Enforcement of International Arbitration Award: Supreme Court Directs Full Settlement in Trade Dispute

The case of State Trading Corporation of India Ltd. vs. M/s Global Steel Holding Limited & Ors. addresses the enforcement of an international arbitration award involving trade agreements between an Indian government corporation and foreign entities. The Supreme Court had to determine whether the High Court correctly dismissed the execution petition for lack of jurisdiction.

The dispute arose from unpaid dues under a trade agreement for the supply of steel commodities. The Supreme Court’s ruling reinforced the principles of arbitration enforcement, jurisdiction, and final settlement of international trade disputes.

Background of the Case

The conflict originated from a tripartite agreement signed between the appellant, State Trading Corporation of India (STC), and the respondents, Global Steel Holding Limited (GSHL) and Global Steel Philippines Inc. (GSPI), for the supply of steel products. The key developments were:

• On April 4, 2005, STC, GSHL, and GSPI signed a trade agreement for the purchase and sale of steel commodities.
• STC, a government-owned corporation, was responsible for ensuring trade security under Indian export policies.
• Disputes arose over outstanding dues owed by GSHL and GSPI to STC.
• The parties entered conciliation proceedings and signed a Settlement Agreement on November 15, 2011.
• The respondents agreed to pay a total amount of US$ 355,818,019.29 with interest at 13.25% per annum by May 11, 2012.
• A Further Settlement Agreement was signed on May 17, 2012, adjusting the payable amount to US$ 347,737,209.68.
• Despite partial payments, GSHL and GSPI defaulted on the remaining amount.
• STC filed an Execution Petition (No. 337/2014) before the Delhi High Court to enforce the settlement agreements.
• The Delhi High Court dismissed the execution petition on March 9, 2015, citing lack of jurisdiction.
• STC challenged this order before the Supreme Court.

Legal Issues Considered

The Supreme Court examined the following key legal questions:

1. Did the Delhi High Court have jurisdiction to entertain the execution petition?
2. Were the settlement agreements enforceable under the Arbitration and Conciliation Act, 1996?
3. What should be the final settlement amount considering delayed payments?
4. Did the respondents act in good faith to discharge their liabilities?

Arguments by the Appellant (State Trading Corporation of India)

The appellant, represented by senior counsel, made the following arguments:

• “The settlement agreements were signed under Section 73 of the Arbitration and Conciliation Act, 1996, and are enforceable as arbitral awards.”
• “The respondents defaulted on payments, necessitating judicial intervention for enforcement.”
• “The Delhi High Court had jurisdiction under the Arbitration Act, and dismissal of the execution petition was erroneous.”
• “The outstanding dues should be recovered with applicable interest.”

Arguments by the Respondents (Global Steel Holding Limited & Others)

The respondents, represented by senior counsel, countered with the following arguments:

• “The Delhi High Court correctly ruled that none of the judgment debtors were within its jurisdiction.”
• “The respondents made substantial payments, reducing their liabilities.”
• “The settlement agreements were commercial contracts and not arbitral awards under Indian law.”
• “The court should exercise its discretion under Articles 136 and 142 of the Constitution to determine a fair interest rate on outstanding dues.”

Supreme Court’s Observations and Judgment

The Supreme Court, comprising Abhay Manohar Sapre and Indu Malhotra, ruled in favor of STC, but modified the interest calculation. The Court made the following observations:

“The settlement agreements signed between the parties are binding under the Arbitration and Conciliation Act, 1996, and are enforceable as arbitral awards.”

The Court provided the following reasoning:

• The High Court erred in dismissing the execution petition solely on jurisdictional grounds without considering the merits.
• The respondents’ payments during the pendency of the case showed willingness to resolve the dispute but did not extinguish full liability.
• Considering delays, the Court set an 8% annual simple interest on the outstanding dues from November 10, 2012, onwards.

The Supreme Court further emphasized:

“To ensure finality in this long-pending dispute, we exercise our powers under Articles 136 and 142 of the Constitution and fix the final interest amount at Rs. 600 crores, payable within 12 weeks.”

Implications of the Judgment

The Supreme Court’s ruling has significant implications:

• It confirms that settlement agreements arising from arbitration conciliation are enforceable as arbitral awards.
• It reinforces the jurisdiction of Indian courts in cross-border trade disputes.
• It ensures that trade agreements with government entities are honored in full.
• It provides clarity on interest calculation for delayed payments in commercial disputes.

Final Decision

The Supreme Court modified the enforcement terms and directed full settlement:

“The respondents shall pay Rs. 600 crores as interest within 12 weeks. Upon payment, all claims under the settlement agreements shall stand settled.”

This ruling strengthens the legal framework for international arbitration and trade dispute enforcement in India.

Petitioner Name: State Trading Corporation of India Ltd..
Respondent Name: M/s Global Steel Holding Limited & Ors..
Judgment By: Justice Abhay Manohar Sapre, Justice Indu Malhotra.
Place Of Incident: New Delhi.
Judgment Date: 06-12-2018.

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