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International Arbitration Forum

National Agricultural Cooperative Marketing Federation of India v. Alimenta SA

Case summary

At a glance

Parties
National Agricultural Cooperative Marketing Federation of India (NAFED) v. Alimenta S.A.
Case no.
Civil Appeal No. 667 of 2012, Supreme Court of India
Court
Supreme Court of India (Civil Appellate Jurisdiction)
Underlying award(s)
FOSFA award of 15 November 1989 and FOSFA Board of Appeal award of 14 September 1990 (London)
Treaty
FOSFA 20 contract of 12 January 1980 (arbitration clause 20); Foreign Awards (Recognition and Enforcement) Act, 1961; New York Convention Article V(2)(b)
Court
Arun Mishra J. (author), M.R. Shah J., B.R. Gavai J.
Sector
Agricultural commodities (groundnut export)
Outcome
Appeal allowed (22 April 2020). The Delhi High Court judgment was set aside and the foreign award was held unenforceable as contrary to the public policy of India. No order as to costs.
Amount
FOSFA award: USD 4,681,000 in damages, with interest at 10.5% p.a. from 13 February 1981. The Board of Appeal raised the interest rate to 11.25%. The award was held unenforceable.

The dispute

NAFED was the Government of India's canalizing agency for groundnut exports. On 12 January 1980 it contracted to sell 5,000 metric tonnes of Indian HPS groundnut to Alimenta S.A. at USD 765 per tonne for the 1979-80 season, on FOSFA 20 terms. Clause 14 of those terms provided for cancellation if a government prohibition restricted export. Only 1,900 tonnes were shipped. Two later addenda moved the remaining 3,100 tonnes into the 1980-81 season. The Ministry of Agriculture then directed NAFED not to carry forward the previous year's contracts and finally refused permission on 27 January 1981, so NAFED did not ship. A FOSFA tribunal in London awarded Alimenta damages, and the Delhi High Court held the award enforceable. On appeal, NAFED argued that enforcement was barred by section 7 of the Foreign Awards Act, 1961. Its grounds were that the award was contrary to public policy, that it had been unable to present its case, that an arbitrator was appointed for it in breach of Indian court stay orders, and that the Board of Appeal raised interest without any appeal by Alimenta. Alimenta argued that the court's review was limited and that the tribunal had found the restriction self-imposed by NAFED.

Key holdings

  1. The Government's refusal to allow export fell within Clause 14 of the contract. Because the parties had expressly provided for this contingency, the contract became void under section 32 of the Indian Contract Act (contingent contracts), not section 56 (frustration). The High Court was wrong to treat the case as self-induced frustration. ¶¶ 43–48, 52
  2. Supply made after the Government's refusal would have been unlawful under the Export Control Order. Enforcing an award that assumes such supply should have been made would breach India's export policy and the Government's order. ¶¶ 52, 57
  3. Applying the Renusagar test (fundamental policy of Indian law, the interests of India, justice or morality), enforcement would be contrary to the fundamental policy of Indian law and the basic concept of justice. The award is therefore unenforceable under section 7(1)(b)(ii) of the Foreign Awards Act. ¶¶ 68–69, 80
  4. NAFED could not now object that FOSFA appointed an arbitrator on its behalf in breach of Indian court stay orders. It should have raised the point when the Supreme Court allowed the arbitration to continue in 1987. ¶ 72
  5. The FOSFA rules barred legal representation before the first-tier tribunal. NAFED showed no prejudice from the Board of Appeal's refusal to let it be represented by solicitors. Neither point made the award unenforceable. ¶ 74
  6. The Court said that an arbitrator ought not to defend his own award at the appellate stage, as Alimenta's nominee had done before the Board of Appeal. It did not decide the objection, because no material had been placed on record about the practice in the UK at the time. It also held that the Board of Appeal could not raise the interest rate without an appeal by Alimenta. ¶¶ 78–79

Procedural history

  1. 12 January 1980FOSFA 20 contract for 5,000 metric tonnes of HPS groundnut. Addenda followed on 18 August 1980 and in October 1980 (the judgment dates the second addendum both 8 October and 6 October 1980).
  2. 27 January 1981The Government of India finally refused permission to export against the previous year's contracts.
  3. 13 February 1981Alimenta began FOSFA arbitration in London.
  4. 20 March 1981The Delhi High Court stayed the arbitration in OMP No. 41 of 1981. FOSFA nonetheless appointed F.A.D. Ralfe as arbitrator for NAFED on 23 April 1981.
  5. 9 January 1987The Supreme Court upheld the High Court's decision of 11 December 1981 that the first agreement was subject to FOSFA arbitration, and sent the parties back to the pending arbitration.
  6. 15 November 1989FOSFA award: USD 4,681,000 in damages, with interest at 10.5% p.a.
  7. 14 September 1990The Board of Appeal decided NAFED's appeal and raised the interest rate to 11.25%.
  8. 28 January 2000A Single Judge of the Delhi High Court held the award enforceable in Suit No. 1885 of 1993. A review was dismissed on 5 May 2000.
  9. 6 September 2010The appeal before the Division Bench of the Delhi High Court was dismissed as not maintainable.
  10. 22 April 2020Supreme Court judgment: NAFED's appeal allowed and the award held unenforceable.

Tribunal, counsel and experts

Decided by
For the claimant
C.A. Sundaram
For the respondent
Clyde & Co · Shyam Diwan · Rana Mukherjee

Run a conflict check on these names →

Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
Supreme Court, No. Civil Appeal No. 667 of 2012
Country
Claimant
National Agricultural Cooperative Marketing Federation of India
Respondent
Alimenta SA
Section

Court: India, Supreme Court
Date of decision: 22 April 2020
Case number: Civil Appeal No. 667 of 2012
New York Convention provisions: V | V(2) | V(2)(b)
Source: New York Convention case law case database.