Dalmia Dairy Industries Ltd (formerly Dalmia-Cement Ltd) (Plaintiffs) The National Bank of Pakistan (Defendants) Dalmia Dairy Industries Ltd (Plaintiffs) The National Bank of Pakistan (Defendants) Dalmia Dairy Industries Ltd (Plaintiffs) The National Bank of Pakistan (Defendants)
| Jurisdiction | England & Wales |
| Judgment Date | 04 May 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0504-2 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 May 1977 |
[1977] EWCA Civ J0504-2
In The Supreme Court of Judicature
Court of Appeal
Civil Division
(Appeal From Order of Mr Justice Kerr - Commercial Court)
Lord Justice Megaw
Lord Justice Roskill and
Lord Justice Browne
Mr ANTHONY LLOYD, Q.C., Mr. DAVID CRACE and Mr. IAN MILLIGAN (instructed by Messrs. Linklaters & Paine's) appeared on behalf of the Appellants (Defendants).
Mr. JOHN HOBHOUSE, Q.C. and Mr. IAN KINWELL (instructed by Messrs. Stocken & Co.) appeared on behalf of the Respondents (Plaintiffs).
This appeal, together with the cross-appeal, arises out of a consolidated action begun by writs issued on 29th January, 1974, 22nd July and 6th October, 1975, in which the plaintiffs seek to make the defendants liable for payment of, or for damages for failure to pay the sums awarded by, two arbitral awards. The first award is in the sum of £827,492.07, with interest thereon. The second award is in the sum of £2,152,806,68, also with interest thereon Mr Justice Kerr, sitting as a judge of the Commercial Court, gave judgment for the plaintiffs. He delivered two judgments. The first, on 27th February, 1976, dealt with issues of liability. The second, on 14th April, 1976, dealt with -an issue as to the amount of interest. The formal judgment was entered on 14th April, 1976, in favour of the plaintiffs for the sum of £3,535,830.09, That sum was made up of £2,980,298.75, the total of the two sums above mentioned, and £555,531.34, being interest at 6 per cent, and 5 per cent, respectively on the capital sums from the dates of the respective awards to the date of judgment. The defendants appeal as to liability. They say that the arbitrator had no jurisdiction to make either of the awards. The defendants cross-appeal as to the amount of interest.
The hearing of the action before Mr. Justice Kerr lasted some two months. Although a few of the issues which he had to consider are not raised again in this appeal, the appellants by their notice of appeal seek to raise afresh the main issues, on which most of the time of the hearing was spent.
We would express our admiration for the most careful, accurate and lucid statement by the learned judge of the relevant facts andof the issues, In a judgment which inevitably was very lengthy. The accuracy of his statement of the facts is not challenged, except on a very few, relatively unimportant, points. If the learned judges judgment had been readily available for reference, we should have been tempted to avoid the task of ourselves stating the relevant facts, simply saying, instead, that they would be found fully, clearly and accurately set out in the learned judge's judgment. As it is, however, our task in attempting to summaries the relevant facts has been made much less laborious because of the fact that we have been able to use that judgment, from which we have freely borrowed without specific acknowledgment, in the introductory part of this judgment.
THE FACTS, THE ARBITRATIONS AND THE AWARDS:
In July, 1952, the plaintiffs, Dalmia Dairy Industries Limited, an Indian public company (then known as Dalmia Cement Limited), made a contract with Mr. Maneckji, a national of Pakistan resident in Karachi. Mr. Justice Kerr conveniently referred in his judgment to the plaintiffs as "Dalmia", and to the contract of July, 1962, as "the sale agreement", We shall use the same descriptions as the learned judge in these, and other, instances.
By the sale agreement Dalmia sold to Mr. Maneckji two cement factories in Pakistan. in fact, on the completion of the sale the purchaser was a Pakistani company controlled by Mr. Maneckji, Nothing turns on that. Nothing in this appeal turns, either, on the detailed terms of the sale agreement, which was governed by the law of Pakistan. it provided that payment of the purchase price for the factories should be made, primarily and principally, by deliveries of cement, from the factories, at the Pakistan/India border, where Dalmia would take delivery. These deliveries were to be at the rate "of about 75.000 tons a year over a period of three years, the value being calculated at 94 Pakistani rupees per ton. Dalmia was to givedispatch instructions year by year. The three-year period was to begin to run from the date of the first dispatch instructions. There was provision for a bank guarantee to be arranged by the buyers in favour of Dalmia. It is in respect of that guarantee that the proceedings culminating in this appeal have arisen. We shall return shortly to its terms. Meanwhile we continue with a brief summary of the history of the sale agreement.
The completion date under the sale agreement, in the event, was 30th September, 1964 On that date the buyers, the Pakistani company, became owners of the factories. Dalmia gave the first of their delivery instructions, in respect of the first year of the three-year period, on 19th December, 1964. Accordingly the three-year period began on that date. Further delivery instructions were given thereafter, including delivery instructions in respect of the second and third years, beginning respectively on 19th December, 1965, and 19th December, 1966. No cement was ever delivered.
The bank guarantee required by the sale agreement was a guar an- tee of the purchase price to be given by a bank with an office and business in India. The guarantee was given by the defendants, The National Bank of Pakistan. We shall call it, as did the judge, "the Bank". It had a branch in Calcutta. It also has a branch in London. Hence the jurisdiction of the English courts, invoked by the plaintiffs in these proceedings. The guarantee was dated 30th September, 1964. The relevant provisions of the guarantee are set out in full in the judgment of Mr. Justice Kerr. We shall merely summaries them, other than the arbitration clause which we shall set out in full.
The guarantee provided that it was to operate in the event of any failure by the buyer under the sale agreement to carry out its obligations under that agreement for any reason whatsoever, whether within or beyond its control. It guaranteed payment to Dalmia inIndia in sterling of a sum equivalent to 94 Pakistani rupees for every ton by which the deliveries of cement to Dalmia should have fallen short of the contract quantity, The date when the Bank's liability was to arise, in the event of a shortfall of deliveries in any of the three years, was 14 days after the end of the respective delivery year. (This is a simplification of more complex provisions, but is sufficient for present purposes, since we are in no way concerned with details of figures). The guarantee was expressed to be unconditional and irrevocable and to remain in force until the purchase price should be fully satisfied. It was provided that the guarantee should be a continuing guarantee and should continue notwithstanding the discharge of the purchaser by operation of law. it was agreed that Dalmia should be at liberty to treat the Bank as principal debtor and to proceed for recovery under the guarantee without first making a demand from the purchaser.
We shall read the arbitration clause in full: "(ix) All disputes arising in connection with this Guarantee shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by a sole arbitrator appointed in accordance with the Rules. The arbitration shall be conducted at Beirut (Lebanon) or Geneva (Switzerland) at the discretion of the sole arbitrator. If in the opinion of the sole arbitrator the local conditions in Beirut and in Geneva prevent the holding of the arbitration proceedings in either of these places, he may conduct the arbitration in any other place which he may determine in consultation with the parties. All questions arising from or pertaining to this Guarantee and the arbitration, if any, shall be decided with reference to the Indian Laws. We agree that the courts in India alone shall have jurisdiction in all matters arising from or connected with this Guarantee and the Arbitration if any".
No point has been taken as to the jurisdiction of the Englishcourts in the present proceedings, by reference to the provisions a in the guarantee which require payment in India or those which confer exclusive jurisdiction on the courts in India. It was not pleaded or argued before Mr. Justice Kerr or before us that an English court ought to decline jurisdiction to deal with trisection arising on the arbitration awards because the parties have by their express agreement provided that the courts of India alone shall have jurisdiction in all matters arising from or connected with the guarantee and the arbitration.
It is accepted that, by reason of the terms of the arbitration clause, the issues before us in respect of the guarantee and of the arbitration clause, including the question of the arbitrator's jurisdiction, and, if it arises, the correctness of his decision as to his jurisdiction, are governed by the law of India.
The arbitration clause defers to the Rules of the International Chamber of Commerce ("the I.C.C."). Articles 6 and 7 of those Rules provide that the I.C.C. has a Court of Arbitration, which does not of itself settle disputes but which nominates the arbitrator if the parties to the intended arbitration have not agreed on an arbitrator. Mr. Justice Kerr in his judgment, at pages 20, 21, sets out the text of a number of the Articles, We shall read only Article 13, Para- graphs (3) and (4): "(3) If one of the parties raises one or more pleas as to the existence...
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