Holding

An arbitral award governed by the Indian Arbitration Act is not binding and cannot be enforced until it is made a rule of the court under Section 17, and therefore only an Indian court can determine its validity and may grant a restraint order against foreign proceedings.

Summary

The Oil & Natural Gas Commission (ONGC) entered into a drilling contract with Western Company of North America that provided for arbitration under the Indian Arbitration Act, 1940 and the law of India, with hearings to be held in London. An umpire, after the arbitrators could not agree, issued an interim award and a final award without a hearing; the awards were lodged in the Bombay High Court. Western Company then sued in a U.S. District Court to confirm the awards and obtain a judgment for $256,815.45. ONGC filed a petition under Sections 30 and 33 of the Arbitration Act to set aside the awards and sought an interim injunction restraining the U.S. action. The High Court initially granted, then vacated, the injunction. The Supreme Court held that under Indian law an arbitral award is unenforceable until it is made a rule of the court by a judgment and decree under Section 17, and that the award therefore had "not yet become binding" within the meaning of Article V(1)(e) of the New York Convention. Consequently, only an Indian court has jurisdiction to determine the award’s validity and may restrain foreign proceedings. The Court allowed the appeal, set aside the High Court’s vacating order, and imposed a conditional restraint order requiring ONGC to pay undisputed sums while the arbitration petition remains pending.

Issues considered

Whether an arbitral award under the Indian Arbitration Act, 1940 becomes enforceable in a foreign court before it is transformed into a judgment and decree under Section 17.
Interpretation of the phrase "not yet become binding on the parties" in Article V(1)(e) of the New York Convention.
Whether Indian courts have exclusive jurisdiction to determine the validity and enforceability of an award governed by Indian law.
Whether Section 41(b) of the Specific Relief Act, 1963 applies to restraining a foreign court proceeding.
Whether the Bombay High Court had jurisdiction to grant an injunction restraining the U.S. action.
Whether a restraint order should be granted on grounds of oppression, justice and prevention of legal chaos.

Legislation cited

Arbitration Act, 1940s. 14, s. 17, s. 2(e), s. 30, s. 33
Arbitration (Protocol and Convention) Act, 1937s. 7
Foreign Awards (Recognition and Enforcement) Act, 1961
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awardss. Article V(1)(e)
Specific Relief Act, 1963s. 41(b), s. 4(b)

Subjects

ArbitrationArbitral awardNew York ConventionEnforcement of foreign awardInjunctionSpecific Relief ActIndian Arbitration ActJurisdictionRestraint orderCommercial contract

Judgment

OIL & NATURAL GAS COMMISSION
A V.
WESTERN COMPANY OF NORTH AMERICA

JANUARY 16, 1987

B [M.P. THAKKAR AND K.N. SINGH, JJ.)

Arbitration Act, 1940-Sections 2(e), 14, 17, 30 and 33-
A ward-Only when transformed into a judgment and decree under
Section 17 becomes enforceable-New York Convention-Article
V(l)(e)-Expression 'not yet become binding on the parties'-lnter-
pretation and significance of-Test applicable-Enforceability as per law
C of the country which governs the award-Arbitration proceedings bet-
ween American Company and ONGC~Award rendered in favour of
American Company-ONGC invoking juri5diction of Bombay High
Court under Sections 30 & 33 to set aside award-Held Indian Court
alone has jurisdiction to pronounce on validity/enforceability of award.
D
Arbitration (Protocol and Convention) Act, 1937-Section 7-
Conditions for enforcement of foreign awards-New York Conven-
tion-Article V( I )(e)-Efject of expression 'not yet become binding on
the parties'-The clause-Recognition and enforcement of award-
When arises.
E
Specific Relief Act 1963-Section 4/(b)-Conditions for appli-
cability.

Word< & Phrases-'Not yet become binding on the parties'.

F A drilling contract was entered into by the appellant and the
respondent which provided that in the case of differences arising out of
the aforesaid contract, the matter shall be referred to arbitration, that
the arbitration proceedings shall be held in accordance with the provi-
sions of the Indian Arbitration Act, 1940, and that the validity and
interpretation thereof shall be governed by the laws of India. The
G agreed venue for hearing was London.

A dispute arose between the parties and it was referred to Arbit-
ration. Consequent upon the inability of the two Arbitrators to agree on
the matters outstanding in the reference, the Umpire entered upon the
arbitration and straight away rendered his interim award, without
H affording any hearing to the parties and the same was lodged in the .

1024 _,
0.N.G.C. v. WEsTERN COMPANY 1025

High Court at the instance of the respondent. Subsequently, the Umpire A
rendered a final award relating to costs.

About a month after the lodging of the award in the High Court,
/
the respondent filed a plaint in the U.S. District Court seeking an order
confirming the interim and final awards and a judgment against the
appellant for the payntent of a sum of $ 256,815.45 by way of· interest B
until the date of judgment and costs etc.

The appellant, however, instituted a Petition under Sections 30
and 33 of the Arbitration Act for setting aside the aforesaid awards and
for an interim order restraining the respondent from pr,oceeding
further with the action instituted in the U.S. Court.
c
A Single Judge of the High Court granted exparte interim
restraint order but vacated the same after hearing the parties. The High
Court.held that the action to enforce the award as a foreign award in the
U.S. Court was quite in order and that the mere fact that a Pl'tition to
set aside the award had already been instituted in the Indian Court and D
was pending at the time of the institution of the action in the V .s. Court
was a matter of no consequence for the purposes of consideration of the
question as to whether or not the respondent should be restrained from
-+ proceeding further with the action in the U.S. Court, that it was open to
the respondent to enforce the award in the V .S. Court and, therefore, it
would not be appropriate to grant the injunction restraining enforce- E
ment, and that it was open to the appellant to contend before the U.S. Court
J that the petition for setting aside the award cannot be said to be vexati-
ous or oppressive.

In the appeal to this Court it was submitted on behalf of the
appellant that the award sought to be enforced in the V .S. Court may F
itself be set aside by the Indian Court and in that event, an extremely
anomalous situation would be created, that since the validity of the
award in question and its enforceability have to be determined by an
Indian Court which alone has jurisdiction under the Indian Arbitra-
tion. Act of 1940, the American Court would have no jurisdiction in this
behalf, that the enforceability of the award must be determined in the G
context of the Indian Law as the Arbitration proceedings are subject to
the Indian Law and are governed by the Indian Arbitration Act of 1940,
and that if the award in question is permitted to be enforced in U.S.
Court without its bein_g confirmed by a court in India or U.S. Court it
would not be in conformity with law, justice or equity.
H
1026 SUPREME COURT REPORTS (1987] 1 S.C.R.
..I.
On behalf of the respondent ii was contended that the action in the
A U.S.A. Court could not be considered as being oppressive lo the appel-
lant and that even if it is so, the Hi.gh Court has no jurisdiction to grant
such a restraint order, and that the appellant had suppressed the fact
that it had appeared in the USA ~ourt and succe•ded in pursuading the
USA Court to vacate the seizure order obtained by the respondent and )
B thereby disentitled itself to seek any equitable order.

Allowing the appeal, this Court,

HELD:!.! Under the Indian law, an arbitral award is unenforce-
able until it is made a rule of the Court, and a judgment and conse-
f
quential decree are passed' in terms of the award. Till an award is
c transformed into a judgment and decree under Section 17 of the Indian 1
Arbitration Act, it is altogether lifeless, from the point of enforceabi-
lity. Life is infused into the award in the sense of its becoming enforce-·
able only after it is made a rule of the Court upon the judgment and
decree in terms of the award being passed. [1042D-E]
D
!. 2 In the instant case, the arbitratioo proceedings are governed
by the Indian Arbitration Act of 1940 and a proceeding under the Act
for affirming the award and making it a rule of the Court or for setting
it aside can be instituted only in an Indian Court. The expression .+
"Court" as defined by Section 2(e) of the Act leaves no room for doubt
E on this score and the Indian Court alone has the jurisdiction to pro-
nounce on the validity or enforceability of the awilrd. [1038A-B]

2.1 Article V(l)(e) of the New York Convention provides that

-~
recognition and enforcement of the award will be refused if the award
"has not yet become binding on the parties or has been set aside or
F suspended by a competent authority of tbe country in which or under
the law of which that award was made." [tt43A-B]

2.2 The singnificance of the expression "not yet become binding
on the parties" employed in Article V(l)(e) cannot be lost sight of. The
expression postulates that the Convention has visualised a time later
G than the making of the award. [1044A-B]

2.3 The award which is sought to be enforced as foreign award
>-
will have to be tested with reference to the key words contained in
Article V(l)(e) of the Convention and the question will have to be ans-
wered whether the award bas become binding on the parties or bas
H not yet become binding on the parties. The test has to be applied in 'the
O.N.G.C. v. WESlERN COMPANY 1027

~ context of the law of the country governing the arbitration proceedings
or the counb1' under the law of which the award bas been made. [1044C-D] A

2.4 The enforceability must be determined as per the law applic-
able to the award. French, German and Italian Courts have taken the
view that the enforceability as per the law of the country which governs
the award is the essential pre-condition for asserting that it has become B
binding under Article V(l)(e). [10478-C]

2.5 India has acceded to the New York Convention. One of the
Objects of the New York Convention was to evolve consensus amongst
the covenanting nations in regard to the execution of foreign arbitral
awards in the concerned Nations. The necessity for such a consensus
was felt with the end in view to facilitate international trade and com- C
merce by ·removing technical and legal bottlenecks which directly or
indirectly impede the smooth How of the river of international com-
merce. Since India has acceded to this Convention it would be reason-
able to assume that India also subscribes to the philosophy and ideology
of the New York Convention as regards the necessity for evolving a 0
suitable formula to overcome this problem. The Court dealing with the
matters arising out of arbitration agreements of the nature envisioned
by the New. York Convention must, therefore, adopt an approach in-
formed by the spirit underlying the Convention. [lOSOG-H; lOSlA-8]

3. Section 41(b) of the Specific Relief Act will be attracted only in E
a fact-situation where an injunction is sought to restrain a party from
instituting or proseq1ting any action in a Court in India which is either
of co-ordinate jurisdiction or is higher to the Court from which the
injunction is sought in the hierarchy of Courts in India. [10498-C]

4.1 There cannot be any doubt that the respondent can institute F
an action in the U.S. Court for the enforcement of the award in question
notwithstanding the fact that the application for setting aside the award
had already been instituted and was already pending before the Indian
Court and that the appellant can approach the U.S. Court for seeking a
stay of the proceedings initiated by the respondent for procuring a
judgment in terms of the award in question. Merely on this ground the G
·relief claimed by the appellant cannot be refused. [10358-D]

4.2 As per the contract, while the parties are governed by the
Indian Arbitration Act and the Indian Courts have the exclusive juris-
diction to affirm or set aside the award under the said act, the respon-
dent is seeking to violate the very arbitration clause on the basis of H
1028 SUPREME COURT REPORTS (1987] 1 S.C.R.

which the award has been obtained by seekin'g confirmation of the
A
award in the New York Court under the American Law. This amounts
to an improper use of the forum in American in violation of the stipula-
tion lo he governed by the Indian law which by necessary implication
means a stipulation to exclude the USA Court to seek an affirmation
and to seek it only under the Indian Arbitration Act from an Indian
B Court. If the restraint order is not granted, serious prejudice would be
occasioned and a party violating the very arbitration clause on the
basis of which the award has come into existence will have secured an
order enforcing the order from a foreign court in violation of the very
clause. [10380-G]

5. I The respondent has prayed for confirmation of award. The
C American Court may still proceed to confirm the award, and in doing so
it would take into account the American law and not the Indian law or
the Indian Arbitration Act of 1940. The American Court will be doing
so at the behest and at the instance of the respondent which has in terms
agreed that the arbitration proceedings will be governed by the Indian
o Arbitration Act of 1940. Not only the matter will be decided by a court
other than the court agreed upon between the parties hut it will be
decided by a court under a law other than the law agreed upon. Such an
unaesthetic situation should not be allowed. Even though_ it was con-
ceded by the respondent that the American Court has no jurisdiction to
confirm the award in view of the New York Convention, in the event of
E the award rendered by the Umpire, the validity of which is not tested
either by an American Court or an Indian Court, being enforced by an
American Court, it will he an extremely uphill task to pursuade the
Court to hold that a foreign award can he enforced on the mere making
of it without it being open to challenge in either the country of its origin
or the country where it was sought to he enforced. [1041H; 1042A, B-CI
F
5.2 In the event of the award rendered by the Umpire being set
aside by the Indian Court, an extremely anomolous situation would arise
inasmuch as the successful party may well have recovered the amount
awarded as per the award from the assets of the losing party in the USA
after procuring a judgment in terms of the award from the USA Court,
G which would result in an irreversible the damage being done to the
losing party for the Court in USA would have enforced a non-existing
award under which nothing could have been recovered. It would also
result in the valuable court time in the USA being invested in a non-
issue and the said Court would have acted on and enforced an award
which did not exist in the eye of law. The USA Court would have done
H something which cou!d not have been done if the respondent company
O.N.G.C. v. WESTERN COMPANY 1029

had waited during the pendency of the proceedings in the Indian Court.
The losing party in that event would he ohliged to initiate fresh pro- A
ceedings in the USA Court for the amount already recovered from it,
pursuant to the judgment rendered by the USA Court in enforcing the
· award which is set aside by the Indian Court. All this would happen if
the restraint order as prayed by the losing party is not granted and this
can be avoided if it is granted. [1037D-H] B

5.3 The American Court would have enforced an award which is
a lifeless award in the country of its origin and under the law of the
country of its origin which law governs the award by choice and
consent. [1042E-F]

6. l It would neither be just nor fair on the part of the Indian c
Court to deny relief to the appellant when it is likely to be placed in such
an awkward situation if the relief is refused. It would be difficult to
conceive of a more appropriate case for granting such relief. [1042G-H]

6.2 The facts of this case are eminently suitable for granting a D
restraint order. No doubt, this Court sparingly exercises the jurisdic-
tion to restrain a party from proceeding further with an action in a
foreign court. However, the question is whether on the facts and cir-
cumstances of this case it would not be unjust and unreasonable not to
+ restrain the respondent from proceeding further with the action in the
American Court. This is'one of those rare cases where the Court would E
be failing in its duty if it hesitated in granting the restraint order, for, to
obHge the appellant to face the aforesaid proceedings in the American Court
would be oppmwive in the facts and circnmstances of the case. [1048C-F]

6.3 It would be unfair to refuse the restraint order in a case like
the present one for the action in the foreign court would be oppressive F
in the facts and circumstances of the case and in such a situation the
courts have undoubted jurisdiction to grant such a restraint order,
whenever the circumstances of the case make it necessary or expedient
to do so or the ends of justice so require. [10490-E)

6.4 There was no deliberate suppression by the appellant, and it G
would, therefore, not be proper to refuse relief to the appellant on this
account. [10508-C)

6.5 While this Court is inclined to grant the restraint order, fair-
ness demands that it should not be unconditional. There are good and
valid reasons for making the restraint order conditional in the sense H
103() SUPREME COURT REPORTS (1987] I S.C.R.

A lh11t the appellant should be required to pay the charges payable In A
respect of the user of rig belonging to the respondent Company at the
lllldispllled rate regardless of the outcome of the petition instituted by it
Ill the High Court for setting aside the award rendered by the Umpire.
ltliSOE-G] .
6.6 It Is no doubt true thai if the arbitral award is set aside by the ):
a lndiilh Coilrt no amount would be recoverable under the said award.
that, however, does not mean that the liability to pay the undisputed
llliiolillt which hiis already been incurred by the appellant disappears. It
would not be fair on the part of the appellant to withhold the amount
which In any case Is admittedly due and payable. The respondent can
a«ept the amount without prejudice to its rights and contentions, to
C claim 11 larger amount. No prejudice will be occasioned to the appellant
b)" illaklill! the payment of the admitted amount regardless of the fact 'f
that the resjMllident is claiming a larger amount. In any case the appel-
b1nt which seeks an equitable relief cannot be heard to say that it is not
prepared to act in a manner just and equitable regardless of the niceties
and nuances of legal arguments. [IOSIB-E]
0
(the order passed by the High Court on April 3, 1986 set aside,
and the l!lirlier order passed by it on January 20, 1986 restortd subject
tii certaill tllnditlons imposed by the Court.]

Cotton Cotpotation of India v. United Industrial Bank, (1983] 3
E Stit 96:21 V!O Ttactoroexport, Moscow v• M Is Tarapore & Company
lltlit Anr., (l911i] 3 S.t.R. 53; Halsbury's Laws of England Vol. 24 page
5~ para !0391 referred to. ·

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1557
of 1986
I
Fium the lodgment and Order dated 3.4.1986 of the Bombay
lti~ Court in Interim Petition No. 11 of 1986.

K. Parasaran, Attorney General, B. Datta, Additional Solicitor
Gt!neral, S.S. Shroff, S.A. Shroff, R.K. Joshi, Mrs. P.S. Shroff, Anil
'
(i K Sharma ilnd Mohan Parasaran for the Appellant.
F.S. Nariman, S,N. Thakkar, lhvi11der Narain, Gulam Vaham-
watl, S. Sukumaran, D.N. Mishra, Adittiya Narain, Mrs. A.K. Venna
and Miss Lira Goswami for the Respondent.
H The Judgment of the Court was delivered by
O:N.G.C. v. WESTERN COMPANY [THAKKAR, J.] 1031

THAKKAR, J. Was the High Court 'right' in granting the
restraint order earlier. and ·wrong· in vacating the said order later'' A

By the order in question the Respondent. Western Company of
North America (Western Company). was restrained from proceeding
further with an action instituted by it in a USA Court against the
appellant. Oil and Natural Gas Commission (ONGC). The said action B
was targeted at se~king a judgment from the concerned court in
U.S.A. on the basis of an arbitral award rendered by an Umpire in
arbitration proceedings held in London but governed by the Indian
Arbitration Act. 19~0. which was the law of choice of the parties as per
the arbitration clause contained in the drilling contract entered into
between the parties. The Western Company has moved the USA
Court for a judgment in terms of the award notwithstanding the fact c
that:•

I) ONGC had already initiated proceedings in an Indian
Court to set aside the award and the said proceeding was as
yet pending in the Indian Court. o
2) The said award was not as yet enforceable in India as a
domestic award inasmuch as a Judgment in accordance
with the Indian law had yet to be procured in an Indian
Court, by the Western Company.
E
The events culminating in the order under appeal may be briefly
and broadly recounted. The appellant, ONGC and the Respondent
Western Company, had entered into a drilling contract. The contract
provided for any differences arising out of the agreement being refer·
red to arbitration, The arbitration proceedings were to be governed by
the lndain Arbitration Act 1940 read with the relevant rules. A dispute F
had arisen between the parties. It was referred to two Arbitrators and
an Umpire was also appointed. The Arbitrators entered on the refer-
ence in London which was the agreed venue for hearing as per the
Arbitration Clause contained in the contract. On October !, 1985 the
Arbitrators informed the Umpire that they were unable to agree on
the matters outstanding in the reference. Consequently the Umpire G
entered upon the arbitration and straightaway proceeded to declare
his non-speaking award (styled as interim award) on October 17, !985
without affording any hearing to the parties on the matters outstanding
in the reference. The Umpire did not afford a hearing subsequent to
his entering upon the arbitration presumably because even when the
-matter was within the domain of the Arbitrators (and not of the H
1032 SUPREME COURT REPORTS (1987] I S.C.R.

A Umpire), and the Arbitrators were seized of the matter, the Umpire
used to remain present at the hearings conducted by the Arbitrators.
Having been present throughout the proceedings whilst the Arbi-
trators were in charge of the same. the Umpire presumably considered
it unnecessary to hear the parties or their counsel after he was seized of
the matter and it came within his domain in the wake of the disagree-
B
ment between the two Arbitrators. And the Umpire straightaway pro-
ceeded to declare the interim award on October J7, 1985. Thereafter,
on November 5, 1985, the Respondent, Western Company, requested
ttie Umpire to authorise one Shri D.C. Singhania to file the award dated
October 17, 1985 in the appropriate Court in India. The Umpire
accordingly authorised the said Shri Singhania in this behalf. And
C pursuant to the said authority the award rendered by the Umpire was
lodged in the Bombay High Court on November 22, 1985. Subse-
quently, on November 28, 1985 the Umpire rendered a supplemen-
tary award relating to costs which has been termed as 'final' award.
About a month after the lodging of the award in the High Court of
Bombay by the Umpire at the instance of the Responde'nt, Western
O Company, the latter lodged a plaint in the U.S. District Court, inter
alia, seeking an order (I) confirn1ing the two awards dated October 17,
1985 and November 28, 1985 rendered by the Umpire (2) a Judgment
against the ONGC, (Appellant herein) in the amount of$ 256,815.45
by way of interest until the date of he Judgment and costs etc.
E
On January 20, 1986, appellant ONGC on its part instituted an
Arbitration Petition No. tO of 1986 under Sections 30 & 33 of the
Indian Arbitration Act 1940 for setting aside the awards rendered by
the Umpire. Inter alia the challenge was rooted in the following.
reasoning. While as per the Indian Arbitration Act 1940 which admit-
tedly governed the arbitration proceedings the Umpire ·:.ould come on
F
the scene.only provided and only when the Arbitrators gave him notice
in writing that they were unable to agree, and the Umpire would enter
upon the reference in lieu of the Arbitrators only subsequent thereto,
in the present case the Umpire had neither held any proceedings nor
had afforded any opportunity of being heard to the ONGC after enter-
ing upon the reference. The appellant, ONGC, also prayed for an
G
interim order restraining the Western Company from proceeding
further with the action instituted in the U.S. Court. The learned Single
Judge granted an ex-parte interim restraint order on January 20, 1986
but vacated the same after hearing the parties by his impugned order'
giving rise to the present appeal by Special Leave.
H 1. Interim Order No. 11 of 1986 passed on April 3, 1986 in Arbitration Petition No.
ID of 1986.
0.N.G.C. v. WESTERN COMPANY ['IHAKKAR, J.) 1033

In order to confine the dialogue strictly within the brackets of
A
the scope of the.problem, four points deserve to be made at the outset
before adverting to the impugned order rendered by the High Court.

1) We are not concerned with the merits of the main dis-
pute between the parties which was the subject-matter of
arbitration and which pertains to the charges payable for a B
jack-up drilling unit and related services provided by West-
ern Company to ONGC. The equipment was utilised
beyond the period stipulated in the contract. In regard to
the employment of the equipment beyond the contractual
period Western Company claimed payment at US $ 41,600
per operating day which was the rate stipulated for the user
of the equipment for the stipulated time-frame, The ONGC c
on the other hand has contended that in the context of the
correspondence between the parties pertaining to the em-
ployment of the equipment beyond the stipulated period the
Western Company is entitled to claim only US$ 18,500 per
day. The dispute concerns the claim for payment for the D
user of the equipment for the extended period ( 136 days
and 16 hours). We are however not concerned with the
merits of the claim giving rise to the dispute and differences
which was referred to the Arbitrators.
+
2) We are not concerned with the merits of the contentions E
raised in the petition instituted by ONGC in the High
Court of Bombay in order to challenge the arbitral award
rendered by the Umpire except to the limited extent of
examining whether ONGC has a prima facie case.

3) We are not concerned with the question as to how an F
arbitral award which is not a domestic award in India can
be enforced in a Court in India in the context of the Indian
legislation enacted in that behalf namely the Foreign
Awards (Recognition and Enforcement) Act, 1961. The
said Act was enacted in order to give effect to an interna-
tional convention known as New York Convention to G
which India has acceded. The provisions of the said Act
would be attracted only if a foreign award is sought to be
enforced in an Indian Court. We are not concerned with
such a situation. The award which is the subject-matter of
controversy in the present case is admittedly a domestic
award for the purposes of the Indian Courts, governed by H
1034 SUPREME COURT REPORTS [1987] l S.C.R.

the provisions of the Indian Arbitration Act of 1940. When
A
the Western Company seeks to enforce the award in ques-
tion in the US Court they do so on the premise that it is a
foreign award in the US Court. In considering the question
as regards the proce.eding initiated by the Western Com-
pany in the US Court, there is no occasion to invoke the
B provisions of the aforesaid Act. The provisions of the said
Act can be invoked only when an award which is not a
domestic award in India is s0ught to be enforced in India.
Such is not the situation in the present case. We are there-
fore not at all concerned with the provisions of the said
Act.
c 4) We are not directly concerned with the law governing
the enforcement of the foreign award in an USA Court. We
would be undertaking an inappropriate exercise in being
drawn into a discussion in depth as regards the law govern-
ing enforcement of foreign awards in USA, the procedure
D to be followed, or as to the interpretation of the relevant
provisions as made by the US Court. So also it would be
inappropriate to speculate on the view that is likely to be
taken by the American Court or to anticipate its interpreta-
tion or its verdict in regard to the relevant matters at that
end.
E
The order under appeal may now be subjected to scrutiny. The
High Court has vacated the interim order granted by it earlier on the
following grounds:-

1) That it was open to the Western Company to enforce
F the award in the US Court and that accordingly it would
not be appropriate to grant the injuction restraining them
from enforcing the same at that end.

2) That it was open to the ONGC to contend before the US
Court that the petition for setting aside the award which was
G sought to be enforced in the US Court was already pending
in the Indian Court.

3) That the proceeding in. the US Court cannot be said to
be vexatious or oppressive.

H The High Court has examined the question as to wheth~r the
O.N.G.C. v. WES1ERN COMPANY [lHAKKAR, J.] 1035

action insti.tuted by the. Western Company against ONGC was main- A
tainable in the context of the New York Convention in the light of the
relevant Articles of the Convention and has come to the conclusion that
an action to enfoce the award in question as a foreign award in the US
Court was quite in order. The view is expressed that the mere fact that
a petition to set aside the award had already been instituted in the
Indian Court and was pending in the Indian Court at the time of the B
institution of the action in the US Court was a matter of no consequ-
ence, for the purposes of consideration of the question as to whether
or not Western Company should be restrained from proceeding
further with the action in the US Court. Now, there cannot be any
doubt that the Western Company can institute an action in the US
Court for the enforcement of the award in question notwithstanding
the fact that the application for setting aside the award had already c
been instituted and was already pending before the Indian Court. So
also there would not be any doubt or dispute about the proposition
that the ONGC can approach the US Court for seeking a stay of the
proceedings initiated by the Western Company for procuring a judg-
ment in terms of the award in question. But merely on this ground D
the relief claimed by ONGC cannot be refused. To say that the Court
in America has the jurisdiction to entertain the action and to say that
the American Court can ·be approached for staying the action is
tantamount to virtually cold-shouldering the substantial questions
raised by ONGC and· seeking an escapist over-simplification of the mat-
ter. The points urged by the ONGC are of considerable importance E
and deserve to be accorded serious consideration.

Prominence deserves to be accorded to the following factors
which appear to be of great significance:

r 1) It is not in dispute that the arbitration clause contained
in the contract which has given rise to the disputes and
differences between the parties in terms provides that:

"The arbitration proceedings shall be held in accordance
F

with the provisions of the Indian Arbitration Act, 1940 and
the rules made thereunder as amended from time to time.·· G
(Vide clause 14 of the Contract)

2) There is also an agreement between the parties that the
validity and interpretation' thereof shall be "governed by
the laws of India" (vide clause 18 of the contract)
H
1036 SUPREME COURT REPORTS (19871_ 1 S.C.R.

3) Under the Indian Law, having regard to the scheme of
A
the Arbitration Act of 1940, an arbitral award as such is not
enforceable or executable. It is only after the award is filed
in the Indian Court and is made a rule of the Court by
virtue of a judgment and decree in terms of the award that
life in the sense of enforceability is infused in the lifeless
B award. (Vide Sections 14 'and 17 'of the Arbitration Act)

The situation which emerges is somewhat ah incongrous one.
The arbitral award rendered by the Umpire may itself be set-aside and
become non-existant if the ONGC is able to successfully assail it in the
petition under section 30/33 for setting aside the award in question in
India. The High Court does not hold that the petition is prima facie
c liable to fail. We do not wish to express any opinion on the merits of
the petition as in our opinion it would be improper to do so and might
occasion prejudice one way or the other. We are however not pre-
pared to assume for the purpose of the present discussion that th~
petition is liable to fail. The question is wide open.The final decision of
D the Court cannot and need not be anticipated.

In the light of the foregoing discussion, the following submissions,
pressed into service by the appellant, ONGC, require to be examined.

( l) The award sought to be enforced in the USA Court
E may itself be set aside by the Indian Court and in that
1. 14(1) & (2):
"14.( l) When the arbitrators or umpire have made their award, they shall sign it and
sh.all give notice in writing to the parties of the making and signing thereof and of the
amount of fees and charges payable in respect of the arbitration and award.

2) The arbitrators or umpire shall, at the request of any party to the arbitration
F agreement or any person claiming under such party or if so directed by the Court and
upon payment of the fees and charges due in respect of the arbitration and award and
oft.he costs and charges of filing, the award cause the award or·a signed copy of it,
together-with any depositions and documents which nlay have been taken and proved
before them, to be filed in Court, and the Court shall thereupon give notice to the
parties of the filing of the award.
3, x x x"
G
2. 17. Judgment in terms of award-Where theCourt sees no cause to remit the award or
any of the matters referred to arbitration for reconsideration or to set aside the
award, the Court shall, after the tirne for maK.ing an application to set aside the
award has expired, or such applic~tion having been made, after refusing it, pro-
ceeded to pronounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow, and no appeal shall lie from such decree except on
H the ground that it is in excess of, or not otherwise in accordance with, the award."
O.N.G.C. v. WESTERN COMPANY [THAKKAR, J.l 1037
A event, an anomalous situation would be created.
A
(2) Since the validity of the award in question and its en-
forceability have to be determined by an Indian Court,
which alone has jurisdiction under the Indian Arbitration
Act of 1940, the American Court would have no jurisdic-
tion in this behalf. 8

(3) The enforceability of the award must be determined in
_, the context of the Indian Law as the arbitration proceed-
ings are admittedly subject to the ln~ian Law and are
governed by the Indian Arbitration Act of 1940.

r (4) If the award in question is permitted to be enforced in c
USA without its being affirmed by a Court in India or a
USA Court, it would not be in conformity with law, justice
or equity.

There is considerable for_ce in the argument advanced in the D
context of the possibility of the award rendered by the Umpire being
set aside by the Indian Court. In that event an extremely anomalous
situation would arise inasmuch as the successful party (Western Com-
+ pany) may well have recovered the amount awarded as per the award
from the assets of the losing party in the USA after procuring a judg-
ment in terms of the award from USA Court. It would result in an E
irreversible damage,being done to the losing party (ONGC) for the
Court in the USA would have enforced a non-existent award under
which nothing could have been recovered. It would result in the valu-
able Court time of the USA Court being invested in a non-issue and
the said Court would have acted on and enforced an award which did
not exist in the eye of law. The U.S.A. Court would have done some- F
thing which it would not have done if the Western Company had
waited during the pendency of the proceedings in the Indian Court.
The parties would also be obliged to spend large amounts by way of
costs incurred for engaging counsel and for incidental matters. The
losing party in that event would be obliged to initiate fresh proceedings
in the USA Court for restitution of the amount already recovered from G
~ it, pursuant to the judgment rendered by the USA Court in enforcing
the award which is set aside by the Indian Court. Both the sides would
have to incur huge expenditure in connection with the attendent legal
proceedings for engaging counsel and for incidental matters once
again. All this would happen if the restraint order as prayed by the
losing party is not granted. And all this can be avoided if it is granted.· H
1038 SUPREME COURT REPORTS (1987) 1 S.C.R.

Equally forceful is the plea urged in the context of the argument
A that the concerned Court in India alone would have jurisdiction to
determine the question regarding enforceability or otherwise of the
award in question, for, admittedly, the arbitration proceedings are
governed by the Indian Arbitration Act of 1940. And that a proceed-
ing under the Indian Arbitration Act for affirming the award and
B making it a rule of the Court or for setting aside can be instituted only
in an Indian Court. The expression "Court" as defined by Section
2(e) 1 of the Arbitration Act leaves no room for doubt on this score.
Thus the Indian Court alone has the jurisdiction to pronounce on the
validity or enforceability of the award in question. But the successful
party (Western Company) has invoked the jurisdiction of the USA
}
Court to seek affirmation of the award. In fact reliefs Nos. I and 2
C claimed by the Western Company in the USA Court are in the follow-
ing terms.

I) An order confirming the interim award dated October
17, 1985.
D
2) An order confirming the final award dated November
28, 1985.

Thus, while as per the contract, parties are governed by the Indian ~
Arbitration Act and the Indian Courts have the exclusive jurisdiction to
E affirm or set aside the award under the said Act, the Western Company
is seeking to violate the very arbitration clause on the basis of which the
award have been obtained by seeking confirmation of the award in the
New York Court under the American Law. Will it not amount to an
improper use of the forum in America in violation of the stipulation to
be governed by the Indian law which by necessary implication means a
F stipulation to exclude the USA Court to seek an affirmation and to seek
·it only under the Indian Arbitration Act from an Indian Court? If the
'restraint order is not granted, serious prejudice would be occasioned
and a party violating the very arbitration clause on the. basis of which
the award has come into existence will have secured an order enforcing
the order from a foreign court in violation of that very clause. When
G this aspect was pointed out to the learned counsel for the Western
Company in the context of another facet of this very question namely
the possibility of the Indian Court taking one view and the American
1. "2(e) "Court" means a Civil Court having jurisdiction to decide the questions form-
ing the subject-matter of the reference if the same had been the subject:-m::i.tter of
suit, but does not, except for the purpose of arbitration proceedings under section 21
H include a Small Cause Court."
0.N.G.C. v. WESTERN COMPANY (THAKKAR, J.l 1039

Court taking a contrary view, counsel stated that though the Western
Company had made a prayer for confirmation of the award, the New A
Yark Court had no jurisdiction under the Convention to confirm or set aside
tile award. It is not appropriate on the part of this Court to anticipate
the decision of the New York Court. If the Western Gompany is aware
of the legal position and is sure of the legal position that the New York
Court has no jurisdiction to confirm the award, pray why has the B
Western Company prayed for the said relief in the New York Court?
We cannot proceed on the basis of the assertion made on behalf of the
Western Company that the ;'1ew York Court has no such jurisdiction.
For ought we know the prayer made by the Western Company may
well be granted and the legal positi_on propounded by the counsel
before us may not prevail with the New York Court. Surely, the West-
ern Company itself is not going to contend before the New York Court C
that even though it has sought this relief the Court has no jurisdiGtion
to grant it. In any case, the Western Company could have amended the
plaint lodged in the New York Court by deleting this prayer which it has
not done so far. Be that as it may, as the matter presently stands the
appellant has invoked the jurisdiction of the New York Cour_t to pro' O
nounce on the same question which is rcqu.ired to be pronounced upoq
by the Indian Court notwithstanding the fact that only an Indian Court
has the jurisdiction to pronounce upon this vital question in view of the
stipulation contained in the arbitration agreement itself. The appellant
has invoked the jurisdiction of the New York Court in a matter which
it could not have invited the New York Court to decide. The Western I::
Company has also invoked the jurisdiction of a Court other than tile
Court which as per the arbitration agreement has the jurisdiction in
the matter. And there is a likelihood of conflicting decisions on the
very vital issue resulting in legal chaos. The apprehension about legal
chaos is more than well-founded. Assuming that the American Court
decides that it has jurisdiction to confirm the award and confirms the f
award, whereas the Indian Court forms the opirtion that the award is
invalid and sets it aside, what will happen? The Western Company
would have recovered the amount as per the award in question by
obtaining a judgment in the American Court upon the award being
confirmed by the said Court. And the losing party, ONGC, wol!ld be
helpless to recover the amount notwithstanding the fact that the award G
has been set aside by the Indian Court, for, the amount would then not
be recoverable under the American law in the Ame.rican Court, the
latter having held the award to be valid. The questions posed to tlte
counsel for the Western Company in this behalf and his answers rele-
vant to the material extent, in his own words, along with the questions
deserve to be quoted: I-!
1040 SUPREME COURT REPORTS [1987] I S.C.R.
,A
A QUESTIONS ANSWERS

It is an award under Indian law Yes: this is precisely what
regardless of the fact that it the Convention contemplates.
was rendered by the umpire while The. N. Y. proceeding is not a
sitting in London. Since law in parallel proceeding but an
B
India does not make it enforceable independent concurrent one
on mere filing of the award but permissible under US Law and
only on it being made a rule under Art. I of the N. Y.
(subject to its being corrected- Convention acceded to by
varied-annulled or modified)
shquld a .parallel proceeding
the U.S. The N.Y. Court
will take into considera-
I
c be permitted for its enforcement tion the pendency of the
outside India before it has become proceedings in India; but
enforceable in India? Particularly, it is for that Court to so
when the Indian Court is already exercise its discretion under
seized of the matter and parties Art. VI.
are bound by Indian law?
D
Western Company has prayed for:-
l. An order confirming the The proceedings in New York
Interim Award dated and Bombay do not involve
October 17, 1985.
2. An order confirming the
"the very matters which will
have to be dealt with by the ,.
Final Award dated Bombay High Court". The Bombay
E November 28, 1985. Court will not have to
consider whether to issue an
Now these are the very matters order of enforcement against
which will have to.be dealt with assets of ONGC, as will the
by the Bombay High Court in the New York Court. Moreover, the
matter arising out of the filing New York Court will not have
F of the award-The award may be to decide, as the Bombay
confirmed (or set aside) decree Court will, whether.to set
may be passed (or refused). Can aside the award. While the
these very matters be permitted complaint in the New York
to be agitated in the parallel case does make a prayer to
proceedings under "American Law .. confirm (as well as enforce)
G when parties have in express terms the awards, the New York
agreed to be governed by the law Court is without jurisdic-
in India? And what will happen if lion under the Convention to
the Indian Court and the American confirm or set aside an
Court take conflicting views? award; it is only competent
Which view will prevail? Will
H
O.N.G.C. v. WESTERN COMPANY [THAKKAR, J.) 1041
A. there not be legal chaos? to "recognized and enforce"
foreign awards, as stated in A
Paragraph 13 of the New 'I'. ork
complaint. Thus, whatever the
prayer for relief, the Bombay
... Court alone will decide the
issues of confirmation/set aside, B
and there will not be any
conflicting jurisdiction.

~ There is no question as to which
Court decision would prevail in
the event of a conflicting result:
y the Indian Court judgment c
setting aside the awards. 111 that
event ONGC could take the
Indian Court decision to a court
in the United States to have it
recognized and enforced so as D
to recover any mon_ies that
Western may have obtained
pursuant to an American Court
order.
The possibility of conflicting act
comes in parallel proceedings E
such as these does not mean
that one court must assert
\
exclusive jurisdiction in order
' ' to prevent "legal chaos".

l The submission that while the validity of the award is required
to be tested in the context of the Indian Law if the Western Company is
permitted to pursue the matter in the _American Court, the matter
would be decided under a law other than the Indian Law, by the Ameri-
F

can Court. Admittedly, Western Company has prayed for confirma-
tion of the award. The American Court may still proceed to confirm
the award. An.ct in doirig so the American Court would take into ac- G
count the American law and not the Indian law or the Indian Arbitra-
~ tion Act of 1940. And the American Court would be doing so at the
behest and the instance of Western Company which has in terms
agreed that the arbitration proceedings will be governed by the Indian
Arbitration Act of 1940. Not only the matter will be decided by a
Court other than the Court agreed upon between the parties but it will H
1042 SUPREME COURT REPORTS (1987) 1 S.C.R.

be. decided by a Court under a law other than the law agreed upon.
A Should or should not such an unaesthetic situation be foreclosed?

The last submission is also quite impressive. If the Western Com-
pany is right in the posture assumed by it in this Court at the time of
the hearing that the American Court has no jurisdiction to confirm the .\>
B award in view of the New York Convention is correct, the resultant
position would be this: The award rendered by the Umpire, the valid-
ity of which is not tested either by an American Court or an Indian
Court will have been enforced by an American Court. It will be an
extremely uphill task to persuade the Court to hold that a foreign J
award can be enforced on the mere making of it without it being open
to challenge in either the country of its origin or the country where it
c was sought to be enforced. And that its validity may perhaps be tested --r
for academic purposes in the country of origin after the award is en-
forced and for seeking restitution later on if possible and if there are
assets which.can be proceeded against in the country where the award
has been enforced. It is essential to emphasise at this juncture and in
D this context that under the Indiart law, an arbitral award is unenforce-
able until it is made a rule of the Court and a judgment and consequen-
tial decree are passed in terms of the award. Till an award is trans-
formed into a judgment and decree under Section 17 of the Arbitration
Act, it is altogether lifeless from the point of view of its enforceability. _.
Life is infused into the award in the sense of its becoming enforceable
E only after it is made a rule of the Court upon the judgment and decree
in terms of the award being passed. The American Court would have
therefore enforced an award which is a lifeless award in the country of
its origin and under the law of the country of its origin which law
governs the award by choice and consent. I

F We are of the opinion that the appellant, ONGC, should not be
obliged to face such a situation as would arise in the light of the
aforesaid discussion in the facts and circumstances of the present case.
To drive the appellant in a tight comer and oblige it to be placed in
such an inextricable situation as would arise if the Western Company is
permitted to go ahead with the proceedings in the American Court
G would be oppressive to the ONGC. It would be neither just nor fair on
the part of the Indian Court to deny relief to the ONGC when it is
likely to be placed in such an awkward situation if the relief is refused.
It would be difficult to conceive of a more appropriate case for grant-
ing such relief. The reasons which have been just now articulated are
good and sufficient for granting the relief and accordingly it appears
H unnecessary to examine the meaning and content of the relevant arti-
0.N.G.C. v. WESTERN COMPANY !THAKKAR, J.] 1043

cles of the New York Convention for the purposes of the present
appeal. All the same we will briefly indicate the questions which were A
debated in the context of the Convention since considerable debate
has centred around the interpretation and scope of some of the articles
of the Convention. Article V(l)(e) provides that recognition and et.-
forcement of the award will be refused if the award "has not yet become
.j;.. binding on the parties or has been set aside or suspended by a compe- B
tent authority of the country in which or under the law of which that
award was made." It was contended on behalf of Western Company
that the legislative history of the New York Convention discloses that
under the Geneva Protocol-given effect to by the Arbitration (Pro-
tocol and Convention) Act, 1937-it was provided that an .award
would not be enforced if it was not considered as 'final' and it was not
'final' if it is proved that any proceedings for the purpose of contesting c
the validity of the award were pending. This provision aroused a great
deal of controversy as it was felt that the requirement of the Geneva
Convention that the award has become final in the country in which it
has been made was considered to be burdensome and inadequate and
that the New York Convention has accordingly changed the format D
and the word "final" was replaced by the word "binding" in Art.
V( l)(e) 1• In these premises it was argued that for the purposes of the.
Convention the award should be considered as binding if no further
recourse to another arbitral tribunal was open and that the possibility
of recourse to a Court of law should not prevent the award from being
binding. On the other hand it was contended on behalf of ONGC that E
an award should be treated as binding only when it has become en-
forceable in the country of origin. It was argued that the word "bind-
ing" was used in the sense of an award from which the parties could
not wriggle out. So far as the present matter is concerned it is unneces-
sary to examine this aspect at length or in depth for we are not
resting our decision on the question as to whether the American Court F
is likely to refuse enforcement or not. As we indicated at the outset, it
would be improper for us to anticip~te the decision of the American
Court on this aspect. We are inclined to rest our decision on the
reasoning which we have indicated a short while ago. We would there-

L "V(l){d) Recognition and enforcement of the award may be refused, at the request
of the party against whom it is invoked, only it' that party furnishes to the competent G
authority where the recognition and enfortemei:it is sought, proof that:

(e) The award has not yet become binding on the parties, or has been set
aside or suspended by a competent ailthority of the coUntry in which, or under the
law of which, that award was made." .H
1044 SUPREME COURT REPORTS (1987) 1 S.C.R.

fore consider it appropriate to refrain from getting drawn into an }-
A
academic debate on this issue. We however consider that it is desirable
to bring into focus certain aspects of the matter in the context of the
debate on this point. The significance of the expression "not yet
become binding on the parties" employed in Article V(l)(e) cannot be
lost sight of. The expression postulates that tile Convention has vis-
B ualised an award which becomes binding at a point of time later than ·"
the making of the award. In other words the provision has in its con-
templation the fact that an award in some cases may become binding
on the mere making of it and in some cases may become binding only
at a later stage. If this was not so there was no point in using the I
expression "not yet become binding". The award which is sought to be )
enforced as foreign award will have thus to be tested with reference to
c the key words contained in Article V( l)(e) of the Convention and the
question will have to be answered whether the award has become 1
binding on the parties or has not yet become binding on the parties. It
is evident that the test has to be applied in the context of the law of the
country governing the arbitration proceedings or the country under
D the law of which the award was made. This conclusion is reinforced by
the views expressed by Albert Jan Van den Berg in his treatise-The
New York Arbitration Convention of 1958-Towards a Uniform
Judicial Interpretation at page 341 as under:

"Most of the authors are also of the opinion that the
E moment at which an award becomes binding within the
meaning of Article V( l)(e) is to be determined under the
law governing the award. However, they also differ at
which moment this should be assumed under that law.·

He has also referred to a judgment rendered by the Italian Supreme
F Court which supports this proposition. Says the author:

"Furthermore, whilst declaring that the Convention has
eliminated the "double Exequatur", the Italian Supreme
Court 'held that the Court of Appeal has correctly ascer-
tained that the award in question, made in the United
G States, had become binding under the relevant law of the
United States."

(Corte di Cassazione (Sez. 1), April 1, 1980 no. 2448,
Lanificio Walter Banci S.a.S.v. Bobbie Brooks Inc. (Italy
no. 40) affirming Corte di Appello of Florence, October
H 8, 1977 (Italy no. 29).
O.N.G.C. v. WESTERN COMPANY [TIIAKKAR, J.] 1045

The author has also adverted to this dimension of the matter at pages A
338 to 340 of his treatise in the following passage:-

"Furthermore, the Courts have unanimously held that the
party against whom the enforcement is sought has to prove
that the award has not become binding. It still happens in
some cases that a respondent merely asserts that the award B
has not become binding. In these cases the courts h.ave
invariably held that the respondent should furnish proof
to this effect.

The above interpretation of the term "biriding" is also
almost unanimously affirmed by the authors. To this extent
there exists a uniformity of interpretation.
c
The uniformity of the interpretation begins to waver, how-
ever, when it comes to the question at which moment an
award can be considered to have become binding under
Article V(l)(e). Although in no case has it been held D
hitherto that the award in question was to be considered as
not having become binding, the various reasonings are
diverse. If this situation continues, it may occur that an
award will not be considered as binding by one court,
whilst the same award would have been considered as bind-
ing by another court. E

In finding the answer to the question at which moment the
award can be considered binding, the prevailing judicial
interpretation seems to be that this question is to be de-
termined under the law applicable to the award. The law
applicable to the award is according to Article V(l)(e), the F
. law of the country in which, or under the law of which, that
award was made (the country of origin). Several courts
appear to search under the applicable law for the moment
at which the award can be considered to be inchoate for
enforcement in the country of origin. Others attempt to
find an equivalent of the term "binding" under the arbitra- G
tion law of the country of origin:

Before the Court of Appeal of Naples, the Italian respon-
dent had resisted to request for enforcement of an award
made in London, alleging that the award should have been
declared. enforceable in England. The Court rejected the H
1046 SUPREME COURT REPORTS [1987] 1 S.C.R.

defence, reasoning that the legal effect of the award was
A
not to be determined under Italian law, according to which
an award becomes binding only upon an enforcement order
of the Pretore, but should be assessed under English law
according to which the leave for enforcement is not neces-
sary in order to.confer binding force upon the award.
B
Another example is the Court of First Instance of Stras-
bourg before which the French respondent had asserted
that the enforcement of an award made in F.R. Germany
could not be granted ,because a leave for enforcement had
not been issued by a German Court. Whilst observing that
the Convention has abolished the "double exequatur", the
f
c Court reasoned that the award had become binding when it
had been deposited with the German Court. The latter is
indeed a prerequisite for the binding force (verbhindlieh-
keit) of an award under German law.

b The binding force of an award under German law was also
considered by the Court of Appeal of Basie. The Court
referred to the Report of the Swiss Federal Council
(Conseil federal) accompanying the implementation of
the Convention in Switzerland, in which it is stated that "an
award is binding within the meaning of Article V(l)(e)
E when the award complies with the conditions required for
being capable for being declared enforceable in the
oountry in which it was made." The Court held that the
award was binding on the ground that a declaration of en-
forceability of the award had been issued by the Court of
Firstlnstance of Hamburg.
F
This decision might create the impression that in order to be
binding under Article V(l)(e), an award made in F.R.
Germany must have been declared enforceable by a
German Court. However, the Swiss Consell federal merely
meant to say that "binding" should be understood as
"ready for enforcement" and not as "enforced". If the
Court had followed this interpretation, it would pro-
bably have reached the same conclusion as the above-
mentioned Court of First Instance.of Strasbourg which con-
sidered the award to be binding under German law once it
had been deposited with the German Court. Nevertheless,
H bDth courts have in common that they considered the qlies-
0.N.G.C. v. WES"IERN COMPANY [TIIAKKAR, J.) 1047

ti'On at which moment an award becomes binding within the A
meaning of Article V( l)(e) under the law applicable to the
award.

Following propo.sitions emerge from the passage quoted hereinabove.

B
+ (I) That the enforceability must be determined as per the
law applicable to the award.

(2) French, German and Italian Courts have .taken the
view that the enforceability as per the law of the country
which governs the award is essential pre-condition for as-
serting that it has become binding under Article V( i)(e). c
T The aforesaid passages and the propositions emerging therefrom
thus buttress and reinforce the view which has been expressed by us.

It was next contended on behalf of Western Company that in the
five cases decided under the New York Convention involving parallel D
proceedings, in no case did a Court decide that an in junction such as
sought by ONGC was necessary. In two of.these five cases, Norsolor v.
Pabalk (France), and Fertilizer Corporation of India v. ID/ Manage-
men/ (US) the Courts, concerned about th.e possibility of conflicting
+- results, ordered a stay of their enforcement proceeding; in the FCI
case the court did so only upon the providing of a guarantee to secure E
the amount of the award at issue. In the other three cases, the court
declined to exercise their discretion to stay an enforcement proceeding
(Gutaverken (Sweden), Southern Pacific Properties v. Egypt (The
Netherlands), and St. Gobain (France). The Court in SPP did so only
because the respondent refused to provide security, thus demonstrat-

•
ing its bad faith. In Sl>P there was in fact a conflicting result when the F
Dutch Court entered an enforcement order on the very same day as a
French Court annulled the award. Such is the argument. We are afraid
that this argument loses sight of the fact that in the present matter we
are not concerned with the question as to whether a foreign court
should adjourn the decision on the enforcement of the award under
Article VI. 1 We are not enforcing any foreign award and the question G

~ 1. "Article VI-If an application for the setting aside or suspension of the award has
been made to a compete_nt authority referred to in Article V(l)(e) the authority
before which the award is sought to be relied upon may, if it considers it proper,
adjourn the decision on the enforcement of the award and may also, on the applica-
tion of the party claiming enforcement of the award, order the other party to give
suitable security." H
1048 SUPREME COURT REPORTS [1987) 1 S.C.R.

is not whether or not a decision on enforcement should be adjourned. ).
A 1t is the American Court which will have to address itself to that
question if an occasion arises.

The decisions relied upon by the counsel for the Western Company
have relevance from the perspective of the problem faced by a Court
B enforcing a foreign award before which a prayer for adjournment of :i
the, decision is made. In so far as we are concerned, the question is
whether the Western Company should be restrained by us from pro-
ceeding with the action instituted in the American Court. We are
therefore not persuaded by the aforesaid submission urged by learned
counsel for the Western Company.
J
c Jn the result we are of the opinion that the facts of this case are
eminently suitable for granting a restraint order as prayed by ONGC. ~
1t is no doubt true that this Court sparingly exercises the jurisdiction to
restrain a party from proceeding further with an action in a foreign
court. We have the utmost respect for the American Court. The ques-
D tion however is whether on the facts and circumstances of this case it
would not be unjust and unreasonable not to restrain the Western
Company from proceeding further with the action in the American
Court in the facts ·and circumstances outlined earlier. We would be
extremely slow to grant such a restraint order but in the facts and
circumstances of this matter we are convinced that this is one of those -'*
E rare cases where we would be failing in our duty if we hesitate in
granting the restraint order, for, to oblige the ONGC to face the
aforesaid proceedings in the American Court would be opperssive in
the facts and circumstances discussed earlier. But before we pass an
appropriate order in this behalf, we must deal with the plea that the
High Court does not have the jurisdiction to grant ~·1ch a restraint
F order even if the proceeding in the foreign court is considered to be
oppressive. Counsel for the Respondent has placed reliance on Cotton
Corporation of India v. United Industrial Bank, [1983] 3 S.C.R. 962 in
support of this plea. In Cotton Corporation's case, the question before
the Court was whether in the context of Section 4 l(b) of the Specific
Relief Act, the Court was justified in granting the injunction. The said
G provision runs thus:

"41. An injunction cannot be granted:-

(a)

H (b) to restrain any person from instituting or prosecuting
0.N.G.C. v. WES1ERN COMPANY [1HAKXAR, J.I 1049

· any proceeding in a court not subordinate to that from which
the injuction is sought;. A

(Emphasis added)

This provision, in our opinion, will be attracted only in a fact-situation B
where an in juction is sought to restrain a party from instituting or
prosecuting any action in a Court in India which is either of co-
ordinate jurisdiction or is higher to the Court from which the in juction
is sought in the hierarchy of Courts in India. There is nothing in
Cotton Corporation's case which supports the proposition th.at the
High Court has no jurisdiction tO grant an in junction or a restraint
order in exercise of its inherent powers in a situation like the one ii) the c
present case. In fact this Court had granted such a restraint order in
V/0 Tractoroexport, Moscow v. Mis Tarapore & Company and Anr.,
[1970] 3 S.C.R, 53 and had restrained a party from proceeding with an
arbitration proceedings in a foreign country (in Moscow). As we have
pointed .out earlier, it would be unfair to refuse the restraint order in a D
case like the present one for the action in the foreign Court would be
oppressive in the facts and circumstances of the case. And in such a
situation the Courts have undoubted jurisdiction to grant such a Fe-
straint order whenever the circumstances of the case make it necessary
or expedient to do so or the ends of justice so require. The following
passage extracted from paragraph 1039 of Halsbury's Laws of England E
Vol. 24 at page 579 supports this point of view:-

"With regard to foreign proceedings the court will restrain
a person within its jurisdiction from instituting or prosecut-
ing proceedings in a foreign court whenever the circums-
tances of the case make such an inter-position necessary or F
expedient. In a proper case the court in this country may
restrain person who has actually recovered judgment in a
foreign court from proceeding to enforce that judgment.
The jurisdiction is discretionary and the court will give
credit to foreign courts for doing justice in their own
jurisdiction." ·G

It was because this position was fully realized that it was argued on
behalf of the Respondent that the action in the U.S.A. Court could not
be considered as being oppressive to the ONGC. We have already
dealt with this aspect and reached a conclusion adverse to Western
Company. There is thus no merit in the submission that the High H
1050 SUPREME COURT REPORTS [1987) 1 S.C.R.

A Court of Bombay has no jurisdiction in this behalf.

It was also urged that the ONGC had suppressed the fact that it
had appeared in the U.S.A. Court and had succeeded in pursuading
the U.S.A. Court to vacate the seizure order obtained by the Western
Company and had thereby disentitled itself to seek an equitable order.
B In our opinion in the first place ihere was no deliberate suppression, i-
and in any case it was not necessary to apprise the Court about the said
development. It would therefore not be proper to refuse relief to the
ONGC on this account. We are therefore unable to accede to this
submission either.
j
Before we conclude we consider it necessary to place on record
c the fact that it is perhaps on account of some understanding gap that it
is observed by the High Court in its judgment:

"It was also not disputed that an award could be enforced
in the USA without the Respondents obtaining a decree in
D terms of the award from this Court."

The learned Additional Solicitor General has solemnly stated before
us that no such concession was made by him. The learned counsel for
the Western Company, with the fairness expected of him, has con-
firmed that the learned Additional Solicitor General had not made any
E such concession. Whilst nothing turns on it, we are adverting to this
aspect for the sake of fairness to the learned Additional Solicitor
General.

And now we come to the conclusion.*While we are inclined to
grant the restraint order as prayed, we are of the opinion that fairness
F demands that we do not make it unconditional but make it conditional
to the extent indicated hereafter. There are good and valid reasons for
making the restraint order conditional in the sense that ONGC should
be required to pay the charges payable in respect of the user of the rig
belonging to the Western Company at the undisputed rate regardless
of the outcome of the petition instituted by the ONGC in the High
G Court for setting aside the award rendered by the Umpire. India has
acceded to the New York Convention. One of the objects of the New
York Convention 'was to evolve consensus amongst the covenanting
nations in regard to the execution of foreign arbitral awards in the
concerned Nations. The necessity for such a consensus was presumably
felt with the end in view to facilitate international trade and commerce
H by removing technical and legal bottlenecks which directly or indi-
O.N.G.C. v. WESTERN COMPANY !THAKKAR, J.l 1051

.rectly impede the smooth flow of the river of international commerce. A
Since India has acceded to this Convention it would be reasonable to
assume that India also subscribes to the philosophy and ideology of the
New York Convention as regards the necessity for evolving a suitable
formula to overcome this problem. The Court dealing with the matters
arising out of arbitration agreements of the nature envisioned by the
B
New York Convention must therefore adopt an approach informed by
the spirit underlying the Convention. It is no doubt true that if the
arbitral award is set aside by the Indian Court, no amount would be
recoverable under the said award. That however does not mean that
the liability to pay the undisputed amount which has already been
incurred by ONGC disappears. It would not be fai; on the part of
ONGC to withhold the amount which in any case is admittedly due C
and payable. The Western Company can accept the amount without
prejudice to its rights and contentions to claim a larger amount. No
prejudice will be occasioned to ONGC by making the payment of the
admitted amount regardless of the fact that the Western Company is
claiming a larger amount. And in any case, ONGC which seeks an
D
equitable relief cannot be heard to say that it is not prepared to act in a
just and equitable manner regardless of the niceties and nuances of
legal arguments. These are the reasons which make us take the view
that the restraint order deserves to be made conditional on the ONGC
paying the undisputed dues at an early date subject to final adjustment
in the light of final determination of the dispute.
E
We accordingly ano·w this appeal and direct as under:-

I

The appeal is allowed. The order passed by the Bomaby High
F
Court on April 3, 1986 is set aside. The order passed by the Bombay
High Court on January 20, 1986 is restored subject to the conditions
engrafted hereafter.

II

The appellant ONGC shall pay to the Respondent Western G
Company, in the manner indicated hereinafer, the amount payable at
the undisputed rate of $ 18,500 per day for the period as computed by
the Umpire in his award amounting to $ 2,528,339 along with interest
at 12% till the date of payment.
H
1052 SUPREME COURT REPORTS (1987) 1 S.C.R.

III
A
The said amount will be paid to the Respondent, Western
Company, by wire transfer to their Bank Account No. 144-0-33008 at
Manufacturers Hanover Trust Company, New York, U.S.A. within
four weeks of the Respondent filing an undertaking (without prejudice
to their rights and contentions) in this Court in the terms indicated
B hereinbelow, namely, (a) to accept the said amount subject to the final
outcome of Arbitration Petition No.10 of 1986 pending in the High
Court of Bombay or the appeal, if any, arising from the order passed
by the High Court in the said matter and (b) further provided the
Respondent files an undertaking in this Court to treat the said pay-
f
ment by way of protanto satisfaction in respect of (i) the Award in
C question, in case it stands confirmed or (ii) a fresh award, if any', that
may be passed in.future in connection with the original cause of action
or (iii) in respect of the original claim giving rise to the arbitration
proceedings in question.

IV
D
In case the Respondent, Western Company, files undertakings in
this Court as contemplated in Clause III hereinabove and yet the
appellant ONGC fails to make the payment in the manner indicated in --1
Clause II hereinabove within four weeks of the date of filing of the said
undertakings the order of stay granted as per Clause I hereinabove
E shall stand vacated.

v
The learned Single Judge before whom the Arbitration Petition
F No. 10 of 1986 is pending shall refer the matter to a Division Bench
having regard to the fact that ( 1) it raises important and complex
questions and (2) that it is desirable that the matter is expeditiously
disposed of and a Letters Patent Appeal is avoided and (3) that the
matter concerns a commercial transaction of international characteL

G VI

The learned Chief Justice of Bombay High Court may constitute
a Division Bench to hear this matter with a request to the Division
Bench to dispose of the same expeditiously.

H
O.N.G.C. v. WESTERN COMPANY [THAKKAR, J.) 1053

VII A

The Division Bench constituted by the Chief Justice will afford
reasonable opportunity to the parties to file their statements of claims,
affidavits etc. and shall post the matter for directions within two weeks
of the statements, affidavits etc. being filed. The Division Bench will
~ direct that the matter is posted for hearing at the earliest and will hear B
the matter from day to day and dispose it of expeditiously, preferably
within six months {excluding the time granted at the joint request of
the parties or at the instance of the Respondent) of the commence-
~ ment of the arguments. '

VIII c
There will be no order regarding costs.

IX

Parties will be at liberty to apply to this Court for further direc- D
tions from time to time in case of necessity.

N.P.V. Appeal Allowed.

I