HIGH COURT OF DELHI
Glencore International AG v. Hindustan Zinc Limited
In the year 2011, the Petitioner and the Respondent entered into a contract for the supply of goods being shipped from Australia to India. Under Clause 27.2 of the said contract, it was stated that the contract was governed by the Law of England with the venue of arbitration to be in London and the proceedings to be conducted in accordance with Rules of the London Court of International Arbitration (LCIA).
The parties, further in the year 2012, entered into a second contract for the supply of an upgraded quantity and had similar terms of governing laws like the previous contract.
When disputes arose, the Indian company invoked the Arbitration Clause before the LCIA in 2014. The subject-matter of the dispute was under two the contracts entered into between the parties therefore, the LCIA passed two final awards concluding the arbitration.
For the second contract of the year 2012, the award was passed in favour of the Petitioner, denying the claims of the Respondent and awarded costs to the Petitioner. After an application by the Petitioner, the Arbitral Tribunal later passed an award for interest on costs.
Simultaneously, the Respondent approached the High Court of Rajasthan under Section 34 read with Section 48 of the Arbitration & Conciliation Act, 1996 challenging the final award.
The High Court of Rajasthan dismissed the applications as non-maintainable concluding that since the seat of arbitration was at London, applications under Section 34 of the Act will not be maintainable and the objections made by the Respondent i.e. Glencore were accepted.
The Respondent challenged the judgment by the Single Judge and filed an appeal before the Division Bench of the High Court of Rajasthan which remains pending.
Thereafter, the Petitioner sent a Legal Notice to the Respondent requesting payment of costs and interests on costs as awarded to the Petitioner however, and as a result of non-payment, the Petitioner had approached the Delhi High Court for Enforcement of Award. Two petitions with respect to Enforcement of Final Award on costs and interest on costs were filed before the High Court of Delhi. The High Court passed a common order since the petitions pertain to common questions of law i.e. maintainability of the petitions.
ISSUE BEFORE THE HIGH COURT OF DELHI
Whether the petitions for enforcement of foreign award filed by the Petitioner are maintainable before the Delhi High Court or not?
The Court examined the contentions of the Petitioner that the Respondent had Bank Accounts and other moveable properties within the territorial jurisdiction of New Delhi along with the Administrative Office.
The Respondent submitted that the immovable property was on lease and not owned by the Respondent. However, the Court noted that the Respondent did not deny existence of moveable properties like Bank Accounts within the jurisdiction of the Court.
The Court referred to and discussed the relevant provisions under the Civil Procedure Code, 1908 and also Section 2 (1) (e) and Section 47 of the Act which defines ‘Court’ for Part I and II of the Act.
Furthermore, the Court relied up on the Bombay High Court judgment of Tata International Ltd., Mumbai v. Trisuns Chemical Industry Ltd., (2002) which discussed the interplay between Section 2 (1) (e) and Section 47 of the Act and held that both provisions are related to different aspects i.e. Section 2 (1) (e) of the Act pertains to subject matter of ‘arbitration’ and Section 47 of the Act pertains to subject matter of ‘arbitral award’.
The Bombay High Court concluded that;
“In the instant case, defendants do not have their office or carry on business within the jurisdiction of this Court. The Offices are either at Gandhidham or Ahmedabad. It is not averred in the petition that the respondents have any money within the jurisdiction of this Court. In these circumstances, to my mind in the absence of the subject matter of the Award being within the jurisdiction of this Court, this Court would have no jurisdiction to hear and decide this petition.”
Further, the Bombay High Court in the case of Wireless Developers Inc. v. India Games Ltd., (2012) concluded that, when enforcement of an arbitral award is in the picture, where the properties, moveable or immoveable are located would be the appropriate jurisdiction and the residence of the Respondent shall be of minimal consideration.
“The territorial jurisdiction of the Court would be where the contract was entered into or where the some or all the properties of the respondent would be. Once the arbitration is concluded and has to be enforced it is the subject matter of the award which would have to be seen. That would be whether the award is a money award (analogous to a money decree in litigation) or a declaration or other relief with regard to a contract or a property. The award would have to be filed for its enforcement in a Court which would be able to enforce that award. It would be futile to file it where a cause of action may have arisen, if the respondent would have no properties in that jurisdiction. Similarly it would be of little use to file it where the respondent resided or carried on business. It would have to be filed where the respondent would have properties, movable or immovable, which could be attached and sold in execution of the award.”
The Court thereafter, concluded that for an enforcement of an award, the party can only approach that Court within whose jurisdiction the properties or assets of the Respondent are located.
The Delhi High Court further referred to the case of Wireless Developers Inc. v. India Games Ltd., and examined Section 51 of the Civil Procedure Code, 1908 with regard to power of the Court to enforce execution by delivery / attachment / sale of a property along with arresting & detaining the Respondent. The Bombay High Court concluded that if the territory within the Court’s jurisdiction has no property to attach or sell, the decree shall be transferred to the Court ‘having jurisdiction’.
“…a Foreign Award is a deemed decree when allowed to be enforced and can be enforced anywhere depending on the location of the assets of the Judgement Debtor or where his money lies. In fact, the words used were that it is in the nature of “Forum Hunting”.”
The Court observed the facts in the case of Wireless Developers Inc. v. India Games Ltd., wherein the Respondent challenged the award under Section 34 of the Act and the Petitioner sought enforcement of the award on the ground that Respondent’s bank accounts were within the jurisdiction of Bombay High Court.
The Bombay High Court dismissed the petition on the ground of lack of territorial jurisdiction as the ground of mere existence of Bank account was considered incorrect.
The Court held that;
“Learned Senior Counsel for the Petitioner is also right that there is a difference in the subject matter of Arbitration and subject matter of the Award. Judgment in the case of Wireless Developers (supra) clearly decides this issue and the relevant paras have been extracted in the earlier part of the judgement.”
Therefore, in the instant case, the Court concluded that as per the provisions of the Civil Procedure Code, 1908 and the Act, the Delhi High Court had territorial jurisdiction to entertain the petition. The Court noted that the Respondent was unable to establish that the property was taken by the Respondent on lease.
The Court further accepted the contention of the Petitioner that the Respondent had moveable properties, an Administrative Office and Bank Accounts within the territorial jurisdiction of the Court.
Further, the Court held that pendency of proceedings before the Rajasthan High Court cannot come in way of enforcement proceedings as settled in the case of Eitzen Bulk A/S v. Ashapura Minechem Limited and Another, (2016).
Therefore, the Court directed the Respondent to file an Affidavit and disclose assets within a period of 5 weeks. The Court has listed the matter in July, 2020 to further consider the issue of territorial jurisdiction after disclosure of documents relating to lease of immovable property.
The Court has therefore, settled that the maintainability of a foreign award enforcement application would depend upon the location of the properties whether moveable or immoveable of the Respondent.
The judgment has settled that the parties are restricted from “Forum Shopping” and directs them to file before the Court having relevant territorial jurisdiction to entertain the petition for enforcement of award.
Furthermore, the Court has interpreted the two definitions of ‘Court’ enshrined under the Part I & II of the Act. However, the Respondent is given an opportunity to establish that there exists no ‘immovable’ property within the jurisdiction of the Court and the observations of the High Court thereafter are awaited on the same.
After the final decision of the Court, it shall become easier for the parties to decide as to which Court has the appropriate territorial jurisdiction for enforcement of a foreign award under Section 49 of the Act.
The Division Bench of the Bombay High Court in the case of Wireless Developers Inc. v. India Games Ltd., observed that:
“This, therefore, settles the territorial jurisdiction aspect under the application for execution made by the appellant. The notice issued under Order 21 Rule 22 would, therefore, be entitled to be issued by this Court having territorial jurisdiction for the enforcement of the award. The impugned order refusing to exercise jurisdiction on the ground that merely because the bank account of the respondent was within its territorial jurisdiction is, therefore, incorrect and must be set aside. This Court would have to exercise its jurisdiction to enforce the award.”
The judgment has also established that the pendency of the proceedings before the Rajasthan High Court challenging the foreign award under Section 34 of the Act had no impact on the enforcement petition as it is a settled law that Part I of the Act has no applicability on a foreign award.
By : Aditya Ghadge
Associate, O.P. Khaitan & Co.
03rd July, 2020