Case: Smita Conductors Ltd Vs. Euro Alloys Ltd

enquiry so as to cover the policy of other countries, that is, the country whose law governs the contract or the country of the place of the arbitration. In the absence of a definition of the expression `public policy, it is construed to mean the doctrine of public policy as applied by the Courts in which the foreign awarded is sought to be enforced and this Court referred to a large catena of cases in this regard. Therefore, we will proceed on the basis that the expression `public policy means public policy of India and the recognition and enforcement of foreign award cannot be questioned on the ground that it is contrary to the foreign country public policy and this expression has been used in a narrow sense must necessarily be construed as applied in private international law which means that a foreign award cannot be recognised or enforced if it is contrary to (1) fundamental policy of Indian law; or (2) the interest of India; or (3) justice or morality. Shri Venugopal strongly attached the correctness of the conclusions reached by the arbitrators on the effect of force majeure clause. In the awarded it is stated : "...Under the force majeure clause the respondents did not have the right to cancel April 1991 and May 1991 quota under contracts S142 and S336 and neither by the same reasoning did not seller have the right to clause but the June through November 1991 quotes against contract number S142 and the June quota against contract No. S336. It may be seen as a commercial oversight, nevertheless the force majeure clause as it is constructed in both contracts, would require both parties to maintain the contracts in being for an indefinite period of time until the force majeure clause had ended, failing alternative arrangements between the parties for delivery and payment." 13. Further, the arbitrators had held that having considered the March 1991 Reserve Bank of India circular imposing restrictions on the imports of certain categories of goods due to difficult balance of payments position prevailing at the relevant time and letter of credit of Rs. 25 lakhs and above should be referred by the local bank branch to the head office for prior appeal and in excess of Rs. 50 lakhs and above should be referred by the banks to the Controller, Exchange Control Department, Central Office, Reserve Bank of India, for clearance, and there is no time limit so far as these restrictions are concerned. The arbitrators noticed that the restrictions set by the Reserve Bank of India had created a situation in which the appellants had difficulty in arranging the opening of letters of credit so as to conform with the terms of the contract although it could be noted that they many applications were submitted by the appellant to the Bank of Baroda after the contractual deadline; that several shipments were made against the letter of credit opened after the contractual deadline; that this it has been established by the documentary evidence to both contractors Nos. S142 and S3367 that declaration of force majeure clause was present though belatedly. The arbitrators ultimately concluded that the Reserve Bank of India directives interfered with the contracts Nos. S142 and S36 which would have the effect of delaying the opening of the letters of credit by the buyer under the specified contracts. The arbitrators were of the opinion that the force majeure clause had no limitation on the period of suspension of the contract while the execution was affected by a valid force majeure; that it had been accepted by both the parties and that the restriction and requirements imposed by the Reserve Bank of India directives must be construed as having caused interference in and/or hindrance to the execution of the contract time rise; that though time had been considered to be of the essence condition, the inclusion of the force majeure clause which provided no time limit to the suspension of the contract caused by conditions envisaged herein though unusual it was accepted that the earlier contracts would be negotiated and executed successfully by the parties to the dispute. 14. The view taken by the arbitrators on the effect of the force majeure clause in the light of the Reserve Bank of India directives is a plausible view and cannot be ruled out as impossible of acceptance, and, therefore, question of substituting our view for that of the arbitrators would not arise. Question of public policy would have arisen if there are complete restriction on the implementation of the terms of the contract. There was no such restriction imposed. But, on the other hand, certain restrictions were imposed which could have been worked out by resorting to appropriate measures in terms of the contract as held by the arbitrators. In that view of the matter, we do not think any question of public policy as such arises for consideration in a situation of this sort. The argument is almost a red-herring and does not constitute a valid reason for interference with the award. Therefore, we reject the contentions raised on behalf of the appellant. 15. It is lastly contended that the interest awarded by the arbitrators needs interference and gave a break-up of the details. Interest has been awarded from period prior to reference in 1991 and after reference till termination of the proceedings before the arbitrators, pendente lite and after decree. This Court in Renusagars case (supra), held that award of such interest after the Interest Act, 1978 is permissible, however, on the facts of the case the High Court not having given a direction to the payment of interest pendente lite did not modify that part of the order. 16. We do not find that it is appropriate to modify the award made by the arbitrators or decree passed pursuant to it as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for us to interfere with the same.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]10. In the light of this decision, we are firmly of the view that the appellant cannot be any longer challenge the existence of an arbitration agreement between the partiesandsuch an agreement was not covered by the New York ConventionThe arbitrators were of the opinion that the force majeure clause had no limitation on the period of suspension of the contract while the execution was affected by a valid force majeure; that it had been accepted by both the partiesandthat the restrictionandrequirements imposed by the Reserve Bank of India directives must be construed as having caused interference inr hindrance to the execution of the contract time rise; that though time had been considered to be of the essence condition, the inclusion of the force majeure clause which provided no time limit to the suspension of the contract caused by conditions envisaged herein though unusual it was accepted that the earlier contracts would be negotiatedandexecuted successfully by the parties to the dispute14. The view taken by the arbitrators on the effect of the force majeure clause in the light of the Reserve Bank of India directives is a plausible viewandcannot be ruled out as impossible of acceptance,, therefore, question of substituting our view for that of the arbitrators would not arise. Question of public policy would have arisen if there are complete restriction on the implementation of the terms of the contract. There was no such restriction imposed. But, on the other, certain restrictions were imposed which could have been worked out by resorting to appropriate measures in terms of the contract as held by the arbitrators. In that view of the matter, we do not think any question of public policy as such arises for consideration in a situation of this sort. The argument is almost adoes not constitute a valid reason for interference with the award. Therefore, we reject the contentions raised on behalf of the appellant15. It is lastly contended that the interest awarded by the arbitrators needs interferenceandgave ap of the details. Interest has been awarded from period prior to reference in 1991andafter reference till termination of the proceedings before the arbitrators, pendente liteandafter decree. This Court in Renusagars case (supra), held that award of such interest after the Interest Act, 1978 is permissible, however, on the facts of the case the High Court not having given a direction to the payment of interest pendente lite did not modify that part of the order16. We do not find that it is appropriate to modify the award made by the arbitrators or decree passed pursuant to it as no exceptional circumstances arise. The fact that there is fluctuation in the exchange rate is no reason for us to interfere with the same.