Bombay High Court
Khark Petrochemical Company vs Hazel Mercantile Ltd on 9 June, 2025
Author: N. J. Jamadar
Bench: N. J. Jamadar
2025:BHC-OS:8433
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Arun Sankpal
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO. 3847 OF 2024
IN
COMMERCIAL SUIT NO. 48 OF 2024
Khark Petrochemical Company
A Company incorporated under the Laws of
Islamic Republic of Iran, registration No. 11569,
having its office at No. 40, Dejam Jou St.,
North Dibaji St., Farmaniyeh Tehran, Iran
through its duly constituted Power of Attorney,
Mr. Pradeep Singh ..Applicant/
Plaintiff
Versus
Hazel Mercantile Limited,
a company incorporated under the laws of India
having its registered office at 181, Ashoka
Centre, G.T. Hospital Complex, L.T. Road,
ARUN Mumbai - 400 001.
RAMCHANDRA
SANKPAL Through Its Managing Director, ...Respondent/
Digitally signed by
Mr. Nitin Didwania Defendant
ARUN
RAMCHANDRA
SANKPAL
Date: 2025.06.09
19:42:13 +0530
Mr. Ratan Kumar Singh, Senior Advocate, with Mr. Akshay Gandotra
and Ms. Irima Pereira, i/b Vibha Juris Consult Co, for the
Applicant.
Mr. Prateek Seksaria, Senior Advocate (though VC), with Mr. Vivek
Kantawala, Mr. Amey Patil, Mr. Nishant Chotani and Mr. Rohit
Agarwal, i/b Mr. Vivek M. Sharma, for the Respondent.
CORAM: N. J. JAMADAR, J.
JUDGMENT RESERVED ON : 16th OCTOBER 2024.
JUDGMENT PRONOUNCED ON : 9th JUNE 2025.
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JUDGMENT:
1. This is an Application for grant of interim relief in the Suit
instituted for decree on a foreign award dated 7 th September 2018
passed by the Aribtral Tribunal in Arbitration Case No. 36/P/95/26
under the Rules of Arbitration Center of Iran Chamber (“ACIC”) in Iran,
in favour of the Plaintiff and against the Defendant.
2. The background facts can be summarised as under:
2.1 The Plaintiff is a foreign company incorporated under the
laws of Islamic Republic of Iran. The Plaintiff produces, and deals
in, petrochemical products such as methanol, naphtha, propane
and butane.
2.2 The Defendant is a company incorporated under the
Companies Act 1956. The Defendant is engaged in international
trade and distribution of chemicals and petrochemical products.
2.3 The Plaintiff and Defendant had been engaged in
commercial transactions since the year 2007. The Plaintiff had
been supplying methanol and naphtha to the Defendant as per
mutually agreed terms and conditions. The Defendant through
Mr Abolfazl Maleki, its authorized representative in Iran, used to
place purchase orders upon the Plaintiff for supply of methanol
and naphtha. Thereupon, the Plaintiff issued proforma invoice
along with the terms and conditions of the sale and delivery. The
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Defendant, through its representative in Iran, conveyed its
acceptance of such proforma invoice. Thereafter, the cargo was
shipped as per the instructions of the Defendant. The payment
was to be made within 60 days of the delivery of cargo. The
Defendant had been paying for the goods sold and delivered
through its wholly owned subsidiary Hazel Middle East FZE till,
the year 2014.
2.4 The Plaintiff affirms from 2014 onwards, the Defendant
used Interglobe Trading FZE (“IGT”) and Venture Crosstrade FZE
(“Venture Crosstrade”) for making payments on the Defendant’s
behalf to the Plaintiff’s authorized broker in United Arab Emirates
(“UAE”), Khat Al Abyad, for the cargo delivered by the Plaintiff.
During the period 2015-2016, the Plaintiff claims, 17 cargos were
shipped for the Defendant. As per the business practice, adverted
to the above, the proforma invoices raised by the Plaintiff were
accepted by the Defendant as “buyer” by appending its seal and
signature thereto. Bills of lading were also issued in favour of the
Defendant as consignee.
2.5 The instant Suit pertains to the eight transactions effected
between the August 2015 to January 2016. The Plaintiff claimed,
the Defendant made only part payment with respect to the first
cargo, leaving the balance of amount of AED 80,289,741.53 as
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due and payable in respect of the supplies made by the Plaintiff to
the Defendants under the aforesaid contract. 36 cheques for an
aggregate amount of AED 47,366,126.12 issued by IGT and
Venture Crosstrade, the entities of the Defendant, for and on
behalf of the Defendant, towards the price of the cargo were
dishonored on presentment. A security cheque drawn in the sum
of AED 38,000,000 was also dishonored on presentment.
2.6 The Plaintiff pursued the matter with the Defendant. The
later categorically admitted its default in making the payment. It
was, however, claimed that the cheques could not be cleared on
account of “compliance issue”. On 3 rd January 2016, the
Defendant sought revised proforma invoice in the name of IGT
and Venture Crosstrade. The Plaintiff reluctantly complied with
the said demand and issued revised proforma invoices.
2.7 The Defendant kept on buying time, on one or the other
pretext. Eventually, the Defendant falsely claimed that the
payment was to be made by IGT & Venture Crosstrade; being the
principal of the Defendant.
2.8 As the Defendant continued to make defaults, despite
assurances, the Plaintiff was constrained to invoke Arbitration as
per the Clause (32) of the terms and conditions of the contract. In
accordance with the Rules of ACIC, the Arbitral Tribunal came to
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be constituted. Eventually, the Arbitral Tribunal passed an Award
on 7th September 2018. The Tribunal ordered the Defendant to
pay AED 82,709,509.34 towards the price of the cargo and late
payment charges plus costs of EUR 207,158.82. The Defendant
was also directed to pay the sum of AED 1,100 as compensation
for late payment for each day from the date of the award till
payment of the principal sum of AED 80,299,741.53.
2.9 The Defendant challenged Arbitral Award before the 105 th
Branch of Public Civil Court of Tehran Province and sought its
annulment. The challenge was dismissed by a Judgment dated
15th July 2019. An Appeal was preferred thereagainst before the
33rd Branch of Tehran Province. The matter was remitted to the
Court of first instance. As the Defendant-Appellant failed to
remedy the defects in the Petition, the Court of first instance
again dismissed the Appeal by its judgment dated 13th January
2021.
2.10 The Plaintiff asserts, as the Defendant failed to prefer an
Appeal against the Judgment dated 13 th January 2021, the said
judgment attained finality on 4 th February 2021, as certified by
the ‘Certificate of Finality’ dated 10th January 2024.
2.11 Since Iran is a non-reciprocating foreign territory for the
purpose of enforcement of Award passed in Iran, in India, the
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Plaintiff is constrained to institute the Suit based on the foreign
award for the recovery of the sums, as awarded under the said
Award, as it furnishes a fresh cause of action. All the prerequisites
for a decree on foreign award are fulfilled.
INTERIM APPLICATION:
3. By this Interim Application, the Plaintiff seeks a direction to
the Defendant to secure the amount as awarded under the said foreign
award dated 7th September 2018 by depositing the said amount in this
Court or furnishing an unconditional bank guarantee in the said sum. In
the alternative, the Plaintiff seeks disclosure of assets of the Defendant
and injunction to restrain the Defendant from creating any third party
interest in whatsoever manner, in the movable and immovable property
of the Defendant or otherwise selling, diluting or dealing with the
shares as disclosed by the Defendant in the consolidated financial
statement of Defendant, filed with the Registrar of Companies, during
the pendency of the Suit.
4. The aforesaid reliefs are premised on the fact that the
Plaintiff learnt, in the last week of December 2023 that, a proceeding
being CSA No. C.A. (CAA) 66/MB/2022, has been initiated by the
Defendant along with Shimer Trade Impex Pvt Ltd, another company
before the National Company Law Tribunal (NCLT) Mumbai, Bench-I,
under Section 232 of the Companies Act 2013. The Defendant intends
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to thereby transfer/demerge its business into Shimer Trade Impex Pvt
Ltd. Certain orders have been passed in the said proceeding. The name
of the Plaintiff has not been included in the list of secured and
unsecured creditors furnished by the Defendant. Thus, the Plaintiff
asserts, the said proceeding has been initiated behind the back of the
Plaintiff with an ulterior motive to deprive the Plaintiff of its legally
recoverable dues. The scheme submitted before the NCLT reveals that
the Defendant intends to remove or dispose all its properties with a
view to defraud its creditors including the Plaintiff. It is averred that the
Defendant has defrauded other creditors, like the Plaintiff. Hence, the
Suit seeking urgent interim reliefs without resorting to the pre-
institution mediation under Section 12A of the Commercial Courts Act
2015.
5. Initially a limited Affidavit in Reply was filed on behalf of
the Defendant in opposition to the prayer for ad-interim reliefs. By an
order dated 22nd March 2024, this Court declined to grant any ad-
interim relief and granted liberty to the Defendant to file an Additional
Affidavit in Reply. Thereupon, on 19 th April 2024, an Additional
Affidavit in Reply came to be filed.
RESISTANCE BY THE DEFENDANT:
6. The substance of the resistance put forth by the Defendant
is that the Suit, in the present form, is not at all tenable. Neither a Suit
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can be filed on the strength of the alleged foreign award. Nor the said
foreign award gives a fresh cause of action in favour of the Plaintiff.
Iran is a non-reciprocating country. The foreign award relied upon by
the Plaintiff is not a foreign judgment under Section 2(6) of the Code of
Civil Procedure 1908 (“the Code”). Thus, the provisions of Sections 13
and 14 of the Code are not attracted. The foreign award having been
passed by an Arbitral Tribunal of a non-reciprocating country, it is
incapable of being recognized much less enforced under the provisions
of part II of the Arbitration and Conciliation Act 1996 (“The Act of
1996″). The Plaintiff cannot be permitted to seek enforcement of a
foreign award, indirectly; which the Plaintiff is not entitled to enforce
under the provisions of the Act of 1996. Thus, the suit is misconceived
and untenable in law.
7. Secondly, the Suit is ex-facie barred by the law of
limitation. Though in the Plaint an alternative prayer of a decree on
original cause of action has been made, yet, the Suit primarily rests on
the foreign award dated 7th September 2018. The Suit based on the
original cause of action to recover the price of the goods sold and
delivered in the year 2015-2016 is clearly barred by law of limitation as
the period expired by the year 2018-2019. Even the Suit based on the
alleged foreign award dated 7th September 2018 is also barred by
limitation as the alleged foreign award attained finality on its
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notification under the Rules of ACIC and the award-debtor became
forthwith liable to pay the amount under the said award. Since the suit
has been instituted on 13th January 2024, it is ex-facie barred by
limitation.
8. Thirdly, the Defendant contends, there was no privity of
contract between the Plaintiff and the Defendant. In view of the
sanctions imposed on Iran by USA in the year 2011, the Defendant
contends, the Plaintiff entered into circuitous transactions. The goods
were supplied by the Plaintiff to IGT and Venture Crosstrade, invoices
were raised on those two entities and even those two entities had
drawn cheques towards the price of the goods allegedly sold and
delivered. Upon dishonor of the cheques, the Plaintiff initiated criminal
proceedings against those two entities in the Court at Dubai. Thus, the
Defendant, who operated as an agent of disclosed principal, cannot be
proceeded against as there is no cause of action qua the Defendant. A
reference is made to the previous transactions between the Plaintiff, on
the one part, and IGT and Venture Crosstrade, on the other part, to
buttress the defence that the Plaintiff was fully cognizant of the legal
character of IGT and Venture Crosstrade and has now falsely claimed
that IGT and Venture Crosstrade were introduced by the Defendant only
to facilitate payment of the goods sold and delivered.
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9. The Defendant contends that the foreign award is
otherwise legally infirm and unsustainable. The proceeding before the
Arbitral Tribunal were in complete breach of the fundamental principles
of judicial process and natural justice. The alleged foreign award thus
does not command any binding force. The award has been passed in
utter disregard to the Indian laws and even the principles of natural
justice. Thus, the Suit itself does not deserve to be countenanced.
10. Fourthly, the Suit is barred by the provisions of Section 12A
of the Commercial Courts Act 2015, for not resorting to the mandatory
pre-institution mediation. On the own showing of the Plaintiff, the Suit
did not contemplate any urgent ad-interim or interim relief. The
Plaintiff has made an undisguised attempt to proclaim a false case of
urgency. A facade of urgent interim relief is created with a view to
bypass the mandatory pre-institution mediation under Section 12A of
the Commercial Courts Act 2015. As no case for urgent interim relief
was made out, the Plaint itself is liable to be rejected in view of the bar
contained in Section 12A of the Commercial Courts Act 2015.
11. In any event, the Defendant contends, the prayers in the
instant Application do not deserve any countenance. Since the very
foreign award, which is the basis of the claim of the Plaintiff, is
incapable of being recognized and enforced, the interim relief seeking
direction to deposit or furnish bank guarantee for an unadjudicated sum
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of money and/or unliquidated damages is clearly unsustainable. No
case for grant of reliefs which partake the character of attachment
before judgment is made out.
12. An Affidavit in Rejonder came to be filed controverting the
contentions in the Affidavit in Reply.
SUBMISSIONS:
13. In the wake of the aforesaid pleadings and facts, I have
heard Mr. Ratan Kumar Singh, the learned Senior Advocate for the
Plaintiff-Applicant, and Mr. Prateek Seksaria, the learned Senior
Advocate for the Defendant-Respondent, at some length. The learned
Counsel took the Court through the pleadings and documents on
record, the statutory provisions which, according to them, govern the
arbitral proceeding before the Arbitral Tribunal and the proceedings
thereagainst before the jurisdictional Courts in Iran.
14. Mr. Singh, the learned Senior Advocate for the Plaintiff-
Applicant, submitted that the Defendant having dishonestly defaulted in
payment of the price of the goods sold and delivered, has resorted to all
sorts of defences to further delay and thereby defeat the legitimate
claim of the Plaintiff. Mr. Singh would urge that, there is no denial of
the fact that the Defendant did participate in the arbitral proceedings
before the arbitral tribunal. Neither the factum of the award by the
Arbitral Tribunal based at Iran is in contest. Nor there is much
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controversy over the orders passed by the Courts in Iran in accordance
with the governing Rules. In the backdrop of these rather
uncontroverted facts, the tenability of the Suit, as such, before this
Court, based on the foreign award, can never be contested, urged Mr.
Singh.
15. Mr. Singh would urge that the Suit of the present nature is
maintainable before this Court as the foreign award is enforceable in
India in the same manner and on the same ground as in England under
the common law, i.e., on the grounds of justice, equity and good
conscience. Mr. Singh placed a very strong reliance on the judgment of
the Supreme Court in the case of Badat and Co Bombay Vs East India
Trading Co1 wherein the Supreme Court has enunciated the
circumstances in which a Suit can be filed on the basis of an award
passed by an Arbitral Tribunal the seat of which is in a non-
reciprocating country.
16. Mr. Singh made a strenuous effort to draw home the point
that the law laid down by the Supreme Court in the case of Badat and
Co (Supra) has remained unaffected even after the incorporation of the
Act of 1996. Amplifying the submission, Mr. Singh would contend that
the Part II of the Act of 1996, deals with enforcement of, “certain
foreign awards”. The Act of 1996 thus cannot be said to cover the
foreign awards which have been passed by the Arbitral Tribunal based
1 1963 SCC OnLine SC 9.
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in a non-reciprocating country. Reliance was also placed by Mr. Singh on
the judgment of the Supreme Court in the case of Harendra H. Mehta &
Ors Vs Mukesh H Mehta & Ors2 wherein, according to Mr. Singh, the
law enunciated by the Supreme Court in the case of Badat & Co (Supra)
was reiterated. A judgment of the Delhi High court in the case of Marina
World Shipping Corporation Limited Vs Jindal Exports Private Limited 3
was also pressed into service to buttress the submission that the
enunciation of law in the case of Badat & Co (Supra) still holds good.
17. Therefore, according to Mr. Singh, the principal defence
that the suit, on the basis of a foreign award, is not tenable, is devoid of
any substance. Once this inference is drawn, according to Mr. Singh,
the enquiry in the Suit would be restricted to the question as to whether
the prerequisites for enforcing the foreign award, as enunciated by the
Supreme Court in the case of Badat & Co (Supra), have been fulfilled.
This Court would then be not required to examine the correctness of the
determination by the Arbitral Tribunal, submitted Mr. Singh.
18. Mr. Singh would urge, the defence of bar of limitation is
equally infirm. Taking the Court through the timeline of the proceedings
before the Arbitral Tribunal and the Courts in Iran, Mr. Singh submitted
that the judgment dismissing the Appeal was passed by the Civil Court
at Iran on 13th January 2021, while granting liberty to the Defendant to
2 (1999) 5 SCC 108.
3 2012 SCC OnLine Del 1229.
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prefer an Appeal within a period of 20 days. Consequently, the Award
became final on 4th February 2021. Institution of the Suit on 12th
January 2024 was clearly within the period of limitation.
19. In any event, according to Mr. Singh, the order passed by
the Supreme Court dated 10th January 2022 in Suo Moto Writ Petition
No. 3 of 2020 extending the period between 15 th March 2020 to 28th
February 2022, enures to the benefit of the Plaintiff. If the period of
limitation is reckoned from 1st March 2022, as ordered by the Supreme
Court, the Suit is well within the period of limitation. To this end
reliance was placed on the Supreme Court’s order dated 10 th January
2022 and a decision of a learned Single Judge of this Court in the case
of Novacare Drug Specialities Pvt Ltd Vs State of Goa and Others.4
20. Adverting to the proceedings before the NCLT, for approval
of the scheme under the provisions of Section 232 of the Companies Act
2013 and the orders passed therein, Mr. Singh submitted that the Plaint
does contemplate an urgent interim relief. The de-merger of the
Defendant-company, without showing the Plaintiff as one of its
creditors, despite the Award in question having been passed by the
competent Arbitral Tribunal, would jeopardise the prospect of recovery
of the amount under the said Award, irretrievably. Thus, the challenge
to the tenability of the Suit for not resorting to the mandatory pre-
4 2023 SCC OnLine Bom 1557.
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institution mediation under Section 12A of the Commercial Courts Act
2015, does not merit countenance.
21. Mr. Singh would further urge that the endeavour made on
behalf of the Defendant to question the jurisdiction of the Court, in the
light of the pendency of the proceeding before the NCLT, need not
detain the Court as the reliefs which are sought in the instant Suit and
the Interim Application can never be granted by the NCLT.
Consequently, the bar contained in Section 430 of the Companies Act
2013 is not at all attracted.
22. On the merits of the matter, Mr. Singh would urge, there is
overwhelming material on record which shows that the Defendant and
its authorized representative have categorically acknowledged the
liability. Belatedly a defence was raised that the Defendant was a broker
and the transactions were between the Plaintiff’ and IGT and Venture
Crosstrade. The said defence is ex-facie dishonest and not borne out by
the record. In fact, in a Suit of the present nature, this Court is not
required to delve into the merits of the Arbitral Award. It was reiterated
that the enquiry would be restricted to the satisfaction about the five
principles enunciated in the case of Badat & Co (Supra). Even
otherwise, the correspondence exchanged between the parties squarely
establishes that the Plaintiff had supplied the goods, and after accepting
the proforma invoice and delivery of the goods, the Defendant
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committed default in payment of price thereof. In these circumstances,
the Plaintiff who has a huge claim against the Defendant cannot be left
in the lurch and interest of the Plaintiff deserves to be appropriately
secured, submitted Mr. Singh.
23. Per contra, Mr. Seksaria, the learned Senior Advocate for
the Defendant, mounted a four-pronged attack to the tenability of the
Suit and the reliefs claimed in the instant application. Firstly, it was
submitted that the Suit based on the foreign award is not at all
maintainable. It was urged that the judgment in the case of Badat & Co
(Supra), which constitutes the sheet-anchor of the Plaintiff’s case, has
no application at all to the facts of the case at hand. With the
enactment of the Act of 1996, which consolidated and amended the law
relating to Arbitration in India, including enforcement of Foreign
Arbitral Awards, the remedies must be worked out under the provisions
of the said Act 1996. Since Part II of the said Act 1996 mandates
recognition and enforcement of the Arbitral Award passed by the
Tribunal in a reciprocating territory, the foreign award passed by an
Arbitral Tribunal in a non-reciprocating country, can never be enforced,
lest the foreign award of a non-reciprocating country would stand on a
better footing than that of a reciprocating country which has to pass the
rigours under Part II of the Act of 1996.
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24. Mr. Seksaria would submit that, the Act of 1996 does not
permit recognition and enforcement of a foreign award from a non-
reciprocating country and, thereby, contains a negative import. A very
strong reliance was placed by Mr. Seksaria on the Seven Judge
Constitution Bench judgment in Re: Interplay Between Arbitration
Agreement under the Arbitration And Conciliation Act 1996 and The
Indian Stamp Act 18995 (N.N. Global), to bolster up the aforesaid
submission that there is a negative import in the matter of recognition
and enforcement of a foreign award of non-reciprocating country.
Reliance was also placed on the judgment of the Supreme Court in the
case of Sundaram Finance Ltd Vs NEPC India Ltd 6 as regards the
approach in the matter of interpretation of the provisions contained in
the Act of 1996.
25. Mr. Seksaria would urge that, even otherwise, the
prerequisites for the enforcement of a foreign award in a non-
reciprocating country, as enunciated by the Supreme Court in the case
of Badat & Co (Supra) have not been fulfilled in the facts of the case at
hand. The foreign award, according to Mr. Seksaria, cannot be said to
have attained finality under the laws of Iran. It was controverted that
the judgment dated 15th July 2019 passed by the Tehran Court was
5 2023 INSC 1066
6 1999 (2) SCC 479.
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under the International Commercial Arbitration Act of Iran 1997 (“Iran
Act of 1997″).
26. The bar of limitation was premised in two parts. First, the
Suit based on original cause of action was ex-facie barred by the law of
limitation as the last of the alleged proforma invoices was raised on 1 st
April 2016. Second, as regards the Suit based on the foreign award, Mr.
Seksaria would urge the right to sue accrued to the Plaintiff on the date
of the said Award, i.e., 7th September 2018. The further proceedings
before the Civil Courts at Iran, according to Mr. Seksaria, did not arrest
the period of limitation which began to run from the date of the passing
of the said Award. For this purpose, Mr Seksaria, placed reliance on the
judgment of the Supreme Court in the case of Hindustan Construction
Company Limited And Anr Vs Union of India And Ors.7
27. As a second limb of the submission, Mr. Seksaria would
urge even if the period of limitation is computed from the date of the
dismissal of the Appeal, i.e., 15th July 2019, the Suit instituted in the
month of January 2024 would be ex-facie barred by the law of
limitation. It was urged that under the provisions of Article 137 of the
Limitation Act 1963 the period of limitation for enforcement of a
foreign award is three years from the date of the Award. To draw
support to this submission, Mr. Seksaria banked upon the judgment of
7 (2020) 17 SCC 324.
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the Supreme Court in the case of Government of India Vs Vedanta
Limited (Formerly Cairn India Limited) And Anr.8
28. Thirdly, Mr. Seksaria would urge, with a degree of
vehemence, that the institution of the Suit was clearly in teeth of the
provisions contained in Section 12A of the Commercial Courts Act 2015.
It was submitted that the very fact that the foreign award was passed on
7th September 2018 and the Suit came to be instituted in the month of
January 2024 rules out any element of urgency in the matter. On the
own showing of the Plaintiff, the said foreign award attained finality on
13th January 2021. Yet, the Plaintiff allowed the prescribed period of
limitation to expire and then instituted the Suit.
29. The endeavour of the Plaintiff to press into service the
pendency of the proceeding under Section 232 of the Companies Act
2013, before the NCLT and the orders passed therein, was stated to be
an instance of clever drafting and subterfuge to shore up a false case of
urgency with a view to avoid the mandatory pre-institution mediation.
The entire endeavour of the Plaintiff was to circumvent the peremptory
requirement of Section 12A of the Commercial Courts Act 2015. It was
incumbent upon the Plaintiff to demonstrate promptitude of such
nature that exhausting the remedy of mandatory pre-institution
mediation, without any Court intervention, could lead to into an
irreversible situation as enunciated by Madras High Court in the case of
8 (2020) 10 SCC 1.
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K Varathan Vs Prakash Babu Nakundhi Reddy, 9 submitted Mr. Seksaria.
Consequently, in view of the decision of the Supreme Court in the case
of Patil Automation Private Limited And Ors Vs Rakheja Engineers
Private Limited,10 the Plaint is liable to be rejected by invoking the
provisions contained in Order 7 Rule 11 of the Code.
30. Fourthly, Mr. Seksaria made an endeavour to draw home
the point that the material on record would unmistakably indicate that
the transactions were between IGT and Venture Crosstrade and the role
of the Defendant was that of a broker. Attention of the Court was
invited to the documents which purportedly indicate that the Plaintiff
had raised invoices upon IGT and Venture Crosstrade even in respect of
transactions which do not form part of the subject mater of the Suit and
the Plaintiff had also received payment from IGT and Venture
Crosstrade. The acceptance of the cheques from the above-named
entities and the initiation of action upon dishonor of the cheques were
also pressed into service, to substantiate the aforesaid defence.
31. In substance, Mr. Seksaria would urge that no monies are
payable by the Defendant as claimed by the Plaintiff and, in these
circumstances, on the basis of a legally infirm foreign award passed by
the Aribitral Tribunal in a non-reciprocating country, the reliefs in the
nature of attachment before the judgment cannot be granted. Even
9 C.S. (Comm. Div.) No. 202 of 2022, decided on 13th October 2022.
10 (2022) 10 SCC 1.
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otherwise this Court’s jurisdiction to grant the prayers in the Interim
Application is expressly barred by the provisions contained in Section
430 of the Companies Act 2013, submitted Mr. Seksaria.
CONSIDERATION:
32. To begin with it is necessary to note that the parties are in
unison on the point that the subject Award has been passed by an
Arbitral Tribunal, the seat of which was in a non-reciprocating country.
The parties were, however, at issue over the tenability of the Suit on the
basis of the foreign award passed by a Tribunal situated in a non-
reciprocating country. As this issue goes to the root of the matter, I deem
it appropriate to deal with the same at the threshold.
TENABILITY OF SUIT ON THE BASIS OF AWARD PASSED IN A NON-
RECIPROCATING COUNTRY:
33. Evidently, the edifice of the Suit is sought to be built on the
judgment of the Supreme Court in the case of Badat & Co (Supra).
Since considerable submissions were canvassed on the import of the
judgment of the Supreme Court in the case of Badat & Co (Supra) and
its applicability to the facts of the case, especially in the light of the
enactment of the Act of 1996, it may be apposite to note the factual
backdrop in which the said decision was rendered by the Supreme
Court.
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34. In the case of Badat & Co (Supra) the dispute arose
between Badat and Company, an Indian Firm, and East India Trading
Company, a private limited company incorporated under the laws of the
State of New York in USA, in relation to supply of turmeric by the
Indian Firm to the said foreign company. The parties had agreed to do
business on the terms of the American Spice Trade Association, which
warranted that all questions and controversies and all claims arising
under the contract should be submitted and settled by Arbitration.
35. In the wake of the dispute, the American company invoked
the Arbitration and obtained two ex-parte Awards, followed by the
confirmation judgments passed by the Courts in America. Thereafter,
the American company instituted the Suit based on the Foreign
judgments and, in the alternative, on the two Awards given by the
Tribunal based in New York, before this Court.
36. The tenability of the Suit was questioned by the Indian
Firm, inter alia, on the ground that the Indian Firm was not residing
within the limits of the original jurisdiction of the Bombay High Court
or carrying business therein and thus the High Court had no jurisdiction
to entertain the Suit.
37. In the aforesaid context, the Supreme Court, enunciated
that the Plaintiffs were not entitled to enforce the judgment of the
Supreme Court of the State of New York against the Defendant by a Suit
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instituted on the Original Side of the High Court. The provisions of the
Arbitration (Protocol and Convention) Act 1937 were not attracted as
the United State was not a party to the convention.
38. The Supreme Court, however, went on to examine the
enforceability of the foreign award in India, under common law on the
grounds of justice, equity and good conscience.
39. The Supreme Court, thus, observed, inter alia, as under:
“31. Thus commercial arbitration awards, though
based on a contract to arbitrate are not contracts and
although they are decisions they are not judgments. Even
though that is so, it has been held in several cases in
England that even where an award has not been reduced
to a judgment in a foreign country it can be enforced in
England provided, of course, the award answers mutatis
mutandis the tests for determining the enforceability of
foreign judgments. Thus, the foreign arbitration tribunal
must have acted upon a valid submission within the
limits of jurisdiction conferred by the submission, and the
award must be valid and final.
………
33. It will thus be seen that there is a conflict of
opinion on a number of points concerning the
enforcement of foreign awards or judgments, based upon
foreign awards. However, certain propositions appear to
be clear. One is that where the award is followed by a
judgment in a proceeding which is not merely formal but
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the judgment will be enforceable in England. Even in that
case, however, the plaintiff will have the right to sue on
the original cause of action. The second principle is that
even a foreign award will be enforced in England
provided it satisfies mutatis mutandis the tests applicable
for the enforcement of foreign judgments on the ground
that it creates a contractual obligation arising out of
submission to arbitration. On two matters connected with
this there is difference of opinion. One is whether an
award which is followed by a judgment can be enforced
as an award in England or whether the judgment alone
can be enforced. The other is whether an award which it
not enforceable in the country in which it was made
without obtaining an enforcement order or a judgment
can be enforced in England or whether in such a case the
only remedy is to sue on the original cause of action. The
third principle is that a foreign judgment or a foreign
award may be sued upon in England as giving good cause
of action provided certain conditions arc fulfilled one of
which is that it has become final.
… … …
39. Just as a foreign judgment affords a fresh cause
of action upon which a suit can be brought in an English
court, so is the case with regard to a foreign award. Thus,
in Bremer Oeltransport GMBH v. Drewey(2) it was held
that a foreign award furnishes a new cause of action
based on the agreements between the parties to perform
the award. This view has been accepted in Halsbury’s
Laws of England Vol. II, p. 45.
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40. Now, when a plaintiff sues upon a foreign
award what he in fact does is to ask the court to pass a
judgment in his favour for the amount stated in the
award only after proving five facts :
(1) that there was a contract between the parties where
under disputes between them could be referred to
arbitration to a tribunal in a foreign country,;
(2) that the award is in accordance with the terms of the
agreements;
(3) that the award is valid according to the law
governing arbitration proceedings obtaining in the
country where the award was made ;
(4) that it was final according to the law of. that country;
and
(5) that it was a subsisting award at the date of suit.
41. A view has been expressed in some English
cases that an award must also be enforceable in the
country in which is was made before a suit can be
brought, in England on its basis. But upon the view we
are taking it is not necessary to decide this point. Now,
when a suit is brought by a plaintiff on the basis of an
award it is not necessary for him to prove that the
amount claimed was actually payable to him in respect of
the dispute nor it is open to the defendants to challenge
the validity of such an award on grounds like those which
are available in India under Section 30 of the Arbitration
Act. A very limited challenge to the claim based on the
award is permissible to the defendants and that is one of
the reasons why it is important to ascertain whether the
award has in fact attained finality in the country in which
it was made. We will assume that the plaintiffs have
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satisfactorily established the first three of the five
conditions which we have set out above. The question
then is whether the fourth and the fifth conditions have
been satisfied.
………
46. No doubt, an award can furnish a fresh cause
of action. But the award must be final. If the law of the
country in which it was made gives finality to judgment
based upon an award and not to the award itself, the
award can furnish no cause of action for a suit in India.
In these circumstances we hold that though the High
Court of Bombay has jurisdiction to enforce a final award
made in a foreign country in pursuance of a submission
made within the limits of its original jurisdiction, the
awards in question being not final, cannot furnish a valid
cause of action for the suit. Upon this view we allow the
appeal and dismiss the suit with costs throughout The
normal rule as to costs must apply because the choice of
forum made by the plaintiffs was deliberate and with the
knowledge that they were taking a risk in not seeking out
the defendants at the place where they reside or carry on
business.”
40. The Supreme Court has thus held that apart from the
provisions of Arbitration (Protocol and Convention) Act 1937, (which
was then in force) foreign award and foreign judgment based upon
Awards, were enforceable in India on the same grounds and in the same
circumstances on which they were enforceable in England under the
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common law on the grounds of justice, equity and good conscience, if
the necessary conditions were satisfied, namely, the contract between
the parties to refer the dispute to Arbitration to a Tribunal in a foreign
country, the Award is in accordance with the terms of the Agreement,
the Award is valid according to the governing law of the country where
the Award was made, the Award was final according to the law of that
country and the Award subsisted on the date of the institution of the
Suit.
41. The judgment of the Supreme Court in the case of Badat &
Co (Supra) with regard to the enforcement of the foreign award is
based on the applicability of the common law and is de hors the
statutory prescription in the matter of enforcement of foreign award.
The pivotal question which crops up for consideration is whether the
aforesaid law exposited by the Supreme Court in the case of Badat & Co
(Supra) still holds the field, especially after the incorporation of the Act
of 1996?
42. Mr. Singh would urge that the precedential value and
binding efficacy of the judgment in the case of Badat & Co (Supra) is
not diluted by the subsequent legislation. It was urged that the Supreme
Court has in fact followed the judgment in the case of Badat & Co
(Supra) in the case of Harendra H. Mehta (Supra). In Marina World
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Shipping Corporation Limited (Supra) the Delhi High Court has also
followed the judgment in the case of Badat & Co (Supra).
43. A perusal of the judgment in the case of Harendra H. Mehta
(Supra) would indicate that the Supreme Court had, in fact, held that
the judgment in the case of Badat & Co (Supra) was not applicable to
the facts of the case in Harendra H. Mehta (Supra) which was governed
by the provisions contained in Foreign Awards (Regulation and
Enforcement) Act 1961.
44. In the case of Marina World Shipping Corporation Limited
(Supra), the Delhi High Court considered the question whether
execution petition was maintainable in view of the Explanation to
Section 44A of the Code?. Holding that Part II of the Act of 1996 is a
complete Code in itself for the enforcement of a foreign award other
than a situation where a Suit may have been filed for enforcement of
such an Award. where there may be a non-reciprocating country as was
the case in the case of Harendra H. Mehta (Supra), it was observed that
the legal position was not different in Badat & Co (Supra). The Delhi
High Court has in terms referred to the remedy of institution of the Suit
for enforcement of a foreign award passed by the Tribunal in a non-
reciprocating country.
45. In contrast to this, Mr Seksaria would urge that the
enactment of the Act of 1996 which is a consolidating and amending
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law with regard to the domestic and commercial arbitration as well as
enforcement of the foreign award, there is no room for enforcement of a
foreign award passed by the Tribunal in a non-reciprocating country by
institution of a suit. It was urged that any other view would put such
Award in a non-reciprocating country on a better footing than the
Award passed in a reciprocating country which has to pass through the
rigour of recognition and enforcement under Part II of the Act 1996.
46. It was forcefully urged that the Act of 1996 is a self-
contained Code and there is a negative import against the enforcement
of the foreign award which does not fall within the purview of the Act
of 1996. Strong reliance was placed on the judgment of the Constitution
Bench in the case of Re: Interplay Between Arbitration Agreement
(Supra).
47. Before the enactment of the Act of 1996, the law of
Arbitration was contained in the Arbitration Act 1940, the Arbitration
(Protocol and Convention) Act 1937 and Foreign Awards (Recognition
and Enforcement) Act 1961. The United Nations Commission on
International Trade Law (UNCITRAL) adopted the model law in 1985 to
foster the development of a unified legal framework for the fair and
efficient settlement of disputes arising in international commercial
arbitration. All the member States were recommended to give due
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consideration to the model law. The statement of objects and reasons of
the Act of 1996, reads as under:
“2. The United Nations Commission on International
Trade Law (UNCITRAL), adopted in 1985 the Model Law
on International Commercial Arbitration. The General
Assembly of the United Nations has recommeded that all
countries give due consideration to the said Model Law, In
view of the desirability of uniformity of the law of arbitral
procedures and the specific needs of international
commercial arbitration practice. The UNCITRAL also
adopted in 1980 a set of Conciliation Rules. The General
Assembly of the United Nations has recommended the use
of these Rules in cases where the disputes arise in the
context of international commercial relations and the
parties seek amicable settlement of their disputes by
recourse to conciliation. An important feature of the said
UNCITRAL Model Lw and Rules is that they have
harmonised concepts on arbitration and conciliation of
different legal systems of the world and thus contain
provisions which are designed for universal application.
3. Though the said UNCITRAL Model Law and Rules
are intended to deal with international commercial
arbitration and conciliation, they could, with appropriate
modifications, serve a sa model for legislation on domestic
arbitration and conciliation. The present Bill seeks to
consolidate and amend the law relating to domestic
arbitration, international commercial arbitration,
enforcement of foreign arbitral awards and to define the
law relating to conciliation, taking into account the said
UNCITRAL Model Law and Rules.”
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48. Part II of the Act of 1996, with which we are primarily
concerned, deals with the enforcement of certain foreign awards.
Chapter I deals with New York Convention Awards and Chapter II with
Geneva Convention Awards.
49. The definition of “Foreign Awards” in Sections 44 and 53 of
the Act of 1996 designedly restricts the operation of the Chapter I and II
to the Awards in one of such territories as the Central Government,
being satisfied that reciprocal provisions have been made, may, by
notification, declare to be territories to which the respective
Convention applies. In other words, the foreign award referred to in
Section 44 and 53 are the Awards made in pursuance of an agreement
to which the New York Convention or Geneva Convention applies. The
title of Chapter II thus gives an indication that it governs the
enforcement of certain foreign awards, implying thereby that the said
Chapter does not apply to the foreign awards not covered by the
definition of “foreign awards” under Sections 44 and 53 of the said Act.
The Act of 1996, thus, does not make any provision for Awards passed
in Arbitration proceedings which take place in a non-convention
country.
50. It is in the aforesaid context, the submission of Mr. Seksaria
that there is a negative import requires appreciation. There can be no
duality of opinion that the Act of 1996 is a self-contained Code. In the
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case of Furest Day Lawson Ltd Vs Jindal Exports Ltd. 11 the Supreme
Court emphasised that the Act of 1996 is a self-contained Code and
exhaustive and carries with it a negative import. The observations in
paragraph 89, on which a very strong reliance was placed by Mr.
Seksaria, read as under:
“89. It is thus, to be seem that Arbitration Act, 1940,
from its inception and right through to 2004 (in P.S.
Sathappan [(2004) 11 SCC 672)] was held to be a self-
contained code. Now, if the Arbitration Act, 1940 was held
to be a self-contained code, on matters pertaining to
arbitration, the Arbitration and Conciliation Act, 1996,
which consolidates, amends and designs the law relating
to arbitration to bring it, as much as possible, in harmony
with the UNCITRAL Model must be held only to be more
so. Once it is held that the Arbitration Act is a self-
contained code and exhaustive, then it must also be held,
using the lucid expression of Tulzapurkar, J, that it carries
with it ” a negative import that only such acts as are
mentioned in the Act are permissible to be done and acts
or things not mentioned therein are not permissible to be
done.” In other words, a letters patent appeal would be
excluded by the application of one of the general
principles that where the special Act sets out a self-
contained code the applicability of the general law
procedure would be impliedly excluded”
(emphasis supplied)
11 (2011) 8 SCC 333.
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51. After referring to the aforesaid statement of law, the Seven
Judge Bench, enunciated in the case of Re: Interplay Between
Arbitration Agreement (Supra), that it is not permissible to do what is
not mentioned under the Act of 1996. Therefore, provisions of other
statutes cannot interfere with the working of the Arbitration Act, unless
specified otherwise.
52. The observations of the Constitution Bench in paragraph
85 read as under:
“85. The Arbitration Act is a self-contained code iner
alia with respect to matters dealing with appointment of
arbitrators, commencement of arbitration, making of an
award and challenges to the arbitral award, as well as
execution of such awards. When a self-contained code sets
out a procedure, the applicability of a general legal
procedure would be impliedly excluded. Being a self-
contained and exhaustive code on arbitration law, the
Arbitration Act carries the imperative that what is
permissible under the law ought to be performed only in the
matter indicated, and not otherwise. Accordingly, matters
governed by the Arbitration Act such as the arbitration
agreement, appointment of arbitrators and competence of
the arbitral tribunal to rule on its jurisdiction have to be
assessed in the manner specified under the law. The
corollary is that it is not permissible to do what is not
mentioned under the Arbitration Act. Therefore, provisions
of other statutes cannot interfere with the working of the
Arbitration Act, unless specified otherwise.”
(emphasis supplied)
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53. The Arbitration Act is indeed a self-contained Code, inter
alia, with respect to matters covered by the said Act 1996. If the Act of
1996 expressly and specifically excludes the foreign awards made in
non- convention countries, then, can the remedies which were available
in relation to the non conventional awards be said to be barred by the
provisions of the Act of 1996?.
54. I am afraid, the answer cannot be in the affirmative. There
cannot be any manner of doubt that the matters which are governed by
the provisions of the Act 1996 can only be dealt with in the manner
ordained by the said Act. However, where the Act of 1996 expressly
excludes certain categories of foreign awards, from the purview of
enforcement thereunder, the principle of negative import cannot be
applied to such a situation by necessary implication.
55. The prohibition in the matter of the enforcement of the
Awards emanating from non-reciprocating territories ought to find a
mandate in the Act of 1996. Evidently, there is no express prohibition.
In the absence of an express prohibition a matter relating to Arbitration
which is not covered by the Act of 1996 cannot be jettisoned away as
impermissible.
56. A profitable reference, in this context, can be made to a
three Judge Bench Judgment of the Supreme Court in the case of
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Centrotrade Mineral & Metals Vs Hindustan Cooper Ltd, 12 where the
permissibility of two-tier Arbitration, i.e., the adjudication of an Appeal
by another Arbitrator/Tribunal, under the provisions of the Act of 1996,
arose. In the said case, reliance was placed on the aforeextracted
observations in paragraph 89 of the judgment in the Furest Day Lawson
Ltd (Supra), to urge that the Act of 1996 does not permit two tier
Arbitration and, thus, such an Arbitration system was not permissible.
The three Judge Bench observed that, it was unable to fully subscribe to
the aforeextracted broad observations that acts mentioned in the statute
are permissible but acts not mentioned therein are impermissible, and
that the position could be converse. The relevant observations in
paragraph 23 of the judgment of the Centrotrade Mineral (Supra) read
as under:
“23. In any event, we are afraid the passage referred
to by the learned counsel from Fuerst Day Lawson has
been misunderstood and is even otherwise inapposite
since we are not concerned with a statutory appeal but a
non-statutory process agreed upon by parties that has
nothing to do with court procedures. We are also unable
to fully subscribe to the broad observation that acts
mentioned in a statute are permissible but acts not
mentioned therein are impermissible. It could very well
be the converse. In any event, the observations of this
Court were in the context of a statutory appeal not
provided (or provided). In that context, it was observed12 2017(2) SCC 228.
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that if an appeal is not provided for by a statute, then the
filing of an appeal is not permissible. … … …”
(emphasis supplied)
57. A useful reference can also be made to the Constitution
Bench judgment in the case of Bharat Aluminum Company Vs Kaiser
Aluminum Technical Services Inc.13 In the said case, a submission was
sought to be canvassed that since non- convention awards would not be
governed either by Part I or Part II of the Act of 1996, it would mean
that there is no law governing such Arbitrations. Repelling the
submission, the Constitution Bench, enunciated the law as under:
“169. It was also submitted that Non-Convention
Awards would not be covered either by Part I or Part II.
This would amount to holding that the legislature has left
a lacuna in the Arbitration Act, 1996. This would mean
that there is no law in India governing such arbitrations.
170. We are of the opinion that merely because the
Arbitration Act, 1996 does not cover the non convention
awards would not create a lacuna in the Arbitration Act,
1996. If there was no lacuna during the period in which
the same law was contained in three different
instruments, i.e. the Arbitration Act, 1996 read with
1961Act, and the Arbitration (Protocol and Convention)
Act, 1937, it cannot be construed as a lacuna when the
same law is consolidated into one legislation, i.e. the
Arbitration Act, 1996.
13 (2012) 9 SCC 552.
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171. It must further be emphasised that the definition
of “foreign awards” in Sections 44 and 53 of the
Arbitration Act, 1996 intentionally limits it to awards
made in pursuance of an agreement to which the New
York Convention, 1958 or the Geneva Protocol, 1923
applies. It is obvious, therefore, that no remedy was
provided for the enforcement of the ‘non convention
awards’ under the 1961 Act. Therefore, the non
convention award cannot be incorporated into the
Arbitration Act, 1996 by process of interpretation. The
task of removing any perceived lacuna or curing any
defect in the Arbitration Act, 1996 is with the Parliament.
The submission of the learned counsel is, therefore,
rejected. The intention of the legislature is primarily to be
discovered from the language used, which means that the
attention should be paid to what has been said and also to
what has not been said. (See: Gwalior Rayon Silk Mfg
(Wvg.) Co Ltd Vs Custodian of Vested Forests (1990 Supp
SCC 785 : AIR 1990 SCC 1747). Here the clear intention
of the legislature is not to include the Non-convention
Awards within the Arbitration Act, 1996.”
(emphasis supplied)
58. The aforesaid observations of the Supreme Court, especially
to the effect that, if there was no lacuna during the period in which the
same law was contained in three different enactments, i.e., Arbitration
Act, 1940 read with 1961 Act and the Arbitration (Protocol and
Convention) Act 1937, it cannot be construed as a lacuna when the
same law came to be consolidated into one legislation (The Arbitration
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Act 1996), indicate that despite the enactment of the Arbitration Act
1996, the legal position as regards the enforcement of non-convention
Award remains the same.
59. I, therefore, find substance in the submission of Mr. Singh
that the decision in the case of Badat & Co (Supra) in the matter of
enforcement of non convention Awards still holds the field, and the Suit
of the instant nature is tenable.
WHETHER THE CONDITIONS STIPULATED IN THE CASE OF BADAT &
CO (SUPRA) HAVE BEEN FULFILLED?:
60. Mr. Seksaria submitted that one of the essential conditions
for enforcement of the foreign award emanating from a non-
reciprocating territory has not been fulfilled as the Award in question
cannot be said to have attained finality under the laws of Iran. Laying
emphasis on the observations of the Supreme Court in paragraph 46 of
the Judgment in the case of Badat & Co (Supra), Mr. Seksaria would
urge that the instant suit must meet the same fate as the Suit in Badat &
Co (Supra), since the Award in question has not attained finality.
61. Mr. Seksaria submitted that under Article 6 of the Iran Act
1997, the judicial functions in relation to Article 33 and 35 therein were
entrusted to Tehran Public Court. Under Article 34, an Award can be
deemed to be null and void and unenforceable in the circumstances
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enumerated therein. Under Article 35 of the Iran Act 1997, the Award
Holder was required to file an application to seek recognition and
enforcement of the Award. Since, the Plaintiff had not filed any
application in the Public Court of Tehran for recognition and
enforcement of the Award in question, the Award cannot be said to have
attained finality. It was further urged that had the Plaintiff filed such an
application, the Defendant would have had an opportunity to contend
that there are circumstances which render the Award null and void.
62. Mr. Seksaria would further submit that the the reliance
sought to be placed by the Plaintiff on the decision of Iranian 105 th
Branch of Public Civil Court, dated 15th July 2019, is of no assistance to
the Plaintiff as the said Court had no jurisdiction in the matter of an
international award. Thus, the judgment dated 15 th July 2019 cannot be
treated as a judgment passed under the Iran Act 1997 to urge that the
Award attained finality.
63. In any event, according to Mr. Seksaria, when this Court
has to form an opinion upon a point of foreign law, the provisions
contained in Section 45 of the Indian Evidence Act would be attracted
and, at this stage, there is no material to form an opinion as to the
effects of the laws of Iran.
64. Mr. Ratan Kumar Singh countered the submissions on
behalf of the Defendant. It was urged that the submissions on behalf of
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the Defendant are premised on an incorrect reading of the decision in
the case of Badat & Co (Supra). Under Article 35 of the Iran Act 1997,
the Award Holder was not required to seek recognition before the
Award attained finality. An application was required to be made only for
the enforcement of the international award. There is a difference
between ‘finality’ and ‘enforcement’ of the Award. An Award may be
final and yet unenforceable. This distinction in the concepts of “finality”
and “enforceability” of the Award, was adverted to by the Supreme
Court in paragraph 43 of the decision in the case of Badat & Co (Supra),
urged Mr. Ratan Singh.
65. Secondly Mr. Ratan Singh would submit that in the
proceeding initiated under Article 489 of the Civil Code of Iran, which
was otherwise not applicable to international commercial arbitration
award, the Tehran Public Court considered the challenge both under
Article 489 of the Iranian Civil Procedure Code as well as Articles 33
and 34 of Iran Act 1997. Since the Award can no longer be subjected to
challenge under the mechanism provided by the Iran Act 1997, Mr.
Ratan Singh would urge, the challenge to the tenability of the Suit on
the ground that the Award has not attained finality is completely
misconceived.
66. The aspect of the finality of the Award is of critical salience
on two counts. First, finality to the foreign award under the laws of
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non- convention country, where it was passed, is a pre-condition for a
Suit based on the foreign award, as enunciated in Badat & Co (Supra).
In fact, in the said case, the Supreme Court on facts held that, under the
governing provisions of the New York State, the Defendant was entitled
to apply for vacating the Award on certain grounds and thus imperil the
finality accorded to the Award by his contract. Therefore, it cannot be
said that the Award has attained finality till the entire procedure was
gone through and, thus, the Award in question, not being final, could
not furnish a valid cause of action for the Suit.
67. Secondly, the issue of finality assumes significance in the
context of the bar of limitation for the Suit based on the foreign award.
It is the stand of the Plaintiff that the award attained finality after 20
days of the disposal of the Appeal by an order dated 13th January 2021.
68. The parties are not at issue over the character of the Award
qua Iran. It was an international award for Iran as well, though the seat
of Arbitration was in Tehran. Under the Article of 1(b) of the Iran Act
1997, an Arbitration is international if at the time of conclusion of the
Arbitration Agreement, one of the parties to the Agreement, is not a
national of Iran under Iranian law. Article 2 of the Iran Act 1997
provides that Arbitration of disputes in international commercial
relations shall be conducted in accordance with the provisions of the
said Act. Article 6, which deals with the supervisory authority of the
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Courts, provides that performance of functions specified in certain
Articles including Articles 33 and 35 are entrusted to the Public Court in
the provincial capital where the place of Arbitration is located and
where, and for as long as, the place of Arbitration has not been
designated, such functions will be performed by Tehran Public Court.
Article 36(1) excludes Arbitration of international commercial disputes
under the said Act, 1997 from the Arbitration Rules contained in the
Civil Procedure Code and other laws and regulations.
69. Chapter 7 of the Iran Act 1997 governs the recourse against
the Awards. Under Article 33(1) an Arbitral Award may be set aside by
the Court specified in Article 6 upon the application of a party when the
circumstances stipulated in Clauses (a) to (i) exists. Article 34 provides
for nullity of Award. It reads as under:
“Article 34. Nullity of award
An arbitral award shall be deemed null and void and
unenforceable where:
(1) the principal subject-matter of the dispute is not capable
of settlement by arbitration under Iranian law;
(2) the terms of the award would be contrary to the public
policy or good morals of the State, or to the mandatory
provisions of this Act;
(3) the arbitral award made in respect of immovable property
located in Iran is in conflict with the mandatory laws of the
Islamic Republic of Iran or with the contents of valid official
documents, unless the “arbitrator” has been authorized to act
as amiable compositeur regarding the latter issue.”
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70. Enforcement of the Award is regulated by Article 35. It
reads as under:
“Article 35. Enforcement
(1) Except for instances specified in Articles 33 and 34 of
this Act, arbitral awards made in accordance with the
provisions of this Act shall be recognized as binding and
enforceable after notification thereof and, upon application
in writing to the court specified in Article 6, enforcement
procedures in connection with court judgments shall be put
into effect.
(2) Where a party requests the court specified in Article 6 of
this Act to set aside an arbitral award, while the other party
requests for its recognition or enforcement, the court may,
on the application of the party requesting recognition or
enforcement of the award, order the other party to provide
appropriate security.”
71. From the perusal of the judgment of 105 th Branch of Public
Civil Court dated 15th July 2019 (Exhibit “JJ”), it prima facie appears
that the Award was challenged by invoking the provisions contained in
Article 489 of the Civil Procedure Code under which an Arbitral Award
shall be null and void and unenforceable if the circumstances stipulated
in Clauses (1) to (7), therein, exist. As noted above, the International
Arbitration is excluded from the Arbitration Rules contained in the
Iranian Civil Procedure Code.
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72. Mr. Ratan Singh would urge that, nonetheless, the Public
Civil Court which decided the said proceeding, was the competent Court
under the Article 6 of the Iran Act 1997 and has, in fact, decided the
matter on merits, including the grounds which were available for
setting aside an Arbitral Award under Article 33 of the Iran Act 1997.
73. The aforesaid submission, in my considered view, requires
consideration, upon forming a correct opinion as to the foreign law. The
merits of the decision of the Public Civil Court at Tehran dated 15 th July
2019 are not as significant as the question of jurisdiction. Prima facie, a
proceeding invoking Article 489 of the Iranian Civil Procedure Code was
not tenable. In such circumstances, can element of finality be attached
to the award, in the context of the said decision dated 15 th July 2019
and the subsequent remand of the matter by the Court of Appeal of
Tehran province, by order dated 11 th August 2020 (Exhibit “KK”) and
the eventual decision dated 13th January 2021 by the Public Civil Court
(Exhibit “LL”), dismissing the Appeal, appears debatable.
74. It would be contextually relevant to note that Article 33(3)
of the Iran Act 1997, reads as under:
“Article 33. Application for setting aside an arbitral
award
(1) … … …
(2) … … …
(3) The application for setting aside the award
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be submitted to the court specified in Article 6 within
three months of notification of the award, including
correction or interpretation of the award, or an
additional award, otherwise the application shall be
inadmissible.”
75. An application for setting aside the Award is required to be
made to the Court specified in Article 6, and within three months from
the notification of the Award. Lest the Application shall be inadmissible.
Could it be urged that after three months of the notification of the
Award, the right of the party to seek setting aside of the award stood
foreclosed and the award attained finality?.
76. Article 34, on the other hand, declares the circumstances in
which an Arbitral Award shall be deemed to be null and void and
unenforceable. At what stage and before which forum, the nullity of the
Award can be agitated, is again a matter which prima facie does not
seem to be free from doubt.
77. As noted above, Article 35 provides that except for
instances specified in Article 33 (setting aside of the Award) and 34
(Nullity of award), Arbitral Awards made in accordance with the
provisions of this Act shall be recognized as binding and enforceable
after notification thereof.
78. The submission of Mr. Ratan Singh that the Plaintiff was
not required to file an application for enforcement for the finality of the
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award, may carry some substance. However, in the case at hand, the
Plaintiff does not claim that the award became final and binding on the
date it was made, but seeks to postpone the date of finality to the award
to the order dated 13th January 2021 passed by the Public Civil Court,
Tehran (Exhibit “LL”).
79. In this view of the matter, in my view, prima facie, it is
debatable whether the award attained finality and, if so, the date on
which the award attained finality, and the determination may require
evidence to be adduced in the matter of interpretation of the foreign
law
BAR OF LIMITATION:
80. The aforesaid, prima facie, finding as regards the finality of
the award also bears upon the aspect of limitation. It may be apposite to
note that, apart from the award in question, the Plaintiff rests his claim
on the original cause of action, albeit, in the alternative. However,
during the course of the submissions, it was urged on behalf of the
Plaintiff that the Suit is, in fact, primarily filed on the foreign award
dated 7th September 2018 having attained finality on 4 th February 2021.
The aforesaid being the nature of the suit claim, it may be necessary to
note the averments in the Plaint as regards the point of limitation.
81. In paragraph 94 of the Plaint, the Plaintiff has averred that
if the Plaintiff is not found entitled to a decree on the basis of the
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foreign award then the Plaintiff is entitled to recovery of the amount on
the basis of the original cause of action. In paragraph 95 of the Plaint,
the Plaintiff claims that the cause of action in respect of each of the
cargos arose after the expiry of the period of 60 days from the date of
issue of Bill of Lading in respect to each cargo and the assurances made
by the Defendant to pay the outstanding amount, the last of which was
on 26th April 2016. In the second part, the Plaintiff claims cause of
action arose on the date of award, i.e., 8 th September 2018 followed by
the judgments of the Court of the first instance on 15 th July 2019, the
Appeal Bench judgment dated 11th August 2020 and again the judgment
of Court of first instance dated 13 th January 2021 and, lastly, on the
expiry of 20 days period thereof, i.e., 4 th February 2021. Lastly, the Suit
is stated to be governed by Article 113 of the Limitation Act (paragraph
98).
82. Evidently, the institution of the suit on 12 th January 2024,
on the basis of the original cause of action constituted by the sale and
delivery of the goods, the last of which was on 1 st April 2016, appears
prima facie, beyond three years from the date of the accrual of the
cause of action. Though an endeavour was made on behalf of the
Plaintiff that there is an acknowledgment of the debt in the form of the
e-mails referred to in paragraph 95 of the Plaint, and, therefore, a fresh
cause of action accrues, yet, the Plaintiff does not seem to have made
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the requisite pleadings in the Plaint to base the suit on the alleged
acknowledgment of debt. In any event, the last of the e-mails referred
to in paragraph 95 of the Plaint was on 26th April 2016.
83. On the aspect of the bar of limitation, in the context of the
Suit based on the foreign award, before adverting to delve into the issue
of finality to the award, the law which governs the period of limitation
for a suit of the present nature, deserves to be ascertained.
84. Mr. Seksaria, placed a very strong reliance on the judgment
of the Supreme Court in the case of Vedanta Limited (Supra) to urge
that the suit ought to have been instituted within a period of three years
from the date of the award. In the case of Vedanta Limited (Supra), the
Supreme Court, inter alia, considered the question of limitation for
filing the enforcement/execution petition for enforcement of foreign
award in India. In that context, the Supreme Court held that the issue of
limitation for enforcement of foreign award being procedural in nature,
is subject to the lex fori, i.e., the law of the forum that the foreign
award was sought to be enforced, namely, the Limitation Act 1963. The
said Act of 1963 does not contain any specific provision for enforcement
of a foreign award. An application for execution of a foreign decree
would be an application not covered under any other Article of
Limitation Act, and, would, thus be governed by Article 137 of the
Limitation Act. Article 136 of the Limitation Act (which provides 12
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years period of limitation for execution of the decree) wound not be
applicable for the enforcement/execution of the foreign award, since it
is not a decree of Civil Court in India. Thus, the period of limitation for
filing a Petition for enforcement of a foreign award under Sections 47
and 49 of the Act 1996 wold be governed by Article 137 of the
Limitation Act 1963, which prescribes a period of three years from the
date when the right to apply accrues.
85. Undoubtedly, the aforesaid enunciation of law was in the
context of the enforcement of a foreign award emanating from a
reciprocating territory and enforceable under Part II of the Act of 1996.
In the instant case, since the Award emanates from a non-reciprocating
territory, the suit has been instituted on the basis of a foreign award.
However, that would not make much qualitative difference in the
matter of the application of law of limitation, i.e. the Limitation Act
1963. A suit for which no period of limitation is prescribed, would be
governed by the residuary Article 113, which provides that a suit for
which no limitation is provided elsewhere in the Schedule, the period of
limitation would be three years and the time begins to run when the
right to sue accrues.
86. Thus, the question as to when the right to sue accrued to
the Plaintiff comes to fore. The Plaintiff asserts the right to sue accrued
when the award, which was passed on 7 th September 2018, attained
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finality on 4th February 2021, i.e., 20 days after the dismissal of the
Appeal by the Court of first instance on 13 th January 2021. This claim of
the Plaintiff, in turn, raises the issue of the date of finality of the award
dated 7th September 2022.
87. I have already adverted to the provisions contained in Iran
Act 1997. A party is entitled to seek setting aside of the award under
Article 33 of the Iran Act 1997 on the grounds set out therein, within a
period of three months from the date of the notification of the award,
before the Court designated under Article 6 therein. This Court is
persuaded to take a prima facie view that if the proceeding for setting
aside the award were not initiated within the said period of there
months, the award would attain finality. This view is in accord with the
submissions forcefully canvassed on behalf of the Plaintiff that there is a
distinction between “finality” and “enforceability” of the award, as
indicated in paragraph 43 of the judgment in the case of Badat & Co
(Supra). Consistent with this view, if the Plaintiff was not required to
file an application for enforcement of the award under Article 35 of the
Iran Act 1997, which was again the stand of the Plaintiff, the award
would have attained finality after the expiry of the period of three
months from the date of the award with no proceeding having been
filed by the Defendant for setting aside the award under the provisions
of Iran Act 1997.
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88. The Plaintiff, however, seeks to defer the finality to the
award dated 7th September 2018, on the basis of the proceeding which
was initiated by the Defendant, under the Iranian Code of Civil
Procedure. Whether such a proceeding before the forum which
apparently lacked jurisdiction, by an adversary, would extend the period
of limitation or defer the finality otherwise attached to the award dated
7th September 2018, prima facie, appears contentious.
89. From the perusal of the provisions contained in the Iranian
Act 1997 which governs an international arbitration, prima facie, it
appears difficult to draw an inference that the finality to the award in
question could have been deferred on the strength of a proceeding,
which appeared to be not properly constituted, and abortive.
90. In the aforesaid view of the matter, I find substance in the
submission of Mr. Seksaria that even if the benefit of the order dated
10th January 2022 passed by the Supreme Court, in Suo Moto Writ
Petition No. 3 of 2020 is extended, it appears to be seriously debatable,
whether the suit was filed within the period of limitation.
91. I am conscious that the question of limitation is more often
than not a mixed question of fact and law, and cannot be legitimately
decided on the basis of bare averments, and submissions. However, in
the case at hand, since the entire case of the Plaintiff rests on the date
of postponement of finality to the award, dated 7 th September 2018,
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which appears rather tenuous, such tentative finding as regards the bar
of limitation is required to be recorded.
CONSEQUENCES OF NON-INVOCATION OF MEDIATION UNDER
SECTION 12A OF THE COMMERCIAL COURTS ACT:
92. The prayer in the Interim Application were principally
rested on the assertion that the proceeding before the NCLT, Mumbai,
being CSA No. C.A. (CAA) 66/MB/2022 under the provisions of Section
232 of the Companies Act 2013, manifest the clear intent of the
Defendant to defraud the Plaintiff as the Plaintiff has not been shown as
the creditor, despite the award. Reference is made to various orders
passed by the NCLT; the last one dated 12 th November 2023, whereby
the Applicant-Defendant herein was allowed to convene and hold
meeting at any date not later than 31 st March 2024, convenient to the
secured creditors. The pendency of the said proceeding before the NCLT
and the possibility of the orders being passed therein, to the prejudice
of the Plaintiff, was pressed as justification for the non-invocation of
mediation under Section 12A of the Commercial Courts Act.
93. Mr. Sekseria would urge that the aforesaid justification is plainly
untenable. Inviting attention of the Court to the orders passed by the
NCLT right from 14th October 2022, Mr. Seksaria would urge that the
Plaintiff had full knowledge about the said proceeding long back and,
yet, the suit came to be instituted without resorting to the mandatory
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pre-institution mediation. Mr. Seksaria laid particular stress on the fact
that the aspect of urgency is required to be considered in the light of
award which came to be passed on 7 th September 2018 and the Suit
itself being ex-facie barred by law of limitation.
94. Mr. Ratan Singh joined the issue by strenuously urging that
this ground also underscores the dishonest intent of the Defendant. An
endeavour was made to demonstrate that the Plaintiff did make
attempts to amicably settle the disputes at both, pre and post award
stage. Attention of the Court was invited to the Minutes of the Meeting
chaired by the Joint Secretary FT(SA) Department of Commerce on 17 th
July 2017 to resolve the issue of pending payment by the Defendant to
Iranian companies. A Defendant who dishonestly evades the liability
cannot be permitted to score a march by taking a technical defence,
urged Mr. Singh.
95. Even otherwise, Mr. Singh would urge, the Plaintiff has
satisfactorily made out the case of urgency if considered in the light of
the limited enquiry warranted at the nascent stage. Reliance was placed
by Mr. Ratan Singh on the judgment of the Supreme Court in the case of
Yamini Manohar Vs T.K.D. Keerthi 14 wherein it was enunciated that
non-grant of relief at ad-interim stage will not justify dismissal of the
Suit under Order VII Rule 11.
14 (2024) 5 SCC 815.
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96. Section 12A of the Commercial Courts Act 2015 bars the
very institution of the Suit without exhausting remedy of pre-institution
mediation, if the Suit does not contemplate any urgent interim relief. In
the case of Patil Automation Private Limited (Supra), the Supreme
Court, has emphasized the mandatory character of the pre-institution
mediation, in the context of legislative object behind the introduction of
the pre-insitution mediation. The object unerringly points to at least
partly foisting compulsory mediation on the Plaintiff in a Suit which
does not contemplate an urgent interim relief.
97. In the case of Kaulchand H. Jogani Vs Shree Vardhan
Investment15 this Court had an occasion to consider the nature and
import of the provisions contained in Section 12A of the Commercial
Courts Act. In paragraphs 28 to 31 this Court observed as under:
“28. In the case of Patil Automation (supra) the Supreme
Court has emphasized the legislative object behind
introduction of preinstitution mediation as a mandatory
measure. Evidently, the outlet for not resorting to pre-
institution mediation is provided by the text of Section
12A itself namely a suit contemplating an urgent interim
relief. In my view, if the said outlet is construed too
loosely in the sense that mere filing of an application for
interim relief, howsoever unjustified and unwarranted it
may be, would take the suit out of the purview of Section
12A, it may run counter to the legislative object. The
interdict contained in Section 12A can be easily15 2022 SCC OnLine Bom 4752
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circumvented by filing an application for interim relief
without their being any reason or basis therefor. Such an
interpretation may not advance the legislative object.
29. The Parliament, it seems, has designedly used the
expression, “a suit, which does contemplate any urgent
interim relief ….”. This phrase cannot be interchangeably
used with the expression, “where the plaintiff seeks an
urgent interim relief…” The test would be whether the
suit does contemplate an urgent interim relief.
30. In a given case, the Court may be justified in
embarking upon an inquiry as to whether there is an
element of justifiability in the claim for urgent interim
relief or such a prayer is a mere subterfuge to overcome
the bar under Section 12A. At the same time, the scope of
such an inquiry would be extremely narrow. Such an
inquiry cannot partake the character of determination of
the prayer for interim relief on merits. It cannot be urged
that if the Court is disinclined to grant interim relief then
the justifiability of the institution of the suit, without pre-
institution mediation, can itself be questioned. Therefore,
the Court may be called upon to stear clear of two
extremes.
31. In my considered view, the proper course would be
to asses whether there are elements which prima facie
indicate that the suit may contemplate an urgent interim
relief irrespective of the fact as to whether the plaintiff
eventually succeeds in getting the interim relief. In a
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under Section 12A, the Court may be justified in
recording a finding that the suit in effect does not
contemplate any urgent interim relief and then the
institution of the suit would be in teeth of Section 12A
notwithstanding a formal application.”
98. In the Yamini Manohar (Supra), the Supreme Court
referred to the aforeextracted observations in paragraph 31, and a
judgment of the Delhi High Court in the case of Chandra Kishore
Chaurasia Vs R.A. Perfumery Works (P) Ltd16 and thereafter enunciated
the law as under:
“10. We are of the opinion that when a plaint is filed
under the CC Act, with a prayer for an urgent interim
relief, the commercial court should examine the nature
and the subject matter of the suit, the cause of action,
and the prayer for interim relief. The prayer for urgent
interim relief should not be a disguise or mask to
wriggle out of and get over Section 12A of the CC Act.
The facts and circumstances of the case have to be
considered holistically from the standpoint of the
plaintiff. Non-grant of interim relief at the ad-interim
stage, when the plaint is taken up for
registration/admission and examination, will not justify
dismissal of the commercial suit under Order VII, Rule
11 of the Code; at times, interim relief is granted after
issuance of notice. Nor can the suit be dismissed under
Order VII, Rule 11 of the Code, because the interim
relief, post the arguments, is denied on merits and on
examination of the three principles, namely, (i) prima16 2022 SCC OnLine Del 3529.
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facie case, (ii) irreparable harm and injury, and (iii)
balance of convenience. The fact that the court issued
notice and/or granted interim stay may indicate that the
court is inclined to entertain the plaint.
11. Having stated so, it is difficult to agree with the
proposition that the plaintiff has the absolute choice and
right to paralyze Section 12A of the CC Act by making a
prayer for urgent interim relief. Camouflage and guise to
bypass the statutory mandate of pre-litigation mediation
should be checked when deception and falsity is
apparent or established. The proposition that the
commercial courts do have a role, albeit a limited one,
should be accepted, otherwise it would be up to the
plaintiff alone to decide whether to resort to the
procedure under Section 12A of the CC Act. An ‘absolute
and unfettered right’ approach is not justified if the pre-
institution mediation under Section12A of the CC Act is
mandatory, as held by this Court in Patil Automation
Privated Limited (Supra)
12. The words ‘contemplate any urgent interim relief’
in Section 12A (1) of the CC Act, with reference to the
suit, should be read as conferring power on the court to
be satisfied. They suggest that the suit must
“contemplate”, which means the plaint, documents and
facts should show and indicate the need for an urgent
interim relief. This is the precise and limited exercise
that the commercial courts will undertake, the contours
of which have been explained in the earlier
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ensure that the legislative object/intent behind the
enactment of Section 12A of the CC Act is not defeated.
(emphasis supplied)
99. The Commercial Courts are enjoined to examine the matter
as to whether the suit does contemplate any urgent interim relief and
the Plaintiff does not have absolute and unfettered right in determining
as to whether he should not resort to pre-institution mediation. The
Supreme Court has postulated that the prayer for urgent interim relief
should not be a disguise or mask to wriggle out of and get over Section
12A of the Commercial Courts Act. The expression, “contemplate any
urgent interim relief” suggests that the suit must “contemplate”, which
means the Plaint, documents and facts should show and indicate the
necessity of an urgent interim relief.
100. On the aforesaid anvil, a primary enquiry on the basis of
the averments in the Plaint, documents annexed thereto and the
attendant facts of the case, prima facie, indicates that the Suit does
contemplate an urgent interim relief. The fact that this Court had
declined to grant ad-interim relief, or for that matter, this Court may not
eventually grant the interim relief, does not bear upon the tenability of
the Suit sans pre-institution mediation.
101. As noted above, the driving force for the institution of the
Suit and the prayers for urgent interim reliefs, as claimed by the
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Plaintiff, was the apprehension of orders being passed by the NCLT in
the “scheme” proceeding. It can be urged that since the award was
passed on 7th September 2018 and even the said award has attained
finality almost prior to three years, there was no question of grant of
urgent interim relief. However, the matter cannot be approached from
this perspective only. The copies of the order passed by NCLT (annexed
at Exhibit “A” to “F” to the Interim Application) do indicate that the
amalgamation proceeding has been pending before the NCLT since the
year 2022. NCLT had ordered issuance of notice to various persons and
authorities. The Defendant was directed to hold the meetings of the
secured creditors in the matter of the approval of the scheme. Time was
sought by the Defendant to hold such meetings. By an order dated 22 nd
November 2023, extension was granted till 31 st March 2024. It was the
apprehension of the Plaintiff that once the creditors’ meeting is held and
the creditors convey their acceptance, the scheme could be approved by
the NCLT and thereupon the possibility of the recovery of the award
amount would be affected. The fact that the Plaintiff was not shown as
one of the creditors, despite holding an award against the Defendant,
was the principal grievance.
102. Evidently, on the date of the institution of the Suit, above-
numbered proceeding was sub-judice before the NCLT and the meeting
of the creditors of the Defendant was yet to be held. In a case of this
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nature, where the Plaintiff apprehended that the recovery of award
amount would be jeopardised, on account of the orders passed in the
scheme proceeding, which was, in fact, sub-judice on the date of the
institution of the Suit, it cannot be said that the suit did not
contemplate an urgent interim relief. What consequences follow the
approval of the scheme, need not be delved into in judging the urgency
of the matter. In the circumstances of the case, the pendency of such
proceeding and likelihood of it being approved, in my view, furnished
an adequate justification for claiming urgency. Though the delay on the
part of the Plaintiff in approaching the Court from the date of the award
and even the date the award attained finality, may bear upon the
entitlement of the Plaintiff for interim relief. However, the urgency is
required to be judged, in the light of the circumstances as obtained on
the date of the institution of the Suit.
103. Thus, I am impelled to hold that the Suit did contemplate
an urgent interim relief.
LIABILITY OF THE DEFENDANT: WHETHER A VERY STRONG
PRIMA FACIE CASE HAS BEEN MADE OUT:
104. The substance of the defence of the Defendant was that it
had acted as a broker of the named principal, i.e., IGT and Venture
Crosstrade. Reliance was placed on the Exclusive Brokerage Agreement
with Venture Crosstrade (Exhibit “EE”), dated 27th March 2012, and IGT,
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dated 31st May 2012 (Exhibit “FF”). Since, on the own showing of the
Plaintiff, in respect of the subject transactions proforma invoices were
issued in the name of IGT and Venture Crosstrade, 36 cheques were
delivered by those entities and upon dishonor of those cheques, the
Plaintiff lodged criminal proceedings against those entities, it was
submitted that the transaction was between the IGT and Venture
Crosstrade. Reliance was placed on the Affidavit filed on behalf of the
IGT and Venture Crosstrade in a suit instituted by the Defendant against
those entities before this Court.
105. On behalf of the Plaintiff, it was urged that the said Suit is
collusive one. IGT and Venture Crosstrade are the entities owned and
controlled by the Defendant. Rajesh Harlalka, who is the director of the
Defendant, is the Managing Director of Venture Crosstrade.
106. Banking upon the purchase orders and the correspondence
exchanged between the parties, the Plaintiff asserts the real transaction
was between the Plaintiff and the Defendant and the later subsequently
dishonestly introduced IGT and Venture Crosstrade with a design to
dupe the Plaintiff.
107. Mr. Ratan Singh submitted that the Arbitral Tribunal has
considered the aforesaid specific defence of the Defendant and rejected
the same by ascribing justifiable reasons. Therefore, this Court need not
delve into the said aspect of the matter.
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108. At this juncture, it is imperative to note the trade licences
of IGT and Venture Crosstrade indicate that they were incorporated as
the free zone commercial entities engaged in general trading. Mr. Karan
Singh Karki was shown the owner of IGT and Mr. Rajesh Harlalka the
owner of the Venture Crosstrade. Secondly, there are Exclusive
Brokerage Agreements in which the Defendant is shown as the broker
and IGT and Venture Crosstrade as the principal.
109. The question as to whether there are circumstances which
would warrant lifting of the corporate veil, for the reason that Mr.
Rajesh Harlalka, who is the director of the Defendant is also the
Managing Director of Venture Crosstrade, is a matter for adjudication.
Had it been a case where the Plaintiff had not issued the invoices in
respect of the subject transaction in favour of IGT and Venture
Crosstrade, different considerations would have come into play. Not
only the Plaintiff issued the proforma invoices in the name of IGT and
Venture Crosstrade but also accepted cheques from those entities
towards the price of the goods and, upon dishonor of the cheques, even
prosecuted IGT and Venture Crosstrade before the jurisdictional
Commercial Courts.
110. All these factors cannot be brushed aside as inconsequential
and immaterial.
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111. If considered in the light of the aforesaid nature of the
claim of the Plaintiff and the action taken by the Plaintiff to enforce the
liability against IGT and Venture Crosstrade, it cannot be said that a
very strong prima facie case is made by Plaintiff so as to grant the
interim relief of the nature claimed by the Plaintiff. The suit is
essentially for the enforcement of a money claim. In the face of the
aforesaid material, especially in the light of the nature of the award, the
suit for the enforcement of which, prima facie, will have to encounter
the challenge on the count of the finality thereto and the bar of
limitation, and the fact that the Plaintiff had dealt with IGT and Venture
Crosstrade as independent entities and even took steps to enforce
liabilities against those entities, the test of strong prima facie case and
the reasonable chance of the decree being eventually passed in favour
of the Plaintiff cannot be said to have fulfilled.
112. Therefore, I am inclined to hold that the Plaintiff failed to
establish a very strong prima facie, case for the grant of interim reliefs
which are essentially in the nature of attachment before judgment. In
the circumstances of the case having regard to the impediments which
the Plaintiff will have to surmount, the balance of convenience tilts in
favour of the Defendant. An interim relief of the nature sought by the
Plaintiff may cause irreparable loss to the Defendant.
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113. Resultantly, the Application deserves to be rejected. Hence
the following order.
:ORDER:
(i) Application stands rejected.
(ii) Costs in cause.
[N. J. JAMADAR, J.]
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