Case: M/s. Govind Rubber Ltd Vs. M/s. Louids Dreyfus Commodities Asia Pvt. Ltd

3. The factual matrix of the case is that the appellant is carrying on business at Mumbai inter alia of import and export of commodities and the respondent company is having its office at Singapore. On 20th August, 2008, the appellant through the broker B.B. Rubber Pvt. Ltd. (in short, `Broker) confirmed the offer for purchase of natural rubber(Thailand origin). The respondent issued a sales contract bearing No. 03S8733 for 200 Metric Tons (MT) of Thaiat US $2,880 per metric ton, CIF Nhava Sheva, India with payment term 100% against Letter of Credit for shipment in September, 2008. The said sale contract, signed by the representative of the respondent, provided the governing terms as "Singapore Commodity Exchange". The name of the appellant was described as buyer, who issued purchase Order No.dated 21st August, 2008. As pleaded by the appellant, by this purchase order, the appellant placed orders on the terms and conditions set out therein. The appellant thereafter requested to change the payment term in the said sales contract to be 10% advance by TT (Telegraph Transfer) and balance 90% by DP (documents against payment) at sight throughdated 26th August, 2008. This request for amendment was accepted by the respondent and accordingly it issued invoice dated 27th August, 2008 for the 10% advance payment for 200 metric tons RSS 3 at the rate of US$ 2,880/MT. It is the case of the respondent that latter the invoice was split into two invoices of 100 metric tons each for which 10% of contract value was US$28,800. Cargo of 200 MTwas accordingly shipped to Nahava Sheva and original documents of shipments were couriered to the appellants Bank.4. On 11th October, 2008, the broker sent a letter to the appellant to confirm acceptance of their request to split bills of lading separately as conditions for payment upon presentation. The respondent on 17th October, 2008 requested for return of the documents from Indian Overseas Bank of the appellant in order to split the bills of lading into smaller lots as requested by the appellant. On 31st October, 2008, the respondent sent the revised split bills of lading and invoices for resubmission on Indian Overseas Bank for payment. On 31st October, 2008, the appellant confirmed acceptance ofdocuments for both contracts and requested for price deduction as conditions to make payment, which was not accepted by the respondent. On 10th November, 2008, the broker emailed to the appellant to insist performance of the contracts and recapping the sequence of events of the contracts. The appellant, however, did not make payment.5. It is pleaded by the respondent that on 22nd August, 2008, upon receiving brokers confirmation of order and advice to fax over the sales contracts, the respondent issued sales contract on 25th August, 2008 bearing No. 03S8739 for 201.6 Metric tons (mt) of SIR20 at us $ 2,895/mt CIF Nhava Sheva, India, with payment term 100% Letter of Credit for shipment in September, 2008 with the respondents contract stating governing terms as Singapore Commodity Exchange to the appellant which issued its purchase Order No. BOM:PO:(in short, the said contract is referred to as "second sales contract"). By email dated 27th August, 2008 the appellant requested to change payment terms in respect of the said second sales contract and the respondent accepted new payment terms as requested by the appellant.6. The dispute arose between the parties in respect of this second sales contract. The respondent, therefore, vide letter dated 12th May, 2009, referred the matter to Singapore Commodity Exchange for arbitration in accordance with the terms of sale contract and attached points of claim in arbitration. The appellant vide letter dated 23rd May, 2009 to SICOM Rubber Contract Dispute Resolution Committee, the Singapore Commodity Exchange, contended that the appellant had incurred huge loss in view of the failure on the part of the respondent to supply the goods in time with standard of second party in quantity. By the said letter, the appellant lodged its counter claim on the first party for US $ 3734036.25 and also agreed for acceptance of nomination to Mr. Leon Tim Fook as their sole arbitrator. The appellant contended that the Singapore Commodity Exchange or its committee did not have any jurisdiction. It was submitted that the jurisdiction shall be in Mumbai. The Arbitral Tribunal made award dated 18th December, 2009 directing the appellant to pay to the respondent a sum of US $716283 for breach of contract and also to bear cost and expenses of said arbitration amounting to Singapore dollar 20330. The Arbitral Tribunal, rejected the counter claim made by the appellant and recorded a finding that SICOM and its arbitral tribunal had arbitration jurisdiction over two contracts in dispute and the said two sales contracts existed and were valid.7. The appellant did not challenge the aforesaid award before the High Court. On the other hand, in the year 2010, appellant filed a suit against the respondent in the High Court inter alia praying for damages. The respondent has also filed notice of motion in the said proceedings. During the pendency of the said suit, respondent filed arbitration petition on 11th January, 2012 for enforcement and execution of the said award as decree. After hearing learned counsel on either side and going through the materials placed before the Court, learned Single Judge allowed the arbitration petition observing that the appellant has not furnished any proof as to why the enforcement of the foreign award dated 18th December, 2009 can be refused. The appellant had made counter claim before the arbitral tribunal and thereafter did not challenge the award passed in favour of the respondent and rejection of the counter claim against the appellant in any court of law. According to the learned Single Judge, the said foreign award is enforceable under Part II and is binding for all purposes on the parties under Section 46 of the Arbitration & Conciliation Act, 1996. After holding that that the said foreign award is enforceable, High Court directed the respondent to put the award in execution in accordance with the rules of this court. The High Court also directed the appellant to produce on oath, complete inventory of its assets and properties as prayer for in prayer clause (b) within the period of four weeks from the date of impugned order.8. Hence, this appeal by special leave under Article 136 of the Constitution is preferred by the appellant

Court's reasoning:
12. There may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However it is the duty of the Court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them. It is necessary for the Court to find out from the correspondence as to whether the parties were ad idem to the terms of contract.We are also of the opinion that a commercial document having arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. On the principle of construction of a commercial agreement, Scrutton on Charter Parties (17th Edition, Sweet & Maxwell, London, 1964) explained that commercial agreement has to be construed, according to the sense and meaning as collected in the first place from the terms used and understood in the plain, ordinary and popular sense (See Article 6 at page 16). The learned Author also said that the agreement has to be interpreted in order to effectuate the immediate intention of the parties. Similarly, Russel on Arbitration (21st Edition) opined, relying on Astro Vendeor Compania Naviera SA v. Mabanaft GmbH, (1970) 2 Llyods Rep.267, that the Court should, if the circumstances allow, lean in favour of giving effect to the arbitration clause to which the parties have agreed. The learned Author has also referred to another judgment in Paul Smith Ltd v. H and S International Holdings Inc., (1991) 2 Llyods Rep.127 in order to emphasise that in construing an arbitration agreement the Court should seek to give effect to the intentions of the parties. (See page 28 of the book).It is clear that for construing an arbitration agreement, the intention of the parties must be looked into. The materials on record which have been discussed hereinabove make it very clear that the appellant was prima facie acting pursuant to the sale contract issued by the respondent. So, it is not very material whether it was signed by the second respondent or not.23. It is not in dispute that although the appellant having full notice and knowledge of the dispute having been decided by the Arbitral Tribunal and an award was passed on 18th December, 2009, the said award has not been challenged by the appellant in any court of law. Instead, the appellant filed the suit against the respondent in the High Court inter alia praying for damages.24. In the aforesaid premise, we do not find any valid ground to oppose the enforcement of the foreign award. The High Court in the impugned order has rightly held that the foreign award is enforceable under Part II and is binding for all purposes on the parties.