TMI Blog2020 (9) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... cement 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 limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. - Civil Appeal No. 3185 of 2020 (Arising out of SLP (Civil) No. 7172 of 2020) - - - Dated:- 16-9-2020 - S. Abdul Nazeer, Indu Malhotra and Aniruddha Bose, JJ. JUDGMENT Indu Malhotra, J. INDEX I Background Facts II Relevant Terms of the Production Sharing Contract III Genesis of Dispute IV Challenge to the Award before the Seat Courts at Kuala Lumpur V Submissions on behalf of the Appellants VI Submissions on behalf of the Respondents VII Discussion and Analysis Part A Limitation for filing an enforcement/ execution petition of a foreign award Under Section 47 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 'Ravva Development Plan'. As per Articles 11.1 and 11.2 of the PSC, Addendums 1 and 2 to the Ravva Development Plan were annexed to the PSC as Appendix F. The Respondents were required to carry out Petroleum Operations in the Ravva Field as per the said Plan. The Ravva Development Plan inter alia contemplated the drilling of 19 oil and 2 gas wells in the Ravva Field. II. Relevant Terms of the Production Sharing Contract The dispute between the Parties emanates from Article 15 of the PSC which inter alia provides for the recoverability of Base Development Costs ( BDC ) incurred by the Respondents-Claimants for the development of the Ravva Field. The relevant clauses of the PSC are extracted hereinbelow: (i) Article 11.2 of the PSC reads as: 11.2 Ravva Development Plan Appendix F to this contract shall constitute the approved development plan for the Existing Discoveries (hereinafter to as the Ravva Development Plan ). The Ravva Development Plan shall be deemed to have been approved by the Managing Committee. (ii) The Proposed Development Plan for the Ravva Field (including Addendums 1 and 2), which was accepted by the Parties as the approved Ravva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accounting Procedure. Such costs shall include, but not be limited to costs incurred in relation to the following facilities and matters in connection therewith, such as: (i) Offshore tanker loading facilities for tankers up to 120,000 DWT; (ii) Wellhead platforms capable of supporting up to total of 24 development wells; (iii) Follow lines necessary to transport well fluids ashore for processing; (iv) Process facilities onshore for processing up to 40,000 Barrels of fluid per day; (v) Storage facilities with a nominal capacity of 500,000 Barrels; (vi) Facilities to allow injection of water into the reservoirs for the purposes of reservoir pressure maintenance; (vii) Construction of an onshore supply base to support production operations; (viii) Environmental studies; (ix) Geophysical, geological and petroleum engineering studies; (x) The drilling of nineteen (19) Development Wells and two (2) Gas Production Wells; (xi) Facilities for developing, transporting and processing NANG; (xii) Project insurance; and (xiii) Project Management. The Parties agree that for the purposes of this Article 15.5 the Contractor's Base Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Committee shall not be obliged to consider any increase where such delay has been caused by the Contractor's failure to act in a diligent manner. (e) In the event that: (i) There is any dispute between the parties, whether or to what extent, a circumstance referred to in Article 15.5(e) (iii) has arisen, or resulted in the Contractor's Base Development Costs being exceeded by more than five percent (5%); or (ii) The Management Committee is unable to agree whether an increase should be made to the Contractor's Base Development Costs, or is unable to agree on the amount of any such increase; then at any time after thirty (30) days from the date of the Management Committee meeting referred to in Article 15.5(e)(iii), any Party shall be at liberty to refer the matter to a sole expert for decision in accordance with the provisions of Article 34.2. (emphasis supplied) (iv) Article 33 of the PSC provides the law applicable to the PSC, and reads as under: Article 33: APPLICABLE LAW AND LANGUAGE OF THE CONTRACT 33.1 Indian Law to Govern Subject to the provisions of Article 34.12 this Contract shall be governed and interpreted in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimants would receive their respective share in the ratio fixed under the PSC. (ii) Article 15 of the PSC provided for recovery of costs for oil and gas; Article 15.1 is a general provision with respect to contract costs; Article 15.2 to 15.4 pertain to exploration costs. The disputes have arisen on the interpretation of Article 15.5 which pertains to Development Costs. Article 15.5(c) defines the Contractor's Base Development Costs, and enumerates a list of facilities and other matters required to be constructed by the Claimants. The Contractor's Base Development Costs were the costs incurred after the effective date, relating to the construction and/or establishment of such facilities as are necessary to produce, process and transport petroleum within the Existing Discoveries in order to enable crude oil production of 35,000 Barrels of Oil Per Day ( BOPD ) in accordance with the Ravva Development Plan. The facilities included the construction of offshore tanker loading facilities for tankers upto 120,000 DWT; wellhead platforms capable of supporting upto a total of 24 Development Wells; process facilities; storage facilities with a nominal capacity of 500,000 Barre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in 1994-1995 until 2008-2009. (vii) On the other hand, the Government contended that all the Development Costs claimed by the Claimants were incurred in connection with the Ravva Plan, and were subject to the 'cap' on such costs as provided by Articles 15.5(b) and (c), notwithstanding the increased quantity of production. The exceptions, were however not subject to the 'cap', and were properly recovered from Cost Petroleum Under Article 15.5(a) which totalled to US $ 65.95 million. (viii) The Government contended that the work contemplated by the Ravva Plan, as per Article 15.5(c) was not completed till 1999-2000, when only 14 wells had been drilled; the remaining 7 wells stipulated in Article 15.5(c)(xi) were drilled by 2007-2008. Consequently, the 'cap' on the Contractor's Base Development Costs would apply to the whole of the costs incurred till 2007-2008, and not the costs incurred till 1999-2000. The Claimants were not entitled to claim more than the Cost Petroleum agreed at US $ 198.43 million plus US $ 65.95 million (towards exceptions). (ix) The Government raised counter claims equivalent to the amounts which the Claimants had cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the Expert Witness produced by the Claimants, which found that the enlarged reservoir known as Block A/D in the Ravva Field, showed a range of physical characteristics which were materially different from those on which the Ravva Development Plan was based. The range of relevant characteristics which were different from what was anticipated included the fault line on the north-west boundary, which was found not to be sealed, but to be porous; the permeability of the rocks was found to be greater leading to increased production pressures; the oil/water contact levels were found to be different. Article 15.5(e)(iii)(dd) provided that a request for an increase in the BDC cap could be made, since materially different characteristics were encountered in the drilling of the additional wells. In such circumstances, Claimants would be entitled to recover the increased amounts, notwithstanding the limit imposed by Article 15.5(b) and (c). The tribunal held that the Respondents were entitled to recover US $ 278,871,668 from the Cost Petroleum towards Development Costs incurred by the Respondents for the period 2000-01 to 2008-09. f) The Award declared as under: We therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But not otherwise; I. That the Respondent is entitled to be credited with the sum of $ 22,307,381 in the final settlement of cost recovery accounts in relation to Development Cost incurred during contract years 1994/5 to 1999/2000 in excess of $ 198.43 million. (xii) The Respondents-Claimants submit that vide their letter dated 29.04.2011 addressed to the Government of India, the revised costs recovery account statements as per the Award were enclosed, and credit of the excess Development Costs of US $22,307,381 was given to the Government of India. IV. Challenge to the Award before the Seat Courts at Kuala Lumpur (i) On 15.04.2011, the Government of India challenged the Award Under Section 37 of the Malaysian Arbitration Act, 2005 before the Malaysian High Court, on three principal grounds: a) the Award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration; b) the Award contains decisions on matters beyond the scope of the submission to arbitration; and c) the Award is in conflict with public policy. (ii) The High Court vide Order dated 30.08.2012 rejected the challenge to the Award holding that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2020, and directed the parties to maintain status quo till further orders. (x) Subsequently, the Respondents filed I.A. No. 61469 of 2020 for Modification of the Order of status quo dated 17.06.2020, and for interim directions. The I.A. was taken up for hearing on 22.07.2020, when the Order of status quo was partially modified, and a direction was issued that the sales revenues be paid directly by the Oil Marketing Companies to the Respondents as per the Orders dated 28.05.2020 and 04.06.2020 passed by the Delhi High Court. The Order of status quo would, however, continue to operate with respect to the bank guarantees/deposits of US $ 93 million, during the pendency of the present proceedings. V. Submissions on behalf of the Appellants Shri. K.K. Venugopal, Learned Attorney General for India instructed by Mr. K.R. Sasiprabhu, Advocate represented the Government of India. It was submitted that the enforcement of the Award was liable to be refused on the following principal grounds: (a) Maintainability of the Petition (i) The Appellants raised an objection to the maintainability of the application on the ground that the petition for enforcement/execution of the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivil court. This finding is contrary to the express holding in Bank of Baroda v. Kotak Mahindra Bank, wherein it has been held that the period of limitation of 12 years prescribed by Article 136 of the Schedule to the Limitation Act, applies only to a decree or order passed by an Indian court. A foreign award could not be treated to be a decree of a civil court. (vii) It was submitted that the reasoning of the Delhi High Court is contrary to the provisions of the 1996 Act, since it has ignored the express words of Section 49, which provides that the court would require to be satisfied that the foreign award is enforceable under this Chapter . It was submitted that this is further supported by the language of Section 46 of the Act which pre-supposes an inquiry before the award is said to achieve the status of the decree of a court. The purposive interpretation adopted by the Ld. single judge, could not be used to negate the express terms of the statute. (viii) For the purpose of making a foreign award enforceable, the procedure available under Part II of the Act is required to be followed. A petition for enforcement and execution of such foreign award by way of a composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the natural gas was held in the sovereign trust of the people of India. The sovereignty over the petroleum produced would continue to remain with the nation, since the natural gas is a resource which falls squarely within the purview of Article 297 of the Constitution of India. (ii) The learned A.G. submitted on behalf of the Government of India that the Award was in conflict with the public policy of India. The tribunal had ignored various clauses of Article 15.5(c) read with the Ravva Development Plan, and particularly Attachment 10 thereto, which contained the basis of computation of the sum of US $ 188.98 million payable to the Respondents as Base Development Costs. Article 15.5(c) of the PSC read with the Ravva Development Plan formed the basis of the dispute between the Parties. Article 15.5(c) provided that the Base Development Cost shall mean the costs incurred after the Effective Date relating to the construction and/or establishment of such facilities as were necessary to produce Petroleum from within the Existing Discoveries in order to enable crude oil production of 35,000 BOPD in accordance with the Ravva Development Plan. Such costs shall include, but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OPD passed the Award in favour of the Claimants. In fact, the Claimants failed to fulfil the other requirements stated in Article 15.5(c) inter alia with respect to development facilities, which included the drilling of 19 oil wells and 2 gas reserves. This was specifically mentioned in the Ravva Development Plan, which was an integral part of the PSC as stated in Article 11.2 of the PSC. By deciding the claim on the basis of one isolated criteria, it had given a go-by to all the other conditions, which would amount to re-writing the mandatory terms of the contract between the parties, and foisting the Government with obligations, which were never agreed to. The net result of the arbitral award was that the Government of India suffered a huge loss to the tune of approximately ₹ 1,600 crores, which would be contrary to the interests of India. The tribunal's interpretation of Article 15.5(c) had the effect of substituting the plain language of Sub-clause (xi) of the said Article, with a new stipulation that the cost of construction of the wells in the Ravva Field would be borne by the Government, once the production capacity of 35,000 BOPD was achieved. This interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Indian law. (vii) Reliance was placed on paragraph 76.4 of the judgment in Reliance Industries v. Union of India, (2014) 7 SCC 603 wherein this Court in the penultimate paragraph of that judgment had observed that since the substantive law governing the contract is Indian law, even the Courts in England (seat of arbitration), would be required to decide the issue of arbitrability by applying the Indian law of public policy. In this case, the Malaysian Courts had erroneously applied the Arbitration Act of Malaysia to uphold the validity of the award. VI. Submissions on behalf of the Respondents The Respondents were represented by Mr. C.A. Sundaram and Mr. Akhil Sibal, Senior Advocates. (a) On Limitation (i) It was contended that Under Section 49 of the 1996 Act, the foreign award becomes a decree of an Indian court after the objections to the award are adjudicated by the enforcement court. (ii) Article 136 of the Limitation Act prescribes a period of 12 years from the date of the decree of the civil court, which would be the appropriate provision for execution of a foreign award. In the present case, the foreign award was passed on 18.01.2011, and the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y suit for which no period of limitation is provided elsewhere in Schedule, the period of limitation is 3 years from the date when the right to sue accrues. The Counsel placed reliance on the judgment of this Court in Shakti Bhog Food Industries Ltd. v. The Central Bank of India. Article 137 is similar to the residuary provision in Article 113 for filing applications, for which no period of limitation has been provided elsewhere in this division, and provides a period of 3 years from the date when the right to apply accrues. If the substantive application was filed Under Sections 47 and 49 of the 1996 Act, it would not fall Under Order XXI of the Code of Civil Procedure, and hence an application Under Section 5 of the Limitation Act, 1963 would be maintainable. Furthermore, since there was uncertainty in the law, as the Madras High Court had held limitation for enforcement of a foreign award to be 12 years, while the Bombay High Court treated this as 3 years, there was sufficient ground to condone the delay. It was submitted that there is a difference between the execution of a foreign decree Under Order XXI of the Code of Civil Procedure, and the enforcement of a foreign awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the balance 7 wells, it was found that the Ravva Field featured materially different physical reservoir characteristics than those originally perceived when the PSC was executed. Accordingly, the trigger Under Article 15.5(e)(iii)(dd) came into operation during the period commencing from 1999-2000 to 2007-2008. For the drilling of the remaining 7 wells, the Respondents were entitled to an additional sum of US $ 278 million. (vi) It was contended that under the Award, the tribunal had made declarations in favour of the parties. The tribunal had upheld the manner in which the Respondents-Claimants had computed and recovered the costs due to them under the PSC. The tribunal had declared a sum of US $ 22 million as payable by the Respondents to the Government of India, which was paid after the Award was passed. (vii) It was contended that the issue of interpretation of the PSC, and a review of the merits of the Award, could not be raised Under Section 48 of the 1996 Act. The scope of inquiry Under Section 48 is limited, and the Appellants cannot invite the Court to take a second look at the Award by seeking a review on merits. Reliance was placed on the judgment of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrow restrictive grounds contained in the New York Convention when a foreign award's enforcement is resisted. x x x 96. ... As has been held, referring to some of the judgments quoted hereinabove, in particular Shri Lal Mahal (supra), the interpretation of an agreement by an arbitrator being perverse is not a ground that can be made out under any of the grounds contained in Section 48(1)(b). Without therefore getting into whether the tribunal's interpretation is balanced, correct or even plausible, this ground is rejected. (emphasis supplied) (ix) The Respondents contended that the parties had voluntarily chosen Kuala Lumpur, Malaysia as the seat of arbitration. Having made such a choice, the Government could not invite Indian courts to revisit the merits of its case under the guise of Indian public policy. In this regard, reliance was placed on the judgment of this Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 648 wherein it was held that: 116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 15.5(c)(xi) to hold that it was not an undertaking given by the Respondents to drill 21 wells, even though only 14 were required. The Award therefore was not in conflict with the public policy of India, and did not attract the grounds for refusal of enforcement envisaged Under Section 48 of the 1996 Act. VII. Discussion and Analysis Part A Limitation for filing an enforcement/execution petition of a foreign award Under Section 47 of the 1996 Act (i) On this issue, divergent views have been taken by some High Courts with respect to the period of limitation for filing a petition for enforcement of a foreign award under the 1996 Act. It has therefore become necessary to settle the law on this issue. Noy Vallesina Engineering Spa v. Jindal Drugs Limited 2006 (3) Arb LR 510 A single judge of the Bombay High Court held that there is no period of limitation provided by any of the Articles in the Schedule to the Limitation Act, for making an application for execution of a foreign award. It was held that the enforcement of a foreign award must take place in two stages. In the first stage, the enforceability of the foreign award would be decided, which would be gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree', and is not necessarily dependent on whether or not it goes through the process of Section 48. Such a foreign award is treated as being equivalent to a foreign decree, whose enforcement may be refused only Under Section 48. Section 48 pre-supposes that a foreign award is a decree whose execution can be resisted by a party against whom it is sought to be executed, if it is able to discharge the burden that the objections can be sustained under one or more of the clauses of Sub-section (1) and/or Sub-section (2) of Section 48 of the 1996 Act. The Delhi High Court held that Article 136 of the Limitation Act would be applicable for filing a petition for enforcement of a foreign award. Even if it is assumed that Article 137 of the Limitation Act is applicable, sufficient grounds for condonation of delay had been urged since the Applicants were under the bona fide belief that the period of limitation for enforcement of a foreign award was 12 years from the date of the Award, as held in Compania Naviera (supra) by the Madras High Court. (ii) Given the conflicting stands taken by various High Courts, we will now discuss this issue. The issue of limitation for enforcement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a civil court is twelve years from the date when the decree or order becomes enforceable. (vi) Article 137 is the residuary provision in the Limitation Act which provides that the period of limitation for any application where no period of limitation is provided in the Act, would be three years from when the right to apply accrues . Articles 136 and 137 read as: Description of the Application Period of Limitation Time from which period begins to run 136. For the execution of any decree (other than a decree granting a mandatory injunction) or order of any civil court. Twelve Years When the decree or order becomes enforceable or where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or deliver in respect of which execution is sought, takes place: Provided that an application for the enforcement or execution of a decree granting a perpetual injunction shall not be subject to any period of limitation. 137. Any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... created only for some definite purpose. A legal fiction is to be limited to the purpose for which it was created, and it would not be legitimate to travel beyond the scope of that purpose, and read into the provision, any other purpose how so attractive it may be. In State of Karnataka v. State of Tamil Nadu, 2017 (3) SCC 274 this Court held that: 74. The Report of the Commission as the language would suggest, was to make the final decision of the Tribunal binding on both the States and once it is treated as a decree of this Court, then it has the binding effect. It was suggested to make the award effectively enforceable. The language employed in Section 6(2) suggests that the decision of the Tribunal shall have the same force as the order or decree of this Court. There is a distinction between having the same force as an order or decree of this Court and passing of a decree by this Court after due adjudication. Parliament has intentionally used the words from which it can be construed that a legal fiction is meant to serve the purpose for which the fiction has been created and not intended to travel beyond it. The purpose is to have the binding effect of the Tribunal's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of application Under Section 2(b) of the Limitation Act, which includes a petition. Article 137 stands in isolation from all other Articles in Part I of the Third Division of the Limitation Act, 1963. (xii) The exclusion of an application filed under any of the provisions of Order XXI of the Code of Civil Procedure from the purview of Section 5 of the Limitation Act, was brought in by the present Limitation Act, 1963. Under the previous Limitation Act, 1908 there were varying periods of limitation prescribed by Articles 182 and 183 of the said Act, as well as Section 48 of the Code of Civil Procedure, 1908. Article 182 provided that the period of limitation for execution of a decree or order of any civil court was 3 years, and in case where a certified copy of the decree or order was registered, the period of limitation was 6 years. Article 183 provided that the period of limitation to enforce a decree or order of a High Court was 6 years. Section 48 of the Code of Civil Procedure (which has since been repealed by Section 28 of the Limitation Act of 1963) provided that the period of limitation for execution of a decree was 12 years. (xiii) The Law Commission in its 3rd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, the Respondents submitted that after the Award dated 18.01.2011 was passed, the cost account statements were revised, and an amount of US $ 22 million was paid to the Government of India. 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. We hold that the petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act, 1963. In any event, 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. Part B Scheme of the 1996 Act for enforcement of New York Convention awards On account of certain anomalies in the impugned judgment with respect to the enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 48. In contrast, the procedure for enforcement of a foreign decree is not covered by the 1996 Act, but is governed by the provisions of Section 44A read with Section 13 of the Code of Civil Procedure. The scheme of the 1996 Act for enforcement of New York Convention awards is as follows: (a) Part II Chapter 1 of the Arbitration and Conciliation Act, 1996 pertains to the enforcement of New York Convention awards. Under the 1996 Act, there is no requirement for the foreign award to be filed before the seat court, and obtain a decree thereon, after which it becomes enforceable as a foreign decree. This was referred to as the double exequatur, which was a requirement under the Geneva Convention, 1927 and was done away with by the New York Convention, which superseded it.6. There is a paradigm shift under the 1996 Act. Under the 1996 Act, a party may apply for recognition and enforcement of a foreign award, after it is passed by the arbitral tribunal. The Applicant is not required to obtain leave from the court of the seat in which, or under the laws of which, the award was made. (b) Section 44 of the 1996 Act provides that a New York Convention award would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1996 Act. Once the enforceability of the foreign award is decided, it would proceed to take further effective steps for the execution of the award. The relevant extract from the judgment reads as: 31. Prior to the enforcement of the Act, the Law of Arbitration in this country was substantially contained in three enactments namely (1) The Arbitration Act, 1940, (2) The Arbitration (Protocol and Convention) Act, 1937 and (3) The Foreign Awards (Recognition and Enforcement) Act, 1961. A party holding a foreign award was required to take recourse to these enactments. Preamble of the Act makes it abundantly clear that it aims at to consolidate and amend Indian laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The object of the Act is to minimize supervisory role of court and to give speedy justice. In this view, the stage of approaching court for making award a Rule of court as required in Arbitration Act, 1940 is dispensed with in the present Act. If the argument of the Respondent is accepted, one of the objects of the Act will be frustrated and defeated. Under the old Act, after making award and prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no need to take separate proceedings, one for deciding the enforceability of the award to make Rule of the court or decree and the other to take up execution thereafter. In one proceeding, as already stated above, the court enforcing a foreign award can deal with the entire matter. Even otherwise, this procedure does not prejudice a party in the light of what is stated in para 40 of the Thyssen judgment. (emphasis supplied) In a recent judgment rendered in LMJ International Ltd. v. Sleepwell Industries (2019) 5 SCC 302, this Court held that given the legislative intent of expeditious disposal of arbitration proceedings, and limited interference of the courts, the maintainability of the enforcement petition, and the adjudication of the objections filed, are required to be decided in a common proceeding. (g) The enforcement/execution petition is required to be filed before the concerned High Court, as per the amendment to Section 47 by Act 3 of 2016 (which came into force on 23.10.2015). The Explanation to Section 47 has been amended, which now reads as: 47. Evidence - (1)... (2)... [Explanation.- In this Section and in the Sections following in this Chapter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may also take the view that the violation is not such as to prevent enforcement of the award in international relations.11 (k) 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 (l) 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. (m) 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. Part C Whether the Malaysian Courts were justified in applying the Malaysian law of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the party making the application provides proof that-- (i) a party to the arbitration agreement was under any incapacity; (ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of Malaysia; (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party's case; (iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration; (v) subject to Sub-section (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or (vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or (b) the High Court finds that-- (i) the subject matter of the dispute is not capable of settlement by arbitration under the laws of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the seat being in Kuala Lumpur, the applicable law to such a challenge would be Under Section 37(1)(a)(iv) and (v) of the Malaysian law, being the curial law. Paragraphs 158 to 161 read as: Applicable law 158. I pause here to deal with this matter of the applicable law. The Plaintiff has contended that read with Section 30, the Court should set aside the Award under subparagraphs 37(1)(a)(iv) and (v); and (b)(ii). By virtue of Section 30, the substantive law of the contract is Indian law of contracts. On the arguments that it had canvassed and which I had set out earlier, the Plaintiff contended that the Court should set aside the Award relying on the Indian Supreme Court decision in Saw Pipes. 159. With respect, I must disagree. When dealing with challenges under sub paragraph 37(1)(a)(iv) and (v); and (b)(ii), the challenge is not determined by reference to he substantive law of the contract. As the seat of the arbitration is Kuala Lumpur, the curial law is that of the seat, that is, Malaysian law; and it remains so even after the Award has been granted or handed down. 160. The Federal Court in The Government of India v. Cairn Energy India Pty. Ltd. and Anr. [2011] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to arbitrate and, in particular, their obligation to submit their disputes to arbitration and to honour an award. This includes inter alia questions as to the validity of the arbitration agreement, the validity of the notice of arbitration, the constitution of the tribunal and the question whether an award lies within the jurisdiction of the arbitrator... (emphasis supplied) (viii) The Government of India filed an appeal before the Malaysian Court of Appeal. The Court of Appeal in paragraph 31 of the judgment, wherein it is opined that: 31. It is the contention of the Appellant that the applicable law to be applied in the High Court proceeding is Indian curial law. This was rejected by the learned Judge and we agree with the same as we are of the view that the law is settled by the Federal Court in the case of The Government of India v. Cairn Energy India Pty Ltd. and Anr. [2011] 6 MLJ 441 ... (emphasis supplied) (ix) In the decision of the Federal Court in the Government of India v. Cairn Energy Pty. Ltd. and Anr., [2011] 6 MLJ 441 the Government of India referred five questions to the Federal Court, of which questions 1 and 2 are relevant, and are set out bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to: 153....The expression under the law is the reference only to the procedural law/curial law of the country in which the award was made and under the law of which the award was made. It has no reference to the substantive law of the contract between the parties. In such view of the matter, we have no hesitation in rejecting the submission of the learned Counsel for the Appellants. (emphasis supplied) The Malaysian Courts rightly examined the public policy challenge in accordance with the Malaysian Act, being the curial law of the arbitration. With respect to the challenge on the ground of excess of jurisdiction, it was submitted that it ought to have been tested on the basis of the proper law of the arbitration agreement i.e. the English law. On the applicable law at the enforcement stage, the Courts would determine the same as per the public policy of India. Discussion and Findings (i) In the present case, the law governing the agreement to arbitrate was the English law as per Article 34.12 of the PSC, which provides that the arbitration agreement shall be governed by the laws of England. Even though there seems to have been some confusion in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruments, such as the Geneva Convention and the New York Convention as well as the Uncitral Model Law. It also recognises the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. By way of a comparative example, we may reiterate the observations made by the Court of Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)] wherein it is observed that: It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award. In the aforesaid case, the Court of Appeal had approved the observations made in A v. B [ (2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237] wherein it is observed that: ... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ... as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration. (iii) The courts before which the foreign award is brought for recognition and enforcement would exercise seconda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply their respective lex fori regarding limitation periods applicable for recognition and enforcement proceedings; the date from which the limitation period would commence, whether there is power to extend the period of limitation. The lex fori determines the court which is competent and has the jurisdiction to decide the issue of recognition and enforcement of the foreign award, and the legal remedies available to the parties for enforcement of the foreign award. (v) In view of the above-mentioned position, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the Court finds that (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation.--Without prejudice to the generality of Clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (3) ... (emphasis supplied) (ii) The public policy defence for refusing enforcement Under Section 48 of the 1996 Act was interpreted by a three-judge bench of this Court in Shri Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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. x x x 47. While considering the enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award nor does it enquire as to whether, while rendering foreign award, some error has been committed. Under Section 48(2)(b) the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to: (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The objections raised by the Appellant do not fall in any of these categories and, therefore, the foreign awards cannot be held to be contrary to public policy of India as contemplated Under Section 48(2)(b). (emphasis supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the award is contrary to the (i) fundamental policy of Indian law, or (ii) interests of India, or (iii) justice or morality. (iv) The Counsel for the Respondents submitted that it was the amended Section 48, which would be applicable to the present case; or alternately, that the amendments effected by the 2016 Amendment Act would have retrospective effect. (v) We will now briefly touch upon the amendments made to Section 48, and consider the issue whether the amendments have retrospective application, and are applicable to the present case. Section 48 was amended by Act 3 of 2016, which came into force w.e.f. 23.10.2015. These amendments were incorporated on the basis of the 246th Report of the Law Commission. The relevant extracts from the 246th Report with respect to the amendments in Section 48 are set out hereunder: SETTING ASIDE OF DOMESTIC AWARDS AND RECOGNITION/ENFORCEMENT OF FOREIGN AWARDS 34. Once an arbitral award is made, an aggrieved party may apply for the setting aside of such award. Section 34 of the Act deals with setting aside a domestic award and a domestic award resulting from an international commercial arbitration whereas Section 48 dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended that a new Explanation being Explanation 2 be inserted into Section 34(2)(b)(ii) i.e.: 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. (vii) Section 48 was amended by Act 3 of 2016. By this amendment, the public policy ground was given a narrow and specific construction by statute, by the insertion of two Explanations. The amended Section 48 reads as: 48. Conditions for enforcement of foreign awards. - (1) ... (2) Enforcement of an arbitral award may also be refused if the Court finds that-- (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment which has to be looked at, rather than the form. Even in cases where for avoidance of doubt , something is clarified by way of an amendment, such clarification cannot have retrospective effect, if the earlier law has been changed substantially. (x) Section 26 of the 2016 Amendment Act provided that: 26. Act not to apply to pending arbitral proceedings. - Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act. (xi) Section 26 of the Amendment Act came up for consideration before this Court in BCCI v. Kochi Cricket Pvt. Ltd. 2018 6 SCC 287 ( BCCI ). This Court held that the Amendment Act would apply prospectively to: (a) arbitral proceedings initiated on or after 23.10.2015 i.e. the date on which the 2015 Amendment Act came into force; (b) court proceedings commenced on or after 23.10.2015, irrespective of whether such court proceedings arise out of, or relate to arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain guidelines to its construction. Its precursors in the Geneva Convention and the 1958 Convention's ad hoc committee draft extended the public policy exception to, respectively, awards contrary to 'principles of the law' and awards violative of 'fundamental principles of the law.' In one commentator's view, the Convention's failure to include similar language signifies a narrowing of the defense [Contini, International Commercial Arbitration: The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Am J Comp L at p. 304]. On the other hand, another noted authority in the field has seized upon this omission as indicative of an intention to broaden the defense [Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71 (1961)]. 8. Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d narrowly. This position was followed in the Southern District of New York in Telenor Mobile Communications v. Storm LLC. 524 F. Supp. 2d 332 (SDNY 2007). It was opined that to refuse enforcement on the ground of public policy, the decision would have to directly contradict the foreign law in such a manner, so as to make compliance with one a violation of the other. (xvi) Albert van den Berg in his commentary on The New York Arbitration Convention, 1958: Towards a Uniform Judicial Interpretation 18 opines that the scope of jurisdiction of the enforcement court is: It is a generally accepted interpretation of the Convention that the court before which the enforcement of the foreign award is sought may not review the merits of the award. The main reason is that the exhaustive list of grounds for refusal of enforcement enumerated in Article V does not include a mistake in fact or law by the arbitrator. Furthermore, under the Convention the task of the enforcement judge is a limited one. The control exercised by him is limited to verifying whether an objection of a Respondent on the basis of the grounds for refusal of Article V (1) is justified and whether the enforcement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies within the domain of the seat courts. Accordingly, errors of judgment, are not a sufficient ground for refusing enforcement of a foreign award. (xix) Given the well-settled position in law with respect to the finality of awards in international commercial arbitrations, and the limits of judicial intervention on the grounds of public policy of the enforcement State, we will advert to the facts of the present case. The Appellants have contended that the award may not be enforced, since it is contrary to the basic notions of justice. We are unable to accept this submission for the following reasons: (a) firstly, the Appellants have not made out a case of violation of procedural due process in the conduct of the arbitral proceedings. The requirement of procedural fairness constitutes a fundamental basis for the integrity of the arbitral process. Fair and equal treatment of the parties is a non-derogable and mandatory provision, on which the entire edifice of the alternate dispute resolution mechanism is based. In the present case, there is no such violation alleged. (b) secondly, the Appellants have not made out as to how the award is in conflict with the basic notio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. (emphasis supplied) This judgment has been recently affirmed by the Singapore High Court in Dongwoo Mann + Hummel Co. Ltd. v. Mann + Hummel GmbH [2008] SGHC 67 (c) The gravamen of the challenge of the Appellants is that the tribunal has given an erroneous interpretation of the terms of the PSC read with the Ravva Development Plan, which would amount to re-writing the contract. The view taken by the tribunal is based on an interpretation of Article 15.5 (c) read with the exceptions contained in Article 15.5 (e)(iii)(dd). The tribunal held that the exception came into play on account of the range of physical reservoir characteristics being materially different, from what was contemplated in the Ravva Development Plan. The tribunal relied upon the evidence of the Expert Witness produced by the Claimants who deposed that the enlarged reservoir known as Block A/D showed a range of physical characteristics, which were materially different from those of the Fault Blocks defined in Article 11.1 of the PSC, on which the Ravva Development Plan wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of Article 15.5(c) of the PSC, and the circumstances in which the PSC and the Ravva Development Plan, were executed, the tribunal held that the Respondents were entitled to costs of US $ 278 million, in excess of the US $ 198 million. The counter claim of the Appellants to the extent of US $ 22 million was allowed by the tribunal. (e) The Appellants are aggrieved by the interpretation taken by the tribunal with respect to Article 15.5 (c) of the PSC and its other Sub-clauses. The interpretation of the terms of the PSC lies within the domain of the tribunal. It is not open for the Appellants to impeach the award on merits before the enforcement court. The enforcement court cannot re-assess or re-appreciate the evidence led in the arbitration. Section 48 does not provide a de facto appeal on the merits of the award. The enforcement court exercising jurisdiction Under Section 48, cannot refuse enforcement by taking a different interpretation of the terms of the contract. (f) We feel that the interpretation taken by the tribunal is a plausible view, and the challenge on this ground cannot be sustained, to refuse enforcement of the Award. (g) With respect to the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, 30 (DDC 1994) M Flatow v. Islamic Republic of Iran and FMC Corp. 1999 US Dist LEXIS 18957; (2000) XXV Ybk Comm Arbn 641; Maritime Enterprises Ltd. v. Agromar Lineas Ltd. (1989) XIV Ybk Comm Arbn 693; Minister of Public Works of the Government of the State of Kuwait v. Sir Fredrick Snow Partners [1983] 1 WLR 818 CA; Northern Sales Co. Ltd. v. Comp Maritima Villa Nova SA, Federal Court of Appeal, Winnipeg, Manitoba, 20 November 1991, (1993) XVIII Ybk Comm Arbn 363; Good Challenger Nave Gante v. Metalexportimport [2003] EWHC 10 (Comm). 2Report of the General Assembly of the UN Commission on International Trade Law in its 41st Session dated 16th June - 3rd July, with respect to the legislative implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958) (UN Doc A/CN.9/656/Add.1) (UN Doc A/CN.9/656/Add.1). 3Umesh Goyal v. Himachal Pradesh Co-op Group Housing Society Ltd. (2016) 11 SCC 313. 4Sundaram Finance Ltd. v. Abdul Saman and Anr. (2018) 3 SCC 622. 5Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011) 8 SCC 333. Kandla Export Corporation and Anr. v. OCI Corporation and Anr., (2018) 14 SCC 715; Shivnath Rai Harnar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation, 1981, Kluwer Law and Taxation Publishers at page 265. 12Cruz City I Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649. 13Reliance Industries v. Union of India (2014) 7 SCC 603. 14Collins, in Lew (ed.), Contemporary Problems in International Arbitration (1986) p. 126 at 127-131. 15The Conflict of Laws, Dicey, Morris and Collins, (15th ed.) Volume 1, Chapter 16, paragraph 16-035, p. 843. 16Russel on Arbitration, Sweet Maxwell (24th Edition, 2015). 17See, e.g., BCB Holdings Limited and The Belize Bank Limited v. The Attorney General of Belize, Caribbean Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ 5 (AJ); Traxys Europe S.A. v. Balaji Coke Industry Pvt. Ltd., Federal Court, Australia, 23 March 2012, [2012] FCA 276; Uganda Telecom Ltd. v. Hi-Tech Telecom Pty Ltd., Federal Court, Australia, 22 February 2011, [2011] FCA 131; Petrotesting Colombia S.A. Southeast Investment Corporation v. Ross Energy S.A., Supreme Court of Justice, Colombia, 27 July 2011; Hebei Import Export Corporation v. Polytek Engineering Co. Ltd., Court of Final Appeal, Hong Kong, 9 February 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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