2019 (1) TMI 1374 - HC - Indian Laws

Enforcement of a foreign award - the case of the respondents in a nutshell is that the awards are not enforceable under the Act because the respondents were deprived of an opportunity to present their case and because the awards are contrary to public policy - scope for resisting enforcement pursuant to 2015 Amendment Arbitration Act - principles of natural justice - Held that - The process adopted by the tribunal is transparent and across the three PFAs and the final award. Different views may have been possible but merely because the tribunal adopted an unfavourable one the award cannot be rendered unenforceable. Dealing with the respondents contention that merely because the respondents had not challenged the award at the seat of the arbitration did not prevent challenge resistance to enforcement I have no hesitation in agreeing with that line of reasoning. Chapter I of Part II which deals with New York Convention Awards does not differentiate between enforcement of awards that have been unsuccessfully challenged at the seat or those which being not except for Section 48(1)(e) and Section 48(3). There is no doubt that failure to challenge the award in the seat of Arbitration would in any manner impact the right of a party to resist enforcement in this country. The Arbitration (ii) to the interest of India and (iii) justice of morality - Application of the doctrine of public policy in the field of contract laws is more limited than in the case of domestic law and the courts are slower to invoke public policy in cases involving a foreign element. The contention that failure to make and averment as to readiness and willingness to perform the contract is fatal since grant of relief in the absence of such mandatory averments would be against the fundamental policy of Indian law is misconceived since the effect of absence of such averments would depend on the facts of a case - In the case at hand the respondents had not raised this contention before the tribunal. Although in the affidavit in reply one of the contentions taken up was that no oral hearing was granted this has not been canvassed as an instance of lack of a proper opportunity to present the respondents case probably because written submissions were on the record of the tribunal. No other ground has been canvassed - the objections sought to be raised are in the nature of seeking a review on merits of the lis and calls for appreciation of evidence which cannot be done. The Awards are enforceable against the respondents. The petitioner may proceed in execution of the Awards - Till the Awards are enforced there will be an order in terms of prayer clause (b) (vii)(a) - petition allowed.

Issues Involved:
1. Enforcement of a foreign award.
2. Alleged material breach of the Joint Venture Agreement (JVA).
3. Alleged bias and conflict of interest of the arbitrator.
4. Alleged violation of principles of natural justice.
5. Specific performance under the JVA and compliance with Section 16(c) of the Specific Relief Act.
6. Valuation of shares and compliance with Foreign Exchange Management Act (FEMA) regulations.

Issue-wise Detailed Analysis:

1. Enforcement of a Foreign Award:
The petitioner corporation, registered under Italian laws, sought enforcement of a foreign award related to a Joint Venture Agreement (JVA) with an Indian company. The respondents opposed the enforcement on several grounds, including allegations of bias, breach of natural justice, and violation of Indian public policy.

2. Alleged Material Breach of the Joint Venture Agreement (JVA):
The petitioner held 51% of the shares in the Indian company, while the respondents held 49%. The petitioner alleged that the respondents committed material breaches of the JVA, including unauthorized employment and support of employee strikes. The tribunal found that the respondents were in material breach and directed them to sell their shares at a discounted price. The respondents contended that the tribunal's interpretation of certain clauses of the JVA was inconsistent and contrary to the fundamental policy of Indian law.

3. Alleged Bias and Conflict of Interest of the Arbitrator:
The respondents initially contended that the arbitrator had a conflict of interest due to prior engagements with the petitioner's advocates. Although this plea was later given up, the respondents alleged bias based on the arbitrator's findings and the premature announcement of the Second Partial Final Award (PFA). The tribunal rejected these allegations, and the respondents continued to participate in the arbitration proceedings without further objections.

4. Alleged Violation of Principles of Natural Justice:
The respondents argued that the tribunal's failure to secure relevant evidence from ACPL (a company related to the petitioner) violated principles of natural justice. They claimed that the petitioner's refusal to produce documents hindered their ability to present their case. The tribunal held that it had no power to compel third-party disclosures and that the respondents could have sought court intervention for such disclosures.

5. Specific Performance Under the JVA and Compliance with Section 16(c) of the Specific Relief Act:
The respondents contended that the petitioner's failure to aver readiness and willingness to perform their obligations under the JVA barred them from seeking specific performance. The tribunal found that the respondents were in breach and that the petitioner's claims for specific performance were valid. The court held that the absence of specific averments was not fatal, as the essence of the relief claimed was pleaded and the tribunal was seized of the rival claims on specific performance.

6. Valuation of Shares and Compliance with Foreign Exchange Management Act (FEMA) Regulations:
The tribunal directed the valuation of the respondents' shares by Deloitte, which the respondents contested, alleging conflict of interest. The tribunal accepted Deloitte's valuation, which was higher than the FEMA-compliant valuation. The respondents argued that the discounted price violated FEMA regulations. The court found that the discounted price was contractually binding and higher than the FEMA-compliant valuation, thus rejecting the respondents' objections.

Conclusion:
The court held that the objections raised by the respondents were in the nature of seeking a review on merits, which is not permissible under Section 48 of the Arbitration and Conciliation Act. The tribunal's findings were not contrary to the fundamental policy of Indian law, nor did they reveal a lack of opportunity for the respondents to present their case. The awards were enforceable in India, and the petitioner was entitled to proceed in execution. The petition was allowed, and the awards were declared enforceable against the respondents.

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