India / 02 June 2020 / India, Supreme Court / M/S. Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd. / Civil Appeal No. 2562 of 2006 and No. 2564 of 2006
|Court||India, Supreme Court|
|Date||02 June 2020|
|Parties||M/S. Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd.|
|Case number||Civil Appeal No. 2562 of 2006 and No. 2564 of 2006|
|Applicable NYC Provisions||V | V(1) | V(1)(b)|
https://www.sci.gov.in (website of the Supreme Court of India)
Summary prepared by Ishita Mishra (Advocate, Supreme Court of India | Chambers of Mr. Gourab Banerji)
This case was the final instalment in the Centrotrade series (which had seen two previous rounds of litigations at the Supreme Court), and finally enforced in 2020, a foreign arbitral award that had been passed in 2001. This dispute between the parties had arisen with respect to the quantity of dry weight copper concentrate that had to be supplied by Hindustan Copper Ltd (the “Respondent”) to Centrotrade, the Appellant, pursuant to a contract for sale. Centrotrade is a U.S. Corporation which had entered into the above-mentioned contract for sale of 15,500 DMT of copper concentrate which was to be delivered by the Respondent at the Kandla Port in the State of Gujarat. Clause 14 of this contract for sale contained a two-tier arbitration clause, which provided for at the first stage, an arbitration in India and then at the second stage, offered the parties an option to ‘appeal’ against the award of the Indian arbitrator by conducting a second arbitration in London under ICC Rules.
In 1996, Centrotrade had invoked the arbitration clause against the Respondent. On 15 June 1999, a nil award had been passed by the Indian arbitrator (“First Award”). After the passing of this award, Centrotrade then utilised the provisions of clause 14 to initiate a second arbitration under ICC Rules in London. In these proceedings, an award was passed by Sir Jeremy Cooke QC on 29 September 2001 in favour of Centrotrade (“Second Award”). Centrotrade now sought to enforce this award in India and filed an application for enforcement of this award before the Calcutta High Court. The case was called before a single judge at the Calcutta High Court who enforced this award. However, the Respondent appealed this decision of the Single Judge, and on appeal, the Division Bench of the Calcutta High Court refused to enforce the Second Award. They observed that the Second Award was not a foreign award as both the arbitral awards (the First and the Second Awards) had been delivered by arbitrators who exercised concurrent jurisdiction and hence, the First Award and the Second Award were mutually destructive. The court held that neither award could be enforced under Section 48 of the Arbitration and Conciliation Act, 1996 (“Indian Arbitration Act”). Centrotrade, then appealed this judgment of the Division Bench of the Calcutta High Court before the Supreme Court of India. A two-judge bench of the Supreme Court of India then further referred this appeal to a larger bench as two separate judgments had been delivered by a two-judge bench in Centrotrade Minerals & Metals Inc v HCL (2006) 11 SCC 245.
This appeal was then heard by a three-judge bench. This bench now focused on two main issues, (i) whether a two-tier arbitration clause was permissible under Indian law, and (ii) if yes, whether the Second Award would be recognised as a ‘foreign award’ enforceable under Section 48 of the Indian Arbitration Act. The first issue was answered in the affirmative by the Supreme Court in Centrotrade Minerals & Metals Inc v HCL (2017) 2 SCC 228. The second issue was referred to another bench of the Supreme Court on account of time constraints facing the 2017 bench.
The second issue related to the enforcement of the Second Award. The Court in ruling on the recognition and enforcement of the Second Award after noting that no challenge had been filed at the seat court against the Second Award, looked at (i) whether the arbitrator should have determined the question of jurisdiction as a preliminary question?, and (ii) whether the Respondent was unable to present its case and in particular at the meaning of the word ‘otherwise’ when interpreting ‘otherwise unable to present his case’ under Section 48(1)(b)? The Respondent argued that the arbitrator the ought to have determined the question of jurisdiction before going into the substantive issues. The Court observed that no such argument had been raised by the Respondent in the past proceedings and then went on to observe on fact that there was no evidence produced which unequivocally showed that the arbitrator sought to take up the plea as to jurisdiction as a preliminary objection. The Respondent then argued that the Second Award must be refused enforcement under Section 48(1)(b) as the Respondent had not been given the full opportunity to present its case by the arbitrator. In evaluating this submission of the Respondent, the court while inferring this provision, referred to the NYC and attributed a narrower meaning to the word “otherwise” as used in Section 48(1)(b) (“…the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case”). The court did so, relying on its judgment in Vijay Karia v Prysmian Cavi 2020 SCC OnLine SC 177 which emphasised on the pro-enforcement bias that runs through the NYC and Part II of the Indian Arbitration Act. The court also noted that an arbitrator’s ‘misconduct’ (as defined under the older (Indian) Arbitration Act, 1940) was a broader ground for setting aside an award, than a party being unable to present its case before the arbitrator as provided for under Section 48(1)(b).
The court then went on to examine what would constitute a party being ‘unable to present its case’. The court took note of judgments from the United Kingdom (Minmetals Germany GmbH v. Ferco Steel Ltd. (1999) C.L.C. 647, Eastern European Engineering v. Vijay Consulting (2019) 1 LLR 1 (QBD), Cuckurova Holding A.S. v. Sonera Holding B.V. (2014) UKPC 15), United States (Jorf Lasfar Energy Co. v. AMCI Export Corp. 2008 WL 1228930, Consorcio Rive v. Briggs of Cancun 134 F. Supp 2d 789, the US District Court, E.D. Louisiana, Four Seasons Hotels v. Consorcio Barr S.A. 613 Supp 2d 1362 (S.D. Fla. 2009)), Hong Kong (Nanjing Cereals v. Luckmate Commodities XXI Y.B. Com. Arb. 542 (1996)) and Italy (De Maio Giuseppe v. Interskins Y.B. Comm. Arb. XXVII (2002) 492) which interpreted this phrase in the context of their domestic arbitration legislations and under Article V(1)(b) NYC and then analysed the facts of the present case. The court noted that the Sir Cooke had provided the Respondent with several opportunities to advance documents and legal submissions in its support. The court noted that, the Respondent had chosen to not participate in the arbitral proceedings in relation to the Second Award until August 2001 and in spite of this, had been granted several time extensions (as requested) and that even submissions made by the Respondent beyond agreed timelines had been taken into account by Sir Cooke before passing his award. The court held that there was no mistake in the conduct of the arbitral proceedings as undertaken by Sir Cooke. Additionally, the court also observed that an enforcing court under Section 48 did not have the power to remand matters back to an ICC arbitrator for him / her to pass a fresh award. Consequently, the Supreme Court enforced the Second Award and allowed Centrotrade’s appeal.
Adobe Acrobat PDF