Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(EFA)(COMM.) 2/2017
SWISS SINGAPORE OVERSEAS ENTERPRISES
PTE LTD ..... Petitioner
Through: Mr S.N. Mitra and Ms Ekta
Bhasin, Advocates.
versus
SARA INTERNATIONAL PVT. LTD .....Respondent
Through: Mr Virender Ganda, Senior
Advocate with Mr Vipul Ganda, Mr Raghav
Kakkar and Ms Shreya Jain, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
O R D E R
% 07.03.2018
VIBHU BAKHRU, J
1. M/s Swiss Singapore Overseas Enterprises Private Limited
(hereafter ‗SSOEPL‘), a company registered under the laws of
Singapore has filed the present petition for enforcement of a foreign
award dated 16.10.2016 (hereafter ‗the arbitral award‘) passed by the
Arbitral Tribunal in respect of an arbitration conducted under the aegis
of Singapore International Arbitration Centre (SIAC).
2. The respondent (hereafter ‗SARA‘), a company incorporated in
India, has filed objections to the enforcement of the arbitral award
under Section 48 of the Arbitration and Conciliation Act, 1996
(hereafter ‗the Act‘), which are considered by this Court hereunder.
3. The arbitral proceedings were commenced in the context of the
disputes that had arisen between the parties in relation to a Sales
O.M.P.(EFA)(COMM.) 2/2017 Page 1 of 10
Contract dated 03.04.2014 (hereafter ‗the Agreement‘), whereby
SSOEPL agreed to sell South African Steam Coal to SARA.
4. Initially, the contract between the parties was for sale and
purchase of 20,000 metric tonnes +/- 10% (at seller‘s option) but the
contract was subsequently amended by an addendum to the
Agreement executed on 08.05.2014. In terms of the said addendum,
the quantity to be supplied was increased by a further 25,000 metric
tonnes +/- 10% (seller‘s option).
5. Disputes arose between the parties in respect of the second
shipment of 25,000 metric tonnes of Steam Coal that was loaded on
board, the Vessel, MV TIAN BAO HAI (hereafter ‗the Vessel‘).
SARA raised certain claims for compensation, which was disputed by
SSOEPL.
6. In view of the disputes between the parties, SARA invoked the
arbitration clause and issued a notice dated 15.09.2014 to SSOEPL in
accordance with Clause 17 of the Agreement (the Arbitration Clause).
The said clause is set out below:-
―17. Commercial law and Arbitration :
a) This contract shall be governed and construed in
accordance with Commercial Law of Singapore subject
to clause (b) below, courts in Singapore shall have
exclusive jurisdiction.
b) Any disputes, claims or controversy between the
parties including without limitation any breach or non-
performance or alleged breach or non-performance of
this agreement or the validity or existence of this
Agreement or any part thereof, arising out of or in
O.M.P.(EFA)(COMM.) 2/2017 Page 2 of 10
connection with or relating to this agreement shall be
resolved by binding arbitration in Singapore, in
accordance with the Arbitration Rules of Singapore
International Arbitration Centre (SIAC Rules) and any
amendments thereof.‖
7. SARA filed a statement of claims on 20.09.2014 along with
notice of arbitration. On 28.10.2014, SSOEPL submitted a response to
the notice of arbitration evincing its intention to prefer a counterclaim.
Since, the parties did not arrive at an agreement on the nomination of
the sole arbitrator, the President of the Court of Arbitration of SIAC
appointed Mr Simon Milnes as the Sole Arbitrator in terms of the
SIAC Rules, 2013.
8. On 04.03.2015, SSOEPL filed its statement of defence and
counterclaims. SARA submitted its statement of reply and defence to
counterclaim on 18.04.2015.
9. SARA claimed that SSOEPL had breached the Agreement by
(a) omitting to give notice of the Vessel‘s estimated time of arrival
seven days prior to arrival at the load port; (b) omitting to transmit (by
e-mail) a non-negotiable set of copy of documents within ten working
days of the date of bills of lading; (c) sending an incomplete
discrepant unusable set of documents (which was sent belatedly); and
(d) tendering documents under the L/C, which were discrepant with
the L/C.
10. SSOEPL contested the aforesaid claims and also preferred a
counterclaim alleging that SARA had breached the Agreement.
SARA‘s claim did not meet with any success. The counterclaim
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preferred by SSOEPL was also rejected. The controversy involved in
the present case is in respect to the award relating to the
apportionment of costs.
11. The Arbitral Tribunal noted that there was no dispute as to the
principle that costs should ―follow the event‖. In this context, the
Arbitral Tribunal held as under:-
―241 Subject to the possible effects of the settlement
offers made by the Parties, which are addressed
below:
(1) The ―event‖ which costs are to follow would
be that the Claimant failed on the claim, and
the Respondent failed on the counterclaim;
(2) Hence, the Respondent would prima facie be
entitle dto recover its legal costs and a
proportionate share of the costs of the
arbitration to reflect its success in defeating
the claim; while the Claimant would prima
facie be entitled to recover its legal costs and
a proportionate share of the costs of the
arbitration to reflect its success in defeating
the counterclaim.
xxxxxxxxxxxxx
246. Given the outcome on the claim and the
counterclaim, there has to be an apportionment to
reflect the Parties‘ respective partial success and
failure. The Parties did not put forward costs
figures that distinguished between costs of the
claim and of the counterclaim. This is
understandable, as there was some degree of
overlap. The counterclaim was a small aspect of
the proceedings. It took up at most approximately
10-15% of the Parties‘ and their counsels‘ efforts
O.M.P.(EFA)(COMM.) 2/2017 Page 4 of 10
in the pleadings, written statements, oral
examination and submissions at the hearing. It
follows that even after being credited for its costs
recovery on the counterclaim, the Claimant will
still be the net paying party by a significant
margin. The Claimant will therefore be credited
for its costs recovery by way of a set-off against
the costs awarded to the Respodnent. For this
reason, the net costs awarded to the Respondent
will be:
(1) 85% of the Respondent‘s legal costs and
disbursements, less 15% of the Claimant‘s
legal costs and disbursements; and
(2) 70% of the costs of the arbitration, with
the Respondent to bear the remaining 30%.
(NB that 70% is arrived at by awarding the
Respondent 85%, less a notional recovery
by the Claimant of 15%).‖
12. The Arbitral Tribunal examined the costs statement computed
by the parties and apportioned the same on the basis of the principle as
set out above. Resultantly, SARA was directed to pay SGD
164,294.40 being a part of SSOEPL‘s legal costs and disbursement.
SARA was also directed to bear 70% of the costs of arbitration. In
addition, SARA was also held liable to pay simple interest at the rate
of 5.33% per annum from the date of the award till the date of final
payment.
Submission
13. Mr Virender Ganda, learned Senior Counsel appearing on
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behalf of SARA contended that the enforcement of the arbitral award
ought to be declined in terms of Section 48(2)(b) of the Act as being
contrary to the public policy of India.
14. He submitted that in terms of Section 35 of the Code of Civil
Procedure, 1908 only reasonable costs could be paid and it was not
permissible that actual costs incurred be reimbursed. He also referred
to Section 31A of the Act and submitted that only reasonable costs
could be imposed. He submitted that in the present case, there was a
wide difference between the legal costs incurred by SSOEPL and
SARA. Whereas, the counsel engaged by SARA had charged a sum of
₹8,62,200/- (equivalent to SGD 17,933), SSOEPL had claimed
counsel fee of SGD 187,610.50, which is more than tenfold the actual
fee paid by the SARA. He submitted that in the given circumstances,
the apportionment of costs as directed by the Arbitral Tribunal would
be unreasonable and impermissible under Indian Law. He also referred
to the decision of the Supreme Court in Sanjeev Kumar Jain v.
Raghubir Saran Charitable Trust an Ors .: (2012) 1 SCC 455 in
support of his contention.
Reasoning and Conclusion
15. SARA has placed its case for resisting the enforcement of the
Arbitral Award, under Section 48(2)(b) of the Act. Thus, at the outset,
it would be relevant to refer to Section 48(2) of the Act, which is set
out below:-
― 48. Conditions for enforcement of foreign
awards .—
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(1) xxxx xxxx xxxx
(2) Enforcement of an arbitral award may also be
refused if the Court finds that—
(a) the subject-matter of the difference is not
capable of settlement by arbitration under the
law of India; or
(b) the enforcement of the award would be
contrary to the public policy of India
[Explanation 2. – For the avoidance of doubt, the test
as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.]‖
16. It is not SARA‘s case that the making of the Arbitral Award
was induced or effected by fraud or corruption or is in violation of
Section 75 or Section 81 of the Act. It is also not SARA‘s case that the
Arbitral Award is in conflict with the most basic notions of morality or
justice. Thus, the only question that falls for consideration of this
Court is whether the Arbitral Award is in contravention with the
fundamental policy of Indian law.
17. Explanation 2 to Section 48(2)(b) of the Act clarifies that the
question whether the award is in contravention of the fundamental
policy of Indian law would not entail a review on the merits of the
dispute.
18. The expression ―public policy‖ is very wide. In Renusagar
Power Co. Ltd. v. General Electric Co. : 1994 Supp. (1) SCC 644 , the
Supreme Court had observed that the term ― public policy is somewhat
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open textured and flexible ‖. In Central Inland Water Transport
Corporation Ltd. & Anr v. Brojo Nath Ganguly & Anr : 1986 3 SCC
156 , the Supreme Court had further observed that the expressions
―public policy‖, ―opposed to public policy‖ or ―contrary to public
policy‖ are incapable of precise definition.
19. It is now well settled that in the context of enforcement of a
foreign award, the expression ―public policy‖ must be interpreted in a
narrow sense. In Renusagar Power Co. Ltd . ( supra ), the Supreme
Court held that the enforcement of a foreign award would be refused
on the ground that it is contrary to public policy if such enforcement
would be contrary to: (i) fundamental policy of Indian law; or (ii) the
interests of India; or (iii) justice or morality. The above position in law
was reiterated by the Supreme Court in a later decision in Shri Lal
Mahal Ltd. v. Progetto Grano SPA : (2014) 2 SCC 433 wherein the
Supreme Court held as under:-
―29. We accordingly hold that enforcement of foreign
award would be refused under Section 48(2)(b) only if
such enforcement would be contrary to a (1)
fundamental policy of Indian law; or (2) the interests
of India; or (3)justice or morality. The wider meaning
given to the expression "public policy of India"
occurring in Section 34(2)(b)(ii) in Saw Pipes is not
applicable where objection is raised to the
enforcement of the foreign award under Section
48(2)(b).‖
20. SARA‘s challenge to the enforcement of the arbitral award
must be decided on the anvil of the aforesaid principles. In the present
case, the Arbitral Tribunal had examined the statement of costs
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submitted by SSOEPL and found that the same was reasonable. The
arbitral proceedings were commenced at the instance of SARA.
While, SARA had technically established minor breaches on the part
of SSOEPL, SSOEPL was also successful in technically establishing
that SARA had breached the Agreement. None of the parties had
prevailed in their claims.
21. The Arbitral Tribunal concluded that the counterclaim was only
a small aspect of the proceedings and at the most it took up only 10 to
15% of the parties and their counsels‘ efforts in the pleadings, written
statements, oral examination and submissions at the hearing. Thus, the
Arbitral Tribunal allocated only 15% of the legal costs to SSOEPL
and the remaining 85% to SARA. Plainly, the same does not offend
the fundamental policy of Indian law. It is well settled that the
expression ―fundamental policy of Indian Law‖ is not synonymous
with provisions of Indian enactments. The expression ―fundamental
policy of Indian Law‖ denotes the fundamental principles on which
the Indian law is founded.
22. The contention that the arbitral award cannot be enforced as it is
contrary to Section 35 of the Code of Civil Procedure or Section 31A
of the Act is unmerited. First of all, it is difficult to accept that the
costs imposed under the arbitral award are unreasonable. However,
even if it is accepted (which this Court does not) that such costs could
not be imposed under Section 31A of the Act, the same is not material.
This is so because in terms of Clause 17 of the Agreement, the parties
had agreed that the Agreement would be governed and construed in
accordance with the commercial law of Singapore. It is not SARA‘s
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case that costs awarded are contrary to the commercial law of
Singapore. In any view, SARA has not produced any material which
would even remotely suggest so.
23. In view of the above, the objection raised by SARA that the
arbitral award contravenes the public policy of India is unmerited. The
said objections are, accordingly, rejected.
24. In view of the above, the SARA is directed to deposit the
awarded amount with the Registrar General of this Court within a
period of three weeks from today.
25. List on 10.04.2018.
VIBHU BAKHRU, J
MARCH 07, 2018
pkv
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