Enforcement of Foreign Arbitral Awards in India

Introduction:

The growing International Business paved way for various new areas. The businesses with them resulted in multiple players who engaged in multiple transactions. These transactions often accompany the risk of non-performance creating a floor for dispute resolution. The long pendency of cases and cumbersome procedure of litigation lead to the growth of Alternative Dispute Resolution for commercial transactions.

The Dispute Resolution processes include Arbitration, Mediation, Conciliation, Settlement Conference, Negotiation, etc which are efficient and effective resolution process. The Arbitration has been recognized formally as preferred means for Dispute Resolution. The Arbitration is usually governed by its own deed. The questions which arise with the International Arbitration are the recognization and enforcement of such Award. The Awards are usually the determiner of the rights and liabilities of the parties and it’s enforcement makes the person enjoy the fruit of the Award. This makes enforcement of Awards paramount for any Arbitral Proceeding and so laws need to be made in accordance to make such Awards enforced smoothly.

Concept of Arbitral Awards

Arbitral Award can be understood as a decision of the Arbitral Tribunal when it is deciding a dispute to determine rights, liabilities and disabilities of parties in dispute. Section 2(b) defines Award as arbitral Awards which is a decision of arbitral   Tribunal, whether in domestic or international arbitration. The arbitral Award includes interim Awards.[1]

The Domestic Award is a result of domestic arbitration it tends to limit itself to the territory of India.  The parties to a Domestic Arbitration are having nexus or birth to Indian origin and dispute too arose on the soil of India. It is to be noted that the territory plays an important role in assessing Domestic arbitration. The Awards given even on foreign soil when both the parties are Indian Nationals too are governed by Indian laws so comes under the purview of Domestic Arbitration.

Foreign Arbitration is defined as a residuary clause. The arbitrations which aren’t covered as Domestic Arbitration are deemed as Foreign Arbitration. The Foreign Award under Section 44 is defined as an Award which relates to the difference in matters of commercial nature decided by a Foreign Arbitral  Tribunal.

The Foreign Arbitral Award are characterized by

• The site of arbitration must be a foreign soil
• The nationality of the arbitrator must be other than Indian.
• The laws applied during arbitration were not Indian Municipal Laws
• Either of the party must be a Foreign Nationale.[2]

The presence of a foreign element in any arbitration makes it Foreign arbitration. The foreign element includes nationality of parties, the nationality of Arbitrator, Nature of law, Seat of arbitration and situation of the property or business in dispute.

The part I of Arbitration and Conciliation Act 1996 provides for a legislative framework for Domestic arbitration. The section 2-43 deals with from making of the deed to the enforcement of Award which includes constitution and procedure of   Tribunal along with appointments, removal, and disqualification of the member. Part II exclusively deals with guidelines for enforcement of Foreign Arbitral Awards in consonance to New York Convention and Geneva Convention in this regard. The section 44-60 of the said Act defines the various areas and mandates in order to fulfil the instruction in the said Award.

Enforcement of Award

The Enforcement of Foreign Awards in India is done as per the guidelines under Conventions of New York and of Geneva. India was a signatory to the abovementioned Conventions and so it is mandatory for India to enforce the Awards from the territories as notified in the Convention under the name of Convention Countries. In India, such Convention Countries are enlisted as Reciprocating Territories under the Official gazette passed in this concern. Therefore, the foreign Awards from the reciprocating territories are enforceable in India.

Section 47 of the Act provides for the procedure to enforce such Foreign Awards. The party seeking enforcement of a Foreign Award needs to make an application to the court, requesting such enforcement. The Court hereby is the High Court which has appropriate jurisdiction. The following documents must accompany the application

• Award in an original or certified copy thereof
• Arbitration Agreement in an original or certified copy thereof
• A translated copy of the Award, if the Award is in some foreign language. Such a translation must be done in English.
• Any other supporting evidence which establish authenticity of the Foreign Award

Conditions Pre-Required for Enforcing an Award

When any Award is sent for enforcement it is done on the same line as of enforcement of a decree of Civil Court.  As the decree, before it’s enforcement allow certain challenges from the person against whom the decree has to be enforced, similarly Awards too allow some reservations which could be raised before enforcement. Following are the grounds which renders an Award to be unenforceable if the other party proves that–

• The parties to the Arbitral proceeding suffer from certain incapacity.
• The agreement or proceedings have used laws which were not justifiable. In other words, the law used to decide the dispute was not correct making the Award illegal and bad in law.
• The Arbitral proceeding was flawed as there was lack of proper notice or by any other means, the party was barred from presenting its case before the Arbitral Tribunal.
• There might be an irregularity in the appointment of an arbitrator.
• The decision of the Arbitral Tribunal is over a matter which didn’t fall in the ambit of the Arbitration Agreement.
• The Award contains areas of law or dispute which by law or agreement fall beyond the jurisdiction of the Arbitral Tribunal.
• Irregularity or otherwise faulty composition of the Arbitral Tribunal in contravention to Law of the land where the arbitration took place or as per arbitration agreement.
• The Award became non-binding, set aside or been suspended by the competent authority of that country or the law in force for the time being.
• The subject matter of the Arbitral Award under Indian laws are subjects which are not capable of settling by arbitration.
• Such Awards under the law in force in India are immoral, against public policy or in conflict with Justice.

Limitation Period in Enforcing an Award

The arbitration proceeding is deemed civil Proceeding hence Limitation Act 1963 applies to it. The Arbitral Awards are deemed decrees making it a subject matter of rules of Limitations[3]. The position of decree and Award differ due to their enforceability. The binding nature depends on the declaration of the same by the competent Court[4]. Although there is no express period of limitation for foreign Awards but it is considered as three years as a limitation[5]. The limitation period for foreign Award is determined as per the residuary clause.

The Proceedings before an Arbitral  Tribunal has different stages and Enforcement consists of one of these stages. The Court has to prima facie determine upon the enforceability of the Awards. Once the enforceability is decided, steps to execute the same may follow[6].

The appeal against the order of court rejecting the objections over is non-appealable but in cases where the Court declares the Award unenforceable may be raised before Higher Courts. Even Article 136 may be invoked before the Supreme Court if the matter of public importance or public interest arises in the opinion of the Apex Court[7].

Procedure to Enforce Foreign Award

The Awards of Foreign Arbitral Awards are enforced on the legislative framework similar to that of enforceability of the foreign decree. Hence there is a need to satisfy the conditions put forth under Section 13 CPC[8], and failing to these conditions the judgment will be inconclusive.

The execution proceedings are required to be filed in India by the party seeking enforcement of a decree of a court in the reciprocal territory. The judgment of reciprocal territory by virtue of Section 44a of CPC is enforceable. Modes to execution under section 51 come to play along with Order XXI.

The positions of decrees or Awards from foreign courts or Tribunal are different from abovementioned. Unlike the decrees or Awards from the reciprocating territory, the decrees or Award from no- reciprocating territory are not themselves deemed decrees but they are mere evidence. The person who wants to enforce the decree will have to file a fresh suit and submit the decree or Award of such foreign authority as evidence before the Indian Authority. The period of limitation will be the same as for any other civil suit that is 3 years.

Conclusion

Having a favourable foreign Award is half battle won because there are numerous cases when in spite of favourable Awards, the parties fail to get the Award enforced from competent Indian Court. The enforcement of a foreign Award often takes shape of litigation. The idea of resorting to Arbitration was to avoid the procedural, time consuming and cumbersome court fights and enforcement as per contemporary laws fails the ideas for which at first place arbitration was chosen. Ironically, the time taken to enjoy actual fruit sometimes exceeds the actual time consumed before the Arbitral  Tribunal. The process by judicial authorities to scrutinize its enforceability is a structural programme and can’t be avoided but the process itself due to its course of action become a botheration.

These decisions are often politically coloured and this annuls and frustrates the intention and effect of the award issued by the International Arbitral Seat.

The Conventions of New York and Geneva aimed to provide for smooth enforcement irrespective of the seat of Arbitral Tribunal. The Arbitration and Conciliation Act 1996 under its part II provides for the mirror image to the ideas of the abovementioned conventions. Part II in law make the actual enforcement of Foreign Awards as mandatory and binding principles. The section 44b talks about reciprocal territories under Government of India’s Gazette. The Government may by notification add, remove, vary or modify territories where out decrees and Awards are enforceable.

But the need of Hour is to add many other nations to this list because the decisions of Foreign Arbitral Bodies of non-reciprocal nations make the Awards virtually at mercy of the Competent Indian Court to enforce it. There are numerous favourable Awards which are mere papers with no practical application.

Additionally, there are various nations which have been contracted for enforceability and reciprocity but due to non-appearance in the said schedule make them difficult to enforce.

---

References:

[1] Shodhganga, ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA, shodhganga (2016) http://shodhganga.inflibnet.ac.in/bitstream/10603/110130/16/16_chapter%206.pdf

[2] Serajuddin v. Michael Golodetz AIR 1960 Cal.49 (India).

[3] M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society (2016) 11 SCC 313 (India).

[4] Compania Naviera Sodnocâ v. Bharat Refineries Ltd. AIR 2007 Mad 251 (India).

[5] Noy Vallesina v Jindal Drugs Limited 2006 (5) BomCR 155 (India).

[6] M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd. 2001 (6) SCC 356 (India)

[7] Sumeet Kachwaha, Enforcement of arbitration Awards in India, AIAJ Volume 4, 2008, at 80

[8] Varun Sharma, Challenges of Executing Foreign Arbitration Awards in India , ipleaders (2018) https://blog.ipleaders.in/arbitration-award/