Badat And Co vs East India Trading Co

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 39 of 1961

Decision Date: 10 May 1963

Coram: Raghubar Dayal, J.R. Mudholkar, Subba Rao

In the case titled Badat And Co versus East India Trading Co, the judgment was delivered on 10 May 1963 by the Supreme Court of India. The bench consisted of Justices Raghubar Dayal, J. R. Mudholkar, and Subbarao K. The reported citation of the decision is 1964 AIR 538 and 1964 SCR (4) 19, with subsequent citations appearing in later reports. The matter involved an application of the Foreign Award and Judgment Act to a suit that had been filed in the original side of the Bombay High Court, raising the question of whether the Court possessed jurisdiction to entertain the suit on the basis of foreign documents.

The respondent, East India Trading Co., was incorporated in New York and conducted a business dealing in spices. It initiated the suit against the petitioner, Badat And Co., seeking recovery of a sum of Rs 92,884‑4‑10. The claim was founded upon a judgment of the Supreme Court of the State of New York which affirmed two arbitration awards obtained by the respondent, as well as upon the awards themselves in the alternative. The respondent was a partnership firm engaged in import and export trade in Bombay. By means of two letters exchanged between the parties, the appellant and the respondent had agreed to trade in turmeric fingers under the terms and conditions set by the American Spice Trade Association. One of those terms was an arbitration clause, which read: “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.”

According to the facts recorded, the appellant failed to supply turmeric in accordance with the two contracts it had entered into with the respondent. The respondent consequently invoked the arbitration clause and referred the dispute to arbitration. The appellant did not take part in the arbitration proceedings. The arbitrators rendered two awards in favour of the respondent, granting damages. The appellant neglected to satisfy those awards. The respondent then instituted appropriate proceedings in New York, and the awards were confirmed by a judgment of the Supreme Court of the State of New York.

When the matter came before the single judge of the Bombay High Court, that judge held that the suit could not be maintained either on the basis of the foreign judgment or on the basis of the foreign awards, and consequently dismissed the suit. On appeal, a Division Bench examined the issue afresh. The Division Bench concluded that, although the suit could not be maintained on the foreign judgment, it was maintainable on the foreign awards. The bench reasoned that a part of the cause of action had arisen in Bombay and that the relevant facts had been established by public documents produced by the respondent and by admissions made by the appellant. Accordingly, the Division Bench decreed the suit in favour of the respondent.

The Division Bench, composed of Justices Dayal and Mudholkar, affirmed the decision of the single judge that the suit was not maintainable on the foreign judgment, but on different grounds. The bench observed that, apart from the provisions of the Arbitration Protocol and Conventions Act, 1937, foreign awards and foreign judgments that were based upon an award were enforceable in India. This observation formed part of the Court’s reasoning in upholding the Division Bench’s decree.

The Court explained that foreign awards could be enforced on the same basis and under the same conditions that they are enforced in England, namely on grounds of justice, equity and good conscience. It observed that English common law also applied in the Bombay High Court by virtue of clause 19 of the Letters Patent read with clause XLI of that Court’s Charter. The Court held that when an award was followed by a judgment rendered in a proceeding where the party against whom the judgment was sought could raise objections to the award’s validity, that judgment would be enforceable in England. Nevertheless, the plaintiff would still retain the right to pursue the original cause of action. The Court further noted that a foreign award would be enforced only if it satisfied, mutatis mutandis, the tests applicable to the enforcement of foreign judgments on the ground that it created a contractual obligation arising from arbitration. The Court identified two points of divergent opinion: first, whether an award that is followed by a judgment could be enforced as an award or whether only the judgment could be enforced; and second, whether an award that is not enforceable in the country where it was made, absent an enforcement order or judgment, could nevertheless be enforced, or whether the sole remedy in such a situation was to sue on the original cause of action. The Court further stated that both a foreign judgment and a foreign award could be sued upon provided certain conditions were met, one of which was that the instrument had become final. Accordingly, while the respondent could sue on the original cause of action in the Bombay High Court, that cause of action had to be distinguished from the cause arising from the judgment of the New York Supreme Court, which the Court held to have arisen in New York and not in Bombay and to constitute an independent cause of action separate from that based on the contracts. Consequently, the Bombay High Court lacked jurisdiction to try a suit founded on that New York judgment. The Court referred to the authorities East India Trading Co. v. Carmel Exporters & Importers Ltd., (1952) 2 Q.B. 439; Schibsby v. Westenholz, (1870) 6 Q.B. 155; and Re Davidson’s Settlement Trust, (1873) L.R. 15 Eq. 383. In a suit based on a foreign award, the Court required the plaintiff to prove five matters: (1) that the contract between the parties provided for arbitration by a tribunal in a foreign country; (2) that the award conformed to the agreement; (3) that the award was valid under the law of that country; (4) that the award was final according to that law; and (5) that the award was subsisting at the date of the suit. The Court concluded by emphasizing the essential difference between a foreign judgment and a foreign award: a foreign judgment is a command of a foreign sovereign and enjoys international recognition when it meets certain basic requirements, whereas a foreign award is founded on the contract between the parties and does not acquire the status of a judgment in the country where it is made.

The Court observed that an arbitration award originated from the contract between the parties and did not acquire the status of a judgment in the foreign country where it was rendered. It further held that such an award could not claim the same international status as a decree issued by a foreign sovereign. The Court noted that even when an award had not obtained the status of a judgment in its country of origin, it could be sued upon in another country if it possessed the essential attribute of finality that characterises a judgment. This was possible provided the award possessed the essential attribute of finality that characterises a judgment, namely its irrevocable and conclusive nature. The Court referred to Union Nationaledes Cooperatives Agricoles de Careales v. Robert Catterall & Co. Ltd. (1959) 2 Q. B. 44 for support. However, the Court held that the finality conferred by rule 15, clause (E) of the American Spice Trade Association on the awards in question was merely a contractual matter between the parties. Accordingly, that contractual finality had to be subject to the law of the State in which the award was to be enforced. A reference to the laws of the State of New York made it clear that the statutory provisions required for the award to become final had not been complied with. Consequently, the award could not give rise to a cause of action in the present suit, because it lacked the required finality under New York law. The Court explained that for an award to furnish a fresh cause of action, it must be final. If the law of the country where the award was made granted finality only to the judgment based on the award, the award itself remained non‑final. Consequently, the award could not constitute a cause of action in India because it lacked the requisite finality. The Court further observed that although the High Court of Bombay possessed jurisdiction to enforce a final foreign award within the limits of its original jurisdiction, the awards in this case were not final. Accordingly, because the awards lacked finality, the suit could not proceed, and the court ordered that the suit must fail.

The Court cited the doctrine of non‑merger of the original cause of action with the foreign judgment pronounced upon it. It referred to Popat v. Damodar (1934) 36 B.L.R. 844 and Oppenbeim and Co. v. Mohmed Haneef (1922) I.L.R. 45 Mad. 496 as authorities. It also cited Nil Ratan Mukhopahya v. Cooch Behar Loan Office, Ltd. (1941) 1 Cal. 171 as further precedent. The Court reasoned that if a contract did not merge into the judgment, then by parity of reasoning an award on which a foreign judgment was passed could not merge into the judgment either. It stated that there was no distinction between a foreign award that required an enforcement order to become enforceable and an award that could be enforced only by a judgment, because both an enforcement order and a judgment served the same purpose as mechanisms for enforcing an award, providing the requisite legal effect. The Court quoted Meerfield Ziegler & Co. v. Liverpool Cotton Association Ltd. (1911) 105 L.T.R. 97 in support of this view. Finally, the Court declared that a suit could lie on a foreign award completed according to the law of that country. The Court added that before a decree could be passed, the plaintiff had to prove three essential elements. Those elements were an arbitration agreement, proof that the arbitration was conducted in accordance with that agreement, and verification that the award was valid under the law of the country in which it was made.

In this matter, the Court cited the earlier case of Norske Atlas Insurance Co. Ltd. v. London General Insurance Company Limited, reported in 1927 at 43 T.L.R. 541, to support its analysis. The Court stated that it was erroneous to assert that the High Court had been wrong in finding that the three required conditions were established by the appellants’ admissions contained in their pleadings. The Court then explained that Rules 3, 4 and 5 of Order VIII of the Code of Civil Procedure constitute an integrated code governing how the factual allegations set out in a plaint must be addressed and what legal consequences follow when those rules are not complied with. According to these rules, the written statement must specifically respond to each factual allegation made in the plaint; if the defendant chooses to deny any such fact, the denial must be clear and must address the substantive point, and any failure to do so results in the fact being deemed admitted. The Court further observed that the discretion granted by the proviso to Rule 5 must be exercised by the court in accordance with the demands of justice, taking into account the nature of the parties, the prevailing standards of drafting in the locality and the established practice of the court. Consequently, the Court emphasized that pleadings before the Bombay High Court must be strictly construed in line with these provisions unless the court decides, exercising the discretion under the proviso, to deviate. The Court also referred to the authorities of Tildesley v. Harper (1878) L.R. 7 Ch. D. 403 and Laxmi Narayan v. Chimniram Girdharilal (1917) I.L.R. 41 Bom. 89 to reinforce its position. In addition, the Court noted that the three conditions were likewise satisfied by the record exhibited from the proceedings of the Supreme Court of New York, which included the certificate of the Consul General of India in New York and certified copies of the order and judgment of that Supreme Court. While Section 78(6) of the Indian Evidence Act requires proof of the character of a foreign document according to the law of the foreign country as a condition precedent to its admission, the Court clarified that such admission is not a condition precedent to drawing the presumption required under Section 86 of the Act. That presumption may be drawn before the document is admitted. Accordingly, the judgment of the Supreme Court of New York, having satisfied the first two conditions prescribed by Section 78(6), was properly admissible as evidence. The Court further observed that the contracts between the parties were concluded within the territorial limits of the original jurisdiction of the Bombay High Court, so that a portion of the cause of action arose there, giving that court jurisdiction to try the suit based on the awards.

The Court recorded that the appeal fell under civil appellate jurisdiction, being Civil Appeal No. 39 of 1961, and arose from the judgment and decree dated September 1958 of the Bombay High Court in Appeal No. 13 of 1958. Counsel for the appellant appeared on behalf of the appellant, while counsel for the respondent appeared on behalf of the respondent. The judgment was pronounced on 10 May 1963, and Justice Subba Rao delivered a dissenting opinion.

In this case, Justice Subba Rao expressed his regret that he could not agree with the judgment prepared by his learned brother, Justice Mudholkar, whose opinion had been delivered after Justice Dayal and Justice Mudholkar had heard the matter. The appeal, which was taken by way of a certificate, presented the Court with the question of whether the Bombay High Court possessed jurisdiction to entertain a suit based on an arbitral award when a judgment on that award had already been rendered by a foreign court, together with other ancillary issues. The facts giving rise to the appeal were then briefly set out, and only those facts that bore upon the jurisdictional question were narrated, because the pleadings originally covered a broader field that had been progressively narrowed as the proceedings advanced to the present stage. The parties were identified as follows: the appellants were Badat & Co., a firm that had formerly carried on business in Bombay, while the respondents were East India Trading Co., a private limited company incorporated under the laws of the State of New York in the United States of America and having its registered office in the State of New York. In 1954 the respondents instituted Suit No. 71 of 1954 against the appellants in the High Court of Judicature at Bombay, invoking the Court’s ordinary original civil jurisdiction, and claimed recovery of a sum of Rs 92,884/4/10 together with interest. The plaint alleged that, by way of correspondence whose details were set out in the plaint, the appellants had agreed to conduct business with the respondents on the terms of the American Spice Trade Association contract. Subsequent correspondence, the plaint said, showed that the parties entered into two separate contracts under which the appellants agreed to sell to the respondents differing quantities of Allepey Turmeric Fingers on terms that had been mutually agreed. The respondents forwarded to the appellants, for each of the two transactions, duplicate copies of contracts prepared on the standard form issued by the Trade Association and requested that the appellants return the signed copies; however, the appellants failed to return the signed documents. The Trade Association contract stipulated that any claim arising under the contract must be submitted to arbitration and resolved in accordance with the Association’s arbitration rules. Pursuant to a specific rule of the Association, the dispute was referred to arbitration and two arbitral awards were rendered on 12 July 1949. Following the procedure prescribed for enforcing such awards in New York, the respondents commenced proceedings in the Supreme Court of the State of New York seeking confirmation of the awards and a judgment thereon. The New York Supreme Court subsequently pronounced a judgment confirming the two awards. On the basis of those allegations, the respondents filed a suit in the Bombay High Court claiming recovery of the amounts payable under the two confirmed awards by the appellants. The suit was tried at first instance before Justice Mody. Justice Mody, inter alia, held that the suit could not be sustained in the Bombay High Court on the basis of the foreign judgment because there was no obligation placed upon the appellants to pay any sum to the respondents at any place within the jurisdiction of the Bombay High Court.

The trial judge observed that there was no evidence of any agreement giving rise to the arbitration awards and that the written‑statement filed by the parties contained no admissions concerning the factual basis of such an agreement. On that basis the judge concluded that the respondents had failed to demonstrate that the Bombay High Court possessed jurisdiction to try the suit. Since the suit was also examined on its merits, the judge considered further questions and held that the written‑statement likewise lacked any proof or admissions relating to the alleged contracts. He affirmed that the arbitrators and the umpire had been competent to make the awards, but he held that the awards had merged into the judgment rendered by the Supreme Court of the State of New York and therefore the suit could not proceed on those two awards. The judge indicated that the remaining findings of his judgment were not essential to the present appeal. Consequently, the trial judge dismissed the suit and ordered the appellant to pay costs. On appeal a division bench of the High Court, composed of Chief Justice Chagla and Justice S. T. Desai, reversed the trial judge’s decision and allowed the appeal, also awarding costs. The appellate judges held that the awards had not merged into the New York judgment, that a suit based on the awards was maintainable, and that the Bombay High Court had jurisdiction to entertain the suit because the cause of action arose within its territorial limits. They further held that all the facts needed to support the respondents’ suit on the awards had been established either by public documents produced in the proceedings or by admissions made by the appellants in their written‑statement. The present appeal has been filed by way of certificate against the judgment of the division bench. Counsel for the appellants, appearing as the Solicitor General, raised three principal submissions: first, that the awards had merged into the New York judgment and thus no independent suit could lie; second, that even if a suit were permissible, the respondents had not shown that any portion of the cause of action had accrued within the jurisdiction of the Bombay High Court, in other words, they had not proved that the agreements giving rise to the awards were entered into or concluded within that jurisdiction; and third, that the respondents had failed to establish the three essential requirements for enforcement of the awards – namely, the existence of a valid arbitration agreement, that the arbitration was conducted in accordance with that agreement, and that the awards were made pursuant to the agreement and were therefore valid under the law of the place where the arbitration was conducted and the awards were rendered. Counsel for the respondents, identified as the representative for the respondents, sought to uphold the findings of the division bench in favor of the respondents.

The Court addressed the findings of the Division Bench of the High Court that had been rendered in favour of the respondents on the questions raised by the appellants. The first question concerned whether the awards had merged into the judgment of the Supreme Court of the State of New York for all purposes, and consequently whether the awards would lose their separate identity such that no suit could be brought to enforce them. The Court examined the authority contained in Halsbury’s Laws of England, volume 7, third edition, page 141, where the relevant principle is set out under the heading “Foreign judgments”. That passage states that a foreign judgment is treated only as a simple contract debt, and therefore the original cause of action does not merge. Accordingly, a plaintiff may sue either on the foreign judgment itself or on the original cause of action on which the foreign judgment was based, unless the foreign judgment has already been satisfied. The Court also referred to Dicey’s Conflict of Laws, seventh edition, page 1059, which expresses a similar view. Dicey writes that, for historical and procedural reasons, English law treats a foreign judgment as a contractual debt and that the possibility of enforcing the judgment by registration does not change this traditional position. Although the author of that commentary later criticised the view, the passage nonetheless reflects the accepted rule on the matter.

The Court further noted an informative discussion of the development of the non‑merger rule in Piggott’s work titled “Foreign judgment”, Part I, page 17. The evolution of the rule was summarised by the Court as follows: first, an action brought on a foreign judgment was described as an action to recover the judgment debt, which required the judgment to serve as evidence of that debt; second, it was not clearly defined whether the debt evidenced was the judgment debt itself or the underlying original debt; third, because the action was framed as one on a debt, the action on the judgment debt soon became confused with, and perhaps was regarded as, an action on the original debt; fourth, having reached that stage, the courts declared that the original debt or cause of action had not merged into the foreign judgment pronounced upon it. The Court observed that, irrespective of the historical origins of the doctrine, the principle that the original cause of action does not merge with a foreign judgment had become well established, even though some textbook authors could not locate a logical basis for it.

The Court also cited the statement found in Smith’s Leading Cases, which affirmed that foreign judgments do not cause a merger of the original ground of action. In addition, the Court referred to Cheshire’s Private International Law, fifth edition, chapter XVII, under the heading “Foreign Judgments”, page 598, where the author explained that domestic English law barres a plaintiff who has obtained a judgment in England from suing again on the original cause of action because the original cause of action is merged into the judgment‑transit in rem judicatum and it would be vexatious to subject the defendant to another action for the same result. However, the author noted that a series of authorities had held that this rule does not apply to foreign judgments. According to that line of authority, a foreign judgment does not merge the original cause of action, and therefore a plaintiff retains the option either to pursue the original ground of action or to sue on the recovered judgment, provided that the judgment has not yet been satisfied. The author further provided a different justification for the distinction between foreign and domestic judgments on page 599, suggesting that the most plausible reason for non‑merger is that a plaintiff suing in England on a foreign judgment, unlike a plaintiff suing on an English judgment, does not gain any higher remedy than he possessed before the foreign action. The effect of a judgment in English proceedings, the author explained, is that the cause of action is transformed into a matter of the foreign judgment, but it does not extinguish the original cause of action.

In the discussion of the doctrine of non‑merger, the Court observed that if a judgment were to be treated as a judgment‑in‑rem, it would be vexatious to require the defendant to face another suit merely to achieve the same result. The Court noted, however, that a series of authorities had held that this principle did not apply to foreign judgments. According to English law, a foreign judgment did not cause the original cause of action to merge, and consequently the plaintiff retained a choice: either to pursue the original cause of action or to bring a fresh suit based on the foreign judgment, provided that the foreign judgment had not yet been satisfied. The learned author explained this distinction by observing that a plaintiff who sued in England on a foreign judgment possessed no higher remedy than the one he had before the foreign action, whereas a plaintiff who sued on an English judgment saw his cause of action transformed into a matter of record of a higher nature, causing the inferior remedy to merge into the higher. The author further remarked that English law treated a foreign judgment as creating merely a simple contractual debt between the parties, and that judges had repeatedly cited the doctrine of non‑merger simply to defend its continued existence.

The Court then recorded that Indian courts had accepted and applied the doctrine of non‑merger, citing Popat v. Damodar (1), Oppenheim and Company v. Mahomed Hanef (2) and Nil Ratan Mukhopadhyaya v. Cooch Behar Loan Office, Ltd. (3). By the same reasoning, the Court held that if a contract did not merge into a judgment, then, by parity of reasoning, an award upon which a foreign judgment was based could not merge into that judgment either. While acknowledging this legal position, counsel for the appellant contended that an award would provide a valid cause of action only if it were legally enforceable in the jurisdiction where it was rendered. The counsel argued that an award made in New York, by its own force, did not create rights or impose liabilities there, and therefore such an incomplete document could not constitute a cause of action. This contention had been noted previously and addressed in Russell on Arbitration, 16th Ed., p. 282. The learned author placed two propositions side by side: first, that an award made by foreign arbitrators which required a local enforcement order to become enforceable was not a judgment of a foreign tribunal that could be enforced by an action in English courts; and second, that an award which was complete and could be enforced in the country where it was made was enforceable in England at common law, independent of any rights conferred by Part 11 of the Act.

Halsbury’s Laws of England, volume eleven, third edition, records at page fifty‑two the proposition that a foreign arbitration award which is complete and enforceable in the jurisdiction where it was rendered is also enforceable in England at common law. The Solicitor‑General attempts to draw a fine distinction between two categories of foreign awards. The first category consists of awards made by foreign arbitrators that require an enforcement order under the local law before they become enforceable. The second category includes awards that cannot be enforced unless a judgment is obtained on the basis of the award. On the basis of this distinction an argument is advanced that, in the first situation, the award becomes “vitalised” by the issuance of the enforcement order, whereas in the second situation the award itself does not become enforceable; rather, it is the subsequent judgment that acquires enforceability. To support this contention reliance is placed on observations from Dicey’s Conflict of Laws, seventeenth edition, page one thousand fifty‑nine, which state that if a foreign award is followed by judicial proceedings in the foreign country that result in a judgment of the foreign court, a judgment which is more than a mere formal order granting leave to enforce the award, then enforcement proceedings in England must be instituted on the foreign judgment – or possibly on the original cause of action – and not on the award itself. The passage notes that these observations are not underpinned by any direct judicial decision and merely reflect the author’s doubts on the issue. From a principled perspective the author of this judgment sees no justification for treating the two categories differently. Both an enforcement order and a judgment on an award serve the identical purpose of giving effect to the award; they are simply two different procedural mechanisms prescribed for enforcement. Under the enforcement‑order procedure a party applies to a court for leave to enforce the award, and once such leave is granted the award may be enforced as though it were a decree of that court. Under the alternative procedure, an action – either in the form of a suit or a petition – must be filed on the award, and a judgment obtained thereon. In that alternative, the award, with respect to the country where it originates, merges into the judgment, and thereafter only the judgment is enforceable. However, as previously explained, no such merger occurs when the enforcement is sought in another country. In both scenarios the award, in its country of origin, remains complete and enforceable. If an award acquires vitality merely through an enforcement order, it obtains an even higher sanctity when the court of origin renders a judgment upon it. Both mechanisms provide a guarantee of the award’s vitality and enforceability in the originating jurisdiction, and consequently a foreign jurisdiction may rely upon that guarantee. In both cases the award is complete in the country of origin, and if the doctrine of merger cannot be invoked in the context of a foreign judgment, as has been held, there is no principle on which the sought distinction can be sustained.

In this portion of the judgment the Court explained that the distinction which the parties attempted to draw between a foreign judgment and an award could not be sustained. The Court observed that to uphold such a distinction in the setting of a foreign judgment would amount to privileging form over substance, thereby accepting a weaker guarantee while discarding a stronger one. The Court then referred to the decision in Merrifield, Ziegleis‑ and Co. v. Liverpool Cotton Association Limited (1) and stated that that decision did not introduce any different rule. In the Merrifield case the plaintiff instituted proceedings in England seeking an injunction that would prevent the Liverpool Cotton Association from expelling the plaintiff from its membership. In response, the Association filed a counter‑claim demanding a substantial sum from the plaintiffs, the sum being payable under an award that had been rendered in Germany. The counter‑claim was essentially a claim to enforce that German award. Under German law an enforcement order (1) (1911) 105 L.T.R. 97, 106 was a prerequisite before any award could be enforced, and no such order had been obtained in the present circumstances. Consequently the High Court dismissed the counter‑claim. While doing so the Court set out several observations, beginning with the statement that the only remaining issue was whether the German award should be treated as a foreign judgment. The Court opined that the award was not a foreign judgment, although it was conclusive between the parties on all matters that the award had finally decided, and therefore it fell into a different category from the “remate” judgment considered by the House of Lords in Nouvin v. Freeman (1). The Court further explained that the award possessed no force or effect until a court determined that it arose from properly conducted proceedings within the jurisdiction of the tribunal that rendered it. The Court emphasized that the award was not automatically enforceable simply because a court might later declare it operative; rather, for all practical purposes the award remained “stillborn” until a court infused it with vitality. At that moment, for the first time, the award acquired at least one essential attribute of a judgment – the right to be enforced.

The Court used the quoted passage to illustrate the principle that an award does not give rise to a cause of action until it is complete in the jurisdiction of origin. The rule exists because, until the appropriate court verifies the regularity of the award, the award remains inchoate and cannot be enforced. Enforcement becomes possible only when either an enforcement order or a judgment confers judicial approval upon the award. The Court clarified that, for the purpose of applying this principle, the distinction between an enforcement order and a judgment on the award is immaterial; in both situations the Court’s approval is required. To reinforce this point, the Court cited the Judicial Committee’s decision in Oppenheim & Co. v. Mahomed Hanef (2), which confirmed that a suit to enforce an award that culminated in a judgment was maintainable. In that case a commercial dispute arose between merchants conducting business in London and a merchant located in Madras, and an award was obtained in England. The English merchants subsequently filed a suit (1) (1889) 15 App. Cas. 1, and the judgment of the Judicial Committee demonstrated the Court’s willingness to treat the award as enforceable only after it had been transformed into a judgment. This reasoning supports the view that an award, by itself, does not create a cause of action until it receives the necessary judicial endorsement in its country of origin.

In the case referred to, the plaintiffs obtained an award from the King’s Bench Division of the High Court of England for the sums that were payable under that award, and they also secured an ex‑parte judgment against the merchant located in Madras. After obtaining those instruments, the plaintiffs instituted a suit in the High Court of Judicature at Madras, seeking to recover the amount stipulated in the English judgment; alternatively, they claimed the sum that was due under the original award. The trial judge, Coutts Trotter J., who presided over the first instance, held that the suit could not be maintained on the basis of the ex‑parte judgment and consequently entered a decree in favour of the award. On appeal, however, a division bench of the same court adopted a contrary position. The matter was again appealed to the Privy Council, which restored the decree originally made by Coutts Trotter J. In doing so, the Privy Council prefaced its order with a cautionary observation, stating: “In order to prevent misconception, it appears desirable to add that it was not pleaded or contended at any stage of the proceedings that the award had merged in the English judgment, and accordingly their Lordships do not deal with that point.” This pronouncement serves as authority for the proposition that, assuming an award does not merge into a foreign judgment, the award itself creates a cause of action in another jurisdiction. The Court previously noted that the same reasoning applied to the doctrine of non‑merger of a contract in a foreign judgment also applies to an award, which likewise does not merge. Accordingly, the Court held that a suit may be instituted on the basis of a foreign award provided that the award has been completed in accordance with the law of the country in which it was made. The Court then turned to the third question of the reference, observing that discussion of that issue would also resolve the problem presented by the second question. The learned Solicitor‑General argued that the plaintiff had not produced sufficient proof of the facts required to satisfy the three conditions previously identified, and that the division bench of the High Court erred in finding otherwise on the basis of alleged admissions contained in the pleadings. Counsel for the respondents, while accepting that the three conditions must be satisfied before a foreign award can be enforced, contended that the necessary facts were established not only through admissions made by the appellants in their written statement, whether express or implied, but also by the production of a certified copy of the foreign court’s judgment. The Court cited the decision in Norake‑Atlas Insurance Co. Ltd. v. London General Insurance Company Limited, where an award rendered in Norway was sought to be enforced in England. In that case, the action was founded upon the award rather than the underlying contract. MacKinnon J. formulated the test for obtaining a decree on a foreign award, requiring proof of (i) the existence of a valid submission to arbitration, (ii) that the arbitration was conducted in accordance with that submission, and (iii) that the award was valid according to the law of the country where it was made.

In discussion of the enforcement conditions, the Court referred to the commentary in Halsbury’s Laws of England, third edition, volume eleven, paragraph one‑one‑six at page fifty‑three, which outlines those conditions with additional detail. The Court noted that there was no real dispute on this point of law, and therefore it did not need to elaborate further. The Court then asked whether the conditions had been satisfied in the present case and indicated that it would first consider the arguments presented in the pleadings. Before analysing those arguments, the Court found it useful to read the relevant provisions of the Code of Civil Procedure, because the arguments depended upon the application of those statutory rules to the pleadings. Order Seven of the Code requires the plaintiff, in the plaint, to set out the facts that make up the cause of action, to state when those facts arose, and to describe the facts that confer jurisdiction upon the court. The purpose of this requirement is to enable the defendant to ascertain from the plaint the necessary facts so that the defendant may either admit or deny them. Order Eight deals with the filing of a written statement, the contents that must be included, and the method of filing; Rules three, four and five of that order are pertinent to the present inquiry. Rule three provides that a defendant may not simply deny the plaintiff’s grounds in general terms; the defendant must address each factual allegation individually, except for allegations of damages. Rule four requires that when a defendant denies a factual allegation, the denial must not be evasive but must answer the substantive point, for example, if the plaint alleges that the defendant received a particular sum of money, the defendant must either deny receipt of that sum or any part thereof, or must state the exact amount received; a denial that merely disputes the surrounding circumstances is insufficient. Rule five states that any factual allegation in the plaint that is not specifically denied, or is not denied by necessary implication, or is not expressly stated to be not admitted in the defendant’s pleading, shall be deemed admitted, except where the defendant is a person under disability; however, the court may, in its discretion, require proof of any such admitted fact by means other than the admission itself. These three rules together constitute an integrated regime governing how allegations in the plaint must be traversed and the legal consequences of non‑compliance. Accordingly, a written statement must specifically address each factual allegation in the plaint, and any denial must be substantive rather than evasive; if a denial is evasive, the fact is deemed admitted, and that admission, being proof, obviates the need for any additional evidence.

The Court noted that the opening paragraph of Rule 5 reproduced paragraph 13 of Order XIX of the English rules that had been enacted under the Judicature Acts. However, the Court observed that in the smaller, or “mofussil”, courts of India the pleadings were often not drafted with exactitude. In those courts, the Court found that applying Rule 5 in a strict manner would have caused serious injustice to parties who possessed legitimate claims. To achieve the justice that the courts are meant to render, the Court explained that the strictness of Rule 5 had been moderated by the insertion of a proviso. The proviso empowered a court, at its discretion, to require that any fact admitted under the rule be proved by evidence rather than by the admission alone. The Court further explained that, in the context of mofussil pleadings, tribunals appeared to rely on this discretionary power and consequently allowed a greater laxity in pleading in order to serve the interests of justice. By contrast, on the Original Side of the Bombay High Court, the Court observed that pleadings were prepared by trained advocates who gave serious thought and drafted them with precision. In such circumstances, the Court held that the proviso could be invoked only in exceptional cases, namely where an obvious injustice would otherwise occur or where a party needed relief from the consequences of an inadvertent slip or omission. The proviso could not be employed to aid a party who deliberately made vague denials and then attempted to rely on those denials to defeat the plaintiff’s case. The discretion granted by the proviso, the Court said, had to be exercised with reference to the justice of the cause, the nature of the parties, the prevailing standard of drafting in the relevant locality, and the traditions and conventions of the particular court in which the pleadings were filed. In illustrating this principle, the Court referred to the decision in Tildestey v. Harper. In that case, the plaintiff’s claim alleged that a lessee had paid a bribe to the donee of a power, and the claim set out the surrounding circumstances. The defendant’s defence denied that any such sum had been paid and contradicted each circumstance, but it did not contain a general denial that a bribe had been given. Applying rules analogous to those in the Code of Civil Procedure, the Court held that the allegation of a bribe had not been adequately denied and was therefore deemed to be admitted. Justice Fry, speaking for the court, asked what the “point of substance” in the claim was and answered that the substance was the allegation that a bribe had been paid by Anderson to Tildesley. He observed that this substance had not been addressed, that no fair and substantial answer had been offered to the allegation of a bribe, and that strict adherence to the pleading rule was of utmost importance. He further stated that the court should require the defendant, when filing a defence, and the plaintiff, when replying to the defence, to meet the point of substance directly.

The Court explained that a defendant must set out the substance of the defence rather than merely issue formal denials of the allegations contained in earlier pleadings without describing the factual circumstances. The Court further stated that it intended to give the fullest effect to this rule, believing that strict adherence to it served the greatest benefit of parties seeking relief in the Court. The Court cited a decision from 1878, reported in the Law Reports, Chancery Division, page 403, to illustrate the principle that a party should be required to address the essential point of the claim rather than offering empty denials.

The Court observed that, in England, the rule requiring a clear answer to the point of substance is applied rigidly and lacks a proviso similar to that found in the Code of Civil Procedure. Nevertheless, the Court held that there was no justification for the original side of the Bombay High Court to relax this requirement, except in exceptional circumstances where the Court might deem a more flexible approach appropriate. The Court referred to the Bombay High Court decision in the case of Laxminarayanan versus Chimniram Girdhai Lal, where the provisions concerning pleading were interpreted and applied to a suit pending before the joint Subordinate Judge of Ahmednagar.

In that case, the plaintiffs filed suit to recover a sum of money on the basis of an account stated. To protect their claim against the defence of limitation, the plaintiffs relied on a letter that had been sent by the defendant‑firm. The defendants, in their written statement, asserted that the suit was time‑barred and that “the suit is not saved by the letter put in from the bar of limitation.” The issue that arose was whether, at that stage of the pleading, the letter could be treated as admitted by the parties and therefore not required to be proved. Justice Batchelor of the Allahabad High Court, after referring to the relevant provisions, observed that a proper reading of paragraph six of the rule indicated that although the letter was not expressly denied, the defendants contended that its effect did not, for whatever reason, save the suit from the limitation bar. Consequently, Justice Batchelor concluded that the letter, identified as Exhibit 33, must be accepted as admitted between the parties and that it was therefore unnecessary to produce additional evidence to prove its contents.

The Court noted that the written statement examined by the Bombay High Court had originally been filed in a court of the provincial districts, yet the High Court nonetheless applied the strict rule and held that the letter did not need to be proved alien to the proceedings. The Court therefore affirmed that pleadings on the original side of the Bombay High Court should be construed with the same strictness as those on the appellate side, with reference to Rules three, four and five of Order Eight of the Code of Civil Procedure, unless the circumstances justified the exercise of discretion under the proviso to Rule five of Order Seven.

Finally, the Court reiterated that the first condition for the enforceability of an arbitral award is the proof that the parties submitted to arbitration. A claim founded on an award is, in effect, a claim to enforce that award on the basis that the submission created a contract obliging the parties to give effect to the award.

In the plaint, the parties set out the particulars of a preliminary contract that incorporated an arbitration clause, and these particulars were described in detail in paragraphs two and three of the pleading. Paragraph two records a series of communications that began with a letter dated 7 September 1948 in which the plaintiffs informed the defendants that they were ready to conduct business on the basis of the contract standard of the American Spice Trade Association. The plaintiffs stipulated that the transaction would be based on net landed weight, a discount of one and a half percent, a letter of credit covering ninety‑five percent of the transaction value, and that the remaining balance would be settled immediately after the goods were weighed and delivered. The plaintiffs further provided that any surplus in their favour should be refunded by the defendants via telegraph. The defendants responded on 13 September 1948, accepting the terms set out by the plaintiffs. Subsequent correspondence continued with a telegram dated 3 March 1949 in which the defendants offered to sell thirty tons of Alleppey Turmeric Fingers at a price of two‑twenty‑one cents per pound, Cost and Freight to New York, less a two percent deduction for a March/April shipment. On the same day the plaintiffs replied by telegram, accepting that offer. On 7 March 1949 the defendants made a further offer, again for thirty tons of the same product at twenty‑two cents per pound, Cost and Freight to New York, less two percent for a March/April shipment, and the plaintiffs immediately accepted that offer by telegram on the same day. The defendants confirmed the contract that had been reached on 3 March 1949 in a letter dated 8 March 1949. The plaintiffs, in a letter dated 9 March 1949, confirmed both contracts and informed the defendants that they had opened the required letters of credit. The plaintiffs then forwarded two duplicate copies of contracts drawn on the standard form used by the American Spice Trade Association, requesting that the defendants sign and return one copy of each. The defendants failed to sign and return the copies. The plaintiffs therefore sought leave to rely on the cited telegrams, letters, and the standard form contract in support of their claim. Paragraph three asserts that the standard form employed by the American Spice Trade Association is commonly known in the spice and herb trade as “The American Spice Trade Association Contract.” It further states that the contract contains the terms and conditions on which the defendants agreed to trade with the plaintiffs, and that this form is widely used by firms dealing in spices and herbs in the New York market and elsewhere. The plaintiffs also contend that the defendants have previously conducted spice and herb transactions with American firms and were therefore familiar with the terms of the American Spice Trade Association Contract.

The Court observed that the defendants had been active in the United States market, had previously entered into several contracts issued by the American Spice Trade Association, and therefore were fully aware of the terms and conditions contained in that standard form of contract. One of the clauses in that contract, as set out in the pleading, stated: “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 hereof. This contract is made as of in New York.” The pleading further explained the procedure by which the dispute should be referred to arbitration, describing how the parties were to appoint arbitrators and an umpire. From these allegations, the Court noted that the plaintiffs had specifically identified the letters exchanged between the parties and had relied on those letters as the basis for claiming that a preliminary contract existed, which incorporated an agreement to submit any dispute to arbitration, and that subsequent contracts for the supply of goods were subsequently concluded.

The defendants responded to these allegations in paragraphs 7 and 8 of their written statement. Paragraph 7 read: “With reference to paragraph 2 of the plaint the defendants deny that they at any time entered into any contract with the plaintiff as alleged in the said paragraph or otherwise. The defendants deny that they at any time signed or were bound to sign a standard form of contract issued by the American Spice Trade Association.” Paragraph 8 continued: “With reference to paragraph 3 of the plaint, the defendants deny that they at any time agreed to do any business or enter into any contract with the plaintiffs as alleged therein or otherwise. The defendants say that they did not at any time sign nor were they bound to sign the said American Spice Trade Association Contract and that they are not therefore bound by or concerned with the terms and/or conditions of the said contract. The defendants deny the rest of the statements contained in the said paragraph.”

The Court pointed out that, although the defendants categorically denied ever entering into a contract with the plaintiffs, they did not dispute that the letters identified in the pleading had indeed been exchanged between the parties. The learned Solicitor‑General argued that the phrase “as alleged” in paragraphs 7 and 8 necessarily implied a denial of the existence of the correspondence. The Court rejected that inference, explaining that the phrase “as alleged” is compatible with the defendants’ admission that the letters were sent, while simultaneously denying that those letters created a binding contract. Accordingly, the expression does not carry a compulsory implication that the defendants denied the passage of the correspondence. The Court further noted that Rules 3 and 4 of Order VIII require each specific allegation in the plaint to be expressly denied, and that a vague or general denial cannot be construed as a denial of the precise facts set out in the pleading.

Rule 3 required that every factual allegation set out in the plaint be specifically denied in the written statement, while Rule 4 stressed that any such denial must address the substantive point of the allegation and must not be vague. In the plaint, the petitioner identified the contents of four letters dated 7 September 1948, 13 September 1948, 8 March 1949 and 9 March 1949, and it expressly stated that those letters were exchanged between the parties. The defendants’ written statement contained no denial of either the fact that the letters were passed between the parties or of the contents of those letters. Consequently, the generic and imprecise denials contained in the written statement could not, either expressly or by necessary implication, be interpreted as a denial of the specific factual allegations relating to the correspondence. On this point, there was a degree of agreement among the learned judges of the Bombay High Court, including Justice Mody. Referring to paragraph 7 of the written statement, Justice Mody observed that the paragraph did not, either directly, indirectly, specifically or by implication, address any of the three factual statements concerning the letters. He explained that a denial that a contract existed did not amount to a denial that the letters dated 7 September 1948 and 13 September 1948 had been received or that they contained particular material. The defendants could, in theory, admit the three factual statements while still denying that those statements gave rise to any contract; therefore, Justice Mody concluded that those three factual statements must be treated as admitted. Concerning paragraph 8 of the written statement, the judge noted that the two factual statements referred to therein had not been pleaded, and consequently they also had to be deemed admitted. However, the judge then held that the alleged admissions could not be allowed into evidence because the plaint did not allege that the defendants authored the letters in question, nor did it describe the contents of the letters. The author of the judgment regarded this approach as overly critical, pointing out that paragraph 2 of the plaint explicitly stated that the letters originated from the defendants and also summarised their substance. The Division Bench of the High Court, while discussing the denials, observed that there was no denial of the correspondence because the plaintiffs had inspected the letters before filing the written statement, and the careful drafter of the written statement could not plausibly dispute the fact that the letters had been exchanged. Accordingly, the Division Bench held that the letters dated 7 September 1948 and 13 September 1948 were admissible as evidence and formally admitted them. The bench further explained that the denial should be read not as a denial of the exchange of letters and telegrams,

In the Court’s assessment, the defendants’ response was not a denial of the accuracy of the document copies they had inspected, but rather a legal submission that the exchange of the letters and telegrams did not give rise to a contract. The Court agreed fully with the view expressed by the Division Bench on the interpretation of the pleadings and affirmed that the letters in question had been properly admitted as evidence. Consequently, because the letters were admissible, the first required element – the existence of a submission – was established in this case. Concerning whether the arbitration was carried out in accordance with that submission, the Court found that the pleadings themselves provided a clear answer. Paragraphs three, four and five of the plaint specifically recorded that the parties had agreed to the arbitration clause and to the procedural rules governing the arbitration. Those paragraphs further stated that, pursuant to rule five and clauses B, C and E of rule fifteen of the Rules of the American Spice Trade Association, arbitrators and an umpire were appointed; that the arbitrators and the umpire took their oaths of office; that they heard the matter on 27 June 1949 and again on 12 July 1949; that the defendants, although duly notified of the hearings, failed to attend; and that on 12 July 1949 the arbitrators and the umpire prepared, signed, acknowledged and published their awards. In those awards the arbitrators unanimously concluded that the defendants had breached the two contracts and ordered the defendants to pay the plaintiffs specified sums as damages for those contracts.

The Court then turned to the content of paragraph seven of the plaint, which described how the defendants had not satisfied the demand, how legal proceedings were instituted before the Supreme Court of the State of New York, how notice of those proceedings was properly served on the defendants, and how that Court issued a judgment confirming the arbitration awards. Paragraphs nine, ten, eleven and twelve of the defendants’ written statement addressed those same allegations. In those paragraphs the defendants did not dispute the fact that arbitrators had been appointed or that the procedure followed by the arbitrators and the umpire in making the awards had taken place. Instead, the defendants maintained that they were not bound by, nor concerned with, the appointment of the arbitrators by the plaintiffs as alleged, nor with any of the statements contained in paragraph seven of the plaint, and they asserted that the awards issued by the arbitrators and the umpire were not binding upon them. Regarding the allegations in paragraph seven, the defendants merely contended that the arbitrators had acted without jurisdiction and that the judgment of the New York Supreme Court was not binding on them. The Court observed that, from those denials, the defendants did not deny either the appointment of the arbitrators or the steps taken by them in rendering the awards.

In this case the Court concluded that, following the same reasoning applied earlier to the allegations concerning the submission, the absence of any specific denial by the defendants means that the awards are to be treated as admitted to have been made in strict compliance with the terms of the submission. Turning to the third requirement, namely proof that the awards are valid under the law of the country in which they were rendered, the defendants again adopt an equivocal stance in their written statement. Paragraph eight of the plaint contains a precise allegation to this effect: “........ the said arbitration having been duly held and the said awards having been duly made, signed, acknowledged and published according to the said rules and the laws of the State of New York, and the defendants not having taken steps to have the said awards or either of them set aside or modified, as provided in the said rules and by the laws of the State of New York, the said awards are binding on the defendants and the defendants are now precluded and estopped from disputing the same.” That paragraph expressly asserts that the awards were made in accordance with the laws of the State of New York. Although the defendants’ written statement generally denies that the awards bind them, it does not contain any specific denial that the awards were not made in conformity with New York law. Applying the same rules of construction that were used for the other averments in the plaint, the Court holds that the defendants must be deemed to have admitted that the awards were made in accordance with the laws of the State of New York. An additional circumstance must be considered when interpreting the written statement. It is undisputed that the plaintiffs filed affidavits disclosing copies of the documents referred to in the plaint, and that the defendants’ counsel examined those documents before filing the written statement. It is also undisputed that the defendants received a copy of the petition filed by the plaintiffs in the Supreme Court of the State of New York, together with a copy of the awards and the order of that Court to show cause. Having knowledge of the contents of the letters and the awards, the defendants’ counsel was in no position to deny the factual occurrence of the letters being sent, the awards being made, and the judgment of the New York Supreme Court confirming those awards. Consequently, the written statement contains only vague and general denials, raising disputes solely on legal questions and offering equivocal answers to factual matters.

The Court observed that no inference of tacit acceptance could be drawn from the defendants or their counsel. After reviewing the documents, the defendants’ counsel asked the plaintiffs’ counsel to produce the original copies. The plaintiffs failed to produce those originals. Nevertheless, this failure did not remove the defendants’ and their counsel’s knowledge of the existence of the documents and of their contents before the written statement was prepared. That knowledge, the Court explained, adequately explains why the written statement of the defendants contained vague and general denials. The vagueness was intentional because the counsel apparently could not bring himself to deny the factual background in full. Accordingly, the Court held, on a fair and reasonable construction of the pleadings and the written statement, that the existence of the three conditions required for enforcing the awards had been admitted by the defendants in their pleadings. Consequently, the Court found that the three conditions did not need to be proved independently. The Court went further and held that the same three conditions were proved by Exhibit X‑9. Exhibit X‑9 is the record of the proceedings of the Supreme Court of the State of New York relating to the arbitration between the plaintiffs and the respondents. The exhibit includes a certificate issued by the Consul‑General, together with other papers relating to the proceedings, including the order and the judgment of that Supreme Court. The certificate reads: “THIS IS TO CERTIFY (a) that the annexed proceedings have been duly had in accordance with the laws of the State of New York. (b) that the annexed proceedings are duly certified by the officer having the legal custody of the originals thereof at the time such annexed proceedings were issued by the Supreme Court of New York. (c) that the several persons named in the annexed proceedings as holding the respective offices stated therein in respect of each of them did in fact hold such respective office at the time the same took place.” The Consulate‑General of India disclaimed any responsibility for the contents of the document. The certificate is dated New York, N.Y., June 18th, 1957 and is signed by M. Gopalcharan, Consul‑General, bearing the seal of the Consulate‑General of India, New York. The order and judgment of the Supreme Court of New York dated March 21, 1950 detail the filing of an application by the respondents for an order confirming the two awards, the Court’s consideration of that application, and the Court’s satisfaction after reviewing the awards and related papers that the proceedings were regular. The decretal portion of the order confirms the awards, and the judgment is signed by Archibald R. Watgon, Clerk, and certified both by the clerk and by the Clerk of the Supreme Court of New York County. If this judgment is admitted into evidence, the three conditions are satisfied: there was a submission, the arbitrators rendered the awards, and a judgment was made on those awards on the ground that the awards were made in accordance with law.

In this case, the Court observed that the awards had been issued in accordance with the submission and that a judgment had been rendered on those awards on the basis that they complied with the law. The learned Solicitor‑General argued, however, that the judgment had not been proved in the manner prescribed by the Indian Evidence Act. The Court therefore set out the relevant statutory provisions. Section 74 of the Evidence Act defines public documents to include documents forming the acts or records of acts of public officers, whether legislative, judicial or executive, of any part of India, the Commonwealth or a foreign country. Section 78 explains how public documents from a foreign country may be proved: the document may be proved by the original, or by a copy certified by the legal keeper of the original together with a certificate under the seal of a notary public or an Indian Consul or diplomatic agent stating that the copy is duly certified by the officer having legal custody of the original, and also upon proof of the character of the document according to the law of the foreign country. Section 86 provides that a Court may presume that any document purporting to be a certified copy of a judicial record of a country outside India or Her Majesty’s Dominions is genuine and accurate if the document appears to be certified in the manner commonly used in that country by a representative of the Central Government.

The parties did not dispute that the copy of the judgment was certified by the legal keeper of the original within the meaning of Section 78(6) and that a certificate under the seal of an Indian Consul attested that the copy had been certified by the officer with custody of the original. The contention centered on the requirement that, under Section 78(6), three conditions must be satisfied before the judgment can be admitted into evidence, the third condition being proof of the character of the document according to the law of the foreign country. The Court noted that the statute makes clear that, in addition to the two certificates—one by the legal keeper and the other by the Consul‑General—there must also be proof of the document’s character as required by the foreign law, and that this is a condition precedent to admission. Consequently, the short question was whether such proof existed in the present case. The Court explained that proof may be established by direct or circumstantial evidence, or by presenting facts that give rise to presumptions, whether rebuttable or irrebuttable. Section 86 was then cited as permitting the Court to presume the genuineness and accuracy of a certified copy of a foreign judicial record when the certification follows the customary practice of that country.

The Court explained that section 86 of the Evidence Act creates a statutory presumption that any document claiming to be a certified copy of a foreign judicial record is genuine and accurate, provided that the copy has been duly certified in the manner and according to the certification rules ordinarily followed in the country where the original record was issued. The Court further clarified that this presumption does not require the foreign judgment to have already been admitted as evidence; the existence of the judgment in the evidence record is not a prerequisite for invoking the presumption. While section 78(6) of the Evidence Act enumerates three conditions that must be satisfied before a foreign judgment may be admitted, the Court held that the admission of the judicial record itself is not a condition precedent to the operation of the presumption under section 86. The presumption may be drawn even before the record is formally admitted. Accordingly, the document can be examined to determine whether the essential certificate is present – that is, a certificate issued by any representative of the Central Government of the foreign country confirming that the document was certified in accordance with the usual method employed in that country for certifying copies of judicial records. The Court noted that recognizing the distinction between the certificate and the judgment reveals the flaw in the opposite argument; it is the certificate that confers admissibility on the document, not the judgment itself. In the present case, the required certificate was indeed produced. Consequently, the Court was able to presume that the document was genuine and accurate, which in turn established its character as a genuine judgment of the Supreme Court of New York. By applying the statutory presumption, the Court found that the third condition of section 78(6) – namely that the document be a judgment of the Supreme Court of the State of New York made in accordance with law – was also satisfied. Since all three conditions stipulated in section 78(6) were fulfilled, the Court concluded that the document could be lawfully admitted into evidence, and that its admission, by its own effect, demonstrated that the three conditions necessary for the enforceability of the awards had been met. Turning to the second contention, the Court addressed the question of whether the Bombay High Court possessed original jurisdiction to entertain the suit. The Court observed that clause 12 of the Letters Patent of Bombay authorises a party to commence a suit, with the Court’s leave, where the cause of action arises in part within the ordinary original jurisdictional limits of the High Court. The plaint alleged that the terms of business were accepted by the defendants in Bombay, that the proposal and acceptance of the contracts occurred in Bombay, and that the defendants’ refusal to pay the sum claimed also took place in Bombay. Based on these allegations, the Court affirmed that leave was obtained from the Bombay High Court and that the suit was consequently filed in that Court.

The Court observed that a claim founded on an award is in truth a claim to enforce that award, based on the principle that the parties’ submission created an implied contract to give effect to the award. The Court further noted that the written statement had admitted all documents that were necessary to demonstrate both the preliminary and the later contracts. Those admitted documents clearly showed that the parties had agreed that any dispute arising under the contracts would be submitted to arbitration in accordance with the rules of the American Spices Trade Association. The contracts themselves were executed within the territorial limits of the original jurisdiction of the Bombay High Court. Consequently, a portion of the cause of action arose within those limits and, because the parties had obtained leave of the High Court, that Court possessed the jurisdiction required to entertain the claim. No other point was raised before the Court. In view of these findings, the Court adopted the conclusions reached by the High Court and dismissed the appeal, ordering the appellant to pay costs.

This appeal was filed by way of a certificate issued by the High Court of Bombay from its judgment dated 12 September 1958, which had reversed the earlier judgment of Mody J. Mody J., by his judgment, had dismissed a suit instituted by the East India Trading Co., who appeared as respondents, against Badat & Co., the defendants, on the original side of the High Court. The suit sought a sum of Rs 92,884‑4‑10 together with interest and costs, and was based on a judgment of the Supreme Court of New York that affirmed awards rendered by a domestic tribunal, or alternatively on the awards themselves. The plaintiff company was incorporated in the State of New York and was engaged, among other activities, in the import of spices. The defendant was a partnership firm that at the relevant time was carrying on import and export business in Bombay. According to the plaintiff, the parties exchanged two letters dated 7 September 1948 and 13 September 1948, the first written by the plaintiff and the second by the defendant, through which they agreed to conduct business on the terms of the American Spice Trade Association. One of the essential terms required the plaintiff, when placing an order for spices, to open a letter of credit covering ninety‑five percent of the value of the commodity ordered, with the balance to be settled immediately after the goods were weighed and delivered. By a cable dated 3 March 1949 the defendants offered to sell the plaintiff thirty tons of Alleppey Turmeric Fingers at a specified rate, with shipment to occur in March or April, and the plaintiff accepted that offer promptly. A similar offer was made by the defendants on 7 March 1949, and the plaintiff again accepted. The plaintiff alleges that it subsequently forwarded to the defendants two contracts in duplicate on the standard forms issued by the American Spice Trade Association, requesting the defendants to return a duly signed copy for each transaction, and that the defendants failed to comply with that request.

The plaintiffs sent two duplicate contracts on the standard forms issued by the American Spice Trade Association and asked the defendants to return a duly signed copy for each transaction. Their complaint is that the defendants did not return the signed copies as requested. The plaintiffs also state that, although they opened letters of credit as required, the defendants breached both contracts by failing to deliver the ordered turmeric. In paragraph three of the plaint, the plaintiffs allege that the defendants were fully aware of, and understood, the terms and conditions of the American Spice Trade Association. One of those terms, which the plaintiffs reproduced, provides: “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.” Acting on that provision, the plaintiffs, having declared the defendants in default, appointed Edward B. Polak as their arbitrator. On 24 May 1949 they invited the defendants to appoint an arbitrator on their own behalf and warned that, should the defendants refuse, the plaintiffs would ask the Association to appoint an arbitrator for the defendants. The defendants did not appoint any arbitrator, and at the plaintiffs’ request the Association appointed Michael F. Corio to act as the defendants’ arbitrator. Mr Corio notified the defendants of his appointment, asked them to supply all documents and information that might be necessary for the arbitration, and warned that, in the absence of such material, the arbitrators would have to proceed based only on the documents provided by the plaintiffs. The defendants gave no response to this communication.

Before commencing the arbitration, the arbitrators selected James F. Knight to serve as umpire and chairman, as required by the Association’s rules. The arbitrators and the umpire then proceeded with the arbitration and issued two awards: one award of US$9,538.64 in respect of the first contract and a second award of US$9,209.36 in respect of the second contract, both awards being for damages. Following the awards, the plaintiffs drew a bill of exchange on the defendants in Bombay for the total amount of US$18,748, which represented the aggregate of the two awards. According to the plaintiffs, the bill was presented to the defendants on several occasions in Bombay, but the defendants “failed and neglected to accept or to pay the same.” Consequently, the plaintiffs commenced proceedings in the Supreme Court of the State of New York seeking confirmation of the awards and entry of a judgment. The plaintiffs claim that notices of the New York proceedings were served on the defendants and that the New York court pronounced a judgment confirming the awards and ordering the defendants to pay US$19,554.17, including

In this case the Court noted that a judgment confirming the arbitration awards and awarding interest and costs was pronounced by the Supreme Court of New York on 13 April 1950. The plaintiffs later instituted the present suit in the High Court of Bombay on 14 January 1954. According to the plaintiffs, the defendants had, by the terms of their contract, voluntarily submitted themselves to the jurisdiction of the New York Supreme Court and had agreed that that Court, which was a court having jurisdiction for that purpose, could confirm the awards and enter a judgment thereon. The plaintiffs further asserted that the parties had expressly agreed that a judgment might be entered on any award made in respect of any question, controversy or claim arising under or out of the contracts, in accordance with the practice of a court having jurisdiction. Alternatively, the plaintiffs argued that if the Court were to hold that the judgment was not a judgment of a foreign court enforceable in the High Court, the defendants had nevertheless, by the terms of the contracts, expressly agreed that any dispute arising under the contracts would be settled by arbitration in New York under the rules of the Spice Trade Association, and that the arbitration awards, having been duly made and published according to the laws of the State of New York and having become final, were binding on the defendants. Accordingly, the defendants were bound to carry out the terms of those awards and to pay the sums awarded. Thus the suit was substantially based on a foreign judgment and, in the alternative, on the two awards rendered by a domestic tribunal operating in New York.

The defendants raised several pleas in defence. First, they contended that they did not reside within the limits of the original jurisdiction of the High Court of Bombay and did not carry on business there, so that the High Court lacked jurisdiction to entertain the suit. They further argued that no part of the cause of action had arisen in Bombay. It was noted that the plaintiffs had obtained ex parte leave of the Court under clause 12 of the Letters Patent, and the defendants submitted that such leave should be revoked. The next major contention of the defendants was that the Supreme Court of New York had no jurisdiction to pass the judgment and the order the plaintiffs sought to enforce. Additionally, the defendants claimed that the arbitrators and the umpire who rendered the alleged awards on which the New York judgment was founded lacked jurisdiction to make those awards. The defendants raised a number of other pleas as well, and elaborate judgments were delivered by Mody J and by the appellate bench consisting of Chief Justice Chagla, C.J., and Justice S. T. Desai, dealing with those contentions. On the view the Court takes of the question of enforceability of the awards in the manner sought in this case, it

In this case the Court observed that it was unnecessary to consider the many pleadings that had been filed earlier. The Court noted that it was not contested before it that, on the date when the suit was filed, the defendants had stopped residing in Bombay and had also ceased to carry on any business within the original civil jurisdiction of the High Court of Bombay. The Court then turned to the reasoning of the appellate court. The appellate court had held that the judgment rendered by the Supreme Court of New York could not be enforced against the defendants in a suit filed on the original side of the High Court of Bombay. However, the appellate court also concluded that the awards on which that foreign judgment was based could be enforced because those awards created a cause of action and a portion of that cause of action had arisen within the territory of Bombay.

The Court explained the reason why the New York judgment could not serve as the foundation of the suit, quoting the learned Chief Justice. The Chief Justice said that the foreign judgment was passed in New York at a time when the defendants neither resided in Bombay nor carried on business there. Consequently, jurisdiction could be attracted only if the pleading alleged that the defendants were obligated under the foreign judgment to pay the amount in Bombay, or that the defendants had undertaken to satisfy the judgment amount in Bombay. The Court observed that no such allegation was made in the plaint. In the absence of such an allegation, the Court held that, had the plaint been based solely on the foreign judgment, it might have agreed with the learned Judge that the Court lacked jurisdiction.

The Court further noted that the learned Chief Justice had added that a final decision on the matter was unnecessary because, in his view, the plaintiffs were already entitled to the relief they claimed on the basis of the awards. The Court pointed out that the counsel appearing for the plaintiffs did not challenge the appellate court’s finding on this point, nor did he argue that the Supreme Court judgment could provide a cause of action for the plaintiffs in the present suit. The Court expressed no doubt that the view that the plaintiffs could not enforce the New York judgment against the defendants by a suit instituted on the original side of the High Court was correct, and therefore, ordinarily the matter could have been left at that point.

Nevertheless, the Court stated that its reasons for agreeing with the High Court’s conclusion differed from those of the appellate judges, and it therefore needed to set out its own reasoning. Before doing so, the Court said it was appropriate to examine the law governing the enforcement of foreign awards and of foreign judgments that are based on such awards. The Court referred to the Arbitration Protocol and Convention Act of 1937 (Act VI of 1937), which provides that certain commercial awards made in foreign countries are enforceable in India as if they were made under an Indian arbitration. The Court emphasized, however, that the provisions of this Act apply only to those countries that are parties to the protocol listed in the First Schedule to the Act.

Under the Arbitration Protocol and Convention Act, 1937, the provisions of the Act apply only to those countries that are listed in the First Schedule to the Act, or to awards that involve parties where one of the parties is subject to the jurisdiction of a power that the Central Government, having been satisfied that reciprocal provisions exist, may by notification declare to be a party to the Convention as set out in the Second Schedule to the Act. It is therefore a matter of common agreement that the statutory provisions do not extend to the particular awards that are the subject of the present dispute. Aside from the very specific provisions of that statute, foreign arbitration awards and foreign judgments that are based upon such awards may be enforced in India on exactly the same basis and under the same circumstances as they are enforced in England, namely on grounds of justice, equity and good conscience as recognized by the common law. In matters that arise before the original side of the High Court of Bombay, English common law is applied because the circumstances of the place and its inhabitants admit such application, a principle that is derived from clause nineteen of the Letters Patent read together with clause forty‑one of the Charter of the Bombay High Court.

The common‑law rule governing the enforcement of foreign arbitration awards is captured in rule one hundred and ninety‑eight of Dicey’s Conflict of Laws, seventh edition, page one thousand fifty‑six. The rule states, in its first paragraph, that a foreign arbitration award which has already been rendered enforceable by a judgment in the country where it originated may be enforced in a subsequent action as a foreign judgment. In its second paragraph, the rule provides that where the foreign award has not been made enforceable by a judgment in the originating country, a court may still enforce it at its discretion, provided that the award (a) complies with the terms of the original submission agreement, (b) is valid according to the law governing the arbitration proceedings, and (c) is final in accordance with the law that governs the submission agreement. The same principle is restated in Russell on Arbitration, sixteenth edition, page two hundred eighty‑two, where it is explained that an award that requires a local enforcement order to become enforceable is not a foreign judgment enforceable in English courts, but an award that is already enforceable in its country of origin can be enforced in England at common law, independent of any rights under Part Two of the Arbitration Act, 1950. Further, Russell, page two hundred eighty‑three, outlines the burden of proof for a plaintiff seeking enforcement of a foreign award at common law: the plaintiff must demonstrate (1) the existence of an arbitration agreement, (2) that the arbitration was conducted in accordance with that agreement, and (3) that the award was issued pursuant to the agreement and is valid according to the lex fori of the place where the arbitration occurred and where the award was made. If the award was validly made as a consequence of a valid arbitration agreement, a sum adjudged due by the award and left unpaid may be recovered in an action upon that agreement.

In this discussion, the author explained that although commercial arbitration awards arise from a contract to arbitrate, the awards themselves are not contracts and, while they are decisions, they are not judgments. The author noted that English case law has held that an award which has not been turned into a judgment in the country where it was made may nevertheless be enforced in England, provided that the award satisfies, with appropriate modifications, the same criteria used to determine whether a foreign judgment is enforceable. Accordingly, the foreign arbitral tribunal must have acted on a valid submission within the jurisdiction granted by that submission, and the award must be both valid and final, as referenced in Dicey’s Private International Law, page 1057. The author then reported that some commentators argue that enforcement in England should depend on the character of the award in its place of origin. Under that view, if the award has been converted into a judgment abroad, the English court should enforce the judgment rather than the award; if the award creates a contractual claim abroad, it should be enforced as a contract in England. The author observed that English courts have generally rejected this approach and have treated the award as a contract for enforcement purposes, regardless of how foreign law characterizes it. Another school of thought contends that enforcement in England rests not on the award itself but on the underlying agreement to submit disputes to arbitration, reasoning that the submission creates an implied contractual obligation to comply with the award and therefore extinguishes the original cause of action.

The author further stated that no single short formula exists for enforcing foreign awards and that the matter involves a complex set of questions that must be examined individually. After reviewing various English decisions and scholarly opinions, the author summarized the conclusions relevant to the present case. First, the plaintiff in an English enforcement proceeding must obtain an enforceable title in England, either by seeking leave to enforce the award or by bringing an action on the award. Second, the claim in England must be framed as a contractual claim, based on the assumption that the agreement to perform the award is implied in the submission and that the submission itself constitutes the contract on which the claim relies. Third, the foreign award does not need to have been declared enforceable in its country of origin before it can be enforced in England, as illustrated by the decision in Union National des Cooperatives Agricoles de Cereales v. Robert Catterall & Co. Ltd.(1), where the award was enforced in England even though it had not been turned into a judgment abroad.

The judgment explained that when a foreign arbitration award was followed by judicial proceedings in the country where the award originated, the resulting foreign judgment could be more than a simple order granting permission to enforce the award. In such circumstances, English enforcement proceedings had to be based on that foreign judgment, or possibly on the original cause of action, but ordinarily not on the award itself. Conversely, when the foreign judgment merely took the form of a formal order that merely allowed enforcement of the award, it was uncertain whether English courts should enforce the award or the order. The court observed that if a practical distinction could be maintained between foreign judgments that decided the award and foreign formal enforcement orders, then, in practice, English courts would likely enforce the award itself when the order was purely formal.

The court then set out the basic requirements that a plaintiff had to satisfy in order to enforce a foreign award in England. First, the plaintiff had to show that the parties had submitted to arbitration. Second, the plaintiff had to demonstrate that the arbitration had been conducted in accordance with that submission. Third, the plaintiff had to prove that the award was valid under the law of the country where it was rendered. These three elements were affirmed in the decision of Norske Atlas Insurance Co. Ltd. v. London General Insurance Co., Ltd., which the court cited as correctly stating the conditions for enforcement of a foreign award in England.

However, the judgment also mentioned an alternative view that had been raised by the Solicitor‑General, relying on the case of Merrifield, Ziegler & Co. v. Liverpool Cotton Association Ltd. That view required that a foreign award be enforceable in its country of origin without the need for a separate enforcement order or judgment. In that case, a German award was sought to be executed in England. The judge, Eve J., observed that under German law the award had the effect of a final court judgment, but it could not be executed unless a German court issued an enforcement order, and such an order would not be issued if any grounds existed for setting the award aside. The judge further stated that the award was not truly enforceable until a court gave it vitality, thereby giving it at least one essential characteristic of a judgment – the right to enforce obedience.

The judgment noted that Dicey had pointed out that the view expressed in Merrifield, Ziegler & Co. was unique and had not been referenced in the earlier Norske Atlas case. It also had not been mentioned in the Union National case, which involved a Danish award that could not be enforced in Denmark without an enforcement order. The court concluded that these differing opinions created a conflict regarding how foreign awards and foreign judgments should be treated for enforcement in England, but certain principles remained clear.

In this case the appeal was said to be enforceable under the Arbitration Act of 1950 on the basis that the award had become final and that, according to Danish law, only formal objections could be raised to such an award in the proceedings for obtaining an enforcement order. The Court observed that there was a clear conflict of opinion on several points relating to the enforcement of foreign awards or judgments that were based on foreign awards. Nevertheless, certain propositions emerged as settled. The first proposition held that where an award was followed by a judgment in a proceeding that was not merely a formality but allowed the party against whom judgment was sought to raise objections to the validity of the award, then that judgment would be enforceable in England. Even in that situation, the plaintiff retained the right to sue on the original cause of action. The second proposition stated that a foreign award could be enforced in England provided it satisfied, mutatis mutandis, the same tests applied to the enforcement of foreign judgments, on the ground that the award created a contractual obligation arising from the parties’ agreement to arbitrate. On two questions connected with this principle there was still disagreement. One question concerned whether an award that was followed by a judgment could be enforced in England as an award, or whether only the judgment itself could be enforced. The other question concerned whether an award that could not be enforced in the country where it was made without first obtaining an enforcement order or a judgment could nevertheless be enforced in England, or whether in such circumstances the only remedy was to sue on the original cause of action. The third principle asserted that a foreign judgment or a foreign award might be sued upon in England as a valid cause of action, provided certain conditions were satisfied, one of which was that the award or judgment had become final. Bearing these principles in mind, the Court considered whether the judgment of the Supreme Court could be enforced against the defendants by instituting a suit on the original side of the High Court. The appeal court had previously held that, because the original cause of action had arisen wholly or partly within the original jurisdiction of the High Court, the suit was maintainable. If the plaintiffs had pursued the original cause of action, there would have been no difficulty and the High Court could have granted leave under clause twelve for the plaintiffs to institute the suit. However, the present matter did not involve the original cause of action but concerned the judgment of the New York Supreme Court and the associated award. The Court noted that the judgment provided an independent cause of action. The question then was whether the cause of action created by that judgment arose within the limits of the original jurisdiction of the High Court. Since the judgment was rendered in New York, the Court concluded that the cause of action it furnished arose at that place and not elsewhere, making it independent of the cause of action arising from the contract, and consequently, a suit based on that judgment would not lie in Bombay.

The Court observed that the cause of action arising from the foreign judgment originated in the jurisdiction where that judgment was rendered and could not be said to have arisen anywhere else. Because this cause of action is distinct from the cause of action created by the underlying contract, a plaintiff who attempted to rely on the foreign judgment could not maintain a suit in Bombay. The Court noted that no earlier case appears to have decided directly whether a suit based on such an independent cause of action could be brought in Bombay. For guidance, the Court referred to the earlier decision of East India Trading Co. v. Carmel Exporters & Importers Ltd. In that case an action was instituted in England to enforce a foreign judgment that awarded damages for breach of contract. The particular issue before the English court was which date should be used to convert the foreign‑currency damages into sterling. After reviewing the relevant authorities, Sellers J. concluded that the appropriate date was the date on which the foreign judgment was entered. Sellers J. explained that the plaintiff’s cause of action was the foreign judgment itself, and that the judgment created the debt which could then be enforced by an English action.

The Court held that the reasoning in East India Trading Co. is applicable to the present dispute because, in both matters, the cause of action is founded on a foreign judgment, and in the present case the cause of action may also be founded on a foreign award. The sole distinction, the Court said, is that the present case required a determination of the geographical location where the cause of action arose, whereas the cited English case required a determination of the temporal point at which the cause of action arose. The Court pointed out that the earlier decision did not explain why a foreign judgment is treated as creating a new legal obligation. The Court then cited Blackburn J.’s judgment in Schibsby v. Westenholz, at page 159, where Blackburn J. 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, and again repeated by him in Williams v. Jones, 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.” The Court also quoted James L. J. in Re Davidson’s Settlement Trusts, observing that “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.” Further, the Court referred to Schmitthoff’s commentary in The English Conflict of Laws, third edition, page 459, which affirms that English courts recognise that a foreign judgment creates private rights that should be protected, and that recognition of a foreign judgment means recognition of the private right created by that judgment rather than enforcement of a foreign sovereign act. Finally, the Court cited Professor Read, who explained that the basis for recognizing foreign judgments is the proof that a vested right has been created through the judicial process of the foreign jurisdiction.

The Court explained that a foreign judgment creates a new legal right through the judicial process of the foreign legal district. The prevailing view, supported by authorities such as (1) (1870) 6 Q.B. 155, (2) (1842) 9 M & W 810, (3) (1845) 13 M & W 628, (4) (1873) L.R./E. & 383, 386, and the treatise “Recognition and Enforcement of Foreign Judgments (1938)” by Professor Read as quoted by Schmitthoff in The English Conflict of Laws, rests on the assumption that the foreign judgment gives rise to a fresh legal obligation. This principle has been repeatedly affirmed by numerous decisions, and no contrary opinions have been recorded. The Court noted that the English doctrine of merger has consistently been held not to apply to foreign judgments. Consequently, even when a plaintiff obtains a judgment abroad, he may still institute suit in an English court on the basis of the original cause of action rather than on the judgment itself. If the plaintiff elects to sue on the original cause of action, the court of the jurisdiction where that cause arose would be the proper forum. However, when the plaintiff chooses to rely on the foreign judgment, the original cause of action loses relevance, even though the judgment has not merged the cause. The Court therefore considered that, because the judgment in question was rendered in New York, the cause of action for a suit based on that judgment arose in New York and not within the territorial limits of the High Court of Bombay. Accordingly, any suit founded on that foreign judgment was beyond the jurisdiction of the Bombay court.

The alternative ground asserted by the plaintiffs was the enforcement of the awards themselves, a basis which the appellate court had previously held to be valid for the present suit. The learned Solicitor‑General argued that, once the awards had merged into a judgment, they could no longer serve as a foundation for the suit. The Court observed that Dicey’s Conflict of Laws records that some writers contend that when a foreign award is reduced to a judgment, the judgment—not the award—must be enforced in England. Nevertheless, this view is not generally embraced by United States courts, as illustrated in Lorenzen’s Cases on Conflict of Laws (4th ed., p. 1090), which states that a foreign judgment is not deemed to merge the original cause of action. The Court therefore concluded that an action may be brought on the award even after it has been converted into a foreign judgment, and that the recognition of the foreign judgment by English courts does not rely on the doctrine of merger. This reasoning supported the view that the plaintiffs could pursue enforcement of the awards in the current proceedings.

In the discussion of the effect of a foreign award that has been transformed into a judgment in another country, the Court observed that the original cause of action would still exist, and consequently an action could be be pursued against the award even though it had been converted into a foreign judgment. The Court noted that the Privy Council had not resolved this issue in L. Oppenheim & Co. v. Mahomed Haneef (1) because the matter had not been raised before that tribunal.

The Court then referred to the authority of Schmitthoff, who explained on page 459 of the English Conflict of Laws that English courts recognise a foreign judgment without relying on the doctrine of merger. The Court explained that the merger doctrine does not apply to judgments issued by courts that are not courts of record under English law. The Court considered that, because the American legal system is based on English common law, the New York Supreme Court might be regarded as a court of record in the English sense, and therefore the merger doctrine could potentially apply to a judgment recorded by that court. However, because no party had argued before the Court that the New York Supreme Court was a court of record, the Court declined to decide that question.

The Court further stated that, just as a foreign judgment creates a new cause of action that may be pursued in an English court, the same principle applies to a foreign arbitral award. The Court cited the decision in Bremer Oeltransport GMBH v. Drewey (2), where it was held that a foreign award provides a fresh cause of action founded on the parties’ agreements to perform the award. The Court added that this position is reflected in Halsbury’s Laws of England, volume II, page 45.

In the case before the Court, the respondents argued that the arbitration submission constituted a contract whereby the parties implicitly promised to obey and carry out the arbitrators’ award; therefore, enforcing the award would amount to enforcing a contract that had been made within the jurisdiction, the contract having been concluded in London while the award itself had been rendered in Hamburg, Germany. Conversely, the appellant argued that because the award originated in Hamburg, an English action to enforce it could not be characterised as enforcement of a contract made in England. The Court rejected this contention. After reviewing the relevant authorities, the Court, relying on the observations of Justice Slesser in I.L.R. 45 Mad. 496, recorded at page 760 that both common‑law and equity judges regard an award as merely the execution of a term of the original submission agreement.

The Court then referred to the remarks of Justice James in Llanelly Ry. and Dock Co. v. London and North Western Ry. Co. (1), where it was noted that it would be difficult to hold that the arbitrator could resolve the essential dispute between the parties under that clause because, if the plaintiffs’ contention were correct, they had already determined a portion of the agreement as well as the entire subject matter of the dispute.

In this case the Court explained that when a plaintiff seeks to enforce a foreign arbitral award, the plaintiff must first obtain a judgment from the court for the amount specified in the award after establishing five essential facts. First, the plaintiff had to demonstrate that a contract existed between the parties that provided for disputes to be referred to arbitration before a tribunal situated in a foreign country. Second, the plaintiff needed to show that the award was issued in accordance with the terms of that contract. Third, the plaintiff was required to prove that the award complied with the law governing the arbitration proceedings in the country where the award had been made. Fourth, the plaintiff had to establish that the award was final under the law of that foreign country. Fifth, the plaintiff had to show that the award was still subsisting at the date the suit was filed.

The Court noted that some English decisions had expressed the view that, before a suit could be brought in England on the basis of a foreign award, the award must first be enforceable in the country where it originated. However, the Court observed that it was not necessary to resolve that point for the present case. The Court further observed that, once a plaintiff filed a suit based on an award, the plaintiff was not required to prove that the amount claimed was actually payable to him in respect of the dispute, and the defendants were not permitted to challenge the validity of the award on the same grounds that are available under section 30 of the Indian Arbitration Act. The only challenge that the defendants could raise was a very limited challenge to the award itself, and that limitation was one reason why it was important to determine whether the award had in fact become final in the country where it was rendered.

Assuming that the plaintiffs had satisfactorily proved the first three of the five conditions, the Court turned to the remaining two conditions – the finality of the award and its subsistence at the date of the suit. The Court referred to the recent Union Nationale decision for guidance on when an award could be considered final. The Court recounted the facts of that decision as set out in the headnote: the appellants and respondents had entered into an agreement in Paris on 31 August 1956 for the sale of wheat seed, and the agreement contained an arbitration clause, the English translation of which provided that all differences arising out of the contract would be decided by the Arbitration Chamber of Copenhagen, whose decisions were to be final and not subject to appeal, with the powers of an amicable arbitrator. The parties therefore referred their dispute to the Copenhagen Chamber of Arbitration, and under the chamber’s procedural rules the awards were rendered by a committee. Regulation 14 of those rules expressly stated that awards made by the Committee were final. The Court therefore indicated that the Union Nationale case illustrated the principle that an award becomes final when the governing arbitration rules declare it to be final, and that this principle was relevant to determining whether the fourth and fifth conditions in the present case were satisfied.

The court explained that an award could be appealed only to the appeal court that was attached to the arbitration committee, and that if the presidency of the committee determined that an appeal was not permissible, then the award made by the judgement and arbitration committee would become final. By an order dated 6 October 1958 the committee awarded the respondents the sum of $183,000. On 25 November 1958 the presidency of the arbitration committee refused the appellants’ application for leave to appeal and formally notified the parties that the award of 6 October 1958 was final. The award, however, could not be enforced in Denmark without the issuance of an order by a Danish court. Accordingly, the respondents initiated proceedings under sections 36 and 26 of the Arbitration Act, 1950, which governs arbitration awards made in Denmark, and applied for leave to enforce the award. The appellant argued that the award was a foreign award and had not become final in the country in which it was made. The appellants contended that because the award was not enforceable in Denmark, it could not be regarded as final there. The Court of Appeal referred to regulation 14, which confers finality on an award that complies with the procedural rules of the arbitration chamber. The appellate court accepted the opinion of a Danish lawyer who explained that, under Danish law, the award was deemed final even though enforcement required a judgment of a Danish court, and that during the enforcement proceedings the defendant could only raise objections concerning formal defects and could not challenge the merits of the award. Consequently, the Court of Appeal distinguished between the concepts of “finality” and “enforceability,” holding that where the law of the country in which an award is made no longer permits a merit‑based challenge, the award must be regarded as final even if, in its present form, it is not enforceable. The court then examined Rule 15, clause (E) of the American Spice Trade Association, which provides that “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.” The court noted a key difference between the Danish rule and Rule 15E: the American rule requires that a judgment be obtained in order to enforce the award when the claim arising from the award is not settled. The court acknowledged, without doubt, the American approach to enforcement.

In the discussion, the Court observed that the rule governing the arbitration award declares that the award shall become final and binding on the parties. However, the Court noted that it must still be examined whether the rule removes the power of a court to look behind the award’s finality. To determine that question, the Court said it was necessary to refer to the statutes and case law of New York State, because the rule is merely a contractual term agreed between the parties and therefore must operate within the framework of the State’s law.

The Court then explained that it was appropriate at this point to compare a foreign judgment with a foreign arbitral award and to keep in mind the differences between them. The Court stated that both foreign judgments and foreign awards generate new obligations, but they arise in different ways. A foreign judgment is a command issued by a sovereign authority and must be obeyed within the territorial limits of that sovereign’s jurisdiction. On the basis of the doctrine of comity, such a judgment receives international recognition provided it satisfies certain basic requirements. By contrast, a foreign arbitral award is based on a contract between the parties and does not acquire the status of a judgment in the country where it was rendered. Consequently, a foreign award cannot claim the same international standing as the act of a foreign sovereign.

The Court cited the commentary of Schmitthoff in the English Conflict of Laws (page 489), which states: “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.” The Court added that the observations of Schmitthoff might be slightly altered by the decision of the Court of Appeal in the Union Nationale case(1). That decision suggested that even an award which has not been given the status of a judgment in its own country may nevertheless be sued upon in another country if the award possesses the essential characteristic of finality.

Keeping these principles in mind, the Court turned to the question of what New York State law requires in order to confer finality on an arbitral award. The Court referred to Appendix I of Sturges’ Cases on Arbitration Law, which reproduces the New York Arbitration Law, Article 84 of the New York Civil Practice Act as it stood on 1 September 1952. The Court reproduced the text of Section 1461, which deals with the confirmation of an award. Section 1461 provides that a “Motion to confirm award” may be brought at any time within one year after the award is made. Any party to the arbitration controversy may apply to the court having jurisdiction, as authorized by Section 1459, for an order confirming the award. The Court must grant such an order unless the award is vacated, modified, or corrected under the provisions of the following sections, or unless the award is found to be unenforceable under Section 1458. The Court also noted that the notice of the motion must be served on the adverse party or on the adverse party’s attorney in accordance with the statutory rules governing service of notice of a motion in the same court.

In the New York Civil Practice Act, the statutory scheme relating to arbitration awards was set out in sections 1461 through 1466. Section 1461 required that a party seeking confirmation of an award serve notice of the motion upon the adverse party or the adverse party’s attorney, following the law governing service of notice of a motion on an attorney in an action pending in the same court. The motion for confirmation had to be presented to the court having jurisdiction in the judicial district that encompassed the country where the judgment was to be entered. Section 1462 dealt with a motion to vacate an award, while section 1462‑a covered a motion to modify or correct an award. Section 1463 regulated the notice of motion and stay, section 1464 addressed the entry of judgment on the award and the award of costs, section 1465 concerned the judgment roll, and section 1466 set out the effect of a judgment and its enforcement.

Section 1462 expressly listed five grounds on which a party to the arbitration could challenge the award. The first ground permitted challenge where the award had been procured by corruption, fraud or other undue means. The second ground allowed challenge where there was evident partiality or corruption in either arbitrator. The third ground provided that an award could be challenged if the arbitrators engaged in misconduct by refusing, without sufficient cause, to postpone a hearing, or by refusing to hear evidence that was pertinent and material to the controversy, or by any other misbehaviour that prejudiced the rights of a party. The fourth ground allowed a challenge where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definite award on the subject matter submitted was not made. The fifth ground permitted challenge where there was no valid submission or contract and the objection had been raised under the conditions set forth in section 1458.

Consequently, although Rule 15E of the arbitration agreement spoke of finality, section 1462 enabled a defendant to apply for vacating the award on the enumerated grounds, thereby threatening the finality that the contract purported to give the award. Only after any objections under section 1462 were finally disposed of could a judgment that ended all controversy be entered under section 1464. Section 1464 provided that, upon grant of an order confirming, modifying or correcting an award, a judgment could be entered in conformity with that order, just as a referee’s report would be entered in an action, unless the article prescribed otherwise. The court could, at its discretion, award costs of the application and subsequent proceedings, not exceeding twenty‑five dollars, together with disbursements, and if awarded, the amount had to be included in the judgment.

Following the entry of judgment, a judgment roll was prepared and the judgment was docketed as if it had been rendered in an ordinary action. Section 1466 then explained that the judgment so entered possessed the same force and effect in all respects as a judgment in an action, and it was subject to all provisions of law relating to such a judgment; consequently, it could be enforced in the same manner as a judgment rendered in the court where it was entered.

It was observed that a judgment entered in a court has the same force as if it had been rendered in an action before that very court. From the statutory provisions discussed earlier, the Court concluded that an arbitral award does not attain finality until the complete procedural steps prescribed by law have been fulfilled; consequently, the award itself cannot be directly enforced. Only the judicial judgment that follows the award may be enforced. The Court noted that the legislation contains no provision authorising the filing of a proceeding solely for the confirmation of an award that would permit the parties to raise every possible objection to the award, except for the limited provision found in section 1461. Even where proceedings are commenced under that section, they must ultimately result in the issuance of a judgment.

In this regard, the Court contrasted the procedural regime of New York State law with that of the Arbitration Act of Denmark, emphasizing that the two systems differ materially. The Court inferred that the plaintiffs, after securing the arbitral awards, approached the Supreme Court of New York to obtain a judgment confirming those awards. The Court affirmed that, as a consequence of that judgment, the arbitral decision became insulated from challenge within New York State and, for all practical purposes, also in India. However, the original award was effectively superseded by the judgment of the Supreme Court of New York, and it is that judgment—not the award—that now provides the plaintiffs with a cause of action. While the Court acknowledged that an award can, in principle, create a fresh cause of action, it emphasized that the award must be final. If the law of the country where the award was rendered grants finality only to the judgment based upon the award and not to the award itself, the award cannot serve as a basis for a suit in India.

Applying these principles, the Court held that, although the High Court of Bombay possesses jurisdiction to enforce a final foreign award when the submission falls within its original jurisdiction, the awards in the present case were not final and therefore could not constitute a valid cause of action for the suit. Accordingly, the Court allowed the appeal, dismissed the suit, and awarded costs in favour of the respondents. The Court applied the ordinary rule on costs, observing that the plaintiffs had deliberately chosen the forum and were aware of the risk inherent in not pursuing the defendants at the location of their residence or business. Following the majority opinion, the appeal was allowed with costs, and the judgment was entered accordingly.