Taneja Law Office - New Delhi

This blog series would be a two part blog. The following blog gives an insightful read on the Recognition, Enforcement & Execution of Foreign Awards by Courts in India. It explains the meaning of Foreign Awards, their enforcement and conditions of enforcement.

Introduction: –

In this blog, we will see the various provisions contained in the Arbitration & Conciliation Act, 1996 (“Arbitration Act”) well as any applicable provisions contained in the Civil Procedure Code, 1908 revolving around the concept of Recognition, Enforcement & Execution of Foreign Awards by Courts in India and there will be an attempt to flush out some of the confusion in relation to foreign arbitral awards.

Overview: –

Part II of the Act contains mainly 2 chapters viz. Chapter I dealing with the New York Convention Awards (“NYCA”) & Chapter II dealing with the Geneva Convention Awards. However, it is pertinent to note that the Geneva Convention has pretty much become obsolete, because when 2 parties sign the New York Convention, the Geneva Convention gets superseded & ceases to have effect due to the operation of Article VII (2) of the NYC.

Hence, there is no need to touch the topic of Geneva Convention and we will leave the same out of the area of discussion in this blog.

Definition/Essentials of a “Foreign Award”: –

The definition of the term ‘Foreign Award’ is reflected in Section 44 of the Arbitration Act.

From the said definition, the following conditions are necessary for an award to qualify as a ‘Foreign Award’:

• It should be one which emanates out of a commercial relationship;
• It should be one which emanates out of an agreement in writing;
• It should be one which emanates out of a contract in which one of the two (or more) parties should be from a territory which is a reciprocating territory;

Enforcement of New York Convention Awards: –

The provisions pertaining to the enforcement of the NYC Awards are encapsulated in Section 47 to 49 of the Arbitration Act. Section 47 (1) of the Arbitration Act spells out the procedural requirements which are necessary for filing an application for enforcement of a foreign award.

On 14.11.2018 in the case of P.E.C Limited vs. Austbulk Shipping the apex court held that the term “in writing” has a connotation, wide enough to include a Charter Party Agreement as well. This means that if the arbitration clause is contained in a charter party agreement, the same would be applicable to the disputes arising between the parties to the agreement and they will be bound by the same. It also observed that as per English law, the charter party agreement need not be necessarily signed by the parties in order for it to be binding on them. The Hon’ble Supreme Court also clarified that though Section 47 (1) of the Arbitration Act contains the word “shall” in relation to the production of the evidence has to be read as “may”.

Conditions/Grounds for Enforcement: –

Section 48 of the Act is the most crucial provision with regards to enforcement of the NYC Awards as it envisages the conditions/grounds for enforcement of a NYC Award.  Section 48 is enacted to give effect to Article V of the NYC, which enables member States to retain some sovereign control over enforcement of foreign awards in their territory. The ground of public policy perhaps provides the strongest expression of a Sovereign’s reservation that its executive power shall not be used to enforce a foreign award which is in conflict with its policy. The other grounds mainly relate to the structural integrity of the arbitral process with focus on inter party rights. These grounds are exhaustive in nature as the same can be derived from the preface of this section. These grounds being exhaustive in nature have to be construed strictly and cannot be enlarged by way of interpretation.

It is pertinent to mention here that an Indian Court can, by no means, set aside a foreign award, but can only refuse the enforcement of the foreign award if any of the conditions mentioned in Section 48 are not met. Further, the courts are always in their own discretion to refuse the enforcement of a foreign award even if it meets all the conditions prescribed in Section 48 of the Act. It is also very important to clear that the court may exercise its jurisdiction & on its own instance evoke the 2 grounds mentioned in Section 48 (2) even if any of the said grounds therein have not been raised by the party contesting/objecting to the enforcement.

The landmark judgment on Public Policy which is the ground mentioned in Section 48 (2) (b) is the judgment passed by the apex court in Renusagar Power Co. Ltd. vs. General Electric Co. In this judgement, the court made it clear that while dealing with enforcement of a Foreign Award, the Public Policy exception has to be construed in a narrow manner & it cannot be given the same interpretation as is done with the enforcement of a Domestic Award under section 34 of the Arbitration Act.

In this judgment, the court held that broadly, 3 issues can be covered by the above mentioned narrow interpretation:

• If the foreign award is contrary to the fundamental policy of Indian Law & not merely a statute;
• If it violates the Interest of India;
• If it is in contravention/violation of justice or morality.

It is pertinent to note that the above ground of “Interest of India” has been done away with due to the Arbitration & Conciliation (Amendment) Act, 2015. The term ‘Public Policy’ will now include only “fundamental policy of Indian law” and “justice or morality”. “Fundamental policy of Indian law” is now to be understood as laid down in the said judgment.

The Renusagar Judgment held the field until the 1996 Act came into force. However, the above principle expounded in Renusagar judgment was re-iterated by a 3 judge bench decision of the apex court in Shri Lal Mahal vs Progetto Grano SpA by saying that with respect to enforcement of foreign awards, you have to adopt a narrow interpretation/construction and a wider interpretation cannot be ventured into.

DISCLAIMER: This article has been shared for information purposes only and is intended merely to highlight issues. The information and/or observations contained in this article do not constitute legal advice and should not be acted upon in any specific situation without appropriate legal advice. The views expressed in this article do not necessarily constitute the final opinion of Madhyasthta or Bharati Vidyapeeth New Law College, Pune.

– Mr. Chirag Bhatia

Associate

Advani & Co., Mumbai