Deliberate Non-Participation In Arbitral Proceedings Not Grounds To Resist Enforcement Of Award: Madras High Court

The Madras High Court bench of Justice N Anand Venkatesh has observed that when a party purposely fails to avail an opportunity duly accorded by the Arbitral Tribunal to present its case, it cannot later use its own default as a ground to resist enforcement of the resultant award. Facts The Petitioner, M/s Vittera BV (“Vittera”) filed the present petition seeking enforcement of the final award dated 30.04.2020 against the Respondent, M/s SKT Textile Mills (“SKT”) under Sections 47 to 49, Arbitration and Conciliation Act,1996 (“ACA”). Vittera entered into a contract with SKT dated 29.05.2019 to sell 200 Metric Tons of raw cotton at the rate of USD 1,829,835 per MTs. The contract was prepared by Vittera in Rotterdam, Netherlands and it was scanned and sent to SKT in Tiruppur, India through an email. Vittera alleged that SKT failed to fulfil its obligations and so Viterra requested SKT to issue a no objection certificate so that the goods could be sold elsewhere in order to mitigate the loss. Since disputes persisted between the parties, Vittera made a request to SKT on 07.11.2019 for arbitration under English Arbitration Act, 1996 before International Cotton Association Ltd. (“ICA”), Liverpool, England in accordance with their contract. The said contract was governed by the laws of England with the seat being Liverpool, England. However, SKT replied that there was no contract or agreement existing between the parties and therefore it was not obligated to be a party to the arbitration proceedings since it had not signed any contract or agreement. Subsequently, a three-member arbitral tribunal was constituted in accordance with procedure prevailing at ICA. The Arbitral Tribunal passed the award dated 30.04.2020 and allowed the claims of Vittera. Since SKT did not prefer any appeal against the said award, the award attained finality. In this backdrop, Vittera filed the present petition seeking enforcement of the final award dated 30.04.2020 in terms of Sections 47 to 49, ACA. Contentions The Counsel for Petitioner submitted that SKT had an opportunity to participate in the arbitration proceedings before the ICA. But it had not participated deliberately. Hence, SKT had forfeited its own right to put up a defence by stating that they were provided with adequate opportunity to present their case before the Arbitral Tribunal. As to the plea taken by SKT that there was no subsisting contract between Vittera and SKT, the Counsel contended that the communications between the parties and the conduct of the Respondent including the issuance of NOC demonstrated that there existed a contract between the parties. The primary plea taken by the Counsel for Respondent was there was no arbitration agreement between the Petitioner and the Respondent in terms of Section 7, ACA. There was only a draft agreement which was never enforced as a contract. Therefore, there was no concluded contract between the parties. And since there was no contract, there was no question of enforcing the foreign award. Observations As to the argument taken by SKT that there was no express or implied contract between the parties, the Court observed that if SKT was not a party to the contract and if the parties had not reached any agreement, there was no requirement for SKT to issue the NOC in favour of Viterra. The Court concluded that the issuance of NOC in addition to the communications exchanged between the parties clinches the fact that there was indeed an agreement between the parties. SKT had also raised an objection that it was not given a proper opportunity to present its case. The Court observed that under Section 48(1)(b), ACA, the Respondent must prove that it was denied effective opportunity to be heard which would require demonstrating a fundamental procedural defect that was unfair and outside the control of the Respondent. The Court highlight certain instances where the party may genuinely be unable to present its case such as – failure to serve notice of arbitration, notice being deliberately sent to incorrect address, insufficient time to party to prepare defence, proceedings being conducted in a language unknown to the party without proper translation, the arbitral tribunal denying a party their right to file evidence or preventing them from filing a document on a key issue. The Court relied on the judgment of the Apex Court in Centrotrade Minerals and Metals Inc. v. Hindustan Copper Limited wherein it was observed that where the party fails to take advantage of an opportunity duly accorded to, it cannot later invoke that ground. The Court observed that the ground under Section 48(1)(b) of the Act will not be available to a party, which makes a conscious and deliberate decision not to participate in the arbitral proceedings after receiving due notice of their commencement. A written communication made by a party refusing...

Deliberate Non-Participation In Arbitral Proceedings Not Grounds To Resist Enforcement Of Award: Madras High Court

Arpita Pande

Tags