{"id":369502,"date":"2025-12-11T09:30:26","date_gmt":"2025-12-11T04:00:26","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=369502"},"modified":"2025-12-12T17:19:11","modified_gmt":"2025-12-12T11:49:11","slug":"mad-hc-enforcement-of-foreign-award-upholding-agreements-based-on-surmises-scc-times","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/12\/11\/mad-hc-enforcement-of-foreign-award-upholding-agreements-based-on-surmises-scc-times\/","title":{"rendered":"Foreign Arbitral Awards upholding agreement based on surmises is against public policy & unenforceable: Madras High Court"},"content":{"rendered":"
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Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.<\/p>\n

Madras High Court:<\/span> In the execution petitions filed under the Arbitration and Conciliation Act, 1996<\/a> (the Arbitration and Conciliation Act) read with Order XXI Rule 46<\/a> CPC<\/a>, seeking recognition and enforcement of two Federation of Oils, Seeds and Fats Associations<\/a> (FOSFA) foreign arbitral awards, a single-judge bench of N. Anand Venkatesh J.<\/span>, dismissed the execution petitions and held that Arbitral Tribunal’s assumption of jurisdiction without a valid arbitration agreement violates Public Policy of India, making the award unenforceable under Section 48(2)(b)<\/a> of the Arbitration and Conciliation Act, 1996<\/a>.<\/p>\n

Factual Matrix<\/h3>\n

In the instant matter, the parties had a “long standing business relationship” involving nearly 89 transactions between 2017 and 2019 relating to crude palm oil.<\/p>\n

On 07-01-2020, the respondents’ agent indicated that “Yentop will need 8,000 MT RBD Olein every month”, initiating negotiations. On 13-01-2020, respondents’ agent sought confirmation for 8,000 MT crude palm oil for March 2020, to which petitioner confirmed. This led to a contract proposal for 4,000 MT at USD 779 per MT.<\/p>\n

Draft contracts were exchanged on 20-01-2020, incorporating FOSFA 81 and an arbitration clause. However, the contracts were never signed by either party, which became central to the dispute. WhatsApp negotiations on 28-01-2020 culminated in respondents confirming 4,000 MT @ USD 779 CNF for March. Further WhatsApp exchanges on 05.02.2020 fixed the price for the second 4,000 MT at USD 755 per MT.<\/p>\n

A crucial document was the internal email dated 05.03.2020 where the respondents stated that the LC would be opened only at USD 725.83 per MT.<\/p>\n

The petitioner never confirmed acceptance of this price; nor were the draft contracts amended to reflect it. Despite the absence of a finalised price or LC, the petitioner nominated a vessel, shipped cargo, and issued reminders seeking LC opening.<\/p>\n

Respondents did not nominate an arbitrator; hence FOSFA appointed one on their behalf under its rules. Respondents did not participate further, and two awards dated 04-02-2021 were passed in favour of the petitioner. Damages were computed taking USD 779 per MT as the contract price—further evidencing no acceptance of USD 725.83.<\/p>\n

The execution petitions were filed under the Arbitration and Conciliation Act read with Order XXI Rule 46<\/a> CPC<\/a>, seeking recognition and enforcement of two foreign arbitral awards dated 04-02-2021 rendered under FOSFA Rules of Arbitration and Appeal, and for attachment of properties belonging to the respondents.<\/p>\n

A prior common order dated 28-08-2024 dismissing the petitions had been set aside by the Division Bench, and the matter was remanded for de novo consideration.<\/p>\n

Moot Points<\/h3>\n
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  1. \n

    Whether there existed concluded contracts between the parties, including a valid and binding arbitration agreement?<\/p>\n<\/li>\n

  2. \n

    Whether the foreign awards were enforceable under Sections 48<\/a> and 49<\/a> of the Arbitration and Conciliation Act<\/a>?<\/p>\n<\/li>\n

  3. \n

    Whether enforcement would be contrary to the Public Policy of India, particularly where the very “jurisdictional pre-condition for reference to arbitration,” a concluded contract was missing?<\/p>\n<\/li>\n<\/ol>\n

    Court’s Analysis<\/h3>\n