Case: M/S. CENTROTRADE MINERALS AND METALS INC Vs. HINDUSTAN COPPER LTD

2. The appellant before us, in Civil Appeal No.2562 of 2006, is a U.S. Corporation who 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. (hereinafter referred to as HCL/ the respondent), who is the appellant in the other Civil Appeal No.2564 of 2006. After all consignments were delivered, payments had been made in accordance with the contract. However, a dispute arose between the parties as regards 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 disagrees with the result, that party will have the right to appeal to a second arbitration to be held by the ICC in London. The appellant M/s Centrotrade Minerals and Metals Inc. (hereinafter referred to as Centrotrade/ the appellant) invoked the arbitration clause. By an award dated 15.06.1999 the arbitrator appointed by the Indian Council of Arbitration made a Nil Award. Thereupon, Centrotrade invoked the second part of the arbitration agreement, as a result of which Jeremy Cook QC, appointed by the ICC, delivered an award in London, dated 29.09.2001, in which the following amounts were awarded:27. For the above reasons I THEREFORE AWARD and ADJUDGE that(1) HCL do pay Centrotrade the sum of $152,112.33, inclusive of interest to the date of the Award in respect of the purchase price for the first shipment(2) HCL do pay Centrotrade the sum of $15,815.59, inclusive of interest to the date of this Award in respect of demurrage due on the first shipment(3) HCL, do pay Centrotrade the sum of $284,653.53, inclusive of interest to the date of this Award in respect of the purchase price on the second shipment(4) HCL do pay Centrotrade their legal costs in this arbitration in the sum of $82,733 and in addition the costs of the International Court of Arbitration, the Arbitrators fees and expenses totalling $29,000(5) HCL do pay Centrotrade compound interest on the above sums from the date of this Award at 6% p.a. with quarterly rests until the date of actual payment3. Even before Jeremy Cook QC could deliver his award, HCL, during the pendency of the proceedings before the arbitrator in London, filed a suit in the Court at Khetri, in the State of Rajasthan, challenging the arbitration clause. By an Order dated 27.04.2000, in a revision petition filed against the Order of the Khetri Court, the High Court at Rajasthan restrained the appellant from taking further steps in the London arbitration, pending hearing and disposal of the revision petition. This ad interim ex parte stay granted by the High Court was ultimately vacated by the Supreme Court only on 08.02.2001. Meanwhile, we are reliably informed that Mr. Cook, the learned arbitrator, referred the matter of stay of the parties from proceeding with the London arbitration to the ICC Court, which then decided that the arbitrator could continue with the arbitral proceedings4. When the said award dated 29.09.2001 was sought to be enforced by Centrotrade in India, a learned Single Judge of the Calcutta High Court, after considering the objections of HCL, dismissed the Section 48 petition filed by HCL, as a result of which the aforesaid foreign award became executable in India. However, a Division Bench of the Calcutta High Court, by its judgment dated 28.07.2004, held that an appeal would be maintainable inasmuch as the London award could not be said to be a foreign award, but that a two-tier arbitration clause would be valid. However, 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, as a result of which the appeal was allowed and the judgment of the learned single Judge was set aside5. At this juncture, the matter came to a Division Bench of this Court. Two separate judgments were delivered by S.B. Sinha, J. and Tarun Chatterjee, J. reported in Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245. After setting out the facts of the case, S.B. Sinha,J. held that a two tier clause of the kind contained in clause 14 of this agreement is non est in the eye of law and would be invalid under Section 23 of the Indian Contract Act. In this view of the matter, the foreign award could not enforced in India and Centrotrades appeal was therefore dismissed, the appeal filed by HCL being allowed. Tarun Chatterjee, J. set out four questions in paragraph 134 as follows:134. We have heard Mr Sarkar, learned Senior Counsel appearing for Centrotrade and Mr Debabrata Ray Choudhury, learned Senior Counsel for HCL. I have also examined the entire material on record including the arbitration agreement, the awards and judgments of the Division Bench as well as the learned Single Judge. Before us, the following issues were raised by the learned counsel for the parties for decision in the appeals:(1) Whether the second part of clause 14 of the agreement providing for a two-tier arbitration was valid and permissible in India under the Act?(2) If it is valid, on the interpretation of clause 14 of the agreement, can it be said that the ICC arbitrator sat in appeal against the award of the Indian arbitrator?(3) Whether the ICC award is a foreign award or not?(4) Whether HCL was given proper opportunity to present its case before the ICC arbitrator?6. These questions were answered by stating that the two-tier arbitration process was valid and permissible in Indian law; that the ICC arbitrator sat in appeal against the award of the Indian arbitrator; that the ICC award was a foreign award; but that since HCL was not given a proper opportunity to present its case before the ICC arbitrator, Centrotrades appeal would have to be dismissed and HCLs appeal allowed7. The matter then came on a reference before a 3-Judge bench of this Court and is reported in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. (2017) 2 SCC 228. The reference order was referred to in paragraph 1 of the judgment of Lokur,J., as follows:These appeals have been referred [Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 ] to a Bench of three Judges in view of a difference of opinion between the two learned Judges of this Court. The controversy is best understood by referring to the proceedings recorded on 9-5-2006: Honble Mr Justice S.B. Sinha pronounced his Lordships judgment of the Bench comprising his Lordship and Honble Mr Justice Tarun ChatterjeeLeave granted. For the reasons mentioned in the signed judgment, civil appeal arising out of SLP (C) No. 18611 of 2004 filed by M/s Centrotrade Minerals and Metal Inc., is dismissed and civil appeal arising out of SLP (C) No. 21340 of 2005 (actually 2004) preferred by Hindustan Copper Ltd. is allowed. In the peculiar facts and circumstances of the case, the parties shall pay and bear their own costs. Honble Mr Justice Tarun Chatterjee pronounced his Lordships judgment disposing of the appeals in terms of the signed judgment. In view of difference of opinion, the matter is referred to a larger Bench for consideration. The Registry of this Court shall place the matter before the Honble the Chief Justice for constitution of a larger BenchThe decisions rendered by Sinha and Chatterjee, JJ. are reported as Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. [Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 ]Paragraph 5 of the aforesaid judgment set out the two questions that arose in this case as follows:5. The issues that have arisen for our consideration, as a result of the difference of opinion between the learned Judges, are as under:(1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India?(2) Assuming that a two-tier arbitration procedure is permissible under the laws of India, 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? If so, what is the relief that Centrotrade is entitled to?For the present, we propose to address only the first question and depending upon the answer, the appeals would be set down for hearing on the remaining issue. We have adopted this somewhat unusual course since the roster of business allowed us to hear the appeals only sporadically and therefore the proceedings before us dragged on for about three months48. In view of the above, the first question before us is answered in the affirmative. The appeals should be listed again for consideration of the second question which relates to the enforcement of the appellate award8. This is how the appeals have been listed again for consideration of the second question, which relates to enforcement of the London award.

Reasoning:
13. In appeal, the Division Bench, in view of its finding that the award is not a foreign award, declined to apply Section 50 of the Arbitration Act, 1996 (hereinafter referred to as Arbitration Act), and then stated that the London award is declared to be inexecutable so long as the Indian Nil Award stands. In view of this finding, it did not go into the natural justice point argued by HCL14. In the first round in this court, S.B. Sinha,J. did not go into the natural justice point, in view of his finding that the arbitration clause itself was null and voidAs has been held in paragraph 76 of Vijay Karia (supra), the context of Section 48 is recognition and enforcement of foreign awards under the New York Convention of 1958. Given the context of the New York Convention, and the fact that the expression otherwise is susceptible to two meanings, it is clear that the narrower meaning has been preferred, which is in consonance with the pro-enforcement bias spoken about by a large number of judgments referred to in Vijay Karia (supra). Kochunis case (supra) dealing with an entirely different Act with a different object cannot, therefore, possibly apply to construe this word in the setting in which it occurs19. As a matter of fact, three earlier judgments of this Court, all under the Arbitration Act, 1940, are also instructive. The ground on which a domestic award could be set aside under Section 30 of the 1940 Act, inter alia, was if the arbitrator misconducted himself or the proceedings. It will be seen that misconduct as a ground for setting aside an award is conceptually much wider than a party being unable to present its case before the arbitrator, which is contained in Section 48(1)(b)29. We now come to the facts of the present case. Shri Ravals plea that this Court cannot go into the question posed before it as there was no difference of opinion on HCL being unable to present its case, Justice Chatterjee Js being the only judgment on this score, has no legs to stand. The reference order that is extracted by us in paragraph 7 above, and that is contained in paragraph 1 of the decision in Centrotrade [2017] (supra), makes it clear that, in view of difference of opinion, the matter is referred to a larger bench for reconsideration. That the expression the matter was understood as meaning the entire matter and not merely issue 1, is further made clear by paragraph 5 of the said judgment as follows:For the present, we propose to address only the first question and depending upon the answer, the appeals would be set down for hearing on the remaining issue. We have adopted this somewhat unusual course since the roster of business allowed us to hear the appeals only sporadically and therefore the proceedings before us dragged on for about three monthsFinally, the 3 Judge Bench concluded:48. In view of the above, the first question before us is answered in the affirmative. The appeals should be listed again for consideration of the second question which relates to the enforcement of the appellate awardIn this view of the matter, we have proceeded to examine the correctness of Chatterjee Js views. We are afraid that this is an argument that has never been raised earlier, and has been raised by Shri Raval here for the first time. Even otherwise, and even if we were to go by the documents that were submitted to us for the first time by Shri Raval, the fax sent on 20.12.2000 by the arbitrator to the parties is incomplete. Even otherwise, it speaks of issues of jurisdiction and Indian law having to be addressed as a primary question before matters of substance relating to the dispute on the contract. None of this clearly and unequivocally shows that the learned arbitrator sought to take up the plea as to jurisdiction as a preliminary objection which should be decided before other matters. This plea of Shri Raval, being taken here for the first time and for the reasons given by us, is devoid of substanceFirst and foremost, the stay order of the Rajasthan High Court was not and could not be directed against the arbitrator – it was directed only against the parties to the proceeding. Secondly, the learned arbitrator initially began the proceedings, after the green signal given to him by the ICC Court to proceed with the arbitration, by directing that the appellant serve submissions along with supporting evidence, followed by the respondents response and evidence on 19.01.2001. This, however, was reiterated only on 03.05.2001, by which time the Supreme Court had vacated the ad- interim ex parte order on 08.02.2001. This plea taken by Shri Raval, also taken before us for the first time, has no legs to stand on33. The sequence of events, even from the documents presented by Shri Raval for the first time, is that legal submissions were furnished after 11.09.2001 and received by the arbitrators office on 13.09.2001. The arbitrator then stated that these submissions have been fully taken into account in the award and that by 18.09.2001, there would be no scope for any further material being supplied, as the publication of the award will follow shortly. This was communicated by fax on 18.09.2001 by the learned arbitrator to Fox & Mandal, the Attorneys of HCL. It is only thereafter, on 19.09.2001, that a couriered letter is sent to the learned arbitrator stating that Fox & Mandal would be deeply obliged if documents contained in paper binder no.1 would also be taken into account. It was then added that paper binder no.2, containing judgments of the Courts of law and authorities are being sent separately and it may take 7 to 10 days more time beyond 19.09.200134. At this stage, it is important to point out that the learned arbitrator had given a large number of opportunities to file documents and legal submissions. On 03.05.2001 the learned arbitrator directed that the appellant serve submissions along with supporting documents, following the respondents response and evidence therein, with a right in the appellant to put in a reply, in accordance with a clear time table that was set out. On 30.07.2001, since no defence submissions or supporting evidence was served by the respondent within the time prescribed, the time was extended, giving the respondent one last opportunity to put in their defence and to seek extension of time for so doing. Until August 2001, it may be stated that respondent did not participate in the arbitral proceedings, even though invited to do so. It is only on 09.08.2001, when the learned arbitrator informed the parties that he is proceeding with the award, that on 11.08.2001, the learned arbitrator received a fax from Fox & Mandal, Attorneys for HCL, requesting for an extension of one months time to put in their defence. This was acceded to by the learned arbitrator on 16.08.2001, giving time upto 31.08.2001. However, on 27.08.2001, Fox & Mandal sought for a further three weeks extension of time, which was also granted by the learned arbitrator, allowing a final extension of time until 12.09.2001. Despite the fact that the legal submissions running into 75 pages were submitted beyond time, that is only on 13.9.2001, in view of the 11.09.2001 attack in New York, the learned arbitrator received the same and took the same into account despite being beyond time. It was only on 29.09.2001 that the learned arbitrator then passed his award. Given the aforesaid timeline, it is clear that the learned arbitrator was extremely fair to the respondent. Having noticed that the respondent wanted to stall the arbitral proceedings by approaching the Courts in Rajasthan and having succeeded partially, at least till February 2001, the conduct of the respondent leaves much to be called for. Despite being informed time and again to appear before the Tribunal and submit their response and evidence in support thereof, it is only after the arbitrator indicated that he was going to pass an award that the respondents attorneys woke up and started asking for time to present their response. This too was granted by the learned 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. This being the case, on facts we can find no fault whatsoever with the conduct of the arbitral proceedings35. Justice Chatterjee, however, in his judgment, made several errors of fact. First and foremost, in paragraph 166 of Centrotrade [2006] (supra), the learned Judge quoted the penultimate line in paragraph 8 of the award, without even adverting to the line just before the aforesaid line which indicated that the material that was received from HCL was in fact taken into consideration while making the award, even beyond the stipulated time of 12.09.2001. Secondly, in paragraph 167, Chatterjee,J. conjectured that between 13 th and 29 th September, 2001, the Arbitrator did receive further material from HCL which he did not consider while making the award, on the ground that they were received after the time limit granted by him to HCL. Factually, there is no supporting material to show that any such further material was received by the learned arbitrator, except documents that have been presented by Shri Raval for the first time before us. They were clearly not before Chatterjee,J. when this surmise was made by the learned Judge, Further, the arbitrator cannot be faulted on this ground as, given the authorities referred to by us hereinabove, the arbitrator is in control of the arbitral proceedings and procedural orders which give time limits must be strictly adhered to. In paragraph 168, the learned Judge then said that given the attack in New York on 11.09.2001, the learned arbitrator should have excused further delay and should not have acted on frivolous technicalities. This approach of a Court enforcing a foreign award flies in the face of the judgments referred to by us hereinabove. Even otherwise, Chatterjee, J., refers to the judgment in Hari Om Maheshwari (supra) as well as Minmetals (supra), but then does not proceed to apply the ratio of the said judgments. Had he applied the ratio of even these two judgments, it would have been clear that an arbitrators refusal to adjourn the proceedings at the behest of one party cannot be said to be perverse, keeping in mind the object of speedy resolution of disputes of the Arbitration Act. Further, the Minmetals (supra) test was not even adverted to by Chatterjee,J., which is that HCL was never unable to present its case as it was at no time outside its control to furnish documents and legal submissions within the time given by the learned arbitrator. HCL chose not to appear before the arbitrator, and thereafter chose to submit documents and legal submissions outside the timelines granted by the arbitrator36. Even otherwise, remanding the matter to the ICC arbitrator to pass a fresh award in paragraph 169, is clearly outside the jurisdiction of an enforcing court under Section 48 of the 1996 Act.