M/S CHEMMARATHIL CASHEW CO. v. M/S CHI COMMODITIES HANDLERS INC

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN** ## **TUESDAY, THE 1ST DAY OF NOVEMBER 2016/10TH KARTHIKA, 1938** ## **OP(C).No. 2197 of 2016 (O)** ## **---------------------------** ## **PETITIONER(S):** **-------------** **1. M/S CHEMMARATHIL CASHEW CO. PAVITHRESWARAM PO, PUTHOOR, KOTTARAKKARA, KOLLAM, PIN 691524, REPRESENTED BY MANAGING PARTNER C.K. SYAM** **2. C.K SYAM, AGED 34 YEARS, S/O.KUNJAPPAN, REPRESENTED BY THE MANAGING PARTNER OF M/S. CHEMMARATHIL CASHEW CO., PAVTHRESWARAM PO, PUTHOOR, KOTTARAKKARA, KOLLAM, PIN 691524** **3. C.K SAM, AGED 32 YEARS, S/O.KUNJAPPAN, REPRESENTED BY THE MANAGING PARTNER OF M/S. CHEMMARATHIL CASHEW CO., PAVTHRESWARAM PO, PUTHOOR, KOTTARAKKARA, KOLLAM, PIN 691524** **BY ADVS.SRI.JOHNSON GOMEZ SRI.S.BIJU (KIZHAKKANELA)** **RESPONDENT(S):** - **--------------** **M/S CHI COMMODITIES HANDLERS INC 3950, 14TH AVENUE SUITE 504, MARKHAM ONTARIOA L3 R OA 9, CANADA, REPRESENTED BY ANIL KUMAR S, AGED 52 YEARS, S/O.SREEDHARAN, #237, 13TH STREET, GIRINAGAR, KADAVANTHRA, COCHIN 682020** **BY ADV. SRI.T.R.ASWAS** **THIS OP (CIVIL) HAVING BEEN FINALLY HEARD ON 7-10-2016,THE COURT ON 01-11-2016 DELIVERED THE FOLLOWING:** **bp** ## **OP(C).No. 2197 of 2016 (O)** ## **---------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** ## **-----------------------** **EXHIBIT P1: A TRUE COPY OF THE FOREIGN AWARD NO. #2558 DATED 07.02.2012 PASSED BY THE ASSOCIATION OF FOOD INDUSTRIES INC (AFI) USA EXHIBIT P2: A TRUE COPY OF THE ARBITRATIN RULES OF THE ASSOCIATION OF FOOD INDUSTRIES INC EXHIBIT P3: A TRUE COPY OF THE ARTICLE 75 OF CIVIL PRACTIVE LAW AND RULES PERTAINING TO ARBITRATION EXHIBIT P4: A TRUE COPY OF THE EA.NO. 372 OF 2016 IN EP.NO. 81/2013 FILED BEFORE THE DISTRICT COURT, ALAPPUZHA EXHIBIT P5: A TRUE COPY OF THE EA.NO. 371/2016 IN EP.NO. 81/2013 FILED BEFORE THE DISTRICT COURT, ALAPPUZHA EXHIBIT P6: A TRUE COPY OF THE OPC NO.1285/2016 BEFORE THE HONOURABLE HIGH COURT OF KERALA. EXHIBIT P7: A TRUE COPY OF THE JUDGEMNT DT 6/6/2016 IN OPC NO. 1285/2016 EXHIBIT P8: A TRUE COPY OF THE EP NO. 81 OF 2013 ON THE FILE OF THE DISTRICT COURT, ALAPPUZHA. EXHIBIT P9: A TRUE COPY OF THE FRDERAL ARBITRATION ACT (USA). EXHIBIT P10: A TRUE COPY OF THE NOTICE FOR CONFIRMATION TO BE FILED BEFORE US COURT. EXHIBIT P11: A TRUE COPY OF THE AFFIDAVIT TO BE FILED FOR CONFIRMATION BEFORE THE US COURT. RESPONDENT(S)' EXHIBITS ----------------------EXT.R1: COPY OF JUDGMENT DT 18/5/2014 IN OPC NO. 1356/2014. EXT.R2: COPY OF ORDER DT 20/2/2015 INCRP NO. 65/2015. EXT.R3: COPY OF JUDGMENT DT 5/1/2015 IN OPC NO. 3049/16.** **OP(C).No. 2197 of 2016 (O)** |**EXT.R4:**|**COPY OF JUDGMENT DT 8/4/2016 IN OPC NO. 1039/16.**| |---|---| |**EXT.R5:**|**COPY OF JUDGMENT DT 6/6/2016 IN PC NO. 1285/2016.**| |**EXT.R6:**|**COPY OF THE ORDER DT 30/7/2016 IN EA NO. 75/2016 IN**| ||**EP NO. 81/13.**| **//TRUE COPY// P.S. TO JUDGE** ## **bp** ## **K. RAMAKRISHNAN, J.** .................................................. O.P.(C).No.2197 of 2016 ....................................................... Dated this the 1[st] day of November, 2016. ## **JUDGMENT** This petition has been filed by the petitioners for issuing a direction to the court below under Article 227 of the Constitution of India. 2. The petitioners are the respondents in EP.No.81/2013 pending before the District Court, Alappuzha. The respondent obtained an award under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') from USA by Association of Food Industries (AFI) as foreign award No.#2258 dated 7.2.2012 evidenced by Ext.P1. They resorted to various methods of execution and finally they approached the District Court, Alappuzha by filing EP.No.81/2013 to enforce the award. After enquiry, the District Court by order dated 17.6.2016 ordered arrest of petitioners 2 and 3. According to the petitioners, as per Section 9 of the Arbitration Rules of Association of Food Industries, the arbitrator shall file the award with the court having jurisdiction to confirm the award. Further even in Ext.P1, it is mentioned that confirmation of the award in court is necessary. Article 75 of Civil Practice Law and Rules pertaining to arbitration relating to New York also indicate that the award has to be confirmed by the court within one year _O.P.(C).No.2197 of 2016_ 2 after its delivery to the party which is produced as Ext.P2 and Ext.P3 respectively. So according to the petitioners, as per Exts.P1 to P3, the arbitration award passed in New York, USA requires a confirmation by the court within a period of one year, but that has not been done in this case. So, the petitioners filed EA.No.372/2016 in EP.No.81/2013 as Ext.P4 before the District Court, Alappuzha to recall the arrest warrant issued against petitioners 2 and 3 and drop further execution proceedings in view of the fact that the award is not executable for want of confirmation. The petitioners also filed Ext.P5 petition as EA.No.371/2016 to advance hearing of the execution petition to an early date. They have also produced Exts.P2 to P3 before the District Court, Alappuzha and the court below is not considering the applications but trying to execute the warrant of arrest against the petitioners. So they have no other remedy except to approach this court seeking the following relief: _“Issue necessary directions to the District Court, Alappuzha to consider Exhibit P4 and P5 applications expeditiously and within a time limit that this Honourable court may consider reasonable, pending consideration of the said applications to keep in abeyance the execution of the award of arbitration issued by the Execution court”._ 3. The petitioners also filed IA.No.1190/2016 to receive additional documents and the same has been received. _O.P.(C).No.2197 of 2016_ 3 4. The respondent entered appearance and filed counter contending as follows: The petition has to be dismissed on the sole ground that the petitioners have deliberately suppressed the material and relevant facts and earlier judgment passed by this court in the same matter and thereby they have defrauded this court and induced this court to pass an ex parte interim order which otherwise this court would not have passed. The respondent filed EP.No.81/2013 under section 47 of the Act before the District Court, Allappuzha on 5.7.2013 for executing an international arbitration award dated 7.2.2012 passed in New York, USA. They filed EA.No.118/2013 for interim attachment of immovable property situated within the territorial limits of the said court. Notice alone was ordered in that application. So the respondent moved this court by filing OP(C).No.2471/2013 and this court has disposed of the same directing the petitioners herein to file their objection within 10 days before the execution court and the execution court to pass appropriate orders in the attachment application and this court, in the meanwhile granted interim attachment till such time the execution court passes appropriate orders in the attachment application in the execution petition. No objection was filed within the time as directed by this court in OP(C). No.2471/2013. On 9.10.2013 they filed an undertaking that they will _O.P.(C).No.2197 of 2016_ 4 not alienate the property sought to be attached and the execution court had on the same day passed an order attaching the property. In spite of that, they did not file any objection and it was adjourned on several occasions. The respondent herein filed OP(C).No.1356/2014 before this court for speedy disposal of the execution petition which was disposed of by Ext.R1 judgment dated 18.6.2014 directing the execution court to pass final orders on or before 31.8.2014. The respondent filed their objection as provided under section 48 of the Act. The objections raised were rejected by a detailed order by the execution court holding that the award is enforceable under section 49 of the Act. This was challenged by the petitioners by filing CRP.No.65/2015 before this court which was dismissed by this court evidenced by Ext.R2 dated 20.2.2015. So the question regarding executability of the award has become final. 5. On 31.3.2015, the execution court ordered sale of the attached property. At that time, Canara Bank came with a claim petition stating that they have got first charge over the attached property which was upheld by the execution court. In the said order, it was held that the petitioners herein had defrauded the court in not stating that the attached property has been already mortgaged to Canara Bank while filing the undertaking that they will not alienate the property. The respondent herein approached this court by filing OP(C). _O.P.(C).No.2197 of 2016_ 5 No.3049/2016 seeking direction to the court below to dispose of the execution within a time frame and this court by Ext.R3 judgment directed the execution court to expedite the disposal of the execution petition on or before 31.3.2016. 6. Later the respondent moved the execution court for arrest of the petitioners and the execution court as per order dated 30.3.2016 held that it has no jurisdiction as the petitioners are residing outside the jurisdiction of that court and closed the execution petition. This was challenged by the respondent before this court and this court by Ext.R4 judgment set aside the order passed by the execution court closing the execution petition and directed the execution court to execute the decree. As per the directions in Ext.R4 judgment, the execution court heard the petitioners and the respondent and issued arrest warrant. That was challenged by the petitioners by filing OP(C).No.1285/2016 which was dismissed by Ext.R5 judgment. Though repeated arrest warrants have been issued, the same could not be executed and the execution court by Ext.R6 order, granted police assistance to the Amin to execute the warrant against the petitioners. That was also evaded by the petitioners and suppressing all these facts that the present petition has been filed and stay of operation of Ext.R6 order has been obtained. Since they had suppressed things that has _O.P.(C).No.2197 of 2016_ 6 transpired earlier and also the fact that the same question has been raised earlier and rejected as per Ext.R2 order by this court, the petitioners are not entitled to raise the same by filing the present petition before the court below. The objection now raised by the petitioners ought to have been raised on the earlier occasion which has not been done. This court after considering all those aspects held that the foreign award is executable in India and rejected the contentions raised and even the order of arrest ordered by the court earlier was also confirmed by this court. So under such circumstances, the petitioners are not entitled to get any relief and they prayed for dismissal of the application with exemplary cost. 7. Heard Sri.Johnson Gomez, counsel appearing for the petitioners and Sri.T.R. Aswas, counsel appearing for the respondent. 8. The counsel for the petitioners submitted that, the prayer in the petition is only to give direction to the court below to consider Ext.P4 application filed and pass appropriate orders in that application. Further being a legal question that has been raised, there is no _res judicata_ . Further as per Section 9 of the Federal Arbitration Act of U.S.A, the award of the arbitrator has to be confirmed by the court, then only it will become valid, till then it is not executable. It is a condition precedent for enforcing the award. It will be seen from Exts.P10 and P11 as to how the confirmation will have to be done by _O.P.(C).No.2197 of 2016_ 7 the court at United States of America as per the Rules. He had also submitted that, he had not suppressed any fact. As directed by this court, he had produced the earlier orders along with I.A.1190/2016 and they were marked as Exts.P5 to P7. So there is no suppression as contended in the counter statement. He has also argued that, his limited prayer is only to direct the court below to consider Ext.P4 application filed by him and this court need not at this stage consider the legality of the provisions in this writ petitions and till then, the court below has to keep the warrant of arrest issued in abeyance. 9. On the other hand, the counsel for the respondent submitted that, it is only a dilatory tactics adopted by the petitioners to prolong the proceedings, which has been initiated in the year 2012. Further the executability of the award has been considered by this court in an earlier proceedings between the same parties and found that it is enforcible under Section 49 of the Arbitration and Conciliation Act. Further in the petition filed by the petitioners, they had not mentioned the result of earlier proceedings transpired between the parties in the same proceedings and they had not even challenged the present order, but they had only innocently filed the application stating that they have filed an application, challenging the executability of the award and that has to be considered by that court, till then the order of arrest passed by the court below has to be kept in abeyance as _O.P.(C).No.2197 of 2016_ 8 though such a question was raised for the first time. So they had suppressed the material facts and they should have placed all the materials before this court that transpired between the parties earlier and then should have submitted this application which they had not done. So they have not entitled to get the discretionary order of this court. He had relied on the decision reported in _**Escorts Ltd. v. Universal Tractor Holding LLC**_ (2013) 10 SCC 717), where it has been held that, there is no necessity for confirmation, and as such no confirmation is required for executing the foreign award in India. He had also relied on the decision reported in _**Chi Commodities Handlers Inc v. Najeem Cashew Industries, Kilikolloor**_ (2015(3) KLJ 664) where it has been held that courts which are empowered to deal with enforcement of foreign awards shall meticulously and scrupulously comply with the stipulations in the Act and dispose of the case within a time frame. The person challenging the enforceability of Foreign Award can rely in the materials in the records itself to prove that the award is unsustainable. 10. It is an admitted fact that the petitioners and respondents are having business transactions and they have entered into an agreement whereby their disputes will have to be settled by virtue of arbitration and accordingly Ext.P1 award has been obtained by the respondent against the petitioners passed by the sole arbitration _O.P.(C).No.2197 of 2016_ 9 Association of Food Industries Inc Newyork. It is also an admitted fact that the respondent herein filed E.P.81/2013 before the District Court, Alappuzha for enforcement of the award against the petitioners and since the court below did not proceed with the execution, the respondents filed a petition before this court as O.P.(C)1356/2014 for speedy disposal and this court directed the District Judge, Alappuzha to take up E.P.81/2013 on its file and pass final orders on or before 31.08.2014 as per Ext.P1 judgment of this court. Thereafter, after enquiry the court below found that it is enforcible in India and that was challenged by the petitioners herein by filing C.R.P.65/2015 before this court and this court by Ext.R2 order relying on Section 47 and 48 of Arbitration and Conciliation Act, 1996 held that the judgment debtor is only entitled to raise only those contentions available under Section 48 of the Act and thereafter came to the conclusion that none of the grounds mentioned under Section 48 has been proved by the petitioners and as such the court below was perfectly justified in coming to the conclusion that the award is executable in India and dismissed the civil revision petition filed by the petitioners. He had not raised the present point that has been raised in the earlier proceedings between the parties. Since the execution court did not finalize the execution proceedings, the respondent again moved this court by filing O.P.(C)3049/2015 and this court by Ext.R3 judgment directed the _O.P.(C).No.2197 of 2016_ 10 court below to expedite the disposal as mentioned in Ext.R1 judgment. Since the court below found that, that has no territorial jurisdiction to entertain the application, the petitioners again moved this court by filing O.P.(C)1039/2016 and this court by Ext.R4 judgment set aside the order closing the execution petition and directed the Additional District Judge before whom the case is pending to execute the award. When the attempt of the decree holders to get the property of the judgment debtors attached and sold failed as it was mortgaged to a nationalized bank, they filed application to enforce the award against the petitioners herein by arrest and detention under Order 21 Rule 37 of the Code of Civil Procedure and the petitioners filed objection stating that they have no means to pay the amount and that was rejected by the execution court and ordered arrest on earlier occasion which was challenged by the petitioners by filing O.P.(C)1285/2016 which was dismissed by this court by Ext.R5 judgment, which was produced by the petitioners also as Ext.P7 along with I.A.1190/2016. It is thereafter that the petitioners have filed Ext.P4 petition before the court below and come to this court to give direction to the court below to consider that application within a time frame, till then the order of arrest should not be executed. 11. At the time when the original petition was filed, the petitioners have not mentioned the orders passed by this court in _O.P.(C).No.2197 of 2016_ 11 C.R.P.65/2015 filed by them evidenced by Ext.R2 and O.P.(C) 1285/2016 evidenced by Ext.R5. But only when then court asked at the time of admission as to whether there was any earlier order passed in this regard and whether that has been challenged, then only the petitioners filed I.A.1190/2016 to receive additional documents where he had produced Ext.P6 to P8 which includes the judgment in O.P.(C)1285/2016 dated 6[th] June 2016, which was produced by the respondent also as Ext.R3. Even at that time they have not produced Ext.R2 judgment passed by this court holding that the foreign award is enforcible in law unless the petitioners were able to establish the grounds mentioned under section 48 of the Arbitration and Conciliation Act, 1996 to challenge the enforceability of the foreign award in India. So there is some force in the submission made by the counsel for the respondent that at the time when the petitioners filed the petition, the petitioners have suppressed material facts and only when this court directed the petitioners to produce the earlier order, they have produced only certain documents and not all the orders passed by this court between the parties in respect of the same proceedings regarding the maintainability or earlier arrest order passed by this court. So there is material suppression of facts by the petitioners. 12. Further in the decision reported in _**Escorts Ltd., v. Universal Tractor Holding LLC**_ (2013) 10 SCC 717), the Supreme _O.P.(C).No.2197 of 2016_ 12 Court has considered the scope of Section 9 of Federal Arbitration Rules U.S.A and held that confirmation is not required and held that an arbitration award passed in U.S.A against the appellant Indian company is enforcible in India without confirmation. That was a case where an arbitration award passed in U.S.A. against an Indian company and when it was sought to be executed in India, an objection was raised by the judgment debtor that unless the award is confirmed by foreign court as per Section 9 of Federal Arbitration Act, U.S, the award is not executable in India, since not binding, that was dismissed by the High Court and that was confirmed by the apex court. It was observed that under U.S. law issue notice of three months is imperative if the party wants to dispute the award which was not complied by the petitioner. Further consent order for referring dispute to arbitration clearly recorded that the award given by the arbitrator is final and binding on the parties. Also Rule of double exequatur doctrine is dispensed with in view of changed law by adoption of provisions of New York convection by 1996 Act. So under such circumstances, the non-confirmation of the award by the U.S. Court, as provided under the Federal Court Arbitration Rules, is not a ground for challenging the executability of the foreign award as per the above decision. So under such circumstances, this court feels that there is no necessity to give any direction to the court _O.P.(C).No.2197 of 2016_ 13 below to pass appropriate orders in Ext.P4 petition, as it is for that court to pass appropriate orders in that application especially when the petitioners were trying to obstruct the execution by one way or other and getting adverse orders against them regarding the same. The court below can pass appropriate orders in Ext.P4 petition and this court feels that there is no necessity to issue any direction in this regard as once an application has been filed, it is for that court to pass appropriate orders without delay and this court has the faith that, that will be done by the court below and this court do not want to give any direction to the court below to keep the execution proceedings in abeyance as well considering the conduct of the parties. It is for that court to consider and pass appropriate orders in Exts.P4 and P5 petitions. With the above direction and observation this petition is dismissed. Registry is directed to communicate the judgment to the court below at the earliest. Interim order of stay granted is vacated. _Sd/-_ ## K.RAMAKRISHNAN , JUDGE //True Copy// P.A. to Judge cl&ss