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M/S. CENTROTRADE MINERALS & METALS INC. VS. HINDUSTAN COPPER LTD.

Author: KAMALI.A.N, V year of B.A.,LL.B.(Hons.) from SAVEETHA SCHOOL OF LAW, SIMATS, SAVEETHA UNIVERSITY.


CASE TITLE

​M/S. Centrotrade Minerals & Metals Inc.. vs Hindustan Copper Ltd.

CITATION

AIR 2020 SC 3136

DATE OF ORDER

Civil Appeal No.2562 of 2006

JURISDICTION

​Civil Appellate Jurisdiction (SC)

QUORUM

​Rohinton Fali Nariman, Navin Sinha, B.R. Gavai

AUTHOR OF JUDGEMENT

​Rohinton Fali Nariman

APPELLANT

M/S. Centrotrade Minerals & Metals Inc.

RESPONDENT

​Hindustan Copper Ltd.

COUNSEL FOR APPELLANT

​Mr. Sarkar (2 JUDGE BENCH)

Mr. Shri Gourab Banerjee (3 JUDGE BENCH)

COUNSEL FOR RESPONDENT

​Mr. Debabrata Ray Choudhury (2 JUDGE BENCH)

Mr.Shri Hardin P. Raval (3 JUDGE BENCH)

LEGISLATIONS INVOLVED

The Arbitration and Conciliation Act,


ABSTRACT

This paper deals with the concept of arbitration by means of business and trade. The main concept of Arbitration is to solve the problem quickly without interference of official court proceedings, but when the controversies arises the court can interfere at any stage of the case. When look into Arbitration, their are two tier Arbitration and multi tier arbitration, like Indian Awards versus Foreign Awards. One of the landmark cases in the field of Arbitration is Centrotrade Minerals & Metals Inc.. vs Hindustan Copper Ltd, which is a case between a US based company and Indian based company. Which also laid down the history of the two tier Arbitration system in India. The case mainly dealt with the definition of Foreign Award mentioned in section 44 of the Arbitration and Conciliation Act, 1996. When the party is aggravated by the order given in 1st tier arbitration then they can move on to two tier Arbitration by means of appeal, Appeal is granted only based on the merits of the case. Thus in this case, the court decides about the inception of foreign awards in the state, by considering the various other countries judgement. Here the company is US based corporation and Indian based Corporation, where the problem occurs in quality of dry copper concentrate payments made as per consignments. Then the corporation challenged the two tier systems applicability in India. In the time of increase of globalization, many Multi national companies are investing in India, to globalise. The Power of Economic system in india will be based on the trust and loyal among business mates, so that the business can be safeguarded .

KEYWORDS : Arbitration, Two tier system, Foreign awards, Appeal, Merits


INTRODUCTION & FACTS OF THE CASE

Both the corporation CMMI and HCL had entered into a contract for the sale of 15,500 DMT of Copper concentrate, and the goods mentioned will be used by HCL. After the delivery of goods, the payments have been made as per consignments. Because of doubt in dry copper concentrate weight, the dispute was aroused between the contracted parties. As per mentioned clause 14 of agreement, a two-tier arbitration will be performed in case of disputes.


FIRST TIER OF ARBITRATION

■ Settled in India

■ Indian council of Arbitration appointed Arbitrator

■ Award passed on 15.06.1999

■ Granted Nil Award


SECOND TIER OF ARBITRATION

■ Settled in ICC (London)

■ Centrotrade invoked second part of Arbitration

■ ICC Appointed Jeremy Cook QC

■ Award passed on 29.09.2001

■ Passed in favour of Centrotrade, asks the HCL to

● Pay Purchase price + Interest for 1st shipment

● Pay Demurrage due + Interest for 1st shipment

● Pay Purchase price + Interest for 2nd shipment

● Pay legal costs + cost of International Court of Arbitration + Arbitrator Fees

● Pay 6% p.a. Compound interest from date of award until actual payment occurs.


SUIT IN KHETRI COURT

■ Before the award was passed in London

■ HCL filed a suit before the court of Khetri, State of Rajasthan, challenging the Arbitration clause 14.

■ Order passed on 27.04.2000


SUIT IN HIGH COURT OF RAJASTHAN

■ Filed Revision petition against The Khetri court’s order.

■ HC controlled the Centrotrade to take further action in London arbitration.

■ Interim stay granted by High court

■ Then the Supreme Court of India stopped the stay order on 08.02.2001

■ The SC constantly referred about the stay of matters to ICC, London and says that the ICC arbitrator can continue with proceedings.


SUIT IN CALCUTTA HIGH COURT

■ As the 2nd tier arbitration favoured Centrotrade, they started to enforce the order.

■ But HCL was against the order and filed a petition in Calcutta HC challenging Section 48 of The Arbitration Act, 1940.

■ HC dismissed the petition filed and said foreign award will be executable in India.

■ Order passed on 28.07.2004

■ HC allowed Appeal because Foreign Award couldn't be said to be an ICC, London Award, but the concept of two tier Arbitration is valid in India.


SUIT IN SUPREME COURT OF INDIA

■ Matter referred to division bench then to 3 judge bench

DIVISION BENCH

JUSTICE S.B. SINHA

○ Clause 14 will be invalid as per sec 23 of Indian contract act

○ 2 tired Arbitration violates public policy

○ Foreign award is not enforceable in India

○ Appeal filed by HCL is allowed.


JUSTICE TARUN CHATTERJEE

○ Clause 14 is permissible in India

○ ICC Arbitrator can appeal against the Indian award granted by Arbitrator

○ Award granted by ICC is an foreign award

○ As proper opportunity was not given to HCL to present it before ICC, Centrotrade appeal is not accountable and dismissed

○ HCL appeal is allowed


THREE JUDGE BENCH

● Petition by HCL is allowed

● Two tier system was not prohibited by act

● Refused to consider the foreign award

● Questioned the validity of 2 tier arbitration clause

● 3 judge bench referred as centrotrade 2


AGAIN THREE JUDGE BENCH

● 2 tier arbitration clause was enforceable

● SC also examines the standard of Section 48 (1)(b)[4]

● SC noted that HCL was given multiple time, inspite of that it was not properly utilised by them

● Court discussed Vijay Karia v. Prysmian Cavi E Sistemi SRL 2020 (3) SCALE 494

● HCL doesnot challenged any proceedings of ICC award

● Court enforced the foreign award.


ISSUES

1. Whether the 2 tier Arbitration is valid as per Clause 14 of part 2 and permissible in India?

2. While Interpreting Agreemental clause 14 is valid, then the ICC Arbitrator can appeal against the Indian award granted by Arbitrator?

3. Whether the award granted by ICC is an foreign award or not?

4. Whether proper opportunity was given to HCL to present its case?


ARGUMENTS

IN FAVOUR OF HCL

■ Argued Section 48 (1)(b)[4] is violative

■ HCL argued that Documents submitted by HCL are not considered, thus it amounts to violation of fairness and Justice.

■ Argued that ICC was not given enough time to argue and submit the documents

■ Argued ICC Award is not enforceable


IN FAVOUR OF CENTROTRADE

■ There is No denial of Natural Justice

■ The ample time was given to HCL to submit the documents.

■ The ICC award was enforceable.


ORDER

● Though HCL is not involved in arbitral proceedings, they are intended to participate in proceedings.

● And no default was found on the side of HCL based on the facts and circumstances.

● The case filed in Calcutta High Court, challenging the validity of sec 48 was not maintainable because the jurisdiction was outside India.

● Court held that the foreign award will be enforceable.


CASES REFERRED

1. In the case of Renusagar Power Co. Ltd. v. General Electric Company and Anr[1]., the court for the dirst time states about the "Public Policy" in above mentioned as Justice/Morality, Fundamental policy of Indian Law and Interests of India.

2. As per Municipal Corporation of Greater Mumbai v. Jyoti Construction Co.[2] , 2003, held that if any arbitral award was affecting public policy was set aside by court under sec 34(2)(b)(ii), then it is considered as valid.

3. In the case of Minmetals Germany Gmbh v. Ferco Steel Ltd.(1999)[3] ,it held that the outside his control test was used only when it was contrary to the principles of natural justice. This was also applied in the case of Jorf Lasfar Energy Co. v. AMCI Export Corp, here held that the suit cannot be seen as unfair and violative of Justice if the parties purposefully ignore the proceedings.

4. In the case of Consorcio Rive v. Briggs of Cancun[4] held that if any of either of the parties is not present during the time of proceedings then it can't be seen as injustice to the parties though they are advised to participate.

5. In Kavalappara Kottarathil Kochuni v. States of Madras and Kerala[5], 1960, held about the word "Otherwise", the meaning of it can be broader or narrower sense.


CONCLUSION

By the Judgement given by the Hon’ble Supreme Court, we can conclude that the two tier Arbitration is valid in India as it makes the strong business among global arbitration. Though the foreign award is valid, it cant be an ICC award, but ICC Award can be a foreign award. In the firld of business, the concept of arbitration plays an major role of deciding factor when disputes aroused.


RELATED CASE LAWS

● Vijay Karia v. Prysmian Cavi E Sistemi SRL 2020 (3) SCALE 494

● Hari Om Maheshwari v. Vinitkumar Parikh [(2005) 1 SCC 379

● Minmetal Germany GmbH v. Ferco Steel Ltd. [ (1999) 1 All ER (Comm) 315

● Jorf Lasfar Energy Co. v. AMCI Export Corp. 2008 WL 1228930

● Dongwoo Mann+Hummel Co. Ltd. v. Mann+Hummel GmbH (2008) SGHC 275

● Kavalappara Kottarathil Kochuni v. States of Madras and Kerala (1960) 3 SCR 887

● B. Monck v. Hilton, 46 LJMC 167

● Waterproof Works (P) Ltd. v. Union of India (1999) 4 SCC 33

● Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier, 508 F.2d 969, 975 (2d Cir.1974)

● Seasons Hotels v. Consorcio Barr S.A. 613 Supp 2d 1362 (S.D. Fla. 2009)

● Nanjing Cereals v. Luckmate Commodities XXI Y.B. Com. Arb. 542 (1996)

● Qinhuangdao Tongda Enterprise Development Co. v. Million Basic Co. Ltd. [1993] 1 HKLR 173

● De Maio Giuseppe v. Interskins Y.B. Comm. Arb. XXVII (2002) 492.


IX. REFERENCE

[1] 1994 AIR 860, 1994 SCC Supl. (1) 644 [2] 2003 (3) ARBLR 489 Bom, 2003 (4) BomCR 770, 2003 (4) MhLj 25 [3] [1999] 1 All ER (Comm) 315 [4] Civ.A. 99–2204 [5] 1960 AIR 1080

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