This article is written by Charu Atrey, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction

As we all know that Arbitration is one of the most effective ways of dispute resolution whether the parties have a contractual or non-contractual relationship, the business entities try to resolve their disputes without the hefty proceedings of the court. The Arbitration and Conciliation Act, 1996 (“A&C Act, 1996”), Section 2(1)(a) defines Arbitration– “Arbitration” means any arbitration whether or not administered by a permanent arbitral institution. Arbitration provides easy ways to business entities and is also less time-consuming than court proceedings; not only the contracts executed in India but also the contracts executed outside of India can resort to Arbitration for dispute resolution. Any foreign business entity while entering into a contract ensures the dispute resolution clause in the contract so that in case of any future disputes such disputes can be resolved without approaching the court.

Decrees/Award passed after the completion of such proceedings by the arbitrators is final and is binding on both parties. The definition of Decree/ Award is provided under Section 2 (1) (c) of A&C Act, 1996-“Arbitral award” includes an interim award. To understand the concept of foreign awards, the definition of which is provided under Section 44 and Section 53 of Arbitration and Conciliation Act, 1996- Any arbitral award made within the boundaries of the state on which the reciprocal provisions of the New York or Geneva Convention applies is known as foreign arbitral award, it is essential to first understand the types of arbitration. There are 2 types of Arbitration, that are:

• Domestic Arbitration;
• International Commercial Arbitration.

Let’s first discuss the difference between the 2 types of arbitration. Disputes arise between 2 parties, where both the parties are an Indian resident and the contract executed in the territory of India is known as Domestic Arbitration. The Award or Decree passed after the completion of proceedings of domestic arbitration is known as Award. Whereas the disputes arose between 2 parties where 1 of the parties is foreign national, or foreign body, corporate, individual, then it is termed as International Commercial Arbitration. Award or decree passed after the completion of such proceedings is known as Foreign Award.

As we know that the award passed by the arbitral tribunal is final and is binding on both parties, the question here is whether the foreign award can be executed in India?

Power of Indian Courts

Now that we have understood what foreign awards are, let’s further discuss what is the role of the Indian court in the enforcement of the foreign award. India acknowledges the foreign awards via the Geneva Convention mentioned under Part II Chapter II of A&C Act, 1996 and the New York Convention mentioned under Part II chapter I. It is essential for the party receiving the foreign award that the country from which the award is received shall be a signatory of the abovementioned conventions. Only the awards passed by the convention countries can be enforced in India. This brings us to our second question as what is the role of the Indian courts in the enforcement of the foreign award. According to Section 47 of the Arbitration and Conciliation Act, 1996, the foreign award can only be enforced via the Indian courts having jurisdiction. The parties seeking the enforcement of foreign awards must move the application for the enforcement in the competent court provided with that:

• The original or the certified copy of the foreign award.
• The original arbitration agreement.
• Evidence of the foreign award is being the foreign award.
• A certified copy of the translated foreign award into English or any other relevant language in case the award is in the foreign language.

For Example, Party A is a Franchisor, who is a foreign food brand and is famous with the brand name CKF foods, enters into a franchise agreement with Party B, who is a Franchisee and has started the food business under the brand name of CKF foods. As per the terms and conditions of the agreement, both parties are under the obligation to perform their duties mentioned under the Agreement. Both parties have mutually agreed upon the Dispute resolution clause.

Further, Party B started to change the menu and has also decreased the quality of the food items and also did not comply with the terms of the agreement as he started to use the cheap raw material available in the market. Upon realizing the fraud done by Party B, Party A sent the notice to Party B stating the period to rectify the mistake and also to comply with the terms of the contract. Party B did not respond to the notice and continue to misuse the name of the brand and also did not comply with the terms of the agreement. Therefore, as the last resort Party A initiated the Arbitration proceedings in their own country. After the completion of the proceedings, the Hon’ble Tribunal passed the decree/ award in favour of Party A and against Party B and also ordered to reimburse the loss incurred by Party A due to the behaviour of Party B. As Party B is in India and the award should be enforced in India. So, to enforce such an award Party A has to move an application in the competent court with all the required documents mentioned above. After that, the Indian court will go through the documents and then decide whether the award is enforceable in India or not.

Now that we have discussed the power of the Indian courts in the enforcement of the foreign award, now the question here is that if the Indian courts can cancel the foreign award or not?

Can they cancel a foreign award?

As we know that the courts have the power to enforce the foreign award, with this the courts are also provided with the power to cancel the foreign award under Section 48 of the Arbitration and conciliation Act, 1996. Yes, the Indian courts do have the power to cancel the foreign award. But let u first discuss that how it is enforced. The parties who have received the foreign award have to comply with the terms of the Indian courts and the award should be as per the Indian laws. If it is not in compliance with the law the award will be cancelled and cannot be enforced. As per the Part II Section 47 of the Arbitration and conciliation Act, 1996 requirements for the valid enforceable foreign award are:

• Commercial Transaction: It is essential for the parties to be in a commercial relationship whether contractual or not.
• The foreign arbitral agreement should be in writing: The parties need to keep the foreign arbitral agreement in writing, or it should be in such a form by which the existence of the agreement can be proved.
•  Valid Agreement: The agreement should be valid and should be as per the laws of India.
•  The Award should be clearly stated: The award should be clear and not ambiguous.
• Convention countries: The foreign award should be passed by the convention country that is a member country of the New York convention.

Further, Part II Section 49 provides that if the court is satisfied, that the award has fulfilled all the conditions mentioned under Section 47, then such an award so deemed to be decree by the court. This brings us to the question as to how the Indian courts can cancel the foreign award by the Indian courts. In the relevant case, the Calcutta High Court had laid down the required conditions for the enforcement of the foreign award in India.

Case law: Serajuddin v/s Michael Golodetz AIR 1960 Cal.49 April 29, 1959 (India)

The required conditions laid down by the Calcutta High Court are:

1. The arbitral proceedings should be held in a foreign country.
2. The arbitral proceedings should be conducted by the foreign arbitrator.
3. The arbitral proceedings should be conducted as per the foreign laws.
4. One of the parties involved in the proceedings should be a foreign national and the other should be an Indian resident.

If yes, what is the process?

Yes, the Indian courts have the power to cancel the foreign award. The process for the cancellation of the foreign award is provided under Part II Section 48 of the Arbitration and conciliation Act, 1996. The Act states that the Indian court may refuse the enforcement of the foreign award on the request by the party against whom the award is granted, only if the party prove the following grounds:

•  If the contract that is being entered into by the parties is invalid or the party against whom the award is passed is incompetent to enter into the contract.
• If the party against whom the award is passed did not receive the proper notice for the appointment of the arbitrator or invocation of the arbitration proceedings.
• If the award contains content that is beyond the ambit of the arbitration and the tribunal has granted the award on the matter which did not fall under the jurisdiction of the arbitration or beyond the scope of it.
• If the composition of the arbitral tribunal and the proceedings is not in accordance with the contract the parties have entered into and is against the law of the country in which the award is made.
• If the award is not legal or is not in accordance with the law of the country in which it is made due to which the competent authority has set aside or suspended the foreign award.

Under such grounds, the Indian courts can refuse to enforce the arbitral award. Further, several cases have defined the limitation for the enforcement of the foreign award in India.

Case laws: Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society (2016) 11 SCC 313 (India).

The Supreme Court states that- Though no such limitation is provided under the Arbitration and conciliation act, 1996, the normal limitation period of the arbitral award will prevail, i.e. the period of limitation of 12 years would apply. Therefore, the party seeking the enforcement of the foreign award shall have to make sure of the availability of the requirements mentioned under Section 47 of the Arbitration and Conciliation Act, 1996. Several essentials provisions are required to look into before the enforcement of the foreign award.

Important provisions of the process

Let us look at the important provisions related to the enforcement and cancellation of the foreign award by the Indian Courts:

1. The first provision which is the most important is Part II Section 44 of the Arbitration and Conciliation Act, 1996. This Section states the definition of the “Foreign Award”- A foreign award is an award arising out of the legal and commercial relationship of the parties whether contractual or non-contractual.
2. The second most important provision is Part II Section 47 which defines the pre-requisites for the enforcement of the foreign award. It is important for the party seeking the enforcement of the foreign award to be able to prove the existence of the required terms in the award, which can make it binding by the Indian courts.
3. Part II Section 48(1) defines the grounds under which the Indian courts can refuse to enforce the foreign award.
4. Part II Section 49 states that if the Indian courts are satisfied and if the foreign award has fulfilled all the requirements then the Indian courts can enforce the foreign award in India.

Important Judgements of the Supreme Court

Vijay Karia v/s Prysmian Cavi E Sistemi SRL (13 Fab., 2020) Supreme Court

In this case the Supreme Court has stated the issues:

• That the party did not get appropriate opportunity to present its case before the Tribunal.
• That the tribunal did not conducted the proceedings properly,
• That the foreign award is against the public policy of India.

The Supreme Court in its judgement stated that:

1. The Act does not provide an Appeal against the order recognising and enforcing an award.
2. The foreign or domestic award should be in accordance with the Indian Laws and Policies.

Government of India v/s Vedanta Ltd. and Others (Civil appeal no. 3185 of 2020 Supreme Court)

In this case, the Supreme Court has stated the views on enforcement of foreign arbitral awards under A&C Act, 1996 as well as the issues related to the “Public Policy” under foreign awards.

This Judgement defines that the foreign award can be enforced in India only if the court is satisfied that the foreign award is enforceable as per Chapter I Part II of A&C Act, 1996 and is made in accordance with Section 47 and 49 of the A&C Act, 1996, after which it can be referred as “Deemed Decree”.

Oil and Natural Gas Corp. v/s Saw Pipes Ltd. (Sc-203, AIR- 2003)

The Supreme Court has elaborated the meaning of “Public Policy of India” as mentioned under Section 34(2)(b)(ii) of A&C Act, 1996 and stated that both domestic, as well as the foreign award, shall be in accordance with the fundamental policy of Indian law.

Conclusion

It is clear from the above discussion that the Indian courts have the authority to enforce or cancel the foreign award. Even if the foreign arbitral tribunal (tribunal from the convention country) is passing an award, to enforce it in India, the award holder has to go through the process mentioned under Arbitration and Conciliation Act, 1996 to enforce the award in India. No such award can be enforced in India which did not fulfil the requirement mentioned under the Act. The requirements for the enforcement and the grounds for the refusal of the enforcement of the foreign award are mentioned under the Arbitration and Conciliation Act, 1996.

References

1. AC Act (arbitrationinIndia Code: Section Detailsdia.com)
2. Foreign Awards (Recognition And Enforcement) Act, 1961 (vakilno1.com)
3. Section 44 in THE ARBITRATION AND CONCILIATION ACT, 1996 (indiankanoon.org)
4. Recognition and enforcement of Arbitral Awards in India (legalserviceindia.com)
5. Arbitral Award Its Challenge & Enforcement (legalservicesindia.com)
6. Grounds on which an Arbitration Award can be Challenged (ipleaders.in)
7. India Code: Section Details
8. India Code: Section Details
9. India Code: Section Details
10. India Code: Section Details
11. India Code: Arbitration and Conciliation Act, 1996
12. Serajuddin Andco. v. Michael Golodetz And Ors. | Calcutta High Court | Judgment | Law | CaseMine
13. M/S Umesh Goel vs Himachal Pradesh Cooperative … on 29 June, 2016 (indiankanoon.org)
14. Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd | Judgments | Supreme Court Judgments: April, 2003 | Law Library | AdvocateKhoj
15. Vedanta Judgment Breaks The Glass – Litigation, Mediation & Arbitration – India (mondaq.com)
16. Enforcement of Foreign Award under the Arbitration and Conciliation Act, 1996 | [Case Analysis of Vijay Karia. v. Prysmian Cavi E Sistemi SRL] | SCC Blog (scconline.com)

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