Calcutta High Court Dismisses Petition Opposing Enforcement Of Foreign Arbitral Award Based On Constructive Res-Judicata

The bench of Justice Sugato Majmudar held that once the enforceability of an award is affirmed by the Supreme Court, it cannot be opposed on a new ground which could have been taken in earlier proceedings in relation to the enforceability. It held that such an application would be barred by constructive resjudicata.

Facts

Hindustan Copper Limited (HCL) (Petitioner) and Centrotrade Minerals (Respondent) entered into an agreement on 16.01.1996 for the purchase of 15,500+- 5% (Dry Metric Tonnes) of copper concentrate.

The agreement provided for a two-tier arbitration mechanism wherein the first award could be challenged in the second arbitration. A dispute arose between the parties with respect to payments under the agreement. Respondent approached the Indian Council of Arbitration for dispute resolution, and an arbitrator was appointed.

The Arbitral Tribunal rejected Respondent's claim, leading it to invoke the second-tier of arbitration by approaching the International Chamber of Commerce.

The Arbitrator, appointed by the International Chamber of Commerce, awarded in favor of the respondent. It filed Execution Application No. 1 of 2002 in the Court of District Judge, South 24 Paraganas at Alipore, which was transferred to the High Court and renumbered as EOS 11 of 2003.

The Single Bench of the High Court held the award to be enforceable. An appeal was made to the Division Bench, which set aside the Single Bench's order holding that the award was not enforceable, though it found the two-tier arbitration agreement valid.

Both parties filed Special Leave Petitions before the Supreme Court of India challenging the Division Bench's order. The Supreme Court referred the matter to a larger Bench, which framed two issues regarding the enforceability of the two-tier arbitration procedure and the foreign award.

The Supreme Court decided both the issues in favour of the respondent. Thereafter, the petitioner filed an application in the execution proceedings seeking refusal to enforce the award.

Submissions by the Parties

The petitioner made the following submissions:

• Clause 11.4.2 of the agreement provided for payment of interest at the LIBOR rate plus 0.5% per annum from the bill of lading date until the date payment is made.
• The Arbitrator departed from the agreed rate of interest and directed Petitioner to pay compound interest on the outstanding purchase price and legal costs of arbitration at 6% per annum with quarterly rests until the actual date of payment.
• Section 31(7) of the A&C Act prohibits arbitrators from transgressing the agreement between parties regarding interest rates. Such transgressions amounts to violation of a statue and results in a breach of 'fundamental policy of Indian Law' making the award non-enforceable.
• In terms of Section 28 of the Act, an arbitrator is required to decide disputes in terms of the contract and cannot ignore the contract's provisions or decide based on equitable considerations unless expressly authorized by the parties.

The respondent made the following counter-submissions:

• The enforceability of the award had been conclusively decided by the Supreme Court.
• The challenge to a portion of the award is barred by constructive res judicata as this challenge could have been raised before the Supreme Court.
• Sections 28 and 31 of the Act relied upon by the Petitioner do not apply to a foreign award.
• The arbitrator is empowered to award compound interest by including the amount of pendente lite interest in the value of 'sum' on which the future interest would be payable.

Analysis by the Court

The Court observed that the issue of enforceability of the award has been conclusively determined by the Supreme Court which has held the award enforceable.

The Court held that the issue of interest could have been raised before the Supreme Court when the issue of the enforceability of the award was being decided. It held that the petition is barred by constructive res-judicata.

The Court held that there cannot be any re-hearing of the issue of enforceability of a portion of the award when the entire award has been held to be enforceable by the Court.

Accordingly, the Court dismissed the petition and directed the award to be executed.

Case Title: Centrotrade Minerals & Metals Inc v. Hindusthan Copper Limited. IA. No. GA. 5 of 2021 in EOS. 11 of 2003

Date: 09.04.2024

Counsel for the Petitioner/Award Debtor: Mr. Jishnu Saha, Sr. Adv. with Mr. Ishaan Saha, Adv. Mr. G. Singh, Adv

Counsel for the Respondent/Award Holder: Mr. S.N. Mookherjee, Sr. Adv. with Ms. Ruby Singh Ahuja, Mr. Vishal Gehrana, Mr. Varun Khanna, Ms. Kritika Sachdeva from Karanjawala with Mr. Ashika Daga, S. Mookherjee, Raunak Das Sharma, Advs.

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