The rationale behind allowing enforcement of foreign awards in India is to have minimal judicial intervention and therefore before arbitration and conciliation act, we had another law which was Foreign Awards (Recognition and Enforcement) Act, 1961 which governs the enforcement aspect and further provided for technical and procedural grounds invoking which the court can refuse to enforce any foreign awards.
India is a signatory to Geneva Convention, 1927 as well as New York Convention, 1958. Under the arbitration and conciliation (amendment) act, 2015 section 44 to 52 deals with foreign awards passed under New York Convention.
Under New York Convention, for enforcement of foreign awards, there are two pre-requisites which are as follows-
- The country must be a signatory to New York Convention,
- The award shall be made in the territory of another contracting state which is a reciprocating territory notified as such by central government.
Section 47of the act provides for production of certain documents before the court by the party applying for enforcement of foreign awards. These are-
(a) The original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;
(b) The original agreement for arbitration or a duly certified copy thereof; and
(c) Such evidence as may be necessary to prove that the award is a foreign award.
Further, section 48 lays down grounds which can be invoked by party against whom award is to be enforced, only if the other party furnished to the court proof that-
- the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
- the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
- the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
- the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
- the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
- the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or
- the enforcement of the award would be contrary to the public policy of India.
Section 53- 60 of the act contains provisions regarding enforceability of foreign awards passed under Geneva Convention. For enforcement under this act, there are certain conditions that needs to be first fulfilled and these conditions are given under section 57 of the 2015 act which are as follows-
- the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;
- the subject-matter of the award is capable of settlement by arbitration under the law of India;
- the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;
- the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending;
- the enforcement of the award is not contrary to the public policy or the law of India.
Section 56 provides that the party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court (a) original award or a duly authenticated copy thereof; (b) evidence proving that the award has become final and (c) evidence to prove that the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto and that the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure. As per the new Act, the application for enforcement of a foreign award will now only lie to High Court.
It is pertinent to mention here that even under foreign awards act and arbitration act, enforcement can be refused on grounds of ‘public policy’ but what constitutes public policy has been a subject of debate and in Renusagar Power Company Limited v General Electric Co (1994 Supp (1) SCC 644) the court made it very clear that it is not a foreign arbitral award but its enforcement that must be against public policy for the public policy provision to apply. Renusagar further elaborated that a foreign award’s enforcement will be refused on the ground that it is contrary to public policy if such enforcement would be contrary to:
- the fundamental policy of Indian law;
- national interests; or
- justice or morality.
Furthermore, in 2014 Supreme Court in (ONGC Ltd v Western Geco International Limited ((2014) 9 SCC 263)) the court observed that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal… will be open to challenge and may be cast away.
Following these judgment, amendment was passed in 2015 by amending the arbitration and conciliation act and the amendment added two explanations to section 48(2) of the act which tries to limit the scope of judicial intervention while determining whether any foreign award or its enforcement is against public policy or not. So According to the first explanation, a foreign award will conflict with public policy only if it:
- was induced by fraud or corruption;
- contravenes the fundamental policy of Indian law; or
- contravenes the basic notions of morality and justice.
The 2015 amendment further added a second explanation by which it clarified that a contravention of the fundamental policy of Indian law will not entail a review on the merits of the dispute.
After this amendment, the court followed the approach of minimal intervention and in 2016 Delhi High Court in GEA EGI Contracting Ltd v Bharat Heavy Electrical Limited ((2016) 233 DLT 661) the court allowed the enforcement of foreign award though the award was incorrect stating that ‘though the award is incorrect, it could be considered reasonable.’ Again in Xstrata Coal Marketing AG v Dalmia Bharat (Cement) Ltd (2016 SCC Online Del 5861) the court allowed the enforcement of foreign award though the damages provided under the award were calculated in absence of necessary evidence. The court stated that the findings on the calculation of damages were not perverse and that the award could be set aside only on limited grounds under Section 48 of the Arbitration and Conciliation Act, which would not entail a review of the award on the merits.
In a recent judgment of Delhi High Court in Daiichi Sankyo Company Limited v Malvinder Mohan Singh (2019 SCC Online Del 7836) the court held that the ‘fundamental policy of India’ as stipulated under Explanation 2 of Section 48(2)(b) of the act does not mean provisions of Indian Statute but rather includes the substantial principles on which Indian Law is founded.
However, in Campos Brothers Farms vs. Matru Bhumi Supply chain Pvt Ltd and ors, the court deviated from the normal approach that has been followed by the court in above mentioned cases by refusing to enforce the foreign awards on the ground that a complete failure to consider the issues and contentions raised by the losing party will trigger Section 48(2) (b) of the Arbitration and Conciliation Act and can render the award unenforceable. Though the court observed that it cannot go into the merits and reasons provided in the arbitral award but since the arbitrator ignored the submissions without giving reasons and hence this act would constitute violation of principles of natural justice.
– Purti Sharma
Associate advocate/Legal coordinator
ASC Solicitors and Advocates