Badat and Co. v. East India Trading Co.

Judgment

original jurisdiction of the Bombay High Court. It follows that a part of the cause of action accrued within the said limits and that as the leave of the High Coutt was obtained,. the said High Court had jutisdiction to entertain the Badat and Company v •. East India Trading Company Subba Rao J. Badat and Compa"y East India Trading Company Mudholkar f. 48 [1%4] claim. No other point is argued before us. In the result, I agree with the conclusions arrived at by the High Court. The appeal is dismissed with costs. MuoHOLKAR J.-This is an appeal by a certificate granted by the High Court of Bombay from its judgment dated September 12, 1958 reversing that of Mody J., who, by his judgment had dismissed a suit instituted by the East India Trading Co., respondents before us, against the defendants Badat & Co., on the original side of the High Court for a sum of Rs. 92,884-4-10 with interest and costs on the basis of a judgment of the Supreme Court of New York affirming awards given by a domestic tribunal or alternatively on the awards themselves.

The plaintiff-company was incorporated in the State of New York and among other things, engages in the import of spices. The defendant-company, was a partnership firm and at the relevant time was carrying on import and export business in Bombay. According to the plaintiffs, by two letters dated September 7, 1948, and September 13, 1948, the first written by the plaintiffs and the second by the defendants, the parties agreed to do business upon the terms of the American Spice Trade Association. One of the terms agreed between the parties was that the plaintiffs at the time of placing an order for the supply of spices with the defendants were to open a letter of credit to the extent of 95 per cent of the value of the commodity ordered to be supplied and the balance to be settled immediately after the goods were weighed and delivered.

By their cable dated March 3, 1949, the defendants offered to sell to the plaintiffs 30 tons of Alleppey Turmeric Fingers at a certain rate, to be shipped in March/ April. This offer was immediately accepted by the· plaintiffs. A somewhat similar offer was again made by the defendants to the plaintiffs on March 7, 1949, which offer also was accepted by the plaintiffs. The plaintiffs claim to have forwarded to the defendants in respect of the said transactions two contracts in duplicate on the standard forms issued by the American Spice Trade Association with a request to the defendants to return to them a duly signed 49 from in respect of each of the transactions and their grievance is that the defendants failed to comply with the request. The plaintiffs further aver that though they opened letters of credit, the defendants committed a breach in respect of both the contracts by failing to supply turmeric.

The plaintiffs have alleged in para 3 of the plaint that the defendants were well aware of and knew what the terms and conditions of the American Spice Trade Association were. One of the terms of the Association which they have set out is as follows: "All questions and controversies and all claims arising under this contract shall be submitted to and settled by Arbitration under the Rules of the American Spice Trade Association printed on the reverse side thereof. This contract is made as of in New York." In pursuance of this term, the plaintiffs who had declared the defendants in default appointed one Edward B. Polak as their Arbitrator and on May 24, 1949, called upon the defendants to appoint an arbitrator on their behalf. They also informed the defendants that if they failed to do so, they, the plaintiffs, would request the Association to appoint an arbitrator on the defendants' behalf.

The defendants not having appointed any arbitrator on their behalf, the Association at the plaintiffs' request appointed one Michael F. Corio to act as an arbitrator on the defendants' behalf. This person informed the defendants of his appointment as Arbitrator and requested them to furnish him with all documents and information which might be necessary or useful in the matter of arbitration and further informed them that in the absence of such documents and information the Arbitrators will have to proceed with the arbitration upon the documents and information made available by the plaintiffs. The defendants did not reply to this communic~tion. The Arbitrators before entering upon arbitration, selected one James F. Knight as Umpire and Chairman as required by the rules of the Association.

Thereafter the Arbitrators and the Umpire entered upon arbitration and gne two awards, in the ·sum of $9,538.6'4 in respect of the first contract and in the sum of $9,209.36 in respect of the second Badat and Company East India Trading Company Mudhollr.ar /. Badat and Company East India Trading Company Mudholkar /. 50 [1964J contract by way of damages. The plaintiffs thereupon drew a bill of exchange on the defendants at Bombay for $18,748 being the aggregate sum awarded by the two awards. According to them, though it was presented to the defendants several times in Bombay they "failed and neglected to accept or to pay the same." Then, according to the plaintiffs, they adopted prcr ceedings in the Supreme Court of the State of New York to have the said awards confirmed and judgment entered thereon.

Notices of the proceedings were said to have been served on the defendants and judgment confirming the said awards and ordering the defendants to pay $19,554.17, including interest and costs, was pronounced on April 13, 1950. The plaintiffs eventually instituted the suit out of which this appeal arises in the High Court of Bombay on January 14, 1954. According to the plaintiffs, the defendants have, by the terms of the contract voluntarily submitted themselves to the jurisdiction of the Supreme Court of New York and have agreed to the said Court, which was a Court having jurisdiction in that behalf, confirming the said awards and entering judgment thereon. Further, according to them, the parties had expressly agreed that judgment might be entered on any award that might be made in respect of any question, controversy or claim between the parties arising under or out of the said contracts in accordance with the practice of any Court having jurisdiction.

Alternatively they have contended that if the Court held that the judgment was not a judgment of a foreign Court on which action would lie in the High Court the defendants having by the terms of the said contracts expressly agreed to have any dispute arising un-, der the contracts settled by arbitration in New York. under the rules of the Spice Trade Association and the arbitration upon which 'the awards are founded having been duly made and published according to the rules and laws of the State of New York and further having become final are binding on the defendants, the defendants are bound to carry out the terms of the said awards and to pay to the plaintiffs the sums awarded under them. Thus the suit is substantially based on a foreign judgment and in the alternative on the two awards given by a domestic 51 tribunal functioning in New York. The defendants raised a number of pleas in defence.

In the first place they said that they did not reside within the limits of the original jurisdiction of the High Court or carry on business therein and the High Court had no jurisdiction to entertain the suit. They further contended that no part of the cause of action had arisen in Bombay. It may be mentioned that the plaintiffs had sought for and obtained ex parte leave of the court under cl. 12 of the Letters Patent and the defendants submitted that the leave should be revoked. The next important contention of the defendants was that the Supreme Court of New York had no jurisdiction to pass the judgment and the order sought to be enforced. Further, according to them, the Arbitrators and the Umpire who gave the alleged awards on which the judgment of the Supreme Court was founded had no jurisdiction to make those awards. They raised a number of other pleas also and elaborate judgments have been delivered by Mody J. as well as by the appeal court consisting of Chagla C. J ., and S. T. Desai J., dealing with those contentions.

Upon the view we take on the question of the enforceability of the awards in question in the manner sought in this case it is not necessary to advert to those pleadings. It was not disputed before us that the defendants had, at the date of suit, ceased to reside or carry on business within the limits of the original civil jurisdiction of the High Court of Bombay. The appeal court, while holding that the judgment of the Supreme Court of New York cannot be enforced against the defendants in a suit brought on the original side of the High Court took the view that the awards upon which the judgment is based can be enforced because they give rise to a cause of action and a part of that cause of action had arisen in Bombay. The reason why the judgment of the Supreme Court of New York could not be the foundation of the suit is, in the words of the karned Chief Justice, as follows :

"The foreign judgment was passed in New York and the defendants did not reside and carry on business within jurisdiction at the relevant date. The only way that jurisdiction could possibly have been attracted was by an averment that there was an obligation Badat and Company Ea1t India Trading Company !963 Badat and Company Ea!t lndja Trading Company Mu_dholkar /. 52 [1964] under the judgment on' the part of the defendants to pay the amount in Bombay or that the defendants had undertaken the obligation to pay the judgment amount in Bombay. There is no such averment in the Plaint and in the absence of any such averment if the Plaint had been based only on the foreign judgment then we might have agreed with the learned Judge and held that the Court had no jurisdiction." No doubt, the learned Chief Justice has further said that it was unnecessary to decide the matter finally because in his view the plaintiffs were entitled to the relief claimed on the basis of the awards.

We may point out that Mr. Setalvad, who appeared before us for the plaintiffs, did not challenge the finding of the appeal court on this point and did not seek to argue that the judgment of the Supreme Court could furnish a cause of action to the plaintiffs in respect of the present suit. We entertain no doubt as to the correctness of the view that the plaintiffs are. not entitled to enforce the judgment of the Supreme Court against the defendants by a suit instituted on the original side of the High Court and therefore, we should ordinarily have let the matter rest there. Our reasons for agreeing with the High Court's conclusion on the point are, however, different and, therefore, it is necessary for us to state them. Before we do so, it would be desirable to examine the position regarding the enforcement of foreign awards and foreign judgments based upon awards.

Under the Arbitration Protocol and Convention Act, 1937 (VI of 1937), certain commercial awards made in foreign countries are enforceable in India as if they were made on reference to arbitration in India. The provisions of this Act, however, apply only to countries which are parties to the Protocol set forth in the First Schedule to the Act or to awards between persons of whom one is subject to the jurisdiction of some one of such powers as the Central Government being satisfied that the reciprocal provisions have been made, may, by notification declare to be parties to the Convention, setfbrth in the Second Schedule to the Act. It is common ground that these provisions are not applicable to the awards in question.

Apart from the provisions 53 of the aforesaid statute, foreign awards and foreign judgments based upon awards are enforceable in India on the same grounds and in the same circumstances in which they are enforceable in England under the common law on grounds of justice, equity and good conscience. We may add that in cases arising on the original side of the High Court of Bombay, English common law is applicable "as nearly as the circumstances of the place and the inhabitants admit" by virtue of cl. 19 of the Letters Patent read with cl. XU of the Charter of the Bombay High Court. The common law on the subject is crystallised thus as rule 198 in Dicey's Conflict of Laws, 7th edn. at p. 1056. "Rule 198(1) : A foreign arbitration award which has been rendered enforceable by a judgment in the country where it was given may be enforced by an action as a foreign judgment. (2)

A foreign arbitration award which has not been rendered enforceable by a judgment in the country where it was given may be enforced by an action at the discretion of the court if the award is,- ( a) in accordance with the terms of the submission agreement; and (b) valid according to the law governing the arbitration proceedings; and ( c) ( semble) final according to the law governing the submission agreement." The position as summarised in Russel On Arbitration, 16th edn. is set out thus at p. 282 : "An award made by foreign arbitrators, which requires an enforcement order to render it enforceable by the local law, is not a judgment of a foreign tribunal which can be enforced by action in English courts. But an award which is complete and could be enforced in the country where it was made is enforceable in England at common law, quite apart from any rights given by Part II of the Act. (Arbitration Act, 1950-14 Geo. 6, c. 27) ."

Dealing with actions upon foreign awards at common law, it is stated further at p. 283 thus : "To succeed in such an action the plaintiff must Badat a~d Company East India Trading Company Mudholkar /. ·Badat and Company ·East India Trading Company Mudholkar f. 54 [1964] prove:- (1) That there was an arbitration agreement ; (2) That the arbitration was conducted in accordance with that agreement ; and (3) That the award was made pursuant to the provisions of the agreement and is valid according to the lex fori of the place where the arbitration was carried out and where the ward was made. If the award is validly made in consequence of a valid arbitration agreement, a sum found due by the award and unpaid may be sued for in an action upon the agreement," Thus commercial arbitration awards, though based on a contract to arbitrate are not contracts and although they are decisions they are not judgments.

Even though that is so, it has been held in several cases in England that even where an award has not been reduced to a judgment in a foreign country it can be enforced in England provided, of course, the award answers mutatis mutandis the tests for determining the enforceability of foreign judgments. Thus, the foreign arbitration tribunal must have acted upon a valid submission within the limits of jurisdiction conferred by the submission, and the award must be valid and final. (see Dicey's Private International Law, p. 1057). Then it is stated there : "Others believe that enforcement in England must depend upon the nature of the award in the country where it was given. Thus, if the award must be, and has been, reduced to a judgment abroad, the judgment and not the award must be enforced in England. If the award gives rise to a claim in contract abroad, it must be enforced as a contract in England.

However, as will be shown, this is not the view generally adopted by the courts, for the award is treated as a contract in England, no matter whether foreign law so regards it or not. Still others assert that the enforcement of an award in England is based not on the award, but on the contractual agreement to submit to arbitration all differences arising out of the original contract, on the ground that the submission to arbitration itself implies a contractual 55 agreement to abide by the award, thereby extinguishing the original cause of action." After stating this, the learned author proceeds to say : "It is submitted that no one short formula is saisfactory and that the enforcement of a foreign award involves a complex of questions which must be treated separately." He has then dealt with various decisions in England and also the opinions of certain writers. The conclusions stated in so far as they are relevant to this case are :-

1In all enforcement proceedings in England the plaintiff must first obtain an enforceable title in England i.e., he must either apply for leave to enforce the award or must bring an action on the award.

2In an enforcement proceeding in England the action on the award must take the form of a claim in contract. This rule is based upon the assumption that the agreement to perform the award is implied in the submission and that the submission is the contract on which the action is based.

3In order to be enforceable in England, the foreign award need not first be pronounced enforceable in the country of its origin. (see Union Nationale des Cooperatives Agricoles de Cereales Robert Catterall & Co. Ltd.(') though there the award was being enforced under the Arbitration Act, 1950). If, however, the foreign award is followed by judicial proceedings in the foreign country resulting in a judgment of the foreign court which is not merely a formal order giving leave to enforce the award, enforcement proceedings in England must be brought on the foreign judgment or possibly on the original cause of action but probably not on the award. If the foreign judgment has the character of a formal order giving leave to enforce the award it is doubtful whether the foreign award or the foreign order is to be enforced in England. If the distinction between foreign judgments on the award and foreign ( 1) (1959) 2 Q.B. 44. Badat and Company East India Trading Company Mudholkar /. Badat and Company East India Trading Company Mudholkar /. 56 [1964] formal enforcement orders can be maintained in practice, then, it is believed that the foreign award and not the foreign order, will be enforced in England, if the enforcement order is purely formal.

4For the purpose of enforcing a foreign award plaintiff must prove only (I) submission, (2) compliance with the submission in the conduct of an arbitration and (3) the validity of the award according to the law of the country where it was made. This is also laid down in Norske Atlas Insurance Co. Ltd., v. London General Insurance Co., Ltd.,(1) and according to the learned author this decision correctly indicates the conditions which must be fulfilled if a foreign award is to be enforced in England. We may, however, mention that relying upon Merrifield, Ziegler & Co., v. Liverpool Cotton Association Ltd.,(2) the learned Solicitor-General contended that an award should also be one which is enforceable in the country in which it was rendered without the aid of an enforcement order or a judgment. There, a German award was sought to be executed in England. Eve J., who decided the case, found that under the German law the award had the effect of a final judgment pronounced by a court of law.

But it could not be enforced by execution unless an enforcement order was made by the Court and further no enforcement order will be made if any grounds exist for setting the award aside. In the course of his judgment the learned Judge observed : "It is not even as though the award were enforceable unless the court stays its operation ; the contrary is really the case, and for all practical purposes it is stillborn until vitality is infused into it by the court .. It is then, for the first time, endowed with one, at least, of the essential characteristics of a judgment-the right to enforce obedience to it." Dicey has pointed out that this is the only case· where such a view has been taken and that it was not even referred to in the Norske's case(1). Nor was it referred to ( 1) (1927) 43 T.L.R. 541. ( 2) (1911) 105 L.T:R. 97. 57 in the Union Nationale case(').

There, a Danish award, though not enforceable in Denmark in the absence of an enforcement order was held by the court of Appeal to be enforceable under the Arbitration Act of 1950 on the ground that it had become final and that under the Danish law only formal objections could be taken to such an award in the proceedings for obtaining an enforcement order. It will thus be seen that there is a conflict of opinion on a number of points concerning the enforcement of foreign awards or judgments, based upon foreign awards. However, certain propositions appear to be clear. One is that where the award is followed by a judgment in a proceeding which is not merely formal but which permits of objections being taken to the validity of the award by the party against whom judgment is sought, the judgment will be enforceable in England. Even in that case, however, the plaintiff will have the right to sue on the original cause of action.

The second principle is that even a foreign award will be enforced in England provided it satisfies mutatis mutandis the tests applicable for the enforcement of foreign judgments on the ground that it creates a contractual obligation arising out of submission to arbitration. On two matters connected with this there is difference of opinion. One is whether an award which is followed by a judgment can be enforced as an award in, England or whether the judgment alone can be enforced. The other is whether an award which it not enforceable in the country in which it was made without obtaining an enforcement order or a judgment can be enforced in England or whether in such a case the only remedy is to sue on the original cause of action. The third principle is that a foreign judgment or a foreign award may be sued upon in England as giving good cause of action provided certain conditions are fulfilled one of which is that it has become final.

Bearing in mind these principles let us consider whether the judgment of the Supreme Court could be enforced against the defendants by instituting a suit on (1) (1959) 2 Q. B. 44. 5-2 S. c. lndia/64 Badat and Company East India Trading Company Mudholkar /. Badat and Company East India Trading Company Mudholkar /. {1964] the original side of the High Court. The appeal court has, as already stated taken the view tliat the original cause of action having arisen wholly or in part within the limits of the original jurisdiction of the High Court, the suit was maintainable. If the plaintiffs were suing upon the original cause of action, there would have been no difficulty and the High Court could have granted leave under cl. 12 to the plaintiffs to institute the suit. But here, we are concerned not with the original cause of action but with the judgment of the New York Supreme Court and the award. The judgment furnishes an independent cause of action.

The question would be whether the cause of action furnished by it arose within the limits of the original jurisdiction of the High Court. The judgment was rendered in New York and, therefore, the cause of action furnished by it arose at that place and not anywhere else. This cause oL action is really independent of the cause of action afforded by the contract and, therefore, if advantage was sought to be taken of it, the suit would not lie at Bombay. This point ?oes not appear to have come up for a direct decision m any case. We may, however, refer to the decision in East India Trading Co., v. Carmel Exporters & Importers Ltd.(') There, an action was brought in England to enforce a foreign judgment awarding damages for breach of contract and the question for' consideration was the relevant date for converting the amount of damages into sterling. After considering the relevant decisions on the point Sellers J., held that the relevant date would be the date of the foreign judgment.

The ground given by him was that the plaintiff's cause of action was the foreign judgment and it is that judgment which creates the debt which was enforceable by action in England. The principle underlying this case should also apply to the present one because in both cases the cause of action is founded on foreign judgments, though in the case before us it is founded alternatively, upon foreign awards also. The only difference is that while in our case the question is where it arose, in the case cited the question was as tO (') (1952) 2 Q.B. 439. v 59 when it arose. The reason why a foreign judgment should be deemed to create a new obligation has not been stated in this case. But it is to be found in the judgment of Blackburn J. in Schibsby v. Westenholz(') where at p. 159 he has stated : "The true principle on which the judgments of foreign tribunals are enforced in England is that stated by Parke B. in Russel v. Smyth(2 ), and again repeated by him in Williams v. fones(') that the judgment of a court of competent jurisdiction over the defendant imposes a duty or obligation on the defendant to pay the sum for which judgment is given, which the courts in this country are bound to enforce ;

As James L. J., has said in Re Davidson's Settlement Trusts(') "It would be impossible to carry on the business of the world if courts refused to act upon what has been done by other courts of competent jurisdiction." Schmitthoff in The English Conflict of Laws, 3rd edn. has stated at p. 459 : "The English courts recognise that a foreign judgment gives rise to private rights which, on principle, should be protected by them. Consequently, when referring to the recognition of a foreign judgment, what is actually meant is the recognition of the private right that is created by the judgment and not the enforcement of a foreign judicial act of State. In the words of Professor Read(')-'The true basis upon which the Anglo-Dominion authorities ........ place the recognition of a foreign judgment is that it proves the fact that a vested right has been created through the judicial process by the law of a foreign law district.' ..........

The view that the recognition of a foreign judgment in the English juris- (') (1870) 6 Q.B. 155. (') (1842) 9 M & W 810. (') (1845) 13 M & W 628. ( 4 ) (1873) L.R./E. & 383, 386, ( 5) "Recognition and enforcement of foreign judgments (1938)" by Prof. Read. Quoted by Schmitthofl in "The English Conflict of Laws" p. 459. Badat and Company East India Trading Company Mudholkar J. Badat and Company East India Tradinf( Company Mudholkar J. 60 [1964] diction is based on the assumption that the foreign judgment creates a new legal obligation is firmly established by numerous decisions." No divergent views have been expressed upon this question. No doubt, the English doctrine of merger has been consistently held in England not to apply to a foreign judgment with the result that despite tl1e fact that a plaintiff has obtained a foreign judgment he may nevertheless sue in an English court upon the original cause of action instead upon the judgment.

When he sues upon the original cause of action, no doubt, the court within whose jurisdiction the cause of action arose would be entitled to entertain the suit. But, if on the other hand, he chooses to sue upon the judgment, he cannot found jurisdiction for the institution of the suit on the basis of the original cause of action because once he chooses to rest himself on the judgment obtained by him in a foreign court, the original cause of action will have no relevance whatsoever even though it may not have merged in that judgment. Since the judgment with which we are concerned was pronounced in New York the cause of action for a suit based thereon must be said to have arisen at that place. Since that is so, it follows that the cause of action in so far as it rests on the judgment, did not arise within the limits of the original jurisdiction of the High Court of Bombay and the suit based upon that judgment must be held to be beyond the jurisdiction of the Court.

The alternative claini of the plaintiffs is for the enforcement of the awards themselves and it is this which t.he Appeal Court has held to be one which can validly form the basis of the present suit. The learned Solicitor-General contended that the awards having merged in the judgment cannot afford a basis to the present suit. It is true that it is pointed out in Dicey's Conflict of Laws that some writers have qpressed the view that where a foreign award must be, and has been, reduced to a judgment the judgment and not the award must be enforced in England. But it has also been pointed out that this is not the view generally adopted by the courts in the United States of America as would appear from the following passage frCllll Lorcnzcn's "Cases on Conflict of Ulwl' 4th edn. r 61 p. 1090:

"As a judgment of a foreign country is held not to merge the original cause of action, it would follow that an action might be brought upon the award, notwithstanding the fact that it has been converted into a judgment abroad." This question was left open by the Privy Council in L. Oppenheim & Co., v. Mahomed Haneef(') as it had not been raised in that case. fhe reco~mtion ;iwen to a foreign judgment by the English Courts is, as pointed out by Schmitthoff at p. 459 of the English Conflict of Laws, not based upon the doctrine of merger. For, this doctrine does not apply to judgments of courts which are not courts of record in the English sense. It may be that founded as the American legal system is on the common law of England the New York Supreme Court would be a court of record in the English sense and, therefore, the doctrine of merger could be said to apply to a judgment recorded by it.

However, as no contention was raised before us that the Supreme Court of New York was a court of record, we would leave the matter there. Just as a foreign judgment affords a fresh cause of action upon which a suit can be brought in an English court, so is the case with regard to a foreign award. Thus, in Bremer Ge/transport GMBH v. Drewry(2) it was held that a foreign award furnishes a new cause of action based on the agreements between the parties to perform the award. This view has been accepted in H alsbury' s Laws of England Vol. II, p. 45. In that case it was contended for the respondents that in so far as the submission is a contract whereby the parties to it impliedly undertake to abide by and carry out the award of the arbitrators, the enforcement of the award would be the enforcement of a contract made within jurisdiction (the contract having been entered into in London while the award thereunder made at Hamburg in Germany).

On the other hand it was contended for the appellant that the award having been made in Hamburg the action for its enforcement in England would not be an action for the enforcement of a contract made in England. Rejecting this contention Slesser (1) I.L.R. 45 Mad. 496. (2) (1933] 1 K.B. 753. Badat and Company &st India Trading Company Mudholkar T. JI Badat aod c'ompany Ea.rt India Trilding Company Mudholkar f. 62 [1964) LJ., after considering the authorities on the subject observed at p. 760 : "So far it would appear clear that in the opinion both o£ common law and equity judges the award is to be regarded as merely the working out of a term of the original agreement of submission ........ " and then referred to the following observations of James L.J., in Uanelly Ry. and Dock Co., v. London and North Western Ry. Co.,('):

"It would be difficult to say that the real question between the parties could be determined by the arbitrator under that clause ; because, "if the plaintiffs are right in their contention, they have determined that part of the agreement as well as everything else." Now, when a plaintiff sues upon a foreign award what he in fact does is to ask the court to pass a judgment in his favour for the amount stated in the award only after proving five facts : (1) that there was a contract between the parties whereunder disputes between them could be referred to arbitration to a tribunal in a foreign country; (2) that the award is in accordance with the terms of the agreements; (3) that the award is valid according to the law governing arbitration proceedings obtaining in the · country where the award was made ; ( 4) that it was final according to the law of that country; and (5) that it was a subsisting award at the date of suit.

A view has been expressed in some English cases that an award must also be enforceable in the country in which is was made before a suit can be brought in England on its basis. But upon the view we are taking it is not necessary to decide this point. Now, when a suit is brought by a plaintiff on the basis of an award it is not necessary for him to prove that the amount claimed was actually payable to him in respect of the dispute nor is it open to the defendants to challenge the validity of such an award on grounds like those which are available iri India under s. 30 of the Arbitration Act. A very limited challenge to the claim based ( 1) (1873) L.R. 8 Ch. 942, 948. · 63 on the award is permissible to the defendants and that is one of the reasons why it is important to ascertain whether the award has in fact attained finality in the country in which it was made.

We will assume that the plaintiffs have satisfactorily established the first three of the five conditions which we have set out above. The question then is whether the fourth and the fifth conditions have been satisfied. As to when an award can be regarded as final has been considered recently in the Union Nationale case('). The facts of that case are succinctly summarised in the head-note and we can do no better than reproduce its relevant portion: "By an agreement in French made in Paris, dated August 31, 1956, the appellants agreed to sell to the respondents a quantity of wheat seed. The agreement contained an arbitration clause, the English translation of which was: 'All differences arising out of the present contract will be judged by the Arbitration Chamber of Copenhagen which will settle without appeal with the powers of an amicable arbitrator.'

Differences having arisen between the parties they were referred pursuant to the arbitration clause to the Copenhagen Chamber of Arbitration. Under the rules regulating the procedure of the arbitration chamber, awards are made by a committee of the chamber. Regulation 14 of the rules provides that: 'awards made by the Committee . . . . shall be final. An award can only be appealed against to the appeal court attached to the committee .... If the presidency decides that the appeal cannot be made . . . . the award made by the judgment and arbitration committee shall be final. ... ' By an order of October 6, 1958, the committee awarded to the respondents the sum of £ 183,000. The presidency of the arbitration committee on November 25, 1958 refused the appellants' application for leave to appeal and notified them that the award of October 6, 1958, was final. The award could not be enforced in Denmark without an order of a Danish court.

The respondents, by summons under section 36 and 26 . of the Arbitration Act, 1950, which applies to arbitration awards made in Denmark, applied for leave to en- ( 1) (1959) 2 Q.B. 44 . Badat and Company East India Trading Company Mudholkar f. Badat and ·Company East India Trading Company Mudholkar f. 64 [1964] force that award. The appellant claimed that the award was a foreign award and had not become final in the country in which it was made."

The contention raised on behalf of the appellants was that the award had not become final in the country in which it was made because it was not enforceable in that country. · The Court of Appeal referred to regulation 14 which gives finality to an award made in accordance with the rules regulating the procedure of the arbitration chamber and accepted the opinion of a qualified Danish lawyer that according to the Danish law the award had become final, though it could not be enforced in Denmark without obtaining a judgment from a Danish Court and that during the proceedings befor~ such court it would be open to the defendant to complain that the award suffered from formal defects but nothing else.

Thus, in this case the Court of Appeal has drawn a distinction between 'finality' and 'enforceability' of an award and held that where under the laws of the country in which an award has been made, it is no longer open to challenge it on merits it must be regarded as final even though in the form in which it stands it may not be enforceable there. Rule 15, cl. (E) of the American Spice Trade Association whereunder the awards in the plaintiff's favour were made runs thus : "The award of such arbitrators and umpire or sole arbitrator shall be final and binding on both parties unless within three business days after receipt of the award, an appeal with a fee $75 be lodged with the Secretary of the Association by either disputant. Settlements under an arbitration award or awards of the Arbitration Committee shall be made within 10 days from the date of such award, and if not so settled, judgment may be entered therein in accordance with the practice of any Court having jurisdiction."

One point of distinction between the Danish rule and rule 15E of the American Rules is that the latter requires the obtaining of a judgment for enforcing it in case the claim arising out of the award is not settled. No doubt, the American rule also says that the award shall become final and binding on the parties but whether it takes away the jurisdiction of the courts to go behind its finality will have · to be ascertained by reference to the laws of New York 65 State. For, that rule is no more than a term of the contract between the parties and must be subject to the laws of the State. It would be desirable at this stage to compare foreign judgment with foreign awards and bear in mind the difference between them. No doubt, both of them create new obligations. The judgment of a foreign sovereign is a command of that sovereign which has to be obeyed within the territorial limits of that sovereign's jurisdiction.

On the principles of comity it is, therefore, accorded international recognition provided it fulfills certain basic requirements. A foreign award, on the other hand, which is founded on a contract of the parties and is not given the status of a judgment in the country in which it is made, cannot claim the same international status as the act of a foreign sovereign. As pointed out by Schmitthoff on the English Conflict of laws, at p. 489 : "It follows that unless the plaintiff can satisfy the English court that the award is treated, in the country where it was made, like a judgment of the court he should sue on the original cause of action, but even in that case he should plead the award because it might in appropriate cases, be regarded by the English courts as conclusive between the parties."

These observations would perhaps now stand slightly modified by the view taken by the Court of Appeal in the Union Nationale case(') in the sense that even an award which has not obtained the status of a judgment in the country in which it was rendered but which possesses an essential attribute of a judgment, that is, finality, it could be sued upon in another counrry. Bearing in mind these principles we must consider what are the requirements of the laws of New York State for giving an award finality. In Appendix I to Sturges' Cases on Arbitmtion Law, the New York Arbitration Law, Art. 84 of the New York Civil Practice Act, as in force on September I, 1952, has been set out. Section 1461 which deals with confirmation of an award runs thus: "Motion to confirm award : At any time within r one year after the award is made, as prescribed in the ( 1) (1959) 2 Q.B. +I. Badat ""d Company East India Trading Company MuJholkar /. Badat and Company East India Trading Company Mudholkar /.

66 [1964] last s~ction, any party to the controversy which was arbitrated may apply to the court having jurisdiction as provided in section fourteen hundred fifty-nine for an order confirming the award; and thereupon the court must grant such an order unless the award is vacated, modified or corrected, as prescribed in the next two sections or unless the award is unenforceable under the provisions of section fourteen hundred fifty-eight. Notice of the motion must be served upon the adverse party or his attorney, as prescribed by law for service of notice of a motion upon an attorney in an action in the same court. In the Supreme Court, the motion must be made within the judicial district embracing the country where the judgment is to be entered." Then follows s. 1462 which deals with a motion to vacate award; s. 1462-a which deals with a motion to modify or correct an award; s. 1463 which deals with 'notice of motion and stay'; s.

1464 which deals with 'entry of judgment on award and costs'; s. 1465 which deals with the judgmentroll and s. 1466 which deals with effect of a judgment and its enforcement. It is clear from s. 1462 that in the motion to vacate an award a party to the arbitration can challenge the award on the following five grounds : "l. Whether the award was p,rocured by corruption, fraud or other undue means. 2. Where there was evident partiality or corruption in the arbitrators or either of them. 3. Where arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehaviour by which the rights of any party have been prejudiced. 4. Where the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject-matter submitted was not made.

5If there was no valid submission or contract, and the objection has been raised under the conditions set forth in section fourteen hundred fiftyeight:' It will thus be seen that despite the tinality. spo~en of by 67 Rule 15E, this section enables the defendants to apply for vacating the award on certain grounds and thus imperil the finality accorded to the award by his contract. It is only after the objections under s. 1462 are disposed of that a judgment putting an end to all controversy, can be entered under s. 1464 which reads thus: "Entry of judgment on award and costs: Upon the granting of an order confirming, modifying or correcting an award, judgment may be entered in conformity therewith, as upon a referee's report in an action, except as is otherwise prescribed in this article. Costs of the application and of the proceedings subsequent thereto ; not exceeding twenty-five dollars and disbursements, may be awarded by the court in its discretion.

If awarded, the amount thereof must be included in the judgment." After the judgment is pronounced a judgment roll is prepared and the judgment docketed as if it was rendered in an action. The effect of the judgment as enunciated in s. 1466 is as follows: "Effect of judgment and enforcement: The judgment so entered has the same force and effect, in all respects as and is subject to all the provisions of law relating to, a judgment in an action ; and it may be enforced as if it had been rendered in an action in the court in which it is entered." From all these provisions it would be abundantly clear that the award has no finality till the entire procedure is gone through and that the award as such can never be enforced. What is enforceable is the judgment. There is no provision in the law providing for taking proceedings for the confirmation of an award in which all objections to the award could be made except, s. 1461.

The proceedings taken thereunder must, however, culminate in a judgment. In this respect the procedure under the law of the New York State is quite different from that under the. Arbitration law of Denmark. Apparently, that is why the plaintiffs, after obtaining the awards, went up to the Supreme Court of New York for obtaining a judgment confirming the awards. No doubt, as a result of the judgment the decision of the arbitrators became unchallengable in the New York State and for all practical purposes in India as well but in the pro- Badat and Company East India Trading Company Mudholkar /. Badat a~d Company East India Trading Company 68 SUPREME. COURT REPORTS [1964] cess the award made by them has given way to the judgment of the Supreme Court of New York. It is this judgment which can now furnish a cause of action to the plaintiffs and not the awards. No doubt, an award can furnish a fresh cause of action. But the award must be final.

If the law of the country in which it was made gives finality to judgment based upon an award and not to the award itself, the award can furnish no cause of action for a suit in India. In these circumstances we hold that though the High Court of Bombay ·has jurisdiction to enforce a final award made in a foreign country in pursuance of a submission made within the limits of its original jurisdiction, the awards in question being not final, cannot furnish a valid cause of action for the suit. Upon this view we allow the appeal and dismiss the suit with costs throughout. The normal rule as to costs must apply because the choice of forum made by the plaintiffs was deliberate and with the knowledge that they were taking a risk in not seeking out the defendants at the place where they reside or carry on business. By Court-Following the opinion of the majority, the appeal is allowed with costs. ,Appeal allowed.