ATLAS EXPORT INDUSTRIES versus KOTAK AND COMPANY

Citation: [1999] SUPP. 2 S.C.R. 192 · Decided: 01-09-1999 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Dismissed

Judgment (excerpt)

A 
B 
ATLAS EXPORT INDUSTRIES 
v. 
K<PTAK AND COMPANY 
SEPTEMBER 1, 1999 
[S. RAJENDRA BABU AND R.C. LAHOTI, JJ.] 
Foreign Awards (Recognition and Enforcement) Act, 1965: Sections 5 
and 6. 
C 
Arbitration-Agreement to refer disputes to arbitration-Referencial 
incorporation of arbitration clause is permissible and binding on parties-
Se//er entered into a contract to supply goods to foreign buyer through 
Indian agent-A// were parties· to the contract which incorporated by 
reference the standard contract of the Grains and Food Trade Association 
D Ltd (GAFTA)-The standard contract provided for settlement of disputes by 
arbitration in a foreign country which actually took place and award passed-
Va/idity.. of-Held: It is not open to a party entering into a contract to raise 
objections about the terms of arbitration clause-High Court rightly rejected 
the seller's objection that there was no agreement in writing to refer disputes 
to arbitration under the rules of GAFTA. 
E 
Contract Act, 1872: Sections 23 and 28 Exception 1. 
Arbitration agreement-Disputes-Reference of-For arbitration in a 
foreign country-Validity-Held: Merely because arbitrators are situated in 
a foreign country cannot by itself be enough to nullify the arbitration when 
F the parties with eyes open have willingly entered into the agreement-More 
so, when the parties have appointed arbitrators, participated in arbitration 
and suffered an award 
Practice and Procedure: 
G 
New plea-Raising of-Plea not raised at the earliest cannot be allowed 
H 
to be raised for the first time in appeal before the Supreme Court. 
The appellant entered into a contract with a foreign company for supply 
of goods (groundnut extractions) through the respondent. The contract 
incorporated by reference the standard contract of Grain and Food Trade 
192 
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-· 
ATLAS EXPORTINDUSTRIES v. KOTAKANDCOMPANY 
193 
Association Ltd. (GAFfA) which provided for arbitration in a foreign country. A 
The respondent was also a party to the contract. 
As there was a dispute between the appellant and respondent it was 
referred to arbitration which took place in a foreign country. The appellant 
and respondent participated in the arbitration and an award was passed in 
favour of the respondent. 
B 
The respondent filed an application under Sections 5 and 6 of the 
Foreign Awards (Recognition and Enforcement) Act, 1961 before the High 
Court for making the award a rule of the court. The appellant raised an 
objection before the High Court that there was no agreement in writing C 
between the parties requiring the disputes to be settled by arbitration under 
the rules ofGAFfA. The High Court rejected the objection and made the 
award a rule of the court. The Letters Patent Appeal preferred by the 
appellant was dismissed. Hence this appeal. 
On behalf of the appellant it was contended that the term of the contract D 
relating to arbitration was opposed to public policy under Section 23 read 
with Section 28 of the Contract Act, 1872 since the parties were compelled 
to resort to arbitration in a foreign country. 
Dismissing the appeal, the Court 
HELD: 1. The appellant did not raise a plea before the High Court that 
it was not aware of the standard contract of the Grain and Food Trade 
Association Ltd. (GAFf A). The High Court was, therefore, right in rejecting 
E 
the appellant's objection that there was no agreement in writing between the 
parties requiring that disputes be settled by arbitration under the rules of p 
GAFfA. [197-E-F; 196-D] 
Alimenta S.A. v. National Agricultural Co-operative Marketing 
Federation of India Ltd., AIR(l987) SC 643, relied on. 
Russell on Arbitration, 19th Edn., p. 50 and Halsbury's Laws of England, G 
4th Edn., Vol. 2, p. 267, para 527, referred to. 
2. The present case is clearly covered by Exception 1 to Section 28 of 
the Contract Act, 1872. Right of the parties to have recourse to legal action 
is not excluded by the agreement. The parties are only required to have their 
dispute/s adjudicated by having the same referred to arbitration. Merely H 
194 
SUPREME COURT REPORTS (1999] SUPP. 2 S.C.R. 
A because the arbi~rators are situated in a foreign country cannot by itself be 
enough to nullify the arbitration agreement when the parties have with their 
eyes open willingly entered into an agreement. More so when the parties 
have appointed arbitrators, participated in arbitration proceedings and suffered 
an award. [198-D-E] 
B 
c 
D 
3. The plea th

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