Case: Harendra H. Mehta  Vs. Mukesh H. Mehta

Harendra or Plan A, the united States package, and B-1, the united States package, and B-1, the Indian note, which we are collectively marking at this proceeding as Exhibit C. The United States Package is four pages and the Indian Note is four pages. there is a total of eight pages in Exhibit C. (Plan A and Plan B-1, the Indian Note, marked as Exhibit C for Identification). MR. KHANNA : Each of these pages have been initialed by Amita Mehta and the attorneys immediately below the Exhibit mark. THE COURT : I would also like the reporter to mark as Exhibit D, the Power of Attorney, going from Harendra to Amita. (Power of Attorney marked as Exhibit `D for identification.) THE COURT : Regarding transfer documents, it is my understanding and the arbitrators understanding, that an agreement has been made regarding these transfer documents. MR. SCIACCA : Correct, that is provided for in a transfer agreement. THE COURT : according to the original submission, the arbitrator had two fold function. One was to make the award. And two was to implement that award. Again a mere look at the agreement shows that it is not an agreement for transfer as understood in clause (a) of Section 269 UA of Chapter XX-C of the IT Act. The settlement agreement also does not stipulate exchange of any immoveable property. It rather divides equally businesses and properties between Harendra and Mukesh. Exchange has been defined under Section 118 of the Transfer of Property Act where two persons mutually transfer of Property Act where two persons mutually transfer the ownership of one thing for ownership of another. When we consider exchange of immovable property falling within the definition of `exchange in Section 118 both the properties would situated in India. Agreement for transfer refers to immovable property falling within the definition of `exchange in Section 118 both the properties would situated in India. Agreement for transfer refers to immovable property which is defined in clause (d) of Section 269UA. It is difficult to appreciate the arguments of Mr. Ganesh as to how in the present case, there is transfer of any immovable property under the settlement agreement. It appears to us that the bone of contention is a flat in Urvashi building in Mumbai which formed part of B+A1 of Mukesh. It was not disputed before us that for this the appellants did execute a gift deed in favour of the respondents on advice received but n steps were taken to compel the transaction as, it appears, relations soured. This would also show that the settlement agreement on the award did not require filing of any declaration under Chapter XX-C of the IT Act. Moreover, in our view in the case of a foreign award, provisions of Chapter XX-C of the IT Act are not attracted. It was said that under Chapter XX-C a net has been thrown wide to bring within its purview all sorts of immovable properties but that net is not wide enough to cover foreign award covering businesses and properties both in India and in a foreign country. Apprehension of Mr. Ganesh that if we give this interpretation a method can be found by the parties to escape the rigour of Chapter XX-C knocking at the very provision of law which strikes at the root of black-money rampant in the sale and purchase of immovable property. If that is so, legislature can always step in to block the gap if it finds there is any escapement of revenue. We are also of the view that a foreign award under the Foreign Awards Act does not require registeration under the Registration Act. 43. A decree or order of a court does not require registration under clause (b) of sub-section (1) of Section 17 of the Registration Act. This is the effect of clause (vi) of Section 2 of Section 17. Earlier under this clause (vi) before its amendment in 1929 even an award did not require registration. However, after omission of the words and any award an award creating or declaring right or interest in immovable property of the value of Rs. 100 would require registration. But then that award would be an award under the Arbitration Act, 1940 and certainly not an foreign award. 44. Let us examine this argument of Mr. Ganesh that foreign award required registration from another angle. He said that the foreign award has already merged in the foreign judgment on the basis of which Mukesh has brought suit in the Bombay High Court. A foreign judgment does not require registration as the process of suit having been decreed on that basis will have to be gone through. When a decree is passed by the Court, it does not require registration in view of clause (vi) of sub-section 2 of Section 17 of the Registration Act. A decree or order of a court affecting the rights mentioned in Section 17(1)(b) and (c) would not require registration. It would, however, require registration where the decree or order on the basis of compromise affects the immovable property other than that which is the subject matter of the suit or proceeding. Even a decree passed by the foreign court execution of which is sought under Section 44A of the Code of Civil Procedure would not require registration. That being the position, we are of the view that foreign award under the provisions of the Foreign Awards Act does not require registration under the Registration Act. In any case, in the present case the award creates a right to obtain transfer and closing documents which as regards Indian properties and businesses are yet to be executed by D.M. Harish & Co., Chartered Accountants. Decision of this Court in Mrs. Tehmi P. Sidhwa case, 1974(2) SCC 579 as rightly pointed by Mr. Dholakia, learned counsel appearing for the respondents, would be fully applicable and the argument that the award required registration has to be rejected on this ground as well.

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

Explanation:
0[ds]matter came to this Court on a certificate granted by the High Court under Article 134A read with Article 134(1)(c) of the Constitution. The impugned judgment had been rendered by a single Judge. There was some controversy if a single Judge could grant such a certificate. However, considering the importance of the issue involved, this Court admitted the appeal. The controversy, therefore, does not survive in the present appeal.In our view these two judgments do not help the appellants. Rather the stress in these judgments is that broad and not restricted construction should be given to the word commercial appearing in Section 2 of the Foreign Awards Act. In R.M. Investment and Trading Companies Pvt. Limiteds case, terms of the agreement required the petitioner to play an active role in promoting the sale and to provide commercial and managerial assistance and information which may be helpful in respondents sales efforts. It was held that relationship between the appellants and respondents was of commercial nature. This Court said that the word commercial under Section 2 of the Foreign Awards Act should be liberally construed. In Renusagars case no doubt this Court observed that the Foreign Awards Act was calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration and also said that any expression or phrase occurring therein should receive consistent with its literal and grammatical sense, a liberal construction.We do not understand as to how it could be said that the award was not a foreign award. All the ingredients of foreign award were there. Parties were having business both in India and in the United States of America as a joint venture and they also acquired properties. Differences that arose between the parties were out of legal relationships and certainly of commercial nature under the laws of this country. Agreement to refer the disputes to arbitration, in writing, was made in the United States where arbitration proceedings held and award given. It is not disputed that United States is a country to which clause (b) of Section 2 of the Foreign Awards Act applies. In the present case, the parties are no doubt related to each other but that could not take the award outside the ambit of the Foreign Awards Act. We asked Mr. Ganesh as to what would happen if there were two strangers having businesses both in India and in United States or when there was a joint venture between an Indian and a US national having properties both moveable and immovable in both the countries and disputes having arisen and award given in the United States. Mr. Ganesh, in spite of his resourcefulness, was unable to give any convincing reply. There is no merit in the objection of the appellant that the award is not a foreign award and that it is outside the Foreign Awards Act.judgment hardly helps Mr. Ganesh in his submissions. In the present case, the parties entered into the settlement during pendency of the arbitration proceedings. Appellant himself approached the courts in the United States never complaining that it was not an award. In proceedings under CPLR 7507 and CPLR 7510. Harendra had even accepted the execution of the settlement agreement and the award made by the arbitrator. We find that no such plea was taken either in the High Court or in the grounds of appeal to this Court. Nassau County Court noticed the functions to be performed by the arbitrator in the settlement agreement. We do not find any merit in the argument of Mr. Ganesh that arbitration agreement stood revoked when the parties during the course of arbitration proceedings entered into a settlement among themselves and yet wanted the arbitrator to give his award in terms thereof. It is nobodys case that authority of the arbitrator was revoked at any time. This argument of Mr. Ganesh seems to us to be made in more desperation24. Nassau County Court did not modify the award as such it merely corrected the award so as to conform to the law of the State of New York25. Contention of the appellants that fraud was committed subsistuting schedules in the award which schedules formed part of the settlement agreement referring disputes to arbitration was also a subject matter of challenge in Nassau County Court by the appellants which was rejected.Supreme Court of New York, Appellate Division rejected the appellants plea regarding fraudulent substitution of the schedules to the award. It will be seen that a competent court in the State of New York rejected the contention of the appellants that any fraud had been committed. Therefore, sub-section (2) of Section 7 of the Foreign Awards Act would not be applicable. There are no conditions now exist under sub-section (1) of Section 7 of the Foreign Awards Act not to enforce the award on the alleged ground of fraud. We find no merit in the plea of the appellant that schedules to the award were substituted. This contention of the appellants must fail.judgment, in our view, is not applicable in the present case. If read out of context, it may appear to be so applicable but it is not so.The judgment of this Court in Badat & Co. is based on the English Common Law. Provisions of the Arbitration (Protocol and Convention) Act, 1937 were held to be inapplicable to the facts of the case. Here we are concerning with the provisions of Foreign Awards Act which give effect to the Convention on the Recognition and Enforcement of Foreign Arbitral) Awards held at New York on June 10, 1958 to which India was a party. To enforce a foreign award, what we have to see is : if it is a foreign award within the meaning of Section 2 of the Foreign Awards Act and conditions as prescribed by Section 7 for its enforcement exist. Under Section 4 of this Act, a foreign award shall, subject to the provisions of the Act, be enforceable in India as if it were an award made on a matter referred to arbitration in India. The Court has to apply the provisions of the Foreign Awards Act to enforce a foreign award within the meaning of Section 2 of the said Act. It would not be relevant to consider if the said Act. It would not be relevant to consider if the foreign award has attained finality in the country where it was made. Further, if a judgment has been obtained on the basis of the award in the country of its origin, the person in whose favour the judgment is made may also be entitled to file suit in this country based on that judgment if it satisfies the criteria laid by law in this country. That may give that person an alternative mode to enforce the award but that would not mean that the provision of Foreign Award Act can be given a go by. We, therefore, find no force in the submission of Mr. Ganesh that once the award attained finality in the Supreme Court of New York, proceedings to enforce foreign award would not be maintainable and that only suit could be filed on the foreign judgment, being the judgment given by the Supreme Court of New York.Thus, as held in Renusagars case, 1984(4) SCC 679 Foreign Awards Act is a complete Code in itself providing for all the possible contingencies in relation to foreign awards. Once it is held that an award is a foreign award, the provisions of the foreign Awards Act would apply and where the conditions for enforcement of such an award exist as mentioned in Section 7 of this Act, the Court shall order the award to be filed and shall proceed to pronounce judgment granting award and upon the judgment so pronounced, decree shall follow. It is not material for the purpose of enforcement of a foreign award under the Foreign Awards Act that in any other country than India, a judgment has already been passed by a Court of competent jurisdiction in terms of that award. A party may have other remedy for filing a suit passed on a foreign judgment but that will not oust jurisdiction of the Court to enforce a foreign award under the Foreign Awards Act. Provisions as contained in Sections 13 and 14 of the Code of Civil Procedure (for short, the `Code) would apply when a suit is brought on a foreign award. Under Section 44A of the Code, there is a provision for execution of decrees passed by Courts in reciprocating territory. Explanation 1 to this section defines reciprocating territory to mean any country or territory outside India which the Central Government may, by notification, in the Official Gazette, declare to be a reciprocating territory for the purposes of this section. Reciprocating territory specified in Section 44A of the Code may not be same as that specified in clause (b) of Section 2 of the Foreign Awards Act. We are not called upon to decide in the present proceedings what is the effect of the judgment given on the award in question in the United States and how the High Court would proceed in the matter when a suit has been filed on the basis of the judgment. The argument that the foreign award has merged in the judgment of the Supreme Court of the State of New York has, therefore, to be rejected.34. The mere fact that the documents of conveyance/exchange/lease are to be executed subsequently in pursuance of the said agreement for transfer is of no relevance or consequence at all. In fact, such documents of conveyance can be executed only if and after the requisite no objection certificate 9NOC) under the provisions of Chapter XX-C is issued. The scheme of Chapter XX-C is that once an agreement for transfer has been entered into, the parties have to mandatorily comply with the requirements of Chapter XX-C and are prohibited from effecting transfer of the property without first complying with the provisions of Chapter XX-C, that is to say, filing the Section 269 UC statement within the specified time and obtain the requisite NOC from the Appropriate Authority. It was submitted that the only situation in which Chapter XX-C does not apply is where the transfer of property takes place without such an agreement ever having been reached and without the volition of the owner, such as, for example, when the property is sold by auction under a Courts order. Conversely, whenever there is an agreement for transfer as defined under Chapter XX-C, which has been entered into between the parties, Chapter XX-C would be applicable in all force.37. In Baldevdas Shivlal and another v. Filmistan Distributors (India) Pvt. Ltd. and others, AIR 1970 SC 406 , this Court was considering whether a consent decree operates as res judicata. It said that consent decree does snot operate as res judicata as it is merely the record of a contract between the parties to a suit to which is super-added the seal of the court and that a matter in contest in a suit may operate as res judicata only if there is an adjudication by the court. The Court said that the terms of Section 11 of the Code of Civil Procedure left no scope for a contrary view.42. We do not think that submissions made by Mr. Ganesh on Chapter XX-C of IT Act have any sound basis. Settlement agreement dated March 20, 1990 is not a mere agreement for transfer. As noted above, parties had vast businesses and properties both in India and in the USA. Settlement agreement was between (1) Harendra Mehta, his wife Amita Mehta and he himself as Karta of Harendra Mehta HUF : (2) Mukesh Mehta, his wife Daksha Mehta and he himself as Karta of Mukesh Mehta HUF; (3) Mettaco Enterprises Trust; and (4) A.D. Developments Ltd., a New York Corporation having its principal office at New York. The settlement agreement runs into 57 long pages. It is a complex agreement. It also mentioned litigation between parties pending in the Supreme Court of the State of New York, Nassau County Court. After the parties have got their respective packages of the properties and businesses both in India and in the United States the award required the parties to execute transfer and closing documents.a mere look at the agreement shows that it is not an agreement for transfer as understood in clause (a) of Section 269 UA of Chapter XX-C of the IT Act. The settlement agreement also does not stipulate exchange of any immoveable property. It rather divides equally businesses and properties between Harendra and Mukesh. Exchange has been defined under Section 118 of the Transfer of Property Act where two persons mutually transfer of Property Act where two persons mutually transfer the ownership of one thing for ownership of another. When we consider exchange of immovable property falling within the definition of `exchange in Section 118 both the properties would situated in India. Agreement for transfer refers to immovable property falling within the definition of `exchange in Section 118 both the properties would situated in India. Agreement for transfer refers to immovable property which is defined in clause (d) of Section 269UA. It is difficult to appreciate the arguments of Mr. Ganesh as to how in the present case, there is transfer of any immovable property under the settlement agreement. It appears to us that the bone of contention is a flat in Urvashi building in Mumbai which formed part of B+A1 of Mukesh. It was not disputed before us that for this the appellants did execute a gift deed in favour of the respondents on advice received but n steps were taken to compel the transaction as, it appears, relations soured. This would also show that the settlement agreement on the award did not require filing of any declaration under Chapter XX-C of the IT Act. Moreover, in our view in the case of a foreign award, provisions of Chapter XX-C of the IT Act are not attracted. It was said that under Chapter XX-C a net has been thrown wide to bring within its purview all sorts of immovable properties but that net is not wide enough to cover foreign award covering businesses and properties both in India and in a foreign country. Apprehension of Mr. Ganesh that if we give this interpretation a method can be found by the parties to escape the rigour of Chapter XX-C knocking at the very provision of law which strikes at the root of black-money rampant in the sale and purchase of immovable property. If that is so, legislature can always step in to block the gap if it finds there is any escapement of revenue. We are also of the view that a foreign award under the Foreign Awards Act does not require registeration under the Registration Act43. A decree or order of a court does not require registration under clause (b) of sub-section (1) of Section 17 of the Registration Act. This is the effect of clause (vi) of Section 2 of Section 17. Earlier under this clause (vi) before its amendment in 1929 even an award did not require registration. However, after omission of the words and any award an award creating or declaring right or interest in immovable property of the value of Rs. 100 would require registration. But then that award would be an award under the Arbitration Act, 1940 and certainly not an foreign award.foreign judgment does not require registration as the process of suit having been decreed on that basis will have to be gone through. When a decree is passed by the Court, it does not require registration in view of clause (vi) of sub-section 2 of Section 17 of the Registration Act. A decree or order of a court affecting the rights mentioned in Section 17(1)(b) and (c) would not require registration. It would, however, require registration where the decree or order on the basis of compromise affects the immovable property other than that which is the subject matter of the suit or proceeding. Even a decree passed by the foreign court execution of which is sought under Section 44A of the Code of Civil Procedure would not require registration. That being the position, we are of the view that foreign award under the provisions of the Foreign Awards Act does not require registration under the Registration Act. In any case, in the present case the award creates a right to obtain transfer and closing documents which as regards Indian properties and businesses are yet to be executed by D.M. Harish & Co., Chartered Accountants.Decision of this Court in Mrs. Tehmi P. Sidhwa case, 1974(2) SCC 579 as rightly pointed by Mr. Dholakia, learned counsel appearing for the respondents, would be fully applicable and the argument that the award required registration has to be rejected on this ground as well.