This article is written by Ahamd Ziad, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
India is a signatory to the New York Convention, 1958 on recognition and enforcement of the foreign arbitral award and Geneva Convention, 1927 on the execution of the foreign arbitral award. If a party to arbitration receives a binding award from an arbitral tribunal situated in a country that is a signatory to the New York Convention, 1958 or the Geneva Convention, 1927 and that country is also recognised as a reciprocating territory by the Indian government, the award is enforceable in India. For executing a foreign award, the decree-holder must file an application with a court of competent jurisdiction for the enforcement of the award, and if the court is satisfied that the award is enforceable, the foreign award can be executed similarly to a court decree. The procedure for the enforcement of foreign awards is prescribed in Part II of the Arbitration and Conciliation Act, 1996, while the procedure for execution of a decree is to be governed by the Code of Civil Procedure, 1908.
For the execution of a foreign award, the decree-holder has to move an application to the court of competent jurisdiction for the enforcement of the award and if the court is satisfied that the award is enforceable, then the foreign award can be proceeded to be executed similar to a decree of the court by virtue of the objective laid down in the Arbitration & Conciliation Act, 1996, which states that every final arbitral award shall be enforced in the same manner as a decree of the court. The enforcement procedure for foreign awards is set out in Part II of the Arbitration and Conciliation Act, 1996. The execution of a decree is governed by the Code of Civil Procedure, 1908.
Since foreign award holders do not have a presence in India they often face difficulty in ascertaining which court to approach for enforcing their award. In 2018, the Supreme Court in Sundaram Finance Limited. v. Abdul Samad and Anr., had clarified that a decree-holder can file an execution petition before any court in India where the assets of the judgment debtor are located. In 2020, the Delhi High Court in the case of Glencore International v. Hindustan Zinc Ltd. provided further guidance on the enforcement of foreign awards by stating that a foreign award could be enforced as a decree, depending on the location of the assets of the judgment debtor. An application for enforcement of a foreign award has to be filed where the assets of the judgment debtor are located.
Facts of the case
On 13.12.2011, Glencore International i.e. decree-holder and Hindustan Zinc Ltd. i.e. judgment debtor entered into a contract for supplying 10,000 mts. of MRM concentrate from Australia to India. The law governing the contract was the law of England and Wales and the contract had an arbitration clause. The venue of the arbitration was London, U.K. On 28.03.2012, both the parties entered into another contract for the supply of 25,500 mts. of MRM with an option to purchase further quantity. The governing law, procedure, and the venue of the arbitration were similar to the terms mentioned in the first contract.
There were disagreements between the parties, therefore the judgment debtor requested arbitration for the contracts on 03.06 2014, by submitting a request to the registrar, London Court of International Arbitration. The Arbitral Tribunal passed its award, which was LCIA No. 142703 for the first contract and LCIA No. 142768 for the second contract.
In LCIA No. 142768, on 17.08.2017, the Tribunal found that the decree-holder was not in breach of the contract dated 28.03.2012, and rejected the judgment debtor’s claims for damages. Following that, the Tribunal passed a final award dated 01.05.2018 and awarded a sum of GBP 822,582.04, excluding interest. Thereafter, the decree-holder sought an award for interest on costs from the Tribunal. The Tribunal passed its final award on interest on costs on 06.08.2018.
On 03.01.2018, the judgment debtor had filed an Arbitration Application No. 6/2018 under S.34 read with S.48 of the Arbitration and Conciliation Act, 1996, before the Rajasthan High Court challenging the final award dated 17.08.2017.
In LCIA No.142703, on 17.08.2017 the Tribunal found that the decree-holder was not in breach of the contract dated 13.12.2011, and rejected the judgment debtor’s claims for damages. Following that, the Tribunal passed a final award dated 01.05.2018 and awarded a sum of GBP 823,162.22, excluding interest. Thereafter, the decree-holder sought an award for interest on costs from the Tribunal. The Tribunal passed its final award on interest on costs on 06.08.2018.
On 09.10.2017, the judgment debtor had filed an Application No. 28/2017 under Section 34 read with Section 48 of the Arbitration and Conciliation Act, 1996, before the Rajasthan High Court challenging the final award dated 17.08.2017.
The Rajasthan High Court through its common judgment dated 02.05.2019 dismissed both the Applications filed by the judgment debtor as non-maintainable. The judgment debtor appealed the decision of the single judge of Rajasthan High Court by filing an appeal before the Division Bench of the Rajasthan High Court against the judgment dated 02.05.2019.On 23.03.2020, the Division Bench of the Rajasthan High Court also dismissed the appeal filed by the judgment debtor.
On 18.03.2019, the decree-holder served a legal notice on the judgment debtor, demanding payment of fees and interest on costs under the final awards in both cases. The judgment debtor failed to make any payments. Having been left with no option, the decree-holder filed two petitions O.M.P. (EFA) (COMM.) 9/2019 and O.M.P. (EFA) (COMM.) 10/2019, before the Delhi High Court for enforcement of final awards.
Contentions of the parties
The decree-holder contended that the awards have been made in London, the UK to which New York Convention, 1958, applies under Section 44 of the Act and the award is thus, a foreign award. Further, that the awards are final and binding on the parties and enforceable in India as prescribed under Part–II of the Arbitration and Conciliation Act, 1996, as a decree of this Court. It was further contended that the judgment debtor has its office in Delhi. The assets/properties including bank accounts, which are sought to be attached in the present proceedings, are within the territorial jurisdiction of the Delhi High Court, and hence, the applications are maintainable.
The judgment debtor on the other hand opposed the enforcement of the award on the grounds that the courts of Delhi lacked territorial jurisdiction as the assets are not located in Delhi. The judgment debtor contended that his assets are located in Rajasthan and the property mentioned in the enforcement petitions is a leased property and that the judgment debtor is not the owner of such property. The judgment debtor further contended that since his enforcement challenge is pending before the Rajasthan High Court, the Delhi High Court should not hear the enforcement petitions.
Observations of the court
The Delhi High Court relied on the judgments of Bombay High Court in the cases of Tata International Limited, Mumbai v. Trisuns Chemical Industry Limited., and Wireless Developers Inc v. India Games Limited, and observed that once arbitration is concluded, and the stage is of enforcement then the question that has to be examined is the subject matter of the award. Where the award is a money award, the enforcement would lie in a court which is able to enforce the award. In the present case, the subject matter of the award is money and the judgment debtor has its assets within the territorial jurisdiction of this Court. The judgment holders have made a categorical averment in the petitions that the judgment debtor has an administrative office in Delhi, as also some moveable properties lying in those premises. It is also averred that the judgment debtor has bank accounts in Delhi. Significantly, the judgment debtor in its application, objecting to the maintainability, has admitted that there is an administrative/liaison office, though on a lease from the government. There is no document on record at present to corroborate the stand that the premises are on lease. Insofar, as the averment of bank accounts or other movables is concerned, there is not even a denial. In any case, in present times, there is a centralised banking system and accounts can be operated from any part of the country.
The Delhi High Court further relied on the judgment of the Supreme Court in the case of Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Limited Saudi Arabia and Others, and held that a foreign award is considered as a decree of the court while enforcing and can be enforced where the assets of the Judgment Debtor are located or where his money lies. The Court further stated that the parties are restricted from “Forum Shopping” and the enforcement petition would be filed before the Court having relevant territorial jurisdiction.
With respect to the contention of the judgment debtor that it has challenged the awards under Section 34 read with Section 48 of the Act and the appeal is pending before the Rajasthan High Court, the High Court relied on the judgment of the SC in the case of Eitzen Bulk vs Ashapura Minechem Ltd. & Anr., and held that the pendency of those proceedings cannot come in the way of the decree-holder enforcing the award before this Court. The issue is no longer resolved and has been settled by the Supreme Court in the Eitzen Bulk case. The Court directed the judgment debtor to file an affidavit and disclose all its assets, both movable and immovable and tangible/intangible within 5 weeks.
A decree holder having an award in his favor in a foreign seated arbitration is only a battle half won. The battle is not won till the decree-holder is able to recover the award. The Delhi High Court in the Glencore International case has provided guidance on the enforcement of a foreign award by holding that a foreign award may be enforced as a decree of the court, at the place where the assets of the judgment debtor are located. The mode of execution of foreign awards and domestic awards is also similar.
Since foreign arbitral award holders do not have a presence in India they often face difficulty in ascertaining the location of all assets owned by the judgment debtor. Decree holders should take the help of experts, at the earliest, to ascertain the location of all the assets of the judgment debtor as obtaining a restriction order against the alienation of assets is only feasible when such assets have been located. Therefore, the decree-holder, at the earliest, should move an application for enforcement of foreign award where the assets of the judgment debtor are located and try to obtain disclosure of assets of the judgment debtor from a competent court having the appropriate jurisdiction. Obtaining such disclosure of assets and financial status of the judgment debtor would reduce the risk of alienation or disposal of assets by the judgment debtor. Once such disclosure is availed, the next step should be to seek an order for the attachment and sale of the assets disclosed.
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