Sleepwell Industries Co. Ltd. vs Lmj International Ltd.

Soumen Sen, J.

This is an application by the judgment-debtor company challenging the enforcement of a foreign award. Before I deal with the scope and ambit of

Section 48 of the Arbitration and Conciliation Act with regard to the power of the Court in scrutinizing a foreign award it is necessary to consider the

facts of the case and the nature of the objection raised by Mr.Anindya Kumar Mitra, learned senior Counsel in assailing the award in this forum.

Briefly stated, the objections are that the Arbitral Tribunal has made out a third case for the parties and have passed an award disregarding the written

terms of the contract. The Tribunal has disregarded the fact that the amounts claimed before the Tribunal representing 2.22 per cent of the invoice

value of the goods are to be released only upon presentation of the quality inspection certificate at the port of destination and that being the only

source and mode of payment, the award-holder having failed to produce such quality inspection certificate, is not entitled to any amount. There is no

obligation on the part of the award-debtor to discharge de hors the terms mentioned in the Letter of Credit. The award-holder has not even alleged

that the award-debtor was under an obligation to produce the quality inspection certificate at the port of destination and has acted in breach thereof. In

the absence of any such pleading and allegation and having regard to the payment terms in the Letter of Credit, the award-holder could not have

maintained an action before the Tribunal. The Tribunal had no jurisdiction to refer to the GAFTA Rules in order to find out ways and means for the

award-holder to obtain an award as such rules were never part of the contract.

These objections without reference to the authorities relied upon by Mr. Mitra are to be considered in juxtaposition to the claim made by the award

holder before the Arbitral Tribunal. The award-holder (hereinafter referred to as ‘Sleepwell’) has entered into a contract dated 25th October,

2010 for sale of 10,000 MT ±5% by buyer’s option non-basmati par boil rice 15% (maximum) broken, 2009-10 or latest crop, Thailand origin @

USD 450 per MT. The contract contains a stipulation that the quantity would be final at the port of loading as per final net certificate issued by SGS at

the costs of the seller namely, Sleepwell. The award-debtor (hereinafter referred to as ‘LMJ’) under the contract was required to open an

irrevocable confirmed unrestricted Letter of Credit in USD in favour of Sleepwell within seven working days from the date of signing of the contract

through a scheduled bank of India which, in this case was the Standard Chartered Bank (India) for the value of the goods to be shipped under the

contract.

The contract is an FOB contract. The contract stipulates that 100 per cent value of the contracted cargo would be payable on receipt of the shipping

documents by the Letter of Credit negotiating bank at 30 days sight. The contract mentions about eleven shipping document to be submitted for

receiving payment under the Letter of Credit. The contract in ‘other terms’ provided that all other terms and conditions not in contradiction with

the stipulated terms of the contract shall be governed by GAFTA 48 and disputes to be resolved as per GAFTA 125 in London. The goods were

meant for the Government of People’s Republic of Bangladesh. The consignment to be shown as “to order†notifying “M/s. Director

General of Food, Government of People’s Republic of Bangladesh, 16 Abdul Ghani Road, Dhakaâ€​.

The buyer opened a Letter of Credit on 11th November, 2010 through its banker, Standard Chartered Bank, and the same was communicated to the

award holder on 12th November, 2010. On a request being made on 5th December, 2010 by the award holder for amendments in the contract and in

the Letter of Credit (LC), the terms of the contract were amended on 7th December, 2010 by which the following amendment to the parent contract

was agreed upon:-

“1. Quantity Now to be read as 15000 Metric Tons â€" 5% more or less in Buyer’s option, final at loading as per official weight certificate

issued by ISC at Seller’s cost.

Specifications Clause II â€" To be amended to 17 Pct Max I/O 15 Pct. Clause IV â€" To be amended to 6 Pct. Max I/O 3 Pct in total. All other

specifications will be remain unchanged. 3. Payment Value @ US$ 440.00 per MT of the contracted cargo payable at 30 days after shipment date

and balance amount @ US$ 10.00 per MT will be payable after receipt of quality inspection report of destination port.

Shipment By 31/12/2010

Documents Required Certificates under Sl. No.G, I, J & K issued by ISC are acceptable I/O existing.†Under the amended contract dated 7th

December, 2010, shipment was to be made by 31st December, 2010. The buyer, accordingly, amended the Letter of Credit on 9th December, 2010 by

extending the period of shipment.

The validity period of the Letter of Credit after first amendment was 15th January, 2011 and the latest date of shipment was mentioned as 31st

December, 2010.The effect of the above said amendment on payment condition was that the LMJ was to pay only 97.78% of the total invoice value

on receipt of the shipping documents and the balance 2.22 % of the total invoice value after receipt of the quality inspection report at the destination

port. The Letter of Credit was also amended. The validity of the Letter of Credit was extended till January, 15, 2011. Sleepwell on 27th December,

2010 issued an invoice in respect of the balance on 2.22 per cent in respect of the shipment. On 12th February, 2011 Sleepwell received a debit note

from LMJ of USD 73500 on account of their alleged inferior quality claim. Sleepwell objected to the said debit note by its e-mail dated 15th February,

2011 as under :

“We are very surprised to receive your debit note for MV. Sturdy Falcon and MV Genlus Mariner which we do not agree. We have never

received any inferior quality claim from you before nor we are responsible for any inferior quality claim. Our sales are based on weight / quality final

at loading port as per surveyor certificate appointed by you which we have given to you with our documents presented through your bank and was

accepted by you and you have paid 97.78 pct and there is a balance of 2.28 pct (US$10.00 per mton)â€​

LMJ however reiterated its claim alleging inferior quality in their e-mail dated 16th February, 2011. LMJ, however, did not provide any quality

inspection report. Sleepwell in its letter dated 25th February, 2011 clarified that there was no issue or claim in respect of the shipment made and

requested for the payment. LMJ however, in their letter dated 10th March, 2011 again raised the issue with regard to the inferior quality without

providing any inspection report. LMJ, however, subsequently withdrew their quality claim by their email dated June 1, 2011. Thereafter, there were

some exchange of correspondences between the parties and since the seller did not receive 2.22 per cent in respect of the consignment, it had initiated

the arbitration proceeding. There is no dispute that the contract contains an arbitration clause and that the award-debtor is a party to the said

arbitration agreement. The said arbitration agreement is not under challenge. The invocation of arbitration in an earlier proceeding between the same

parties having the same and/or similar arbitration clause was upheld and enforcement of the foreign award was allowed.

Mr. Anindya Mitra learned Senior Counsel has referred to the statement of claim and submitted that there is no averment in the statement of claim

which would show that the Sleepwell has alleged that it is an obligation of the buyer to produce the quality inspection certificate at the port of

destination. Mr. Mitra refers to the payment clause 3 of the addendum no.1 dated 7th December, 2010 to the original contract and submits that under

the said clause US $ 10% per MT. would be payable after receipt of quality inspection report of destination port. The modified Letter of Credit

however contains a clause which requires a “certificate of quality inspection report at port of destinationâ€. This was a specific term in the

amended LC although in the addendum clause there is no mention of any certificate. The parties have agreed that only upon production of a quality

inspection certificate at the port of destination that the payment under the LC would be receivable.

Mr. Mitra submits that once the parties have agreed that the only mode of payment is through Letter of Credit and is the obligation of the Sleepwell to

produce such certificate at the port of destination in order to get payment under the LC, and Sleepwell having failed to do so cannot independently sue

for the price of the goods sold to buyer. The buyers stand discharge from its obligation to make any payment as the seller had failed to submit the

required documents. Mr. Mitra has referred to a decision of the Queen’s Bench Division (Commercial Court) in ‘Shamsher Jute Mills Ltd.

versus Sethila (London) Ltd’ reported at 1887 (1) Lloyd’s Law Reports and submitted that Mr. Justice Bingham in a similar situation has

discharged the buyer of its obligation to make any payment under the letter of credit. The following observation of Lordship Justice Bingham has been

placed.

“If the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms

of the contract, require, the buyer is discharged; that was the Ficom case. In the ordinary case, therefore, of which the present is an example, the due

establishment of the letter of credit fulfils the buyer’s payment obligation unless the bank which opens the credit fails for any reason to make

payment in accordance with the credit terms against documents duly presented. I know of no case where a seller who has failed to obtain payment

under a credit because of failure on his part to comply with its terms has succeeded in recovering against a buyer personally. If this were an available

road to recovery, many of the familiar arguments about discrepancies in documents would be unnecessary. Bearing in mind the likelihood that buyers

will (as here) sell on to subbuyers, such a result would, I think, throw the course of international trade into some confusion. It must in my view follow

that the sellers here, not having complied with the credit terms, cannot recover against the buyers personally.â€​

Mr. Mitra has submitted that the Tribunal has completely misdirected its mind in referring to the Gafta Rules in order to find out whose responsibility it

is to produce the certificate at the port of destination as it has not been alleged by the plaintiff in the statement of claim that it was the obligation of the

buyer to produce such certificate and buyer has failed to perform its obligation. In order to appreciate such submission, it may be necessary to refer to

the statement of claim as well as the correspondence annexed to the statement of claim. In the statement of claim, the seller has categorically stated

in paragraph 9 and I quote.

“The Buyers reiterated their claim of US$ 73500 on account of alleged inferior quality in their email dated 16 February, 2011 which is attached as

Page 54. The Buyers however did not provide any Quality Inspection Report.â€​

In paragraph 8 the claimant had referred to an email dated 15th February, 2011 in which the claimant had categorically stated that the sales were

based on weight/quality final at loading port as per surveyor certificate appointed by LMJ which were given to LMJ along with other documents and

accepted by LMJ and on that basis has paid 97.78%. The correspondence mentioned in paragraph 9 to 15 of the claimant’s submissions would

show that Sleepwell has all throughout insisted for payment and such payment was denied by LMJ only on a specious plea that the goods supplied

were of inferior quality. LMJ had even gone to the extent of referring to test reports allowed to be in its possession without disclosing them although

asked for by Sleepwell. LMJ had never disputed that under the amended LC, LMJ is not required and/or expected to submit the quality inspection

report at the destination port. In fact, at the port of loading, the quantity and quality of the goods were certified by the surveyor of LMJ which fact has

not been disputed. It is evident from record that that by the time the dispute arose with regard to the payment of 2.22%, the validity of the LC had

expired.

The Letter of Credit was opened by LMJ and it was incumbent upon LMJ to keep the said LC renewed till the dispute is resolved. LMJ did not

extend the validity of the letter of credit. Although enough opportunity was given to LMJ to appear before the Tribunal and contest the proceeding,

LMJ had deliberately avoided participation. In absence of any contrary evidence and having regard to the fact that the addendum no.1 only refers to a

quality inspection at the port of destination, the Tribunal arrived at a finding by reference to the Gafta Rules 1948 in order to find out as to who was

responsible for producing the quality inspection certificate and has arrived at a conclusion that buyer had failed to perform its obligation under the

contract. The relevant observations of the Tribunal in this regard are.

6.9 “If we disregard of the alterations envisaged by the Amendment to the Contract dated 7 December 2010, granting an even higher level of, at

least for “Broken Grains†and “Dead, Damaged and Discoloured Grainsâ€, the results provided by ISC and OMIC were well within the

parameters foreseen for the quality under the Contract.

6.10 The Tribunal therefore FINDS THAT the quality of the cargo of the shipment under the Contract is contractual.

6.11 In addition to the above, the relevant provision of the Quality Clause 5 of GAFTA Contract No.48, being a Tale Quale contract as such, states,

inter alia, “Certificate of Inspection at time of loading shall be final as to quality.â€​

6.12 Consequently, and under consideration of the Payment Term of the Contract providing for payment “on receipt of the shipping documentsâ€,

inter alia the above Pre-Shipment Certificates as issued by ISC and OMIC and as provided by Sellers, Sellers were duly entitled to trigger payment

under the Contract.

6.13 As Claimants were entitled to payment under the Contract, reference must be made now to the balance of USD 10.00per metric ton for the

shipment, as agreed under the Amendment dated 7 December 2010. The Amendment provided that the “Balance amount @ US$ 10.00 per MT

will be payable after receipt of quality inspection report of destination port.â€​

6.14 This indeed establishes an alternation to the original provision of the Contract that the quality would be final at the port of loading, at least as far

as the balance of USD 10.00 per metric ton is concerned. On interpretation and construction of the Contract itself and its Amendment dated 7

December 2010, the Tribunal notes that the Amendment itself defines in “1. Quantity†that the weight in accordance with the Contract would be

still “final at loading†while the amended Payment Term now states that “a balance amount of US$ 10.00 per MT†would only “be

payable after receipt of a quality inspection report of destination port.â€​

6.15 WE THEREFORE FIND THAT the Contract had been validly altered to the provision that Sellers could only have triggered payment of the

balance of USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination i.e. Bangladesh.

6.16 As no such quality inspection report had been presented by Buyers, despite various reminders by Sellers, until the present day, the GAFTA

Sampling Rules No.124, cl. 6:1 provided that a “certificate of analysis†should be sent to the other party “within 14 consecutive days†after

dispatch of the samples to the analyst.

6.17 Buyers by means of their debit note of 12 February 2011 firstly purported that the quality of the cargo was inferior.

6.18 The Tribunal THEREFORE FINDS THAT Buyers, with respect to cl. 6:1 of the GAFTA Sampling Rules No.124 were obliged to provide a

certificate of analysis latest14 days after that message dated 12 February 2011, therefore latest 26 February 2011.

6.19 The date of default shall therefore be one day later, the 27 February 2011, and SO WE DO FIND.

6.20 As Buyers failed to forward the certificate within this time limit of 14 days, any claim for rejection or for an allowance in respect of any matters

dealt with under the Contract, and its Amendments, shall be deemed to be waived and absolutely barred, AND SO WE DO FIND.

6.21 WE FIND THAT a total of 10,500.00 metric tons of Rice was shipped. Therefore, Sellers’ claim for payment of the balance invoices based

on USD 10.00 per metric ton, totalling USD 105,000.00, SUCCEEDS.â€​

The Tribunal was conscious of the fact that payment was refused in view of alleged failure by the seller to produce the quality inspection report at the

port of destination and dealt with the issue and arrived at a finding that the seller is not responsible. GAFTA contract No.48 was specifically

incorporated into the contract. The Tribunal has referred to Clauses 5, 11, 17, 24 and 28 of the GAFTA contract No.48 and held that GAFTA would

apply Clause 17 of GAFTA contract No.48 reads:

“17. SAMPLING, ANALYSIS AND CERTIFICATES OF ANALYSISthe terms and conditions of GAFTA Sampling Rules No. 124 are deemed

to be incorporated into this contract. Samples shall be taken at the time of discharge on or before removal from the ship or quay, unless the parties

agree that quality final at loading applies, in which event samples shall be taken at time and place of loading. The parties shall appoint superintendents,

for the purposes of supervision and sampling of the goods, from the GAFTA Register of Superintendents. Unless otherwise agreed, analysts shall be

appointed from the GAFTA Register of Analysts.â€​

There were altogether three shipments and all were in one Vessel M.V. Sturdy Falcon. The three Bills of Lading aggregating to 10,500 MT of non-

Basmati parboiled rice are all dated 27th December, 2011. The original contract contained payment clause which specified that 100% were to be

received after 30 days. This contract was modified on 7th December, 2010 which stated that US$ 440 was payable on receipt of shipping document

and US$ 10 after quality inspection at destination port. The LC accordingly was also amended. The original LC states date of issue as 11th

November, 2010 and clauses 41D and 42C state that credit is available by any bank by negotiation and payment by draft would be at 30 days after

shipment. LC was amended on several occasions. The first amendment is dated 12th November, 2010 which also states that drafts would be at 30

days sight. The second amendment dated 9th December, 2010 is more important and new date of expiry is mentioned as 15th January, 2011. Clause

46B of the LC states the documents required. For payment no.1 it is mentioned that 97% will be made only after 30 days’ shipment against

submission of all documents. These 30 days would expire on 27th January, 2011. Payment no.2 states that payment of 3% would be made at site

against submission of certificate of quality inspection at port of destination provided payment no. 1 is accepted. The third amendment of the LC is

dated 10th December, 2010 and 97% was changed to 97.78% and 3% was changed to 2.22% and “all other terms and conditions remain

unchangedâ€. Mr. Tilak Bose, learned senior counsel, relying on such chain of events has accordingly submitted that, there is no way the payment

no.2 could have been triggered before 27th January, 2011. LMJ as buyer accepted the goods and arranged for payment of 97.78% but did not arrange

for payment of 2.22% by opening a valid LC under which payment could be obtained.

Mr. Mitra however, has contended that no such case was made out in the statement of claim that the balance 2.22% could not be realized because

there was no valid Letter of Credit in existence. There is no finding by the arbitral tribunal that the balance 2.22% could not be realized because there

was no valid Letter of Credit. This argument is unacceptable as this was not submitted to the tribunal. In any event, it is an admitted position that

97.78% was realized under the same irrevocable Letter of Credit established by the buyer and accepted by the seller. Payment no. 2 being the

balance 2.22% was payable at sight against submission of certificate of quality inspection report at port of destination provided payment no. 1 being

97.78% was accepted. The acceptance of payment no. 1 means “acceptance of documents†required under payment no. 1 by buyer when such

documents are presented by the seller to its banker which in terms negotiates the documents with the LC opening bank. The right to obtain payment

accrues the moment the documents are presented by the seller and accepted by the buyer. It has nothing to do with the release of funds by the

seller’s bank to the seller. The submission that there was no valid Letter of Credit would be given beyond the award and wrongful assumption of

facts which are impermissible at this stage.

This argument cannot be accepted at this stage since it was not one of the grounds on which a award could be challenged under Section 48 of the

Arbitration and Conciliation Act. It is not a ground under Section 48(1)(c) of the Arbitration and Conciliation Act. From the narration of facts stated

earlier it cannot be said that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it

contains decisions on matters beyond the scope of the submission to arbitration. It has to be remembered that in spite of repeated opportunity given to

the petitioner to participate in the arbitration proceeding the petitioner has avoided participation and cannot be allowed to raise objection with regard to

the enforcement of the award on any other grounds not covered under Section 48 of the Arbitration and Conciliation Act. The submission of Mr.

Mitra that reference to GAFTA contract no.48 â€" GAFTA Sampling Rules no.124 Clause 6:1 is contrary to contract is not accepted. Neither the

contract nor the amended payment term under the Letter of Credit stipulates as to who would be required to produce the quality inspection certificate.

As mentioned earlier, the goods both with regard to the quality and quantity were duly certified by an appointed agent of LMJ at the port of loading.

The dispute with regard to inferior quality was raised by LMJ after 15th January, 2011, that is say, after the expiry of the validity of Letter of Credit.

There is nothing on record to show that prior to expiry of the validity of Letter of Credit any such dispute was raised. The debit note was issued only

on 12th February, 2011. The claimant had disclosed documents before the Tribunal to show that the claimant had never received any inferior quality

claim from LMJ prior to February 15, 2011. In absence of any dispute being raised prior to the expiry to the validity of Letter of Credit it is no more

open for LMJ to insist that the agreed mode of payment is through Letter of Credit and LMJ is absolved from liability. In fact claimant in its email

dated 10th June 2011 remonstrated that LMJ had neither extended the Letter of Credit of Standard Chartered Bank which expired on 15th January,

2011 nor had provided the amendment to the Letter of Credit opened from Bank of Baroda as per addendum to the contract. The said

correspondence were annexed to the statement of claim. LMJ appears to have withdrawn its quality claim by its email dated June 1, 2011. The

tribunal in paragraph 3.16 of the award has noted such fact. There is another interesting feature which has emerged during the submission made by

Mr. Tilak Bose, the learned Senior Counsel representing the claimant in this proceeding.

In the instant case all shipments were made within the last date of shipment by reason whereof 97.78% could be realized. However balance 2.22%

could not be realized as there was no valid Letter of Credit when such payment of 2.22% could be triggered. It is also pertinent to note that similar

objection raised with regard to a similar contract where similar dispute was raised with regard to another contract having similar terms was rejected

by this Court in G.A. No. 3306 of 2016 with EC No. 487 of 2013 (Sleepwell Industries Co. Ltd. Vs. LMJ International Ltd. reported at 2017 (4) CHN

(Cal) 621) the relevant paragraphs where such objections were recorded are:

“However, the Arbitral Tribunal proceeded on the basis that the buyer was obliged to provide certificate of invoices of discharge port. The Tribunal

has made a new case for the parties, which is not permissible in law. The Tribunal proceeds on a wrong assumption and has gone beyond the scope of

submission to arbitration. The award, therefore, is without jurisdiction. Another new case was made out by the Tribunal with regard to the requirement

of certificate of analysis. It is submitted that Arbitral Tribunal made out a case that the buyers under clause 6.1 of GAFTA Sampling Rules 124 were

obliged to provide certificate of analysis. It was not the case of the claimant and even in the claim submission that under the GAFTA Sampling Rules

buyer was obliged to provide certificate of analysis. Even in the claim submission it is not averred by the claimant that under GAFTA Sampling Rules

124 the buyer was obliged to provide certificate of analysis. This new case made out by the Arbitral Tribunal in paragraph 6.2.1 of the award is also in

violation of principles of natural justice. The buyer was never informed that such new case would be made out by the Arbitral Tribunal in their award.

The new cases made out by the Arbitral Tribunal were beyond the scope of submission to arbitration and, accordingly, not enforceable under Section

48(1)(c) of the Act. The Tribunal has no jurisdiction to make out a new case or to consider the dispute not raised by the claimant in their claim

submission. In this regard reliance is placed on Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported at 53 CWN 873 and Jasraj Inder Singh

Vs. Hemraj Multanchand reported at AIR 1977 SC 1011. The third objection is that the award is perverse.

The Arbitral Tribunal’s uncalled for reliance on GAFTA Sampling Rules 124 clause 6.1 is wholly perverse. The contract as amended and

recorded in the award in Paragraphs 6, 15, 6.16 and 6.17 does not provide that the buyer was to obtain quality inspection report of the destination port

and to hand over the same to the seller nor does the amendment provide that if the quality inspection report of the destination port is not provided by

the buyer, the seller will be entitled to balance amount of price. GAFTA Sampling Rules 124 Clause 6.1 is not applicable in this case. GAFTA

Sampling Rules 124 does not provide that the buyer is to acquire the quality inspection report. It was not even the case of the claimant that said

GAFTA Sampling Rules provide that a quality inspection report was to be provided by the buyer.

It is submitted that in paragraph 6.18 the Tribunal has quoted GAFTA Sampling Rules 124, without holding that the said clause 6.1 provided that the

certificate of analysis was to be sent to the seller by the buyer. The finding in paragraph 6.20 that “with respect to clause 6.1 of the GAFTA

Sampling Rules 124 buyer was obliged to provide certificate of analysis†is without any reasons and is not supported by paragraph 6.18 of the award.

It is not a case of interpretation of GAFTA Rules No.6.1 by the Tribunal, who have not analysed or interpreted Clause 6.1 of the Rule. Suddenly, the

Tribunal have made an observation in paragraph 6.20, without any reason in support of their assumption, which is not really a finding. It is totally

unreasonable, contradictory and wholly perverse.

The award is contrary to the terms of the agreement to be read with Letters of Credit as required under English Law and, therefore, makes the award

contrary to public policy. The award proceeds on the basis that the buyer failed to forward the certificate. The contract is governed by the English

law. It is nowhere provided that the buyer is to produce the certificate, but the correspondent L/C amended contemporaneously with amendment of

the Contract enjoin that the quality analysis report is to be produced by the holder of L/C (the seller) for receiving payment of the Balance amount.

L/C was accepted by the seller.

The Tribunal failed to apply its mind to the Letters of Credit which was on record and also the Bill of Exchange. Non-consideration of material on

record vitiates the Award. The Arbitral Award does not contain any reason for assuming that the discharge port quality inspection report would be

required to be furnished by the buyer. In short, obtaining an award for balance price without presentation of quality inspection report of the destination

port and without inspection and finalization as proposed and agreed by the seller should shock judicial conscience. The award is totally contrary to

Wednesbury’s principle of reasonableness and would shock judicial conscience. The learned Senior Counsel has referred to the contract terms set

out at page 5 of the claim submission which reads:-

“all other terms/conditions not in contradiction with the above as per GAFTA Contract No.48.â€​

The amendment of the contract is also admitted by the claimant in the claim submission and also by the Tribunal in Paragraph 6.17 of the award.

There is no explanation, reason or justification given by the Arbitral Tribunal on the basis of which it holds that the buyers were obliged to provide the

certificate of analysis. Clause 6.1 of the GAFTA Sampling Rules No.124 nowhere provides that the buyers were obliged to provide the certificate of

analysis. There is a complete non-judicial approach. The findings of the Arbitral Tribunal in paragraphs 6.18, 6.20 and 6.22 is contradictory to its own

finding given in paragraphs 6.15, 6.16 and 6.17 of the award which would demonstrate that the Tribunal lacked judicial approach in the matter.

The Arbitral Tribunal has failed to apply its mind and has not at all considered that since GAFTA Contract No.48 is in contradiction with the amended

contract and the letter of credit, GAFTA Contract No.48 would not be applicable in the instant case. Consequently, GAFTA Sampling Rules No.124

would also be in applicable. Therefore, the inference drawn by the Arbitral Tribunal in paragraphs 6.18, 6.20 and 6.22 of the award is on the fact of its

untenable as it is against the specific contract terms.

Furthermore the Arbitral Tribunal has omitted to consider that GAFTA Sampling Rules if in contradiction with the terms of the contract would not be

applicable. The terms of the contract read with letter of credit clearly mean that certificate of quality inspection report of the destination port was to

be acquired by the seller. Accordingly, reliance on the GAFTA Sampling Rules is perverse, contrary to the terms of the contract and void.†These

objections were dealt with in paragraphs 109 to 125 of the judgment and, on the basis of the reasons recorded therein, similar arguments were not

accepted. The said paragraphs read:

“In my view, it is not open for a party who has consciously avoided a proceeding and did not participate in the arbitration proceeding to allege at the

stage of enforcement that the award is vitiated by fraud by nondisclosure of a document. It was incumbent upon the buyer to respond to the several

notices issued by the Tribunal and to submit its defence. Although, the said letter may not have been produced but subsequent correspondence

between the parties were disclosed which clearly shows that the claimant buyer has categorically denied its obligation to produce any quality

inspection report at the port of destination. The Tribunal was conscious of the fact that payment was refused in view of alleged failure by the seller to

produce the quality inspection report at the port of destination and dealt with the issue and arrived at a finding that the seller is not responsible. The

Tribunal has the jurisdiction to decide the issue and has decided the issue in one way or the other. Interpretation of a contract is a matter for the

arbitrator to determine, even if it gives rise to determination of a question of law. Arbitration is consensual and some amount of laxity should be given

while scrutinizing an award. A sense of informality is attached to such proceeding. It cannot be scrutinized with an Eagle’s eye or as an appellate

authority. The objection to enforcement of a foreign award is extremely limited. Moreover, in view of the order passed by the Division Bench in

refusing to pass any order of injunction restraining commencement and/or continuation of the arbitration proceedings it cannot be said that the award

was passed in violation of any order passed by a superior Court. The relevant observations of the Division Bench in this regard are:-

“The intention of the parties to have their disputes resolved by arbitration cannot be doubted. The parties have entered into such contract with their

eyes wide open. They have decided that all disputes are to be resolved, adjudicated and decided by arbitral tribunal to be constituted under the

GAFTA Rules. The principal ground for avoiding the said Tribunal is of forum inconvenience. The additional grounds appeared to be that there is no

agreement between the plaintiff and the defendant to refer any dispute arising out of the said contract to arbitration either as per GAFTA Rules, 125

in London or otherwise. In deciding the said issue, the reference is required to be made to the contract containing such arbitration clause. There

cannot be any dispute that the obligation to make payment or avoidance of any such payment is arising out of a transaction covered by the contract

which contains the arbitration the arbitration clause. In the instant case, there is no dispute that the said contract containing arbitration clause has been

validly and duly executed by the parties.

The ground to resist the said arbitration is that it involves prohibitive costs. The appellant was not compelled to execute the said agreement. The

appellant precisely knew at the time of execution of the contract that in the event of any dispute arising out of the said contract, it would be governed

by the GAFTA Arbitration Rules, 125. In absence of any demonstrable injustice or harassment being caused by reason of initiation of the arbitral

proceedings or participation in such proceeding and having regard to the fact that the agreement is not in dispute, in our view, the plaintiff is not

entitled to an order of injunction.â€​

The buyer, of course, is not challenging the order on that ground. The circumstances are such which clearly debars the buyer to challenge the award

on the ground that it is against public policy. The buyer has argued that there has been a breach of natural justice and the finding of the arbitral tribunal

that the buyer was responsible to produce the quality certificate at the port of discharge is contrary to the terms of the contract which should shock

the conscience of the Court and such finding is against justice and morality. It is a settled law that interpretation of the contract and appreciation of the

evidence by the arbitral tribunal cannot be reopened by arguing that the foreign award is contrary to the contract and, therefore, its enforcement would

offend public policy of India. A party who has consciously and deliberately avoided a proceeding knowing fully well that the result of the proceeding

may be adverse to its interest cannot complain of violation of natural justice. The petitioner was under no disability and nothing has prevented the

petitioner to file its statement of defence along with documents. The petitioner is in effect seeking a review of the foreign award on merit which is not

permitted in this proceeding. Lord Mansfiled in Holman v. Johnson stated that the principle of public policy is ex dolo malo non oritur action. No Court

of law will lend its aid to a man who founds his cause of action upon an immoral or illegal act. The rule has been further illustrated by Russel by

stating that grounds of public policy on which an award may be set aside include: (1) that its effect is to enforce an illegal contract; (2) that the

arbitrator, for instance manifested obvious bias too late for an application for his removal to be effective before he made his award.

None of the above conditions apply in the instant case. The petitioner is not alleging fraud or bias by the arbitrator. Even under the domestic award, a

possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to

be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a

trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, and then he

is the last word on facts. The construction of the terms of the contract is primarily for an arbitrator to decide unless the arbitrator construes the

contract in such a way that it could be said to be something that no fair minded or reasonable person would do, of course, the arbitrator cannot wander

outside the contract and deals with the matters not forming the subject matter or allotted to him as in that case he would commit jurisdictional error.

The judgment in Associate Builders (supra), which was passed in relation to a domestic award also recognized and reaffirmed the settled law that

where a cause or matters in differences are referred o an arbitrator, whether lawyer or layman, he is considered to be the sole and final judge of all

questions of law and of fact obviously with the limited grounds of interference, namely, if it is opposed to fundamental policy of Indian Law, interest of

India, justice or morality and patent illegality. It is an admitted position that the buyer did not participate in the proceeding nor has filed its pleading. The

Tribunal on the basis of the materials on record has arrived at the following finding:-

“6.10.If we disregard the alternations envisaged by the Amendment to the Contract dated 7th December 2010, granting an even higher level for

“Broken Grains†and “Dead, Damages and Discoloured Grainsâ€, the results provided by ISC were well within the parameters foreseen for

the quality under the Contract.

6.11. The Tribunal therefore finds that the quality of the cargo shipped on the three vessels was within the amended contractual specifications.

6.12. In addition to the above, the relevant provision of the Quality Clause 5 of GAFTA Contract No.48, being a Tale Quale contract as such, states,

inter alia:

“Certificate of Inspection at time of loading shall be final as to qualityâ€​.

6.13. Consequently, and under consideration of the Payment Term of the Contract providing for payment “on receipt of the shipping documentsâ€,

inter alia the above Pre-Shipment Certificates as issued by ISC and provided by Sellers, Sellers were duly entitled to trigger payment under the

Contract.

6.14. We therefore find that Sellers’ claim for payment of USD 440.00 per metric ton for all three partial shipments succeeds.

6.15. In reference with the balance of USD 10.00 per metric ton for each partial shipment, as agreed under the Amendment dated 7th December,

2010, the Amendment provided that the “Balance amount @ US$ 10.00 per MT will be payable after receipt of quality inspection report of

destination portâ€​.

6.16. This indeed establishes an alteration to the original provision of the Contract that the quality would be final at the port of loading, at least as far as

the balance of USD 10.00 per metric ton is concerned. On interpretation and construction of the Contract itself and its Amendment dated 7th

December, 2010, the Tribunal notes that the Amendment itself defines in “1. Quantity†that the weight in accordance with the Contract would be

still “final at loading†while the amended Payment Term now states that “a balance amount of US$ 10.00 per MT†would only “be

payable after receipt of a quality inspection report of destination portâ€​.

6.17. We therefore find that the Contract had been validly altered to the provision that Sellers could only have triggered payment of the balance of

USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination, i.e. Bangladesh.

6.18 As no such quality inspection report had been presented by Buyers, despite various reminders from Sellers, until the present day, the GAFTA

Sampling Rules No.124, cl. 6:1 provide that a “certificate of analysis†should be sent to the other party “within 14 consecutive days†after

dispatch of the samples to the analyst.

6.19. Buyers in their message of 5 February, 2011 firstly explained that the quality of the cargo on the last vessel, i.e. MV Tu Man Gang, was inferior.

6.20. The Tribunal therefore finds that Buyers, with respect to cl. 6:1 of the GAFTA Sampling Rules No.124 were obliged to provide a certificate of

analysis latest 14 days after that message dated 5th February, 2011, therefore, latest 20 February, 2011.â€​

The aforesaid finding, in my view, is in the realm of the interpretation of contract and passed on appreciation of evidence. This finding cannot be

interfered with in this proceeding. The findings are not opposed to justice or morality or contrary to the public policy of India. The said award is not

passed in contravention of any law of the land. Even the English decisions on the basis of which it was argued that the buyer stands discharged

because of non-submission of the quality certificate at the port of destination does not assist the petitioner. In Shamsher Jute Mills Ltd. (supra) the

issue was:-

“If an F.O.B seller who has contracted for payment under a letter of credit to be opened by the buyer ships the goods but fails to obtain payment

under the credit because of a failure on his part to comply with its terms, may he recover the contract price or damages for non-acceptance against

the buyer.â€​

It appears from the judgment that there is no clear evidence to establish that what exactly happened to the goods. Neither buyers nor sellers derived

any benefit. The sellers’ central contention was that a letter of credit is conditional payment only. If, therefore, a seller duly ships the goods and

fails to obtain the payment under the letter of credit he is entitled to recover the price directly from the buyer, at any rate once the letter of credit has

expired. The buyers appear to have agreed that a letter of credit is a conditional payment only, but contend that it is under the parties’ contract the

sole method of payment agreed. Justice Bingham on consideration of the materials on record stated that “if the seller fails to obtain payment

because he does not and cannot present the documents which the terms of the credit, supplementing the terms of the contract, require, the buyer is

discharged: that was the Ficom case. In the ordinary case, therefore, of which the present is an example, the due establishment of the letter of credit

fulfils the buyer’s payment obligation unless the bank which opens the credit fails for any reason to make payment in accordance with the credit

terms against documents duly presented. I know of no case where a seller who has failed to obtain payment under a credit because of failure on his

part to comply with its terms has succeeded in recovering against a buyer personally. If this were an available road to recovery, many of the familiar

arguments about discrepancies in documents would be unnecessary. Bearing in mind the likelihood that buyers will (as here) sell on to sub-buyers,

such a result would, I think, throw the course of international trade into some confusion. It must in my view follow that the sellers here, not having

complied with the credit terms, cannot recover against the buyers personallyâ€​.

The aforesaid decision is distinguishable on facts inasmuch as the award is passed on interpretation of the contract clause read with the GAFTA

sample rules. The Tribunal held that the buyer has failed to furnish proof of inferior quality of food grains. In Ficom S.A. (supra) the Court was

concerned with a contract of sale in which the terms of the letter of credit and in particular of the documents to be presented under the letter of credit

â€" were undefined in the sale contract. In deciding the said issue, the following approach was adopted:-

“I approach the matter in this way. It is plain on the authorities that parties to a contract of sale, under which payment is to be made by means of a

letter of credit, can, by subsequently agreeing to terms of the letter of credit which differ from those specified in the sale contract, hereby vary their

contractual obligation under the sale contract: see W.J. Alan & Co. Ltd. V. El Nasr Export and Import Co. [1972] 2 Q.B. 189; [1972] 1 Lloyd’s

Rep. 313. A somewhat similar case may arise where the parties do not, in their sale contract, define the terms of the proposed letter of credit. Where

that occurs the letter of credit, as subsequently agreed between the parties, may fill the contractual gap and so supplement the terms of the sale

contract; if that is not done, for example, where the parties are unable to agree on the terms of a letter of credit to be issued under a contract of sale,

then the dispute may have to be resolved by defining where possible by means of implication or by resort to any approved custom of the trade, the

terms upon which the parties must be taken to have agreed that the letter of credit should in due course be issued.†In Gutteridge & Megrah’s

Law of Bankers’ Commercial Credits, 8th Edition, the learned Author made the following observation with regard to the said decisions:-

“3-29 In Ficom SA v. Sociedad Cadex Limitada and Shamsher Jute Mills Ltd. V. Sethia (London) Ltd. non conforming documents were presented

under the credit. In the former case the sellers then disposed of the goods for their own account and in the latter the goods appear to have been sold in

satisfaction of freight or warehouse costs with neither seller nor buyer deriving any benefit. In both cases it was held that the seller could only obtain

the price through the letter of credit. In Shamsher Jute, Bingham J. said:

If the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms of

the contract, require the buyer is discharged: that was the Ficom case. In the ordinary case, therefore, of which the present is an example, the due

establishment of the letter of credit fulfils the buyer’s payment obligation unless the bank which opens the credit fails for any reason to make

payment in accordance with the credit terms against documents duly presented. I know of no case where a seller who has failed to obtain payment

under a credit because of failure on his part to comply with its terms has succeeded in recovering against a buyer personally.

3-30 In the Shamsher Jute, Bingham, J. was dealing with a case where the failure to present documents required by the terms of the credit is the fault

of the seller. In Saffron v. Societe Miniere Cafrika the seller shipped goods under an F.O.B contract in circumstances which enabled the buyer to

obtain control of the goods upon shipment prior to issue of the bill of lading. The buyer then obtained a bill of lading made out in terms that prevented

the seller from complying with the terms of the credit and as a result the seller could not obtain payment from the bank. The seller sued for the price.

The High Court of Australia upheld the claim, saying:

The question could only arise in special circumstances, e.g. if the bank responsible for the credit were to become insolvent, or as here, where

notwithstanding that the documents tendered were not in conformity with the letter of credit, the seller had lost control of the goods to the buyer. The

Court held that property in the goods had passed to the buyer and, the buyer not having restored dominion over the goods to the seller, the seller was

able to maintain an action for the price. The seller had sold and delivered the goods to the buyer and was entitled to payment unless there was a term

in the contract excusing payment. It held that on the facts there was no such term since the letter of credit was not confirmed and provided for part

payment only of the price. The Court then considered what the position would have been if the letter of credit had been intended as the “primary

source of paymentâ€​ and said:

Had the issue been whether the letter of credit was intended as the primary source of payment, the answer would have been that it was. In that event,

the further question would have arisen whether the circumstances in which that primary source failed excused the defendant from payment

altogether. It would seem that the only possible ground upon which the seller could have been defeated in his claim for the price would have been that

the seller was solely responsible for the failure of the primary source of payment.†The learned Authors have also discussed the consequences of

breach in the following Paragraphs:-

“3-42.Where the buyer fails to open a letter of credit in accordance with the contract of sale by the date required by the contract, this constitutes a

repudiation of the contract and the seller is entitled to treat the contract as terminated and claim damages for non-acceptance of the goods.

3-43. Where the seller fails to perform an obligation which is a condition precedent to the buyer’s obligation to open the credit or fails to present

conforming documents to the bank within the time stipulated in the credit, this constitutes a repudiation of the contract of sale and the buyer is entitled

to treat the contract as terminated and claim damages for nondelivery of the goods.

3-44. If the seller presents conforming documents to the bank, this will discharge his obligations under the contract in relation to the documents and he

will be able to recover the sum due under the letter of credit. This will usually be the whole contractual consideration, but it need not be. If it is not the

seller is entitled to recover such further consideration from the buyer as is payable under the contract of sale. If, when the goods are delivered, they

do not conform to the contract quality, the buyer may claim damages for breach of warranty, or if the facts justify it may reject the goods and claim

damages for non-delivery or return of the price as for a consideration that has wholly failed.

3-45. If it transpires that the documents tendered to the bank are fraudulent (by, for example, the bill of lading being ante-dated) and the bank pays the

seller, the buyer may be able to recover damages from the seller for breach of contract or, if the facts justify it in deceit.†Jack on Documentary

Credits, 4th Edition has also discussed this aspect of the matter. The learned Author observed:-

“3.60 Whether the credit is conditional or absolute payment, if the seller presents documents to the bank that do not comply with the credit and are

rejected the seller cannot sue the buyer directly unless the buyer has actually obtained the goods. This is so whether or not the goods conform to the

contract. This is the clear outcome of both Soproma (1) and Shamsher Jute (2).

1 [1966] 1 Lloyd’s Rep 367: see para 3.50 above.

2 [1987] 1 Lloyd’s Rep 388: see para 3.54 above.

3.63 The buyer may receive the goods and yet the seller remain unpaid in two contrasting situations. One is where the credit provides for deferred

payment and the documents are duly processed and taken up by the buyer in order to obtain the goods. The other is where the documents are not

accepted, perhaps because the bank rightly rejects them, but the buyer nonetheless obtains the goods. He may, for example take delivery from the

vessel without bills of lading by giving an indemnity to the shipowner. An equivalent result may obtain by reason of a fraudulent scheme devised by the

buyer. He may for example have ensured that the letter of credit demands a document that the seller is unlikely to be able to provide, or he may have

failed to extent the period of the credit to cover a later shipment to which the parties have agreed.

3.65 Where the documents have not been accepted and yet the buyer has received the goods one may be confined that the buyer will be held liable

for the price. However, the legal basis for reaching this solution may be difficult to predict without knowledge of the precise circumstances. It might

be held that by instructing the bank not to pay against the documents because of the discrepancies (the bank will usually request the buyer’s

instruction), the buyer has waived and right to treat the credit as payment. Where, as is likely, the seller has retained the right to possession of the

goods, he has an alternative to his action for the price, which is to sue in the tort of conversion for the value of the goods. The buyer will have

converted the goods by taking them if he had no title to them and no right to possession. This remedy is of particular use where the market has risen

so that damages may exceed the contract price. In such a situation if the buyer has himself sold the goods â€" perhaps for a higher price â€" the seller

may alternatively pursue a restitutionary action to recover the amount received by the buyer as the proceeds of his tort. If the goods have been

delivered to the buyer without the buyer having duly presented bills of lading, the seller, if he retains the bills, will have a cause of action against the

carrier for misdelivery, in English law for conversion. For an example of such a claim being made against a carrier and admitted by him in exchange

for an assignment of the seller’s rights under the credit, see Mannesman Handel AG v Kaunlaran Shipping Corpn.â€​

The aforesaid decision was cited primarily that when the contract is silent as to who would produce the quality certificate, terms of the letter of credit

can be looked into to fill up the gap, if any, in order to ascertain whose obligation it would be to produce such certificate. It is an admitted fact that

when the third consignment was received by that time the validity of the L/C had expired and the parties had agreed to replace the L/C by bill of

exchange. There was no stipulation concerning the said consignment that the payment is subject to production of the Quality Inspection Report by the

seller at the port of destination. Even for 2.22% there was no valid and subsisting L/C. The buyer nonetheless obtained the goods. The findings of the

Tribunal would show that the buyers in spite of notice did not furnish any proof of inferior quality of the goods. The Tribunal has interpreted the

contract clause with regard to furnishing a quality certificate at the port of destination to be the responsibility of the buyer and, in absence of any

document to show that the goods were inferior in quality returned a finding in favour of the seller.

The Court in this limited jurisdiction and the narrower scope within which the Court has to act under Section 48 of the Arbitration and Conciliation Act,

1996 is unable to accept the submission of the buyer that the said award is contrary to public policy of India or opposed to justice and morality. In the

instant case, in so far as the seller is concerned, it is quite clear that certificate at the port of loading is final. The reference to GAFTA Rules for the

purpose of interpretation of the relevant contractual terms to find out who is responsible for the production of the quality certificate at the destination

port by the arbitral tribunal, in my view, is entirely within the domain of the Tribunal and is within the realm of interpretation of the contract. Even a

Court in dealing with a domestic award would not touch the award on this ground. In any event, such grounds of challenge are not coming within the

purview of Section 48 of the Act.â€​

Mr. Mitra although tried to distinguish the said judgement on the ground that in the that case a Bill of Exchange was issued in respect of the last of the

three Letters of Credit which is not the case here but the same does not make any difference as admittedly the validity of the Letter of Credit expired

on 15th January, 2011 and the quality inspection certificate at the port of destination could not have been presented thereafter for payment even

assuming that the Letter of Credit is the only mode of payment agreed between the parties. Even observations of Justice Bingham does not assist the

applicant. In the said judgment it was stated that: “if the seller fails to obtain payment because he does not and cannot present the document which

the terms of credit to the supplementing the terms of the contract, require, the power is discharged†would not be applicable in that case as seller had

never failed inasmuch as even if the interpretation of the amended payment terms of the Letter of Credit is construed in favour of the buyer which

reads:

“Certificate of quality inspection report at port of destination†would not have been possible as the validity of the Letter of Credit had expired on

15th January, 2011 and the acceptance of 97.78% of the invoice value is payable only 30 days after shipment date against submission of documents 1

to13 which clearly shows that the seller would receive payment 30 days after shipment date against production of such documents. Although Mr.

Mitra urged that this was not a case made out in the statement of claim but this has now become necessary in view of nature of objections raised in

this proceeding with regard to the enforcement of the foreign award. This issue was never raised before the Tribunal, not even in any of the

correspondences between the parties.

Mr. Mitra has relied upon the decision of Delhi High Court in Toepfer International Asia Pvt. Ltd. Vs. Priyanka Overseas Pvt. Ltd. reported at

2007(4) Arbitration Law Report 499 for the proposition that the fundamental policy of Indian Law is that the law of the land must be obeyed and the

law of the land is that an arbitral tribunal is bound by the terms of contract of which its creation is not in dispute. The said principle would apply

provided the conditions are fulfilled. The interpretation of a contract is a matter for the arbitrator to determine, even if, it gives rise to determination of

a question of law. Arbitration is consensual and some amount of laxity should be given which scrutinizing an award. A sense of informality is attached

to such proceeding. It cannot be scrutinized with an Eagle’s eye or as an appellate authority.

The reliance of the arbitrator on the GAFTA Rules in order to find out the responsibility of the person required to produce such certificate in my view

is not de hors the contract or a matter which does not fall within the jurisdiction of the arbitrator or falling within the terms of submission to arbitration.

In the arbitration proceeding the seller had asserted three things. Firstly, invoices for the balance 2.22% of the invoice value was raised and accepted

by the buyer, however, the said invoices had remained unpaid. Secondly, the seller never had received any inferior quality claim before 15th February

2011, nor was the seller responsible for any inferior quality claim. Thirdly, the buyers did not produce any quality inspection report. In the claim

statement, the sellers have annexed relevant documents and correspondence between the parties. The buyer is not required to plead evidence. The

tribunal proceeded on the uncontroverted statements made in the claim statement. The tribunal considered the documentary evidence and construed

the payment terms mentioned in the amended contract as well as in the amended LC along with the correspondences exchanged between the parties

to ascertain who would be required and responsible to produce the quality inspection certificate at the destination port.

The tribunal in deciding the issue has neither acted contrary to the contract nor has exceeded its brief. It is not a case where the tribunal has travelled

beyond its jurisdiction and decided a matter contrary to the terms of the contract. It is a possible view taken by the tribunal on the basis of the

pleadings and evidence produced before the tribunal. I have already briefly indicated the nature of the documents that formed part of the statement of

claim and also briefly indicated the reasoning of the tribunal based on such documents. It was open for the petitioner before the tribunal to raise all

such objections which the applicant has conveniently avoided. The numerous correspondences between the parties would unmistakably show that the

buyer had never raised the issue of production of quality inspection certificate at the port of destination by the buyer, inasmuch as the buyer although

claimed to be in possession of the alleged inspection reports showing inferior quality, had never disclosed or furnished such reports to the seller or even

the tribunal. The buyer, as could be seen from the email of 1st June, 2011, had written off its quality claim against the seller. LMJ could have

submitted its defence in a communication to the tribunal, disclosing such report.

It is a settled law that interpretation of the contract and appreciation of the evidence by the arbitral tribunal cannot be reopened by arguing that the

foreign award is contrary to the contract and, therefore, its enforcement would offend public policy of India. A party who has consciously and

deliberately avoided a proceeding knowing fully well that the result of the proceeding may be adverse to its interest cannot complain of violation of

natural justice. The petitioner was under no disability and nothing has prevented the petitioner to file its statement of defence along with documents.

The petitioner is in effect seeking a review of the foreign award on merit which is not permitted in this proceeding. Lord Mansfiled in Holman v.

Johnson stated that the principle of public policy is ex dolo malo non oritur action. No Court of law will lend its aid to a man who founds his cause of

action upon an immoral or illegal act. The rule has been further illustrated by Russel by stating that grounds of public policy on which an award may be

set aside include: (1) that its effect is to enforce an illegal contract; (2) that the arbitrator, for instance manifested obvious bias too late for an

application for his removal to be effective before he made his award.

None of the above conditions apply in the instant case. The petitioner is not alleging fraud or bias by the arbitrator. Even under the domestic award, a

possible view by the arbitrator on acts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to

be relied upon when he delivers is arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a

trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, and then he

is the last word on facts. The construction of the terms of the contract is primarily for an arbitrator to decide unless the arbitrator construes the

contract in such a way that it could be said to be something that no fair minded or reasonable person would do, of course, the arbitrator cannot wander

outside the contract and deals with the matters not forming the subject matter allotted to him as in that case he would commit jurisdictional error.

Under such circumstances G.A.3307 of 2016 fails and is dismissed with cost assessed at Rs.1 lakh.

(Soumen Sen, J.)

Later on:

The learned Counsel representing the award debtor has produced before this Court an order of the Hon’ble Supreme Court dated 4th July, 2018 in

Special Leave Petition No.540 of 2018 by which the award holder was restrained to deal with the bank guarantee or any aspect of it without leave of

the Hon’ble Supreme Court and the matter is listed before the Hon’ble Supreme Court on 23rd July, 2018. The learned Counsel has prayed

for stay of operation of this order. This order shall remain stayed till 31st July, 2018. EC No.488 of 2013 shall appear on 31st July, 2018.