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Case Reviews, The Law

Glencore International AG v. Hindustan Zinc Limited

Foreign arbitral award holders who do not have a presence in India often face the dilemma of which Indian court to approach for the enforcement of their award. On June 8, 2020, the Delhi High Court in Glencore International AG v. Hindustan Zinc Limited provided further guidance on the matter holding that a foreign award maybe enforced as a deemed decree, depending on the location of the assets of the judgement debtor.

By: Antalina Guha, Ajeenkya DY Patil University.

Facts of the Case

The petitioner and the Respondent entered into a contract in 2011 for the supply of MRM concentrate being shipped from Australia to India. The contract under Clause 27.2 stated that the said contract was governed by the Laws of England with the venue of the arbitration being in London.

The parties further entered into a second contract in 2012, for an upgraded quantity and had the similar terms of governing laws like the previous contract.

The respondent, in pursuance of the disputes that were arising between the parties, invoked the arbitration clause and submitted the dispute to the London Court of International Arbitration (LCIA), in 2014.

 As the subject matter of the disputes related to two separate contracts that were entered between the two parties, the LCIA issued two final awards and further awards on costs and interest on costs.

The respondent challenged the final awards before the Rajasthan High Court, which was dismissed. The respondent appealed against this judgement before the division bench of the Rajasthan High Court.

While the appeal was pending, the petitioner approached the Delhi High Court for the enforcement of the awards on costs and the interest of costs. The respondent challenged the enforcement petition on the ground that the Delhi High Court lacked appropriate territorial jurisdiction as the assets were not located within the jurisdiction of the court. 

The Petitioner argued that, where the subject matter of the foreign award is money, an enforcement petition can be filed where the assets are located. The petitioner noted that the respondent’s administrative office and movable assets such as cars, bank accounts, furniture were located in New Delhi, therefore Delhi High Court had requisite jurisdiction. 

Issues

The Delhi High Court considered the following issue:

  • Whether the petitions for enforcement of foreign award filed by the Petitioner are maintainable before the Delhi High Court or not?

Territorial Jurisdiction

The High Court held that a petition for the enforcement of the arbitral award is maintainable only where properties or assets of the judgement debtor are located.

Relying on the Supreme Court judgement in Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Ltd., Saudi Arabia & Ors. 1995, the Court observed that a foreign award is a deemed decree when granted enforcement and can be enforced anywhere depending on the location of the assets of the judgement debtor or where the money lies.

The High Court also relied on Wireless Developers Inc. v. India Games, 2012 to rule that the onus is on the award holder to locate the money of the judgement debtor and in the event of such money being not found, the award holder may subsequently file an application before another court to locate other property. Accordingly, the High Court ruled that it had the necessary jurisdiction to entertain the enforcement petition since the respondent had moveable assets and bank accounts within the court’s jurisdiction.

The Court observed that the respondent had failed to establish that the administrative office was on lease. The respondent was therefore directed to file an affidavit disclosing all assets- moveable and immovable, tangible and intangible.

The respondent was also ordered to furnish proof that the office premises were on lease. The court held that depending on the disclosure in the affidavit, the issue of territorial jurisdiction would be finally decided. The court also held that pendency of proceedings before the Rajasthan High Court did not hinder the enforcement proceedings before the Delhi High Court.

Observation

The Court examined the contentions of the petitioner that the respondent had Bank Accounts and other moveable properties within the territorial jurisdiction of New Delhi along with Administrative Office.

The Respondent submitted that the immovable property was on lease and not owned by the Respondent. However, the Court noted that the Respondent did not deny existence of moveable properties like Bank Accounts within the jurisdiction of the Court.

The Court referred to and discussed the relevant provisions under the Civil Procedure Code, 1908 and also Section 2 (1) (e) and Section 47 of the Act which defines ‘Court’ for Part I and II of the Act.

The Court relied up on the Bombay High Court judgment of Tata International Ltd., Mumbai v. Trisuns Chemical Industry Ltd., Kutch 2002which discussed the interplay between the Section 2 (1) (e) and Section 47 of the Act and held that both provisions are related to different aspects i.e. Section 2 (1) (e) of the Act pertains to subject matter of ‘arbitration’ and Section 47 of the Act pertains to subject matter of ‘arbitral award’.

The Bombay High Court concluded that:

“In the instant case, defendants do not have their office or carry on business within the jurisdiction of this Court. The Offices are either at Gandhidham or Ahmedabad. It is not averred in the petition that the respondents have any money within the jurisdiction of this Court. In these circumstances, to my mind in the absence of the subject matter of the Award being within the jurisdiction of this Court, this Court would have no jurisdiction to hear and decide this petition.”

Further, the Bombay High Court in the case of Wireless Developers Inc. v. India Games Ltd., 2012 concluded that, when enforcement of an arbitral award is in the picture, where the properties, moveable or immoveable are located would be the appropriate jurisdiction and the residence of the Respondent shall be of minimal consideration.

The territorial jurisdiction of the Court would be where the contract was entered into or where the some or all the properties of the respondent would be. Once the arbitration is concluded and has to be enforced it is the subject matter of the award which would have to be seen.

That would be whether the award is a money award (analogous to a money decree in a litigation) or a declaration or other relief with regard to a contract or a property. The award would have to be filed for its enforcement in a Court which would be able to enforce that award. It would be futile to file it where a cause of action may have arisen if the respondent would have no properties in that jurisdiction. Similarly, it would be of little use to file it where the respondent resided or carried on the business.

It would have to be filed where the respondent would have properties, movable or immovable, which could be attached and sold in execution of the award.”

Conclusion

The Court thereafter, concluded that for an enforcement of an award, the party can only approach that Court within whose Jurisdiction the properties or assets of the respondent are located.

The court concluded that as per the provisions of the Civil Procedure Code, 1908 and the Act, the Delhi High Court had territorial jurisdiction to entertain the petition. The Court noted that the Respondent was unable to establish that the property was taken by the Respondent on lease.

The Court further accepted the contention of the Petitioner that the Respondent had moveable properties, an Administrative Office and Bank Accounts within the territorial jurisdiction of the Court.

Therefore, the Court directed the Respondent to file an Affidavit and disclose assets within a period of 5 weeks. The Court has listed the matter in July, 2020 to further consider the issue of territorial jurisdiction after disclosure of documents relating to lease of immovable property.

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