- (1.)This appeal, by special leave, occupied judicial time of almost whole day, and the basic question raised is this : whether enforcement of the award dated October 18, 1999 given by the International Court of Commercial Arbitration at the Chamber of Commerce and Industry of Russian Federation, Moscow in favour of the respondent is contrary to public policy of India under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996.
(2.)By contract dated November 18, 1997, between -- Phulchand Exports Limited, Mumbai, India ('the sellers') and OOO Patriot, Moscow, Russia ('the buyers'), a transaction relating to sale of 1000 Metric Tons of Indian long grain 1.5 time polished rice PR-- 106 of 9 per cent broken maximum (for short, 'the goods') for a price fixed at INR 12,450 (Indian Rupees twelve thousand four hundred fifty only) per one metric ton net on CIF (liner out) Novorossiysk, Russia basis was concluded. The price was fixed according to Incoterms-90 and included value of the goods, packing and marking, loading into hold, stowing of the cargo, fulfilling the customs formalities in the sellers' country, insurance, freight charges, berthing charges and unloading charges of the goods at the port of Novorossiysk. The total value of the contract was firm and fixed at INR 12,450,000,00 ( Indian Rupees twelve million four hundred fifty thousand only). It is upon this contract, and on what was done under it, that the above question in this appeal turns. Some of the relevant terms, and, omitting clauses which do not appear important, are as follows :
"1. SUBJECT OF CONTRACT :

the Goods on CIF Novorossiysk port, Russia basis,

2. PRICE OF THE CONTRACT

The price is fixed on the terms of CIF (liner out) Novorossiysk, Russia according to Incoterms--90.

3. TERMS OF PAYMENT

Payment for the Goods, delivered under the present contract is to be effected by irrevocable documentary Letter of Credit opened in favour of the sellers for the total value of the contract for the period of 45 days.

The L/C is governed by "ICC Uniform customs and practice for documentary L/C".

The L/C should be opened within 10 working days from the date of signing of the contract.

The L/C is executed by the beneficiary's bank against presentation by the sellers of the following documents:

3. Insurance Policy for 11% of the value of the Goods, Covering all risks stipulated in the Institute Cargo Clauses (A), Institute War Clauses, Institute Strike Clauses till the completion of the unloading of the Goods at the port of Novorossiysk, issued in the name of the Buyers Bank - Joint Stock Commercial Bank AVTOBANK, Moscow, Russia.

4. TERMS OF DELIVERY

Shipment should be done on the basis of CIF (liner out) Novorossiysk, Russia in accordance with Incoterms - 90. The Goods sold under the present contract should be shipped within 40 days from the date of opening the L/C. The date of shipment is the date of loading of the Goods to the board of vessel.

Shipment should be done by a vessel that is on the way to Novorossiysk as the first port of discharge. The Sellers shall take all possible measures that transit time of the Goods to Novorossiysk, Russia will not exceed 25 days.

The sellers shall take all possible measures for placing the Goods in such a way that it will be free for examination and will not be blocked up by any other cargo while unloading at the port of Novorossiysk.

Insurance Policy for 110% of the value of the Goods, covering all risks, stipulated in the Institute Cargo Clauses (A), Institute War Clauses, Institute Strike Clauses till the completion of the unloading of the Goods at the port of Novorossiysk, issued in the name of the Buyers Bank - Joint Stock Commercial Bank AVTOBANK.

In case the Goods do not arrive to the customs area of Russian Federation within 180 days from the date of payment the transferred amount is to be reimbursed to the Buyers' account.

8. PENALTY

The Sellers are obliged within 5 working days from the date of receipt of the Buyers advice of the L/C to open in favour of the Buyers the Performance Bond issued by the Sellers Bank for 2% of the total value of the Contract in favour of the Buyers valid for 60 days from the date of opening of the L/C. The original of the said document should be dispatched to the Buyer's by courier mail. The copy of the AWB should be faxed to the Buyers immediately.

When failing to deliver the goods in time stipulated in clause 4 of the present Contract, the Sellers are to pay penalty to the Buyers at the rate of 0.3% of the value of non-delivered Goods per each day of delay from the 5 th day after expiry of the delivery date to the 15th day inclusive. Total amount of penalty should be paid to the Buyers within 10 days from the date of bill in the currency of the Contract.

9. TERMS OF CANCELLATION OF THE CONTRACT

The Buyers have the right to cancel the Contract under the following circumstances:

The quality of the delivered Goods does not correspond to the Appendices No. 1 and No. 2 to the present Contract (according to the report of the State Board Inspection of Russian Federation for the testing of the Goods at the port of shipment Kandla (India).

The date of shipment of the Goods is postponed by the Sellers beyond the period of more than 15 days.

The Sellers have the right to cancel the Contract if the date of the opening of the L/C is postponed for the period of more than 15 days from the agreed date."

(3.)The buyers opened irrevocable letter of credit ('L/C') for the total value of the contract on December 3, 1997 with the last date of shipment - January 12, 1998. On presentation of documents by the sellers, the bank honoured L/C and paid the amount to the sellers. The sellers shipped goods on January 29, 1998 - 16 days later of the stipulated time and the vessel freighted by the sellers left the port of loading viz., Kandla (India) on February 20, 1998 -- 38 days later than the time of departure stipulated in the contract. The goods never reached the port of destination (port of Novorossiysk). It so happened that the vessel carrying the goods suffered an engine failure as a result of which it was declared 'General Average' by the Master of the vessel. In salvage operation, the vessel was rescued and taken to the Turkish sea port of Eregli. The owner of the rescue vessel claimed to the Admiralty Court of Eregli to arrest the vessel with the cargo in an action for enforcement of the lien against the vessel. The concerned court took judgment to arrest vessel towards the cost of rescue and the entire cargo was sold out to compensate the cost of rescue of the vessel.