Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.

[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 635

A HAFEEZ IQBAL OIL & GHEE INDUSTRIES (PVT) LTD v.

ALAMI VEGETABLE OIL PRODUCTS SDN BHD
HIGH COURT MALAYA, SHAH ALAM
AZIMAH OMAR J
[ORIGINATING SUMMONS NO: 24-26-01-2013]
B
18 AUGUST 2017

ARBITRATION: Award – Enforcement – Application for recognition and

enforcement of awards as judgments – Preliminary objection – Whether applicant
could seek to recognise both final arbitration award and final appeal board award
C – Whether decision by final appeal board final or concluded award – Whether award
to be enforced final award by final appeal board – Whether preliminary objection
raised had merit
ARBITRATION: Award – Enforcement – Application for recognition and
enforcement of awards as judgments – Applicant seeking to recognise final
D
arbitration award and final appeal board award – Whether final appeal board acted
outside terms of arbitration – Whether contained decisions on matters beyond scope
of submission to arbitration – Whether awards in conflict with public policy of
Malaysia – Whether awards consistent with PORAM Rules of Arbitration and
Appeal – Whether defendant successfully proved grounds to challenge recognition of
E arbitral awards – Arbitration Act 2005, s. 39
The plaintiff, a company based in Pakistan and the defendant, a Malaysian
company, through a broker Intra Oil and Fats Sdn Bhd (‘Intra Oil’), had
entered into an agreement to sell and purchase 10,000 metric tonne (‘MT’)
of RBD Palm Oilen in bulk. Intra Oil had issued an initial contract/sold note
F
to both the plaintiff and the defendant. A sales contract was subsequently
executed between the plaintiff and the defendant to formalise the initial
contract/sold note. A dispute, however, arose between the plaintiff and the
defendant in respect of the sale and purchase of 10,000 MT of RBD Palm
Olein which had resulted in the plaintiff filing a request for arbitration under
G the PORAM Rules of Arbitration and Appeal pursuant to item 12 of the
initial contract/sold note. In its request for arbitration, the plaintiff had
submitted that the defendant had failed to furnish the performance bond to
the plaintiff. The defendant took the stance that the terms of the sales contract
had clearly and expressly provided that the plaintiff was required to
H issue/furnish a letter of credit (‘LC’) first and upon the issuance of the LC,
only then the defendant was required to furnish the performance bond. The
plaintiff, however, took the opposite stance that only upon the issuance of
the performance bond that the earlier furnished LC would then become
operational. Both the arbitration tribunal and the appeal board found in
I favour of the plaintiff. The plaintiff, via encl. 1 and pursuant to s. 38(1) of
the Arbitration Act 2005 (‘the Act’) applied for an order that the Persatuan
Minyak Sawit Malaysia Award of Arbitration Final Award (‘final arbitration
636 Current Law Journal [2018] 3 CLJ

award’) and the Persatuan Penapis Minyak Sawit Malaysia Final Appeal A
Board Award (‘final appeal board award’) be recognised as binding and be
enforced by entry as a judgment in terms of the award. The defendant
objected to the plaintiff’s application and contended that ss. 38 and 39 of the
Act did not apply to international arbitration and submitted that the
plaintiff’s application must be dismissed. The High Court found in favour of B
the plaintiff and allowed the recognition and enforcement of the final
arbitration award and the final appeal board award. The defendant’s appeal
to the Court of Appeal was dismissed on the grounds that s. 38 of the Act
covered international arbitral awards. The Federal Court, however, directed
that the case be remitted to the High Court to be heard on its merits of the C
defendant’s challenge under s. 39 of the Act before a new judge. The matter
to be determined was whether the defendant had successfully proved any of
the grounds under s. 39 of the Act to challenge the recognition of the
international arbitral award. The defendant raised a preliminary objection in
relation to s. 38 that the plaintiff could not seek to recognise and enforce both
D
the final arbitration award and the final appeal board award. The defendant,
in further opposing the recognition and enforcement by the plaintiff, relied
on ss. 39(1)(a)(iv) and/or (v) and also ss. 39(1)(b)(ii) of the Act, namely on
the following grounds (i) the final appeal board had acted outside the terms
of arbitration stipulated in the plaintiff’s request for arbitration and/or
contains decisions on matters beyond the scope of the submission to E
arbitration; and (ii) both the final award and final appeal board award were
in conflict with the public policy of Malaysia in that they were inconsistent
with the PORAM terms and would be unfair to the seller.
Held (allowing plaintiff’s application in encl. 1):
F
(1) There was no merit in the preliminary point raised for the defendant on
the ground that even though there were two decisions of the arbitral
bodies (namely, the final arbitration award and the final appeal board
award), the latter award was delivered by the appeal board as a result
of an appeal filed by the defendant against the arbitration tribunal award. G
Once the appeal board had heard the appeal and delivered its decision,
the decision or the award by the final appeal board would be the final
award or the concluded award. Hence, the award to be recognised and
enforced obviously would be the final award by the final appeal board.
(para 27)
H
(2) The arbitration clause or term was provided under item 12 of the initial
contract/sold note. The plaintiff had referred the parties’ dispute to the
arbitration tribunal pursuant to the arbitration term provided under the
initial contract/sold note. The defendant did not take any objection on
the arbitration proceedings and as a matter of fact submitted itself within I
the jurisdiction of the two arbitral bodies even though the sales contract
did not provide for an arbitration clause. Thus, the defendant’s
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 637

A contention that the appeal board had acted outside the submission of the
arbitration was clearly an afterthought. Item 12 of the initial contract or
the sold note not only provided for arbitration but also stipulated that
arbitration must be governed by the PORAM Rules and Kuala Lumpur
was nominated as the seat of arbitration. (paras 38-40)
B
(3) The appeal board had dealt with the precise dispute contemplated by the
parties and fell within the terms of the submission to arbitration,
namely, the issue pertaining to the performance bond being the primary
or central issue to the dispute. The final appeal board award did not
contain decisions on matters beyond the scope of the submission to
C arbitration. The appeal board had derived its decision within the scope
of submission of the arbitration. Therefore, the contentions of the
defendant that the appeal board had exceeded its scope was without
merit and therefore must fail. The circumstance in s. 39(1)(a)(iv)
and/or (v) of the Act was never proven by the defendant. (paras 44 &
D 45)
(4) Both the plaintiff and the defendant had voluntarily chosen and agreed
to arbitrate their dispute according to PORAM Rules, which provides
that the decision of the arbitral tribunal shall be final and conclusive.
The defendant was, therefore, estopped from asserting that the award
E was inconsistent with the PORAM Rules. It is trite law that those who
make a contract to arbitrate their dispute should be held to their bargain.
(paras 48 & 49)
(5) The defendant had clearly failed to prove that the award was in conflict
with the public policy of Malaysia. It is trite law that the contravention
F
of public policy argument ought not to be utilised as a facade to re-open
settled matters in the arbitration. The defendant here did not make any
application under s. 37(1)(a)(i) to (vi) or under (b)(ii) of the Act. The
failure in applying to set aside the award under s. 37 of the Act on the
same grounds now attempted to be raised under s. 39 of the Act led to
G the inescapable conclusion that the issues raised by the defendant in this
application lacked bona fide intent and was obviously an afterthought.
The defendant had ultimately failed to discharge the burden of proof to
prove that the defendant’s challenges against the recognition under s. 38
of the Act fell within any of the circumstances under s. 39 of the same
H Act. (paras 52-54)
Case(s) referred to:
Alami Vegetable Oil Products Sdn Bhd v. Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd
[2016] 7 CLJ 19 CA (refd)
Allianz General Insurance Company (M) Bhd & Ors v. Kapar Energy Ventures Sdn Bhd
I [2016] MLJU 1515 (refd)
Archer Daniels Midland Co lwn. TTH Global (M) Sdn Bhd [2016] 1 LNS 1282 HC (refd)
Berjaya Times Square Sdn Bhd v. M Concept Sdn Bhd [2010] 1 CLJ 269 FC (refd)
638 Current Law Journal [2018] 3 CLJ

Cheah Theam Kheng v. City Centre Sdn Bhd (In Liquidation) & Other Appeals [2012] A
2 CLJ 16 CA (refd)
Colliers International Property Consultants (USA) v. Colliers Jordan Lee and Jaafar
(Malaysia) [2010] MLJU 650 (refd)
Open Tyre Joint Stock Company Efirnoye (“EFKO”) v. Alfa Trading Ltd [2012] 1 CLJ
323 HC (refd)
B
Legislation referred to:
Arbitration Act 2005, ss. 38(1), (2), 39(1)(a)(i), (ii), (iii), (iv), (v), (vi), (vii)
For the plaintiff - RS Sodhi; M/s Ajit & Co
For the defendant - Gregory Ling & CS Hui; M/s Ranjit Singh & Yeoh
C
Reported by Suhainah Wahiduddin

JUDGMENT
(Enclosure 1- Application pursuant to s. 38(1) of the Arbitration Act 2005)

Azimah Omar J: D

Introduction
[1] This originating summons (encl. 1) relates to an arbitration matter. By
its encl. 1, the plaintiff is seeking from this court for an order that the
Persatuan Minyak Sawit Malaysia Award of Arbitration Final Award dated E
11 February 2009 and the Persatuan Penapis Minyak Sawit Malaysia Final
Appeal Board Award dated 24 May 2010 made by the Persatuan Penapis
Minyak Sawit Malaysia against Alami Vegetable Oil Products Sdn Bhd, be
recognised as binding and be enforced by entry as a judgment in terms of the
award.
F
[2] The plaintiff’s encl. 1 is filed pursuant to s. 38(1) of the Arbitration
Act 2005 (“Act”).
The Background Facts
[3] The plaintiff (Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd) is a G
limited liability company incorporated under the laws of Pakistan, based in
Pakistan.
[4] While the defendant (Alami Vegetable Oil Products Sdn Bhd) is a
Malaysian based limited liability company incorporated under the laws of
Malaysia. H

[5] Through a broker, Intra Oil and Fats Sdn Bhd (Intra Oil), the plaintiff
and the defendant had entered into an agreement to sell and purchase 10,000
Metric Tonne (MT) of RBD Palm Olein in bulk.
[6] For confirmation of the said sale of 10,000 MT of RBD Palm Olein I
in bulk between the plaintiff and the defendant, Intra Oil had on 8 July 2006
issued an initial contract/sold note (RBDOLN/0607018) to both the plaintiff
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 639

A and the defendant. The initial contract/sold note (exh. SA-2,

encl. 2) contained the detailed particulars of the transaction as well as the
terms and conditions of the sale and purchase of the RBD Palm Olein.
[7] It must be noted that item 12 of the initial contract/sold note reads as
follows:
B
12. Other Terms and Conditions
(a) the Seller to provide 2% unconditional Performance upon receipt of
pre-advice/draft copy of LC (Already received by Seller on 8/7/
2006). Upon receipt of PB buyer shall make LC operative
C (b) Arbitration: Kuala Lumpur as per PORAM Rules.
(c) Seller to appoint SGS as surveyor for quantity and quality.
[8] Two days later namely; on 10 July 2006, a sales contract
(No: AV/BLK-1700(M)08 (exh. “A-1, encl. 2) was executed between the
D
plaintiff and the defendant to formalise the initial contract/sold note.
[9] The term set out in item 12 of the initial contract/sold note with
regards to the performance bond and the letter of credit was incorporated in
the sales contract in the following terms:
Payment: 100% Irrevocable LC At Sight With Reimbursement Allowed
E
Validity: LC Will Be Operative Within 3 Working Days Upon Receipt
Upon Receipt Of The 2% Unconditional Performance Bond/Guarantee
Issued By Seller’s Bank.
[10] Dispute arose between both the plaintiff and the defendant in respect
F
of the sale and purchase of 10,000 MT of RBD Palm Olein which had
resulted in the plaintiff filing a request for arbitration under the PORAM
Rules of Arbitration and Appeal pursuant to item 12 of the initial contract
/sold note.
[11] This court must mention at this juncture that the arbitration clause or
G term with regards to arbitration provided in item 12 of the initial contract
/sold note was not incorporated in the sales contract dated 10 July 2000.
[12] In its request for arbitration, the plaintiff has described the dispute as
follows:
the seller [the Defendant] has failed to make performance bond due to
H
huge rate jump & finally default no shipment.
[13] The defendant had however refuted the plaintiff’s claim that the
defendant had failed to furnish the performance bond to the plaintiff.
[14] The defendant takes the stance that the terms of the sales contract has
I clearly and expressly provided that the plaintiff was required to issue/
furnish a letter of credit (LC) first and upon the issuance of the LC, only then
640 Current Law Journal [2018] 3 CLJ

the defendant is required to furnish the performance bond. The plaintiff A

however, takes the opposite stance that, only upon the issuance of the
performance bond the earlier furnished LC would then become operational.
[15] Both the arbitration tribunal and the appeal board found in favour of
the plaintiff.
B
Salient Findings Of The Arbitral Bodies
[16] For easy understanding of the matter at hand, it is apt for this court
to set out the relevant findings of the two arbitral bodies below.
(i) The final award of arbitration tribunal
C
(Exhibit “A-2”, encl. 2)
The arbitration tribunal consisted of three arbitrators, namely Vinayak
Pradhan, Nakul Rastogi and P.R.Thakore. Arbitration Tribunal
delivered its decision on 11 February 2009. It was a split decision
wherein Nakul Rastogi and P.R. Thakore found in favour of the plaintiff D
but Vinayak Pradhan found in favour of the defendant.
The relevant findings:
61.1. .... The Contract was on a shipped weight and quality basis.
61.2. The Respondent was to procure the issuance of 2% E
Performance Bond.
61.3. It was a condition precedent to the issuance of the 2%
Performance bond that the claimant provided a draft/pre-advice
letter of credit.
F
61.4. It was an implied condition of the contract that the draft/pre-
advice letter of credit would conform to the terms and
conditions of the Contract.
61.5. The obligation for a letter of credit, whether a draft letter of
credit or an issued letter of credit, to conform to the terms of
the Contract, cannot be satisfied through the seller’s assurance G
that it will order the issuing bank to amend the terms of the
letter of credit after the letter of credit is issued and/or the
goods are shipped. Accordingly:
61.5.1. The claimant, in evincing an intention to issue a letter of credit
that would be on a landed weight and quality basis, H
anticipatorily repudiated the contract, even though the claimant
intended to amend the letter of credit after issue or shipment
of the goods, and the Respondent exercised its right to
terminate the Contract following this anticipatory repudiation
by refusing to issue the Performance Bond; or
I
(ii) The final appeal board award
The final appeal board consisted of three members namely; Rajendra
Navaratnam, Mohamed Abd Majed and Yoong Chow Han.
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 641

A (a) At para. 5.2 of the appeal board award, the appeal board had noted
that the respondent had appealed against the arbitration tribunal’s
decision primarily on two grounds.
(1) Whether the Respondent had failed to perform his contractual
obligations in not posting a Performance Bond (PB), and
B whether there were circumstances that discharged the
Respondent from so posting the Performance Bond; and
(2) Whether the Claimant was in breach of contract by proposing
to establish a Letter of Credit (L/C) that provided for payment
on the basis of weights and quality final at the port of discharge,
C instead of at the port of loading.
(b) The relevant findings on the first ground of appeal with regards the
issuance of the performance bond by the defendant (seller).
The board had referred to both the initial contract/sold note dated the
8 July 2006 and the sales contract and had made these findings:
D
5.9 The appeal Board notes that the Initial Contract was not
objected to as to its terms at the time by the Respondent.
5.10 The Appeal Board also finds that the provision in the Sales
Contract relating to the provision of the Letter of Credit is not
E inconsistent with that in the Initial Contract.
5.11 It must be presumed that the Sales Contract ought to reflect the
agreement of the parties in the Initial Contract, unless there is
some evidence that there was further negotiation of these terms
between the Initial Contract and the Sales Contract. No such
evidence was tendered.
F
5.12 Furthermore, as the obligation in the Initial Contract as to the
provision of the Letter of Credit had already been performed
(“Already received”), it would be unconscionable if the
corresponding provision in the subsequent Sales Contract were
to be given an interpretation which was inconsistent with that
G in the earlier Initial Contract.
5.12A. Finally, the Respondent’s message to the Claimant on 19 July
2006 states as follows:
Thanks for arranging the amendments in the Letter of Credit.

H We are arranging the Performing Bond.

A matter of concern to us is that to date we have not been able
to finalise fixture of vessel to carry the cargo in the first week
of August 2006.
For reasons of prudence and to avoid disappointments, we
I request that the latest shipment date to be extended to end
August 2006.
642 Current Law Journal [2018] 3 CLJ

5.13 This is not a response that would be expected from a party who A
is anxiously awaiting a Letter of Credit, as is now being
contended.
We find this message from the Respondent to the claimant to
be the absolute confirmation and agreement of the Respondent
as to its understanding of its obligations to provide a B
Performance Bond as soon as the draft Letter of Credit was
tendered.
5.15 If that is the case, then the draft Letter of Credit which was already
received by the Respondent as of 8th July 2006 would have discharged
the claimant’s initial obligations in respect of the Letter of Credit until the
C
Respondent tendered a Performance Bond, upon which the Claimant
would be obliged to tender an operative Letter of Credit within 3 days.
5.16 The Claimant would therefore be within its rights to declare
default if Respondent did not tender a Performance Bond as
soon as it received the draft Letter of Credit, as happened in
this case. D

5.17 There are therefore no circumstances that discharged the

Respondent from posting the Performance Bond, and the
Respondent therefore fails on this ground of appeal.
(emphasis added)
E
The Earlier Proceedings
[17] Before this court proceeds to consider the merits of this case, it is
pertinent for this court to set out a brief account of the earlier proceedings
that took place in relation to the plaintiff’s application (encl. 1).
F
(a) The plaintiff filed its encl. 1 on 7 March 2013. It was filed under the
new s. 38 of the Act.
(b) When encl. 1 was called for hearing on 30 May 2013 before Justice
Hadhariah bt Syed Ismail, the defendant had objected the plaintiff’s
application and contended the position that the final appeal award could G
not be recognised and enforced by reason of the wording of the old
s. 38 of the Act. The defendant had argued that the old s. 38 of the Act
did not provide for an award for an “international arbitration”. In the
present case, it is not in dispute that the plaintiff is a Pakistani based
company. It was further argued by the defendant that in view of the
H
provision of s. 2 of the Act, the appeal board award is an award of an
international arbitration. However, s. 38 of the Act was subsequently
amended via the Arbitration (Amendment) Act 2011 which came into
force on 1 July 2011, wherein the term “domestic arbitration” was
replaced with “where the seat of arbitration is in Malaysia”.
I
(c) According to the defendant, the purpose of the amendment in s. 38 the
Act is not to extend enforcement to international arbitrations but to
provide for situations where the office of the foreign party is in Malaysia
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 643

A and preponderances of the business or other activities that is the subject

of the arbitration takes place in Malaysia. It was the contention of the
defendant that ss. 38 and 39 of the Act do not apply to international
arbitration. Based on these contentions, the defendant had submitted that
the plaintiff’s application must be dismissed.
B
(d) Justice Hadhariah had found in favour of the plaintiff and allowed the
recognition and enforcement of the final arbitration award and the final
appeal award. It must be made clear that based on the submission of the
parties, Justice Hadhariah’s decision here is that s. 38 of the Act applies
upon international arbitral awards so long as the seat of arbitration is in
C Malaysia. Nonetheless, Justice Hadhariah’s decision at this juncture did
not consider the application of s. 39 of the Act as elucidated in the Court
of Appeal’s decision in Alami Vegetable Oil Products Sdn Bhd v. Hafeez
Iqbal Oil & Ghee Industries (Pvt) Ltd [2016] 7 CLJ 19; [2016] 12 MLJ 169:
What was before the learned trial judge was a s. 38 application.
D What was the complaint before the learned trial judge and before
us by the appellant was in respect of the merit of the award, which
is irrelevant consideration at the stage of a s. 38 application … The
learned trial judge did not deal with a s. 39 of the Act 2005
application.
E (e) Dissatisfied, the defendant had filed a notice of appeal in the Court of
Appeal appealing against Justice Hadhariah’s decision. The Court of
Appeal had dismissed the defendant’s appeal with costs. The Court of
Appeal however further elaborated its stance on the applicability on
ss. 38 and 39 of the Act. Briefly, the Court of Appeal held that s. 38 the
F Act covers international arbitral awards to be put to recognition under
the same section. In addition, the Court of Appeal adds that issues on
merits of the dispute (that were put in arbitration) cannot be raised at
the recognition stage under s. 38 of the Act. The Court of Appeal states
that the only challenge that could be raised is the grounds and instances
as prescribed under s. 39 of the Act. The Court of Appeal also adds that
G
for such challenge under s. 39 of the Act to be raised, the challenge must
be raised via a formal application:
It was not permissible to argue issues relating to the award or merit
of the award etc under s. 38 of the Act as the merit of the award
could not be an issue under s. 38. Section 38 is a ‘recognition
H
procedure’ to convert an arbitration award to a judgment and can
only be done by the person holding an arbitration award. What
was before the court was a s. 38 application which was in respect
of the merit of the award, which was irrelevant consideration at the
stage of s. 38 application.
I It was permissible to place such an argument in an application
under s. 39 of the Act. For s. 39 to apply, the application must be
made by the respondent to the award. The respondent to the
award was the appellant and no such application had been filed.
644 Current Law Journal [2018] 3 CLJ

Instead, the appellant had only filed an opposing affidavit stating A

why the respondent’s application should not be allowed. The
appeal had no merit and was an abuse of judicial process as the
appellant had not taken the argument before the court by a proper
application under s. 39 of the Act.
(f) The defendant thereafter applied for leave to appeal to the Federal Court B
and on 22 October 2015, the Federal Court granted leave on the
following questions:
(i) whether or not the Defendant, being part of a group of persons/
entities upon whom an international arbitration award had been
made against, prior to 1.7.2011, would be allowed to challenge the C
international arbitration award at the recognition or enforcement
stage, i.e. when an application was made pursuant to section 38 of
Act 2005?
(ii) whether under the circumstances of this case, the Defendant, being
part of a group of persons/entities upon whom an international
D
arbitration award had been made against prior to 1.7.2011, could
avail itself of a “passive remedy” as recognised in the Federal Court
decision in State Government of Sarawak v. Chin Hwa Engineering
Development Co [1995] 3 MLJ 237, meaning that it did not have to
take the initiative to attack an award, but could simply wait until an
application was made to recognise or enforce the award and resist E
the application then?
(iii) could the circumstances of the present case constitute an additional
situation upon which a party in the same position as the applicant
(i.e. the Defendant) could avail itself of the “passive remedy” in
order to meet the ends of justice?
F
(g) It is pertinent to note that the Federal Court then had not granted leave
to questions regarding the applicability of s. 38 regarding international
arbitral awards. It remains undisputed that s. 38 of the Act applies. The
questions which were granted leave only pertain to the nature and the
manner of challenge that may be raised by the appellant/defendant. G
(h) The Federal Court heard the appeal and on 13 October 2016 the Federal
Court allowed the appeal with no order as to costs. Both the Court of
Appeal decision and High Court decision were set aside (but limited to
only questions which were granted leave by the Federal Court). The
Federal Court had directed that the case be remitted to the High Court H
to be heard on its merits of the appellant’s challenge under s. 39 of the
Act before a new judge. Based on the previous courts’ decisions, as well
as both parties’ respective written and oral submission before this court,
it is understood that the task at hand for this court, is to determine the
merits defendant’s challenge of the recognition of the award under s. 39 I
of the Act. And this was exactly what was submitted by the parties
(particularly by the defendant) before this court. It is essential for this
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 645

A court to stress that the applicability of s. 38 of the Act is not a live issue
in the present case as the Federal Court had not allowed any questions
to deter the application of the provision with regard to international
arbitral award. It remains that s. 38 of the Act is sufficiently wide to
cover international arbitral awards. The only matter to be determined
B by this court is whether the defendant had successfully proven any of the
grounds under s. 39 of the Act to challenge the recognition of the
international arbitral award.
(i) It is utterly crucial to be appreciated that the merits dealt with by both
of the counsels, and this court is not the exactly the merits of the finding
C of any of the arbitral tribunal, but the merits of the defendant’s challenge
within the purview of s. 39 of the Act. And this is exactly in line with
the decision of the Federal Court. Even the submission by the defendant
is generally tailored to s. 39 of the Act.
[18] Hence, this court now shall determine the plaintiff’s application
D
namely; whether or not the plaintiff is able to recognise and enforce the final
award and the final appeal award pursuant to the new s. 38 of the Act and
most pertinently, whether there are grounds for the refusal of such
recognition or enforcement pursuant to s. 39 of the Act.
The Law - Section 38 And 39 Of The Act
E
[19] The new s. 38 of the Act provides as follows:
Recognition and enforcement
(1) On an application in writing to the High Court, an award made in
respect of an arbitration where the seat of arbitration is in Malaysia
F
or an award from a foreign State shall, subject to this section and
section 39 be recognised as binding and be enforced by entry as a
judgment in terms of the award or by action.
(2) In an application under subsection (1) the applicant shall produce-

G (a) the duly authenticated original award or a duly certified copy of

the award; and
(b) the original arbitration agreement or a duly certified copy of the
agreement.
(3) Where the award or arbitration agreement is in a language other
H than the national language or the English language, the applicant
shall supply a duly certified translation of the award or agreement
in the English language.
(4) For the purposes of this Act, “foreign State” means a State which
is a party to the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards adopted by the United Nations
I
Conference on International Commercial Arbitration in 1958.
646 Current Law Journal [2018] 3 CLJ

[20] Section 38(2) provides that: A

In an application under subsection (1) the applicant shall produce-

(a) the duly authenticated original award or a duly certified copy of the
award and
(b) the original arbitration agreement or a duly certified copy of the B
agreement
[21] Section 39 of the Act provides:
Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an award, irrespective of the State C
in which it was made, may be refused only at the request of the
party against whom it is invoked-
(a) where that party provides to the High Court proof that-
(i) a party to the arbitration agreement was under any
incapacity; D

(ii) the arbitration agreement is not valid under the law to which
the parties have subjected it, or, failing any indication
thereon, under the laws of the State where the award was
made;
(iii) the party making the application was not given proper notice E
of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present that party’s
case;
(iv) the award deals with a dispute not contemplated by or not
falling within the terms of the submission to arbitration; F
(v) subject to subsection (3), the award contains decisions on
matters beyond the scope of the submission to arbitration;
(vi) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a G
provision of this Act from which the parties cannot derogate,
or, failing such agreement, was not in accordance with this
Act; or
(vii) the award has not yet become binding on the parties or has
been set aside or suspended by a court of the country in H
which, or under the law of which, that award was made; or
(b) if the High Court finds that:
(i) the subject-matter of the dispute is not capable of settlement
by arbitration under the laws of Malaysia; or
I
(ii) the award is in conflict with the public policy of Malaysia.
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 647

A (2) If an application for setting aside or suspension of an award has

been made to the High Court on the grounds referred to in
subparagraph (1)(a)(vii), the High Court may, if it considers it proper,
adjourn its decision and may also, on the application of the party
claiming recognition or enforcement of the award, order the other
party to provide appropriate security.
B
(3) Where the decision on matters submitted to arbitration can be
separated from those not so submitted, only that part of the award
which contains decisions on matters submitted to arbitration may be
recognised and enforced.

C
[22] It remains as a rule of law that the above s. 38 of the Act provides that
a party who had obtained an arbitration award (where the seat of arbitration
is in Malaysia irrespective of the award being international or domestic) can
apply to the High Court for an order that the award be recognised as binding
and be enforced by entry as a judgment in terms of the award or by action.
D [23] Meanwhile, s. 39 of the Act expressly provides the numerous
instances where such an application for recognition can be refused at the
request of the party against whom it is invoked. It is for the party against
whom the application is invoked, to produce evidence or proof to the
satisfaction of the court that instances under s. 39(1)(a), (i) to (vii) has been
established.
E
[24] The plaintiff’s application is supported by an affidavit in support
affirmed by Sheikh Muhammed Ikram a/l Sheikh Muhammed Yaqoob on
30 October 2012.
The Preliminary Objection
F
[25] At the commencement of the hearing of the plaintiff’s application, the
defendant raised a preliminary point in relation to s. 38 that the plaintiff
cannot seek to recognise and enforce both the final arbitration award the final
appeal award. It was submitted by counsel for the defendant that two
decisions by the two arbitral bodies were arrived on different reasoning and
G
awarded different amounts of compensation. Furthermore, the compensation
amounts awarded were based on a different calculation/formula.
[26] It was submitted by counsel for the defendant that if the plaintiff were
to recognise and enforce both the final award and final appeal award, such
H enforcement would lead to confusion as to what was the basis for the award
in favour of the plaintiff. Hence, the plaintiff can only seek to recognise and
enforce the final appeal award.
[27] This court finds no merits in the preliminary point raised by counsel
for the defendant simply on the ground that even though there are two
I decisions of arbitral bodies, (namely; the final arbitration award the final
appeal award) the latter award was delivered by the appeal board as a result
of an appeal filed by the defendant against the arbitration tribunal award.
648 Current Law Journal [2018] 3 CLJ

Once the appeal board has heard the appeal and delivered its decision, thus A
the decision or the award by the final appeal board would be the final award
or the concluded award. Hence, the award to be recognised and enforced
obviously would be the final award by the final appeal board.
The Plaintiff’s Case
B
[28] It was submitted by the plaintiff’s counsel that the plaintiff has duly
complied with both requirements in this application and is entitled to the
order prayed for, until and unless the defendant can bring itself within s. 39
of the Act.
[29] Counsel for the plaintiff submitted that the defendant has not identified C
in their affidavits of which are the exact provisions of s. 39(1)(a)(i) to (vii)
that the defendant is invoking.
[30] Counsel for the plaintiff further submitted that under s. 39 of the Act
the defendant is required to prove the grounds of refusal by affidavit
evidence. The failure of the defendant to state the specific provision relied D
upon in its affidavit should appropriately lead the court to dismiss
defendant’s challenge under s. 39 of the Act. Regarding this contention,
counsel for the plaintiff had referred to the case of Archer Daniels Midland Co
lwn. TTH Global (M) Sdn Bhd [2016] 1 LNS 1282; [2017] 7 MLJ 325.
E
The Defendant’s Opposition
[31] In opposing the plaintiff’s application, the defendant filed the
following affidavits:
(i) affidavit in reply affirmed by Sultan Alaudin a/l KS Mohamed Ismail
on 22 February 2013 (Sultan Alaudin). F

(ii) affidavit in reply affirmed by Sultan Alaudin a/l KS Mohamed Ismail

on 27 February 2017.
[32] Upon this court’s perusal on both affidavits affirmed by Sultan
Alaudin in opposing the plaintiff’s application, this court wholly agrees with G
the submission by counsel by the plaintiff that in both of the defendant’s
affidavits, the defendant did not specifically state or identify the exact
provisions of s. 39(1)(a), (i) to (vii) that the defendant is invoking. However,
the counsel for the defendant had in para. 29 of the defendant’s written
submission had submitted that in opposing the recognition and enforcement H
by the plaintiff, the defendant relies on s. 39(1)(a)(iv) and/or (v) of the Act
and also s. 39(1)(b)(ii), namely, the following grounds:
(i) the final Appeal Board had acted outside the terms of Arbitration
stipulated in the plaintiff’s Request for Arbitration and/or contains
decisions on matters beyond the scope of the submission to arbitration. I
(ii) both the Final Award and Final Appeal Award are in conflict with the
public policy of Malaysia in that they are inconsistent with the PORAM
terms and would be unfair to the seller.
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 649

A Ground (i): the final Appeal Board had acted outside the terms of
Arbitration stipulated in the plaintiff’s Request for Arbitration and/or
contains decisions on matters beyond the scope of the submission to
arbitration
[33] It was submitted on behalf of the defendant that the appeal board had
B considered matters outside the terms of the submission to arbitration and this
has occasioned a circumstance under s. 39(1)(a)(iv) and/or (v) of the Act.
With regards to this ground, counsel for the defendant had submitted the
following argument:
(i) the plaintiff in its request for arbitration had requested for arbitration
C of the dispute arose between the plaintiff and the defendant under
Contract Number: AV/BLK-1700(M)/06 dated 10 July 2006 which
was the sales contract.
(ii) it is not in dispute that the sales contract constituted a binding contract
between the plaintiff and the defendant and the said sales contract
D
contained terms and conditions which has been agreed upon between
the parties.
(iii) notwithstanding the fact that in the request for arbitration, the plaintiff
had only cited that the dispute between the plaintiff and the defendant
E
arose from the sales contract, the appeal board when considering the
appeal before them had referred and considered not only the sales
contract but also the initial contract/sold note issued by Intra Oil. The
appeal board in this case had found that the said initial contract/sold
note constituted the actual binding agreement between the plaintiff and
the defendant. The appeal board had gone further to consider cl. 12
F
of the initial contract/sold note and concluded that the draft letter of
credit which was issued by the plaintiff to the defendant was a
sufficient compliance of the plaintiff’s obligation to issue letter of
credit. Since the plaintiff had issued the letter of credit, it was
incumbent on the defendant upon receipt of the letter of credit to
G prepare and issue the performance bond.
(iv) the appeal board had therefore derived its decision from the wrong
contract namely; outside the sales contract, and hence acted outside
and beyond the terms of the submission to arbitration (which only
stipulated the sales contract). Consequentially, the award by the
H
appeal board gives rise to the circumstance under s. 39(1)(a)(v) of the
Act.
(v) when the appeal board had considered matters outside the sales
contract, the appeal board had gone out the parol evidence rule. The
I
application of terms or matters outside the sales contract constituted
a clear violation of the way in which contracts should be interpreted.
On this contention, counsel for the defendant had relied on the Federal
Court’s decision in the case of Berjaya Times Square Sdn Bhd
v. M Concept Sdn Bhd [2010] 1 CLJ 269; [2010] 1 MLJ 597.
650 Current Law Journal [2018] 3 CLJ

(vi) the appeal board had no reason to conclude that a “draft” letter of A
credit was agreed upon by the parties when there was no mention of
the word “draft” in the sales contract. Hence, the conclusion that a
“draft” letter of credit was sufficient amounted to a material change
in the already clear terms of the sales contract.
B
(vii) when the sales contract provided that the letter of credit or L/C will
be “operative within three working days upon receipt of the
2% unconditional performance bond …”. It must mean that the letter
of credit had to have first been issued before the performance bond.
Otherwise, the sales contract would have used the word “issued”
rather than “operative”. C

(viii) even from a commercial perspective, the requirement to furnish a

proper letter of credit rather than a mere draft letter of credit is
important. In the marketplace, when the abovementioned clause is
stipulated, the buyer (in this case the plaintiff) would have to arrange
D
for its bank to issue the letter of credit in favour of the seller/
beneficiary (in this case the defendant) and transmit the same via
SWIFT to the advising bank with instructions to release the letter of
credit to the seller/beneficiary upon them posting the two per cent
performance bond. Accordingly, it makes no sense for a “draft” letter
of credit to be issued when such a “draft” would carry no weight as E
it did not constitute a formal document (carrying with it the
seriousness of the party to commit to the transaction).
(xi) the obligation of the defendant to issue the performance bond only
arises when the letter of credit itself was issued by the plaintiff
F
(and not the draft letter of credit). And thus, the decision arrived at
by the appeal board is manifestly wrong and must not be recognised
or enforced by the court.
Court Analysis And Findings On Ground (I)
[34] The dispute in this matter obviously concerns parties obligation in a G
contract and primarily in relation of interpretation of contract, namely;
whether the plaintiff as the buyer is required to issue the letter of credit first
or whether the defendant as the seller is required to issue the performance
bond first.
[35] It is the defendant’s contention that, since the plaintiff’s in its request H
for arbitration had only cited the sales contract in requesting the dispute be
arbitrated by arbitrator, it is incumbent upon both the arbitral bodies to
adjudicate the dispute within the confines or the parameters of the sales
contract only. According to the defendant, when the plaintiff referred the
dispute to the arbitration tribunal by citing only the sales contract, therefore I
the submission of the arbitration shall strictly be based on the sales contract
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 651

A and consideration must only be given to the terms and conditions contained
in the sales contract. Given that situation, the arbitral bodies should only
focus on the sales contract and must not take into account the initial contract
or the sold note.
[36] In essence the defendant argues that, when the appeal board in this
B
case had considered the initial contract or sold note in arriving at its decision,
the appeal board had gone outside the submission of the arbitration, and
therefore has occasioned a circumstance in s. 39(1)(a)(iv) and/or (v) of the
Act.

C
[37] In analysis, this court will first begin by setting out what was covered
or provided under the sales contract. The sales contract provides the
following particulars:
CONTRACT NO : AV/BLK-1700(M)/05 DATE: 10TH JULY 2008

SELLER : ALAMI VEGETABLE OIL PRODUCTS SDN BHD

D WE CONFIRM SOLD TO YOU THE FOLLOWING ITEMS DATED 10/07/2006:

BUYER : HAFEEZ IQBAL OIL & GHEE INDUSTRIES (PVT) LTD,

PLOT NO.191 & 192, INDUSTRIAL AREA D, ISLAMABAD,
PAKISTAN

INTERNATIONAL BROKER : INTRA OILS AND FATS SN. BHD.

QUANTITY : 10,000 MT
E
COMMODITY : RBD PALM OLIEN IN BULK

PORAM SPESIFICATION : FFA (AS PALMITIC : 0.10% MAX

…. : 0.10% MAX

IV : 58 MIN
F MELTING POINT (ADCB CC 3-25) : 24 DEG. C MAX

COLOUR (5% LOVIBOND CELL) : 8 RED MAX

CLOUD POINT : 10 MAX

SHIPMENTS : BEFORE 10TH AUGUST 2006

PRICE : USD 450 PMT CNF PORT QABIM, PAKISTAN

G
PAYMENT : 100% IRREVOCABLE, L/C AT SIGHT WITH TT
REIMBURSEMENT ALLOWED

L/C TO BE ESTABLISHED TO BENEFICIARY ALAMI VEGETABLE OIL PRODUCTS SDN

BHD.

BANK DETAILS : STANDARD CHARTERED BANK MALAYSIA BERHAD

H KLANG BRANCH
NO. 11, 15 & 17 KEPAYANG,
41050 KLANG, SELANGOR DARUL EHSAN.

TEL : 603-3344 1700/ 3344 1170

FAX : 603-3344 1770

I SWIFT : SCBLMYXXXXX

ACCOUNT NO. 708-1- ...

652 Current Law Journal [2018] 3 CLJ

WEIGHT ANALYSIS : FINAL AT THE PORT OF LOADING A

QUALITY AND QUANTITY : FINAL AT THE PORT OF LOADING

ORIGIN : MALAYSIA

VALIDITY : L/C WILL BE OPERATIVE WITH IN 3 WORKING DAYS

UPON RECEIPT OF THE 2% UNCONDITIONAL B
PERFORMANCE BOND/ GUARANTEE ISSUED BY
SELLERS BANK

[38] It must be noted and observed here that the sales contract did not
provide a term for arbitration. The arbitration clause or term is provided
under item 12 of the initial contract/sold note. In the present case, the C
plaintiff had referred the parties’ dispute to arbitration tribunal pursuant to
the arbitration term provided under the initial contract/sold note. The
defendant did not take any objection on the arbitration proceedings and as
a matter of fact submitted itself within the jurisdiction of the two arbitral
bodies even though the sales contract did not provide for arbitration clause.
D
[39] Here, it is crystal clear that when the dispute was referred to the
arbitration tribunal it was pursuant to the initial contract/sold note and this
was accepted by the defendant readily and willingly. And on top of that, the
defendant who was not happy with the award of the arbitration tribunal had
filed an appeal to the appeal board. E
[40] In addition to that, this court agrees with the submission of counsel for
the plaintiff that the defendant’s contention that the appeal board had acted
outside the submission of the arbitration, was clearly an afterthought. Item
12 of the initial contract or the sold note not only provides for arbitration
but also stipulates that arbitration must be governed by the PORAM Rules F
and Kuala Lumpur was nominated as the seat of arbitration.
[41] Thereto, this court opines that the defendant cannot be allowed to
willy-nilly elect when the initial contract or the sold note should apply or
should not apply at its whims and fancies. Upon the defendant submitting
itself to the jurisdiction of arbitration by virtue of item 12 of the initial G
contract/sold note, thus, it entails that the rest of the terms provided under
the initial contract or the sold note must also have similar application. Both
the arbitral bodies are justified in making reference to both the sales contract
and the initial contract/sold note and consider the same. Upholding the same
principle, the Court of Appeal in the case of Cheah Theam Kheng v. City Centre H
Sdn Bhd (In Liquidation) & Other Appeals [2012] 2 CLJ 16 had held the
following:
In other words of Sir Nicolas Browne-Wilkinson VC in Express Newspapers
Plc v News (UK) Ltd and Others (1990) 3 All ER 376 at pp. 383 to 384: There
is a principle of law of general application that it is not possible to I
approbate and reprobate. That means you are not allowed to blow hot
and cold in the attitude that you adopt. A man cannot adopt two
 Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd v.
[2018] 3 CLJ Alami Vegetable Oil Products Sdn Bhd 653

A inconsistent attitude towards another: he must elect between them and,

having elected to adopt one stance, cannot thereafter be permitted to go
back and adopt an inconsistent stance
[42] Be that as it may, it is undisputed that the dispute between the plaintiff
and the defendant is primarily in respect of the issuance of the performance
B bond by the defendant and the issuance of the letter of credit by the plaintiff.
The issuances of the performance bond as well as letter of credit are set out
both in the sales contract as well as the initial contract/sold note. Both the
sales contract and the initial contract were put before the appeal board for
their consideration.
C [43] What the appeal board had done in this present case was to consider
the initial contract/sold note together with the sales contract and read both
documents harmoniously and then conclude an express finding of fact that
the documents were consistent.
[44] This court is of the view that the appeal board has dealt with the
D
precise dispute contemplated by the parties and falling within the terms of
the submission to arbitration namely, the issue pertaining to the performance
bond being the primary or central issue to the dispute as cited by the plaintiff
in its the request for arbitration.

E [45] It is this court’s judgment that that the final appeal board award did
not contain decision on matters beyond the scope of the submission to
arbitration. The appeal board had derived its decision within the scope of the
submission of the arbitration. And therefore the contentions of the defendant
that the appeal board had exceeded its scope are without merits and therefore
must fail. The circumstance in s. 39(1)(a)(iv) and/or (v) of the Act was never
F
proven by the defendant.
Court Analysis And Findings On Ground (ii)
Ground ii: both the Final Award and Final Appeal Award are in conflict
with the public policy of Malaysia in that they are inconsistent with the
G PORAM terms and would be unfair to the seller.
[46] The defendant had contended that the final award and/or the final
appeal award are in conflict with the public policy of Malaysia. This court
is in agreement with the plaintiff’s counsel that the defendant in its affidavits
does not state how the final appeal award is in conflict with the public policy
H of Malaysia.
[47] The defendant had never raised any issue in their affidavit explaining
that the award conflicted with fundamental principles of natural justice,
illegality or morality or otherwise offensive to the public policy of Malaysia.
The only ground that the defendant had raised was that somehow (though not
I
explained by the defendant) the award is allegedly inconsistent with the
PORAM terms and would be unfair against the defendant.
654 Current Law Journal [2018] 3 CLJ

[48] In the present case, both the plaintiff and the defendant had voluntarily A
chose and agreed to arbitrate their dispute according to PORAM Rules. The
PORAM Rules expressly provide that the decision of the arbitral tribunal
shall be final and conclusive.
[49] The defendant is therefore estopped from asserting that the award is
B
inconsistent with the PORAM Rules. It is trite law that those who make a
contract to arbitrate their dispute should be held to their bargain. (See: Allianz
General Insurance Company (M) Bhd & Ors v. Kapar Energy Ventures Sdn Bhd
[2016] MLJU 1515)
[50] Coming back to the issue of contravention of public policy, the law C
requires the defendant to adduce proof that the award is in conflict with the
public policy of Malaysia. The defendant here has clearly failed to prove the
same. It is trite law that the contravention of public policy argument ought
not to be utilised as a facade to reopen settled matters in the arbitration.
(See: i. Colliers International Property Consultants (USA) v. Colliers Jordan Lee
D
and Jaafar (Malaysia) [2010] MLJU 650; ii. Open Tyre Joint Stock Company
Efirnoye (“EFKO”) v. Alfa Trading Ltd [2012] 1 CLJ 323; [2012] 1 MLJ 685)
[51] The defendant here did not make any application under s. 37(1)(a)(i)
to (vi) or under (b)(ii) of the Act.
[52] This court agrees with the plaintiff’s submission that if the defendant E
was indeed serious about their contention (that the final appeal board had
acted outside the terms of arbitration stipulated in the plaintiff’s request for
arbitration and/or contains decisions on matters beyond the scope of the
submission to arbitration and that both the final award and final appeal award
are in conflict with the public policy of Malaysia) the defendant should have F
moved the court under s. 37 of the Act to set aside the award which they
failed to do.
[53] The failure in applying to set aside the award under s. 37 the Act on
the same grounds now attempted to be raised under s. 39 the Act, leads to
the inescapable conclusion that the issues raised by the defendant in this G
application lacks bona fide intent and obviously an afterthought.
[54] It is this court’s judgment that the defendant in the present case has
ultimately failed to discharge the burden of proof to prove that the
defendant’s challenges against the recognition under s. 38 of the Act falls
within any of the circumstances under s. 39 of the same Act. H

Court’s Decision
[55] Based on the above mentioned reasons, the plaintiff’s application in
encl. 1 is allowed with costs. This court also orders that the defendant to pay
the plaintiff the sum of RM10,000 as costs. I