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Airtract Monika Mukherjee Lets understand the use of law together.

Case Brief: Smita Conductors Ltd vs Euro Alloys (2001) 7 SCC 728 02 July, 2020   

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.

Euro Alloys Case Contract Indian Contract Act

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