Monika Mukherjee Verified
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Bench: S.
Rajendra Babu, S.N. Phukan
Facts:-
In this case Euro Alloys, the
respondent proposed a contract [bearing No. S-142], containing arbitration
clause, for supply of aluminum rods on 18.3.1991. The appellant
did not sign the contract but dispatched the consignments for the months of
January, February & March.
Meanwhile, on 19.3.1991 RBI
releases circulars restricting import of goods. On 30.4.1991, the appellant sent a
telex to the respondent about
the restrictions that had been imposed by RBI due to unprecedented foreign
exchange crisis and informed that RBI had not cleared the application for
letter of credit and wanted to raise a force majeure
clause in the contract. On
30.5.1991, the respondent informed the appellant that they have
initiated arbitration proceedings under the arbitration clause in the contract.
On
30.8.1991, the appellant filled a suit praying that there is no valid contract
and that arbitration, which has been initiated by the respondent is void and
the case was dismissed by the Bombay High Court on 18.12.1991.
Meanwhile,
the arbitrators, on 29.7.1992 awarded damages amounting to US$ 676,000 against
the appellant. The London Metal Exchange also rejected the request for waiver
of deposit, appealed by the appellant to the Appeal Board of the London Metal
Exchange.
Thereafter,
the respondent filled a petition in the Bombay HC under the Foreign Awards
(Recognition & Enforcement) Act, 1961 for execution of the award, where, the High Court of
Bombay allowed the petition. And, hence, this petition was filled by the
appellant in the Supreme Court.
Issues:-
1. Whether
the arbitration clause can be imposed on the parties?
2. Whether
the award given by the arbitrators was contrary to the public policy of India?
Judgement:-
Supreme
Court held that the communication and the conduct of the parties clearly indicated
that there existed a valid agreement and the so, the arbitration clause.
Therefore,
if the act of the parties proves that the contract is binding them even in the
absence of signatures of both the parties, then, it can be said that such
arbitration clause, in the agreement, is also binding on the parties.
Under
Section 7(1)(b)(ii) of Foreign Award Act, 1961, the term “Public policy” constitutes
the public policy of India and not the law of any such country governing the
contract.
This
award is not against the
fundamental policy of Indian law or justice so, the award is not
against the public policy of India.
It
has been taken into account that there was no such time specified in the
contract, as to when the contractual obligations were supposed to be performed.
The effect of the force majeure clause can only come into effect in case of an
occurrence of any particular event, in which the performance of contract
becomes completely impossible and there arise a complete restriction on the
implementation of the terms of the agreement. But in this case, there was no
such restriction imposed. The restrictions which were imposed could be sorted
out by taking appropriate measures as held by the arbitrators and so the
contentions of the appellant had been rejected by the Apex Court.
Hence,
SC do not find appropriate to make any changes in the award made by the
arbitrators and dismissed the appeal.
Accept
Reject
