DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

ADR

PROJECT

“ENFORCEMENT OF ARBITRATION AWARD”

SUBMITTED BY: SUBMITTED TO:

HARDIK ANAND Dr. Prasenjit Kundu

B.A. LL.B. ASST. PROFESSOR

ENROLLMENT NO.: 160101073 RMLNLU

 ACKNOWLEDGEMENTS

I would like to express my sincere gratitude and indebtedness to

Dr. Prasenjit Kundu for his enlightening lectures on Arbitration law. I would also like to express my sincere
gratitude to our teaching staff for guiding me the path towards gaining knowledge. I would also like to thank
RMLNLU, library for the wealth of information therein. I would like to thank Library Staff as well for their co-
operation.
TABLE OF CONTENTS

Introduction

History

Procedure for enforcement under the old act

Procedure for enforcement under the new act

Grounds for setting aside an arbitral award

A brief history of the relevant conventions & overview of the

A few important aspects of the definition

Essentials considerations for the enforcement of foreign awards

Conclusion

Bibliography
INTRODUCTION

Conflict between partners in trade has existed ever since the beginning of trade itself and so have methods of
resolution of such disputes. As a means of resolving disputes, arbitration has been used for centuries. 1 There
have been a number of attempts to define arbitration but this has always been considered problematic. However,
the following definition might be taken for the purposes of this paper:

“Arbitration is a reference to the decision of one or more persons, either with or without an umpire, of some
matter or matters in difference between parties to commercial transactions.”

Arbitration helps to improve international economic relations by providing a mechanism that reduces the risk of
transactional commerce. While entering into a business relationship, the business houses do hope that there
would be no failure of agreements, but the fear of a dispute is never too distant. This fear gets accentuated when
the businessman is not sure of the reliability, pragmatism, promptness as well as the fairness of the dispute
resolution mechanism.  This would result in the increase of prices to compensate for the additional hazard.

It is thus clear that the presence of effective methods of dispute resolution is a major step forward in the
direction of facilitation of trade and commerce.  The main attraction of a proceeding like arbitration is the fact
that it provides the parties a neutral forum in which they can solve their disputes and is speedy in its
dispensation of a result. In order to retain this attraction the arbitration proceedings should avoid getting into the
courts as far as possible.

The arbitrator/s hears the parties and pronounces their verdict in the form of an “award”. Since the parties chose
to arbitrate and they appointed the arbitrator by mutual consent, they usually abide by the award as well.
However, there are always some persons who will not adhere to the award. Just because the parties to
arbitration took the dispute out of the court’s hands does not mean that the court will not step in to redress the
grievances of the aggrieved party in such situations. The court has the power to enforce the award, within its
own jurisdiction, as though it were executing one of its own decrees. This sort of judicial execution of an
arbitral award is usually called ‘enforcement’.

A process like arbitration assumes special importance for a developing country like India. In the early 1990s,
foreign exchange reserves were frighteningly low and foreign capital was only trickling in. In order to
encourage more foreign investment, security of investment and a speedy and just dispute resolution process
were two of the basic requirements. Hence, India adopted the policy of liberalisation. At the same time, India
began to hard-sell arbitration as a form of dispute resolution to its domestic businessmen. Arbitration was

1
David St John Sutton, John Kendall, Judith Gill, Russell on Arbitration, 21st ed., Sweet and Maxwell, London, 1997, p.3.
already a major form of dispute resolution among commercial circles in developed countries. If India could
develop a strong arbitration base, then that would take care of the speedy disposal of cases; thus encouraging
foreign investment. As a useful starting point, India was already a party to both the New York and Geneva
Conventions on arbitration. However, the domestic law was inadequate to meet the demand. Hence, in 1995,
India passed an ordinance based on the UNCITRAL Model law on arbitration; and this subsequently became
legislation in 1996. This opened the floodgates for arbitration for Indian entrepreneurs. However, one trend that
was noticed was that most arbitration involving Indian businesses took place in foreign countries, although the
award was to be enforced here. Hence, the area of enforcement of these foreign awards assumed special
importance in India.

HISTORY

The enactment of the Arbitration Act, 1940 (hereinafter "the old Act"), was a reflection of the legislature's
determination to ensure speedy resolution of disputes. However, the old Act, though sound in principle, was
bogged down by procedural delays. To put it in the words of the Apex Court:

"Experiences show and law reports bear ample testimony that the proceedings under the Act have become
highly technical accompanied by the intending prolixity at every stage providing a legal trap to the unwary.
Informal forum chosen by the parties for expeditious disposal of the disputes has, by the decisions of the courts
been clothed with legalese and unforeseeable complexity."2

There was no uniform procedure in terms of a unified code for the enforcement of foreign awards under the
New York Convention and the Geneva Convention. The Foreign Awards (Recognition and Enforcement) Act,
1961 for the enforcement of arbitral awards under the New York Convention and the Arbitration (Protocol and
Convention), Act 1937 hitherto held the field. With the adoption, by the United Nations Commission for
International Trade Law of the UNCITRAL Model Arbitration Law and the subsequent adoption of the same by
various countries in the world, it was but necessary that India adopt the Model Law to govern arbitrations and
this saw the genesis of the more dynamic Arbitration and Conciliation Ordinance leading to the Arbitration and
Conciliation Act, 1996 (hereinafter "the new Act").

The New Act has consolidated and amended the law relating to arbitration and is comprehensive in the sense
that it covers both domestic and foreign arbitrations.

2
Gurunanak Foundation v. Rattan Singh and Sons, (1981) 4 SCC 634
It has simplified the procedure in many respects, especially concerning appointment of arbitrators, procedure to
determine whether an arbitration agreement exists or not, challenge to an arbitral award and finally,
enforcement. The interference of courts in the matter of arbitration has been reduced to the minimum. The
enforcement procedure has also been revised. The purpose or scope of this article is to examine the law in India
insofar as the enforcement of arbitral awards is concerned.

A comparison of the provisions in the old Act and the new Act would be meaningful and useful.

PROCEDURE FOR ENFORCEMENT UNDER THE OLD ACT

After the making of the award by the arbitrators or umpire and after having signed the same, at the request of
one of the parties' to the agreement or any person claiming under him or if so directed by the court, the award
and all other documents were to be filed in court. (Section 14)

The court had jurisdiction to entertain the application for filing of the award.

The court had to give notice to the parties under Section 14(2).

The parties were entitled to object to the award.

The court was to determine and modify or correct an award, where:

(a) It appeared to the court that a part of the award is upon a matter not referred to arbitration;

(b) The award is imperfect in form; or contains any obvious error which can be amended without
affecting such decision or it contains clerical mistakes (Section 15).

The court had also the power to remit the award to the arbitrator for fresh consideration, if any issues were left
undetermined, or where the award was so indefinite to be incapable of execution, or where objection to legality
of award is apparent upon the face of it.

The court could consider that the time for filing of objections against the award had expired or such application
having been made had been refused.

It was only upon satisfaction of the above conditions that the court could pass a decree confirming the arbitral
award and only then would the award become final and binding and thereafter enforceable.
PROCEDURE FOR ENFORCEMENT UNDER THE NEW ACT

Under the new Act, the procedure for enforcement stands simplified to a very great extent when compared to
the provisions of the old Act.

Section 35 of the new Act makes the award final and binding on parties and persons claiming under them.

Section 36 provides for enforcement of the arbitral award as though it were a decree of the court, and a party is
entitled to enforce the arbitral award, when the time for making an application to set aside the arbitral award had
expired or such application having been made, had been refused. This saves the time spent under the old Act to
make an award a decree of court.

Therefore under the new Act, after an award is made or passed, the party in whose favour an award is made has
nothing to do but just wait whereas under the old Act the winning party had to file an application within 30 days
of receipt of the award for getting it made a rule of the court.

GROUNDS FOR SETTING ASIDE AN ARBITRAL AWARD

An important aspect which needs to be considered is the aspect relating to setting aside of an arbitral award.
Under Section 34(2) of the new Act, an award may be set aside by the court either on the application of the
party or (without such application) by the court under certain circumstances. The grounds under which a party
may apply to the court to set aside an award are only those mentioned in Section 34(2). They are:

a. Where a party making the application was under some incapacity.

b. The arbitration agreement is not valid under the law to which the parties are subjected or failing such
indication thereon, under the law for the time being in force.

c. The party making the application was not given proper notice of the appointment of arbitrators or of
the Arbitral Tribunal or was otherwise unable to present his case.

d. Arbitral award deals with a dispute not contemplated by the parties or beyond the terms of
submission.

e. Composition of the Arbitral Tribunal was not in accordance with the agreement of the parties.

f. Subject-matter of dispute is not capable of settlement by arbitration under the law for the time being in
force.

g. The arbitral award is in conflict with the public policy of the country.
The court can enforce the award only if application for setting aside it is disallowed or the time for making such
prayer is over. The last-mentioned position seems to run counter to the avowed objects of the Act, namely
avoidance of delay. It is noteworthy to mention that once an application is preferred under Section 34, the
executing court has no jurisdiction to enforce the award, until and unless the application under Section 34 is
dismissed or refused. This is a marked departure from even the normal rule under the Code of Civil Procedure,
1908 where an executing court can execute the decree if there exists no stay by the appellate court. In the
opinion of the author, this ought not to have been the position under the new Act. Enforcement of the award
should be permitted unless there is a stay by the court hearing an application under Section 34. That appears to
be an inadvertent departure under the new Act from the normal procedure contemplated under the Civil
Procedure Code and runs contrary to the avowed object of speedy resolution of disputes contemplated under the
new Act. It is in this area that Section 36 is definitely capable of being put to mischief and therefore requires a
fresh look.

A BRIEF HISTORY OF THE CONVENTIONS & OVERVIEW OF THE RELEVANT SECTIONS OF

THE ACT
Background to the New York Convention3
After the First World War, international trade increased and at the same time, there was also an increase in the
use of international commercial arbitration for the resolution of disputes relating to this international trade. A
need was felt for providing proper arbitral machinery for the resolution of disputes in this manner, subject to the
jurisdiction of different States. In this regard, the ICC promoted an international convention for removal of
impediments to the enforcement of the arbitral awards.4

The first serious effort in this direction was made under the auspices of the League of Nations. These efforts
resulted in the Protocol on Arbitration Clauses, which was ratified by 30 States on 24 thSeptember 1923. This
Protocol also provided a procedure for conducting arbitration and a mechanism for execution of the same.
Article 2 of the Protocol gave the parties the freedom to choose the constitution of the Arbitral Tribunal and the
freedom to conduct the arbitration in a country of their choice. However, the Protocol’s major shortcoming was
present in Article 3. Due to the construction of this Article, only domestic awards could be enforced by the
Courts of the member States.
In order to overcome this deficiency, inter alia, inherent in the above Protocol, the League of Nations pushed
for the drafting of another better treaty. The new Convention was concluded in Geneva on 26 th September 1927

3
The Delhi High Court in one case traced the history and background to the New York Convention and India’s role in the same: Gas
Authority of India Ltd. v. SPIE CAPAG, SA (1994) 1 Comp. L.J. 374, at 383-385 (Delhi)
4
K.K. Venugopal, et al. (eds.), Justice R.S. Bachawat’s Law of Arbitration and Conciliation (3rd ed. Nagpur: Wadhwa & Co. 1999), at
974
and was christened the Convention on the Execution of Foreign Arbitral Awards, for short the “Geneva
Convention”. This Convention rectified the major errors of the old Protocol and was ratified by 27 States. As
per the Geneva Convention, each contracting State was required to recognize and enforce an arbitration award
made in another contracting State pursuant to an agreement covered by the 1923 Protocol.
India was a party to the Protocol and the Geneva Convention, subject to the reservation of limiting India’s
obligations in respect thereof to contracts which were considered as commercial under the laws of India. For
implementing and giving effect to the Protocol and the Geneva Convention, the Arbitration (Protocol and
Convention) Act, 1937 was enacted.

Whatever the plus points of the Geneva Convention, India’s experience showed that the Convention was not
conducive to the speedy enforcement of foreign arbitral awards. The most important reason for this was that the
beneficiary of the award was required to show to the Court before which the matter came for enforcement that
the award had become final in the country in which it was made. The Convention also laid too much emphasis
on the remedies that were open to the parties to invoke the law of the country where the award was made, for
the purposes of setting aside of the same.

These shortcomings were noticed not only by India, but also by the Economic and Social Council (ECOSOC) of
the United Nations. The ECOSOC held extensive discussions and prepared a draft of a new convention for the
enforcement of international arbitral awards. Finally on 10th June 1958, the ECOSOC passed a resolution and
the New International Convention on the Recognition and Enforcement of Foreign Arbitral Awards, for short
the New York Convention, was adopted.
In order to give effect to the New York Convention, the Indian Parliament passed the Foreign Awards
(Recognition and Enforcement) Act, 196. However, this Act was repealed by the Arbitration and Conciliation
Act, 1996. The new Act lays down in detail provisions relating to recognition and enforcement of both Geneva
and New York Convention Awards.

In the following pages, the researcher will examine those provisions of the Arbitration and Conciliation Act,
1996 which are relevant to this project and which have provoked discussion among the commentators upon the
subject.

A FEW IMPORTANT ASPECTS OF THE DEFINITION

Definition of “foreign award”
Part 2 of the Arbitration and Conciliation Act, 1996 deals with the enforcement of arbitral awards made under
the New York Convention and the Geneva Convention. Sections 44 and 53 define which awards can be
enforced under this part as “foreign awards”.   A few aspects of these definitions elicit a discussion.
“Legal relationship considered as commercial”: The definition of ‘foreign award’ in section 44 refers to “legal
relationships… considered as commercial under the law in force in India”. The New York Convention made
reference to the ‘national law’ and the declaration of accession to the New York Convention by India made
reference to “the law of India”.5 What is the importance of “law in force in India” and “transactions which are
considered as commercial”? One commentator believes that these words are of such wide import that they will
envelop the entire body of laws which are effective or operative in India. He says that with several kinds of
transactions which may be considered as ‘commercial’ on the facts of each case, it is obvious that when the
Parliament referred to the legal relationship considered as commercial under the law in force in India, it had in
mind the general body of laws with reference to which the nature of the transactions would be considered. The
Bombay High Court in European Grain and Shipping Ltd. v. Bombay Extractions Pvt. Ltd.6, considered the
scope of Section 2 of the Foreign Awards (Recognition and Enforcement), 1961, which is similar to section 44
of the new Act, said:
“If the nature of the transaction between the parties is one which partakes of commerce or which is in the nature
of commerce, then inevitably the relation between the parties to the contract or parties to the transaction will be
clearly a commercial relationship. The nature of the relationship will depend on the nature of the transaction and
whether the nature of the transaction is commercial or not will have to be determined with reference to
generally to the law in force in the country inclusive of the operative legal principle in force in India. The mere
use of the word “under” preceding the words “law in force in India” would not necessarily mean that you have
to find a statutory provision or a provision of law which specifically deals with the subject of particular legal
relationship being commercial in nature.”

In other words, the Court was trying not to confine the term “commercial” by defining it or by referring to
particular types of transactions, but to keep the scope of the section as wide as possible. This policy was clear
even in a later decision of the Supreme Court.7 In the submission of the researcher, this view taken by the courts
is correct, as narrowing the scope of the section would mean that certain awards may not be enforceable merely
because of a technicality. This would be against the spirit of free international trade, which can be considered to
be part of public policy today.

Further, the researcher draws attention to the dictum of the Supreme Court in Atiabari Tea Co. Ltd. v.State of
Assam8. In this case, the Court interpreted the term “trade and commerce” used in Article 301 of the
Constitution. Even in this case, the Court has not restricted the words “trade and commerce” to mean any
specific activities alone, but to include all activities wherein some commodities are exchanged for money or

5
Justice B.P. Saraf & Justice S.M. Jhunjhunwala, Law of Arbitration and Conciliation (2nd ed. Mumbai: Snow White Publishers Pvt.
Ltd. 2000), at 336
6
AIR 1983 Bom 36
7
R.M. Investment & Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC 1136
8
AIR 1961 SC 232
such-like commodities. Therefore, it is submitted that the public policy on this aspect is clear – “commercial”
must be given as wide an interpretation as possible. Several other cases have also used this approach.9
However, not all foreign arbitral awards are covered under these definitions. There are other foreign awards,
which cannot be classified under either Section 44 or Section 53. Firstly, the researcher will see how certain
awards cannot fall under the definitions available in Part 2 of the Act.

1. The Central Government notifies which countries are parties to the New York and Geneva Conventions
for the purpose of enforcement of awards made in arbitrations held in these countries. However, not all
international commercial arbitrations take place in these countries. Further, traders from India trade with
people from countries, which are not parties to either Convention. They might have arbitration clauses in
their contracts. In any of these cases, the award announced by the arbitral tribunal cannot be enforced
under Part 2 of the Act, as they do not qualify for the definition of “foreign award” under Sections 44 and
53.
2. Although there is a wide interpretation given to the scope of “commercial” used in the definition of
‘foreign award’, there are many disputes which are not of commercial nature. Further, there are
arbitrations which take place in foreign countries which are not commercial arbitrations. Awards
announced in these arbitrations are not enforceable under Part 2 of the Act.

ESSENTIAL CONSIDERATIONS FOR THE ENFORCEMENT OF FOREIGN AWARDS

Enforcement of Awards
Keeping in mind the two reasons discussed in the previous chapter regarding the inadequacy of Part 2 of the Act
for the enforcement of foreign awards, one needs to look at the avenues available for the enforcement of foreign
arbitral awards. Sometimes it so happens that a person may require a process other than that specified in Part 2
of the Act for enforcing even Convention awards. In the researcher’s opinion, all arbitral awards, even foreign
awards covered under Part 2, are enforceable through Section 36 of the Act.

Section 36 of the Act states that an arbitral award is enforceable by a civil court of competent jurisdiction in the
same manner as the court executes its own decrees. In other words, all arbitral awards are enforceable by a court
as though they are decrees passed by the court itself. Further, Sections 52 and 60 state that the provisions of Part
2 are not exhaustive for the enforcement of awards made under the two Conventions – the parties can take
recourse to any mechanism afforded by the law to enforce arbitral awards. Extending the same logic to the non-

9
See Fatehchand Himmatlal v. State of Maharashtra, AIR 1977 SC 1825, Mukesh H. Mehta v. Harendra H. Mehta, (1995) 5 Comp
L.J. 517 (Bom), Josef Meisaner GMBR v. Kanoria Chemicals & Industries Ltd., AIR 1986 Cal 45
Convention awards, the researcher submits that non-Convention awards passed during an international
arbitration are enforceable

An interesting aspect of Section 36 is that it gives the status of decree to arbitral awards. Some commentators
refer to this as a “deemed decree”, although the researcher submits that this would be a misnomer. According to
Section 36, a court of competent jurisdiction will enforce an arbitral award, as though the award was a decree
that had been passed by it. Therefore, as far as enforcement of an arbitral award is concerned, there is no
difference between the award and a decree of the court. However, the term “deemed decree” seems to indicate
that the award is in fact a decree of the court. This is not true, because the court has not heard the parties, the
court knows nothing about the merits of the dispute, it has not applied its mind while resolving the matter;
therefore, there is no way that the award will be regarded as a decree of the court. What the section provides is
that the court will execute the arbitral award in the same manner as it would execute one of its own decrees.

Hence, a foreign arbitral award, which cannot be enforced under Part 2 of the Act, can be enforced under
Section 36 of the same Act. Further, under Sections 52 and 60, even awards which can be enforced under Part 2
can be enforced with the help of Section 36 instead.

Defences Against Enforcement under the Convention {Article V(1)}

The following are the defences to the enforcement of awards found in Article V in the Convention. The first
five defences are those that must be raised by a party, and the party that raises them has the burden of proof to
establish those.

Lack of Capacity, Lack of Agreement

The first defence is incapacity of the party or a lack of a valid arbitration agreement. One might be concerned
about incapacity if there was arbitration in a dispute with a governmental entity; in other words, the question
might be whether that entity had the capacity to enter into the arbitration agreement because the entity lacks
authority to bind itself to arbitrate. This issue is also relevant in domestic arbitrations while dealing with the
government.

The other issue is the lack of a valid arbitration agreement. This issue should not pose great obstacles because
generally such matters would be explored in the course of the arbitration as potential defences to enforcement of
the contract.

Inadequate Notice and Opportunity to Present Case

The second defence is inadequate notice or opportunity to be heard. It is interesting to note that in the
Convention itself there is no differentiation between a contested and default award. This contrasts with the
situation in the enforcement of foreign judgments, where, in the case of a default judgment, courts are more
willing to look at what actually occurred in the case itself.
In the enforcement of arbitral awards under the Convention, the focus of the courts is more on whether the
losing party had notice of the proceeding and an opportunity to attend conferences and hearings, submit briefs,
etc. If the party had those opportunities and failed to avail itself of them, courts do not have a great deal of
sympathy and proceed to enforce foreign arbitral awards.

Waiver
In arbitration cases it is very common that, when there are party-appointed arbitrators, they make appropriate
disclosures at the outset that someone can perhaps raise issues of bias, conflict of interest, etc. So even if there
are procedural deficiencies that may, theoretically, provide for a refusal of enforcement, if there is no objection
made in the course of the arbitration, it will be regarded by the courts as having been waived.

Awards Exceeds Arbitrators Authority

The third ground, which is in Article V(1)(c), is that the award exceeds the scope of the arbitrator’s authority.
This, too, is very narrowly construed by courts, which do not want to get involved in analyzing the merits or the
decision making process undertaken by the arbitrators. In fact, if courts see that there were extensive hearings
and submissions and that a fairly thorough decision was rendered, they will not refuse to enforce. A good
example is the Fertilizer Corporation of India case, where the contract explicitly said that consequential
damages were not to be available. Notwithstanding that provision, there was an award in India under Indian law
that included consequential damages, and the US court upheld that award.

Composition of Tribunal
The fourth ground, found under Article V(1)(d), is irregularity in the composition of the arbitration panel or
procedure. Essentially there has to have been a violation of the procedures set forth in the arbitration agreement,
such as for the appointment of arbitrators, discovery, or exchange of pleadings. Arbitration agreements are often
specific in this regard. Procedures may also be mandated under the law of the place where the arbitration was
held.

Was the Award Binding, Set Aside, or Suspended?

The last ground under Article V is that the award was binding or was set aside or suspended. Obviously, if that
were the situation the court would refuse to enforce the award; and “binding” under the Convention only means
that it’s not subject to further arbitral procedures. It could be subject to court challenges, but that would not
change the fact that the award is binding.

Grounds
Two additional grounds, which are under Article V(2) of the Convention, can be raised by either a party or by
the court on its own initiative.
ARBITRABILITY
The first is that the subject matter of the dispute is not arbitrable under the law of the country where
enforcement is sought. Obviously, in view of the developments in this country in terms of the extension of
arbitrability, particularly in the international arena, there are very few areas in fact that this would provide a
basis for avoiding enforcement of an award.

Public Policy
The final ground for non-enforcement of an award is that enforcement would violate public policy. This ground
has not been used with much success, although it has been attempted in numerous cases. Of course, every
attempt to deny enforcement of an award always has the public policy ground inherent in it, either
independently or as a backdrop to the main arguments against enforcement.

Conditions for enforcement under the Indian Law

The grounds mentioned in section 48 are exhaustive.  Enforcement may be refused only if the objector can
prove one of the grounds given in sub section (1) or if the Court finds existence of a ground listed in sub-section
(2). As a general rule of interpretation the grounds under section 48 for refusal are to be construed narrowly.

The Courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual
notion of expediency or fairness.  They do not close their doors unless help would violate some fundamental
principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.

The grounds listed in sub-section (1) of section 48 of the 1996 Act for refusal of enforcement of the award are
to be proved by the party against whom it is invoked (hereinafter also ‘the respondent’).  The burden of proof to
the show existence of the grounds for refusal is on the respondent.  These grounds can be invoked only by an
application of the respondent.

Under the scheme of section 7 of the 1937 Act the plaintiffs had to prove that the award was enforceable under
the Act and in that connection the plaintiffs had to prove what is referred to in detail in clause (a), (b), (c), (d)
and (e) of section 7(l) of the 1937 Act.  The plaintiffs would have further to prove that “the enforcement of the
award is not contrary to the public policy or the law of India.

Enforcement of a foreign award may be refused

Sub-sections (1) and (2) of section 48 of the 1996 Act have used Permissive expression that the enforcement of
a foreign award “may” be refused instead of mandatory expression of “shall”.  The Court has discretion to
overrule the defence put up by the respondent even if he has proved the existence of one of the grounds listed in
this section.  The Court may use discretion in cases where it finds the objector is estopped from invoking any of
the grounds listed in section 48 of the 1996 Act or that the “public policy” violation involved is not such as to
prevent enforcement of the award.

Scope of the enquiry

Under the Geneva Convention, in order to obtain recognition or enforcement of a foreign arbitral award, the
requirements of clauses (a) to (e) of Article 1 had to be fulfilled and in Article 2, it was prescribed that even if
the conditions laid down in Article I were fulfilled recognition and enforcement of the award would be refused
if the Court was satisfied in respect of matters mentioned in clauses (a), (b) and (c).  The principles, which
apply to recognition and enforcement of foreign awards, are in substance, similar to those adopted by the
English Courts.10 With regard to enforcement of foreign judgments, the position at common law is that a foreign
judgment which is final and conclusive cannot be impeached for any error either of fact or of law and is
impeachable on limited grounds, namely, the Court of the foreign country did not, in the circumstances of case,
have jurisdiction to give the judgment in the view of English law; the judgment is vitiated by fraud on part of
the party in whose favor the judgment is given or fraud on the part of the Court which pronounced the
judgment; the enforcement or recognition of the judgment would be contrary to public policy; the proceedings
in which the judgment was obtained were opposed to natural justice. 11 In the matter of enforcement of foreign
arbitral awards at common law a foreign award is enforceable if the award is in accordance with the agreement
to arbitrate which is valid by its proper law and the award is valid and final according to the arbitration law
governing the proceedings.  The award would not be recognized or enforced if, under the submission agreement
and the law applicable thereto, the arbitrators have no justification to make it, or it was obtained by fraud or its
recognition or enforcement would be contrary to public policy or the proceedings in which it was obtained were
opposed to natural justice. The English Courts would not refuse to recognize or enforce a foreign award merely
because the arbitrators (in its view) applied the wrong law to the dispute or misapplied the right law.
It is a generally accepted interpretation of the New York Convention that the Court before whom 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 New York 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(I) is justified and whether the enforcement of the award would
violate, the public policy of the law of his country.  This limitation must be seen in the light of the principle of
international commercial arbitration that a national Court should not interfere with the substance of the

10
Dicey and Morris , The Conflict of Laws, 11th Edn. , Vol. 1, p. 578
11
Dicey and Morris, The Conflict of Laws, 11th Edn.  Rules 42 to 46, pp. 464 to 476; Cheshire and North, Private International Law,
12th Edn. pp., 368 to 392
arbitration.12The New York Convention does not permit any review on the merits of an award to which to the
Convention applies and in this respect, therefore, differs from the provisions of some systems of national law
governing the challenge of an award, where an appeal to the Courts on points of law may be permitted. 13In
proceedings for enforcement of a foreign award under the 1961 Act the scope of enquiry before the Court in
which award is sought to be enforced is limited to grounds mentioned in section 7 of the 1961 Act and does not
enable a party to the said proceedings to impeach the award on merits.14

Meaning of ‘enforcement’
In Pratabmill v. K.C. Sethia Ltd. 15,  it was submitted that the agreement and the award were against public
policy of India and the expression; “enforcement thereof” means execution of the foreign award under section 7
of the 1961 Act.  Calcutta High Court has observed-
“It is said that the awards in this case only direct the appellant to pay a certain sum of money as damages.   As
such, on the face of it, it cannot be said that the awards are against any public policy.  The difficulty of
accepting this argument is the narrow meaning it attributes to the word, “enforcement”.  Enforcement is not
merely the technical part of execution.  Enforcement includes the whole process of getting an award as well as
its execution.  We are, therefore, not prepared to limit the word, “enforcement”, in section 7(i) of the Act to the
mere technical part of its execution.”

“Public Policy”
As all arbitration practitioners and scholars know, violation of public policy of the enforcing State has long been
a ground for refusing recognition/enforcement of foreign judgments and awards. This principle is enshrined in
Article V.2 of the New York Convention and Article 36 of the UNCITRAL Model Law. The public policy
exception to enforcement is an acknowledgement of the right of the State and its courts to exercise ultimate
control over the arbitral process. There is a tension, however, which the legislature and the courts must resolve
between: on the one hand, not wishing to lend the State’s authority to enforcement of awards which contravene
domestic laws and values; and, on the other hand, the desire to respect the finality of foreign awards. In seeking
to resolve this tension, some legislatures and courts have decided that a narrower concept of public policy
should apply to foreign awards than is applied to domestic awards. This narrower concept is often referred to as
international public policy. This name suggests that it is in some way a supra-national principle; however, in
practice it is no more than public policy as applied to foreign awards and its content and application remains
subjective to each State.

12
The New York Convention of 1958 – Towards a Uniform Judicial Interpretation by Albert Jan van den Berg p.269
13
Redfem and Hunter, Law and Practice of International Commercial Arbitration 2nd Edn., p.461
14
Renusagar Power Co. Ltd. v. General Electric Co., AIR 1994 SC 860 (881)
15
AIR 1960 Cal 702 (708)
As is always the case when the term is used, there was some doubt as to the scope of “public policy” used in
Section 48. What considerations must weigh on the court’s mind before it can declare that an award is not
enforceable because it is contrary to public policy? This question was considered in Renusagar Power
Co. v. General Electric Co.16. The court held that mere contravention of law would not attract bar of public
policy, but the award must be contrary to (i) fundamental policy of Indian law, or (ii) the interests of India, or
(iii) justice or morality. The researcher submits that the decision of the court in the above case has not cleared
the ambiguity regarding the term because it has also used vague and general terms such as “fundamental policy”
and “national interest” and “justice”. In this regard, the dictum of the Supreme Court in Central Inland Water
Transport Co. Ltd.  v. Brojo Nath Ganguly17 is noteworthy:
“Public policy connotes some matter which concerns the public good and the public interest. The concept of
what is for the public good or in the public interest or what would be injurious or harmful to the public good or
the public interest has varied from time to time.”

The above paragraph from this judgement makes it clear that public policy is a subjective term, which has to be
determined keeping in mind the social, economic and political status of the country and also the facts and
circumstances of the case on hand. As an aid to interpretation of the term ‘public policy’, the Explanation to
Section 48 states that an award obtained by fraud or corruption is also contrary to public policy.

In another recent decision by the Bombay High Court, the point that arose for consideration is the circumstances
under which a foreign award may be regarded as unenforceable in India, on the ground of being contrary to
public policy.

The case relates to a contract under which Ruchi International, an Indian Company, was to sell soybean meal
from India to a French buyer. The terms and conditions of the contract were governed by the GAFTA General
Conditions of Contract and Arbitration Rules. GAFTA is an international chamber of commerce dealing with
matters relating to food and grain trade. The buyer alleged breach of contract by the seller and invoked the
arbitral clause under GAFTA rules, and an award was passed in favour of the claimant buyer.

In the appeal, it transpired that the claimant, who was under liquidation, had assigned its rights in the claim in
the arbitration to a third party (the “assignee”). The Appellate Forum held the assignment to be valid under the
applicable laws as it was done with notice to the contesting party. The objection that the arbitration agreement
had failed was rejected. The assignee was permitted to contest the appeal on substitution of the name of the
parties, and the appeal was rejected on merits.

16
AIR 1986 Del 8
17
AIR 1986 SC 1571
The assignee filed a petition in the Indian court for enforcement of the award under the Indian Arbitration and
Conciliation Act (“Arbitration Act”), 1996, where it was resisted on the ground of being opposed to public
policy in view of Section 6(e) of the Transfer of Property Act.

Under Section 6(e) of the TP Act, a mere right to sue cannot be transferred or assigned. The assignment in the
present case took place in appeal proceedings and was held valid under the applicable laws. Once the
assignment was accepted as valid and the award passed, the question arising for consideration is whether the
enforcing court could treat the award as being opposed to public policy.

The GAFTA award is a “foreign award” within the meaning of the Arbitration Act. The question is of whether
Section 6(e) of the TP Act would extend to a foreign award. The Supreme Court in the case of Renusagar
Power Co Vs General Electric had held the areas covered by public policy and the law of the land are not
necessarily coextensive. A foreign award would be refused enforcement on being contrary to public policy, if its
enforcement is against the fundamental policy of India law or the interests, justice or morality of India.
What had to be considered by the enforcing court is that assignment was not of the right to sue but of the award,
on the passing of which a debt came into existence. Is then an award based on an assignable right
unenforceable, because if the assignee had sued in India his case would be barred under Section 6(e) of the TP
Act? The award cannot be said to be opposed to justice when the appellate forum had considered and decided
the issue of assignment. By no stretch of imagination can the award be regarded being opposed to morality.
Transfer of a right to sue could interpret as being against morality, if the purpose is gambling or betting. But if
such law is valid in the country where the award is made, then the enforcing court cannot refuse execution on
such grounds. There are several pronouncements of English courts in similar situations.

On these grounds, the Bombay High Court permitted the enforcement of the award. The division bench has
concurred, clarifying that Section 6(e) would have been applicable only, if the assignee had filed its claim for
damages in India on the basis of the assignment. The court has therefore adopted the international approach
towards enforcement of foreign awards, instead of creating technicalities — an indication that the Indian
judiciary has expressed its atonement with a globalised commercial world instead of taking a jingoistic position.
CONCLUSION

 As defined under sections 44 and 53 of the Arbitration and Conciliation Act, 1996 the core of the
definition of a foreign award that can be enforced under Part 2 of the Act is that the award should be in
relation to a dispute arising out of a legal relationship that can be described as commercial under the law
of India. The term commercial has been given a wide interpretation by the Indian courts. However, the
researcher is not convinced with the logic behind confining the scope of this Part to commercial
transactions, as it could easily have been extended to all arbitral awards under the Convention without
any hassle.
 The enforcement mechanisms for awards under both the New York and Geneva Conventions are
similar. Once the court is convinced that the award is a foreign award as per the statute, it will enforce the
award. However, if certain conditions are met, the court can refuse to enforce the award. Such an order of
refusal is appealable. Once the court is convinced that the award is a foreign award, it will execute the
award as if it were its own decree. However, the party seeking to enforce the award need not follow this
mechanism; he can follow any mechanism available to him under law to ensure enforcement of the
award; in other words, he can avail of Section 36 to enforce his award.
 Similarly, a party seeking to enforce an award that falls under neither Convention, he can ask the court
to enforce it under Section 36. Such an award is also executed in the same manner as a decree of the
enforcing court. This further strengthens the researcher’s point that the Act contains unnecessary
technicalities regarding the definition of foreign award, as the enforcement mechanisms under Part 2 and
Section 36 are very similar.
 The Act has gone a long way to promote the Indian economy. The Act is based on the UNCITRAL
model law on arbitration, but Parliament has gone a step further and has tried to plug the loopholes
contained in the model law. Hence, the end product is that India has a very useful arbitration law, which
would go a long way to promotion of foreign trade in India. The results are there to be seen. Arbitration is
one of the fastest emerging fields in India and as far as the law on paper is concerned, India is one of the
best in the world. The enforcement mechanism is also not slack, although the enforcing authorities are the
ordinary civil courts. This is an encouraging sign and shows that the law of arbitration has not betrayed
the policy of liberalisation.
BIBLIOGRAPHY

ARTICLES

1. Dhyan Chinnappa, Enforcement of Arbitral Awards (2002) 8 SCC (Jour) 39.

2. Kenneth R. Davis, “Unconventional Wisdom: A New Look At Articles V And VII Of The Convention On
The Recognition And Enforcement Of Foreign Arbitral Awards “, 37 Tex. Int’l L.J. 43.
3. Pelagia Ivanova, “Forum Non Conveniens And Personal Jurisdiction: Procedural Limitations On The
Enforcement Of Foreign Arbitral Awards Under The New York Convention”, 83 B.U. L. Rev. 899,
4. S.K. Dholakia, Case Comment: Bhatia International v. Bulk Trading S.A., (2003) 5 SCC (Jour) 22.
BOOKS

1. Justice B.P. Saraf & Justice S.M. Jhunjhunwala, Law of Arbitration and Conciliation (2nd ed.

Mumbai: Snow White Publications Pvt. Ltd. 2000).
2. K.K. Venugopal, et al. (eds.), Justice R.S. Bachawat’s Law of Arbitration and Conciliation (3rd ed.
Nagpur: Wadhwa & Co. 1999).
3. P. Chandrasekhara Rao, The Arbitration and Conciliation Act, 1996: A Commentary (New Delhi:
Universal Law Publishing Co. 1997).
4. Sudipto Sarkar & V.R. Manohar (eds.), Sarkar’s Law of Civil Procedure (10th ed. Nagpur: Wadhwa
& Co. 2002).
WEBSITES

1. www.manupatra.com
2. www.westlaw.com