Enforceability of Foreign Arbitral Awards in India

When it comes to matters of arbitration, the prevalent judicial scenario in India nurtures a minimal interference model for courts. In order to give more autonomy to the process of arbitration and to bring it in line with the international regime, the Indian Supreme Court (“SC”) is making efforts to ensure that courts do not unnecessarily interfere with arbitration proceedings.

Statutory Provisions The primary legislation governing arbitration in India is the Arbitration and Conciliation Act, 1996. (“Act”). Part II of the Act stems from India being a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) and the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927. For a foreign arbitral award to be enforceable in India, the following criteria must be met[1]:

1. the country must be a signatory to the New York Convention, and
    
2. the Central Government should have notified the said country as
   having reciprocal provisions through the official gazette.

Section 48 under Chapter I of Part II deals with enforcement of foreign arbitral awards. It lays down the conditions under which the award becomes unenforceable, if the award:

1. is ultra vires to the contract that the parties have entered into;
    
2. contains decisions on issues that are beyond the decided and permitted scope of arbitration;
    
3. would violate public policy in India if executed or it has been set aside by a competent court in the country or under the law in which the award was made;[2]
    
4. covers subject matters that are not classified as arbitrable under the Act;
    
5. has not been delivered in accordance with the law that governs the arbitration or the laws of the country in which the award was delivered depending upon the agreement between the disputing parties.

Process of Enforcing Foreign Arbitral Awards

The SC, in the case of  Fuerst Day Lawson vs. Jindal Exports Ltd[3], while elaborating the process of execution and enforcement of foreign awards in India, held that the process commences with the filing of an execution petition in a competent court, which is then obligated to check whether the award is in compliance with various requirements and guidelines of the Act. Thereafter, the court must check the arbitrability of the subject-matter, after which the award can be enforced as a valid decree. This decree, then, can be executed in the same manner as a decree under the provisions of the Code of Civil Procedure, 1908.

Grounds for Setting Aside Foreign Arbitral Awards

In the recent case of Vijay Karia and Others vs. Prysmian Cavi E Sistemi SRL and Others[4], (“Vijay Karia”) the SC, while reiterating the importance of minimal interference and considering the grounds for setting aside a foreign arbitral award, dismissed a special leave petition under Article 136 of the Indian Constitution and clarified the following:
 

“1. Refusal to enforce a foreign award may be allowed under Section 48 of the Act only if the party resisting enforcement can prove that any of the stated grounds have been made to resist enforcement and the discretion to do so lies with the Court in order to ensure a balancing act.

1. Section 48(1)(b) needs to be harmoniously interpreted along with the preceding phrase “was otherwise unable to present his case”.
    
2. An award can be set aside if it overtakes the basic notion of justice.
    
3. The following will not fall under the ambit of Section 48 of the Act.
   1. Any ground which is an after-thought and was not taken before the learned arbitrator in the given circumstances.
       
   2. If it is prima facie that no adverse inference has been drawn by the arbitrator and there is no breach of natural justice.
       
   3. The award cannot be challenged on the sole ground that critical evidence has not been taken into account or admissions have not been ignored.
       
   4. Valuation on the basis of merits is for the arbitrator to determine and falls outside the purview of any grounds laid down under Section 48.
       
   5. Interpretation of an agreement by an arbitrator being perverse is not a ground under Section 48(1)(b).
       
   6. Pleas going to the unfairness of the conclusions of the award are foray into the merits of the matter, and which is plainly forbidden by Section 48 read with the New York Convention.”

The SC further stated that the jurisdiction under Article 136 of the Constitution has limited applicability and scope. If the arbitral award has already dealt with the merits of the case, the interference of the jurisdictional high courts and the SC is unnecessary and arbitrary.

The position taken in Vijay Karia was reiterated and emphasised in the case of Centrotrade Minerals and Metals Inc., vs. Hindustan Copper Inc.,[5] wherein the SC held that the object of the Act is to enforce foreign awards subject to certain minimal, well-defined exceptions and that these awards must be interpreted by courts in a supportive manner, with the courts being inclined towards upholding the awards rather than destroying them. This position is in line with the concept of minimal interference.

However, this was not always the case. Before Vijay Karia, not much heed was paid to the idea of minimal interference by the Indian courts. For instance, in the 2016 case of Daiichi Sankyo Company Limited vs. Malvinder Mohan Singh And Ors.,[6] the Delhi High Court made an extremely limited interpretation with respect to the enforcement of a foreign arbitral award and stated that the enforcement of an award could be refused if it was contrary to the (a) fundamental policy of India, (b) interest of India, and (c) justice or morality. The Delhi High Court did not address what constituted ‘fundamental policy’, ‘interest’ or ‘morality’. Thus, the enforcement of foreign arbitral awards was left upon the wide discretion of courts which only resulted in increased judicial interference in arbitration.
 

Conclusion

The SC while dealing with Vijay Karia, was of the opinion that most of the grounds raised by the appellants in the matter pointed towards alleged perversity of the award, which was outside the range of section 48 of the Act. The view of minimal interference taken by the SC brought much needed clarity and finality to the position of enforceability of foreign arbitral awards in India. Following this, the courts have stepped in to prevent enforcement only on limited grounds and in select cases. Even in such select cases, the threshold for convincing the court that an award should not be enforced is high. Therefore, in view of the present position in India, it appears that enforcement of foreign arbitral awards is the norm and refusal is the exception. The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal, Hyderabad.

[1] Byron Sequeira & Dhruv Srivastava, ‘Enforceability of Foreign Arbitral Award in India: Developments’, May 2020

[2] Renusagar Power & Co. Ltd., vs. General Electric Company, (1990) 1 BOM CR 561

[3] M/s. Fuerst Day Lawson vs. Jindal Exports Ltd., AIR 2010 Del 135

[4] Vijay Karia and Others vs. Prysmian Cavi E Sistemi SRL and Others, 2020 SCC OnLine SC 177

[5] Centrotrade Minerals and Metals Inc., vs. Hindustan Copper Inc., (2006) 11 SCC 245

[6] Daiichi Sankyo Company Limited vs. Malvinder Mohan Singh And Ors., 2018 SCC OnLine Del 6869