International commercial arbitration paving its way into the Indian legal system – Parinam Law Associates

INTRODUCTION:

 

International Commercial Arbitration:

 

With growing international relations, foreign investments and trade world over, the International Commercial Arbitration (ICA) has emerged as effective means for resolving disputes arising out of international commercial contracts/agreements. It is used as an alternative to conventional methods of dispute resolution (litigation) and is governed primarily by the terms agreed upon by the contracting parties, rather than national legislation or procedural rules. The reason why parties usually adopt the ICA is indefinite and inordinate delays in the adjudication of a dispute by the courts, who has to follow the complex and time-consuming procedure of adjudication of dispute. Arbitration clause has become one of the essential clauses under any contact/agreement. The parties are at liberty to specify the forum, procedural rules, and the governing law in order to determine the structure for the resolution of the dispute that may arise between the parties.

 

International Commercial Arbitration in India – A need of the hour!

 

Since liberalization of Indian economy in 1991, India has jumped out of the comfort zone of its home ground and has entered in the world of international trade. With a rising influx of foreign investments, overseas commercial transactions and open-ended economic policies acting as a catalyst, international commercial disputes involving India are steadily rising. Consequently, with the growing international relations of India, the scope of international commercial dispute resolution mechanism has increased over the past few decades. Since then, ICA has emerged as the preferred option for resolving commercial disputes with foreign entities and preserving business relationships.

 

India is one of the fastest growing economies and therefore requires a reliable and a stable dispute resolution process to attract foreign investments. With the extreme backlog of litigation before the Indian courts, international commercial investors and traders in India and abroad have developed a strong preference to resolve disputes via arbitration. Arbitrations in India are governed by the Arbitration and Conciliation Act, 1996 (the Act) as amended from time to time. India was one of the original signatories to the New York Convention of 1958, but, arbitration in India has not always kept up with international practices. However, in the last five years there has been a significant positive change in the approach taken by the Courts and legislators who have acted with a view to bring legislation governing Indian Arbitration in line with international practices as evidenced by the Amendment Acts of 2015 and 2019 i.e. The Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act 2015) and The

Arbitration and Conciliation (Amendment) Act, 2019 (Amendment Act 2019). The Indian Courts and legislators are now taking more pro arbitration view and are restricting the Court’s intervention in matters adjudicated through arbitration.

 

Section 2(1)f of the Act defines International Commercial Arbitration as under:

 

“international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—

 

(i) an individual who is a national of, or habitually resident in, any country other than India; or

 

(ii) a body corporate which is incorporated in any country other than India; or

 

(iii) *** an association or a body of individuals whose central management and control is exercised in any country other than India; or

 

(iv) the Government of a foreign country.

 

Thus, a dispute resolution mechanism arising out of a legal relationship is not necessarily contractual but, which is considered as commercial under the law prevailing in India and where at least one of the party is a foreign national or resident, or is a foreign body corporate, an association or body of individuals whose central management or control is in foreign hands will be considered as ICA. Thus, under Indian law, an arbitration with a seat in India, but involving a foreign party will also be regarded as an ICA.

 

The Amendment Act 2015 deleted the word “company” from definition of ICA. Therefore, by inference, it has been made clear that if a company has its place of incorporation in India then central management and control would be irrelevant for determination of being an “international commercial arbitration”. The Hon’ble Supreme Court in the matter of 1TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd. (2008) determined the scope of Section 2(1)f wherein, despite TDM Infrastructure Pvt. Ltd. having control by foreign country was determined to have Indian nationality as it was incorporated in India for purpose of the Act. Thus, though the Act recognizes companies controlled by foreign hands as a foreign body corporate, the Supreme Court has excluded its application to companies registered in India and having Indian nationality. Hence, in case a company has dual nationality, one based on foreign control and other based on registration in India, such company would not be regarded as a foreign company, for the purpose of the Act.

 

India’s paradigm shift into a more pro-arbitration country

 

The Supreme Court discredited the infamous Bhatia2 and Venture Global (‘Bhatia’) (2002) Decisions in the 3Bharat Aluminium Co v. Kaiser Aluminium Technical Services (‘BALCO’) (2012) decision and observed that:

 

(1) The Indian courts should not assert jurisdiction in matters concerned with (i) the grant of interim remedies in assistance of foreign-seated arbitrations under Section 9 of the 1996 Act; (ii) making of default appointment of arbitrators in foreign-seated arbitrations under Section 11 of the 1996 Act; and (iii) applications to set aside foreign awards under Section 34 of the 1996 Act.

 

(2) Following the Bhatia and Venture Global decisions, exclusion of Part I of the Act had become a standard drafting practice for parties who wanted minimal intervention from the Indian courts with respect to their contracts that involved at least one Indian party and contained a foreign-seated arbitration clause. BALCO’s judgement clarified that the Indian courts will no longer have to attempt to divide the express or implied intentions of the parties. Also, it will not be necessary for parties to expressly exclude the application of Part I of the 1996 Act in arbitration agreements that provide for foreign-seated arbitration. The Supreme Court held that Part I of the 1996 Act will continue to apply to all arbitrations (i.e. domestic and international) seated in India. In arbitrations seated in India, the Indian courts, in their capacity as the supervisory courts at the seat of arbitration, will have broad jurisdiction under Part I of the 1996 Act to supervise and support the arbitral process (including the power to set aside an award made pursuant to such arbitration).

 

(3) BALCO has succinctly clarified that the Indian courts will also not have jurisdiction to entertain an ordinary civil suit filed under the CPC for the purpose of seeking interim relief in aid of foreign-seated arbitrations. This is because such interim relief is not a substantive cause of action to warrant the institution of a civil suit under Indian law.

Another important aspect of BALCO to be considered is the manner in which the Indian Supreme Court has embarked on a direct inquiry as to the intention and purpose behind the relevant provisions of the UNCITRAL Model Law and the New York Convention, as discernible from the travauxi préparatoires, in addition to appreciating how those operative provisions are understood in several other jurisdictions.

 

This is an important development because it represents a paradigm shift away from preceding laws and practice followed by Indian courts. The Supreme Court’s willingness to do so, in fact, emboldens the fact that Indian courts will no longer hesitate to be directly guided by the terms of the relevant international conventions, as they are understood internationally, and, if the need arises, construe Indian legislation in conformity with the same.

 

The Arbitration and Conciliation act, 1996 vis-à-vis International Commercial Arbitration.

 

India, in its pursuit to encourage alternate dispute resolution, which is time efficient and cost effective for the settlement of commercial disputes nationally and internationally, adopted a legislation in the form of the Act. The Act aims to provide a speedy and efficacious dispute resolution mechanism in the existing judicial system which is marred by inordinate delays and a backlog of cases.

 

The Act is divided into four parts.

 

Part I contains provisions governing domestic arbitrations and international commercial arbitrations having seat in India. (Section 1 to 43);

 

Part II of the Act deals with the enforcement of certain foreign awards and applicability of Part I is excluded [save and except Section 9, 27 and 37(1)(b) and 37(3) by virtue of proviso in Section 2(2);

 

Part III contains provisions governing Conciliation (Section 61 to 81) &

 

Part IV contains Supplementary Provisions. (Section 82 to 86).

 

Part I and Part II deals with the laws governing ICA and the same are dealt in detail hereunder:

 

Part I

 

Part I of the Act runs from Section 1 to Section 43 and deals with domestic arbitrations and ICA when the arbitration is seated in India. Thus, an arbitration seated in India between one foreign party and an Indian party, though defined as ICA is treated akin to a domestic arbitration in respect of any matter arising thereof.

 

In Part I, Section 8 deals with power of court to refer the parties to arbitration where there is an arbitration agreement. Sections 3, 4, 5, 6, 10 to 26, and 28 to 33 regulate the procedure for commencement of arbitration. Section 34 regulates the challenge to the award and Sections 35 and 36 regulate the recognition and enforcement of the award. Sections 1, 2, 7, 9, 27, 37 and 38 to 43 are supplementary provisions that either support the arbitral process or are necessary.

 

Chapters III to VI, particularly Sections 10 to 33 of Part I of the Act, contain the important procedural law which parties would have the autonomy to forgo. Remaining Chapters of Part I of the Act form part of the proper law, thus making those provisions non-derogatory by parties who are subjected to Part I including parties to ICA where seat of arbitration is in India, even by contract.

 

In case of ICA seated outside India, the law governing seat of arbitration as agreed upon by the parties shall be applicable for any matters arising thereof. Thus, in the matter of dispute resolution by way of ICA the arbitration law or any other law of the country agreed between the parties in legal commercial relationship will be applicable.

 

However, proviso to Section 2(2) of the Act provides

 

“….that subject to an agreement to the contrary, the provisions of Sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of Section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

 

Hence, unless parties to ICA either expressly or by necessary implications abandons the application of Section 9, 27 and clause (a) of sub-section (1) and sub-section (3) of Section 37 of the Act, same shall be applicable even in the matter of ICA seated outside India.

 

(Section 9 of the Act deals with Interim reliefs etc. by the Court, Section 27 of the Act deals with Court assistance in taking evidence and Section 37 deals with Appeals)

 

Section 9 applications are to be made directly before the High Courts in case of international commercial arbitrations seated in India as well as outside India. Post grant of interim relief, arbitration proceedings must commence within 90 days or any further time as determined by the court.

 

Also, the seat of Arbitration is important from the point of view of challenging the award. The award if challenged must be challenged in the national court governing seat of arbitration. The grounds of challenge are determined by national laws governing seat of arbitration which may include challenge on the aspects of jurisdictional ground, procedural ground, and substantive ground.

 

Section 42 of the Act states:

 

“Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”

 

Part II

 

Part II of the Act deals only with foreign awards and their enforcement under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) and Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”). Part II of the Act is applicable to all foreign awards sought to be enforced in India.

 

Thus, Part II of the Act regulates arbitration only in respect of recognition enforcement and execution of a foreign award, and no provisions under the same can be derogated from by a contract between two parties.

 

Part II is divided into two chapters:

 

Chapter 1 deals with foreign awards delivered by the signatory territories to the New York Convention which have reciprocity with India. Provisions under Chapter 1 are discussed in detail herein after.

 

Chapter 2 deals with foreign awards delivered under the Geneva Convention. Provisions in respect of the Geneva convention are similar to those of the New York Convention (except Section 47 of the New York Convention) and hence has not been dealt with in detail in this article.

 

However, Section 52 of the Act categorically excludes Chapter 2 of the Act if foreign award is governed by Chapter 1.

 

To understand various provisions under Chapter 1 it is significant to understand Foreign Award under the Act.

 

Section 44 of the Act defines the Foreign Award as:

 

“means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October 1960

 

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and;

 

(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

 

Explanation to Section 44(b):

 

Thus, even if a country is a signatory to the New York Convention, it does not by that very fact mean that an award passed in such country would be enforceable in India. There must be further notification by the Central Government declaring that country to be a territory to which the New York Convention applies.

 

In the case of Bhatia International the Supreme Court expressly clarified that an arbitration award not made in a convention country will not be considered a foreign award.

 

Thus, essential ingredients to satisfy and conclude that an award is a foreign award, the following conditions are to be met:

 

a) the award passed should be an arbitral award,

b) it should be arising out of differences between the parties of which either is foreign body.

c) the difference should be arising out of a legal relationship.

d) the legal relationship should be considered as commercial in law in India.

e) it should be in pursuance of a written agreement to which the New York Convention applies; and,

f) the foreign award should be made in one of the 48 countries notified by Central Government of India.

 

Power of judicial authority to refer parties to arbitration

 

Section 45 of the Act casts a burden on a judicial authority to refer those parties to arbitration, who, under Section 44 of the Act have entered into an arbitration agreement.

 

Section 45 of the Act reads as:

 

Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, 1[unless it prima facie finds] that the said agreement is null and void, inoperative or incapable of being performed.

 

Thus, Section 45 of the Act starts with a non-obstante clause, giving an overriding effect to the provision and making it prevail over anything contrary contained in Part I of the Act or the CPC. It gives the power to the Indian judicial authorities to specifically enforce the arbitration agreement between the parties. But, as an essential pre-condition to specifically enforcing the arbitration agreement, the court must be satisfied that the agreement is valid, operative, and capable of being performed. In view thereof, it can be clearly understood that it is mandatory for the judicial authority to refer parties to the arbitration.

 

In a way Section 45 of the Act in Part II is similar to Section 8 of the Act in Part I as both provides for referring the parties to Arbitration except the fact that under Section 45 of the Act, the Judicial Authority has to satisfy itself in respect of validity of the subject agreement between the parties.

 

Unlike Section 8 of the Act, the Supreme Court, in 4World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. (2014) was of the view that no formal application is necessary to request a court to refer the matter to arbitration under Section 45 of the Act. In case a party so requests, even on an affidavit, a court is obliged to refer the matter to arbitration.

 

Thus, Section 45 needs only a ‘request’ for that purpose. Further, Section 45 can only be applied when the matter is the subject of a New York Convention arbitration agreement, whereas Section 8 applies in general to all arbitration clauses falling under Part I of the Act.

 

Further, In 5Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) (“Chloro Controls”), the Supreme Court has held that the expression ‘person claiming through or under, as provided under Section 45 of the Act, would mean and include within its ambit, multiple and multiparty agreements. Hence, even non-signatory parties to some of the agreements can pray and be referred to arbitration.

 

However, the Supreme Court, in the case of 6Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited & Anr. (2019) (“Reckitt Benckiser”) had occasion to revisit the principles laid down in Chloro Controls. The Supreme Court has held that it is upon the party seeking to implead a non-signatory to show its intention to consent to the arbitration agreement. Further, it held that a non-signatory without having any causal connection with the process of negotiations preceding the arbitration agreement cannot be made party to the arbitration. Importantly, it has also ruled that circumstances and correspondence post execution of an arbitration agreement cannot bind a non-signatory to the arbitration agreement.

 

Once the Award is passed by the Arbitral tribunal the question arises as to what are options available to losing party?

 

Party dissatisfied with the award, can challenge the same in the court governing the seat of arbitration as per laws prevailing in that country. For instance, if the seat of Arbitration for ICA is in India and a losing party wishes to challenge the award, it may do so on grounds mentioned under Section 34 of the Arbitration and Conciliation Act, 1996 and amendments there to as the Act is governing provision in relation to Arbitration law in India. Depending upon the outcome of the Section 34, the losing party may decide whether to challenge the order under Section 37 of the Act or not. Section 37 of the Act also states that no second appeal shall lie from the order passed therein. However, it does not take away any right to appeal to the Supreme Court. Ultimately, in case the losing party further loses in Section 37 appeal or in an appeal to Supreme Court or does not challenge the order which was passed under Section 34, it will have to either accept and honour the award or wait for winning party to file execution proceedings against it, compelling the losing party to honour the terms of the award. Once the award is unchallenged or upheld by the court under Section 34 and/or Section 37 of the Act, it shall be treated as decree of court for all purposes and can be enforced as any other decree passed by the civil court.

 

The Amendment Act 2015 has added an explanation to Section 34 of the Act (which deals with the challenge to the arbitral award with a seat in India). In the explanation, ‘public policy’ of India has been clarified to mean only if: (a) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or 81; or (b) it is in contravention with the fundamental policy of Indian law; or (c) it is in contravention with the most basic notions of morality or justice.

 

Since the Amendment Act of 2015, the Courts have refrained from giving a wide interpretation to “public policy” or interfering with the merits of the case. In November 2017, the Supreme Court in the matter of 7Venture Global Engineering LLC and Ors. v. Tech Mahindra Ltd. and Ors. (2017) (“Venture Global”) the Court observed “The Award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award; nor can it examine the merits of claim by entering in factual arena like an Appellate Court.”

 

These judgments show that the recent trend of interpretation of “public policy” has been one where the Courts have refused to examine the arbitral awards on merits, thereby upholding the legislative mandate of “minimal intervention of the Courts in the arbitral process” as reflected by the changes brought by the Amendment Act, 2015.

 

The Amendment Act 2015, in further amendment to Section 34 of the Act also specified that the ground of ‘patent illegality’ is not available as a ground for setting aside an arbitral award in ICA. The language and grounds for setting aside and refusing arbitral awards under Sections 34 in Part I and Section 48 in Part II are similar, except for the ground of ‘patent illegality’ which is available only for domestic arbitrations. The Supreme Court in the matter of 8Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India

(2019) upheld the said amended proposition under Section 34 of the Act.

 

The Amendment Act 2015 also amended Section 36 of the Act, which deals with enforcement of award. The amended provision provides, that a challenge to an award under Section 34 of the Act, will not be an automatic stay on the execution of the award. The party challenging the award under Section 34 will have to file a separate application seeking stay on enforcement of an award and on satisfaction the court, will have to pass an order, expressly staying the execution proceedings in respect of the award.

 

Remedy to the Foreign Award holder:

 

In case a foreign award is passed in reciprocal territory and a losing party in such ICA does not fulfil its obligation under the award, the award holder will have to file an application for recognition and enforcement of award in the country of domicile/or incorporation of losing party. In case a losing party is an Indian national then a winning party will have to file an application for recognition and enforcement of foreign award in India under the provision of Section 48 in Part II of the Act.

 

Recognition, Enforcement and Execution of Foreign Award in India under New York Convention:

 

When a party is seeking enforcement of a New York Convention award in India, it must make an application under the provisions of the Act to the Court of competent jurisdiction with the following documents as provided under Section 47 of the Act.

 

1. The original/duly authenticated copy of the award.

2. The original/certified copy of the agreement; or

3. such evidence as may be necessary to prove that the award is a foreign award.

4. if the award is in a foreign language, official translation of same by a consular or diplomatic agent.

 

Requisites for Foreign Award to be enforceable under the Act

 

There are several requirements for a foreign arbitral award to be enforceable under the Act as under:

 

a. Commercial transaction out of legal relationship

 

The award must be given in a convention country to resolve commercial disputes arising out of a legal relationship. In the case of 9RM Investment & Trading v. Boeing (1994), the Supreme Court observed that the term “commercial” should be liberally construed as having regard to manifold activities which are an integral part of international trade.

 

b. Written agreement

 

The New York Convention provides that a foreign arbitral agreement must be made in writing i.e. the agreement must provide for express provision in respect of referring the

dispute to arbitration under New York Convention. As no specific format is provided for such arbitration agreement, it does not have to be worded formally.

 

c. Agreement must be valid

 

For a foreign award to be valid it must arise out of an enforceable commercial agreement which is valid in law. In the case of 10Khardah Company v. Raymon & Co. (India) (1963), the Supreme Court held that an arbitration clause cannot be enforceable when the agreement of which it forms an integral part of is declared illegal. In another judgment by the Delhi HC, in 11Virgoz Oils and Fats Pte. Ltd. v. National Agricultural Marketing Federation of India (2018) the Hon’ble Court has held that a contract containing an arbitration agreement must be signed by all the parties to the contract, in order to make the arbitration agreement valid and binding upon the parties.

 

d. Award must be unambiguous and capable of resolution under Indian Law

 

In the case of 12Koch Navigation v. Hindustan Petroleum Corp (1989). the Supreme Court held that courts must give effect to an award that is clear, unambiguous and capable of resolution under Indian law.

 

Grounds for Refusing the Enforcement of a Foreign Arbitral Award:

 

A party against whom a foreign award is passed under New York Convention can object to enforcement of the same, when, such foreign award is sought to be enforced in India under Section 48 of the Act. However, it is to be borne in mind, while objecting to such enforcement objector cannot seek for setting aside of such award.

 

Under Section 48 of the Act, in case of a New York Convention award, an Indian court can refuse to enforce a foreign arbitral award if it falls within the scope of the following statutory defences:

 

i. the parties to the agreement are under some incapacity;

 

ii. the agreement is void;

 

iii. the award contains decisions on matters beyond the scope of the arbitration agreement;

 

iv. the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;

 

v. the award has been set aside or suspended by a competent authority of the country in which it was made;

 

vi. the subject matter of dispute cannot be settled by arbitration under Indian law; or

 

vii. the enforcement of the award would be contrary to Indian public policy.

 

Majorly, foreign awards are objected on the ground of them being against the public policy of India. The term “public policy”, as mentioned in Section 48(2)(b), is one of the conditions to be satisfied before enforcing a foreign award. The Supreme Court, in 13Renusagar Power Co. Ltd. v. General Electric Co. (1994), (“Renusagar”) held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to: i. fundamental policy of India; or ii. the interest of India; or iii. justice or morality.

 

The 2015 Amendment Act specifically provides an explanation to Section 48 of the Act, for the avoidance of all doubts on the point that an award is in conflict with the public policy of India, only if (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention of the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.

 

(Section 75 of the Act deals with provision in respect of ‘confidentiality’ and Section 81 of the Act deals with provision in respect of ‘Admissibility of evidence in other proceedings’)

 

In the case of 14Vijay Karia & Ors v. Prysmian Cavi E Sistemi S.r.l & Ors. (2020). the Supreme Court recently held that Courts should refuse the enforcement of foreign arbitral awards only in exceptional cases of a blatant disregard of Section 48 of the Act. The Supreme Court further held that a violation of Rule 21 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 would not constitute a violation of the fundamental policy of Indian law under Section 48(2)(b)(ii). The Supreme Court held that the fundamental policy refers to the core values of India’s public policy as a nation, which may find expression not only in statutes but also time-honoured, hallowed principles which are followed by the Courts.

 

The Supreme Court passed various judgments over a period of time, settling certain ambiguous positions of law vis-à-vis the enforcement of foreign Arbitral awards where the seat was outside India and awards passed when the arbitration was seated in India.

 

The Amendment Act 2015 was enacted keeping in view various propositions and challenges faced by judiciary while dealing with matters pertaining to domestic as well as international commercial arbitrations. The 2015 Amendment is prospective in nature. However, the amendment to Section 36 of the Act, which pertains to removing the implied automatic stay on the execution of arbitral awards, applies retrospectively as it is procedural in nature. The 2015 Amendment Act was well received and significantly improved the efficiency of arbitration in India.

 

The language and grounds for setting aside and refusing arbitral awards under Sections 34 and 48 are similar, except for the ground of ‘patent illegality’ which is available only for domestic arbitrations.

 

On fulfilling the statutory conditions mentioned above, a foreign award will be deemed to be a decree of the Indian court enforcing the award and thereafter, will be binding for all purposes

on the parties subject to the award.

 

No separate application needs to be filed for the execution of the award. A single application for the enforcement of award would undergo a two-stage process. In the first stage, the enforceability of the award, having regard to the requirements of the Act (New York Convention grounds) would be determined. Foreign arbitration awards, if valid, are treated at par with a decree passed by an Indian civil court and they are enforceable by Indian courts having jurisdiction as if the decree had been passed by such courts.

 

Once the court decides that the foreign award is enforceable, it shall proceed to take further steps for execution of the same, the process of which is identical to the process of execution of a domestic award.

 

Court for enforcement and execution of Foreign Award :

 

A foreign award holder can initiate enforcement and execution proceedings before any court in India where assets of the opposite party are located if the subject matter of award is money. In case the subject-matter of the arbitration is of a specified value, the commercial courts established under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (“Commercial Courts Act”) would have jurisdiction. In case of any other subject matter, Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have jurisdiction, i.e., where the opposite party resides or carries on business or personally works for gain.

 

Limitation Period:

 

The limitation period for enforcement of foreign award is twelve years.

 

When a Foreign Award is binding:

 

Section 46 of the Act states that Any foreign award which would be enforceable against any party shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India.

 

Appealable orders:

 

Section 50 of the Act makes provision for Appeal. It provides right to appeal only in two cases i) refusal by Indian court to refer the parties to arbitration under Section 45 of the Act and ii) refusal by the Indian court to enforce the foreign award under Section 48 of the Act. It further provides that such appeals shall be heard by the court authorised to hear the same. Further, Section 50 also states that no second appeal shall lie from the order passed therein. However, it does not take away any right to appeal to the Supreme Court.

 

Amendment Act of 2019:

 

The Arbitration and Conciliation (Amendment) Bill, 2019 was introduced and successfully

enacted as the Arbitration and Conciliation (Amendment) Act, 2019 on August 9, 2019. The Amendment Act 2019 was passed with a view to make India a hub of institutional arbitration for both domestic and international arbitration. However, the Amendment Act of 2019 is yet to be notified and hence, provisions governing the same are not dealt with in this article.

 

Arbitrable and Non Arbitrable disputes:

 

There are certain issues that are not within the jurisdiction, that cannot be tried by arbitration. The Supreme Court has in 15Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011). (“Booze Allen”), discussed the concept of arbitrability in detail and held that the term ‘arbitrability’ had different meanings in different contexts:

 

a) disputes capable of being adjudicated through arbitration,

b) disputes covered by the arbitration agreement, and

c) disputes that parties have referred to arbitration.

 

Any dispute that can be decided by a civil court can also be resolved through arbitration. However, certain disputes may, by necessary implication, stand excluded from resolution by a private forum. Such non-arbitrable disputes include:

 

a) disputes relating to rights and liabilities which give rise to or arise out of criminal offences;

b) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, or child custody;

c) guardianship matters;

d) insolvency and winding up matters;

e) testamentary matters (grant of probate, letters of administration and succession certificate); and

f) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

 

The Supreme Court’s observation on fraud:

 

The Supreme Court held, in 16N. Radhakrishnan v. M/S Maestro Engineers (2009) that where fraud and serious malpractices are alleged, the matter can only be settled by the court and such a situation cannot be referred to an arbitrator. The Supreme Court also observed that fraud, financial malpractice, and collusion are allegations with criminal repercussions and as an arbitrator is a creature of the contract, he has limited jurisdiction. It was further observed that the courts are more equipped to adjudicate serious and complex allegations and are competent in offering a wider range of reliefs to the parties in dispute.

 

However, the Supreme Court, in 17Swiss Timing Limited v. Organizing Committee, Commonwealth Games 2010, Delhi (2014) and World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. (2014). held that allegations of fraud are not a bar to refer parties

to a foreign-seated arbitration and that the only exception to refer parties to foreign seated arbitration are those which are specified in Section 45 of the Act, i.e. in cases where the arbitration agreement is either (i) null and void or (ii) inoperative or (iii) incapable of being performed. Thus, it seemed that though allegations of fraud are not arbitrable in ICAs with a seat in India, the same bar would not apply to ICAs with a foreign seat.

 

Further, the Supreme Court in 18A Ayyasamy v. A Paramasivam & Ors. (2016). has clarified that allegations of fraud are arbitrable as long as it is in relation to simple fraud. The Supreme Court held that: (a) allegations of fraud are arbitrable unless they are serious and complex in nature; (b) unless fraud is alleged against the arbitration agreement, there is no impediment in arbitrability of fraud. The judgment differentiates between ‘fraud simpliciter’ and ‘serious fraud’ and concludes that while ‘serious fraud’ is best left to be determined by the court, ‘fraud simpliciter’ can be decided by the arbitral tribunal. The Supreme Court has further held that, an arbitrator has to thoroughly examine the allegations regarding fraud.

 

CONCLUSION:

 

The Indian judiciary has often been criticized for its interference in international arbitrations and foreign application of domestic laws in foreign seated arbitrations. However, in the recent past, the Supreme Court has delivered various landmark rulings, taking a very pro-arbitration approach, such as declaring the Indian arbitration law as seat-centric; referring non-signatories to an arbitration agreement to settle disputes through arbitration; defining the scope of public policy both in domestic and foreign seated arbitration; agreements that are arbitrable and determining that simple allegations of fraud are arbitrable. Thus, the latest developments in the arbitration jurisprudence clearly reflects the support of the judiciary in enabling India to adopt a more prudent international practice. The Amendment Act of 2015 has brought significant change to arbitration law in India and has, since, clarified lot of ambiguity in the existing Act. Further, it is hoped that the Amendment Act of 2019, once notified, will make way for ground-breaking success in the field of institutional arbitration and make India more arbitration friendly nation in for domestic as well as International Commercial Arbitration. It will enable India to be an arbitration hot spot and pave the way for an expeditions and efficacious dispute resolution mechanism.