Arbitration and Conciliation Act

This article is written by Anvita Datla, pursuing Certificate Course in Advanced Criminal Litigation & Trial Advocacy from Lawsikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).

Introduction

With the advancement of globalization and with India positioned as a major international and global player in the world economy, the law with regards to the enforcement of foreign decrees in India holds great relevance. The paper would essentially aim to discuss the provisions of enforcement of foreign decrees in India. It would further aim to look at the provision of Section 13 of the Civil Procedure Code and the various points under it which make a foreign judgment non-conclusive and unenforceable. The researcher will also look at the concept of Section 13 from the point of view of the enforcement of foreign judgments on divorce and then look at the way the enforcement of foreign arbitral awards differs due to the arbitration and conciliation act which governs it and the New York convention that India has ratified. The pro-enforcement bias in enforcement of foreign arbitral awards will be analyzed by way of judgments and how that is essentially contrasted with the uncertainty of law with regards to foreign divorce decrees which is a sphere in need of change.

The judgments of foreign courts are enforced keeping in mind that where a court having competent jurisdiction has already adjudicated and given its decision on a certain claim, there arises a legal obligation to fulfil such a claim in the country where such a judgment needs to be enforced. All nations may have varied private International law; however, by way of comity of nations, there are certain rules which are identified and accepted as common to civilized jurisdictions. “Through part of the judicial system of each state these common rules have been adopted to adjudicate upon disputes involving a foreign element and to enforce judgments of foreign courts, or as a result of international conventions”. Such identification is accorded not as an act of courtesy but on consideration of basic principles of justice, equity and good conscience.

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The terms Foreign court and Foreign Judgements are defined in Section 2 of the Civil Procedure Code, 1908. As defined in Section 2(5), a foreign court is one being situated outside India and not established or continued by the authority of the central government, and as defined in Section 2(6), a foreign judgement means the judgement of a foreign court. In other words, a foreign judgement means an adjudication by a foreign court on a matter before it. 

There are two ways through which a foreign judgement can be passed in India and the rule varies due to the distinction of the classification of the foreign country as a ‘reciprocating’ or ‘non-reciprocating territory’. 

The concept of a reciprocating territory

A reciprocating territory is a term that refers to any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be reciprocating territory for the purpose of enforcement of foreign judgements. The list of reciprocating territories as per the provisions of Section 44A of the Code of Civil Procedure, 1908 is as under: 

1. United Kingdom, 2. Singapore, 3. Bangladesh, 4. UAE, 5. Malaysia, 6. Trinidad & Tobago, 7. New Zealand, 8.The Cook Islands (including Niue) and The Trust Territories of Western Samoa 9. Hong Kong, 10. Papua and New Guinea, 11. Fiji 12. Aden. 

As defined in Section 44 of CPC, the procedure that has to be undertaken for a foreign judgement of a reciprocating territory to be valid and for it to have the same force in India, can be straightaway executed by filing a simple application of execution following the procedure under Section 44A and under order XXI Rule 11(2) of CPC.

The concept of non-reciprocating territory 

The procedure for getting a decree of a foreign country that is not a reciprocating territory to be enforced in India is slightly complex. As was held by Bombay High Court in the matter of Marine Geotechnics LLC v. Coastal Marine Construction and Engineering Ltd, where a decree is obtained from a non-reciprocating territory, the option of the decree-holder is either to file a suit in Indian Courts based on that foreign decree, or on the original underlying cause of action or both. The decree-holder cannot simply execute such a foreign decree. The foreign judgement holds the importance of just evidentiary value. 

A blanket rule that applies in case of both reciprocating and non-reciprocating territories is that the foreign decree has to surpass the tests of conclusiveness as laid down in Section 13 of CPC which states that the foreign judgement shall be conclusive unless:

  • It has not been pronounced by a Court of competent jurisdiction;
  • It has not been given on the merits of the case;
  • It appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
  • The proceedings in which the judgment was obtained are opposed to natural justice;
  • It has been obtained by fraud;
  • It sustains a claim founded on a breach of any law in force in India.

The most interesting and intriguing part that encourages one to delve deeper into this set of tests, is how they affect the decisions of foreign divorce judgments. 

Foreign divorce decrees

There might arise three scenarios in case of foreign divorce judgments that lead to difficulties that arise. Firstly a situation might come up when a woman in a foreign country residing with her husband finds that her husband has vanished, leaving her alone. There might be a second kind of instance wherein a woman residing with her husband abroad is taken back to India by way of deception or coercion. Lastly, there might be a scenario in which the marriage of the woman takes place before the husband leaves for a foreign country and then she is never given sponsorship for the purpose of visa and is not allowed to join him in that country. Apart from these, there might be many issues that might come up, as a multitude of Indians have settled in foreign countries and they resort to legal remedies for the marital problems they face. There has been a multitude of cases wherein Indian nationals who go on to reside outside the country would have actually formally married under the law of India but go on to get a divorce or legal separation in a foreign court. The result of such a scenario would be a grant of divorce decree in the foreign court with the parties being considered divorced in that country. Now if such a decree is not recognized in India where the parties actually got married, the parties would in fact be considered as still married as per the Indian law. This is how legal complications tend to arise with respect to aspects such as bigamy, remarriage, inheritance and so on and so forth. 

There is a huge gap and difference in the divorces of different countries due to the wide gap in cultural traditions. India is called the land of diverse cultures, religions and ethnicities. The issue of the validity of marriages and matrimonial clauses such as recognition and enforcement of decree for divorce have always been problematic in this highly diverse country. There are a variety of personal laws. India is a country of a lot of religions. There is not one unified practice that can be applied in matters of matrimonial causes. The provisions of Section 13 of the Civil Procedure Code, 1908 have been applied time and again to examine the conclusiveness of the foreign decree. Principles governing matters within the divorce jurisdiction are so conflicting in the different countries that such an instance may occur in which a man and a woman are husband and wife in one jurisdiction but treated as divorced in another jurisdiction. Two of the most important cases that dealt with the question of recognition and are important for the purposes of enforcement of foreign decrees are the cases of Satya v Tej Singh and Narasimha Rao v Y. Venkata Lakshmi. Indian courts used to previously follow the English principle of lex domicile which looks at where the husband is domiciled to decide the jurisdiction. In the case of Satya v Tej Singh, the court of Nevada granted a decree of divorce when the husband approached the court stating that he was domiciled in Nevada. However, when the case came up for the purposes of enforcement in India, the court ruled that since the plaintiff husband had misled the Nevada court as he was not really domiciled in Nevada the court did not, in reality, have jurisdiction and thus the decree was unenforceable in India. Justice Chandrachud stated that recognition of a foreign divorce decree in India must depend principally on the rules of our private International law and such recognition is accorded not as an act of courtesy but by consideration of justice. However, the court did caution as to the possibility of limping marriages that would arise in case of non-recognition. As in different countries, the divorce jurisdiction is so complicated and conflicting that the problem of limping marriages becomes prominent. As there is no codified law on the matter of enforcement of a foreign divorce decree, much reliance has been placed on Section 13 of CPC and this continuous reliance has led to the 65th Law Commission report in 1976, which, unfortunately, did not prove beneficial. As discussed in the case of Narasimharao v. Y Venkata Lakshmi, even the British were very hesitant to apply their laws in these family matters. The case even correctly pointed out the need for a change. The legislature has not even after so many years of Independence, thought fit to enact rules of Private International Law in this area and in the absence of such an initiative, the courts are forced to rely on precedents which in turn have relied on the English rules. The court stated that the relief granted must be in accordance with the matrimonial law under which parties are married. Though this decision does seem like a good step in enhancing the life of the woman who might be abandoned, the problem still stands regardless. The courts have throughout the time given decisions not just on the law but according to what the situation demands the decision to be. The law is not taken as it is but interpreted and in some cases, even decisions have been made which were not primarily on the basis of law. The predominant example of this is how courts these days have recognized the concept of irretrievable breakdown of the marriage for granting divorce even though it is not a valid ground for divorce. The court has in cases understood how the couple cannot be seen as living together anymore and the ‘sanctity of marriage’ that Indian law attempts to uphold cannot stand true in certain instances. These kinds of decisions are based on the rationale that the judges make out of the case presented to them and not on any law. Thus these kinds of situations shed light as to how recourse to relying on Section 13 to test conclusiveness might become inadequate. Strict adherence to this would mean that many of the cases would stand inconclusive even though they might have been decided differently if they were decided in the Indian court in the first instance. The approach towards foreign divorce decrees has been left to the discretion of the judges in absence of a specific law in this sphere which again might have its own merits and demerits. Merits are those of the court examining cases on a case to case basis and giving its decision and the demerit is that in absence of proper law, there is ambiguity and a sense of unaccountability that can be felt. Furthermore, as India has so many religions which have certain specific morals, what the country perceives as ‘public policy’ and ‘natural justice’ might be different. This can be understood through an example. There are some countries that have legalized same-sex marriages. However, enforcement of such a decree will not be possible in India because of the morals that the country holds coupled with the fact that the transgender community is regarded as ‘impure’. 

Foreign arbitral awards

Foreign arbitral awards stand apart from foreign divorce judgments and the other kinds of foreign decrees and judgments as these are governed by the Arbitration and conciliation act. Furthermore, India has ratified The New York Convention on enforcement and recognition of foreign arbitral awards 1958. According to the convention, the country in which the award is made has the primary jurisdiction and is the only party that can annul an award. All the other signatory countries only have a secondary jurisdiction and can simply decide whether that award is enforceable in that country or not. The main objective of the New York Convention on enforcement of foreign arbitral awards in 1958, is to reduce the uncertainty in International trade arrangements arising out of differences in legal regimes. 

The discretionary nature of Article V of the New York Convention on enforcement of foreign arbitral awards complements its pro-enforcement bias. The ‘permissive’ nature of this provision depicts that it is not mandatory; thus it preserves the courts’ discretion to enforce the awards. This is exemplified from the use of the term ‘may’ instead of ‘shall’ under article V of the Convention. The presence of grounds for refusing enforcement may not definitely lead to non-enforcement of the awards. 

The intent of the legislature is also very much visible in the formation of the 1996 Act of Arbitration and Conciliation. The Act which was enacted in the UNCITRAL (United Nations Commission on International Trade Law) model very much demonstrates that it was made with an intention of providing higher autonomy in the arbitral process and further limiting the intervention by the judiciary to a very narrow circumference than what was there before in the legal regime. It can be seen as a minimal inference approach that has been even enshrined and is visible in the Arbitration and Conciliation Act, 1996 under Section 48. Under this Section as well, there has been using of the word ‘may’ that indicates the very same pro-enforcement idea. The defences which are used for purposes of opposing and contradicting the enforcement are to be construed in a very exhaustive manner in favour of enforcement. An analysis of the pattern in which case laws have been decided and the rationale is given thereon helps us understand this narrow and minimal interference approach. The most crucial judgment as it stands is the judgment given in Vijay Karia v Prysmian Cavi E Sistemi Srl which carries out the task of setting forth and clearing the avenues and scope of how far the court can go in rejecting the enforcement of a foreign arbitral award. The Supreme Court in this case cautioned the Courts from interfering with the enforcement of foreign arbitral awards. The bench constituting of Justice RF Nariman, Justice Aniruddha Bose and Justice V Ramasubramania discussed in great detail the scope of Section 48 of the Arbitration and Conciliation Act and the aspect of ‘jurisdiction of the supreme court’ under Article 26 of the Constitution of India. 

The supreme court made the observation that under the scheme of the Arbitration Act, an appeal can be made when a judge refuses to recognize and enforce a foreign award. However, it cannot be turned the other way. There isn’t any provision that allows for an appeal against an order which recognizes and enforces a foreign award. The court also emphasized that the jurisdiction of the Supreme Court by way of article 136 of the Indian Constitution is not to be used in a way through which it can circumvent the legislative policy that is set out in the Arbitration Act. 

The court revisited the decision of Renusagar Power Plant Co. Ltd v General Electric Co. and made the observation that by taking into regard the findings in Renusagar, it can be seen that the grounds set in Section 48 of Arbitration and Conciliation Act, 1996 nowhere present a challenge to the foreign awards on ‘merits’ and even the defence of public policy contravention is to be construed very narrowly. Under the guise of contravention of the public policy of the country involved, foreign awards cannot be set aside by second-guessing the arbitrator’s interpretation of the agreement between the parties. This provided the clarification that enforcement of foreign awards being governed by the principles of private International law, the doctrine of public policy as applied in the field of international law alone would be attracted. The fundamental policy of law thus must be a breach of some legal principle or legislation which is so basic to Indian law that it is not susceptible to being compromised. A mere infraction of a domestic law per se would not amount to a conflict with the public policy of law of India. In stating so the limited scope of even the public policy ground is made out. The supreme court went on to impose unusually high costs while dismissing the appeal to set a sort of an example as to how the precious time of the court is not to be wasted when it has already been dealt with before, as well as to depict depicting how foreign awards are to be enforced in most cases except for very major problematic ones.

Conclusion

The very sub provision which says that a foreign decree can be held to be inconclusive when it is not been given on the ‘merits of the case’ widens the scope of the non- conclusiveness and non-enforcement of the foreign decree as compared to when an arbitral award is unenforceable. It has been clearly laid out through case law that only in the rarest of opportunities when an arbitral award seems to jeopardise or put down the basic, most inherent values of India, is such an award to be non-enforceable. The case can never come upon parameters such as ‘merits’ and the scope of denial of enforcement is extremely low. The wide spectrum of points that are seen to make a foreign decree unenforceable, act as a good step in ensuring that the party gets justice and the fairness aspect is kept in mind as well. However, in cases like foreign decrees of divorces, too many barriers to enforcement can be seen as problematic. Though the grounds might help a woman in a situation in which her husband tricks her and gets a divorce decree in some other country leaving her in India, too many such barriers to enforcement also cause limping marriages where a divorce decree is given in some other country but is unenforceable in India. It can be seen as forcing the couple to be together when in reality one of the parties might not want to, causing graver issues in the marriage. The solution to this sphere of cases is to first follow the path taken in the enforcement of arbitral awards by forming a specific set of rules and laws in accordance with the international needs on the basis of which these foreign divorce judgments will be decided. The idea of natural justice should be the basic rule that should cause the non-enforcement and pro-enforcement bias as seen in the case of arbitral awards. it should be absorbed in cases of divorce decrees as well so that at the end of litigation the wife can be sure of her status. The idea of natural justice moreover should be observed strictly by the entire international community and courts everywhere so that an unfair decision is not passed which will, in turn, be inapplicable in India and hence leave the wife in an imbalanced and unsure position.

References

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