Enforcement Of Foreign Awards In India

November 8, 2021

INTRODUCTION

The Arbitration and Conciliation Act 1996 (hereinafter referred to as The Act) specifically provides for the manner in which a Foreign Award is to be dealt with for the purposes of its enforcement. The Act of 1940 had no such provision.

The Foreign Awards are to be dealt with separately under the New York Convention and the Geneva Convention both of which are dealt with under Chapter I and II of Part II of the Act.

According to Section 44 of Chapter I of the Arbitration and Conciliation Act 1996, Foreign Awards 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 11th October 1960 in pursuance of an Agreement in writing for Arbitration. The Award has to be passed in one such territory with which India has a reciprocal treaty. Similar conditions are specified under Section 53 for the Geneva Convention Awards. The said Awards can be executed as if it was a decree passed by the Civil Court of original jurisdiction in India as envisaged under Section 36 of the Act. For execution of the Award the format laid down in Order 21 Rule 11 (2) of the Code of civil Procedure 1908 for execution of decree is required to be followed.

Under Section 48, the Executing Court shall enforce the Award only after it is satisfied that the parties were not under some incapacity, were given proper notice and that the disputes submitted to arbitration were not beyond the scope of Arbitration Agreement.
Section 57 lays down some more conditions while dealing with the Geneva Convention Award, that the Executing Court shall enforce the Award only after it is satisfied that the conditions are fulfilled.

(a) the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;

(b) the subject- matter of the award is capable of settlement by arbitration under the law of India;

(c) the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;

(d) the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending;

e) The enforcement of the award is not contrary to the public policy or the law of India. Without prejudice to the generality of clause 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.

The Party enforcing the Award has to show beyond doubt that the Award has become final in the country in which it was passed.

he conditions for enforcement of foreign awards under the Geneva Convention are provided under Section 57 of the Arbitration and Conciliation Act, 1996. These are as follows:

the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto;
the subject-matter of the award is capable of settlement by arbitration under the law of India;
the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;
the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending;
the enforcement of the award is not contrary to the public policy or the law of India.

The Amendment Act has restricted the ambit of violation of public policy for international commercial arbitration to only include those awards that are: (i) affected by fraud or corruption, (ii) in contravention with the fundamental policy of Indian law, or (iii) conflict with the notions of morality or justice.

However, the said section lays down that even if the aforesaid conditions are fulfilled, enforcement of the award shall be refused if the Court is satisfied that-

the award has been annulled in the country in which it was made;
the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented;
the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration: Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide.

However, the said section lays down that even if the aforesaid conditions are fulfilled, enforcement of the award shall be refused if the Court is satisfied that-

the award has been annulled in the country in which it was made;
the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented;
the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration: Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide.

Appropriate Court for Enforcement: –

As per the clauses of the Arbitration Act a ‘court’ would mean the principal Civil Court having original jurisdiction to decide the question forming the subject matter of the arbitration if the same was the subject matter of a suit.

In light of the above it is apparent that an award holder can initiate execution proceedings before any court in India within whose jurisdiction the assets/ interests that are the subject matter of the dispute are located. To further reduce ensure the expeditious enforcement of foreign awards the legislature has formed various commercial courts under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (“Commercial Courts Act”), that in most cases have the jurisdiction to hear such matters.

Conclusion:

The rapid growth and development witnessed in India since the opening up of the economy post the 1991 reforms has made India as a regional powerhouse and on the path to become a global commercial superpower. This growth in the commercial sector however have burdened and, in some cases, crippled the judiciary with a heavy backlog of cases and matters often taking decades to be resolved. It has long been a sore point with international investors that any disputes which arise in or require enforcement of awards against assets and interests located in India usually take a large amount of time and the same was not conducive to the establishment and growth of trade and commerce. However, changes have been made to make India a more investor friendly jurisdiction.

The pro-arbitration approach of the courts are evident from the recent spate of judgements propounding the limited role to be played by courts in the enforcement of foreign awards. The passing of the 2015 and 2019 amendments to the Arbitration Act along with the establishment of the commercial courts as mentioned earlier have been lauded as developments that have aligned India with the prevailing jurisprudence and best practices in the field of Arbitration globally.

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November 8, 2021