DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

TITLE OF THE PROJECT

Case analysis on Ramji Dayawala and Sons Private Limited v Invest Import

SUBJECT

 Arbitration and Conciliation Act, 1996

NAME OF THE FACULTY

Dr. R.V. Vishnu Kumar

A. J. L. Nikhil Kalyan Reddy

2017126 & 6th Semester
 ACKNOWLEDGEMENT

I would sincerely like to put forward my heartfelt appreciation to our respected ADR

Professor, Dr. R.V. Vishnu Kumar for giving me this golden opportunity to take up this

project regarding “(Case analysis on Ramji Dayawala and Sons Private Limited v Invest

Import)”. I have tried my best to collect information about the project in various possible

ways to depict clear picture about the given project topic.

I would also like to thank my University ‘’Damodaram Sanjivayya National Law University”
for providing me with all the required materials for the completion of my project and I also
came to know many new things.

CERTIFICATE

This is to certify that A.J.L.Nikhil Kalyan Reddy, studying in semester VI bearing roll

number 2017126 has completed this project all by myself with the guidance of the faculty of

ADR Professor , Dr. R.V. Vishnu Kumar and with the help of DSNLU library.

Signature of the student Signature of the faculty

 RESEARCH METHODOLOGY

This project is purely Doctrinal and based on primary and secondary sources such as
websites, books, journals and internet sources. The referencing style followed in this project
is BLUE BOOK 19th Edition's format of citation. This Research process deals with
collecting and analyzing information to answer questions. The Research is purely descriptive
in its boundaries of the topic
 CONTENTS:

1. Abstract

2. Facts of the case

3. Identification of the issues

4. Explaining the legal principle/section/proviso involved

5. Appling the law to issues with logical conclusions

6. Judgment

7. Cases Referred

8. Enforcement of Arbitral Awards

9. Conclusion
 ALTERNATIVE DISPUTE RESOLUTION ABSTRACT

TITLE: Case analysis on Ramji Dayawala and Sons Private Limited v Invest Import

CITATION: 1980 Indlaw SC 268

The basic idea behind taking recourse to alternate dispute resolution mechanism was to seek a
quick remedy from an informal forum of one’s choice. whether an arbitrator or mediator or
conciliator rather than from the Courts. With this aim in view, the parties started providing
for an arbitration clause in the contract. Power to appoint an arbitrator was often given to the
employer and it was expected that he would show no favour to his department and appoint an
independent and impartial person to act as the arbitrator in the matter of disputes between the
contracting parties. Till late seventies of the last century, all the awards (barring exceptions)
were non-speaking awards. No duty was cast on the arbitrator to pass a speaking award. At
least in engineering contracts, it was more or less a practice to pass a non-speaking award.
Even the losing party did not grudge the verdict of the arbitrator. Such was the faith of the
parties in the arbitrator. Times changed and so did the thinking process of the parties. The
awards were doubted by one or both the parties. Reason: lack of faith in the arbitrators, for
good or bad reasons. Challenge to awards became a rule rather than an exception. More and
more cases started coming to the Courts.

A petty labour contractor in search of its labour charges in a paltry amount of Rs. 4,25,343.00
from a giant foreign engineering and construction company which had undertaken to erect a
thermal power station at Barauni in Bihar State under a contract dated February 27, 1960,
with Bihar State Electricity Board, filed a suit in the year 1963 which stands stayed without
the slightest progress for the last 17 years and with end nowhere in sight. Plaintiff (appellant
herein), a private limited company, a labour contractor, entered into a sub-contract for
erecting two complete radiation type steam boilers as part of Thermal power station at
Barauni, with the defendant Invest-Import, a Yugoslavia based company which in turn had
entered into a contract with the Bihar State Electricity Board for setting up the power station.
Plaintiff sub-contractor, pursuant to the sub-contract dated July 10, 1961, had to supply
skilled labour, unskilled labour and apprentice labour, to carry out the erection work and
incidentally to do other things provided in the sub-contract.
S. 34 - Arbitration (Protocol and Convention) Act, 1937, S. 3 - Code of Civil Procedure,
1908, S. 151 - (A) 0 - Held, if truth of facts stated in a document is in issue mere proof of
handwriting and execution of document would not furnish evidence of truth of facts or
contents of document - Truth would have to be proved by evidence of those persons who can
vouchsafe for truth of facts in issue - Respondent has not controverted averments made -
Therefore it is admissible - (B) Whether silence amounts to acceptance of offer? - Held, all
facts must be examined in its entirety to make a valid acceptance - A party may be taken to
have assented if he has so conducted himself as to be estopped from denying that he has so
assented - Although appellant has signed subcontract, there is convincing evidence pointing
that he has not accepted every part of it - (C) Whether High Court was right in exercising its
discretion in favor of respondent by granting stay of suit filed by appellant? - Held, u/s. 34
party who in breach of arbitration agreement institutes an action before court, burden would
be on such party to prove why stay should be refused - If application is u/s. 151, CPC, 1908
invoking inherent jurisdiction of court to grant stay, burden will be on party seeking stay to
establish facts for exercise of discretion in favor of such party - HC was wrong by granting
stay of suit to one who insists on arbitration not as a matter of principle but with a view to
thwarting, stifling or exhausting other side - An approach not dictated by sound judicial
principles but considerations wholly extraneous to issue under discussion allows SC to
interfere - (D) Whether jurisdiction of domestic court is barred if parties have agreed to refer
dispute to Foreign Arbitral Tribunal? - Held, it is not barred - It only gives to court power to
refuse its assistance in appropriate cases - (E) When can court make an order staying
proceedings u/s. 3 of 1937 Act? - Court unless satisfied that agreement or arbitration has
become inoperative or cannot proceed, or that there is not in fact any dispute between parties
with regard to matter agreed to be referred, shall make an order staying proceedings. S. 3
would only be attracted if there is a submission pursuant to an agreement to that effect.
Appeal allowed.

Done By:
A.Nikhil Kalyan
2017126
 STATEMENT OF FACTS

 The respondent, a Yugoslavia based company, entered into a sub-contract with the plaintiff-
appellant, a private limited company, for supply of labour to the respondent in order to carry
out the respondent’s main contract with the Bihar State Electricity Board for setting up a
thermal power station at Barauni.
 The subcontract, which was signed by the parties in Belgrade (Yugoslavia) incorporated an
arbitration clause providing: “Any mutual disputes should be settled in mutual agreement,
however, should they fail to reach an agreement in the way, both contracting parties accept
the jurisdiction of the Arbitration by the International Chamber of Commerce in Paris with
application of Yugoslav materials and economical law.”
 Just after signing the subcontract, the MD of the appellant-company, who was in then
Belgrade, handed over on the very date a letter to the respondent in Belgrade stating that
that he had objected to the arbitration clause which was deleted from the appellant’s revised
draft of agreement sent to the respondent in advance and that the arbitration clause would be
acceptable to the appellant only if the arbitration was to be done in India according to the
rules, regulations and procedures of this country.
 The letter was followed by a cable reiterating and repeating the objection to the arbitration
clause which the MD sent to the respondent immediately on returning to India.
 The respondent did not respond to the letter and the cable. In carrying out the work
undertaken under the sub-contract, the appellant claimed that it carried out some extra work
for which it was entitled to recover extra amounts from the respondent.
 Subsequently, dispute arose between the parties regarding payment of a sum of Rs. 4, 25,243
which was claimed by the appellant to be due from the respondent in connection with the
work done by the former in compliance with the subcontract.
 When the payment was not made by the respondent, the appellant filed a suit in the original
side of the High Court. The manager of the respondent, posted at its Calcutta office, moved
an application purporting to be under Section 151 of the CPC praying, inter alia, that the suit
may be stayed in view of the arbitration clause and that if the provisions of Arbitration Act
did not apply, the court may in exercise of its inherent jurisdiction injunct the plaintiff-
appellant from proceeding with the suit.
 The Single Judge of the High Court allowed the respondent’s petition and stayed further
proceedings in the suit filed by the appellant. The Division Bench dismissed the appeal filed
by the appellant but granted a certificate under Section 133(1) (c) of the Constitution.
 IDENTIFICATION OF ISSUES

1. Whether the arbitration clause has been mutually agreed by both the parties?

2. Whether silence amounts to acceptance of offer?

3. Whether High Court was right in exercising its discretion in favor of respondent by
granting stay of suit filed by appellant?

4. Whether jurisdiction of domestic court is barred if parties have agreed to refer dispute
to Foreign Arbitral Tribunal?

5. When can court make an order staying proceedings u/s. 3 of 1937 Act?
 Explaining the legal principle/section/proviso involved

Grounds for setting aside an arbitral award

An important aspect which needs to be considered is the aspect relating to setting aside of an
arbitral award. Under Section 34(2) of the new Act, an award may be set aside by the court
either on the application of the party or (without such application) by the court under certain
circumstances. The grounds under which a party may apply to the court to set aside an award
are only those mentioned in Section 34(2). They are:

a. Where a party making the application was under some incapacity.

b. The arbitration agreement is not valid under the law to which the parties are
subjected or failing such indication thereon, under the law for the time being in force.

c. The party making the application was not given proper notice of the appointment of
arbitrators or of the Arbitral Tribunal or was otherwise unable to present his case.

d. Arbitral award deals with a dispute not contemplated by the parties or beyond the
terms of submission.

e. Composition of the Arbitral Tribunal was not in accordance with the agreement of
the parties.

f. Subject-matter of dispute is not capable of settlement by arbitration under the law

for the time being in force.

g. The arbitral award is in conflict with the public policy of the country.

The court can enforce the award only if application for setting aside it is disallowed or the
time for making such prayer is over. The last-mentioned position seems to run counter to the
avowed objects of the Act, namely avoidance of delay. It is noteworthy to mention that once
an application is preferred under Section 34, the executing court has no jurisdiction to enforce
the award, until and unless the application under Section 34 is dismissed or refused. This is a
marked departure from even the normal rule under the Code of Civil Procedure, 1908 where
an executing court can execute the decree if there exists no stay by the appellate court. In the
opinion of the author, this ought not to have been the position under the new Act.
Enforcement of the award should be permitted unless there is a stay by the court hearing an
application under Section 34. That appears to be an inadvertent departure under the new Act
from the normal procedure contemplated under the Civil Procedure Code and runs contrary to
the avowed object of speedy resolution of disputes contemplated under the new Act.

Section 3 of Code of Civil Procedure 1908 "Subordination of Courts

For the purposes of this Code, the District Court is subordinate to the High Court, and every
Civil Court of a grade inferior to that of a District Court and every Court of Small Causes is
subordinate to the High Court and District Court.

Section 151 of CPC reads:

Saving of inherent powers of the code:- Nothing in this code shall be deemed to limit or
otherwise affect the inherent powers of the court to make such orders as may be necessary for
the ends of the justice or to prevent abuse of the process of the court.

(a) Section 151 CPC is not a substantive provision which creates or confers any power or
jurisdiction on courts. It merely recognises the discretionary power inherent in every
court as a necessary corollary for rendering justice in accordance with law, to do what
is that is, to do all things necessary to secure the ends of justice and prevent abuse of
its process,

(b) As the provisions of the Code are not exhaustive, Section 151 recognises and
confirms that if the Code does not expressly or impliedly cover any particular
procedural aspect, the inherent power can be used to deal with such situation or
aspect, if the ends of justice warrant it. The breadth of such power is coextensive with
the need to exercise such power on the facts and circumstances.

(c) A court has no power to do that which is prohibited by law or the Code, by
purported exercise of its inherent powers. If the Code contains provisions dealing with
a particular topic or aspect, and such provisions either expressly or by necessary
implication exhaust the scope of the power of the court or the jurisdiction that may be
exercised in relation to that matter, the inherent power cannot be invoked in order to
cut across the powers conferred by the Code or in a manner inconsistent with such
provisions. In other words the court cannot make use of the special provisions of
Section 151 of the Code, where the remedy or procedure is provided in the Code.

(d) The inherent powers of the court being complementary to the powers specifically
conferred, a court is free to exercise them for the purposes mentioned in Section 151
of the Code when the matter is not covered by any specific provision in the Code and
the exercise of those powers would not in any way be in conflict with what has been
expressly provided in the Code or be against the intention of the legislature.

(e) While exercising the inherent power, the court will be doubly cautious, as there is
no legislative guidance to deal with the procedural situation and the exercise of power
depends upon the discretion and wisdom of the court, and in the facts and
circumstances of the case. The absence of an express provision in the Code and the
recognition and saving of the inherent power of a court, should not however be treated
as a carte blanche to grant any relief.

(f) The power under Section 151 will have to be used with circumspection and care,
only where it is absolutely necessary, when there is no provision in the Code
governing the matter, when the bona fides of the applicant cannot be doubted, when
such exercise is to meet the ends of justice and to prevent abuse of process of court.

INHERENT POWER: The word “Inherent” is very wide in itself. It means existing
and inseparable from something, a permanent attribute or quality, an essential
element, something intrinsic, or essential, vested in or attached to a person or office as
a right of privilege. Hence, inherent powers are such powers which are inalienable
from courts and may be exercised by a court to do full and complete justice between
the parties before it.
Appling the law to issues with logical conclusions

ARUGMENTS ADVANCED

CONTENTION I
There was mutual agreement between the parties in relation to the arbitration clause.
Acceptance of a suggestion may be sub silentio reinforced by the subsequent conduct. The
general rule is that an offer is not accepted by mere silence on the part of the offeree. There
may, however, be further facts which taken together with the offeree’s silence constitute an
acceptance. One such case is where the part of the offer was disputed at the negotiation stage
and the original offeree communicated that fact to the offerer showing that he understood the
offer in a particular sense. This communication will probably amount to a counter offer in
which case it may be that mere silence of the original offerer will constitute his acceptance.
The respondent sent the arbitration agreement soon after the agreement was signed to the
appellant in order to get a response regarding the modification or deletion of the arbitration
clause. The appellant did not reply to this letter which clearly signifies the appellant’s
agreement to the arbitration clause. The mere fact that continuation of the performance of
obligations by the appellant expresses the consent to the arbitration clause.
In Carrier Air conditioning and Refrigeration Vs M/s Linc Digital Items and Ors 1., The
applicant appointed the first respondent as an authorized sales and service dealer of the
products of the appellant company vide Dealership Agreement dated 10.1.1998. The agreement
was for a period of one year and any further renewal was to be as per mutual agreement. The
agreement was terminated by the applicant vide notice dated 23.10.2003. The agreement
contains an arbitration clause. The applicant served a notice on the respondents dated
11.10.2006 enumerating therein the disputes, which had arisen between the parties. As there
was no named arbitrator, the applicant proposed the names of three persons giving the option to
the respondent to appoint anyone of them as the arbitrator. By reply dated 8.11.2006, the
respondents denied the liability as well as the subsistence of the arbitration agreement and
declined to appoint the arbitrator. Hence the applicant has approached this court under Section
11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter, for brevity's sake, referred to
as the Act).

1
KE 968,2012
 The conduct of the parties, as evidenced in the said correspondence and, in particular the
appellant's silence on the respondent's letters dated 5.11.1998 and 4.1.1999, coupled with the
fact that they continued to use the vessel, manifestly goes to show that except for the charter
rate, there was no other dispute between the parties. They accepted the stand of the respondent
sub silentio and thus, continued to bind themselves by other terms and conditions contained in
the charter party dated 6.5.1997, which obviously included the arbitration clause."  Under the
circumstances, the argument raised by the respondents that the renewal can be only by written
agreement has to be rejected.

CONTENTION II
Held, all facts must be examined in its entirety to make a valid acceptance - A party may be
taken to have assented if he has so conducted himself as to be estopped from denying that he
has so assented - Although appellant has signed subcontract, there is convincing evidence
pointing that he has not accepted every part of it

CONTENTION III
Held, u/s. 34 party who in breach of arbitration agreement institutes an action before court,
burden would be on such party to prove why stay should be refused - If application is u/s.
151, CPC, 1908 invoking inherent jurisdiction of court to grant stay, burden will be on party
seeking stay to establish facts for exercise of discretion in favor of such party - HC was
wrong by granting stay of suit to one who insists on arbitration not as a matter of principle
but with a view to thwarting, stifling or exhausting other side - An approach not dictated by
sound judicial principles but considerations wholly extraneous to issue under discussion
allows SC to interfere

CONTENTION IV
Held, it is not barred - It only gives to court power to refuse its assistance in appropriate cases

CONTENTION V
Court unless satisfied that agreement or arbitration has become inoperative or cannot
proceed, or that there is not in fact any dispute between parties with regard to matter agreed
to be referred, shall make an order staying proceedings. S. 3 would only be attracted if there
is a submission pursuant to an agreement to that effect. Appeal allowed.
Judgment and critical appraisal

In this case court held that s. 3 of the 1937 Act which is not amended. It must, therefore,
receive the same interpretation which an identical provision received at the hands of this
Court. Viewed from that angle, in this case while there is an agreement as contemplated by
First Schedule to 1937 Act, there is no submission made in pursuance of such agreement and,
therefore, the application of the respondent could not have been entertained under s. 3 of the
1937 Act. As far as the 1961 Act is concerned, Mr. Majumdar conceded that Yugoslavia has
not ratified the protocol pursuant to which 1961 Act was enacted and, therefore, the
respondent cannot maintain its application under s. 3 of the 1961 Act.The last submission is
that this being an arbitration agreement to refer a dispute to a foreign arbitral tribunal, s. 34 of
the Arbitration Act would not be applicable and hence the application of the respondent for
stay of the suit is not maintainable. It is not necessary to examine this contention on its merits
because we have assumed for the purpose of this appeal that s. 34 of the 1940 Act would be
attracted even where the agreement is to refer a dispute to a foreign arbitral tribunal.

Having examined the matter from all angles it is clear that both the learned single judge and
the division bench of the High Court were in error in granting stay of the suit in this matter
and, therefore, Civil Appeal No. 2407 of 1968 is allowed and the stay of suit granted by the
learned single judge and affirmed by the division bench of the Calcutta High Court is
vacated. The suit should accordingly proceed further from the stage where it was stayed. As
the suit is a very old one, we hope the trial court would give priority to it and dispose it of as
expeditiously as possible. The appeal is allowed with costs throughout.
Appeal allowed.
 CASES REFERRED

1. R. v Fulham, Hammersmith and Kensington Rent Tribunal Ex p.Zerek2

The tribunal can inquire into the genuineness of an agreement. If they do embark on such an
inquiry, they must proceed on the principles on which a Court of equity would act and on
such evidence as the Court would require in a suit for rectification, subject, of course, to oral
evidence being unsworn, as they have no power to administer an oath. Written agreements,
more especially where executed after professional advice and assistance, are not to be lightly
set aside. Per Lord Goddard, C.J..: "The mere statement of one of the parties without more
[is] not evidence which would justify any tribunal holding that an agreement was a sham or
that a restriction inserted therein was never intended to apply".Per Devlin, J.: "The tribunal
cannot be required to determine summarily . . . an issue [whether an agreement is a sham or
where charges of fraud or forgery and the like are raised] if it involves a point of substance,
and, if one or other of the parties is willing to have it determined in the ordinary civil courts,
an adjournment can always be granted to allow that to be done. This will avoid an
inconclusive inquiry by the tribunal and safeguard the tenant against the danger of being
presented with an order which may afterwards turn out to be illusory".The premises had been
let to the tenant under an oral agreement at 35s. a week unfurnished, and there was no
furniture in them when he saw them. When the tenant went with his own furniture to take
possession, the landlord refused to let him take possession unless he agreed first to let to him
the furniture which he had brought with him and which was the subject of a hire-purchase
agreement between the tenant and a company and then to take the rooms with the furniture in
them. The tenant was then told that he must sign an agreement stating that the rooms were let
to him furnished at 35s. a week and that the landlord had paid to him GBP 12 for the hire of
the furniture comprised in the agreement between the tenant and the company. On an
application by the tenant to the tribunal to fix a reasonable rent under the Act of 1949, the
tribunal held that the document produced by the landlord was a sham and reduced the rent
from 35s. to 15s. The landlord applied to the Divisional Court for an order of certiorari to
bring up and quash the determination of the tribunal. Held, apart from the question whether
any part of the transaction was bogus or genuine, the tribunal had to satisfy itself whether the
letting was, for the purposes of the Acts, of furnished or unfurnished rooms, and as the rooms
had been offered to the tenant at 35s. a week unfurnished no part of the rent could possibly be

2
[1951] 1 All E.R. 482;
attributed to the use of furniture in order to constitute a furnished letting even if the furniture
had belonged to the landlord and he had put it into the rooms and then let them furnished at
the same rent

2. Michael Golodetz and Others v Serajuddin and Company3

Arbitration & ADR - Practice & Procedure - Arbitration Act, 1940, s. 34 - (A) Whether court
is obliged to grant stay because parties have under a commercial contract agreed to submit
their dispute in a matter to an arbitration tribunal in a foreign country ? - Held, no, it does not
- Court ordinarily requires parties to resort for resolving disputes arising under a contract to
tribunal contemplated by them at time of contract - It merely seeks to promote sanctity of
contracts, and for that purpose stays suit - The jurisdiction of court to try suit remains
undisputed, but discretion of court is on grounds of equity interposed - Court is, therefore, not
obliged to grant stay merely because parties have even under a commercial contract agreed to
submit their dispute in a matter to an arbitration tribunal in a foreign country - It is for court,
having regard to all circumstances, to arrive at a conclusion whether sufficient reasons are
made out for refusing to grant stay - Appeal dismissed.

3
1962 Indlaw SC 312
Enforcement of Arbitral Awards

"An arbitrator is a private extraordinary judge between party and party, chosen by their
mutual consent, to determine controversies between party and party. And arbitrators are so
called because they have an arbitrary power; for if they observe the submission (arbitration
agreement) and keep within bounds, their sentences are definite from which there lies no
appeal". (Sir Raymond, CJ)

The purpose of arbitration is to ensure effective, quick and consensual decision making
process avoiding the arduous process of courts. The need for such a procedure is greater in a
country like India where delay has ingrained itself as part of the system of administration of
justice. While arbitration is indeed a quick procedure, the interference by court in the process
acts as a clog to its development.

The enactment of the Arbitration Act, 1940 (hereinafter "the old Act"), was a reflection of the
legislature's determination to ensure speedy resolution of disputes. However, the old Act,
though sound in principle, was bogged down by procedural delays. To put it in the words of
the Apex Court:

"Experiences show and law reports bear ample testimony that the proceedings under the Act
have become highly technical accompanied by the intending prolixity at every stage
providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious
disposal of the disputes has, by the decisions of the courts been clothed with legalese and
unforeseeable complexity."1

There was no uniform procedure in terms of a unified code for the enforcement of foreign
awards under the New York Convention and the Geneva Convention. The Foreign Awards
(Recognition and Enforcement) Act, 1961 for the enforcement of arbitral awards under the
New York Convention and the Arbitration (Protocol and Convention), Act 1937 hitherto held
the field. With the adoption, by the United Nations Commission for International Trade Law
of the UNCITRAL Model Arbitration Law and the subsequent adoption of the same by
various countries in the world, it was but necessary that India adopt the Model Law to govern
arbitrations and this saw the genesis of the more dynamic Arbitration and Conciliation
Ordinance leading to the Arbitration and Conciliation Act, 1996 (hereinafter "the new Act").
The New Act has consolidated and amended the law relating to arbitration and is
comprehensive in the sense that it covers both domestic and foreign arbitrations.

It has simplified the procedure in many respects, especially concerning appointment of

arbitrators, procedure to determine whether an arbitration agreement exists or not, challenge
to an arbitral award and finally, enforcement. The interference of courts in the matter of
arbitration has been reduced to the minimum. The enforcement procedure has also been
revised. The purpose or scope of this article is to examine the law in India insofar as the
enforcement of arbitral awards is concerned.

A comparison of the provisions in the old Act and the new Act would be meaningful and
useful.

Procedure for enforcement under the old Act

After the making of the award by the arbitrators or umpire and after having signed the same,
at the request of one of the parties' to the agreement or any person claiming under him or if so
directed by the court, the award and all other documents were to be filed in court. (Section
14).

The court had jurisdiction to entertain the application for filing of the award.

The court had to give notice to the parties under Section 14(2).

The parties were entitled to object to the award.

The court was to determine and modify or correct an award, where:

(a) it appeared to the court that a part of the award is upon a matter not referred to arbitration;

(b) the award is imperfect in form; or contains any obvious error which can be amended
without affecting such decision or it contains clerical mistakes (Section 15).

The court had also the power to remit the award to the arbitrator for fresh consideration, if
any issues were left undetermined, or where the award was so indefinite to be incapable of
execution, or where objection to legality of award is apparent upon the face of it.
The court could consider that the time for filing of objections against the award had expired
or such application having been made had been refused.

It was only upon satisfaction of the above conditions that the court could pass a decree
confirming the arbitral award and only then would the award become final and binding and
thereafter enforceable.

Procedure for enforcement under the new Act

Under the new Act, the procedure for enforcement stands simplified to a very great extent
when compared to the provisions of the old Act.

Section 35 of the new Act makes the award final and binding on parties and persons claiming
under them.

Section 36 provides for enforcement of the arbitral award as though it were a decree of the
court, and a party is entitled to enforce the arbitral award, when the time for making an
application to set aside the arbitral award had expired or such application having been made,
had been refused. This saves the time spent under the old Act to make an award a decree of
court.

Therefore under the new Act, after an award is made or passed, the party in whose favour an
award is made has nothing to do but just wait whereas under the old Act the winning party
had to file an application within 30 days of receipt of the award for getting it made a rule of
the court.

Grounds for setting aside an arbitral award

An important aspect which needs to be considered is the aspect relating to setting aside of an
arbitral award. Under Section 34(2) of the new Act, an award may be set aside by the court
either on the application of the party or (without such application) by the court under certain
circumstances. The grounds under which a party may apply to the court to set aside an award
are only those mentioned in Section 34(2). They are:

a. Where a party making the application was under some incapacity.

b. The arbitration agreement is not valid under the law to which the parties are subjected or
failing such indication thereon, under the law for the time being in force.

c. The party making the application was not given proper notice of the appointment of
arbitrators or of the Arbitral Tribunal or was otherwise unable to present his case.

d. Arbitral award deals with a dispute not contemplated by the parties or beyond the terms of
submission.

e. Composition of the Arbitral Tribunal was not in accordance with the agreement of the
parties.

f. Subject-matter of dispute is not capable of settlement by arbitration under the law for the
time being in force.

g. The arbitral award is in conflict with the public policy of the country.

The court can enforce the award only if application for setting aside it is disallowed or the
time for making such prayer is over. The last-mentioned position seems to run counter to the
avowed objects of the Act, namely avoidance of delay. It is noteworthy to mention that once
an application is preferred under Section 34, the executing court has no jurisdiction to enforce
the award, until and unless the application under Section 34 is dismissed or refused. This is a
marked departure from even the normal rule under the Code of Civil Procedure, 1908 where
an executing court can execute the decree if there exists no stay by the appellate court. In the
opinion of the author, this ought not to have been the position under the new Act.
Enforcement of the award should be permitted unless there is a stay by the court hearing an
application under Section 34. That appears to be an inadvertent departure under the new Act
from the normal procedure contemplated under the Civil Procedure Code and runs contrary to
the avowed object of speedy resolution of disputes contemplated under the new Act. It is in
this area that Section 36 is definitely capable of being put to mischief and therefore requires a
fresh look.

Enforcement of foreign awards

A foreign award is defined as an arbitral award on differences between persons arising out of
legal relationships whether contractual or not, considered as commercial under the law in
force in India in pursuance of which either the Geneva Convention or the New York
Convention applies and which is made in one of such territories where reciprocal provisions
have been made for enforcement of award.
Enforcement of arbitral awards in the international scenario assumes greater significance than
domestic arbitration since now the law and rules regarding enforcement in the domestic arena
are fairly well settled. The Geneva Convention and the New York Convention are steps
towards bringing about uniformity in the matter of enforcement of arbitral awards. This
aspect was highlighted by the US Supreme Court in Scherk v. Alberto-Culver2 thus:

"The goal of the New York Convention, and the principal purpose underlying American
adoption and implementation of it, was to encourage the recognition and enforcement of
commercial arbitration agreements in international contracts and to unify the standards by
which agreements to arbitrate are observed and arbitral awards are enforced in the signatory
countries."3

As many as 96 countries have ratified the New York Convention including India.

It is pertinent to mention that for an award to be a foreign award under the new Act, the
award should arise in relation to a relationship, which can be considered as "commercial" as
understood by the law in India. The word "commercial" has not been defined in the new Act.
The Supreme Court in R.M. Investments v. Boeing Company4 observed that while construing
the expression "commercial", guidance can also be taken from UNCITRAL Model Law
which runs as follows:

"The term commercial should be given a wide interpretation so as to cover matters arising
from all relationships of a commercial nature, whether contractual or not. Relationships of a
commercial nature, include, but are not limited to, the following transactions: any trade
transaction for supply or exchange of goods or services; distribution agreement; commercial
representation or agency; factoring; leasing; construction of works; consulting; engineering.

In Kamani Engg. Corp. Ltd. v. Socite De Traction Et D'Electricity Sociate Anonyme, the

Bombay High Court was of the opinion that the widest meaning should be accorded to the
word "commercial".

It is undoubtedly true that in most foreign awards, there is always a commercial element. The
word "commercial" not having been defined, it should include all areas which unless can be
categorized under some other head such as matrimonial or commercial or social or political,
should necessarily fall within the meaning of commercial. As a matter of fact, the courts in
the United States have also held that the commercial limitation is only to exclude matrimonial
and other domestic relations awards, political awards and the like. Why the law does not
make provision for other arbitrations would be an interesting issue to ponder upon.
Unfortunately, enforcement of arbitration awards has not yet transgressed beyond the
commercial parameters agreed upon by various countries.

Enforcement of foreign awards and reciprocity

India has accepted the New York and Geneva Conventions only with a specific reservation of
reciprocity and that is clear at Sections 44(b) and 53(c) of the new Act. Reciprocity is only in
relation to the place where the award is made and does not bear any real relation to the
nationality of the parties or whether the nations to which each of the parties belong have
signed or ratified the Conventions. So long as the award is made in a territory where
reciprocal provision exists as in India, the award is automatically enforceable. An interesting
situation arose in a case decided by the United States Court in Fertilizer Corpn. of
India v. IDI Management, Inc.7, where an award rendered in India was sought to be
enforced in the United States. The contention that was urged was that India would not have
enforced the award had it been rendered in the United States against Fertilizer Corporation.
The Court examined the reciprocity defence and held that reciprocity contemplated by the
Convention only required that India be a signatory to the Convention; reciprocity does not
extend to the judicial interpretation and enforcement policies of the contracting State in
which the award was rendered.

In Iran Aircraft Industries v. Avco Corpn.8, the New York Convention was held applicable
to an award made in the Netherlands against a US company in favour of an Iranian company,
although Iran has not ratified the convention.

Foreign award: a decree of court

Apart from consolidating the law relating to arbitration under the new Act, there is yet
another qualitative change which has been brought about to the law relating to enforcement
of foreign awards under the new Act in contrast to the Foreign Awards (Recognition and
Enforcement) Act, 1961 and the Arbitration (Protocol and Convention), Act 1937. The
qualitative change is in respect of the fact that under the old Act, the party seeking
enforcement was required to file the award in court and the court was required to pronounce
judgment according to the award, once it came to the conclusion that the award was
enforceable. Upon the judgment so pronounced a decree was to follow.

However, now under the new Act, the executing court is to merely satisfy itself that the
award is enforceable and the award is to be enforced as if it is a decree of the court9

Procedure for enforcement

The procedure for enforcement of arbitral awards is pretty much the same in the new Act as
under the Foreign Awards (Recognition and Enforcement) Act, 1961 and the Arbitration
(Protocol and Convention), Act 1937. The reason that there are no qualitative differences is
because the New York Convention and the Geneva Convention themselves provide for the
procedure for enforcement which are merely given statutory recognition by way of an
enabling legislation and the same continues under the new Act.

A person who intends to enforce a foreign arbitral award should apply to the court and
produce the following documents:

(a) Original award or copy thereof, duly authenticated in the manner required by the
law of the country in which it was made.

(b) Original agreement for arbitration or a duly

(c) Such evidence as may be necessary to prove that the award is a foreign award.

(d) Translations, if necessary shall also be furnished.

The court is bound to enforce an arbitral award unless enforcement is refused owing to the
following reasons:

Parties to the agreement were under some incapacity.

The said agreement is not valid under the law to which the parties have subjected themselves
or is invalid under the law of the country where the award was made.

No proper notice was given to the party against whom the award is sought to be enforced.

Award deals with a difference outside the scope of reference.

Composition of Arbitral Tribunal was not in accord with the agreement between the parties.

Award has not become binding on the parties, or has been set aside.

Subject-matter of the difference is not capable of settlement by arbitration under law in India.

Enforcement is contrary to the public policy of India.