Stamping of Foreign Awards

In this article, Jay Karnawat discusses the Law pertaining to stamping of Foreign Arbitration Awards in India in the light of Supreme Court’s ruling in M/S. Shri Ram EPC Limited Vs Rioglass Solar SA[1].

In a recent ruling by the Supreme Court bench of Justice Indu Malhotra and Justice R Fali Nariman delivered on 13.9.2018, the apex Court has settled the position of law pertaining to the requirement of stamping of foreign arbitral awards. The Court affirmed the Madras High Court’s Judgement in the case of Narayan Trading Co. v. Abcom Trading Pvt. Ltd. [2]and held that foreign awards are not required to be stamped.

Before moving on to the analysis of M/S. Shri Ram EPC Limited Vs Rioglass Solar SA, let us get a brief idea pertaining to enforceability of foreign arbitral awards.

Enforceability of foreign arbitral awards

There are two conventions pertaining to enforcement of foreign arbitral awards.

  • First is Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) and,
  • Second is the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”).
  • India is signatory to both the conventions.  Being a signatory, if it receives an award from another signatory, the award would then be enforceable in India.

Enforcing a foreign award in India requires adherence to two-stage process. First of which is filing a petition for the execution of the award. Thereafter, the court would examine that whether the award complied with the requirements mentioned in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”), if yes, then it would be enforceable as a decree.

Judicial trends on the requirement of Stamping of Foreign Awards

In the case of Naval Gent Maritime Ltd v Shivnath Rai Harnarain[3], Delhi High Court held that a foreign arbitral award is not required to be registered as it is considered as decree. Non-stamping of the award will not make it un-enforceable. The High Court of Bombay adopted the same view in the ruling of Vitol S.A v. Bhatia International Limited[4]

The Supreme Court in the case of Thyssen Stahlunion Gmbh vs. Steel Authority of India[5] held that the only significant difference in the provisions of the Act and the Foreign Awards (Recognition & Enforcement) Act, 1961 is that in the former, a foreign award is considered to be already stamped as decree whereas in the latter a decree follows the award.

Analysis of M/S. Shri Ram EPC Limited Vs Rioglass Solar SA

Brief facts

In arbitration proceedings between Shriram EPC Limited (hereinafter referred to as “Petitioner”) and Rio Glass Solar SA (hereinafter referred to as “Respondent”), the arbitral award was given in London as per the ICC rules. The award was challenged by the petitioner under Section 34 of the Act. The court dismissed the petition and held that no petition is maintainable against foreign awards under Section 34.

The Single Judge of the High Court of Madras allowed the petition for enforcement of the award by the Respondent. The petitioner then filed an appeal before the Division Bench of Madras High Court which was also dismissed. Thereafter the petitioner filed a Special Leave Petition before the Supreme Court.

The main issue identified by the Supreme Court was, whether the term ‘award’ in Schedule I of the Indian Stamp Act, 1899, include in its ambit foreign awards as well?

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Arguments by appellant

The appellant contended that, as per Article III of the New York Convention, stamp duty, which falls under the category of fees or charges levied in order to ensure recognition and enforcement of the foreign award, shall be enforced as per the rules and regulations of the territory where the award is sought to be enforced.

Cases relied upon by the Appellant

Senior Electric Inspector and Ors v Laxminarayan Chopra[6]

In this case the Supreme Court observed that an act must be construed as on date. The petitioner in the present case contended that it is not reasonable to confine legislature’s intention to a meaning attributable to a word prevailing at the time when it was made.

Arguments by Respondents

The respondent on the other hand contended that the expression ‘award’ in Schedule I of the Act has never been extended to include in its ambit, foreign awards. In order to enforce foreign awards in India, one needs to follow the requirements mentioned under Section 48 of the Act only.

Cases relied upon by the Respondent

Narayan Trading Co. v. Abcom Trading Pvt. Ltd

In this case, the Madhya Pradesh High Court held that, as per the Act, foreign award is made enforceable as a decree and there has been no amendment in the act to construe that stamp duty is payable on foreign awards

Judgement

To answer the question the court resorted to the history of the act and came to the conclusion that the term ‘award’ never included a foreign award from the very inception till date even after the enactment of the Arbitration (Protocol and Convention) Act, 1937 and/or the Foreign Awards (Recognition and Enforcement) Act, 1961.

The Supreme Court rejected the contention of the appellant that even if stamp duty is payable on a foreign award, it won’t be contrary to Public Policy under Section 48(2) (b) of the Act. In support of this the Court held that Stamp Act, 1899 being a fiscal statute dealing with India’s economy thereby making it par with the fundamental policy of Indian Law.

Moreover, the Court relied upon the case of Fuerst Day Lawson Ltd. v. Jindal Exports Ltd [7] wherein it was held that a foreign award is considered to be already stamped and as per the Act, it is enforceable as a decree.

From the above discussion, it can be concluded that the controversy pertaining to the enforcement of Non-stamped foreign award is settled. The decision of the Supreme Court boosts India’s image as a country which encourages out of court settlement.

References

[1] (2018) SCC Online 1471

[2] (2001) 6 SCC 356

[3] 174 (2009) DLT 391

[4] 2014 SCC OnLine Bom 1058

[5] (1999) 9 SCC 334

[6] (1962) 3 SCR 146.

[7] (2013) 2 MPLJ 252.

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