{"id":173077,"date":"1999-05-13T00:00:00","date_gmt":"1999-05-12T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/harendra-h-mehta-anid-ors-vs-mukesh-h-mehta-and-ors-on-13-may-1999"},"modified":"2017-10-03T07:47:58","modified_gmt":"2017-10-03T02:17:58","slug":"harendra-h-mehta-anid-ors-vs-mukesh-h-mehta-and-ors-on-13-may-1999","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/harendra-h-mehta-anid-ors-vs-mukesh-h-mehta-and-ors-on-13-may-1999","title":{"rendered":"Harendra H Mehta Anid Ors vs Mukesh H. Mehta And Ors on 13 May, 1999"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Harendra H Mehta Anid Ors vs Mukesh H. Mehta And Ors on 13 May, 1999<\/div>\n
Bench: D P. Wadhwa, Santosh Hegde<\/div>\n
           CASE NO.:\nAppeal (civil)  4006 of 1995\n\nPETITIONER:\nHARENDRA H MEHTA ANID ORS.\n\nRESPONDENT:\nMUKESH H. MEHTA AND ORS\n\nDATE OF JUDGMENT: 13\/05\/1999\n\nBENCH:\nD P. WADHWA & SANTOSH HEGDE\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
1999 (3) SCR 562<\/p>\n
The Judgment of the Court was delivered by<\/p>\n
D.P. WADHWA, J. The Appellants (Harendra H. Mehta & Ors.) are challenging
\nthe judgment dated February 24, 1995 of the Bombay High Court enforcing the
\n`foreign award’ dated October 31. 1990 on a petition fileId by the
\nRespondents (Mukesh H. Mehta & Ors,). It was, however, directed that the
\nenforcement of the same or execution of the decree shall be subject to the
\nrespondents’ obtaining the necessary permission under Foreign Exchange
\nRegulations Act, 1973 `(`F-ERA’, for short) as regards the enforcement part
\nin India is concerned. The matter came to this Court on a certificate
\ngranted by the High Court under Article 134A read with Article 134(l)(c) of
\nthe Constitution. The impugned judgment had been rendered by a single
\nJudge, There was some controversy if a single Judge could grant such a
\ncertificate. However, considering the importance of the issue involved,
\nthis Court admitted the appeal. The controversy, therefore, does not
\nsurvive in the present appeal.\n<\/p>\n
For convenience, we refer to the appellants as `Harendra’ and respondent as
\n`Mukesh’, Both Harendra and Mukesh are brothers. Harendra is elder to
\nMukesh. They appointed their older brother Lalit Mehta as arbitrator to
\ndivide their businesses and properties both in the United States of America
\n(USA) and India. Lalit Mehta gave his award in New York. Some proceedings
\narising out of the arbitration :agreement and the award were held there in
\nthe courts. Arbitration agreement was entered into at New York where
\narbitration proceedings held and award given. Mukesh applied to the Bombay
\nHigh Court here under the provisions of the Foreign Awards (Regulation and
\nEnforcement) Act, 1961 (for short, the `Foreign Awards Act’) for enforcing
\nthe award. High Court after contest ordered the award to be filed and
\npronounced judgment according to the award as required under Section 6 of
\nthe Foreign Awards Act, Harendra finds himself aggrieved by the judgment,
\nThat is how the matter before us.\n<\/p>\n
We may now consider the controversy between the brothers in detail.
\nHarendra and Mukesh were having vast businesses in the USA and India. They
\nalso acquired properties in both the countries. Disputes having arisen,
\nthey decided to divide and distribute their jointly held assets: Both haye
\nequal share in all the properties and businesses. On October 25, 1989, they
\nentered into an agreement to refer their disputes to their elder brother
\nLalit Mehta. Their submission to the arbitrator is in the following terms:\n<\/p>\n
“Lalit Mehta, 48 Arobor Lane, Roslyn Hts., W- 1.1577. Dear Lalitbhai,<\/p>\n
We,. Harendra Mehta and Mukesh Mehta hereby appoint you as our
\nsole\/arbitrator for the following difference of opinions.\n<\/p>\n
They are related to :\n<\/p>\n
1. All our business in USA & India<\/p>\n
2. Social relationship.\n<\/p>\n
Your award in the matter shall be binding on both of us and our legal
\nheirs.\n<\/p>\n
In areas where you need any assistance of any lawyers arid\/or technical or
\noutside persons you are fully authorised to take such assistance,<\/p>\n
On our part we agree to offer our fullest co-operation in giving you all
\nthe document, papers and any information you call for from time to time.\n<\/p>\n
We shall ensure full participation in the meetings and clarify whatever
\nexplanations and clarification you may seek.\n<\/p>\n
we shall be prepared to sign any papers in advance that you ask for before
\nthe beginning of the arbitration proceedings which will remain solely in
\nyour custody.\n<\/p>\n
If you require the signatures of bur wives and any of bur representatives
\nwe shall give you the same as may be called for by you.\n<\/p>\n
Yours sincerely,
\nSd\/-\n<\/p>\n
Harendra Mehta<\/p>\n
Sd\/-\n<\/p>\n
Mukesh Mehta
\nSd\/-\n<\/p>\n
Witness”\n<\/p>\n
Thereafter a formal agreement dated November 17, 1989 to refer the disputes
\nto Arbitrator Lalit Mehta was entered into by the parties. It was signed by
\nHarendra, his wife Amita Mehta and Hafendra Mehta as Manager (KIrta) of his
\nHUF on the one part and Mukesh Mehta his wife Daksha Mehta and Mukesh Mehta
\nas Manager (Karta) of his HUF on the other. This agreement gave the details
\nof the businesses carried on by the parties and their properties in USA and
\nIndia. The agreement was entered into in New York and was duly notorised
\nthere. It would appear that the formal agreement dated November 17,1889 to
\nrefer the disputes to Arbitrator superseded the earlier agreement dated
\nOctober 25, 1989.\n<\/p>\n
Hareridra challenged the agreement dated November 17, 1989 in the Supreme
\nCourt of the State of New York, Nassau County Court by motion dated
\nFebruary 16, 1990 ori the ground that it was unconscionable, against public
\npolicy, entered under duress and coercion and that the arbitrator is biased
\nand cannot be fair and impartial, this challenge was negatived by judgment
\ndated March 12, 1990: It will be seen that the challenge to the agreement
\nwas made after the arbitrator had entered into reference. The court
\nobserved that Harendra Was a seasoned businessman, having managed numerous
\nsuccessful businesses both in USA and in India. He signed not just one but
\ntwo submission agreements. Court wondered why did he consent on two
\noccasions that Lalit Mehta be chosen arbitrator if he allegedly had
\nstrained relations with him. There was nothing to show that any duress or
\ncoercion was caused. In short, the Court negatived all the pleas of
\nHarendra and said that the agreement could not be declared invalid on a
\nmotion under Article 7503 of CPLR (Civil Practice Law Rules) and,
\ntherefore, “an application to declare the agreement invalid must await a
\ntrial and, therefore, was premature.”\n<\/p>\n
During the pendency of the arbitration proceedings, parties settled their
\ndifferences by entering into a detailed agreement on March 20, 1990. The
\nagreement was to toe retroactively effective as on March 1, 1999, The
\nagreement detailed various properties and businesses which the parties were
\nhaving. Harendra was to draw four packages `A’, `A-1′, `B’ and `B-l’ as
\nunder :\n<\/p>\n
” `A’- USA properties and businesses<\/p>\n
`A-1′ – U.S.- Note for payment. In US $ and share in jointly held in US
\nproperties and businesses.\n<\/p>\n
`B’- Indian properties and businesses<\/p>\n
`B’- Indian Note for payment in Indian rupees and certain India properties
\nand share and interest in jointly held Indian properties and businesses.”\n<\/p>\n
It was agreed that one party would choose A+B-1 or B+A-1. First choice was
\nto be exercised by Mukesh. The arbitrator was to make his award in
\naccordance with the selection of packages. Parties were to execute transfer
\nand closing documents in terms of the award; The forms in which the
\ndocuments were to be executed were also prescribed. It was also agreed that
\nthe parties shall execute, from time to time, any and all further documents
\nthat may be required at any time to effectuate the award made in pursuance
\nto the agreement. On refusal of any of the parties to execute the transfer
\nand closing documents, it was agreed that Mr, Vinod Mehta shall be duly
\nappointed attorney of each of the parties to execute the transfer and
\nclosing documents. There was also a penalty clause in case of failure or
\nfeusal to execute the transfer and closing documents. That was irrespective
\nof any other remedy open to the parties. Mukesh opted for the package
\nB+A-1, On March 20, 1990 itself, the arbitrator rendered his award after
\nthe proceedings were held under CPLR 7507 incorporating the aforesaid
\nsettlement agreement of the same date. CPLR 7507 provides that the award
\nshall be in writing, signed and acknowledged by the arbitrator making it
\nwithin the time fixed by the agreement, or if the time is not fixed, within
\nsuch time as the court orders. There is also provision for delivering a
\ncopy of the award to each of the parties.\n<\/p>\n
In proceedings under CPLR 7507 which were held on March 20, 1990 Amita
\nMehta, wife of Harendra, represented her husband as his attorney and
\nappeared in-person. Both Mukesh and his wife Daksha Mehta were present They
\nall waived notice of the hearing; They agreed that they had entered into
\nand executed an agreement involving all the issues of the arbitration
\nproceedings. Judge Ralph diamond, before whom the proceedings under CPLR
\n7507 were held, examined the parties who were present along with their
\ncounsel as to the execution of the settlement agreement by each of the
\nparties and thereafter the award made by the arbitrator It was recorded
\nthat Mukesh had given the choice of packages A1 with B. It was also
\nrecorded that the arbitrator had two fold functions (I) to make the award
\nand (2) to implement the award.\n<\/p>\n
Now, Mukesh Mehta brought a motion for an order pursuant to CPLR 7510 for
\nconfirmation of the award in the Nassau Country Court in the State of New
\nYork. Harendra also filed cross motion for an order pursuant to CPLR 751
\nl(b) for vacating the award or in the alternative seeking modification of
\nthe award on the grounds mentioned in the cross motion. By judgment dated
\nOctober 22, 1990, the Court confirmed the award granting the motion of
\nMukesh Mehta with certain modifications. It observed that Harendra failed
\nto demonstrate that the award either dealt with matters beyond the scope of
\nwhat had been submitted or that he gave a completely irrational
\nconstruction to the settlement agreement between the parties which was
\nincorporated in the award and formed part of the award. There were certain
\ntypographical errors in the judgment which were corrected by Order dated
\nOctober 31, 1990. A formal order was drawn on January 14. 1991 which read
\nas under;\n<\/p>\n
“ORDERED AND ADJUDGED, pursuant to CPLR 7510 and 7514 that the award of the
\narbitrator, Lalit Mehta, dated October 31, 1990 is hereby confirmed and
\nshall constitute a judgment of this court, provided however, that payments
\nby A,D. Development Ltd. to Mukesh Mehta for the purchase of his shares of
\nA.D. Development Ltd. shall be limited pursuant to Business Corporation Law
\ns. 514 to the availability of surplus, and it is further,<\/p>\n
ORDERED AND ADJUDGED, that the branch of the motion of Mukesh Mehta and
\nDaksha Mehta seeking reargument of this court’s order and decision dated
\nOctober 22, 1996 be, and the same hereby is granted, and it is declared
\nthat the limitation of payments by A.D. Development Ltd. for the repurchase
\nof shares to years in which the Corporation has a surplus is not applicable
\nto others obligated to make such payments, and it is further,<\/p>\n
ORDERED, that the cfoss-motion of Harendra pursuant to CPLR 75 M(b) for an
\norder vacating such arbitration award on grounds of fraud or for
\nmodification of the award to substitute a different neutral party to
\ndetermine certain matters be, and the same hereby is, denied without a
\nhearing, and it is further<\/p>\n
ORDERED, that the branch of Harendra `s cross-motion pursuant to CPLR 7514
\nseeking to compel Mukesh Mehta to comply with certain obligations pursuant
\nto such arbitration award, and conditioning enforcement of any judgment
\nagainst Harendra upon Mukesh Mehta’s first fully complying therewith be,
\nand the same hereby is, denied, and it is further,<\/p>\n
ORDERED AND ADJUDGED, that other remedies to enforce the award flow from
\nthis judgment and enforcement proceedings may be brought in an appropriate
\nforum; and it is further,<\/p>\n
ORDERED, that the branch of Harendra’s cross-motion pursuant to CPLR 6302
\nand 6311 to enjoin Mukesh Mehta and Daksha Mehta from taking any additional
\naction concerning certain Indian documents released to them by the law firm
\nof D.M. Harish & Co., and compelling Mukesh Mehta to deliver such documents
\nto the court pending further proceedings be, and the same hereby is denied,
\nand it is further,<\/p>\n
ORDERED AND ADJUDGED, that pursuant to the provisions of paragraphs “12”,
\n“15” and “17” of the Settlement Agreement dated March 20, 1990 incorporated
\ninto the award of the arbitrator, Mukesh Mehta, residing at 48 Arbor Lane,
\nRoslyn Heights, New York 11577 shall recover from A.D. Development Ltd., a
\nNew York Corporation having its principal place of business located at 22,
\nAthex Drive, Glen Cove, New York 11542 the sum of $ 265,000 less the sum of
\n$146.293 paid on account thereof, making the net sum of $188, 706.21, with
\ninterest upon $ 68706.31 of said sum from October 3.1,1990 to December 31,
\n1990 at the rate of 9% per annum, in the amount of $1,030.59; and `interest
\non $25,000 from November 1, 1999 to December 31, 1990 at the rate of 9% per
\nannum, in the amount of $375; With interest on $25,000 from December 1,
\n1990 to December 31, 1990 at the rate of 9% per annum, in the amount of
\n$187,50; and making in all a judgment of $120,299.30 as of December 31,
\n1990; and it is further…”\n<\/p>\n
Objections of Harendra to the award were, thus, rejected by the Nassau
\nCounty Court. It, however, modified the award limiting and restricting the
\npayment to be made to Mukesh by the US company for his share and passed
\njudgment confirming the award so modified.\n<\/p>\n
In those proceedings under CPLR 7510, the Court noticed that arbitration
\nproceedings were recorded under oath held before a Court Reporter and
\nNotary Public and though language of the award showed that the arbitrator
\nhad signed and affirmed the award but, in fact, he did not actually sign
\nthe award or deliver a copy to each party as required by CPLR 7507. The
\nCourt, however, observed that the parties agreed that the failure of the
\narbitrator to issue an award shall not affect the validity or binding
\neffect of settlement agreement, The Court, therefore, permitted to the
\narbitrator to sign and affirm the award in compliance with CPLR 7507 and
\nserve a copy on the parties or their attorneys. Liberty was then granted to
\nMukesh to renew his application to confirm the signed award. In pursuance
\nwith this direction by the Court, the arbitrator signed his award on
\nOctober 31, 1990.\n<\/p>\n
Amita Mehta then filed an affidavit on February 13, 1992 in Nassau County
\nCourt alleging that duly initiated schedules A and B of the Settlement
\nAgreement had been fraudulently substituted by other non-initialed
\nschedules which contained some entirely new clauses. By order dated
\nSeptember 20, 1993, the Supreme Court of New York Appellate Division
\nrejected her plea regarding fraudulent substitution of schedules.\n<\/p>\n
Now, the scene shifted to India when Mukesh moved the Bombay High Court
\nunder provisions of the Foreign Awards Act for enforcement of the Award
\ndated October 31, 1990 of Lalit Mehta the arbitrator, contending the same
\nto be a foreign award. Harendra raised various pleas in opposition thereto.
\nHigh Court after elaborate discussion rejected all of them and ordered that
\nthe award be filed and proceeded to pronounce judgment according to the
\naward and thereafter decree followed.\n<\/p>\n
Mr. Ganesh, learned counsel for the appellant, submitted that the High
\nCourt could not order the award to be Filed and give judgment in terms
\nthereof. His objections to the impugned judgment were :\n<\/p>\n
1.      It is not an arbitral award inasmuch as there was no dispute on the
\nbasis of which the arbitrator could give his award   The arbitrator merely
\nacted as a rubber stamp.\n<\/p>\n
2.      It is not an award under the foreign Awards Act as the award is
\nmerely effecting a family settlement. It is not of commercial nature.
\nDispute did not arise out of any international trade.\n<\/p>\n
3.      Chapter XX-C of the Income Tax Act, 1961 has been violated and the
\nenforcement of the award in violation of the law of this country would be
\nagainst the public policy,<\/p>\n
4.      The award merged in the foreign judgment of a New York Court which
\nmodified the award: So only the judgment could be enforced.\n<\/p>\n
5.      A fraud has been committed in getting the award and further that
\ncertain schedules which formed part of the agreement to refer the disputes
\nto arbitration have been fraudulently substituted.\n<\/p>\n
6.      Supreme Court of the State of New York had already passed judgment
\non June 6,1995 directing enforcement of the award which would now be
\nforeign judgment. The respondent has, in fact, filed a suit in the Bombay
\nHigh Court on the basis of the foreign judgment which suit was Filed in
\n1996 and service was effected on the appellant only in 1997.\n<\/p>\n
Detailing his objections Mr, Ganesh said :\n<\/p>\n
He read the objects and reasons of the Foreign Awards Act, Definition of
\n`foreign Award’ is given in Section 2 of that Act and also Articles I and
\n11 of the New York Convention of Recognition and Enforcement of Foreign<\/p>\n
Awards which is schedule to the Foreign Awards Act. Argument was that
\nForeign Awards Act is inapplicable as it is not a `foreign award’.\n<\/p>\n
Section 2 of the Foreign Awards Act defines the “foreign award” to mean an
\naward on differences between persons arising out of legal relationship,
\nwhether contractually or not considered as commercial under the law in
\nforce in India, made on or after the 11th day of October, 1960-\n<\/p>\n
(a) in pursuance of an agreement in writing for arbitration to which the
\nConvention set forth in the Schedule applies, and<\/p>\n
(b) in one of such territories as the Central Government being satisfied
\nthat reciprocal provisions have been made, may by notification in the
\nOfficial Gazette, declare to be territories to which the said Convention
\napplies.\n<\/p>\n
Article 1 of the New York Convention is as under :\n<\/p>\n
 `Article I<\/p>\n
1.  This convention shall apply to the recognition and enforcement of
\narbitral awards made in the territory of a State other than the State where
\nthe recognition and enforcement of such awards are sought, and arising out
\nof difference between persons, whether physical or legal. It shall also
\napply to arbitral awards not considered as domestic awards in the State
\nwhere their recognition and enforcement are sought,<\/p>\n
2. The term “arbitral awards” shall include not only awards made by
\narbitrators appointed for each case but also those made by the permanent
\narbitral bodies to which the parties have submitted,<\/p>\n
3. When signing, ratifying or acceding to this Convention, or notifying
\nextension under article X hereof, any State may on the basis of reciprocity
\ndeclare that it will apply the Convention to the recognition and
\nenforcement of awards made only in the territory of another Contracting
\nState, it may also declare that it will apply the Convention only to
\ndifferences arising out of legal relationships, whether contractual or not,
\nwhich are considered as commercial under the national law of the State
\nmaking such declaration:”\n<\/p>\n
Article II of the Convention is in somewhat similar terms as the expression
\n`foreign award’ under Section 2 of the Foreign Awards Act and it is as
\nunder:\n<\/p>\n
“Article II<\/p>\n
1.  Each Contracting State shall recognise an agreement in writing under
\nwhich the parties undertake to submit to arbitration all or any differences
\nwhich have arisen or which may arise between them in respect of defined
\nlegal relationship, whether contractual or not, concerning a subject matter
\ncapable of settlement by arbitration.\n<\/p>\n
2.  The term “agreement in writing” shall include an arbitral clause in a
\ncontract or an arbitration agreement, signed by the parlies or contained in
\nand exchange of letters or telegrams.\n<\/p>\n
3.  The Court of a Contracting State, when seized of an action in a matter
\nin respect of which the parties have made an agreement within the meaning
\nof this article, shall, at  the request of one of the parties, refer the
\nparties to arbitration, unless it finds that the said agreement is null and
\nvoid, inoperative or incapable of being performed.”\n<\/p>\n
Submission of Mr. Ganesh was that it is not a foreign award because (i)
\nthere was no commercial dispute arising out of any international trade;\n<\/p>\n
(ii) award does not relate to any commercial dispute arising if! the course
\nof international trade; and (iii) legal relationship between the parties
\nwas of family members having equal shares in the properties and businesses
\nwho merely sought separation and partition of their respective shares. He
\nsaid that mere fact that some of the properties happened to be derived form
\nthe business done by the parties could not convert the award into foreign
\naward. To support his submission, he referred to two decisions of this
\nCourt in R.M.. Investment and Trading Co. Ltd. v. Boeing Co. and Anr.,<\/a>
\n[1994] 4 SCC 54 and Renusagar Power Co. Ltd, v. General Electronic Co. &
\nAnr.,<\/a> [1984] 4 SCC 679, In our view these two judgments do not help the
\nappellants. Rather the stress in these judgments is that broad and not
\nrestricted construction should be given to the word “commercial” appearing
\nin Section 2 of the Foreign Awards Act. In R.M. Investment and Trading
\nCompanies Pvt. Limited’s case, terms of the agreement required the
\npetitioner to play an active role in promoting the sale and to provide
\n“commercial and managerial assistance and information” which may be helpful
\nin respondents sales efforts. It was held that relationship between the
\nappellants and respondents was of commerciaJ nature. This Court said that
\nthe word “commercial” under Section 2 of the Foreign Awards Act should be
\nliberally construed. In Renusagar’s case no doubt this Court observed that
\nthe Foreign Awards Act was calculated and designed to subserve the cause of
\nfacilitating international trade and promotion thereof by providing for
\nspeedy Settlement of disputes arising in such trade through arbitration and
\nalso said that any expression or phrase occurring therein should receive
\nconsistent with its literal and grammatical Sense a liberal construction.\n<\/p>\n
In ordinary parlance “commercial means’<\/p>\n
” 1… of, engaged in, or concerned with, commerce. 2 Having profit as
\nprimary and rather than artistic etc. value; philistine.” (the Concise
\nOxford Dictionary).\n<\/p>\n
In Black’s Law dictionary, “commercial” is defined asI :\n<\/p>\n
“Relates to or is connected with trade and traffic or commerce in general
\nis occupied with business and commerce. Anderson v. HumIble Oil& Refining
\nCo., 226 Ga. 174 S.E. 2d 415, 416.”\n<\/p>\n
The word “trade” is also defined in the Black’s Law Dictionary. It is :\n<\/p>\n
“the act or the business or buying and selling for money; traffic; barter.
\nMay V. Sloan, 101 U.S, 231, 25, L.Ed. 797, Purchase and sale of goods and
\nservices between businesses, states or nations. Trade is not a technical
\nword and is ordinarily used in three senses: (1) in that of exchanging
\ngoods or commodities by barter of by buying and selling for money; (2) in
\nthat of a business occupation generally; (3) in that of a mechanical
\nemployment, in contradistinction to the learned professions, agriculture,
\nof the liberal arts. People v. Volar vort of America, Inc., 1.0 Misc. 2d
\n378, 174 N.Y.S. 2d 789, 793.\n<\/p>\n
An occupation or regular means of livelihood and is business one practices
\nother work in which one engages regularly. One’s calling; occupation;
\ngainful employment; means of livelihood. People v. Carr,, 163 Cal. App. 2d
\n568, 329 P. 2d 746, 752.”\n<\/p>\n
We do not understand as to how it could be said that the award was hot a
\nforeign award. All the ingredients of Foreign award were there. Parties
\nwere having business both in India and in the United States of America as a
\njoint venture and they also acquired properties. Differences that arose
\nbetween the parties were out of legal relationships and certainly of
\ncommercial nature under the laws of this country. Agreement to refer the
\ndisputes to arbitration, in writing, was made in the United States where
\narbitration proceedings held and award given. It is not disputed that
\nUnited States is a country to which clause (b) of Section 2 of the Foreign
\nAwards Act applies, In the present case, the parties are no doubt related
\nto each other but that could not take the award outside the ambit of the
\nForeign Awards Act, We asked Mr. Ganesh as to what would happen if there
\nwere two strangers having businesses both in India and in United States or
\nwhen there was a joint venture between an Indian and a US national having
\nproperties both moveable and immovable in both the countries and disputes
\nhaving arisen and award given in the United States, Mr. Ganesh, in spite of
\nhis resourcefulness, was unable to give any convincing reply; There is no
\nmerit in the objection of the appellant that the award is not a foreign
\naward arid that it is outside the Foreign Awards Act<\/p>\n
That the award is not an arbitral award, submission of Mr. Ganesh was that
\nthe arbitration agreement which was entered into on November 17, 1989 stood
\nrevoked after the parties arrived at the settlement agreement dated March
\n20, 1990, Earlier agreement dated October 25, 1989 to refer the disputes to
\narbitration stood superseded by the agreement dated November 17, 1989. Mr,
\nGanesh read in detail the terms of the settlement agreement to contend that
\nparties themselves had resolved their disputes and that agreement was to
\ntake effect irrespective of the fact whether the arbitrator gave his award
\nin terms thereof or not. He said arbitrator was to act merely as a rubber
\nstamp after parties had opted for various packages containing their
\nbusinesses and properties , Submission in brief was that unless there was
\ndispute or difference, there could be no arbitration, The arbitrator was
\nnot only not required to act judicially after the agreements dated November
\n17, 1989 had been arrived at between the parties but, in fact, he was
\nprevented from acting judicially and giving any decision whatsoever
\naffecting the fights Of parties. He was not expected to hear or apply his
\nmind or perform any of the arbitration functions. In such a situation, even
\nthough there was in existence an arbitration agreement that stood revoked
\nfor one basic and simple reason that at that time there existed no dispute.
\nThe agreement was straightaway made into the award, in support of his
\nsubmissions, Mr. Ganesh referred to a decision of this Court in K.K. Modi,
\nv. K.N Modi & Ors.,<\/a> [1983] 3 SCO 575 to contend that when a person has been
\nauthorised to decide a certain dispute between the parties but he has no
\nfunction to perform as arbitrator, he could not give an award. But in that
\ncase, under clause (9) of the Memorandum of Understanding between the
\nparties there were different contentions; one contending that the clause
\nconstituted arbitration agreement, the other contending to the contrary.
\nThis clause (9) was as follows : “Implementation will be done in
\nconsultation with the financial institutions. For all disputes,
\nclarifications etc, in respect of implementation of this agreement, the
\nsame shall be referred to the Chairman, IFCI or his nominees whose
\ndecisions will be final and binding on bath the groups”.\n<\/p>\n
It was in this context that this Court said that looking at the nature of
\nthe functions expected to be performed by the Chairmen, IFCI, his decision
\nis not arbitration award. This judgment hardly helps Mr Ganesh in his
\nsubmissions. In the present case, the parties entered into the settlement
\nduring pendency of the arbitration proceedings. Appellant himself
\napproached the courts in the United States never complain ing that it was
\nnot an award. In proceedings under CPLR 7507 and CPLR 7510, Harendra had
\neven accepted the execution of the settlement agreement and the award made
\nby the arbitrator. We find that no such plea was taken either in the High
\nCourt or in the grounds of appeal to this Court. Nassau County Court
\nnoticed the functions to be performed by the arbitrator in the settlement
\nagreement. We do not find any merit in the argument of Mr, Ganesh that
\narbitration agreement stood revoked when the parties during the course of
\narbitration proceedings entered into a settlement among themselves and yet
\nwanted the arbitrator to give his award in terms thereof. It is nobody’s
\ncase that authority of the arbitrator was revoked at any time. This
\nargument of Mr Ganesh seems to us to be made in more desperation.\n<\/p>\n
Nassau County Court did not modify the award as such it merely corrected
\nthe award so as to conform to the law of the State of New York.\n<\/p>\n
Contention of the appellants that fraud was committed substituting
\nschedules in the award which schedules formed part of the settlement
\nagreement referring disputes to arbitration was also a subject matter of
\nchallenge in Nassau County Court by the appellants which was rejected.\n<\/p>\n
Section 7 of the Foreign Award Act details the circumstances under which a
\nforeign award may not be enforced. These are :\n<\/p>\n
“7. Conditions for enforcement of foreign awards . – (1) A foreign award
\nmay not be enforced under this Act –\n<\/p>\n
(a) if the party against whom it is sought to enforce the award proves to
\nthe Court dealing with the case that-\n<\/p>\n
(i)    the parties to the agreement were under the law applicable to them,
\nunder some incapacity, or the said agreement is not valid under the law to-
\nwhich-the parties have subjected it, or failing any indication thereon,
\nunder the law of the country where the award made; or<\/p>\n
(ii) the party was not given proper notice of the appointment of the
\narbitrator or of the arbitration proceedings or was otherwise unable to
\npresent his case; or<\/p>\n
(iii) the award deals with questions not referred or contains decisions on
\nmatter beyond the scope of the agreement ;\n<\/p>\n
Provided that if the decisions on matter submitted to arbitration can be
\nseparated from those not submitted, that part of the award which contains
\ndecisions on matter submitted to arbitration may be enforced; or<\/p>\n
(iv) the composition of the arbitral authority or the arbitral authority or
\nthe arbitral procedure was not in accordance with the agreement of the
\nparties or failing such agreement, was not in accordance with the law of
\nthe country where the arbitration took place; or<\/p>\n
(v) the award has not yet become binding on the parties or has been set
\naside or suspended by a competent authority of the country in which, or
\nunder the law of which, that award was made; or<\/p>\n
(b)    if the Court dealing with the case is satisfied that –\n<\/p>\n
(1)      the subject-matter of the difference is not capable of settlement
\nby arbitration under the law of India; or<\/p>\n
(ii)    the enforcement of the award will be contrary to public policy;\n<\/p>\n
(2)  If the court before which a foreign award is sought to be relied upon
\nis satisfied that an application for the setting aside of suspension of the
\naward has been made to a competent authority referred to in sub-clause (v)
\nof clause (a) of sub-section   (1), the court may, if it deems proper,
\nadjourn the decision on the enforcement of the award and may also, on the
\napplication of the party claiming enforcement of the away, order the other
\nparty to furnish suitable security.”`<\/p>\n
Supreme Court of New York, Appellate Division rejected the appellants plea
\nregarding fraudulent substitution of the schedules to the award. It will be
\nseen that a competent court in the State of New York rejected the
\ncontention of the appellants that any fraud had been committed. Therefore,
\nsub-section (2) of Section 7 of the Foreign Awards Act would not be
\napplicable. There are no conditions now exist under sub-section (1) of
\nSection 7 of the Foreign Awards Act not to enforce the award on the alleged
\nground of fraud. We find no merit in the plea of the appellant that
\nschedules to the award were substituted. This contention of the appellants
\nmust fail.\n<\/p>\n
It was then submitted by Mr. Ganesh that it was the case of the respondents
\nthemselves that the foreign award had already merged into judgment dated
\nJanuary 8,1991 of the Nassau County Court of the New York State. Under CPLR
\n7514, a judgement shall be entered upon the confirmation of an award. CPLR
\n7514 of the New York Arbitration Law is as under :\n<\/p>\n
“7514, Judgement on an Award<\/p>\n
(a)  Entry. A judgment shall be entered upon the confirmation of an award.\n<\/p>\n
(b)  Judgmnt-roll, The judgement-roll consists of the original or a Copy of
\nthe agreement and each written extension -of time within which to make an
\naward; the statement required by section seventy-five hundred eight [7508]
\nwhere the award was by confession; the award; each paper submitted to the
\ncourt and each order of the court upon an application sections 7510 and
\n7511; and a copy of the judgment.”\n<\/p>\n
He said the respondents filed a suit in the Bombay High Court on its
\noriginal side (Suit No, 3787\/96) on the basis of the judgment of Nassau
\nCounty Court dated 8.1.1991 arid that suit is pending of which service was
\neffected on the appellants only in August 1996. A copy of plaint in the
\nsuit filed by the respondents was shown to us during the course of hearing.
\nRespondents in that prayed as underI :\n<\/p>\n
(a)  That the Hon’ble Court be pleased to order and declares that the said
\nforeign judgment dated 8th January, 1991 delivered by the Supreme Court of
\nNassau. USA as confirmed by the Appellate Division of the Supreme Court of
\nNew York dated 20th September 1993 is final, conclusive and binding upon
\nthe plaintiffs as well as the Defendants herein;\n<\/p>\n
(b)  That this Hon’ble Court be pleased to pass a decree in terms of the
\nsaid Foreign Judgment orated 8th January, 1991 delivered by the Supreme
\nCourt of Nassau, USA as confirmed by the Appellate Division of the Supreme
\nCourt of New York dated 20th September, T.993.”\n<\/p>\n
Thus, the argument was that when respondents have themselves filed suit on
\nthe basis of the foreign judgement, they could not have recourse to Foreign
\nAwards Act. It was the foreign judgment in which the award merged which
\nwould now hold the field. In support of this submission reference was made
\nto a decision of this Court in Badat & Company v…East India Trading Co.
\n[1964] 4 SCR 19, This judgement, in our view, is not applicable in the
\npresent case. If read out of context, it may appear to be a so applicable
\nbut it is not so. In this case, dispute arose between Badat & Co., an
\nIndian firm and East Indian Trading Company, a Private Ltd. Company
\nincorporated under the laws of the State of New York in USA for supply of
\nturmeric by the Indian firm to the foreign company. Parties had agreed to
\ndo business on the terms of the American Spice Trade Association Under the
\nrules of the Association all questions and controversies and all claims
\narising under the contract shall be submitted to and settled by
\narbitration. American company invoked the arbitration agreement. It-
\nobtained two exparte awards totalling US $18748. American Company then
\nadopted proceedings in the Supreme Court of the State of New York to have
\nthe said awards confirmed and judgment entered thereon. Judgment confirming
\nthe awards was pronounced on April 13, 1950. American company thereupon
\ninstituted the suit in the Bombay High Court on January 14, 1954, Suit Was
\nsubstantially based on the foreign judgment and in the alternative on the
\ntwo awards given by a domestic tribunal functioning in New York, Indian
\nfirm raised number of pleas in defence. It was submitted that Indian firm
\nwas not residing within the limits of the original jurisdiction of the
\nBombay High Court or carry on business therein and the High Court had ho
\njurisdiction to entertain the suit. It was not disputed that the Indian
\nfirm on the date of the suit had ceased to reside or carry on business
\nwithin the limits of the civil jurisdiction of the Bombay High Court. The
\nmatter could have rested at that but this court proceeded to examine the
\nposition regarding the enforcement of foreign awards and foreign judgments
\nbased upon awards. It referred to the provisions of the Arbitration
\n(Protocol and Convention) Act, 1937 and observed that it was common ground
\nthat the provisions of that Act were not applicable to the awards in
\nquestion. It said that apart from the provisions of that Act, foreign
\nawards and foreign judgments based upon awards were enforceable in India on
\nthe same grounds and in the same circumstances on which they were
\nenforceable in England under the common law on grounds of justice, equity
\nand good conscience. This Court then examined the law on the subject in
\nEngland and said that there was conflict of opinion on a number of points
\nconcerning the enforcement of foreign awards and judgments based upon
\nforeign awards. However, certain propositions appear to be clear and these
\nwere stated as under :\n<\/p>\n
“One is that where the award is followed by a judgment in a proceeding
\nwhich is not merely formal but which permits of objections being taken to
\nthe validity of the award by the party against whom judgment is sought, the
\njudgment will be enforceable in England, Even in that case, however, the
\nplaintiff will have the right to sue on the original cause of action. The
\nsecond principle is that even a foreign award will be enforced in England
\nprovided it satisfies mutatis mutandis the tests applicable for the
\nenforcement of foreign judgements on the ground that it creates a
\ncontractual obligation arising out of submission to arbitration. On two
\nmatters connected with this there is difference of opinion. One is whether
\nan award which is followed by a judgment can be enforced as an award in
\nEngland or whether the judgment alone can be enforced. The other is whether
\nan award which is not enforceable in the country in which it was made
\nwithout obtaining an enforcement order or a judgement can be enforced in
\nEngland or whether in such a case the only remedy is to sue on the original
\ncause bf action, the third principle is that a foreign judgment or a
\nforeign award may be sued upon in England as giving good cause of action
\nprovided certain conditions are fulfilled one of which is that it has
\nbecome final.”\n<\/p>\n
Bearing in mind these principles this Court again considered whether
\njudgment of the Supreme Court of New York would be enforced against the
\nIndian firm by instituting a suit on the original side of the High Court
\nand said that the judgment furnished an independent cause of action and,
\ntherefore, the question would be whether the cause of action furnished by
\nit arose within the limits of the original jurisdiction of the Bombay High
\nCourt. The judgment was rendered in New York and, therefore, the cause of
\naction furnished by it arose at that place and not that anywhere else. This
\nCourt then said that cause of action was really independent of the cause of
\naction afforded by the contract and, therefore, if advantage was sought to
\nbe taken of it the suit would not lie at Bombay, Finally the Court said :\n<\/p>\n
“(1) that there was a contract between the parties whereunder disputes
\nbetween them could be referred to arbitration to a tribunal in a foreign
\ncountry;\n<\/p>\n
(2)    that the award is in accordance with .the terms of the agreements,’<\/p>\n
(3),   that the award is valid according to the law governing arbitration
\nproceedings obtaining in the country where the award, was made:\n<\/p>\n
(4)    that it was final according to the law of that country; and<\/p>\n
(5)    that it was a subsisting award at the date of suit. Then the court
\nobserved as follows :\n<\/p>\n
“A view has been expressed in some English case that an award must also be
\nenforceable in the country’ in which it was made before a suit can be
\nbrought in England on its basis. But upon the view we are taking it is not
\nnecessary to decide this point, Now, when a suit is brought by a plaintiff
\non the basis of an award it is not necessary for him to prove that the
\namount claimed was actually payable to him in respect of the dispute nor is
\nit open to the defendants to challenge the validity of such an award on
\ngrounds like those which are available in India under S.30 of the
\nArbitration Act. A very limited challenge to the claim based on the award
\nis permissible to the defendants and mat is one of the reasons why it is
\nimportant to ascertain whether the award has in fact attained finality in
\nthe country in which it was made. We will assume that the plaintiffs have
\nsatisfactorily established the fast three of the Five conditions which we
\nhave set out above. The question then is whether the fourth and the fifth
\nconditions have beert satisfied.”\n<\/p>\n
The Court then considered the requirements of the laws of New York State
\nfor giving an award finality and after examining various provisions said
\nthat “from all these provisions it would be abundantly clear that the award
\nhas no finality till the entire procedure is gone through and that the
\naward as such can never be enforced. What is enforceable is the judgment.”
\nIt then added “No doubt, as a result of the judgement the decision of the
\narbitrators became unchallengable in the New York State and for all
\npractical purposes in India as well but in the process the award made by
\nthem has given way to the judgment of the Supreme Court of New York, It is
\nthis judgment which can now furnish a cause of action to the plaintiffs and
\nnot the awards”. This Court then finally held :\n<\/p>\n
“No doubt, an award can furnish a fresh cause of action. But the award must
\nbe final. If the law of the country’ in which it-was made gives Finality to
\njudgment based upon an award and not to the award itself, the award can
\nfurnish no cause of action for a suit in India. In these circumstances, we
\nhold that: though the High Court of Bombay has jurisdiction to enforce a
\nfinal award made in a foreign country in pursuance of a submission made
\nwithin the limits of its original jurisdiction, the awards in question
\nbeing not final, cannot furnish a valid cause of action for the suit. Upon
\nthis view we allow the appeal and dismiss the suit with costs throughout.”\n<\/p>\n
The judgment of this Court in Badat & Co. is based on the English Common
\nLaw. Provisions of the Arbitration (Protocol and Convention) Act, 1937 were
\nheld to be inapplicable to the facts of the case. Here we are concerning
\nWith the provisions of Foreign Awards Act which give effect to the
\nConvention on the Recognition and Enforcement of Foreign Arbitral Awards
\nheld at New York on June 10, 1958 to which India was a party. To enforce a
\nforeign award, what we have to see is : if it is a foreign award within the
\nmeaning of Section 2 of the Foreign Awards Act and conditions as prescribed
\nby Section 7 for its enforcement exist. Under Section 4 of this Act, a
\nforeign award shall, subject to the provisions of the Act, be enforceable
\nin India as if it were an award made on a matter referred to :arbitration
\nin India. The Court has to apply the provision of the Foreign Awards Act to
\nenforce a foreign award within the meaning of Section 2 of the said Act. It
\nwould not be relevant to consider if the foreign award has attained
\nfinality in the country where it was made. Further, if a judgment has been
\nobtained on the basis of the award in the country of its origin, the person
\nin whose favour the judgment is made may also be entitled to file suit in
\nhis country based on that judgment if it satisfies the criteria laid by law
\nin this country. That may give that person an alternative mode to enforce
\nthe award but that would not mean that the provision of Foreign Award Act
\ncan be given a go by. We, therefore, find no force in the submission of Mr;
\nGanesh that once the award attained finality in the Supreme Court of New
\nYork, proceedings to enforce foreign award would not be maintainable and
\nthat only suit could be filed on the foreign judgment, being the judgment
\ngiven by the Supreme Court of New York, In Renusagar’s, this Court said :\n<\/p>\n
“Moreover, an examination of the relevant provisions of this Act (Foreign
\nAwards Act) and the Arbitration Act, 1940 will show that the schemes of the
\ntwo Acts are not identical and as will be pointed out at the appropriate
\nstage there are various differences which have a material bearing on the
\nquestion under consideration and as such decisions on similar or analogous
\nprovisions contained in the Arbitration Act may not help in deciding the
\nissue arising under the Foreign Awards Act because just as the Arbitration
\nAct, 1940 is a consolidating enactment governing all domestic awards the
\nForeign Awards Act constitutes a complete code by itself providing for all
\npossible contingencies in relation to foreign awards made pursuant to
\nagreements to which Article II of the Convention applies.”\n<\/p>\n
Thus, as held in Renusagar’s case [1984] 4 SCC 679, Foreign Awards Act is a
\ncomplete Code in itself providing for all the possible contingencies in
\nrelation to foreign awards. Once it is held that an award is a foreign
\naward, the provisions of the Foreign Awards Act would apply and where the
\nconditions for enforcement Of such an award exist as mentioned in Section 7
\nof this Act, the Court shall order the award to be filed and shall proceed
\nto pronounce judgment granting award and upon the judgment so pronounced,
\ndecree shall follow. It is not material for the purpose of enforcement of a
\nforeign award under the Foreign Awards Act that in any other country than
\nIndia, a judgment has already been passed by a Court of competent
\njurisdiction in terms of that award. A parry may have other remedy for
\nfiling a suit passed on a foreign judgment but that will not oust
\njurisdiction of the Court to enforce a foreign award under the Foreign
\nAwards Act. Provisions as contained in Sections 13 and 1.4 of the Code of
\nCivil Procedure (for short, the `Code’) would apply when a suit is brought
\non a foreign award. Under Section 44A of the Code, there is a provision for
\nexecution of decrees passed by Courts in reciprocating territory.
\nExplanation 1 to this section defines “reciprocating territory” to mean any
\ncountry or territory outside India which the Central Government may, by
\nnotification, in the Official Gazette, declare to be a reciprocating
\nterritory for the purposes of this section, Reciprocating territory
\nspecified in Section 44A of the Code may hot be same as that specified in
\nclause (b) of Section 2 of the Foreign Awards Act. We are not called upon
\nto decide in the present proceedings what is the effect of the judgment
\ngiven on the award in question in the United States and how the fiigh Court
\nwould proceed in the matter when a suit has been filed on the basis of the
\njudgment. The argument that the foreign award has merged in the judgment of
\nthe Supreme Court of the State of New York has, therefore, to be rejected.\n<\/p>\n
Main stress of Mr. Ganesh has been on the plea that the award is bad for
\nnon-compliance with the provisions of Chapter XX-C of the Income Tax Act,
\n1961 (for short, the `IT Act’}. Chapter XX-C confers on the Central
\nGovernment (through Income-tax Department) primitive right to purchase an
\nimmovable property for the amount of “apparent consideration”, where the
\nAppropriate Authority (constituted under the IT Act) finds that such
\n“apparent consideration” is 15% or more below the fair market value of the
\nproperty. Chapter XX-C gives the Income-Tax Department statutory right of
\npurchase of irnrnoveable property in respect of which the parties have
\nentered into an “agreement for transfer” within the meaning of Section 269
\nUA(a) of the IT Act. Section 269 UC requires that if an “agreement for
\ntransfer” has been entered into, the parties must thereupon reduce it to
\nwriting and file the requisite statement in the prescribed form with the
\nAppropriate Authority, thereby enabling the Appropriate Authority to
\nconsider the transaction and then to decide whether or not to exercise its
\nstatutory power of compulsory purchase. Rule 48 L (2) of the Income Tax
\nRules, 1962 lays down that the statement under Section 269UC must be
\nfurnished within 15 days from the date Of the entering into the “agreement
\nfor transfer”. Failure to comply with this statutory requirement attracts
\ncriminal sanctions user Section 276 AB, The term “transfer” has been given
\na wide meaning under Section 269 UA (f). It was submitted that the purpose
\nbehind the insertion of these provisions is to ensure that each and every
\ntransaction concerning “transfer” of “immoveable property” (which terms are
\nvery widely defined in Section 269 UA(f) and Section 269 U A(d) of the IT
\nAct) comes under the scrutiny of the Appropriate Authority as only then can
\nthere be a check on proliferation of uncounted money. It is stated that
\nthis Chapter was introduced in order to tackle the extremely grave problem
\nof rampant tax evasion and generation of black money which is then utilised
\nfor acquisition of immoveable properties at prices which are shown to be
\nfar below their real market value.\n<\/p>\n
The mere fact that the documents of conveyance\/exchange\/lease are to be
\nexecuted subsequently in pursuance of the said “agreement for transfer” is
\nof no relevance or consequence at ail. In fact, such documents of
\nconveyance can be executed only if and after the requisite no objection
\ncertificate (NOG) under the provisions of Chapter XX-C is issued. The
\nscheme of Chapter XX-C is that once an “agreement for transfer” has been
\nentered into, the parties have to mandatoriiy comply with the requirements
\nof Chapter XX-C and are prohibited from effecting “transfer” of the
\nproperty without first complying with the provisions of Chapter XX-C, that
\nis to say, filing the Section 269 UC statement within the specified time
\nand obtain the requisited NOG from the Appropriate Authority. It was
\nsubmitted that the Only situation in which Chapter XX-C does not apply is
\nwhere the transfer of property takes place without such an agreement ever
\nhaving been reached arid without the volition of the owner, such as, for
\nexample, when the property is sold by auction under a Court’s order.
\nConversely, whenever there te an “agreement for transfer” as defined under
\nChapter XX-C, which has beeti entered into between trie parties, Chapter
\nXX-C would be applicable in all force.\n<\/p>\n
As to what was the background under which Chapter XX-C came to be
\nincorporated under the IT Act, Mr, Ganesh referred to a decision of this
\nCourt in C.B. Gautam v. Union of India & Ors.,<\/a> (1993) 199ITR 530, where
\nthis Court noticed the arguments of the Union of India as ;\n<\/p>\n
“…the main reason behind the introduction of this Chapter in the Income-
\ntax Act was the desire to curb large scale evasion of income-tax and to
\ncounter to other modes of tax evasion adopted by various assessees to
\ndeprive the Government of its legitimate tax dues, It was felt that a lot
\nof tax evasion was involved in transfers of immovable properties in urban
\nareas. Reference is made in the affidavit to the recommendations of the
\nDirect Taxes Inquiry Committee chaired by the Hon’ble Mr, Justice Wanchoo,
\nretired Chief Justice of India and known as the Wanchoo Committee. In this
\ninterim report in 1970, the Wanchoo Committee took the view that
\nunderstatement of prices in the sale deeds of the immovable properties was
\na widespread method of tax evasion and recommended, by way of a drastic
\nremedy, that the Government should empower itself to acquire the property
\nwhere the consideration was found to be understated in the sale deeds. It
\nwas in pursuance of this recommendation that the provisions of Chapter XX-A
\nwere introduced in the Income-tax Act. However, the provision of that
\nChapter were found inadequate for dealing with the evil of under valuation
\nof immovable properties in sale deeds and agreements to sell with a view to
\nevade tax arid certain difficulties emerged in the effective enforcement of
\nthe provisions of Chapter XX-A. It was in these circumstances that Chapter
\nXX-C was introduced in the Income-tax Act. It may be mentioned here that
\nthe provisions of Chapter XX-A ceased to operate in respect of transfers of
\nimmovable property made after September 30, 1986, and as from October I,
\n1986, the provisions of Chapter XX-C came into force,”\n<\/p>\n
Mr. Ganesh submitted that the settlement agreement dated March 20, 1990
\nattracted the provisions of Chapter XX-C of the Income Tax Act and, thus,
\nit mandatorily required compliance with the provisions of that chapter. The
\naward was at best only a consent award which stood on no better: fooling
\nthan or on the same footing as a consent decree. He said in view of the
\ndecision of this Court that a consent decree is nothing but a private
\nagreement between the parties and that the seal of the Court which is added
\nthereto does not in any manner change its character or effect in law.\n<\/p>\n
In Baldevdas Shivlal and Aw. v, Filmistan Distributors (India), Pvt. Ltd &
\nOrs., AIR (1970) SC 406 this Court was considering whether a consent decree
\noperates as res judicata. It said that consent decree does not operate as
\nres judicata as it is merely the record of a contract between the parties
\nto a suit to which is super-added the seal of the court and that a matter
\nin contest in a suit may operate as res judicata only if there is an
\nadjudication by the court. The Court said that the terms of Section  11 of
\nthe Code of Civil Procedure left no scope for a contrary view. On this, Mr.
\nGanesh based an argument that award was nothing but a contract which
\ncontained transfer of interest, imrnoveable property in India by Harendra
\nand Mukesh and, thus, fall within the scope of Chapter Xx-C of the IT Act<\/p>\n
In Ruby Sales and Services (P) Ltd & Anr. v. State of Maharashtra & Ors.,<\/a>
\n[1994] 1 SCC 531, question before this Court was whether a consent decree
\nwhereunder the title of immoveable property is conveyed expressly falls
\nunder the definition of “conveyance” under Section 2(g) or “instrument”
\nunder Section 2(1) of the Act or such consent decree falls outside the
\nambit and scope of the definition of “conveyance” or “instrument” under the
\nAct. This Court upheld the view of the Division Bench of the Bombay High
\nCourt that having regard to the recital in the consent decree itself, the
\nconsent decree on its true interpretation is a conveyance itself and is
\ncovered by the definition of “conveyance” under the Stamp Act and at any
\nrate the consent decree fulfils all the requirements of transfer under the
\nconsent decree in favour of the vendees and as such a consent decree -would
\nbe liable to stamp duty under the Act. This Court noticed that the consent
\ndecree depends on the terms thereof. Merely because an agreement is put in
\nthe shape of a consent decree it does not change the contents of the
\ndocument. It remains an agreement and it is subject to all rights and
\nliabilities which any agreement may suffer. Having a stamp of court affixed
\nwill not change the nature of the document. A compromise decree does not
\nstand on a higher footing than the agreement which preceded it. A consent
\ndecree is a mere creature of the agreement oh which it is founded and is
\nliable to be set aside on any of the grounds which will invalidate the
\nagreement.\n<\/p>\n
Further submission of Mr. Gatiesh was that an award is also an “agreement
\nfor transfer” within the meaning of Chapter XX-C, The award declare the
\nright of Mukesri to immoveable properties comprised in the packages
\nselected by him and also similarly declare the rights of Harendra in
\nrespect of immoveable properties including in the packages allotted to him.
\nBoth these sets of packages including a large number of Immoveable
\nproperties located in and outside Mumbai in India and also in the United
\nStates, It was, thus, submitted that the arbitral award which declares the
\nrights of the parties in respect of immoveable properties was compulsorily
\nrequired to be registered under the provisions of the Registration Act,
\n1908 and if the award was not registered, the Court cannot look at such an
\naward or pass a decree in terms thereof, Reference was made to a decision
\nof this Court in Lachhman Dass v. Ram Lal & Anr,,<\/a> [1989] 3 SCC 99.\n<\/p>\n
It was, thus, submitted that since the award in the present case was not
\nregistered, the impugned judgment and decree passed which are in-terms of
\nthe said unregistered award are to be set aside. Judgment of this Court in
\nTehmi Sidhwa & Ors. V. Shiv Banerjee & sons Pvt. Ltd, [1974] 2 SCC 574, was
\nsought to be distinguished. Section 269 UC of Chapter XX-C prescribes
\nregistration of a transfer unless the requisite NOC obtained. In Lachhman
\nDass v. Ram Lal & Anr.,<\/a> [1989] 3 SCC 99, there was dispute between the
\nbrothers respecting certain piece of land which stood in the name of the
\nappellant. Claim of the respondent was that it was Benami in the name of
\nthe appellant. They set an arbitration who gave his award and then filed
\nthe same in the Court for making that rule of the Court. One of the
\nobjections raised by the appellant was that the award was bad and
\nunenforceable. It was hot properly stamped nor it was registered one and as
\nsuch could not be made rule of the court; The award which was under the
\nArbitration Act, 1940 said that half ownership of the disputed land was now
\nbe owned by the respondent. Then the award gave certain directions. This
\nCourt said that the award affected immoveable property of the value of over
\nRs 100\/- and as such required to be registered Under the Registration Act.
\nIn Mrs. Tehmi P. Sidhwa & Ors. v. Shiv Benerjee & Sons Pvt. Ltd. & Anr.,<\/a>
\n[1974] 2 SCO 574, the award under the Arbitration Act, 1940 directed
\npartition of immovable property of the value of more than Rs. 1,00,000. The
\nquestion was if it requires registration under Section 17(1 )(b) of the
\nRegistration Act. This Court after examining the award said that if the
\naward related to partition of immoveable property of the value exceeding
\nRs, 100, it would require registration but then it to be seen if the award
\noperated to create rights in immovable property or whether it merely
\ncreated a right to obtain another document which would when executed create
\nany such right. Since the award merely created a right to obtain another
\ndocument, it would fall under section 17(2)(v) and not under Section 17(l)\n<\/p>\n
(b) of the Registration and would not require registration.\n<\/p>\n
Lastly, it was submitted that if what the High Court in the impugned
\njudgment says is correct, it would become extremely easy to bypass the
\nprovisions of Chapter XX-C thereby effectively reducing it to a dead letter
\nas it could always be possible for parties first to enter into an agreement
\nand then to get an arbitral award in terms of such an agreement within or
\noutside India and then claim that the provisions of Chapter XX-C are not
\nattracted. Mr, Ganesh said that if this interpretation was to be accepted.
\nChapter XX-C would become completely unworkable and meaningless and its
\nunderlying public purpose and policy would be totally frustrated.\n<\/p>\n
We do not think that submissions made by Mr. Ganesh on Chapter XX-C of IT
\nAct have any sound basis. Settlement agreement dated March 20, 19% is not a
\nmere agreement for transfer. As noted above, parties have vast businesses
\nand properties both in India and in the USA. Settlement agreement was
\nbetween (1) Harendra Mehta, his wife Amita Mehta and he himself as Karta of
\nHarendra Mehta HDF; (2) Mukesh Mehta, his wife Daksha Mehta and he himself
\nas Karta of Mukesh Mehta HUF; (3) Mettaco Enterprises Trust; and (4) A.D.
\nDevelopments Ltd., a New York Corporation having its principal office at
\nNew York. The settlement agreement runs into 57 long pages. It is a complex
\nagreement. It also mentioned litigation between parties pending in the
\nSupreme Court of the State of New York, Nassau County Court. After the
\nparties have got their respective packages of the properties and businesses
\nboth in India and in the United States the award required the parties to
\nexecute transfer and closing documents. In this respect, clause 5 of the
\nsettlement agreement would be relevant and is as under -:-\n<\/p>\n
“Further, at the closing, the parties will execute transfer and closing
\ndocuments to be mutually agreed to by the parties’ respective attorneys. If
\nthe parties attorneys cannot agree on the sum and substance of the closing
\ncomments, the firm of Skadden, Arps, Slate, Meaghr & Flom or if they refuse
\nthe firm of Simpson, Thacher &. Bartlett shall choose the appropriate
\ntransfer and closing documents and the choice made by this firm shall be
\nbinding upon the parties of this agreement and the cost of any consultation
\nof assistance in preparation of the Transfer and closing documents shall be
\nshared equally between the parties. It is specifically understood that the
\ntransfer and closing documents referred to herein are the United States
\nBusinesses and Properties Transfer and closing documents. The parties have
\nalready agreed that the opinion of D.M. Harish & Company with respect to
\nthe transfer and closing documents of Indian Businesses and properties will
\nbe final and binding on the parties.” This clause also provided as to how
\nthe documents would be executed if any party refuses to execute the
\naforesaid transfer and closing documents. Then there are various terms
\nregarding continuances of their obligations under the businesses and
\nproperties even though there is separation and division of assets between
\ntwo different groups. Settlement agreement also stipulates certain rights
\nof one party with respect to the assests falling to the share of the other.
\nAll these clauses are not to be read in isolation and they form part of one
\ncomposite agreement. It is not necessary to detail various clauses of the
\nsettlement agreement. It will, however, be interesting to note some part of
\nthe proceedings under GPLR 7507 before Judge Ralph Diamond on March 20,
\n1990 Mr. Sciacca represented Harendra while Mr, Ravi Khanna represented
\nMukesh; Anita Mehta appeared for herself and as attorney to her husband
\nHarendra Mehta ;\n<\/p>\n
“THE COURT : It is my understanding that the agreement as well as the plan
\nthat has been selected will all be included as part of the arbitrator’s
\naward.\n<\/p>\n
MR. SCIACCA : Correct. MR. KHANNA : Correct.\n<\/p>\n
LALIT MEHTA (Arbitrator) : It is the further understanding of the
\narbitrator that two plans of settlement have been, pursuant to said
\nagreement, proposed by Harendra and presented to Mukesh for acceptance of
\none of the plans,<\/p>\n
I now address Mukesh Mehta and ask if he has had an opportunity to review
\nthe plan and make a selection.\n<\/p>\n
MUKESH MEHTA: Yes, I have Selected the India Plan which is B combined with,
\nI believe, A-l, which is the second half of the B plan.\n<\/p>\n
The B plan is the Indian package which enumerates the various assets
\nincluding Mettaco Engineering, Mettaco Cold roiling Private Limited,
\nMettaco Alloys Private Limited, Mettaco Rolling Industries, Mettaco
\nInternational, Mettaco Corporation, Progressive Safes Private Limited,
\nMettaco Enterprises Trust Daksh Holding and Trading Private Limited, Amish
\nHolding and Trading Private Limited, Shaanamish Holding and Trading Private
\nLimited, H.H, Associates, Amish Associates, D.M. Associates, an apartment
\nin Urvach Building. LALIT MEHTA (Arbitrator); That is on Nepenacy Road in
\nBombay, That is the Petit Hall Apartment.\n<\/p>\n
MR. SClACCA : Don’t read it. We will sign it.\n<\/p>\n
MR. KHANNA : The Indian Plan B is three pages. It is in conjunction with
\nanother plan.\n<\/p>\n
MUKESH MEHTA : I have to take Al with B. MR. KHANNA : That is two pages.\n<\/p>\n
MUKESH MEHTA : Plan B along with Plan Al. That is how the pages are
\nprepared.\n<\/p>\n
MR. KHANNA : That’s it.\n<\/p>\n
THE COURT :I Is there any problem? My understanding is there are two plans.
\nEach plan has two parts. And the two parts you are talking about is part of
\nthat one plan.\n<\/p>\n
MR. KHANNA ; That is how the agreement is made out. Anyone -picking the
\nIndia Plan will pick out Plan Al,<\/p>\n
LALIT MEHTA (Arbitrator) : There is no objection. MR. SCIAGCA : That is
\nright,<\/p>\n
LALIT MEHTA (Arbitrator) v Therefore, that plan is what number? Let the
\nlawyer see it.\n<\/p>\n
MR. SCIACCA : Plan A and Plan Bl. Let Mukesh Mehta sign AI and Plan B.
\n(Mukesh Mehta signed Agreement.)<\/p>\n
LALIT MEHTA (Arbitrator) : May I request that each side check each and
\nevery page.\n<\/p>\n
MUKESH MEHTA : Should we initial each page? LALIT MEHTA (Arbitrator): Yes.
\n(Each page initiated.)<\/p>\n
THE COURT ; May I suggest the following: when the arbitrator’s award is
\ncomplete it’s going to include a number of exhibits. Exhibit A will be the:
\nagreement itself. Exhibit B will be the plan selected by Mukesh and Daksh.\n<\/p>\n
Let’s have the reporter so mark it so their will be no question as to what
\nwe are referring to<\/p>\n
(Settlement Agreement marked as Exhibit `A’ for identification.) Plan B and
\nPlan Al marked as Exhibit B for identification)<\/p>\n
MR, SCIACCA : Just to be clears the plan that Mukesh has chosen is Exhibit
\nB to this stipulation and arbitration proceeding.\n<\/p>\n
Plan B which is the Indian Package and Plan A1 which is the United States
\nnote.\n<\/p>\n
MR. KHANNA : Plan B is 3 pages and Al is two pages. Therefore, Exhibit B is
\n5 pages in all. Each of which have been either initiated or signed by
\nMukesh.\n<\/p>\n
MR. SCIACCA : Attorneys for both side have initiated Exhibit B immediately
\nbeneath the Exhibit mark.\n<\/p>\n
THE COURT : Regarding Exhibit C, which is being made a part of the
\narbitrator award, that is regarding Harendra Mehta which properties will be
\ngoing to Harendra or Plan A, the United States package, and B-l, the Indian
\nnote, which we are collectively marking at this proceeding as Exhibit C.
\nThe United States Package is four pages and the Indian Note is four pages.
\nThere is a total of eight pages in Exhibit C<\/p>\n
(Plan A and Plan B-l, the Indian Note, marked as Exhibit C for
\nIdentification.)<\/p>\n
MR, KHANNA : Each of these pages have been initialed by Amita Mehta and the
\nattorneys immediately below the Exhibit mark.\n<\/p>\n
THE COURT : I Would also like the reporter to maker as Exhibit D, the Power
\nof Attorney, going from Harendra to Amita.\n<\/p>\n
(Power of Attorney marked as Exhibit `D’ for identification.)<\/p>\n
THE COURT; Regarding transfer documents, it is my understanding arid the
\narbitrators understanding, that an agreement has been made regarding these
\ntransfer documents,<\/p>\n
MR. SCIACCA : Correct, that is provided for in a transfer agreement.\n<\/p>\n
THE COURT: According to the original submission, the arbitrator had a
\ntwofold function.\n<\/p>\n
One was to make the award.\n<\/p>\n
And two was to implement that award…”\n<\/p>\n
Again a mere look at the agreement shows that it is not an agreement for
\ntransfer as understood in clause (a) of Section 269 UA of Chapter XX-C of
\nthe IT Act, The settlement agreement also does not stipulate exchange of
\nany immoveable property. It rather divides equally businesses and
\nproperties between Harendra and Mukesh. “Exchange” has been defined under
\nSection 118 of the Transfer of Property Act where two persons mutually
\ntransfer the ownership of one thing for ownership of another. When we
\nconsider exchange of immoveable property falling within the definition of
\nexchange’ in Section 118 both the properties would situated in India.
\nAgreement for transfer refers to immoveable property which is defined in
\nclause (d) of Section 269UA. It is difficult to appreciate the arguments of
\nMr. Ganesh as to how in the present case, there is transfer of any
\nimmoveable property under the settlement agreement. It appears to us that
\nthe bone of contention is a flat in Urvashi building in Mumbai which formed
\npart of B+A1 of Mukesh. It was not disputed before us that for this the
\nappellants did execute a gift deed in favour of the respondents on advice
\nreceived but no steps were taken to compel the transaction as, it appears,
\nrelations soured. This would also show that the settlement agreement on the
\naward did not require filing of any declaration under Chapter XX-C of the
\nIT Act. Moreover, in our view in the case of a foreign award, provisions of
\nChapter XX-C of the IT Act are not attracted. Ft was said that under
\nChapter XX-C a net has been thrown wide to bring within its purview all
\nsorts of immoveable properties but that net is not wide enough to cover
\nforeign award covering businesses and properties both in India arid in a
\nforeign country. Apprehension of Mr. Ganesh that if we give this
\ninterpretation-a method can be found by the parties to escape the rigour of
\nChapter XX-C knocking at the very provision of law which strikes at the
\nroot of biack-money rampant in the sale and purchase of immoveable
\nproperty. If that is so, legislature can always stop in to block the gap if
\nit finds there is any escapement of revenue. We are also of the view that a
\nforeign award under the Foreign Award Act does not require registration
\nUnder the Registration Act.\n<\/p>\n
A decree or order of a court does not require registration under clause (b)
\nof sub-section (I) of Section 17 of the Registration Act This is the effect
\nof clause (vi) of sub-section (2) of Section 17. Earlier under this clause\n<\/p>\n
(vi) before its amendment in 1929 even an award did not require
\nregistration. However, after omission of the words “and any award” an award
\ncreating or declaring right or interest in immoveable property of the value
\nof Rs. 100 would require registration. But then that award would be an
\naward under the Arbitration Act, 1940 and certainly not a foreign award.\n<\/p>\n
Let us examine this argument of Mr, Ganesh that foreign award required
\nregistration from another angle, He said that the foreign award has already
\nmerged in the foreign judgment on the basis of which Mukesh has brought
\nsuit in the Bombay High Court. A foreign judgment does not require
\nregistration as the process of suit having been decreed on that basis will
\nhave to be gone through. When a decree is passed by the Court, it does not
\nrequire registration in view of clause (vi) of subjection (2) of Section 17
\nof the Registration Act. A decree or order of a court affecting the rights
\nmentioned in Section 17(l)(b) and (c) Would not require registration. It
\nwould, however, require registration where the decree or order on the basis
\nof compromise affects the immoveable property other than that which is the
\nsubject matter of the suit or proceeding. Even a decree passed by the
\nforeign court execution of which is sought under Section 44A of the Code of
\nCivil Procedure would not require registration. That being the position, we
\nare of the view that foreign award under the provisions of the Foreign
\nAwards Act does not require registration under the Registration Act: In any
\ncase, in the present case the award creates a right to obtain transfer and
\nclosing documents which as regards Indian properties and businesses are yet
\nto be executed by D.M. Harish & Co., Chartered Accountants. Decision of
\nthis Court in Mrs. Tehmi P. Sidhwa, case [1974] 2 SCC 579, as rightly
\npointed by Mr Dholakia. learned counsel appearing for the respondents,
\nwould be fully applicable and the argument that the award required
\nregistration has to be rejected on this ground as well.\n<\/p>\n
After having examined, all the contentions raised by the appellants, We
\nfind no ground to interfere in the impugned judgment of the High Court.
\nAppeal is accordingly dismissed with costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Harendra H Mehta Anid Ors vs Mukesh H. Mehta And Ors on 13 May, 1999 Bench: D P. Wadhwa, Santosh Hegde CASE NO.: Appeal (civil) 4006 of 1995 PETITIONER: HARENDRA H MEHTA ANID ORS. RESPONDENT: MUKESH H. MEHTA AND ORS DATE OF JUDGMENT: 13\/05\/1999 BENCH: D P. WADHWA & SANTOSH HEGDE […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-173077","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nHarendra H Mehta Anid Ors vs Mukesh H. 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