Supreme Court Paved A Way For The Execution Of A Foreign Award Emanating From A Two-Tier Arbitration Mechanism [Read Judgment]

In a landmark judgment, the Supreme Court of India in Centrotrade Minerals and Metals Inc v. Hindustan Copper Ltd. has paved the way for the execution of a Foreign Arbitral Award in India arisen out of a two-tier arbitration mechanism. The judgment will transform the landscape of arbitration law under the 1996 regime. The Judgment has been delivered by a bench comprising of HMJ Rohinton Fali Nariman, HMJ S. Ravindra Bhat and HMJ V. Ramasubramaniam.

The matter relates to the agreement between Centrotrade Minerals and Metals Inc, an American giant, and Hindustan Copper Limited, a Government of India enterprises, for the supply of Copper Concentrate. The arbitration clause in the agreement provided for a two-tier arbitration mechanism whereby any dispute was to be settled by a Sole Arbitrator under the aegis of the Indian Council of Arbitration (ICA). In the event of any party disagreeing with the award rendered by the Sole Arbitrator, it would have a right to appeal to a Second Arbitration in London under the aegis of the International Chamber of Commerce (ICC).

The ICA Sole Arbitrator passed an award rejecting the claims made by Centrotrade Minerals. This award was challenged by the American company before the second arbitration in London, which ultimately passed a reasoned award in favour of Centrotrade Minerals. The dispute reached up till the apex court on the issues pertaining to the validity of the arbitration clause and the enforceability of the ICC Arbitral Award (in appeal) passed in favour of Centrotrade Minerals. However, it was referred to the three-Judge Bench of the Hon'ble Supreme Court of India as the Division Bench comprising of HMJ S.B. Sinha and HMJ Tarun Chatterjee failed to reach a consensus upon the validity of the arbitration clause and delivered a split verdict in Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd.,reported as (2006) 11 SCC 245.

While deciding the first issue regarding the validity of the said arbitration clause, the three-Judge Bench of the Hon'ble Supreme Court comprising of HMJ Madan B. Lokur, HMJ R.K. Agrawal and HMJ D.Y. Chandrachud in its landmark judgment reported as Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd., reported as (2017) 2 SCC 228 held that two-tier arbitration agreement is valid and legally permissible under the Arbitration and Conciliation Act 1996 and the parties may opt for such a mechanism for resolving their disputes.

Subsequently, HMJ Lokur and HMJ Agrawal retired and the second issue pertaining to the enforceability of the ICC Foreign Award under Section 48 of the Arbitration and Conciliation Act 1996 came before the three-judge bench comprising of HMJ Rohinton Fali Nariman, HMJ S. Ravindra Bhat and HMJ V. Ramasubramaniam. HCL objected to the enforceability of the award stating that it was unable to present its case before the ICC Arbitrator. However, by its landmark judgment pronounced today, the apex court rejected this objection and has given a go-ahead for the execution of ICC Foreign Award passed in favour of Centrotrade.

Senior Advocate Harin Raval instructed by Nandini Sen argued for Hindustan Copper.

Centrotrade Minerals was advised and represented by a legal team comprising of Ms. Ruby Singh Ahuja, Mr. Vishal Gehrana, Mr. Shravan Sahny, and Mr. Ashutosh P. Shukla from Karanjawala & Co. Mr. Gourab Banerji, Sr. Advocate, and Mr. Siddharth Bhatnagar, Sr. Advocate along the advocates from Karanjawala & Co. appeared on behalf of the American company before the apex court.

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