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Recognition and enforcement of Arbitral Awards in India

Continuous growth of international commerce has resulted in players from various markets to seek other methods of dispute resolution in order to abstain from litigation since its enforcement in foreign parties is often complex and vexatious, which has resulted in creation of efficient methods of dispute resolution like mediation, arbitration, their hybrid clauses as they are both efficient and effective, but with such methods what arises is the question of recognition and enforcement of such awards especially when done abroad, arbitral awards which determine the rights and obligations of the parties need more clarity. This research paper aims at bringing out the ways how domestic and foreign arbitral awards are made enforceable in India and the reasons why the enforcement of Foreign Arbitration Awards still turns out to be a major challenge in India.

Arbitral Awards, Domestic and Foreign Awards

Arbitral awards refer to the decision of an arbitral tribunal, whether in a domestic or international arbitration. Arbitral awards include interim awards.
Domestic awards are governed by Part I whereas foreign awards are governed by part II of the Arbitration and Conciliation Act of India. A domestic award is an award passed under the provisions of Section 2 to 43 of the Act.

A domestic award is a result of domestic arbitration, hence it confines itself to the territory of India, the parties should have a nexus or birth to Indian origin, basically territory comes into play in order to asses a domestic arbitration. Award given by an arbitral institution in India or an award even if given by a foreign state for a dispute where both the parties are of an Indian origin and the nationality is also governed by the Indian laws shall also come within the purview of domestic arbitration.[1]

A Foreign award as per section 44 means an arbitral award which relates to differences relating to the matters considered as commercial under the law in force in India.[2] Hence it’s safe to say that a ‘Foreign Award’ means an arbitral award made as a result of foreign arbitration not being a domestic one.

Further clarity was given in the case of Serajuddin v. Michael Golodetz[3] where the Calcutta High court laid down the necessary conditions for an arbitration to be called ‘foreign arbitration’ or the essential elements of a foreign arbitration, where the award could further be called as a foreign arbitral award, the main points laid out were (must include all)-
a. Arbitration should have been held in foreign a foreign country.
b. by a foreign arbitrator.
c. Arbitration by applying foreign laws.
d. One of the parties consists of foreign nationals.

Enforcement of domestic and foreign awards

Enforcement in case of domestic awards

Prior to applying for enforcement and execution of the award awarded by the tribunal, an award holder will need to wait for a period of 90 days, and during this intervening period the award maybe challenged in accordance with section 34 which provides for the procedure for application for setting aside an arbitral award.[4] Post expiry of the period, if a court finds the award to be enforceable, at the stage of execution, no further challenge will be permitted to question the validity of the arbitral award. As per the new Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay on the execution of an award.[5]

Enforcement in case of foreign awards

India recognises foreign awards under the New York Convention and the Geneva Convention as it is a signatory to the abovementioned conventions. If a binding award is received by a party from a country that is a signatory to the New York or the Geneva Convention and the award is made in a territory which has been notified as a convention country by India in its official gazette, the award would then be enforceable in India.[6]

As per section 47 of the Act a party seeking to enforce a foreign arbitral award needs to make an application to the court, i.e. high court ( having jurisdiction) and provide the - original award or its certified copy, the original arbitration agreement or its duly certified copy, and if the award or agreement is in a foreign language, the party must produce a certified copy of a foreign award translated into English or any other evidence in order to establish that the award awarded is a foreign award.[7]

Conditions for enforcement of arbitral awards (domestic and foreign)

In order to challenge an award a party may resort to the following grounds. Such an award would be rendered unenforceable in case the other party proves that-
- The parties to the agreement under the law were under some incapacity.
- The agreement in question was not in accordance with the law to which the parties were subjected, or under the law of the country where the award was made (especially in case of foreign awards).
- The party was not provided with a proper notice of appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case in the arbitral tribunal.
- Award deals with a difference not falling within the terms of the agreement.
- Award contains decisions on matters beyond the scope of being referred arbitration.
- Composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement.
- Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place (in case of foreign awards).
- The award (specifically a foreign award) did not become binding on the parties, or had been set aside or suspended by a competent authority of the country in which, or under the law of which that award was made.

- Subject matter of the dispute is not capable of settlement by arbitration under the Indian law. Enforcement of the award would be contrary to the public policy of India, or in conflict with morality or justice.

Limitation period for enforcement of awards

In case of domestic arbitral awards the limitation Act 1963 shall apply to arbitrations, as per section 21 the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.[8] The Supreme Court in M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society[9] observed that arbitral awards are deemed to be decrees. Though the Arbitration Act does not provide any limitation for the enforcement of a foreign award, it is likely that the normal period of limitation (12 years) would apply.[10]

In case of foreign awards various high courts have given varying interpretations on the limitation period within which a party can enforce an award. In Noy Vallesina v Jindal Drugs Limited[11] the Bombay High court observed a foreign award to not be a decree, hence making it non-binding on parties unless recorded as enforceable by a competent court. The Madras High court on the other hand in Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd[12]. referred to foreign awards as deemed decrees. What sets the two apart is that when the court considers an award to be a decree the foreign award would fall within the residuary provision of the Schedule to the Limitation Act, making the limitation period three years, whereas when a foreign award is deemed as a decree the limitation period would be of three years.[13]

It was in M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd[14], where the Supreme Court held that a single proceeding can have different stages. A court can, in the first proceeding, decide upon the enforceability of the award. Once the enforceability is decided, it can take further effective steps for execution of the same.

In case of enforcement of a foreign award, the party cannot appeal against any decision of the court rejecting objections to the award. Only in case the court holds the award to be non-enforceable, an appeal can be made. Hence once cannot appeal against a decision which upholds the award. However, the party can look forward to a discretionary appeal to the Supreme Court of India under Art 136 of the Constitution of India. Such kinds of appeals are entertained only in case the court feels that a question of fundamental importance or public interest exists.[15]

Enforcement of foreign judgements in India (reciprocating and non-reciprocating countries)
Firstly, for a foreign judgement to be applicable, it needs to satisfy the grounds given in Section 13 of the CPC, failing which the judgement will be inconclusive.[16]

Execution proceedings are required to be filed in India by the party seeking enforcement of a decree of a court of a reciprocating country. Foreign judgements from superior courts of a reciprocating territory can be directly enforced by virtue of section 44A of the Civil Procedure Code by filing an execution application. Post which section 51 and order XXI of CPC will come into play.

In case the foreign judgment is given by a non-reciprocating country, a fresh suit will need to be filed in a court of competent jurisdiction in India, where the foreign judgement will be treated as evidence. The time limit for filing a suit for enforcement of such foreign judgments is three years from the date on which the judgment has been delivered.[17]

Challenges in executing foreign arbitral awards in India

Getting an award from a foreign arbitral tribunal in your favour is somewhat a half battle won as it still needs to be enforceable in India. There have been various cases, where, despite of receiving a favourable award in a foreign arbitral tribunal, the party failed in getting it enforced in competent Indian courts.[18] Hence, no way out exists in order to get an arbitral awards imposed than to get into litigation, from which both the parties refrained from at the first place. As it is time consuming an order which has already been passed by a foreign arbitral tribunal will take more time to actually become effective rendering the process to take more time in application of justice. But this route cannot be avoided as it provides more of a structured process and ensures due scrutiny on behalf of the courts is applied making the award enforceable.

Pressure by local governments, especially local parties which have more political power may try to annul the award or the total effect of the award, which carries a potential to frustrate the award issued by the international arbitration seat.[19]

Part II of the Indian Arbitration & Conciliation Act, 1996 (“the Act”) deals with Enforcement of foreign awards whereas Chapter I (Section 44-52) deals particularly with Convention related awards. As per Section 44(b) , a “foreign award” must be made in one of such territories as the Government of India, upon being satisfied about the existence of reciprocal provisions, may by notification in its Official Gazette, declare it to be the particular territory where the convention shall be applicable. However, there is a reason why this requirement of getting gazetted mention needs to be removed, in order to bring India’s arbitration regime into sync with the standards of the convention. The requirement of gazetting creates unnecessary ambiguity with respect to enforcing foreign awards made in countries which are contracting states to the Convention but have not yet been notified in the gazette.[20]

Conclusion
Overall, India does not pose to be a jurisdiction carrying anti-arbitration bias. Previously there were no rules and regulations on enforcement of foreign awards in India. Hence, it can easily be argued that the legal system of India strives towards creating a facilitative environment for enforcement of foreign awards. A major problem with the Arbitration and conciliation Act, 1996, is regarding enforcement, it treats foreign arbitral awards and foreign court decisions similarly. Because of lack of distinction between foreign arbitral awards and court decisions, issues particularly relating to foreign awards are not properly addressed in Indian Law. Some improvements such as bringing in clarity on convention countries carrying reciprocal provisions that are yet to be listed on the official gazette is required and a legislation which directly deals with foreign arbitral award will make it possible to provide more structure to the arbitral process and keep India in line with advanced legal regimes across the world.

End-Notes
[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] Because it is mandatory that the relationship falls within the meaning of the word “Commercial” under the law in force in India.
[3] Serajuddin v. Michael Golodetz AIR 1960 Cal.49 (India).
[4] Arbitration and Conciliation (Amendment) Act,2015, §. 34
[5] Arbitration and Conciliation (Amendment) Act, 2015, §. 36(2)
[6] Nishith Desai Associates, Enforceability of arbitral awards and decrees in India , Nishith Desai Associates(2019), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[7] The Indian Lawyer, ENFORCEMENT OF FOREIGN AWARDS IN INDIA ,The Indian lawyer, (2016), http://www.theindianlawyer.in/blog/2016/09/09/enforcement-foreign-awards-india/.
[8] Arbitration and Conciliation (Amendment) Act,2015, §.43.
[9] M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society (2016) 11 SCC 313 (India).
[10] Sameer Parekh, Arbitration procedures and practice in India: overview, Thomson Reuters(2016), https://content.next.westlaw.com/Document/I8abc648d1c9a11e38578f7ccc38dcbee/View/FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1.
[11] Noy Vallesina v Jindal Drugs Limited 2006 (5) BomCR 155 (India).
[12] Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd. AIR 2007 Mad 251 (India).
[13] Nishith Desai Associates, Enforceability of arbitral awards and decrees in India , Nishith Desai Associates(2019) http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[14] M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd. 2001 (6) SCC 356 (India)
[15] Sumeet Kachwaha, Enforcement of arbitration awards in India, AIAJ Volume 4, 2008, at 80
[16] Civil Procedure Code 1908, § 13
[17] Nishith Desai Associates, Enforceability of arbitral awards and decrees in India, Nishith Desai Associates(2019), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[18] Varun Sharma, Challenges of Executing Foreign Arbitration Awards in India , ipleaders (2018) https://blog.ipleaders.in/arbitration-award/
[19] Varun Sharma, Challenges of Executing Foreign Arbitration Awards in India , ipleaders (2018) https://blog.ipleaders.in/arbitration-award/
[20] Subhiksh Vasudev, Has India Truly Delivered on Its Obligations Under Articles I and V of the New York Convention Over the Last 60 Years?, Kluwer Arbitration Blog (November 29, 2018), http://arbitrationblog.kluwerarbitration.com/2018/11/29/has-india-truly-delivered-on-its-obligations-under-articles-i-and-v-of-the-new-york-convention-over-the-last-60-years/

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