VII. Discussion and Analysis Part A

Limitation for filing an enforcement / execution petition of a foreign award under Section 47 of the 1996 Act

(ii) Given the conflicting stands taken by various High Courts, we will now discuss this issue. The issue of limitation for enforcement of foreign awards being procedural in nature, is subject to the lex fori i.e. the law of the forum (State) where the foreign award is sought to be enforced.17

(ix) In Bank of Baroda v Kotak Mahindra Bank, (2020) SCC OnLine 324. this Court took the view that Article 136 of the Limitation Act deals only with decrees passed by Indian courts. The Limitation Act was framed keeping in view the suits, appeals and applications to be filed in Indian courts. Wherever the need was felt to deal with an application / petition filed outside India, the Limitation Act specifically provided a time period for that situation. The legislature has omitted reference to “foreign decrees” under Article 136 of the Limitation Act. The intention of the legislature was to confine Article 136 to the decrees of a civil court in India. The application for execution of a foreign decree would be an application not covered under any other Article of the Limitation Act, and would be covered by Article 137 of the Limitation Act.

(x) Foreign awards are not decrees of an Indian civil court. By a legal fiction, Section 49 provides that a foreign award, after it is granted recognition and enforcement under Section 48, would be deemed to be a decree of “that Court” for the limited purpose of enforcement. The phrase “that Court” refers to the Court which has adjudicated upon the petition filed under Sections 47 and 49 for enforcement of the foreign award. In our view, Article 136 of the Limitation Act would not be applicable for the enforcement / execution of a foreign award, since it is not a decree of a civil court in India.

(xi) The enforcement of a foreign award as a deemed decree of the concerned High Court [as per the amended Explanation to Section 47 by Act 3 of 2016 confers exclusive jurisdiction on the High Court for execution of foreign awards] would be covered by the residuary provision i.e. Article 137 of the Limitation Act.

In this background, the present Limitation Act, 1963 excludes any application filed under Order XXI from the purview of Section 5 of the Act, with the object that execution of decrees should be proceeded with as expeditiously as possible. The period of limitation for execution of the decree of a civil court is now uniformly fixed at the maximum period of 12 years for decrees of civil courts.

(xiv) In view of the aforesaid discussion, we hold that the period of limitation for filing a petition for enforcement of a foreign award under Sections 47 and 49, would be governed by Article 137 of the Limitation Act, 1963 which prescribes a period of three years from when the right to apply accrues.

(xv) The application under Sections 47 and 49 for enforcement of the foreign award, is a substantive petition filed under the Arbitration Act, 1996. It is a wellsettled position that the Arbitration Act is a self-contained code. The application under Section 47 is not an application filed under any of the provisions of Order XXI of the CPC, 1908. The application is filed before the appropriate High Court for enforcement, which would take recourse to the provisions of Order XXI of the CPC only for the purposes of execution of the foreign award as a deemed decree. The bar contained in Section 5, which excludes an application filed under any of the provisions of Order XXI of the CPC, would not be applicable to a substantive petition filed under the Arbitration Act, 1996. Consequently, a party may file an application under Section 5 for condonation of delay, if required in the facts and circumstances of the case.

(xvi) In the facts of the present case, the Respondents submitted that after the Award dated 18.01.2011 was passed, the cost account statements were revised, and an amount of US $ 22 million was paid to the Government of India.

On 10.07.2014, a show cause notice was issued to the respondents, raising a demand of US $ 77 million, being the Government’s share of Profit Petroleum under the PSC. It was contended that the cause of action for filing the enforcement petition under Sections 47 and 49 arose on 10.07.2014. The enforcement petition was filed on 14.10.2014 i.e. within 3 months from the date when the right to apply accrued.

We hold that the petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act, 1963.

Part B Scheme of the 1996 Act for enforcement of New York Convention awards

(i). The enforcement Court cannot set aside a foreign award, even if the conditions under Section 48 are made out. The power to set aside a foreign award vests only with the court at the seat of arbitration, since the supervisory or primary jurisdiction is exercised by the curial courts at the seat of arbitration. The enforcement court may “refuse” enforcement of a foreign award, if the conditions contained in Section 48 are made out. This would be evident from the language of the Section itself, which provides that enforcement of a foreign award may be “refused” only if the applicant furnishes proof of any of the conditions contained in Section 48 of the Act. 

(j) The opening words of Section 48 use permissive, rather than mandatory language, that enforcement “may be” refused. The use of the words “may be” indicate that even if the party against whom the award is passed, proves the existence of one or more grounds for refusal of enforcement, the court would retain a residual discretion to overrule the objections, if it finds that overall justice has been done between the parties, and may direct the enforcement of the award.33 This is generally done where the ground for refusal concerns a minor violation of the procedural rules applicable to the arbitration, or if the ground for refusal was not raised in the arbitration. A court may also take the view that the violation is not such as to prevent enforcement of the award in international relations.

(k) The grounds for refusing enforcement of foreign awards contained in Section 48 are exhaustive, which is evident from the language of the Section, which provides that enforcement may be refused “only if” the applicant furnishes proof of any of the conditions contained in that provision.

(l) The enforcement court is not to correct the errors in the award under Section 48, or undertake a review on the merits of the award, but is conferred with the limited power to “refuse” enforcement, if the grounds are made out.

(m) If the Court is satisfied that the application under Section 48 is without merit, and the foreign award is found to be enforceable, then under Section 49, the award shall be deemed to be a decree of “that Court”. The limited purpose of the legal fiction is for the purpose of the enforcement of the foreign award. The concerned High Court would then enforce the award by taking recourse to the provisions of Order XXI of the CPC.

Part C Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award?

(v) In view of the above-mentioned position, the Malaysian Courts being the seat courts were justified in applying the Malaysian Act to the public policy challenge raised by the Government of India. The enforcement court would, however, examine the challenge to the award in accordance with the grounds available under Section 48 of the Act, without being constrained by the findings of the Malaysian Courts. Merely because the Malaysian Courts have upheld the award, it would not be an impediment for the Indian courts to examine whether the award was opposed to the public policy of India under Section 48 of the Indian Arbitration Act, 1996. If the award is found to be violative of the public policy of India, it would not be enforced by the Indian courts. The enforcement court would however not second-guess or review the correctness of the judgment of the Seat Courts, while deciding the challenge to the award.

(vi) In our view, the observation made in paragraph 76.4 of the Reliance judgment does not have any precedential value, since it is an observation made in the facts of that case, which arose out of a challenge to a final partial award on the issue of arbitrability of certain disputes. The last sentence in paragraph 76.4 is not the ratio of that judgment, which is contained in paragraphs 76.1 to 76.3.

(vii) In the present case, the Appellants have challenged the Award inter alia on the ground of excess of jurisdiction, and as being contrary to the public policy of India. The observations made in paragraph 76.4 in the Reliance judgment, would not be applicable to the present case, since the issue of arbitrability has not been raised, and cannot be relied upon by the Appellants in the present case.

Part D Whether the foreign award is in conflict with the Public Policy of India?

The enforceability of the foreign award will be decided in accordance with the parameters laid down in Renusagar i.e. whether the award is contrary to the (i) fundamental policy of Indian law, or (ii) interests of India, or (iii) justice or morality.

(iv) The Counsel for the Respondents submitted that it was the amended Section 48, which would be applicable to the present case; or alternately, that the amendments effected by the 2016 Amendment Act would have retrospective effect.

(v) We will now briefly touch upon the amendments made to Section 48, and consider the issue whether the amendments have retrospective application, and are applicable to the present case.

(xi) Section 26 of the Amendment Act came up for consideration before this Court in BCCI v. Kochi Cricket Pvt Ltd. (“BCCI”). This Court held that the Amendment Act would apply prospectively to:

(a) “arbitral proceedings” initiated on or after 23.10.2015 i.e. the date on which the 2015 Amendment Act came into force;

(b) court proceedings commenced on or after 23.10.2015, irrespective of whether such court proceedings arise out of, or relate to arbitration proceedings which were commenced prior to, or after the commencement of the Amendment Act.

(xii) The 2019 Amendment Act (to the Arbitration Act of 1996) inserted Section 87 as a clarificatory amendment, to provide that arbitral proceedings and court proceedings “arising out of, or in relation to such proceedings” shall constitute a single set of proceedings, for the applicability of the 2016 Amendment Act. Section 87 was inserted with retrospective effect from 23.10.2015 i.e. the date of coming into force of the 2016 Amendment Act. Section 15 of the 2019 Amendment Act provided that Section 26 of the 2015 Amendment Act stood deleted.

(xiii) In Hindustan Construction Co. Ltd v. Union of India & Ors., the Supreme Court struck down Section 87 of the 2019 Amendment Act, and restored Section 26 of the 2016 Amendment Act to the statute book. It was held in paragraph 54 that:

“54. The result is that the BCCI judgment will, therefore, continue to apply so as to make applicable salutary amendments made by the 2015 Amendment Act to all court proceedings initiated after 23.10.2015.” (emphasis supplied)

(xiv) In view of the aforesaid discussion, we hold that the amended Section 48 would not be applicable to the present case, since the court proceedings for enforcement were filed by the Respondents-Claimants on 14.10.2014 i.e. prior to the 2016 Amendment having come into force on 23.10.2015.

(xv) We will now consider the issue whether the award in the present case is in conflict with the public policy of India, and contrary to the basic notions of justice, as submitted on behalf of the Appellants.

The Appellants have contended that the award may not be enforced, since it is contrary to the basic notions of justice. We are unable to accept this submission for the following reasons:

(a) firstly, the Appellants have not made out a case of violation of procedural due process in the conduct of the arbitral proceedings. The requirement of procedural fairness constitutes a fundamental basis for the integrity of the arbitral process. Fair and equal treatment of the parties is a non-derogable and mandatory provision, on which the entire edifice of the alternate dispute resolution mechanism is based. In the present case, there is no such violation alleged.

(b) secondly, the Appellants have not made out as to how the award is in conflict with the basic notions of justice, or in violation of the substantive public policy of India. In the seminal judgment of Parsons (supra), which has been followed in various jurisdictions, including by the Indian Supreme Court in the Renusagar case, it was held that enforcement may be refused only if it violates the enforcement State’s most basic notions of morality and justice, which has been interpreted to mean that there should be great hesitation in refusing enforcement, unless it is obtained through “corruption or fraud, or undue means.”

(f) We feel that the interpretation taken by the tribunal is a plausible view, and the challenge on this ground cannot be sustained, to refuse enforcement of the Award.

(xx) We conclude that the enforcement of the foreign award does not contravene the public policy of India, or that it is contrary to the basic notions of justice.