Foreign Awards (Recognition and Enforcement) Act, 1961

Enhancement of interest in absence of appeal

Arbitration - International Arbitration - Enhancement of interest in absence of appeal - Board of Appeal constituted under the rules of Federation of Oil, Seeds and Fats Associations Ltd. (FOSFA), London while deciding the appeal of NAFED enhancing the interest whereas Alimenta S.A. filed no appeal - NAFED was directed to pay interest components at the rate of 11.25% instead of 10.5% p.a. - It was not open to the Board of Appeal to increase the interest in the absence of appeal - Foreign Awards (Recognition and Enforcement) Act, 1961- Section 7. #2020 SCeJ 676

Legal representation

Arbitration - International arbitration – Legal representation - Rules allowed legal representation in Appeal - Not allowed - In the absence of proof of prejudice caused due to non-representation by a Legal Representative and to show that it was disabled to put forth its views, award can not be set aside - Arbitration proceedings governed by the rules of Federation of Oil, Seeds and Fats Associations Ltd. (FOSFA), London – Appeal against the award to the Board of Appeal - NAFED was not allowed to have any legal representation before the arbitral tribunal or in the Board of Appeal - Rule 3 of the FOSFA Rules bars the parties from having legal representation before the Arbitral Tribunal - However, Rule 6 empowers the Board of Appeal to allow legal representation to the parties in case of particular circumstances - NAFED through its solicitor submitted letters to permit legal representation - However, the same was denied by the Board of Appeals - Due opportunity of defending to NAFED was not afforded - It is not disputed that before the Arbitration Tribunal, the rule debars legal representation; hence the submission as to non representation before the Tribunal, cannot be accepted - However, in appeal due to refusal to permit representation through a legal firm, the NAFED was not able to point out the prejudice caused to it - In the absence of proof of prejudice caused due to non-representation by a Legal Representative and to show that it was disabled to put forth its views, we cannot set aside the award on the ground that it would have been proper to allow the assistance of a Legal Representative - Foreign Awards (Recognition and Enforcement) Act, 1961- Section 7 . #2020 SCeJ 676

Public Policy

Arbitration - Public Policy - Foreign Awards (Recognition and Enforcement) Act, 1961- Section 7 – Section 7 inter alia provides that a foreign award may not be enforced if the “enforcement of the award will be contrary to public policy” - The expression “public policy” relates to the public policy of the country where award is being enforced - Section 23 of the Contract Act, 1872 deals with what consideration and objects are lawful and what not - If the court regards it as immoral or opposed to public policy, in that event, the consideration or object of agreement is said to be unlawful, and any agreement of which the object or consideration is unlawful is void. Held, It is apparent from above-mentioned decisions as to enforceability of foreign awards, Clause 14 of FOSFA Agreement and as per the law applicable in India, no export could have taken place without the permission of the Government, and the NAFED was unable to supply, as it did not have any permission in the season 1980-81 to effect the supply, it required the permission of the Government. The matter is such which pertains to the fundamental policy of India and parties were aware of it, and contracted that in such an exigency as provided in clause 14, the Agreement shall be cancelled for the supply which could not be made. It became void under section 32 of the Contract Act on happening of contingency. Thus, it was not open because of the clear terms of the Arbitration Agreement to saddle the liability upon the NAFED to pay damages as the contract became void. There was no permission to export commodity of the previous year in the next season, and then the Government declined permission to NAFED to supply. Thus, it would be against the fundamental public policy of India to enforce such an award, any supply made then would contravene the public policy of India relating to export for which permission of the Government of India was necessary. [Para 68] Held, In our considered opinion, the award could not be said to be enforceable, given the provisions contained in Section 7(1)(b)(ii) of the Foreign Awards Act. As per the test laid down in Renusagar (supra), its enforcement would be against the fundamental policy of Indian Law and the basic concept of justice. Thus, we hold that award is unenforceable, and the High Court erred in law in holding otherwise in a perfunctory manner. [Para 69] #2020 SCeJ 676