Enforcement of Foreign Arbitration Awards

Project Assignment

Contract Law

Submitted by

Kaustubh George

ID No. 6275

2005-2006

NATIONAL LAW SCHOOL OF INDIA UNIVERSITY

BANGALORE
 2

Certificate

Certified that the project report on Enforcement of Foreign Arbitration Awards is

my original work and that it complies with all the formalities prescribed in the
Regulations.

(Kaustubh George)

ID No. 6275
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Table of Contents

Title Page No.

1. Abbreviations 4

2. Bibliography 5

3. Introduction 6

4. Definitions 8
a. Arbitration Agreement 8
b. Foreign Award 9
c. Interpretation of the Definition 11

5. Enforcement of Foreign Awards 13

a. Recognition and Enforcement 13

b. Mode of Enforcement 16

i. New York Convention Awards 16

ii. Geneva Convention Awards 28

7. Judicial Analysis 30
 4

Abbreviations

1. All ER All England Reporter

2. AIR All India Reporter

3. Arb LR Arbitration Law Reporter

4. HL House of Lords

5. SC Supreme Court

6. SCC Supreme Court Cases

7. UNCITRAL United Nations Commission on International

Trade Law
 5

Bibliography

 Arbitration Practice and Procedure (Interlocutory and Hearing Problems), 2 nd

Edition 1997 – D. Mark Cato.

 Justice Without Law? – Jerold S. Auerbach 1984

 Law and Practice of International Commercial Arbitration, 3 rd Edition 1999 –

Redfern and Hunter

 Law of Arbitration and Conciliation, 4th Edition 2005 – Justice R. S. Bachawat.

 Law of Arbitration and Conciliation (Practice and Procedure), 2 nd Edition 2004

– S.K. Chawla. 

 Law of Arbitration and Conciliation, 4th Edition 1999 – Dr. Avtar Singh.

 Law Relating to Arbitration and Conciliation, 4 th Edition 2001 – P.C.

Markanda.

 Russell on Arbitration 22nd edition 2003

 The Arbitration and Conciliation Act, 1996 (A Commentary), 1997 Edition. –

P. Chandrasekhara Rao

 The Conflict of Laws, 13th edition 2000 – Dicey and Morris

 The Law and Practice of Arbitration and Conciliation, 1 st Edition 2002 – O.P.
Malhotra.
 6

I. Introduction

Arbitration is a method whereby parties can resolve their disputes privately. It is

known as an alternative dispute resolution mechanism. An arbitration clause may
be included in the relevant contract or the two parties may enter into a separate
arbitration agreement for settlement of disputes. The person who is chosen to
settle the disputes is an arbitrator. Arbitration agreement could refer to present or
future disputes between the two parties. Another alternative is that the parties
can instead of filing a case in a court, can refer their case to an arbitral tribunal,
which is the forum where arbitration proceedings are conducted. The arbitral
tribunal will consider the questions over which the parties are in conflict and will
arrive at a decision.

Arbitration started as a delegalisation reform, to resolve conflict with love and

trust, an equitable process based on reciprocal access and trust among
community members, expressing an ideology of communitarian justice without
formal law.1

Interminable, time consuming, complex and expensive court procedures impelled

jurists to search for an alternative forum, less formal, more effective and speedy
for resolution of disputes avoiding procedural claptrap and this led them to
Arbitration Act, 1940.2

In India, the law relating to arbitration was governed principally by the Arbitration
(Protocol and Convention) Act, 1937; the Arbitration Act, 1940 and the Foreign
Awards (Recognition and Enforcement) Act, 1961. In 1996 the Indian Parliament
enacted The Arbitration and Conciliation Act 1996 which ensured compliance of
domestic legislation with relevant international conventions. It legislated a new
law on the subject, in tune with UNCITRAL Model Law on International

1
Justice Without Law? – Jerold S. Auerbach
2
Guru Nanak Foundation v. Rattan Singh and Sons AIR1981 SC 2075
 7

Commercial Arbitration, repealing all existing statutes covering the subject of

arbitration, both domestic and international.3

The object of the Act is to consolidate and amend the law relating to domestic
arbitration, international commercial arbitration and the enforcement of foreign
arbitral awards and for related matters. 4

As per general practice, matters involving moral questions or questions of public

law cannot be resolved by arbitration. The following matters cannot be referred to
arbitration:
1. Matrimonial
c. Guardianship of a minor
d. Testamentary, e.g., the validity of a will
e. Insolvency
f. Criminal proceedings
g. Matters relating to charities or charitable trusts
h. Matters within the purview of the Monopolies and Restrictive Trade
Practices Act
i. Dissolution or winding up of a company.

The mode of enforcement of a decision of the arbitrator or the arbitral tribunal is

carried out in the same manner as if the decision were a decree of the court.
Therefore, powers of the court executing (enforcing) the decision can be invoked
only after the expiry of the time for filing an application to set aside the award and
in case of such an application having been made, the said application has been
refused by the court. Arbitration proceedings are governed by the provisions of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) and
as also as agreed to between the parties. Provisions in the Civil Procedure Code
as such do not apply to arbitral proceedings.

3
Section 85 of the Arbitration and Conciliation Act, 1996
4
Statement of Object and Reasons
 8

II. Definitions

Section 2(1) of the Act contains definitions.

Arbitration Agreement as defined under Section 2 (1)(b) of the Act means an

agreement referred to in section 7.

Section 7 of the Act reads as follows:

7. Arbitration agreement – (1) In this Part,

"arbitration agreement" means an agreement by the
parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them
in respect of a defined legal relationship, whether
contractual or not.

(2) An arbitration agreement may be in the form of an

arbitration clause in a contract or in the form of a
separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is

contained in-

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or

other means of telecommunication which
provide a record of the agreement; or

(c) an exchange of statements of claim and

defence in which the existence of the
 9

agreement is alleged by one party and not

denied by the other.

(5) The reference in a contract to a document

containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and
the reference is such as to make that arbitration
clause part of the contract.

Further, the Act goes on to define an ‘arbitral award’ to include an interim award. 5
The Act, however, does not define the expression “interim award”.

Earlier, Section 2 of the Foreign Awards (Recognition and Enforcement) Act,

1961 brought out the definition of a Foreign Award.

The definition of foreign award has been reproduced verbatim in the New York
Convention and the same has been incorporated in the existing Act under
Section 44 Part II Chapter I. The section reads as follows:

44. Definition – In this Chapter, unless the context

otherwise requires, "foreign award" 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 the 11th day of October, 1960-

(a) in pursuance of an agreement in writing for

arbitration to which the Convention set forth in the
First Schedule applies, and

(b) in one of such territories as the Central

Government, being satisfied that reciprocal provisions
have been made may, by notification in the Official

5
Section 2(1)(c)
 10

Gazette, declare to be territories to which the said

Convention applies.

Under Chapter II of the Act, Geneva Convention Awards gives another

interpretation to the definition of foreign awards. The relevant section reads as
under:

53. Interpretation – In this Chapter "foreign award"

means an arbitral award on differences relating to
matters considered as commercial under the law in
force in India made after the 28th day of July, 1924,-

(a) in pursuance of an agreement for arbitration to

which the Protocol set forth in the Second Schedule
applies, and

(b) between persons of whom one is subject to the

jurisdiction of some one of such Powers as the
Central Government, being satisfied that reciprocal
provisions have been made, may, by notification in
the Official Gazette, declare to be parties to the
Convention set forth in the Third Schedule, and of
whom the other is subject to the jurisdiction of some
other of the Powers aforesaid, and

(c) in one of such territories as the Central

Government, being satisfied that reciprocal provisions
have been made, may, by like notification, declare to
be territories to which the said Convention applies,

and for the purposes of this Chapter an award shall

not be deemed to be final if any proceedings for the
 11

purpose of contesting the validity of the award are

pending in the country in which it was made.

Interpretation of the Definition

In the National Thermal Power Corporation v. Singer Co.6 Justice Thommen

paraphrasing the language of Section 2 of the Foreign Award (Recognition and
Enforcement) Act, 1961 (which was in pari materia with Section 44 of the Act)
said:

An Award is ‘foreign’ not merely because it is made in

the territory of a foreign state, but because it is made
in such a territory on an arbitration agreement not
governed by the law of India. An award made on an
arbitration agreement governed by the law of India
though rendered outside India, is affected by the
saving clause in Section 9(b) of the Act of 1961 and is
therefore, not a foreign award.

In the case of Gas Authority of India v. SPIE CAPAG, SA7, a single judge of
the Delhi High Court held:

The New York Convention will apply to an arbitration

agreement if it has a foreign element or flavour
involving international trade and commerce even
though such an agreement does not lead to a foreign
award but the enforcement and recognition of the

6
AIR 1993 SC 998, 1011
7
AIR 1994 Del 75, 96 per Anil Dev Singh J.
 12

agreement will of course be subject to the limitations

already spelt out.
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III. Enforcement of Foreign Awards

Recognition and Enforcement

There has been confusion regarding the phrase ‘recognition and enforcement’ as
it gives the impression that the terms ‘recognition’ and ‘enforcement’ are
synonymous. The New York Convention 1958 uses this phrase with respect to
‘foreign awards’. The English Act also uses the phrase ‘recognition and
enforcement’8 of awards. The Geneva Convention of 1927, was more precise in
using the disjunctive phrase ‘recognition or enforcement’. This phrase has also
been adopted in Article 1 to the Second Schedule to the Arbitration (Protocol and
Convention) Act, 1937. The Foreign Awards (Recognition and Enforcement) Act,
1961 used the compound phrase ‘recognition and enforcement’. The present Act,
however, uses the expression ‘enforcement’ only and omits the word
‘recognition’.

In Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East

Lines Ltd., Saudi Arabia,9 the Supreme Court said:

An award may be recognized without being enforced:

but if it is enforced, then it is necessarily recognized.
Recognition alone may be asked for as a shield
against reagitation of issues with which the award
deals. Where a court is asked to enforce an award, it
8
Section 103, English Arbitration Act, 1996
103 Refusal of recognition or enforcement - (1) Recognition or enforcement of a New York
Convention award shall not be refused except in the following cases.
(2) …
(3) …
(4) …
(5) …
9
AIR 1994 SC 1715, 1720
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must recognize not only the legal effect of the award

but must use legal sanctions to ensure that it is
carried out.

Recognition

Recognition is a process which shields any attempt to raise, in a fresh

proceeding, issues that have already been decided in an earlier arbitration
resulting in the award sought to be recognized. It usually arises where a court is
asked to protect a party with respect to a dispute that has already been the
subject matter of an earlier arbitral proceeding. The party, who got a favourable
award in an arbitration, is entitled to object to the subsequent arbitration with
respect to the dispute which was the subject matter of the earlier arbitration. 10

Enforcement

In contradistinction to ‘recognition’, ‘enforcement’ is a weapon of attack. It is used

to ask the court not only to recognize the legal force and effect of an arbitral
award, which has become final and binding, but also to enforce it, by using legal
sanctions as are available. The concepts of ‘recognition’ and ‘enforcement’ go
hand in hand. One is necessary part of the other because a court that is
prepared to grant enforcement of an award will do so because it recognizes the
award as valid and binding upon the parties to it, suitable for enforcement. 11

10
The Law & Practice of Arbitration and Conciliation – O.P. Malhotra 1 st Edition 2002 at pg 903
11
Supra at pg 904
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Judicial Conflict

On the question, whether the award further requires execution on the terms of
Order 21 of the Code of Civil Procedure, after the court is satisfies that it is
enforceable under Chapter II and has become a decree of the court under
Section 49, there has been a divergence of opinion.

In Western Shipbreaking Corporation v. Clare Haven Ltd. (UK),12 the Gujarat

High Court held that the expression ‘enforcement’ as used in section 47 is
nothing other than ‘execution’ as contemplated by Order 21 of the Code of Civil
Procedure.

In Toepfer International Asia Pvt. Ltd. v. Thapar Ispat Ltd.,13 the Bombay High
Court took a contrary view and held that Section 49 of the Act merely empowers
the court to declare that the ‘foreign award’ is enforceable under the provisions of
Chapter II of the Act.

The conflict has finally been settled by the Supreme Court in Furest Day
Lawson Ltd. v. Jindal Export,14 wherein the Court affirmed the view of the
Gujarat High Court. Justice Shivraj Patil said, ‘there is no need to take separate
proceedings, one for deciding the enforceability of the award… and the other to
take up execution thereafter.’

12
1998 (Supp) Arb LR 53 (Guj)
13
2000 (1) Arb LR 230 (Bom)
14
AIR 2001 SC 2293
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Mode of Enforcement

A foreign award cannot be enforced in India straightaway. The machinery for

enforcement of such awards has been provided under Part II of the Act.

The foreign awards which can be enforced in India are as follows:

(a) New York Convention award – made after 11th October, 1960
(b) Geneva Convention award – made after 28th July, 1924, but before the
concerned Government signed the New York convention.

New York Convention Awards

Party that intends to enforce a foreign award has to produce the arbitral award
and agreement of arbitration (original or its certified copy) to the district court
having jurisdiction over the subject matter of the award and obtain an
enforcement title from the court. This condition has been laid down in Section 47
of the Act.

47. Evidence – (1) The party applying for the

enforcement of a foreign award shall, at the time of
the application, produce before the court -

(a) the original award or a copy thereof, duly

authenticated in the manner required by the law of the
country in which it was made;
 17

(b) the original agreement for arbitration or a duly

certified copy thereof; and

(c) such evidence as may be necessary to prove that

the aware is a foreign award.

(2) If the award or agreement to be produced under

sub-section (1) is in a foreign language, the party
seeking to enforce the award shall produce a
translation into English certified as correct by a
diplomatic or consular agent of the country to which
that party belongs or certified as correct in such other
manner as may be sufficient according to the law in
force in India.

Explanation – In this section and all the following

sections of this Chapter, "Court" means the principal
Civil Court of original jurisdiction in a district, and
includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction over the
subject-matter of the award if the same had been the
subject-matter of a suit, but does not include any civil
court of a grade inferior to such principal Civil Court,
or any Court of Small Causes.

Under Part II Chapter I burden of proof is differently apportioned. After complying

with the conditions in Section 47 the burden of proof is shifted to the Defendant
seeking to resist the enforcement.
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Defences against Enforcement

Enforcement of a foreign award is mandatory except in cases where it may be

refused by the court on any of the grounds set forth in Section 48. There are
seven grounds in all.

48. Conditions for enforcement of foreign awards

– (1) Enforcement of a foreign award may be refused,
at the request of the party against whom it is invoked,
only if that party furnishes to the court proof that -

(a) the parties to the agreement referred to in section

44 were, under the law applicable to them, under
some incapacity, or the said agreement is not valid
under the law to which the parties have subjected it
or, failing any indication thereon, under the law of the
country where the award was made; or

(b) the party against whom the award is invoked was

not given proper notice of the appointment of the
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or

(c) the award deals with a difference not

contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration.
 19

Provided that, if the decisions on matters submitted to

arbitration can be separated from those not so
submitted, that part of the award which contains
decisions on matters submitted to arbitration may be
enforced; 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), 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) If an application for the setting aside or

suspension of the award has been made to a
 20

competent authority referred to in clause (e) of sub-

section (1) the Court may, if it considers it proper,
adjourn the decision on the enforcement of the award
and may also, on the application of the party claiming
enforcement of the award, order the other party to
give suitable security.

The first five grounds contained in Section 48(1) deal with the impact of the
procedural defects vitiating a foreign award in the country in which or under the
law of which that award was made. A losing party may set up one or more of the
grounds for resisting enforcement of a foreign award in India. The court may
exercise the jurisdiction to refuse enforcement if only the party resisting the
enforcement of the award, makes an application to the court for refusing its
enforcement and furnishes proof to it of existence of one or more of these
grounds.

The remaining two grounds are contained in Section 48(2) which deal with the
non-arbitrability of the subject matter of the dispute under the law of India and the
conflict of the enforcement of the foreign award with the public policy of India.
The court may take ex officio take note of the existence of these grounds and
refuse enforcement.

The grounds are explained below:

1. Incapacity and Invalidity of Arbitration Agreement

The first ground for refusal of enforcement of a foreign award is non-existence

and invalidity of the arbitration agreement. If there was no existing arbitration
agreement out of which the alleged award is claimed to have arisen, such award
is a nullity. Even if an arbitration agreement does exist, it must be valid under the
law to which the parties have subjected to it or failing an indication thereon,
under the law of the country where the award is made.
 21

Incapacity of a party to an arbitration agreement annuls it. For invoking the

jurisdiction of the court under Section 48(1)(a) to refuse the enforcement of a
foreign award, the party against whom, it is invoked, is required to request the
court and furnish proof to the court of the incapacity of the parties. It has to
establish that one or more of the parties to the agreement were under the law
applicable to them under some incapacity.

2. Non Compliance of Due Process

Due process of law means compliance with rules of natural justice. Section 48 (1)
(b) contains the second and most important ground for refusal to enforce a
foreign award. This provision is designed to ensure that the arbitration is properly
conducted with procedural fairness.

It provides that enforcement of a foreign award may be refused if the party

against whom it is invoked, proves that:

(i) he was not given proper notice of the appointment of an arbitrator

or
(ii) he was not given proper notice of the arbitral proceedings or

(iii) he was otherwise unable to present his case.

It requires that the arbitral tribunal to observe the due process of law in
conducting the arbitral proceedings.15

3. Jurisdictional Defect

15
Law and Practice of International Commercial Arbitration – Redfern and Hunter, 3 rd Edition
1999 at pg 463-464
 22

Section 48 (1)(c) sets forth the third condition justifying refusal of enforcement of
a foreign award on the ground of a jurisdictional defect.

The first part of this ground for refusal under Section 48 (1)(c) contemplates a
situation in which the complaint is that the arbitral tribunal has acted in excess of
its authority and has dealt with the disputes that were not submitted to it.

The second part deals with a situation where the complaint is that the arbitral
tribunal exceeded its jurisdiction only in some respects but not in others.

This defence is based on the premise that the arbitral tribunal derives its
jurisdiction or competence from the arbitration agreement under which the parties
agreed to submit the dispute to arbitration. 16

4. Arbitral Authority and Arbitral Procedure

The fourth ground for refusing enforcement of a foreign award as provided in

Section 48 (1)(d) is that ‘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’.

There are two parts to this ground for resisting enforcement, viz,

(i) that the composition of the arbitral authority of the arbitral

procedure was not in accordance with the arbitration agreement
between the parties and

(ii) that in the absence of such agreement, the composition of the

arbitral authority or the arbitral procedure was not ‘in accordance
16
Deutsche Schachbau v. Shell International Petroleum Co. Ltd. (1988) 2 All ER 833 (HL)
 23

with the law of the country where the arbitration took place – forum
of arbitration’.17

The first part of this provision relates to composition of arbitral tribunal. The
parties are free to choose as to how the arbitral tribunal is to be composed with
respect to the number or qualifications of the arbitrators.

The second part of this ground rests on the departure from a procedure agreed
upon by the parties. The parties are free to choose the procedure governing
arbitration proceedings, and, in the absence of such choice, the proceedings are
governed by the law of the country where the arbitration takes place. 18

5. Status of the Award

Section 48 (1)(e) provides that enforcement of a foreign award maybe refused if

‘the award has not yet become binding on the parties’. It splits into three
situations in which the court may refuse enforcement of a foreign award
depending on its status. These three situations are:

a. the award has not yet become binding on the parties;

b. the award has been suspended by a competent authority of the
country in which or under the laws of which it was made; or

c. the award has been set aside by a competent authority of the country
in which it was made.
17
Section 48(1)(d); China Agribusiness Development Corporation v. Balli Trading (1998) 2
Lloyd’s Rep 76
18
The Conflict of Laws – Dicey and Morris, 13th edition 2000 at pg 39
 24

A. Award not yet Binding

An award becomes binding on the parties under the law of the country in
which it was made. If a foreign award has not become binding on the
parties under the corresponding law of the country where it was made, the
court in India under Section 48 (1)(e), may refuse its enforcement.

Double Exequatur

It is mandatory for the enforcing court in India, under section 48, to

enforce a foreign award which has become binding on the parties, unless
it suffers from any one or more defects set out in this provision.

An award which has become binding on the parties, imports res judicata
effect. All these grounds relate to procedural defects. In one or more of
these grounds contained in a corresponding statute of a Convention
country, have been rejected by the court in an application for setting aside
the award, in the country where it was made and has become binding on
the parties, it will have res judicata effect against invoking them in the
enforcement proceedings under Section 48 in India. This will avoid double
exequatur, one in the country where the award was made and the other
where it is sought to be enforced.

B. Suspended Award
 25

In an application for setting aside an award, if the court considers it

appropriate, it may, on the request of a party, suspend the award to
enable the tribunal to eliminate the grounds for setting aside the award. If
an award has been suspended by a competent authority of the country in
which or under the law of which it is made, the enforcing court in India,
under Section 48 (1)(e), will recognize that order and refuse to enforce the
award. However, the party resisting the enforcement is required to make a
request to the court and furnish the proof that the award has been so
suspended.

C. Enforcement of an Annulled Award

Normally, where an award has been set aside by a competent authority of

the country in which or under the law of which, it was made, the Indian
court in its jurisdiction under Section 48 (1)(e) will recognize the order
setting aside the award and refuse to enforce it.

This ground is intended to encompass the exceptional cases where an

arbitration having been conducted in one country under the law of another
country, the award is set aside by the courts of the latter. The reference to
the law of the country under which the award was made signifies the
procedural law of the arbitration, not the substantive law governing the
contract out of which the dispute arose nor the law governing the
arbitration agreement.19

19
The Conflict of Laws – Dicey and Morris, 13th edition 2000 at pg 640
 26

6. Non – Arbitrability of Subject Matter of the Dispute

Article 36 (1) (b) (i) of the UNCITRAL Model Law provides that recognition and
enforcement of a foreign award may be refused if the competent authority in the
country where the recognition and enforcement is sought, finds that ‘the subject-
matter of the dispute is not capable of settlement by arbitration under the law of
that country. The text of this provision of the Model Law has been implemented in
Section 48 (2)(a) of the Act.

This provision sets forth the sixth ground for refusal to enforce a foreign award
where the court finds that the subject-matter of the difference is not capable of
settlement by arbitration under the law of India. It does not require the party
seeking to resist the enforcement to plead or prove to the court that the subject-
matter of dispute is not arbitrable under the law of India. The court may refuse to
enforce a foreign award ex officio.

There have been no judicial pronouncements in this regard, albeit there are
matters which cannot be decided by arbitration. It is, therefore, for the courts of
India to decide what matters are capable of settlement by arbitration.
 27

7. Conflict with Public Policy of India

The seventh ground for refusal of enforcement of a foreign award is provided in

Section 48 (2)(b). It provides that ‘enforcement of an arbitral award may also be
refused if the court finds that… the enforcement of the award would be contrary
to the public policy of India’. The Explanation to this provision specifically states
that an award is contrary to public policy of India if making of the award was
induced or affected by fraud or corruption.

Once the Court is satisfied that the foreign award is enforceable under this
Chapter, the award shall be deemed to be a decree of that Court. 20

The expression 'public policy' will have the same connotation in respect of an
arbitration agreement or an award. The judicial intervention in such matters has
never been free from difficulty. Whereas refusing enforcement of an arbitral
award has been viewed with much skepticism, the English Courts are more often
than not have refused to enforce a foreign award on public policy ground holding
that common law recognizes that English public policy is paramount. 21

20
Section 49 – Arbitration and Conciliation Act, 196
21
Russell on Arbitration 22nd edition 2003 at pg 389
 28

Geneva Convention Awards

Like Section 47, 48 and 49 in Chapter I, the provisions under Section 56, 57 and
58 of Chapter II contain the entire procedure relating to enforcement of foreign
awards as defined in Section 53.22

These provisions are inter-related and have to be read together. A party seeking
to enforce a foreign award under this Chapter, has to make an application to the
court under Section 56 for enforcement of the award along with the evidence as
required therein. But unlike Section 48 which requires the party against whom the
foreign award is invoked to furnish proof to the court of the existence of the
conditions set forth therein, Section 57 requires the party seeking enforcement of
the award to show the existence of the conditions necessary for enforcement of
the award. Section 58 also states that the foreign award shall be deemed to be a
decree of the court if the court is satisfied that the award is enforceable under
this Chapter.

The burden of proof under Section 56 as to the genuineness and finality of the
arbitration award is on the party seeking enforcement of the award, by producing
certain documentary evidence before the court at the time of making the
application for enforcement.

Section 57 (1) further casts the burden of proof on the applicant of the existence
of the conditions set forth in clauses (a) to (e). Then Section 57 (2) casts the
burden of proof on the party contesting the enforcement of the award to satisfy
the court of the existence of the conditions set out in clause (a) to (c) thereof,
even if the conditions laid down in Section 57 (1) are fulfilled.

22
Sec 53 provides an Interpretation of Geneva Convention Awards
 29

The conditions set out in Section 57 are mentioned below. The same have been
discussed hereinabove. They are as follows:

1. Validity of Arbitration Agreement

2. Arbitrability of the Subject Matter

3. Arbitral Authority and Procedure

4. Finality of the Award

5. Annulment of the Award

6. Jurisdictional Defects

7. Due Process

8. Public Policy

9. Further Legal Ground

30
 31

IV. Judicial Analysis

Section 34 of the Arbitration and Conciliation Act 1996 specifies the grounds on
which an award can be challenged and uses the word “only” before enumerating
the grounds of challenge. The Awards made by arbitral tribunal cannot be
challenged on ‘merits’ and the conclusions of arbitral tribunal on facts as well as
law are final and no appeal or petition to set aside an award lies merely on this
count. The underlying object of such an approach is to provide finality and
encourage resolution of disputes by arbitral tribunal having consensual
jurisdiction. If the award can be liberally challenged before the Court and the
fresh round of litigation is permitted with a liberal approach, the very object of
arbitral process as a speedy process of adjudication would be defeated.

Under the Arbitration Act 1940, an arbitral award could be challenged inter-alia
on the ground that “the award is otherwise invalid” as specifically set out in
Section 30 of the Act. Thus under the old Act the awards which could be shown
as suffering from “error of law apparent on the face of the Award” could be
challenged before a Court of Law, save and law were “ specifically referred” to
arbitration. In cases of ‘specific references’ challenge to the awards on ground of
error of law apparent on face of award was totally barred, Section 34 (2) of the
New Act eliminates challenge to the Award on merits whether the alleged errors
are of facts or of law. The grounds of challenge available as set out in section 34
(2) of the Act can be classified as under:
a. Want of jurisdiction
b. No proper hearing by arbitral tribunal
c. Subject matter of the dispute being not capable of settlement under the
law of the land.
d. The award being in conflict with the Public Policy of India - as for example
- where the award is induced or affected by fraud or corruption of the
arbitrator or is in violation of Section 75 or 81 of the Act.
 32

Under the Arbitration act 1940, the ground of the award being in conflict with
public policy was not available but the same could be challenged on ground of
“misconduct”, or where it was otherwise invalid or it was improperly procured.

However, in case of enforcement of “foreign awards” it was provided by Act of

1937 as well as Act of 1961 that the Foreign Award would not be enforceable in
India if it was shown to be in conflict with public policy of India. Under the new
Act, Section 34 (2) (b) (ii) and Section 48 (2) (b) are couched in identical terms.

It has been the considered view of the Hon’ble Supreme Court in the case of
Renusagar Power Co. Ltd v. General Electric Company23 that an award could
not be set aside on the ground of the same being “in conflict with public policy of
India” merely because the Award was shown to be suffering from “error of laid”. It
has always been the view of the Honourable Courts since then that in order to
attract the bar of public policy as a ground for refusing enforcement of Award that
the challenge must invoke something more than mere violation of law of India.

In the case of Central Inland Water Transport Corporation Ltd. v. Brojo Nath
Ganguly24 wherein the applicability of the expression 'public policy' on the
touchstone of Section 23 of the Indian Contract Act and Article 14 of the
Constitution of India came to be considered. The Apex Court was dealing with
unequal bargaining power of the workmen and the employer and came to the
conclusion that any term of the agreement which is patently arbitrary and/ or
otherwise arrived at because of the unequal bargaining power would not only be
ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the
Indian Contract Act.

On 17th April 2003, the Hon’ble Supreme Court of India delivered the judgement
in the case of Oil and Natural Gas Corporation v. Saw Pipes Limited; for the

23
(1994) Supp (1) SCC 644
24
AIR 1986 SC 1571
 33

first time interpreting the expression “public policy of India” used in Section 34 (2)
(b) (ii) in a much wider sense and holding that an award shown to be suffering
from ‘patent error of law’ (which need not necessarily be error apparent on face
of the award) could be challenged under the head “Award being in conflict with
public policy of India”.

This view is a total departure from earlier decisions of the Hon’ble Courts. In
Renusagar’s case, the Hon’ble Apex Court held that the award would be
considered as being in conflict with the public policy of India if it was shown to be
contrary to:
(a) fundamental policy of Indian law
(b) interest of India or
(c) justice or morality
An award shown to be suffering merely from error of law without anything more
could not be said to be in conflict with public policy of India. In this case, the
Supreme Court gave various illustrations for purpose of highlighting its viewpoint.
The Supreme Court interpreted the provisions of Foreign Awards Recognition
and Enforcement Act 1961 and Arbitration Protocol and Convention Act 1937.

By the judgement of the Supreme Court in ONGC’s case, it has been held that
“in addition, the award would be considered as being in conflict with the Public
Policy if it was patently illegal”. It was also observed in this case that if the award
was shown to be inconsistent with procedural provisions of law, it would follow
that the Arbitral Tribunal had acted beyond its jurisdiction. The Hon’ble Supreme
Court held that Section 34 of the Act should be read along with Section 28 (1) of
the Act which obligated the Arbitral Tribunal to decide the disputes submitted to
arbitration in accordance with substantive law for the time being in force in India.
It was held that the expression “public policy” used in Section 34 (2) (b) (ii) must
be widely construed so as to include “error of law”.

What would be public policy would be a matter which would depend upon the
nature of transaction and the nature of statute. For the said purpose, the
 34

pleadings of the parties and the materials brought on record would be relevant so
as to enable the court to judge the concept of what was a public good or public
interest or what would otherwise be injurious to the public good at the relevant
point as contradistinguished by the policy of a particular government. 25

Section 48 (2) (b) of the Arbitration and Conciliation Act 1996 pertaining to
enforcement of New York Convention Awards is in identical terms to the
UNCITRAL Model Law. The said Section provides that enforcement of foreign
awards covered by the said provision may be refused if the Court finds that the
enforcement of such Award would be contrary to the public policy of India. On the
other hand, Section 57 (1) (c) of the Act prescribing conditions for enforcement of
“Geneva Convention Awards” provides that the foreign awards covered under the
said provision, shall not be enforced if the enforcement of the Award was in
conflict with the public policy or the law of India. The language and content of
Section 34 (2) (b) (ii) and Section 48 (2) (b) of the Act is different from the
language used in Section 57 (1) (e) of the Act. Section 57 (1) (e) of the New Act
is in the same terms as Section 7 (1) of the Arbitration (Protocol and Convention)
Act 1937 which existed prior to the repeal of this Act by Act of 1996. Similarly,
Section 48 (2) (b) of the New Act is identical with Section 7 (1) (b) (ii) of Foreign
Awards (Recognition and Enforcement) Act 1961. It is of significance that the
provisions of Foreign Awards (Recognition and Enforcement) Act 1961 and
Section 48 (2) (b) of the Arbitration and Conciliation Act 1996 do not provide that
the foreign award can be challenged on the ground that the Award was contrary
to the law of India as provided by Section 57 of the New Act in context of
enforcement of Geneva Convention Awards. The above referred provisions of
Foreign Award (Recognition and Enforcement) Act 1961 and Arbitration (Protocol
and Convention) Act 1937 were interpreted by the Apex Court in Renusagar’s
case. The ratio of the said judgement has been followed in all subsequent cases
till date including in the judgements delivered by Hon’ble Courts while deciding
petitions challenging Awards as contemplated by Section 34 of the Act of 1996.

25
State of Rajasthan v. Basant Nahata (2005) 12 SCC 77
 35

In ONGC’s case, the Hon’ble Supreme Court held that the appellant had rightfully
deducted the amount of liquidated damages from the amount claimed by the
Respondent and it was not necessary for the appellant to prove the loss suffered
by it in view of there being a provision in the contract for payment of liquidated
damages and the impugned Award thus suffered from patent illegality and was,
therefore, liable to be set aside on the ground that the patent error of law was
included in the ground that the impugned Award was in conflict with the public
policy of India. The Apex Court also appears to have made observations to the
effect that the Arbitral Tribunal had acted without jurisdiction.

While analyzing the ratio of Renusagar’s case, the Hon’ble Court held that the
ratio of the above referred judgement of the Supreme Court in Renusagar’s case
was to be understood in context of the fact that in that case there was a
challenge to the enforceability of foreign award and not ‘domestic award’. The
Hon’ble Court held that the ratio of the earlier judgement of the Supreme Court in
Renusagar’s case could not be applied while interpreting Section 34 (2) (b) (ii) of
the Act although applicable in case of challenge to the foreign awards. The
enforcement of foreign award could be refused by the Court, as provided under
Section 48 (1) (e) of the Act, also on the ground that the Foreign Award sought to
be enforced had not yet become binding on the parties and had been set aside
or suspended by the Court of the country in which or under the Law of which that
Award was made. The Apex court held that Section 48 (2) (b) of the Act was
liable to be construed differently having regard to the concept of “Double
Exequatur” recognized in context of challenge to “Foreign Awards”.

In Adam v. Cape Industries26, wherein, although the court was dealing with the
enforcement of foreign judgments, it laid down the principles relevant to the
enforcement of New York Convention awards stating that where it was alleged
that a New York Convention award should not be enforced because such
enforcement would do substantial injustice and, therefore, was contrary to public

26
(1990) 1 Ch 433
 36

policy in respect whereof the following had, normally, to be included amongst the
relevant considerations:

• the nature of the procedural injustice;

• whether the party resisting enforcement had invoked the

supervisory jurisdiction of the seat of the arbitration;

• whether a remedy was available under that jurisdiction;

• whether the courts of that jurisdiction had conclusively

determined the complaint in favour of upholding the award;

• if the party resisting enforcement had failed to invoke that

remedial jurisdiction, for what reason and, in particular,
whether it was acting unreasonably in failing to do so.