"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Saturday, May 12, 2012

Recent Developments in India on Foreign Arbitrations- Videocon & Agritrade

In this very short post, we take note of a couple of interesting developments in India concerning foreign arbitration.

Agritrade International v. NAFED 2012(1) Arb LR 405 (Delhi):

Agritrade International v NAFED (Agritrade) relates to a foreign arbitral award that was passed in favour of Agritrade International directing National Agricultural Co-operative Marketing Federation of India Limited (NAFED) to pay USD 580,000 plus pre-award interest at 8% and post award interest at 8% plus costs. Agritrade filed a petition for execution of the arbitral award. NAFED objected to the enforcement on the ground that there was no concluded contract between the parties. A Single Judge of the Delhi High Court found that Agritrade had neither complied with the requirement of Section 47(1)(b) of producing the original arbitration agreement or a duly certified copy thereof even after affordign adequate opprotunity nor was there any concluded contract between Agritrade and NAFED. The court refused enforcement of the award on the ground that the enforcement of the award would be contrary to the public policy of India. A couple of questions here- (1) Shouldn't the court have examined whether to refuse enforcement on the ground mentioned in Section 48(1)(a) ("...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.")? (2) If the court should have examined whether to refuse enforcement under Section 48(1)(a) for the reasons stated, has the Delhi High Court impliedly followed the Supreme Court in reading public policy in a wider manner (See, Phulchand Exports Ltd. v. OOO Patriot) and disregarded  Penn Racquet Sports v. Mayor International Ltd.?

In mid-2011, the Supreme Court had passed a controversial judgement in Videocon Industries v Union of India regarding, among other things, whether there was a transfer of seat from Kuala Lumpur to London in arbitration proceedings under the Production Sharing Contract. Our comments criticising the judgement can be accessed from here. The Supreme Court had held that there was no transfer of seat from Kuala Lumpur to London and therefore the forum for challenge of arbitral award was Malaysia and not UK. Despite the judgement of the Supreme Court, Videocon pursued proceedings pertaining to the arbitration in London. These proceedings were in the nature of those dealt with by the courts of the seat of arbitration. Therefore, Union of India filed a suit in the Delhi High Court praying for injunction to be granted against Videocon restraining it from pursuing the said proceedings in the London court. A single judge of the Delhi High Court granted the same. It may be noted that in a previous post, there was no necessity for the Delhi High Court and the Supreme Court to deal with the issue as to the seat of arbitration in the proceedings under Section 9 in the first place and hold that the “governing procedural law is yet to be determined”. Videocon’s argument was that in view of London as the choice of seat of the parties, Part I was impliedly excluded. Union of India contended that Malaysia was the seat of arbitration. The question as to whether London or Malaysia was the seat of arbitration was immaterial in deciding whether Part I was excluded impliedly because the argument was that the choice of a foreign seat had impliedly excluded applicability of Part I. So the court had to simply decide whether the choice of a foreign seat, of English Law as the law of arbitration agreement and of Indian law as the substantive law of contract excluded the applicability of Part I. It would be interesting to see if Videocon goes on appeal from the order of the Single Judge

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