A Bit More on Reciprocal Arrangements under Section 44 of the 1996 Act

In the last decade (yes you read it right!) we wrote two posts (here and here) on the notifications relating to reciprocal arrangements under the Foreign  Awards (Recognition & Enforcement) Act, 1961 and the Arbitration and Conciliation Act, 1996. Thanks to inputs from readers, we were able to get hold of a few more notifications. In this post, we provide a consolidated overview of the notifications and the law on the subject. It would be great if readers could contribute to the list of notifications either by posting the notification's link on the comment box or by emailing it to lawbadri@gmail.com.

1. Source: Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010), P.2264 ff. List of countries notified under the Foreign  Awards (Recognition & Enforcement) Act, 1961 (p. 2296): The countries are Austria, Botswana, Bulgaria, Central African Republic, Chile, Cuba, Czechslovak Socialist Republic, Denmark, Ecuador, Arab Republic of Egypt, Finland, France, German Democratic Republic, Federal Republic of Germany, Ghana, Greece, Hungary, Italy, Japan, Kuwait, Republic of Korea, Malagasy Republic, Mexico, Morocco, Nigeria, The Netherlands, Norway, Philippines, Poland, Romania, San Marino, Spain, Sweden, Switzerland, Syrian Arab Republic, Thailand, Trinidad and Tobago, Tunisia, USSR, UK, United Republic of Tanzania, and USA.
2. Source: Reply to RTI Application (here): Singapore, Malaysia, Canada, Australia, China, Hong Kong SAR and Macao SAR, Mauritius

Some Related Issues:

Whether Notifications issued under the Foreign  Awards (Recognition & Enforcement) Act, 1961 could be used for Awards after 1996 Act was brought into force?

Yes, guess so. Please see Section 85 which states: 

"85. Repeal and savings.—(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal,—

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act." (emphasis added).

Whether precedents enforcing of foreign awards can be cited in the absence of tracing the relevant notifications?

Will not hurt making such an attempt. In the last post in 2018, we had noted:

"We spoke to some of the practitioners in the field. They say that none of the respondents had raised such an objection. Even if they raise such an objection, it would be possible to cite previous judgements where awards for such territories have been enforced. But the question is whether such an objection has been raised in the first place in those decisions?"

However, it is possible for a counter-argument (where applicable) that the objection regarding reciprocity was not taken before the court which enforcement a foreign award.

In any case, to address the information gap, it would be useful for courts deciding on enforcement of foreign arbitral awards to specify the seat of arbitration so that such precedents could be cited, in the absence of copy of notifications. We find that in several decisions enforcement foreign awards, courts have not been mentioning the seat/ place of arbitration. It would be useful if they did so. 

Some judgments mention the seat and courts in those cases have enforced foreign awards from seats not mentioned in the notifications issued under the 1996 Act (here). Some such judgments rendered in the last three years are as follows:

Switzerland: Pasl Wind Solutions Private Limited vs. GE Power Conversion India Private Limited (20.04.2021 - SC) : MANU/SC/0295/2021(strictly, not a decision enforcing a foreign award)

USA: International Nut Alliance LLC vs. Johns Cashew Company (09.12.2021 - KERHC) : MANU/KE/3139/2021 

Finland: Finnish Fund for Industrial Corporation Ltd. vs. VME Precast Pvt. Ltd. and Ors. (14.10.2020 - MADHC) : MANU/TN/5710/2020

Egypt: Angelique International Limited vs. Public Electricity Corporation and Ors. (23.06.2020 - DELHC) : MANU/DE/1290/2020  

UK: Glencore International AG vs. Hindustan Zinc Limited (08.06.2020 - DELHC) : MANU/DE/1238/2020 (London Court of International Arbitration-LCIA- Award enforced); Peniel Cashew Company and Ors. vs. Ahcom Sarl (30.10.2018 - KERHC) : MANU/KE/2997/2018 (CENTA award); C and C Maritime Pte. Ltd. vs. Advance Surfactants India Ltd. (24.01.2019 - DELHC) : MANU/DE/0280/2019.

Scope of Public Policy in Setting Aside Awards: Ssangyong v NHAI

As stated in the previous post, the decision of the Supreme Court in Ssangyong Engineering & Construction Co. Ltd. V. NHAI [Civil Appeal No. 4779/2019 dt. 8 May 2019]  is significant for several reasons and one of the important reasons is because it lays down the contours of setting aside arbitral awards on the grounds of public policy and patent illegality post the 2015 amendments. 

In this post, we look at what the Supreme Court held as regards the scope of the ground of public policy in setting aside the arbitral award.

Provisions of Law

Some salient provisions of the amended Arbitration and Conciliation Act, 1996 ("Act" or "1996 Act") are given below:

Section 28(3): "While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction."

Section 34(2)(b)(ii): "An arbitral award may be set aside by the Court only if—... 

(b) the Court finds that—...

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.For the avoidance of any doubt, it is clarified 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 with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice. 

Explanation 2.For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute."

Section 34(2A): "An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence."

The Contours of Public Policy and Patent Illegality: Ssangyong

The Supreme Court laid down what can be done and what cannot be done in a petition for setting aside an arbitral award on the ground of public policy and patent illegality. These are given below:

General

• The amended provisions would apply for petitions filed on or after 23 October 2015 (see last post)
• "Public policy" under Section 34(2)(b)(ii) and Section 48(2)(b) will have the same meaning. Additionally, purely domestic awards could be set aside on the ground of patent illegality appearing on the face of the record.
• The ground of interest of India as was recognised in Renusagar v GE  has been deleted and no more exists.

Fundamental Policy of Indian Law

• "Fundamental policy of Indian law" would not entail a review on merits of the dispute. 
•  Disregarding orders passed by superior courts of India, violation of foreign exchange laws  and contravention of statute linked to public policy or public interest would amount to contravention of the fundamental policy of Indian law.
• But fundamental policy of Indian law does not entail a review on the merits of the dispute.
• Fundamental policy of Indian law does not mean perversity. Wednesbury principles do not apply to the ground of fundamental policy of Indian law and decisions which fall short of reasonableness cannot be questioned on this ground. 
• While audi alterem partem principle is of great importance, it falls is already covered in Section 34(2)(a)(iii) and therefore does not fall within the scope of fundamental policy of Indian law. 

Justice and Morality

• The ground of justice and morality as provided in Renusagar v GE has been replaced with the most basic notions of morality or justice. These grounds as explained in p. 26 to 29 of Associate Builders would apply.
• An award which shocks the conscience of the court is likely to be set aside under this ground. If the claimant claims, say, Rs. X but the tribunal awards Rs. X + Y (i.e., Y is not at all claimed) without reason or justification, the award is liable to be set aside it is is opposed to the most basic notions of justice.
• Morality would obtain the meaning as is given in Section 23 of the Indian Contract Act, 1872. As such it would include sexual morality, such as an award providing for specific performance of an agreement involving prostitution. 
• Morality would also cover agreements that, though not illegal, are against the prevailing mores of the day. 
• However, if an award has to be set aside under this ground, it has to shock the court's conscience. 

In the next post, we shall see what the Supreme Court stated on the scope of Section 34(2A) and its impact on the interpretation of "public policy" in Section 48(2)(b).

Retrospective Applicability of the 2015 Amendments to Indian Arbitration Law

This presentation provides a descriptive comment of the recent decision of the Supreme Court of India in BCCI v Kochi Cricket Ltd. (15.03.2018), which partially answers whether the 2015 amendments to the Arbitration and Conciliation Act, 1996 are prospective or even apply to pending proceedings.

We will do a detailed post critically evaluating the decision. Prima facie, the court has given an interesting judgement attempting to balance all interests. The idea was probably suggested by Dr. AM Singhvi in course of the hearing, as acknowledged by the court in Para 34 of the judgement. 

Now what next for the Government? The most reasonable course of action for the Government is to continue with its idea of enacting S 87 but also statutorily recognising the Supreme Court's judgement in BCCI v Kochi Cricket by applying the amended S. 36 to pending S 34 petitions and to such petitions filed after 22.10.2015. At the same time, the Government should not abandon S 87 as every time there is a question on whether a provision of the 2015 amendment applies to such pending proceedings, the question has to be argued in various courts and finally settled by the Supreme Court. 

Transfer of Arbitral Awards to Court of Execution is Unncessary: SCI Clarifies

Way back in 2011, we did a post providing a descriptive comment on the decision of the Madras High Court in Kotak Mahindra Bank Ltd. v Sivakama Sundari S Narayana S B Murthy where it was held that it was not really necessary to file the award in the court within whose jurisdiction the award was transferred for the purposes of executing it in another court. But some High Courts had held that it was so required as the Code of Civil Procedure, 1908 necessitated it in the context of decrees and that since the arbitral award was deemed to be a decree, the execution of the arbitral award had to also undergo the same rigour. 

In view of the divergence in views of different High Courts, the Supreme Court has clarified the legal position, correctly, in the case of Sundaram Finance Ltd.v. Abdul Samad. This presentation provides a descriptive comment of the judgement of the Supreme Court.

The presentation concludes by arguing that the vestigial requirement of filing the award in the court having jurisdiction over the arbitration for onward transfer to the executing court had the effect of only delaying the award holder from enjoying the fruits of the arbitral award and that the decision has paved way for an easier and more efficient execution of arbitral awards. 

This begs a larger question: Is filing a decree in the civil court which passed the judgement really necessary? 

(A Lot) More on Reciprocal Arrangement Countries under the Arbitration & Conciliation Act, 1996

Recently, we did a post in this blog titled "(Nothing?) More on Reciprocal Arrangement Countries under the Arbitration & Conciliation Act, 1996" where we discussed another post titled "Reciprocal Arrangement Countries under Section 44 of the 1996 Act" in this blog penned about four years back on the countries which the Government has notified as having made reciprocal provisions for the enforcement of the New York Convention.

To recap, Section 44 of the 1996 Act defines the term "foreign award" for the purposes of Chapter I, Part II of 1996 Act to mean, among other things, an award made in one of the territories to which the New York Convention, 1958 (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958) applied and the Central Government had notified that such a territory made reciprocal provisions for enforcement of awards made in India [S. 44(b)]. 

The territories notified under Section 44(b) of the 1996 Act: Singapore, Malaysia, Canada, Australia, China, Hong Kong SAR and Macao SAR, and Mauritius. The notifications (provided in the previous post) are available here. 

We had noted in the previous post that by virtue of Section 82(2)(b) of the 1996 Act {which reads: "(2) Notwithstanding such repeal-...(b) all rules made and notifications published, under the said enactments [Arbitration (Protocol and Convention) Act, 1937, Arbitration Act, 1940, and Foreign Awards (Recognition and Enforcement) Act, 1961] shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act."} notifications issued under Section 2 of the Foreign Awards (Recognition and Enforcement Act, 1961 are deemed to have been issued under the 1996 Act. Section 2(b) contains provisions virtually identical to Section 44(b). Section 2(b) reads: "In this Act, unless the context otherwise requires," foreign award" means an 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 -... (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."

We had further noted that this blogger had filed an RTI application with the Ministry of Law and Justice seeking notifications issued under the 1961 Act but the PIO had given the notifications under the 1996 Act (See the reply of the CPIO). Thereafter, this blogger had filed an RTI Appeal, to which the Appellate Authority issued the following order dt. 18.01.2018: 

"Please refer to your appeal dated 23.12.2017 received on 10.01.2018 regarding furnishing of information sought under RTI Act, 2005.

2. Your appeal has been examined and it is found that CPIO has provided you the information in respect of notifications issued under the Arbitration & Conciliation Act, 1996 in place of the Foreign Awards (Recognition & Enforcement), 1961. Therefore, CPIO is directed to provide information within two weeks in respect of notifications issued under section 2 of the Foreign Awards (Recognition & Enforcement), 1961.

3. The Appeal is disposed of accordingly."

Vide Reply dt. 24.01.2018, the CPIO gave information on about 11 notifications issued under Section 2 of the 1961 Act. The entire sequence of events pertaining to the RTI application is narrated above to point out the efficacy of the RTI Act and the spirit in which the officials of the Ministry of Law and Justice disposed of the RTI application. 

The notifications provided now by the Ministry covers several territories mentioned in the previous post. The list of territories and the notification details are provided here. 

Sl. No.	Territories Covered	Notification No.	Notifying Ministry	Notification Date
1	Poland	S.O. 1238	Commerce	29/02/68
2	Greece, Equador, Bulgaria, Rumania, and Norway	S.O. 428 (E)	Foreign trade	14/06/72
3	Japan, Phillippines, USA, Tanzania, The Netherlands, Thailand, Sweden, and Austria	S.O. 732 (E)	Foreign trade	24/11/72
4	Nigeria, Tunisia, Ghana and Morrocco	S.O. 282 (E)	Commerce	16/05/73
5	UK	S.O. 4302	Commerce	25/10/76
6	Botswana, Cuba, Malagasy Republic, Mexico, Trinidad & Tobago, German Democratic Republic, Denmark and Egypt	S.O. 42 (E)	Commerce	07/01/78
7	Syria	S.O. 2920	Commerce, Civil Supplies & Cooperation	25/09/78
8	Belgium	S.O. 290 (E)	Commerce and Civil Supplies	28/04/80
9	San Marino	S.O. 84 (E)	Commerce	03/02/83
10	Central African Republic	S.O. 85 (E)	Commerce	03/02/83
11	Kuwait	S.O. 86 (E)	Commerce	03/02/83

The PIO has not provided notifications of the following territories: Chile, Czechslovak Socialist Republic, Federal Republic of Germany, Ghana, Hungary, Italy, Republic of Korea, Spain, Switzerland, and USSR. The CPIO had clarified in his reply that he was able to provide notifications as were available with his Section.

Belgium was not in the original list of territories noted in popular commentaries on Indian arbitration law but it appears that Belgium is also a notified territory. Hence authors of commentaries may take note of this add to the list of reciprocal territories notified. 

The above listed notifications can be accessed from here.

(Nothing?) More on Reciprocal Arrangement Countries under the Arbitration & Conciliation Act, 1996

We did a post about four years back on the countries which the Government has notified as having made reciprocal provisions for the enforcement of the New York Convention.We mentioned there that countries which were so notified under the Section 2 of the Foreign Awards (Recognition and Enforcement) Act, 1961 were: Austria, Botswana, Bulgaria, Central African Republic, Chile, Cuba, Czechslovak Socialist Republic, Denmark, Ecuador, Arab Republic of Egypt, Finland, France, German Democratic Republic, Federal Republic of Germany, Ghana, Greece, Hungary, Italy, Japan, Kuwait, Republic of Korea, Malagasy Republic, Mexico, Morocco, Nigeria, The Netherlands, Norway, Philippines, Poland, Romania, San Marino, Spain, Sweden, Switzerland, Syrian Arab Republic, Thailand, Trinidad and Tobago, Tunisia, USSR, UK, United Republic of Tanzania, and USA (Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010), P.2264 ff, 2296). We also mentioned that these notifications were valid even under the 1996 Act in view of Section 82(2)(b), which creates a fiction as if these notifications  were issued under the the 1996 Act.

In that post, we provided the links to the readers of notifications issued under the 1996 Act for Singapore, Malaysia, Canada, Australia, China, Hong Kong SAR and Macao SAR. Most of this information were sourced through an RTI Application seeking information on the notifications under Section 44(b) [see the post]. But what about the territories mentioned above? These must have been notified under the 1961 Act. Although the previous Application would have included all the territories mentioned above, in view of the deeming fiction, we nevertheless filed another RTI Application seeking the list of territories notified under the 1961 Act. None of the territories mentioned in the aforesaid commentary found its place in the reply of the PIO. In fact, the notifications given in the decision were those issued under the 1996 Act and not the 1961 Act. The Reply can be accessed from here. 

In addition to the countries mentioned in the previous RTI application, Mauritius has been notified vide Notification dt. 13.07.2015. 

It is possible that the Ministry has failed to trace notifications of the territories mentioned in the commentary, such as France, Spain, Switzerland, USA, etc. If so, how do petitioners seeking enforcement of arbitral awards satisfy the court that requirements under Section 44(b) have been met? 

We spoke to some of the practitioners in the field. They say that none of the respondents had raised such an objection. Even if they raise such an objection, it would be possible to cite previous judgements where awards for such territories have been enforced. But the question is whether such an objection has been raised in the first place in those decisions? 

As we noted in the previous post, the PIO did not give accurate information in reply to the query for information on this issue. Therefore, in order to put an end to this issue, a court hearing an objection of failure to comply with Section 44(b) should issue notice to the Government seeking their reply. 

We've filed an appeal against the decision of the PIO and we will keep readers updated on the outcome of the appeal. 

Contempt Mechanism under Section 27(5) of the A&C Act 1996

On the 6th of July, the Supreme Court passed a judgement in the case of Alka Chandewar v. Shamshul Ishrar Khan [Civil Appeal No. 8720/2017]. The Civil Appeal arose against a judgement of the Bombay High Court where the High Court construed Section 27(5) to state that teh said provision did not "empower the Tribunal to make representation to the Court for contempt if orders including interim orders passed by the Arbitrator except in respect of taking evidence are violated by the party."

The said position taken up by the High Court is correct for the following reasons:

(1) The text of Section 27(5) is based on of Regulation XVI of the Regulations for the Administration of Justice in the Courts of the Mofussil Dewannee Adaulut and in the Suddur Dewannee Adaulut, 1781 (“1781 Regulation). The said provision reads: 

“XXVI … [T]he Court shall grant the like Process as well to the Parties and Witnesses to appear before such Arbitrator and shall administer such Oath to the Parties and Witnesses as the Court is authorized to do in Causes tried before the Judge thereof And the several Persons not attending in consequence of such Process or making any Default or refusing to give their Testimony or sign their Depositions or being guilty of any Comtempt to the Munsiffs in the executing of his Office shall be subject to like Disadvantages Penalties and Punishments by Order made by the Arbitrator as they would incur for the same Causes in Suits tried before the Judge of the Court so that the Arbitrator do report such Order together with the Reason for making the same to the Judge of the Court and do obtain the Consent of the Judge thereto which shall be signified by such Judge signing such Order with his Name;” 

This provision was adopted in the Code of Civil Procedure 1859, which was then adopted in the Codes of 1877, 1882 and 1908. Section 43(2) of the Arbitration Act, 1940 borrowed this provision and the same was once again borrowed into the 1996 Act. These provisions were enacted at a time when the arbitral tribunal was not empowered to pass interim orders at all! [See for instance, Surendra Kumar Roy Chowdhury v. Sushil Kumar Roy Chowdhury AIR 1928 Cal 256]. It is not possible that the predecessors of Section 27(5) could have applied to disobedience to an interim order by the tribunal. It was only for the first time under the 1996 Act that an arbitral tribunal was empowered to order interim measures.Therefore, how can one construe the same provision to mean that the tribunal was empowered to refer matters to the High Court for contempt?

(2) The scope of Section 43(2) of the 1940 Act [the present Section 27(5)] and its predecessors was restricted to witnesses alone 

[Interestingly, the 1859 Code formed the basis on which the Jamaican Code of Civil Procedure, 1879 (“Jamaican Code”) was drafted. Section 343 of the Jamaican Code contained a provision virtually identical to Section 317 of the 1859 Code. Significantly, the Marginal Note to Section 343 read: “Non-attendance or contempt by witness”. See, GOVERNMENT OF JAMAICA, The Laws of Jamaica Passed in the Year 1879 (1879)].

In its 76th Report, the Law Commission of India has stated the following in respect of Section 43: 

"Section 43 confers powers on the court to issue processes for appearance before the arbitrator or umpire. The power is co-extensive with the corresponding power of the court in suits tried before it. There are consequential provisions in regard to persons who fail to attend, and there is a definition of the expression “processes”. No amendment is required in the section.” 

The aforesaid observations clearly imply that Section 43 dealt with the “consequential provisions” pertaining to failing to honour the summons for witnesses or for production of documents and other default by the recipient of such summons and did not encompass contempt to the arbitral tribunal for breach of its interim orders.

(3) Even precedents under Section 43 of the 1940 Act provided for a limited scope:

In Nihaluddin v. Tej Pratap Singh and Ors. [AIR 1968 All 157], the Consolidation Officer referred a dispute as to title to the Civil Judge, who in turn, referred the matter to the arbitrator as per Section 37 of the U.P. Consolidation of Holdings Act, 1939. One of the parties to the dispute allegedly disobeyed the injunction order passed by the statutory arbitrator. The other party filed a criminal miscellaneous petition under Section 3 of the Contempt of Courts Act, 1952 alleging contempt. The court had to decide whether the arbitrator was a “court”. Having held that the arbitrator was not a court, the Allahabad High Court went on to hold that the opposite party could not be guilty of contempt of court in having overlooked the arbitrator’s order. On the scope of the provision, the court held:

“Under Section 43 of the Arbitration Act, it is the Court (and not the Arbitrator) who has authority to issue process to the parties and their witnesses whom they or the Arbitrator want or wants to examine. It is again the Court which would enforce the production of documents before the Arbitrator. Thus the Arbitrator again lacks the power to enforce the production of parties, their witnesses and documents, which is a distinguishing feature of Courts.”

The aforementioned arbitrator could pass interim orders since the relevant statute empowered him to do so. Even in such a case, the court held that a party disobeying such arbitrator’s interim orders was not liable for contempt. It is also noteworthy that if the court had the power to initiate contempt proceedings against a party disobeying the tribunal’s orders, either the party would have invoked Section 43(2) of the 1940 Act or the court would have referred to it, especially when the court discussed Section 43 of the 1940 Act.

Similarly, in M.I. Shahdad v. Mohd. Abdullab Mir and Ors.[AIR 1967 J&K 120], the High Court of Jammu & Kashmir held that the sole purpose of Section 43 was to “ensure service or process”. In Union of India v. Bhatia Tanning Industries [AIR 1986 Delhi 195], the Division Bench of the Delhi High Court held that Section 43 was “confined to cases where a person, whether a party or a third person, is required to appear as a witness before the arbitrator” and that where a witness was guilty of contempt to the arbitrator or the umpire, he could be taken to task by the court. Notably, the High Court held that Section 43 was “confined to witnesses and witnesses alone.”. This position has been affirmed by the Supreme Court in Delta Distilleries Limited v. United Spirits Limited and Anr. [2013(4) Arb LR 47 (SC)]

(4) The interpretation affording the power to refer for contempt for all kinds of disobedience is not correct. Section 27(4) employs the term “witnesses” while Section 27(5) speaks of “persons”. Consequently, it is possible to contend that Section 27(5) is not merely restricted to witnesses but to any person, including a person who disobeys an interim order of the arbitral tribunal. However, the placement of Section 27(5) in Section 27 (which is titled “Court assistance in taking evidence”) itself militates against this argument. Even otherwise, the said contention might not hold much water. Section 27(2)(c) provides that an application under Section 27(1) shall specify the name and address of a “person” to be heard as witness or expert witness. Section 27(4) employs the term “witnesses” and not “persons”. Reading Sections 27(2)(c) with Section 27(5), it is clear that “person” employed in both sections refer either to a third party witness or to a party-witness. Consequently, the difference in references in Sections 27(4)(witness) and 27(5)(person) cannot be determinative of the applicability of Section 27(5) to disobedience of orders under Section 17.

For these reasons the decision of the Supreme Court is erroneous. 

It is pertinent to note that the Supreme Court observed that the 2015 amendments making Section 17 enforceable provide a better remedy and therefore reference to the Court under Section 27(5) may "no long be necessary".  The decision can be accessed from here.

Two-Tiered Tribunal with the first Tier Indian & Second Tier Foreign Valid Says SC: Another Pro-Arbitration Decision?

Readers would be aware of the two-Judge Bench of the Supreme Court in Centrotrade (2006) 11 SCC 245:2006(3) Arb LR 201 (SC).) where SB Sinha, J. held a two-tiered tribunal invalid when the first tier was Indian and the second tier was foreign while Tarun Chatterjee, J. disagreed with him. Due to the difference of opinion between the judges, the matter was referred to a larger Bench. . 

Readers may note that while SB Sinha, J. tried to distinguish two tier tribunals of arbitral institutions from the two-tiers in the case, there are observations in his judgement to the effect that two tiered tribunals of the nature discussed in the case (one Indian and the other foreign) is not contemplated in the 1996 Act. A three judge-Bench heard the matter and held such a clause to be valid.

Two questions were before the three-Judge Bench:

"(1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India? 

(2) Assuming a two-tier arbitration procedure is permissible under the laws of India, whether the award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade? If so, what is the relief that Centrotrade is entitled to?"

The judgement of the three judge-Bench primarily rests on party autonomy and non-applicability of public policy  to set aside the award. Holding that such a clause was valid, the Supreme Court, the Supreme Court held that the appeal should be listed again for consideration of the second question quoted above. 

The decision of the three-judge Bench can be accessed from here. 

Reciprocal Arrangement Countries under Section 44 of the 1996 Act

In one of the conferences on International Arbitration held in May this year, a partner of a Delhi-based law firm remarked that nobody knew the complete list of territories with which India had a reciprocal arrangement as per Section 44(b) of the Arbitration and Conciliation Act, 1996. The remark prompted this blawgger to attempt to find out such a list. This short post deals with this the list of such territories.

"Section 44: Definition.- In this Chapter, unless the context otherwise requires, "foreign award" 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."

Section 44 defines the term "foreign award" for the purposes of Chapter I, Part II of 1996 Act. According to it, a foreign award must satisfy the following conditions:

• It must be an arbitral award on the differences between persons.
• Such differences must have arisen out of legal relationships, whether contractual or otherwise.
• The award was in pursuance of an arbitration agreement to which the New York Convention applied.
• The award was made in one of the territories to which the Convention applied and the Central Government had notified that such a country had made reciprocal provisions for enforcement of such awards made in India.

Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010), P.2264 ff. has an excellent discussion on the subject and one may refer to the same for detailed analysis. The said commentary (at p. 2296) provides a list of countries that were notified under Section 2 of the Foreign Awards (Recognition and Enforcement) Act, 1961 as having reciprocal provisions for enforcement of Indian awards.  The countries are Austria, Botswana, Bulgaria, Central African Republic, Chile, Cuba, Czechslovak Socialist Republic, Denmark, Ecuador, Arab Republic of Egypt, Finland, France, German Democratic Republic, Federal Republic of Germany, Ghana, Greece, Hungary, Italy, Japan, Kuwait, Republic of Korea, Malagasy Republic, Mexico, Morocco, Nigeria, The Netherlands, Norway, Philippines, Poland, Romania, San Marino, Spain, Sweden, Switzerland, Syrian Arab Republic, Thailand, Trinidad and Tobago, Tunisia, USSR, UK, United Republic of Tanzania, and USA.

It may be noted that the Notifications declaring these countries to have provided reciprocal arrangements is valid even under the 1996 Act, in view of Section 82(2)(b) of the 1996 Act which provides: "(2) Notwithstanding such repeal-...(b) all rules made and notifications published, under the said enactments [Arbitration (Protocol and Convention) Act, 1937, Arbitration Act, 1940, and Foreign Awards (Recognition and Enforcement) Act, 1961] shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act." [fn. 45, p. 2296, Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010)]

Considering the availability of the notified territories in the public domain, ambiguities, if at all, should have arisen in respect of territories notified subsequent to the enactment of the 1996 Act. Consequently, an application under the Right to Information Act, 2005 dt. 22.05.2013 was given to the Ministry of External Affairs seeking reply on the list of territories notified under Section 44(b) of the 1996 Act. The Ministry forwarded the said application to the Department of Legal Affairs, Ministry of Law and Justice on 08.07.2013. It took more than two months for the Department to find out the territories under Section 44(b) of the 1996 Act. As per the Reply dt. 16.09.2013, the Notified countries are Singapore, Malaysia, Canada and Australia.

The CPIO could not find the notification number for the Notification of Australia. The Reply can be accessed from here.

It may be noted that on 19.03.2012, the Department of Legal Affairs had notified China, Hong Kong SAR and Macao SAR as territories under Section 44(b) (See, MANU/LAFF/2012) . However, the CPIO has not disclosed the same. 

Bharat Aluminium v. Kaiser Aluminium: A Summary

As readers of this blog and the followers of Indian arbitration are aware, it has taken about a decade for the

Bhatia International judgement to be overruled by a Bench consisting of Five judges of the Supreme Court in Kaiser Aluminium (pdf). For those who are new to Bhatia International and its legacy, see this post (here) and this paper (pdf) on the decision and its effects on  arbitration in India. We do not wish to dwelve upon the aspects covered by these posts and the said paper. In Bhatia International, it was held by a three judge Bench of the Supreme Court that Part I would apply even to international commercial arbitrations held outside India. Thus, in effect, courts in India had jurisdiction even over international commercial arbitrations held outside India. This meant, among other things, that the Indian courts could set aside awards in arbitrations whose seat were outside India. The contentions of counsel would be subjected to a detailed analysis in a subsequent post, if at all. We go straight to summarize the relevant portsions of the judgement in Kaiser Aluminium delivered today (on 06.09.2012). The judgement deals with the history of arbitration law in India and at the international level. These will not be dealt with in this post:

1. In Para 14(b) of Bhatia International, it was held: "(b) Lead to an anomalous situation, inasmuch as Part I would apply to Jammu and Kashmir in all international commercial arbitrations but Part I would not apply to the rest of India if the arbitration takes place out of India." The conclusion in the above para of Bhatia International is incorrect. Section 1(2) is the same as was in the Arbitration Act, 1940 (1940 Act). The said section 1(2) read: "It extends to the whole of India (except the State of Jammu and Kashmir).” In addition, the 1996 Act contains the following proviso to Section 1(2): “Provided that Parts I, III and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation.” The above proviso is only to incorporate the special provisions pertaining to International Commercial Arbitration. These aspects were not dealt with under the 1940 Act and therefore the proviso was necessary. No anomaly would be  created as Section 2(2) would apply equally to arbitrations is Jammu and Kashmir and the courts in J & K would not have jurisdictions as regards ICA held outside India. Sectio 2(2) is not therefore affectd by the said  proviso. Purely domestic awards would be governed by the relevant J & K Arbitration statute.

2. Section 2(2) bars jurisdiction of Indian courts as regards arbitration held outside India. The opposite conclusion reached in Bhatia International is overruled. The exclusion of "only" in Section 2(2) is not a case of casus omissus and the omission is not a mistake.A plain reading of Section 2(2) makes it clear that Part I does not apply to arbitrations held outside India.

3. The relevant Model Law Article 1(2) used the wordd "only" as it contained exceptions to the territorial applicability and certain provisions such as interim measures were applicable even for arbitrations held outside the relevant country.  Therefore "only" was to stress the fact that except for such provisions, the Model Law was applicable to the relevant  country alone. Since those exceptions have not been retained in the 1996 Act, use of "only" was not necessary in Section 2(2). In fact the Swiss Private International Law Act 1987 and the English Arbitration Act, 1996 have dropped off "only"  as well.

4. If Part I was applicable to international commercial arbitrations outside India, certain words would have to be added to Section 2(2) which is not permissible.

5. Bhatia International's conclusion that Section 2(2) conflicts Sections 2(4) or (5) is erroneous.Section 2(4) only deals with arbitrations under other enactments. This provision has to be read in conjunction with Section 2(2) and would operate only as regards arbitrations in India under any enactment in force. This is in consonance to Article 245 of the Constitution which provides that Parliament may make laws for thewhole or part of India. Similarly Section 2(5) must be read in conjunction with Section 2(2)."All arbitrations" in Section 2(5) is to be read with as all arbitrations in India in view of Section 2(2).

6. It was contended that Section 2(7) indicates that Part I would apply to arbitrations outside india. It reads:
"An arbitral award made under this Part shall be considered as a domestic award.” This does not in any way dilute the adherence to the territoriality principle adopted in the 1996 Act nor does it provide for delocalized arbitration. The need for defining "domestic awards" was to distinguish it with "foreign awarsds" which are covered by Part II of the Act. Further, the definition also clarifies that even if the award was rendered in an international commercial arbitration held in India, such award is a domestic award.

7. The definitions Sections in Part I and II clarify the respective applicability of Parts I and II. Section 2 begins with the expression “In this part, unless the context otherwise requires……” Similarly Sections 44 and 53 gives the  interpretation of foreign awards for the purposes of Chapters I and II of Part II.

8. It was contended that Section 9(b) of the Foreign Awards (recognition & Enforcement) Act, 1961, not retained in the 1996 Act provided that nothing there was applicable to award in an arbitration agreement governed by Indian law.  There is no link between the deletion of 9(b) and the applicability of Part I to foreign arbitrations. The purpose behind Section 2(7) was to foreclose the possibility that an arbitration in India between two foreign parties should  be construed to be a non-domestic arbitration and provisions pertaining to foreign awards would be invoked to enforce such an award in India. 

9. Section 2(1)(e) which defines "courts" deals with courts which would exercise supervisory control over the  arbitral process. Thus, if neither party belongs to Delhi but both arbitrate in Delhi, the Delhi courts would have supervisory jurisdiction over the arbitral process. This is apart from the courts which would have had the jurisdiction as cause of action arose within such court's jurisdiction. This has no relevance to the applicability of Part I of the Act to non-domestic arbitrations. Section 20 which provides that parties could agree to the place of arbitration and that in case of failure by parties the tribunal will determine the appropriate place, is only meant to operate in arbitrations where place is India but parties have not selected the particular location in India. Further, for practical considerations a tribunal may meet even outside India as provided in Section 20(3). Thus, there is a distinction between "seat" and "venue". An agreement has to be construed independently to see if The foreign “seat” would be read as in fact only providing  for a venue where the hearings would be held, in view of the choice of the 1996 Act as being the curial law or Whether the specific designation of a foreign seat, "necessarily carrying with it the choice of that country’s Arbitration / curial law, would prevail over and subsume the conflicting  selection choice by the parties of the
 1996 Act". If the agreement provides for an Indian seat, Part I would be applicable. If it provides for a foreign seat, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement states that the 1996 Act shall govern the arbitration proceedings.

10. The choice of a foreign country as the seat necessarily implies that the law of the seat regarding conduct and supervision of arbitration will apply. Therefore, if the seat is a foreign country, Part I would not be applicable to enable Indian courts exercise supervisory jurisdiction. But "it would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English Procedural Law/Curial Law.

11. Section 28 provides an option in a domestic international commercial arbitration for the parties to choose a different substantive contract law and is not indicative of the intent to make Part I applicable to foreign arbitrations.

12. It was contended that Part II recognised jurisdiction of two courts to exercise jurisdiction to annul the award- courts of seat and the courts of the country under the laws of which the award was made.This provision imported from the New York Convention is only to recognise that two Courts may have jurisdiction to annul an award.Thus, there is a complete segregation between Part I and II in the Act. Regulation of arbitration consists of four steps (a) commencement, (b) conduct, (c) challenge and (d) recognition and enforcement. Part I deals with all the four but as regards domestic arbitration while Part II deals with only (a) commencement and (b) recognition and enforcement. Thus, the conduct and the challenge of arbitrations are to be done in the country having supervisory jurisdiction over the arbitration. This is in consonance with the schemes in international instruments such as the New York Convention and the UNCITRAL Model Law on International Commercial Arbitration.

13. The use of expression “notwithstanding anything contained in Part I, or in the Code of Civil Procedure, 1908”, in Section 45 of the Arbitration Act, 1996 do not indicate the extra territorial applicability of Part I. These were the expressions used in the 1961 Act and since the 1996 Act is also a consolidating statute, it is not rare for a consolidating act to retain the expressions used in the previous Acts

14. It was argued that the expression that enforcement of a foreign award may be refused when the award “has been set aside or suspended ” “under the law of which” that award was made in Section 48(1)(e) indicated Part I was applicable to foreign arbitrations. This is not so. The said provision has been imported from the New York Convention. The said provision merely recognises the two courts have jurisdiction to annul and does not confer jurisdiction on a court to annul an award made outside the jurisdiction of the seat. It may be noted that the second alternative, that is, "under the law of which" the Award was made was inserted to state that in case the national legislation in the seat did not permit challenge, challenge could be made in the law under which the award was made. Thus the "second alternative" is not really an alternative but only operates in case of the absence of provision of challenge in the "first alternative", that is, the law of the seat. A similar situation resulted in Venture Engineering where the award was set aside under the laws governing the applicable law, Indian law. Furthermore, it is to be noted that the expression "under the law" in Section 45 does not denote the substantive law of contract but the procedural law of arbitration.

15. As regards applicability of Section 9 to foreign arbitrations, the power cannot be imputed to a court by the process of interpretion and doing the same would violate the principle of territoriality in Section 2(2) of the Act.

16. In Bhatia International, a non-convention award was interpreted to be included in Part I of the 1996 Act as the court considered it to be a lacuna that the said Act did not cover such awards. There is no such lacuna. Further, no interim relief could be claimed in respect of a foreign arbitration through a civil suit as an interim relief could only be in furtherance of the main relief. There is no power to a civil court to grant interim relief in relation to a foreign arbitration even if parties agree that 1996 Act should govern the arbitration even if it is a foreign seat.

17. Therefore, Bhatia International and venture Engineering are clearly erroneous and are overruled. Since Bhatia International and Venture Engineering have been applied by numerous courts, the law declared in this
judgement would be applicable prospectively to all arbitration agreements executed hereafter.

The judgement will be analysed in detail in this blog in the coming weeks. Its impact on Bhatia International is clear- the choice of a foreign seat would operate as an exclusive jurisdiction clause and exclude the applicability of Part I and no interim measures would be available in arbitrations held in foreign seats. But there are certain observations, summarized in paras 10 and 11 above, which have the potential to generate controversies. These will be dealt with in greater detail, starting next week, hopefully.

Recent Developments in India on Foreign Arbitrations- Videocon & Agritrade

In this very short post, we take note of a couple of interesting developments in India concerning foreign arbitration.

Agritrade International v. NAFED 2012(1) Arb LR 405 (Delhi):

Agritrade International v NAFED (Agritrade) relates to a foreign arbitral award that was passed in favour of Agritrade International directing National Agricultural Co-operative Marketing Federation of India Limited (NAFED) to pay USD 580,000 plus pre-award interest at 8% and post award interest at 8% plus costs. Agritrade filed a petition for execution of the arbitral award. NAFED objected to the enforcement on the ground that there was no concluded contract between the parties. A Single Judge of the Delhi High Court found that Agritrade had neither complied with the requirement of Section 47(1)(b) of producing the original arbitration agreement or a duly certified copy thereof even after affordign adequate opprotunity nor was there any concluded contract between Agritrade and NAFED. The court refused enforcement of the award on the ground that the enforcement of the award would be contrary to the public policy of India. A couple of questions here- (1) Shouldn't the court have examined whether to refuse enforcement on the ground mentioned in Section 48(1)(a) ("...agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.")? (2) If the court should have examined whether to refuse enforcement under Section 48(1)(a) for the reasons stated, has the Delhi High Court impliedly followed the Supreme Court in reading public policy in a wider manner (See, Phulchand Exports Ltd. v. OOO Patriot) and disregarded  Penn Racquet Sports v. Mayor International Ltd.?

Union of India v. Videocon Industries Limited 2012(1) Arb LR 416 (Delhi) 

In mid-2011, the Supreme Court had passed a controversial judgement in Videocon Industries v Union of India regarding, among other things, whether there was a transfer of seat from Kuala Lumpur to London in arbitration proceedings under the Production Sharing Contract. Our comments criticising the judgement can be accessed from here. The Supreme Court had held that there was no transfer of seat from Kuala Lumpur to London and therefore the forum for challenge of arbitral award was Malaysia and not UK. Despite the judgement of the Supreme Court, Videocon pursued proceedings pertaining to the arbitration in London. These proceedings were in the nature of those dealt with by the courts of the seat of arbitration. Therefore, Union of India filed a suit in the Delhi High Court praying for injunction to be granted against Videocon restraining it from pursuing the said proceedings in the London court. A single judge of the Delhi High Court granted the same. It may be noted that in a previous post, there was no necessity for the Delhi High Court and the Supreme Court to deal with the issue as to the seat of arbitration in the proceedings under Section 9 in the first place and hold that the “governing procedural law is yet to be determined”. Videocon’s argument was that in view of London as the choice of seat of the parties, Part I was impliedly excluded. Union of India contended that Malaysia was the seat of arbitration. The question as to whether London or Malaysia was the seat of arbitration was immaterial in deciding whether Part I was excluded impliedly because the argument was that the choice of a foreign seat had impliedly excluded applicability of Part I. So the court had to simply decide whether the choice of a foreign seat, of English Law as the law of arbitration agreement and of Indian law as the substantive law of contract excluded the applicability of Part I. It would be interesting to see if Videocon goes on appeal from the order of the Single Judge

Delay for us is endemic we don't need government to push for it.

Australian's doesn't seems to understand it says Justice Srikrishna. An Australian firm has lined up Indian Republic as respondent in a commercial matter. It has stated that the India judiciary is under the thumb of Indian Government highlighting the delay in implementing an arbitral award against Coal India Ltd. by the SC of India. The decision is expected in few months from an arbitration panel in London. Please see the news here and an earlier related post here.

Transmission of Arbitral Awards for Enforcement: Madras HC Clarifies

Kotak Mahindra Bank Ltd. v Sivakama Sundari S Narayana S B Murthy

Case: C.R.P.(NPD) No.574 of 2011

Bench: Justice V. Ramasubramanian

Date: 26.08.2011

Facts:

Disputes arose between the Petitioner (Kotak) and the Respondent (Sundari) which were referred to an arbitrator. The sole arbitrator passed an award in January 2010. Kotak thereafter filed an execution petition before the X Assistant Judge, City Civil Court, Chennai for executing the award as Sundari resided within the limits of the said court. The X Assistant Judge returned the execution petition asking the petitioner to the grounds for filing the petition even without transmitting the award through proper channel. After hearing the petitioner, the X Assistant Judge, relying on a judgement of the Karnataka High Court, dismissed the petition on the ground that the award was not transmitted through the proper court. Kotak filed a CRP in the High Court against the order of the X Assistant Judge.

The Single Judge of the High Court found that the law regarding transmission of awards was uncertain. This uncertainty has resulted in about 2362 execution petitions filed in the first half of 2011 requesting transmission of awards to various courts, either within or outside the State of Tamil Nadu.

Relevant Provisions:

Code of Civil Procedure, 1908:

"37. Definition of Court which passed a decree— The expression "Court which passed a decree", or words to that effect, shall, in relation to the execution of decrees, unless there is anything repugnant in the subject or context, be deemed to include,—

(a) where the decree to be executed has been passed in the exercise of appellate jurisdiction, the Court of first instance, and

(b) where the Court of first instance has ceased to exist or to have jurisdiction to execute it, the Court which, if the suit wherein the decree was passed was instituted at the time of making the application for the execution of the decree, would have jurisdiction to try such suit.

Explanation.—The Court of first instance does not cease to have jurisdiction to execute a decree merely on the ground that after the institution of the suit wherein the decree was passed or after the passing of the decree, any area has been transferred from the jurisdiction of that Court to the jurisdiction of any other Court; but in every such case, such other Court shall also have jurisdiction to execute the decree, if at the time of making the application for execution of the decree it would have jurisdiction to try the said suit.

38. Court by which decree may be executed— A decree may be executed either by the court which passed it, or by the Court to which it is sent for execution.

39. Transfer of decree— (1) The Court which passed a decree may, on the application of the decree-holder, send it for execution to another Court of competent jurisdiction,—

(a) if the person against whom the decree is passed actually and voluntarily resides or carries on business, or personally works for gain, within the local limits of the jurisdiction of such other Court, or

(b) if such person has not property with in the local limits of the jurisdiction of the Court which passed the decree sufficient to satisfy such decree and has property within the local limits of the jurisdiction of such other Court, or

(c) if the decree directs the sale or delivery of immovable property situate outside the local limits of the jurisdiction of the Court which passed it, or

(d) if the Court which passed the decree considers for any other reason, which it shall record in wiring, that the decree should be executed by such other Court.

(2) The Court which passed the decree may of its own motion send it for execution to any subordinate Court of competent jurisdiction.

(3) For the purposes of this section, a Court shall be deemed to be a Court of competent jurisdiction if, at the time of making the application for the transfer of decree to it, such Court would have jurisdiction to try the suit in which such decree was passed."

Order XXI

5 . Mode of transfer— Where a decree is to be sent for execution to another Court, the Court which passed such decree shall send the decree directly to such other Court whether or not such Court is situated in the same State, but the Court to which the decree is sent for execution shall, if it has no jurisdiction to execute the decree, send it to the Court having such jurisdiction.

6 . Procedure where Court desires that its own decree shall be executed by another Court— The Court sending a decree for execution shall send—

(a) a copy of the decree;

(b) a certificate setting forth that satisfaction of the decree has not been obtained by execution within the jurisdiction of the Court by which it was passed, or, where the decree has been executed in part, the extent to which satisfaction has been obtained and what part of the decree remains unsatisfied; and

(c) a copy of any order for the execution of the decree, or, if no such order has been made, a certificate to that effect.
...

10 Application for execution— Where the holder of a decree desires to execute it, he shall apply to the Court which passed the decree or to the officer (if any) appointed in this behalf, or if the decree has been sent under the provisions hereinbefore contained to another Court then to such Court or to the proper officer thereof."

Arbitration and Conciliation Act, 1996:

Section 2(e)

"Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

"36. Enforcement.- Where the time for making an application to set aside the arbitral award under award shall be endorsed under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court."

Decision:

The decision of the court is summarized below:

1. A decree is to be executed, primarily, by the court which passed that decree (Decree Court).

2. Provisions for sending the decree to another court (Transmission) exists only in those instances where it is not possible for the Decree Court to execute it.

3. An award under the Arbitration and Conciliation Act, 1996 is deemed to be a decree of a civil court for the purposes of execution. However, the arbitral tribunal is not equivalent in status to that of a civil court. The arbitral tribunal does not have the power to execute a decree. Consequently, it does not have the power to transfer the decree to a competent court.

4. There is a misconception that the execution petition must be filed in the court within whose jurisdiction the award was passed. This has led to filing of numerous (at least 2362) award execution applications for transfer to other courts. There is no such provision of law.

5. In Daelim Industrial Co. Ltd. v. Numaligarh Refinery [EA 105/2009 in EP 242/ 2008 decided on 13.03.2009], an award that was passed by an arbitral tribunal in Calcutta. The award was set aside by the District Court of Assam but the High Court at Guwahati partly upheld the award. The Supreme Court, on appeal, party modified the High Court’s judgement. Question arose before the Delhi High Court as to whether it had the territorial jurisdiction to entertain the execution petition. The Delhi High Court held that in the absence of mandate under Section 38 of the Code of Civil Procedure, the court having territorial jurisdiction over the place in which the properties of the judgement debtor would have jurisdiction.

6. Consequently, there is no single court where the execution petition must be necessarily filed for executing an award.

7. The 1996 Act does not necessitate that parties must arbitrate in a particular place. Therefore, parties may choose to arbitrate in any place according to their convenience. Even the tribunal can conduct arbitration proceedings in a place different from the place chosen by the parties, if any, for convenience. Therefore, it cannot be insisted that the award be enforced in the place chosen by the parties or in a place where the arbitral tribunal conducted hearings for the sake of convenience.

8. If the misconceived practice as is currently adopted is the rule, then, by logical extension, an award passed in London could only be enforced in London and not in India.

9. A connected misconceived practice is for the decree holder to get a certificate from the High Court that the award has not been satisfied by the judgement debtor. Only the court which actually passed the decree can give such a certificate.

10. In fact, courts do not insist on such a transmission of an award passed by the Registrar of Chits under Section 69 of the Tamil Nadu Chit Funds Act, 1982.

Consequently, the court concluded:

"In the absence of any provision in the 1996 Act, requiring a Court to pass a decree in terms of the award (except in terms of Section 34) and in the absence of any provision in the 1996 Act making the Arbitral Tribunal a Court which passed the decree and in the absence of any provision anywhere making the court within whose jurisdiction an award was passed as the court which passed the decree, it is not open for any [Court executing an arbitral award] (i) either to demand transmission from any other Court; (ii) or to order transmission to any other Court."

The court directed the petitioner to present the execution petition once again in the court of the X Additional Judge.

Thanks to this news report in the Business Line for bringing to our attention the above decision.

Link to the Paris Court of Appeal Decision in Dallah Real Estate v Pakistan

In the last post, we had dealt with the Paris Court of Appeal decision in the case of Dallah Real Estate v. Government of Pakistan. The Court of Appeal decision can be accessed from this link. Thanks to one of the members in the Linkedin International Arbitration group who was gracious enough to send me the judgement.

The Paris Court of Appeal Decision in Dallah Real Estate v Pakistan

Thanks to one of the members in the Linkedin International Arbitration group, this blawgger was able to get hold of the decision of the Court of Appeal of Paris in Dallah Real Estate and Tourism Holding Co. v. Government of Pakistan. We have had about three posts (more would come, hopefully in the near future!) on the case. Basically, we had discussed a few principles involved in the case and had two posts (here and here) on the English Commercial Court's decision. We now analyse the French Court of Appeal (CoA) decision and compare the same to what the Commercial Court decided.

The only issue that the CoA was really concerned with was whether Pakistan was a party to the arbitration agreement. While discussing the facts, the court noted that the Awami Hajj Trust established by an Ordinance of the Government of Pakistan ceased to exist only after the agreement was executed (for facts, see this post). The CoA held that Pakistan was a party to the arbitration agreement for the following reasons:

• As per the MoU (Memorandum of Understanding) signed between Dallah and Pakistan, Dallah was to submit the terms and conditions of the agreement, the financial plans etc to Pakistan and the financier was to be an entity designated by Pakistan. Further, the Pakistan had the right as per the MoU to 
• The only interlocutor with Dallah was the Government of Pakistan. the negotiations took place exclusively between Pakistan and Dallah
• The officials of the Ministry of Finance, Pakistan were members of the board of the Trust.
• The financial plans etc were given by Dallah to the Government during the pre-contractual stage
• Although Dallah has written a letter which states that the Trust was the sole contracting partner , as per the understanding between Dallah and the Government, the government designated in the letter head of the government the financier for the project.
•  It was clearly indicated to the Chairman of Dallah by one of the members of the Board of the Trust that it was for the Government to approve the contractual relationship between Dallah and the Trust.
• During the performance of the contract, officials of the Pakistani Government exchanged correspondence in respect of the agreement.

It may be noted that the English Commercial Court decided that the Government of Pakistan was not a party to the agreement. The Commercial Court (CC) accepted that the Trust was created by the Ordinance and that the Government had control over the Trust (through the board). Further, the CC also admitted that the participation of the Government in the agreement was substantial: the agreement was signed by a Government  official although he signed it as a member of the board; the Trust had a unilateral right to assign the contract to the Government; the government provided the contract bank guarantee on behalf of the Trust. Nevertheless the CC concluded that the Government was not party. The reasons were:

• The Managing Trustee of the Trust signed the contract
• The guarantee provided to the affiliate of Dallah was an independent contract. merely furnishing the bank guarantee does not indicate that the third party intended to be bound by the contract. The obligations of the trust were independent to that of the Government in furnishing guarantee
• Pakistan was not a party to the agreement
• The assignment clause itself was indicative of the fact that the Government did not have any rights in the agreement.  
• The most important aspect in favour of Pakistan was that the MoU contemplated that the Government would be a party while in the agreement the Government was not a party.
• Although the letters nominating the financier were sent to Dallah under the letter head of the Government, the nomination was already done by the Trustees.
• Although the arbitrators concluded that it was the Government which actually funded the Trust, the conclusion was not correct because the funds were to come from the piligrims and philanthropists
• Although the termination letter was under the letter head of the Ministry of Religious Affairs, he could not have acted as a member of the Board of the Trustee as by then the Trust had ceased to exist.
• It was not that by not re-promulgating the Ordinance, the Government decided to step in the shoes of the Trust.
• Before the Judge in Pakistan, the government had sought a declaration that the agreement was repudiated due to the default of Dallah. This implied that the Government did not consider itself to be a party to the agreement.

I leave it to the readers to decide which one is of these judgements is more convincing. We'll look at this extremely interesting divergence between the French and the English courts in a future post.

Enforcement of Foreign Awards: India Catching Up with the International Trend?

Two recent  judgements by the Delhi High Court on the enforcement of foreign awards are worth noting.We'll do a detailed post on one of the two and give the link to the other. We'll cover the other in brief in this month's roundup of arbitration cases.

1. Penn Racquet Sports v. Mayor International Ltd.

EX.P. 386/08 & E.A. Nos.451/2010, 704-705/2009 & 77/2010

High Court of Delhi

Date of Judgement: 11 January 2011

High Court of Delhi

Facts:

Penn Racquet Sports (Penn) is a company based in USA. Major International Ltd. (Major) is an Indian company. Under the Trademark Licence Agreement (TLA) entered into between Penn and Major, the trademark “Penn” was licenced to Major for certain purposes and for the same Major had to pay annual royalty. The annual royalty was to be paid in quarterly instalments. Default in payment attracted interest.

Clause 17 stated that the agreement would be governed by Austrian laws. Clause 18 of the TLA provided for reference of disputes to arbitration administered by ICC.

Major defaulted in payments and consequently, Penn terminated the contract. Disputes arose and were referred to Ms. Gabrielle Nater-Bass, the sole arbitrator. The arbitrator decided in favour of Penn.

Mayor argued before the Delhi High Court that the award was contrary to public policy.

Decision:

The Court held that narrow meaning has to be attributed to the term “public policy of India” where the matter involves conflict of laws. The court referred to the decision of the Supreme Court in Smita Conductors Ltd. v. Euro Alloys Ltd. In Smitha Conductors, it was held that public policy has been:

“used in a narrow sense must necessarily be construed as applied in private international law which means that a foreign award cannot be recognised or enforced if it is contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality.”

The court also referred to Jindal Exports Ltd v. Fuerst Day Lawson Ltd where the Delhi High Court followed the Smita Conductors. 

Major did not cite any other ground under Section 48 of the Arbitration and Conciliation Act, 1996 (Act). It only contended that the arbitrator interpreted a term of the TLA wrongly. The court rejected Major’s contention for the following reasons:

• Interpretation of contract is in the domain of the arbitrator.
• Even in case of domestic awards, courts would not interfere with the interpretation by the arbitrator of the contract unless such interpretation is contrary to the terms of the contract.
• The substantive law of contract is Austrian law. Thus, if Major contended that the interpretation of the contractual term by the arbitrator was erroneous, the interpretation of the term of the contract would be on the basis of Austrian law, usually proved on the basis of expert evidence. Major did not lead any expert evidence on Austrian Law relating to the interpretation of the relevant provision of law.
• Major has attempted to interpret the relevant term of the contract on the basis of Indian law, which is not permissible.
•  An award cannot be denied enforcement merely for the reason that it contravenes Indian law. The award should be contrary to the fundamental policy of India or because the award is contrary to interests of India or is contrary to justice or morality.

Major had also contended that the award was contrary to principles of natural justice because:

1. the terms of reference drafted by the arbitrator were not signed by Major,
2. Major’s counter-claim was not even taken on record by the arbitrator.

The court negated the contention of the above contentions as:

• the arbitrator had given adequate opportunity to sign the terms of reference. Despite several reminders, Major failed to sign the same.
• The counter claim was fixed by the ICC Court of Arbitration (ICCA) but was not paid by Major. As per the ICC Rules, if the fee for counter-claim is not paid, it is deemed to be withdrawn.

Since the argument of Major failed to convince the court, the court deemed the award enforceable. 

It  may be noted that a post in the Kluwer Arbitration blog comments that this case is a great development for the Indian arbitration industry. Check it out.

The other case that was mentioned at the beginning of this post is Anita Garg v. Glencore Grain Rotterdam B.V. & Anr. The case pertains to enforcement of a GAFTA award. A comment of the case can be found at the Indian Corp Law blog. The challenge/ enforcement of GAFTA awards in India is a fascinating topic that would form the subject-matter of a post on another day.