The newly elected Indian government wins judgement in the English Court – A good omen for India?


Days following the new Indian Government’s electoral triumph, the London High Court has given the Government its first victory, with a judgement in favour of PEC Ltd, a company 100 per cent owned by the Indian Government.


PEC Ltd faced a $6.2 million liability plus several years interest and costs under the Grain and Feed Trade Association (GAFTA); if the government lost they would have faced around $9 million liability including interest, the other side’s costs and PEC’s own legal costs. However, in its judgement the High Court ruled that the senior official of PEC did not have legal authority to conclude the contract.


The dispute focused on a Thai-based company called Asian Golden Rice (AGR) which entered into contract with PEC Ltd regarding the scale of 25,000mt of rice. The contract was not performed by PEC. The issue before the English Court was whether the senior official who had signed the contract on behalf of PEC Ltd had legal authority to make the contract a legally binding agreement.  PEC Ltd argued that this individual did not have the legal authority to enter into this contract. In July 2012, the GAFTA ruled that the agent did have the authority and PEC Ltd were made liable to pay AGR the claim.


Following this decision, PEC Ltd decided to challenge the Arbitration Award in the High Court in London. As the contract was executed on Indian soil, one of the main issues was whether the senior official who signed the contract was legally authorised by the PEC Ltd board. There was therefore a question of Indian Law in respect of which on PEC’s behalf Mr Soli Sorabjee, a Senior Advocate of Indian Supreme Court and the Attorney General of India, gave evidence in the Court and Mr Harish Salve, a Senior Advocate of the Indian Supreme Court and the Solicitor General of India, gave evidence for AGR.  In its Judgment the English Court has held that the senior official of PEC did not have legal authority to conclude the contract.


PEC Ltd was represented in the English Commercial Court by the respected international arbitration specialists, London law firm Zaiwalla & Co Solicitors.  Zaiwalla & Co Solicitors has a long history of success for Indian clients in the English Courts. The unsuccessful AGR was represented by a leading City of London solicitors firm.


Today’s judgement can be seen as an encouraging development for the future of international arbitration cases in the English courts. It may well be a case of a good omen for the new Indian government which is taking office this week.