Summary
The foreign award imposing damages on NAFED was held unenforceable because government refusal of export permission triggered the contract’s express cancellation contingency. Section 32 governed the agreed contingency, rather than Section 56 frustration. Enforcing damages despite that prohibition offended fundamental Indian policy under the Foreign Awards Act, 1961. Separate objections concerning legal representation and appointment during interim stays did not supply the basis for refusal.
Issues
- Whether refusal of government export permission discharged the unfulfilled contract under its prohibition clause.
- Whether Section 32 or Section 56 governed the contingency.
- Whether enforcement of the foreign award conflicted with public policy.
- Whether the additional procedural and interest objections affected enforcement.
Provisions considered
- Section 32, Indian Contract Act, 1872Applied the agreed contingency of export prohibition and consequent cancellation of the unfulfilled contract. (¶¶ 43, 44, 45, 47, 48, 49, 50, 52, 55, 57, 68, 80)
- Section 7(1)(b)(ii), Foreign Awards (Recognition and Enforcement) Act, 1961Refused enforcement as contrary to fundamental Indian policy and the basic concept of justice in light of the export restriction and agreed cancellation. (¶¶ 52, 59, 60, 63, 65, 68, 69, 80)
- Clause 14, FOSFA 20 contract dated 12 January 1980Applied the express prohibition-and-cancellation provision to the Government’s refusal of permission for carry-forward exports. (¶¶ 32, 33, 34, 35, 38, 43, 44, 48, 57, 68, 80)
Held
- NAFED, as canalising agency, required government permission to carry the prior season’s commitment forward. Permission was refused and the governmental direction was binding. Clause 14 covered that contingency and released the parties from performance of the unfulfilled portion. NAFED could not lawfully make the supply without permission. (¶¶ 31, 32, 33, 34, 35, 36, 37, 38, 43, 44, 57, 58)
- When the contract expressly or impliedly stipulates discharge upon a specified contingency, Section 32 governs its consequences. Section 56 addresses supervening impossibility outside such an agreed term. Here both sides contemplated governmental restriction, so the express cancellation clause and Section 32 applied. (¶¶ 44, 45, 46, 47, 48, 49, 50, 52, 55)
- Public policy in foreign-award enforcement is construed narrowly; mere factual or legal error does not justify appellate review of an award. Applying the Renusagar test to this case, however, enforcing damages despite the binding export restriction and agreed cancellation offended fundamental Indian policy and the basic concept of justice. The award was unenforceable under Section 7(1)(b)(ii). (¶¶ 59, 60, 63, 64, 65, 66, 67, 68, 69, 80)
- The objection to appointments made during interim stays was not entertained at this stage: the earlier proceedings had ended in 1987 with permission for arbitration to continue, when the issue should have been raised. (¶¶ 70, 71, 72)
- Tribunal rules prohibited legal representation, and NAFED showed no concrete prejudice from denial of representation at the appellate stage. That objection did not justify refusal of enforcement. The Court criticised an arbitrator’s later advocacy defending his award but declined to decide that objection without sufficient material on the relevant UK law and practice. (¶¶ 73, 74, 75, 76, 77, 78)
- The appellate board could not increase interest from 10.5% to 11.25% without an appeal by Alimenta. Other submissions did not require decision once the award was held unenforceable. (¶ 79)
Result
NAFED’s appeal allowed; High Court judgment set aside and foreign award declared unenforceable. No costs.