LEGAL ISSUE: Whether an appeal, not maintainable under Section 50 of the Arbitration and Conciliation Act, 1996, is maintainable under Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015.
CASE TYPE: Arbitration Law
Case Name: Kandla Export Corporation & Anr. vs. M/s OCI Corporation & Anr.
[Judgment Date]: 7 February 2018
Date of the Judgment: 7 February 2018
Citation: (2018) INSC 123
Judges: Justice Rohinton Fali Nariman and Justice Navin Sinha
Can a party appeal an order enforcing a foreign arbitration award, even if the Arbitration Act doesn’t allow it? The Supreme Court addressed this crucial question, clarifying the interplay between the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015. The core issue revolved around whether the Commercial Courts Act provides an additional avenue for appeal when the Arbitration Act specifically restricts it. The judgment was delivered by a bench of Justice Rohinton Fali Nariman and Justice Navin Sinha, with Justice Nariman authoring the opinion.
Case Background
The dispute arose from an arbitration award passed on April 28, 2014, under the Grain and Feed Trade Association (GAFTA) rules. The award directed Kandla Export Corporation (the Appellants), the sellers, to pay M/s OCI Corporation (the Respondents), the buyers, US$ 846,750 plus interest.
On appeal, the Appellate Tribunal modified the award on April 16, 2015, reducing the amount to US$ 815,000, plus interest.
The Appellants unsuccessfully challenged the Appellate Tribunal’s award in the Queen’s Bench and the Court of Appeal in the U.K.
Meanwhile, the Respondents initiated execution proceedings in India on June 29, 2015, before the District Court, Gandhidham-Kutch, under Section 48 of the Arbitration Act, 1996. The Appellants filed objections on March 7, 2016.
The Respondents applied to the High Court of Gujarat under Section 15(5) of the Commercial Courts Act to transfer the execution petition to the High Court, which was allowed on November 11, 2016. A Special Leave Petition against this order was dismissed by the Supreme Court on March 3, 2017.
On August 8, 2017, the High Court of Gujarat dismissed the Appellants’ objections and allowed the execution petition.
The Appellants then filed an appeal under the Commercial Courts Act, which was dismissed on September 28, 2017, by the High Court, stating that the Commercial Courts Act did not provide an additional right of appeal not available under the Arbitration Act.
Timeline
| Date | Event |
|---|---|
| April 28, 2014 | Arbitration award passed, directing Appellants to pay Respondents US$ 846,750 plus interest. |
| April 16, 2015 | Appellate Tribunal modifies the award, reducing the amount to US$ 815,000 plus interest. |
| July 14, 2015 | Appellants’ appeal rejected by the Queen’s Bench. |
| September 15, 2015 | Appellants’ appeal rejected by the Queen’s Bench Division, Commercial Court. |
| June 29, 2015 | Respondents file Execution Petition in District Court, Gandhidham-Kutch under Section 48 of the Arbitration Act. |
| March 7, 2016 | Appellants file objections to the Execution Petition. |
| September 12, 2016 | Respondents apply to the High Court of Gujarat to transfer the execution petition. |
| November 11, 2016 | High Court transfers the execution petition to the Commercial Division of the High Court. |
| March 3, 2017 | Supreme Court dismisses the Special Leave Petition against the transfer order. |
| August 8, 2017 | High Court of Gujarat dismisses Appellants’ objections and allows the execution petition. |
| September 28, 2017 | High Court dismisses Appellants’ appeal under the Commercial Courts Act. |
| February 7, 2018 | Supreme Court dismisses the appeals. |
Course of Proceedings
The Appellants, after failing to overturn the arbitration award in the U.K., faced execution proceedings in India. The High Court of Gujarat initially transferred the case to its Commercial Division. Subsequently, the High Court dismissed the Appellants’ objections and allowed the execution petition. The Appellants’ appeal under the Commercial Courts Act was also dismissed, leading to the present appeal before the Supreme Court.
Legal Framework
The core legal issue revolves around the interpretation of Section 13(1) of the Commercial Courts Act, 2015, and Section 50 of the Arbitration and Conciliation Act, 1996.
Section 13(1) of the Commercial Courts Act states:
“Any person aggrieved by the decision of the Commercial Court or Commercial Division of a High Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty days from the date of judgment or order, as the case may be: Provided that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 as amended by this Act and section 37 of the Arbitration and Conciliation Act, 1996.”
Section 50 of the Arbitration Act, 1996, specifies:
“Appealable orders. —(1) An appeal shall lie from the order refusing to – (a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order.”
The Supreme Court also considered Section 21 of the Commercial Courts Act, which states:
“Save as otherwise provided, the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law for the time being in force other than this Act.”
The Court also took into account Section 49 of the Arbitration Act, which states:
“Enforcement of foreign awards. —Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.”
The interplay between these provisions determines whether an appeal against the enforcement of a foreign award is permissible under the Commercial Courts Act, even when the Arbitration Act does not explicitly provide for it. The Arbitration Act is a self-contained code dealing with arbitration matters, while the Commercial Courts Act aims to expedite commercial disputes.
Arguments
Appellants’ Arguments:
- The Appellants argued that Section 13(1) of the Commercial Courts Act provides a broad right of appeal against any decision, judgment, or order of a Commercial Division of a High Court.
- They contended that since Section 50 of the Arbitration Act is not mentioned in the proviso to Section 13(1) of the Commercial Courts Act, the general right of appeal under Section 13(1) should apply.
- The Appellants relied on Section 21 of the Commercial Courts Act, which gives it an overriding effect over other laws, arguing that this provision should prevail over Section 50 of the Arbitration Act.
- They highlighted that Section 37 of the Arbitration Act, which is specifically mentioned in the proviso to Section 13(1) of the Commercial Courts Act, contains the expression “and no others,” which is absent in Section 50 of the Arbitration Act, suggesting that Section 50 does not bar appeals that are not mentioned.
- The Appellants also argued that Section 49 of the Arbitration Act, which deems a foreign award to be a decree of the Court, should make it appealable under Section 13(1) of the Commercial Courts Act.
- The Appellants stated that the legislative intent of the Commercial Courts Act is to provide an appeal in all matters over Rs. 1 crore, given the high stakes involved.
Respondents’ Arguments:
- The Respondents argued that the Arbitration Act is a self-contained code, and Section 50 impliedly bars appeals against the enforcement of a foreign award.
- They relied on the Explanation to Section 47 of the Arbitration Act, read with Section 11 of the Commercial Courts Act, to argue that the non-obstante clause in Section 21 of the Commercial Courts Act should give way to Section 11.
- The Respondents cited the Supreme Court’s judgment in Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333, which held that the Arbitration Act is a self-contained code that excludes the applicability of general laws like Section 13 of the Commercial Courts Act.
- They argued that the object of both the Arbitration Act and the Commercial Courts Act is to speedily determine matters, and providing an additional appeal would defeat this purpose.
- The Respondents contended that if no appeal lies for foreign awards below Rs. 1 crore, an extra appeal should not be provided merely because the amount exceeds Rs. 1 crore.
Submissions of Parties
| Main Submission | Sub-Submissions (Appellants) | Sub-Submissions (Respondents) |
|---|---|---|
| Appealability under Commercial Courts Act |
|
|
Issues Framed by the Supreme Court
The Supreme Court framed the central issue as:
- Whether an appeal, not maintainable under Section 50 of the Arbitration and Conciliation Act, 1996, is nonetheless maintainable under Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether an appeal not maintainable under Section 50 of the Arbitration Act is maintainable under Section 13(1) of the Commercial Courts Act? | No | The Arbitration Act is a self-contained code, and Section 50, being part of that code, does not allow appeals against the enforcement of a foreign award. Section 13(1) of the Commercial Courts Act, being a general provision, cannot override the specific provisions of the Arbitration Act. |
Authorities
The Supreme Court relied on the following authorities:
| Authority | Court | How it was Considered | Legal Point |
|---|---|---|---|
| Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333 | Supreme Court of India | Followed | The Arbitration Act is a self-contained code, excluding the applicability of general laws. |
| CIT v. Indo-Mercantile Bank Ltd. , 1959 Supp (2) SCR 256 | Supreme Court of India | Cited | The function of a proviso is to qualify the generality of the main enactment. |
| Union of India vs. Mohindra Supply Company, (1962) 3 SCR 497 | Supreme Court of India | Discussed | The Arbitration Act, 1940, was held to be a self-contained code. |
| Sumitomo Corporation vs. CDC Financial Services (Mauritius) Ltd. and Ors., (2008) 4 SCC 91 | Supreme Court of India | Cited | Section 50 of the Arbitration Act provides for an appeal, and the forum is determined by other laws. |
| Arun Dev Upadhyaya v. Integrated Sales Service Ltd., (2016) 9 SCC 524 | Supreme Court of India | Cited | Section 50 provides for an appeal, and the appeal has to be adjudicated within the parameters of Section 50. |
The Supreme Court also considered the following legal provisions:
- Section 13(1) of the Commercial Courts Act, 2015
- Section 50 of the Arbitration and Conciliation Act, 1996
- Section 21 of the Commercial Courts Act, 2015
- Section 49 of the Arbitration and Conciliation Act, 1996
- Section 37 of the Arbitration and Conciliation Act, 1996
- Explanation to Section 47 of the Arbitration and Conciliation Act, 1996
Judgment
How each submission made by the Parties was treated by the Court?
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellants | Section 13(1) of the Commercial Courts Act provides a broad right of appeal. | Rejected. The Court held that Section 13(1) is a general provision that does not override the specific provisions of Section 50 of the Arbitration Act. |
| Appellants | Section 50 of the Arbitration Act is not mentioned in the proviso to Section 13(1) of the Commercial Courts Act, so the general right of appeal should apply. | Rejected. The Court stated that Section 50 is part of a self-contained code and impliedly bars appeals not explicitly mentioned. |
| Appellants | Section 21 of the Commercial Courts Act has an overriding effect over other laws. | Rejected. The Court held that Section 21 would apply only if Section 13(1) were to apply in the first place, which it does not in cases covered by Section 50 of the Arbitration Act. |
| Appellants | The absence of “and no others” in Section 50 implies that appeals are not barred. | Rejected. The Court stated that Section 50 is not comparable to Section 37, as they belong to different statutory schemes. |
| Appellants | Section 49 makes the award a decree, thus appealable under Section 13(1). | Rejected. The Court held that Section 49 does not make the award appealable under Section 13(1) when Section 50 does not provide for it. |
| Appellants | Legislative intent is to provide an appeal for matters over Rs. 1 crore. | Rejected. The Court stated that this interpretation would lead to absurdity and would be contrary to the object of the Commercial Courts Act. |
| Respondents | The Arbitration Act is a self-contained code, and Section 50 impliedly bars appeals against enforcement. | Accepted. The Court agreed that the Arbitration Act is a self-contained code, and Section 50 is exhaustive in nature. |
| Respondents | Section 11 of the Commercial Courts Act prevails over Section 21. | Not explicitly addressed. The Court did not find it necessary to address this argument since it had already concluded that Section 13(1) does not apply. |
| Respondents | Fuerst Day Lawson judgment supports the exclusion of general laws. | Accepted. The Court relied heavily on the Fuerst Day Lawson judgment in its reasoning. |
| Respondents | Additional appeal would defeat the purpose of both Acts. | Accepted. The Court agreed that providing an additional appeal would contradict the object of speedy resolution of disputes. |
How each authority was viewed by the Court?
- Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333*: The Supreme Court followed this judgment, reiterating that the Arbitration Act is a self-contained code, and the applicability of general laws is impliedly excluded.
- CIT v. Indo-Mercantile Bank Ltd. , 1959 Supp (2) SCR 256*: The Supreme Court cited this case to explain the function of a proviso, stating that it qualifies the generality of the main enactment by providing an exception.
- Union of India vs. Mohindra Supply Company, (1962) 3 SCR 497*: The Supreme Court discussed this case to highlight that the Arbitration Act, 1940, was held to be a self-contained code.
- Sumitomo Corporation vs. CDC Financial Services (Mauritius) Ltd. and Ors., (2008) 4 SCC 91*: The Supreme Court cited this case to support the view that Section 50 of the Arbitration Act provides for an appeal, and the forum is determined by other laws.
- Arun Dev Upadhyaya v. Integrated Sales Service Ltd., (2016) 9 SCC 524*: The Supreme Court cited this case to emphasize that Section 50 provides for an appeal, and the appeal has to be adjudicated within the parameters of Section 50.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the principle that the Arbitration Act is a self-contained code. The Court emphasized that Section 50 of the Arbitration Act, which deals with appeals against the enforcement of foreign awards, is exhaustive and does not permit appeals beyond what is explicitly provided. The Court also considered the legislative intent behind both the Arbitration Act and the Commercial Courts Act, which is to ensure speedy resolution of disputes. Providing an additional appeal would defeat this purpose.
| Sentiment | Percentage |
|---|---|
| Self-contained nature of the Arbitration Act | 40% |
| Legislative intent for speedy resolution | 30% |
| Exhaustive nature of Section 50 | 20% |
| Avoiding absurdity and delay | 10% |
Fact:Law Ratio:
| Category | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning:
Issue: Is an appeal against enforcement of a foreign award maintainable under the Commercial Courts Act when not allowed by the Arbitration Act?
Step 1: Analyze Section 13(1) of the Commercial Courts Act for broad appeal rights.
Step 2: Analyze Section 50 of the Arbitration Act for specific appeal provisions.
Step 3: Determine if the Arbitration Act is a self-contained code, as per Fuerst Day Lawson.
Step 4: Conclude that Section 50 is exhaustive and does not allow additional appeals.
Step 5: Hold that Section 13(1) of the Commercial Courts Act does not apply to cases covered by Section 50 of the Arbitration Act.
The Court considered alternative interpretations but rejected them, emphasizing that the Arbitration Act is a special law that prevails over the general provisions of the Commercial Courts Act in matters of arbitration. The Court reasoned that allowing an additional appeal would contradict the legislative intent of both Acts, which is to ensure speedy resolution of disputes.
The Supreme Court held that no appeal lies against an order enforcing a foreign award under the Commercial Courts Act if the Arbitration Act does not provide for it. The Court’s reasoning was based on the self-contained nature of the Arbitration Act and the legislative intent to expedite arbitration matters.
The key reasons for the decision were:
- The Arbitration Act is a self-contained code.
- Section 50 of the Arbitration Act is exhaustive and does not allow appeals against the enforcement of a foreign award.
- Section 13(1) of the Commercial Courts Act is a general provision that cannot override the specific provisions of the Arbitration Act.
- Providing an additional appeal would defeat the purpose of both Acts, which is to ensure speedy resolution of disputes.
- The judgment in Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333, supports the view that the Arbitration Act excludes the applicability of general laws.
“The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment.”
“Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it “a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done”.”
“Given the objects of both the enactments, if we were to provide an additional appeal, when Section 50 does away with an appeal so as to speedily enforce foreign awards, we would be turning the Arbitration Act and the Commercial Courts Act on their heads.”
Key Takeaways
- The Arbitration Act is a self-contained code, and its provisions regarding appeals are exhaustive.
- The Commercial Courts Act does not provide an additional avenue for appeal in cases where the Arbitration Act specifically restricts it.
- Orders enforcing foreign awards are not appealable under the Commercial Courts Act if the Arbitration Act does not provide for such an appeal.
- The legislative intent behind both Acts is to ensure speedy resolution of disputes, and this should guide their interpretation.
This judgment clarifies the interplay between the Arbitration Act and the Commercial Courts Act, ensuring that the enforcement of foreign awards is not unduly delayed by additional appeals.
Directions
No specific directions were given by the Supreme Court in this judgment.
Development of Law
The ratio decidendi of this case is that the Arbitration Act is a self-contained code, and Section 50 of the Arbitration Act is exhaustive and does not permit appeals beyond what is explicitly provided. This judgment reinforces the principle that special laws prevail over general laws in their specific domains. There is no change in the previous position of law, rather, it reiterates the position of law as laid down in Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333.
Conclusion
The Supreme Court dismissed the appeals, holding that an order enforcing a foreign award is not appealable under the Commercial Courts Act if the Arbitration Act does not provide for such an appeal. The Court emphasized the self-contained nature of the Arbitration Act and the legislative intent to ensure speedy resolution of disputes.