Case Note & Summary
The dispute arose from a contract between Centrotrade Minerals and Metals Inc., a US corporation, and Hindustan Copper Ltd. (HCL) for the sale of copper concentrate. The contract contained a two-tier arbitration clause: first arbitration in India under the Indian Council of Arbitration, and if either party disagreed, a second arbitration by the ICC in London. The Indian arbitrator made a nil award. Centrotrade invoked the second tier, and Jeremy Cook QC, appointed by the ICC, delivered an award in London on 29.09.2001, awarding Centrotrade various sums. HCL challenged the arbitration clause in Indian courts and obtained an ex parte stay, later vacated by the Supreme Court. When Centrotrade sought to enforce the London award in India, the Calcutta High Court's Single Judge dismissed HCL's objections under Section 48 of the Arbitration and Conciliation Act, 1996, but the Division Bench held the award unenforceable because the two awards were mutually destructive. The matter reached the Supreme Court, where a two-judge bench differed: S.B. Sinha J. held the two-tier clause invalid under Section 23 of the Contract Act, while Tarun Chatterjee J. held it valid but found HCL was not given proper opportunity to present its case. A three-judge bench was constituted and answered the first question in favor of validity, remitting the second question on enforceability. On the second question, the Supreme Court held that the ICC award is a foreign award and enforceable. The court examined the natural justice aspect and found that HCL was given six opportunities to present its case, and the arbitrator even considered documents filed after deadlines. The court rejected HCL's preliminary objection that the natural justice issue was not referred to the larger bench, noting that the difference of opinion included that issue. The court allowed Centrotrade's appeal and directed enforcement of the London award.
Headnote
A) Arbitration Law - Two-Tier Arbitration Clause - Validity - Section 23 of Indian Contract Act, 1872 - A two-tier arbitration clause providing for an initial arbitration in India and an appellate arbitration by ICC in London is valid and permissible under Indian law - The clause does not offend public policy or Section 23 of the Contract Act - Held that such clauses are recognized in international commercial arbitration and are not per se invalid (Paras 5-7). B) Arbitration Law - Foreign Award - Enforcement - Section 48 of Arbitration and Conciliation Act, 1996 - A foreign award rendered in appellate arbitration under a valid two-tier clause is enforceable in India - The award is a foreign award under Part II of the Act - The court must examine whether the party resisting enforcement was given proper opportunity to present its case - Held that on facts, HCL was given ample opportunity and the award is enforceable (Paras 8-10).
Issue of Consideration
Whether a foreign award rendered in appellate arbitration under a two-tier arbitration clause is liable to be enforced under Section 48 of the Arbitration and Conciliation Act, 1996, and whether HCL was given proper opportunity to present its case before the ICC arbitrator.
Final Decision
The Supreme Court allowed Centrotrade's appeal, set aside the Division Bench judgment of the Calcutta High Court, and held that the ICC London award is enforceable in India. The court directed enforcement of the award in accordance with law.
Law Points
- Two-tier arbitration clause is valid under Indian law
- Foreign award is enforceable under Section 48 of Arbitration and Conciliation Act
- 1996
- Natural justice opportunity must be assessed on facts
