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2020 (9) TMI 1178 - SC - Indian LawsEnforcement of Foreign Award - application Under Section 48 of the Arbitration and Conciliation Act, 1996 was dismissed - Limitation for filing an enforcement/ execution petition of a foreign award - condonation of delay in filing the execution petition by the Respondents - Scheme of the 1996 Act for enforcement of New York Convention awards - Malaysian law of public policy while deciding the challenge to the foreign award by Malaysian Courts - foreign award vis-a-vis Public Policy of India. Limitation for filing an enforcement/execution petition of a foreign award Under Section 47 of the 1996 Act - HELD THAT - On 10.07.2014, a show cause notice was issued to the Respondents, raising a demand of US 77 million, being the Government's share of Profit Petroleum under the PSC. It was contended that the cause of action for filing the enforcement petition Under Sections 47 and 49 arose on 10.07.2014. The enforcement petition was filed on 14.10.2014 i.e. within 3 months from the date when the right to apply accrued - the petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act, 1963. Thus, there are sufficient grounds to condone the delay, if any, in filing the enforcement/execution petition Under Sections 47 and 49, on account of lack of clarity with respect to the period of limitation for enforcement of a foreign award. Scheme of the 1996 Act for enforcement of New York Convention awards - HELD THAT - The grounds for refusing enforcement of foreign awards contained in Section 48 are exhaustive, which is evident from the language of the Section, which provides that enforcement may be refused only if the Applicant furnishes proof of any of the conditions contained in that provision 12 - The enforcement court is not to correct the errors in the award Under Section 48, or undertake a review on the merits of the award, but is conferred with the limited power to refuse enforcement, if the grounds are made out. If the Court is satisfied that the application Under Section 48 is without merit, and the foreign award is found to be enforceable, then Under Section 49, the award shall be deemed to be a decree of that Court . The limited purpose of the legal fiction is for the purpose of the enforcement of the foreign award. The concerned High Court would then enforce the award by taking recourse to the provisions of Order XXI of the Code of Civil Procedure. Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award? - HELD THAT - The Malaysian Courts being the seat courts were justified in applying the Malaysian Act to the public policy challenge raised by the Government of India. The enforcement court would, however, examine the challenge to the award in accordance with the grounds available Under Section 48 of the Act, without being constrained by the findings of the Malaysian Courts. Merely because the Malaysian Courts have upheld the award, it would not be an impediment for the Indian courts to examine whether the award was opposed to the public policy of India Under Section 48 of the Indian Arbitration Act, 1996. If the award is found to be violative of the public policy of India, it would not be enforced by the Indian courts. The enforcement court would however not second-guess or review the correctness of the judgment of the Seat Courts, while deciding the challenge to the award. Whether the foreign award is in conflict with the Public Policy of India? - HELD THAT - The enforcement of foreign award would be refused Under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression public policy of India occurring in Section 34(2)(b)(ii) is not applicable where objection is raised to the enforcement of the foreign award Under Section 48(2)(b) - Moreover, Section 48 of the 1996 Act does not give an opportunity to have a 'second look' at the foreign award in the award-enforcement stage. The scope of inquiry Under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or ignoring/rejecting the evidence which may be of binding nature) in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy. The amended Section 48 would not be applicable to the present case, since the court proceedings for enforcement were filed by the Respondents-Claimants on 14.10.2014 i.e. prior to the 2016 Amendment having come into force on 23.10.2015. The enforcement of the foreign award does not contravene the public policy of India, or that it is contrary to the basic notions of justice. Application disposed off.
Issues Involved:
1. Limitation for filing an enforcement/execution petition of a foreign award under Section 47 of the 1996 Act. 2. Scheme of the 1996 Act for enforcement of New York Convention awards. 3. Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award. 4. Whether the foreign award is in conflict with the Public Policy of India. Detailed Analysis: Part A: Limitation for Filing an Enforcement/Execution Petition of a Foreign Award Under Section 47 of the 1996 Act The Supreme Court addressed the conflicting views among various High Courts regarding the limitation period for filing a petition for enforcement of a foreign award under the 1996 Act. The Court concluded that the limitation period for filing such a petition would be governed by Article 137 of the Limitation Act, 1963, which prescribes a period of three years from when the right to apply accrues. This decision was based on the interpretation that a foreign award is not a decree of an Indian civil court and that the enforcement petition is a substantive petition under the Arbitration Act, 1996, not under Order XXI of the Code of Civil Procedure. Part B: Scheme of the 1996 Act for Enforcement of New York Convention Awards The Court clarified the scheme under the 1996 Act for the enforcement of New York Convention awards. It emphasized that a foreign award does not become a "foreign decree" at any stage of the proceedings. Instead, a foreign award is enforced as a deemed decree of the Indian Court that has adjudicated the petition filed under Section 47 and the objections raised under Section 48. The enforcement process involves a two-stage procedure: first, determining the enforceability of the award under Sections 47 and 48, and second, taking effective steps for execution under Section 49. The Court also highlighted that the enforcement court cannot set aside a foreign award but can only refuse enforcement if the conditions under Section 48 are met. Part C: Whether the Malaysian Courts Were Justified in Applying the Malaysian Law of Public Policy While Deciding the Challenge to the Foreign Award The Court addressed the issue of the applicable law for setting aside the award at the seat of arbitration (Malaysia). It concluded that the Malaysian Courts were justified in applying Malaysian law to the public policy challenge, as the seat of arbitration determines the curial law. The Court also noted that the enforcement court in India would independently determine the enforceability of the award under Indian law, irrespective of the findings of the Malaysian Courts. Part D: Whether the Foreign Award is in Conflict with the Public Policy of India The Court examined whether the foreign award was in conflict with the public policy of India under Section 48 of the 1996 Act. It reaffirmed the narrow interpretation of "public policy" as laid down in the Renusagar judgment, which includes (i) fundamental policy of Indian law, (ii) interests of India, and (iii) justice or morality. The Court found that the award was not contrary to the fundamental policy of Indian law or the basic notions of justice. It emphasized that the enforcement court cannot re-assess the merits of the award and that the interpretation of the contract terms by the tribunal was a plausible view. Consequently, the Court upheld the enforcement of the foreign award. Conclusion The Supreme Court affirmed the judgment of the Delhi High Court, rejecting the application under Section 48 and confirming the enforcement of the award. The Court clarified the limitation period for filing enforcement petitions, the scheme for enforcement under the 1996 Act, the applicability of the curial law at the seat of arbitration, and the narrow scope of the public policy defense in refusing enforcement of foreign awards.
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