims, alleged counter-claims, between the Claimant and the Respondent (See Exhibit Ko. No.30). In light of the above, the claims made in the Request for Arbitration shall be finally settled by arbitration in Tokyo, Japan, in accordance with the Commercial Arbitration Rules of the JCAA.” 12. In this context, Mr. Mahajan also referred to the earlier determination dated 30th August, 2007 by the Arbitrator which reads as under :- O.M.P. Nos.383, 384/2008 Page 9 of 25 “….Turning to the cases at hand, it is patently clear from the language of Clause 13(A) that the parties have contractually agreed “that any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity, or termination, shall be referred to and finally resolved by arbitration in Tokyo, Japan…” Thus, the Arbitrator can see no basis for an argument that the parties have not agreed to arbitration. The intent of the parties to submit to arbitral jurisdiction is clear and incontrovertible. The letter from Kapil Kher, dated 07th July 2007, acknowledges the correctness of the above conclusion by stating as follows :”At the outset we would like to clarify that our client never disputed the existence of an arbitration agreement between All Nippon Airways Co. Limited and Japan Travel Services..” The gist of the argument by Counsel appears to be limited to a challenge to the jurisdiction of the JCAA to hear this dispute. This challenge, in turn, appears to be based on the reference in the arbitration clause to the “Arbitration Institute, Ministry of Justice (Japan).” It is true that the parties did not specifically refer to the JCAA. This fact, however, is not fatal as it reflects only a lack of precision in drafting, not uncommon among business people without legal training, as to the proper name of the forum for arbitration. To the best knowledge and belief of the Arbitrator, no such “Arbitration Institute” exists within the Ministry of Justice of Japan. In fact, the JCAA is the only permanent arbitral institute, in Japan and it deals mainly with international commercial disputes of the nature and type contemplated by these cases. It is not unreasonable or unfair to Respondents to interpret the reference to the Arbitration Institute to mean the JCAA, thus, giving meaning and effect to the clear intention of the parties to arbitrate in Japan. It is the opinion of the Arbitrator, giving due consideration to the clear intention of the parties and the arguments of their Counsel, that to deny the arbitral jurisdiction of the JCAA in these two cases because of imprecise drafting would be unfair, unreasonable and unjust. The parties bargained for arbitration in Japan as the method of resolving disputes. The JCAA is the only permanent arbitral institute in Japan. Therefore, the Arbitrator has concluded for the reasons set forth above that the parties intended to nominate the JCAA by referring to the Arbitration Institute in the agreements. Both arbitrations shall proceed under the auspices of the JCAA. O.M.P. Nos.383, 384/2008 Page 10 of 25 The JCAA being the proper forum for these arbitration cases, it follows that the appointment of the Arbitrator by the JCAA under Rule 16, and this determination by the Arbitrator under Rule 33, Paragraph 1, are both valid and with full effect.” 13. Mr. Mahajan further submitted that since law of Japan was the governing law and the situs for arbitration was Tokyo, it was for the petitioners-objectors who were challenging the arbitral awards to show that appointment of the Arbitrator or the arbitration procedure was not in accordance with the law of Japan. Mr. Mahajan submitted that in the present case, petitioners-objectors had failed to show that either the appointment of the Arbitrator or the arbitration procedure was not in accordance with the law of Japan. In this connection, Mr. Mahajan relied upon a judgment of the Supreme Court rendered in the case of Transocean Shipping Agency (P) Ltd. Vs. Black Sea Shipping & Ors. reported in (1998) 2 SCC 281 wherein it has been held as under :- “15. The appellants have raised various disputes in relation to arbitration. The appellants have contended that the arbitration has not been conducted in accordance with the law of Ukraine. They also contend that the government order appointing the second respondent as the sole arbitrator is not a valid appointment of the arbitrator. They have also contended that the arbitrator being an official of the first respondent, is an interested arbitrator. The appellants, however, did not produce before the High Court any material including the law of Ukraine to establish that the award was invalid as per Ukrainian law or the procedure was incorrect. xxxx xxxx xxxx xxxx 18. The appellants have now sought permission to produce before us the arbitration law of Ukraine which according to them, is the prevailing law. This is rightly objected to by the respondents. The respondents also O.M.P. Nos.383, 384/2008 Page 11 of 25 contend that what is sought to be produced is not the entire law on the subject. We do not propose to permit the appellants now to produce/prove the relevant law of Ukraine when they have failed to do so before the High Court, and their contention has been consequently rejected by the High Court. The practice of filing fresh documents or evidence for the first time before this Court when the High Court had rejected the claim in the absence of such material, must be deprecated. The appellants were in a position to produce the relevant material before the High Court. They failed and neglected to do so. They must take the consequence. The respondents have, in this connection, also pointed out that any objections to the competence of the arbitrator, or any defect in arbitration procedure could have been agitated by the appellants in Ukraine before the prescribed authorities. They have, however, not taken any steps in accordance with the law of Ukraine to challenge the arbitration or the award. Hence the award has now become final and binding. The respondents have filed an affidavit stating that the award has become final and binding as per Ukrainian law. The appellants have not controverted this by showing the relevant law. A mere assertion by the appellants that the award is defective or not in accordance with the law of Ukraine cannot be treated as establishing this contention. On the contrary, the presumption would be in favour of the validity of the award.” 14. Mr. Mahajan lastly submitted that the petitioners-objectors‟ objections had not been filed within limitation as prescribed under Section 34 (3) of the Act, 1996 inasmuch as copies of the awards had been received by the respondents-claimants on 9th February, 2008 while the affidavit accompanying the present objection petitions had been sworn on 21st July, 2008. 15. In rejoinder, Mr. Kher submitted that the objection petitions were within limitation as they had been filed on 2nd May, 2008. He reiterated that the draft arbitral awards prepared by the respondents- O.M.P. Nos.383, 384/2008 Page 12 of 25 claimants‟ solicitor had been „blindly copied‟ by the learned Arbitrator. He stated that only where the respondents-claimants‟ solicitor had left a blank, the Arbitrator had filled up the same by quoting previous orders. In this connection, Mr. Kher referred to the draft arbitral awards annexed with letter dated 29th November, 2007 wherein respondents- claimants‟ solicitors had virtually directed the Arbitrator to „please insert the details of proceedings of 7th December, 2007’. He submitted that other than that the Arbitral Tribunal had made no changes in the draft arbitral awards that had been prepared by respondents-claimants‟ solicitors including all figures, dates and amounts. 16. Before I deal with the rival submissions, I may mention that a foreign award can only be enforced if it fulfills the conditions prescribed in Section 48 of Act, 1996 for enforcement of foreign awards and the said foreign award does not fall foul of Section 34(2) of Act, 1996. Sections 34(2) and 48(1) and (2) of Act, 1996 are reproduced hereinbelow :- “34. Application for setting aside arbitral award. – (2) An arbitral award may be set aside by the court only if- (a) The party making the application furnishes proof that- (i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or O.M.P. Nos.383, 384/2008 Page 13 of 25 (iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute 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, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) The court finds that- (i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) The arbitral award is in conflict with the public policy of India. Explanation. -Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. xxxx xxxx xxxx 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, O.M.P. Nos.383, 384/2008 Page 14 of 25 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