Case Note & Summary
This was an appeal by certificate to the Supreme Court from a judgment of the Bombay High Court in a suit for recovery of money based on a foreign judgment and foreign awards. The respondent, East India Trading Co., a New York corporation trading in spices, sued the appellant, Badat & Co., a Bombay partnership, for Rs. 92,884-4-10. By correspondence, the parties entered into two contracts for sale of Allepey Turmeric Fingers on terms of the American Spice Trade Association, which included an arbitration clause. The appellant failed to supply turmeric. The respondent referred the disputes to arbitration in New York under the Association rules; the appellant did not participate. Two awards dated July 12, 1949 were made in favour of the respondent. The respondent obtained confirmation of the awards by a judgment of the Supreme Court of the State of New York. The respondent filed Suit No. 71 of 1954 in the Bombay High Court Original Side on the foreign judgment and alternatively on the awards. The Single Judge dismissed the suit; the Division Bench held the suit maintainable on the awards (not on the judgment) and decreed it. The appellant appealed to the Supreme Court. The legal issues included whether the Bombay High Court had jurisdiction over the foreign judgment and awards, whether foreign awards were enforceable in India under common law, whether the awards were final under New York law, and whether the plaintiff proved the necessary conditions. The appellant contended that the suit was not maintainable on the foreign judgment because the cause of action arose in New York; that the awards were not final under New York law and could not furnish a cause of action; and that the High Court lacked jurisdiction. The respondent argued that the contracts were concluded in Bombay, so part of the cause of action arose there; that the awards were valid and final; and that admissions in the pleadings proved the necessary facts. The majority, consisting of Dayal and Mudholkar JJ, held that apart from the Arbitration Protocol and Convention Act, 1937, foreign awards and judgments based on awards are enforceable in India on common law principles. A foreign judgment creates an independent cause of action where it is rendered, so the Bombay High Court had no jurisdiction over the New York judgment. A foreign award must be final according to the law of the country where made to be sued upon; if that law gives finality to the judgment based on the award rather than to the award itself, the award cannot furnish a cause of action. The majority examined New York law and found that the relevant provisions for confirmation of awards had not been complied with, so the awards were not final. Thus the suit on the awards also failed. Subba Rao J dissented, holding that an award does not merge in a judgment; a suit lies on a foreign award if final and three conditions are proved; he found those conditions proved by admissions in pleadings under Order VIII Rules 3-5 CPC and by admissible foreign judgment under the Evidence Act; and he held that the Bombay High Court had jurisdiction because the contracts were concluded within its original limits. The Supreme Court allowed the appeal, set aside the Division Bench decree, and dismissed the suit, holding that the awards lacked finality and could not be enforced in India. The New York judgment was not actionable in Bombay because the cause of action arose outside the court's jurisdiction.
Headnote
A) Private International Law - Enforcement of Foreign Awards and Judgments - Foreign awards and foreign judgments based on awards are enforceable in India on same grounds as English common law, applying justice, equity and good conscience - Arbitration (Protocol and Convention) Act, 1937 - The respondent sued on a New York judgment confirming two arbitration awards and alternatively on awards; majority held that apart from statutory scheme, common law principles applied and plaintiff could sue on original cause of action, but the foreign judgment created an independent cause of action arising in New York, so Bombay High Court lacked jurisdiction over judgment. Held that suit on foreign judgment not maintainable. (Paras Not mentioned) B) Arbitration - Foreign Award Finality - A foreign award must be final according to law of country where made to furnish a fresh cause of action; if law gives finality only to judgment on award, award cannot be sued upon - Arbitration (Protocol and Convention) Act, 1937; American Spice Trade Association Rules - Majority held that although Bombay High Court had jurisdiction to enforce a final foreign award if submission made within its original jurisdiction, the awards in question were not final under New York law because relevant provisions of New York laws for confirmation had not been complied with; therefore awards could not provide cause of action. Held suit on awards fails. (Paras Not mentioned) C) Civil Procedure - Pleadings and Admissions - Order VIII Rules 3-5 CPC require specific denial of plaint allegations; evasive denial amounts to admission; discretion under proviso to Rule 5 must be exercised as justice demands - Code of Civil Procedure, 1908, Order VIII Rules 3-5 - Per Subba Rao J (dissenting), written statement must deal specifically with each allegation; on original side of Bombay High Court pleadings strictly construed; appellant's failure to specifically deny arbitration agreement, conduct of arbitration, and validity of awards resulted in admissions proving necessary conditions. Held that three conditions for suit on foreign award were admitted. (Paras Not mentioned) D) Evidence - Proof of Foreign Judicial Records - Section 78(6) requires proof of character of document according to foreign law before admission; Section 86 presumption can be drawn before document is admitted - Indian Evidence Act, 1872, Sections 78(6) and 86 - Per Subba Rao J, certified copies of New York Supreme Court proceedings and certificate of Consul General of India satisfied conditions for admissibility; presumption under Section 86 could be drawn. Held that judgment of New York Supreme Court admissible. (Paras Not mentioned) E) Jurisdiction - Territorial Jurisdiction in Contract Disputes - Part of cause of action arises where contract concluded within local limits of original jurisdiction - Code of Civil Procedure, 1908 (general principles) - Per Subba Rao J, contracts concluded within original jurisdiction of Bombay High Court, so part of cause of action arose there, giving Bombay High Court jurisdiction to try suit on awards. Held that High Court had jurisdiction. (Paras Not mentioned)
Issue of Consideration
Whether the Bombay High Court had jurisdiction to entertain a suit on foreign awards and a foreign judgment based on awards; whether the awards were final and enforceable in India; whether the suit was maintainable.
Final Decision
Appeal allowed; Division Bench judgment set aside; suit dismissed. The foreign awards were not final under New York law and could not furnish a cause of action; the Bombay High Court had no jurisdiction to entertain suit on the New York judgment because cause of action arose outside its limits.
Law Points
- Foreign awards and foreign judgments based on awards are enforceable in India on same grounds as English common law on principles of justice
- equity and good conscience
- a foreign judgment can be enforced if the person against whom it is sought had opportunity to object to award validity
- a foreign award must be final according to law of country where made to furnish cause of action
- foreign judgment and award may be sued upon if final
- an award does not merge in judgment
- original cause of action remains
- for a suit on foreign award plaintiff must prove arbitration agreement
- award in accordance with agreement
- valid and final under foreign law
- subsisting at date of suit
- Order VIII Rules 3-5 CPC require specific denial of plaint allegations
- evasive denial amounts to admission
- Section 78(6) and 86 Evidence Act deal with proof and presumption of foreign judicial records
