In 2012, 14 contracts for sale of RSM by the Friends Group (Kandla Export Corporation, Oswal Salt and Chemical Industries, Friends and Friends Shipping Private Limited, and Friends Mercantile Private Limited) to M/s OCI Corporation ("OCI") were entered into. In July 2012, the Friends Group informed OCI that the contract had expired because OCI had not nominated its vessels before the commencement of the delivery period and it had failed to open letters of credit. Due to the disputes between the parties, arbitration proceedings commenced. OCI obtained 9 foreign awards ("Awards") from GAFTA, London. Thereafter, execution applications were filed before the Gandhidham District Court which were transferred to the Commercial Division of the Gujarat High Court after the commencement of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 ("Commercial Courts Act").
Commercial Division of the Gujarat High Court by its order dated 8 August 2017 held that the Awards have become final as per English Law and are enforceable. By order dated 28 September 2017 (the "Impugned Order"), the Commercial Appellate Division of the High Court of Gujarat dismissed the appeals filed against the 8 August 2017 order, on the grounds that the appeals were not maintainable, being appeals from orders not specifically mentioned in Section 50 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act").
Special Leave Petitions ("SLPs") were filed by the Friends Group, through Kandla Export Corporation, against the Impugned Order.
Whether Section 13 of the Commercial Courts Act provides for an additional right of appeal against an order of the Commercial Division enforcing a foreign award when such a right of appeal is not provided under Section 50 of the Arbitration Act.
The Court after perusing the provisions of both, the Arbitration Act and the Commercial Courts Act, held that the appeals filed under Section 50 of the Arbitration Act have to be adjudicated within the parameters of Section 50 alone. In this regard, the Court strongly relied on the decision laid down in Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333 and held that Section 50 of the Arbitration Act is a provision contained in a self-contained code on matters pertaining to arbitration, and is exhaustive in nature. Hence, where Section 50 excludes an appeal, no such appeal will lie. The Court also observed that the Commercial Courts Act is a general legislation as compared to the Arbitration Act. Therefore, Section 13(1) of the Commercial Courts Act would not apply to cases covered under Section 50 of the Arbitration Act.
Section 50 of the Arbitration Act alone provides for an appeal in cases of enforcement of foreign awards and the forum of appeal is left "to the Court authorized by law to hear appeals from such orders". This means that if an appeal lies under Section 50 of the Arbitration Act, then Section 13(1) of the Commercial Courts Act, which provides forum for such appeals, would be attracted. With regard to Friends Group's argument that Section 21 of the Commercial Courts Act will have an overriding effect over the Arbitration Act, the Court observed that Section 21 of Commercial Courts Act would only apply if Section 13(1) of the Commercial Courts Act were to apply first. Since Section 13(1) of the Commercial Courts Act is found not to be applicable, Section 21 cannot be held to apply. The Court also observed that if an appeal under Section 13(1) of the Commercial Courts Act is allowed in cases where the foreign award is for INR 1 crore or more, it would not only further delay the enforcement of such awards but also lead to absurdity, where there is no such appeal for foreign award of less than INR 1 crore. Accordingly, the Supreme Court dismissed the appeal.
This judgment is a landmark decision as it delineates the scope of judicial interference and challenge under Section 13 of the Commercial Courts Act. It gives effect to the objects of both the Commercial Courts Act and the Arbitration Act, which provide for speedy resolution of disputes between the parties. The judgment further clarifies the confusion regarding appeals in arbitration cases under the Commercial Courts Act and holds that the Arbitration Act is a special statute for matters relating to arbitration.
* Kandla Export Corporation and Anr. v. M/s OCI Corporation and Anr., Civil Appeal Nos. 1661-1663 of 2018 arising out of SLP (C) Nos. 28582-84 of 2017; OCI was represented by team from Shardul Amarchand Mangaldas & Co., consisting of Tejas Karia, Partner & Head – Arbitration, Ila Kapoor, Partner, Shruti Sabharwal, Senior Associate, Ananya Aggarwal, Senior Associate, Ritika Sinha, Associate, Surabhi Lal, Associate and Kiran Devrani, Associate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.