SUPREME COURT REAFFIRMS THE LAW GOVERNING RECOGNITION AND ENFORCEMENT OF FOREIGN AWARDS

The Three-Judge Bench of the Supreme Court has in a recent case of Government of India vs Vedanta Ltd and Others., passed a Judgment dated 16-09-2020 and reaffirmed the law governing #recognition and #enforcement of #foreignawards in India.

In this case, the Government of India had executed a Production Sharing #Contract (the Contract) with the Respondent Companies to develop and explore the Ravva Gas and Oil Fields (located about 10 to 15 kms offshore in the Bay of Bengal). But soon thereafter, certain disputes arose between the Parties regarding development costs and the Respondent Companies initiated #arbitration proceedings against the Appellant in Kuala Lumpur, Malaysia, which was to be governed by the Laws of England.

The Arbitral Tribunal passed an Award dated 18-01-2011 and held that the Respondent Companies were entitled to charge development costs incurred during execution of the Project from the Appellant.

Thereafter, the Respondents filed an Application for Enforcement of the Foreign Award dated 18-01-2011 (the Foreign Award) under Section 47 and 49 of the Arbitration and Conciliation Act, 1996 (the Act) before the Delhi High Court. Whereas, the Appellant filed an Application for resisting the Enforcement of the Foreign Award under Section 48 of the Act on several grounds including that the Foreign Award was in conflict with public policy of India and that it contained decisions on matters beyond the scope of the submission to arbitration.

But the High Court dismissed the Appellant’s Application and allowed enforcement of the Foreign Award, vide Order dated 19-02-2020. Hence, the Appellant filed this Appeal before the Apex Court challenging the Delhi High Court Order.

The Supreme Court made the following observations regarding enforcement of foreign awards under the Act:

1- The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, New York (the Convention) provides that parties to the said Convention would not discriminate foreign arbitral awards against domestic awards and would ensure that such foreign awards are recognised and enforced in their jurisdiction in the same way as that of domestic awards.

2- Thus, Part II of the Act provides for recognition and enforcement of New York Convention awards and also those awards that are passed in countries with which India has reciprocal arrangements to recognise and enforce foreign awards.

3- Under Part II of the Act, enforcement of foreign awards in India can take place only after the court is satisfied that the foreign award is enforceable as a deemed decree under Section 49 of the Act.

4- For the said purpose, the court would first adjudicate the evidence filed by the party seeking recognition and enforcement of foreign award under Section 47 of the Act that includes the original arbitration agreement, original and certified copy of foreign award, etc.

5- Further, in case, a petition is filed challenging the foreign award under Section 48 of the Act, then the court would also adjudicate the said petition to determine whether the foreign award is struck by any of the grounds for rejection of enforcement. The limited conditions on which the enforcement of a foreign award may be refused are that if the parties to agreement were under some incapacity, or if the agreement was invalid, or if the other party was not given proper prior notice about arbitration proceedings, or if the award contains decisions on matters beyond the scope of the submission to arbitration, etc. The court may further refuse enforcement on the ground that the subject-matter is not capable of settlement of arbitration or if it is contrary to public policy of India.

6- The Court reiterated that an award would be contrary to public policy of India in the following cases:

  • If the enforcement would be contrary to the fundamental policy of Indian law
  • If the enforcement would be contrary to the interests of India
  • the enforcement would be contrary to justice or morality

In such cases, if by upholding the award it would shock the public conscience or would be clearly injurious to the public good or would be wholly offensive to the ordinary reasonable and informed member of the public, then the court may refuse to enforce the award. For instance, if the award is obtained through corruption or fraud, or undue means, then the award would be set aside.

But in this case the Appellants could not establish that there was violation of any procedural formality, which constitutes the integrity of alternate dispute resolution process. Also, there is no evidence to show that the Foreign Award is in conflict with the basic notions of justice or public policy of India. Thus, the Apex Court upheld and confirmed the Order of Enforcement of Foreign Award passed by the Delhi High Court on 19-02-2020.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer

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