2013 (7) TMI 643 - SC - Companies Law

Enforceability of Foreign Awards Under Indian Law: Supreme Court Upholds Decision

Shri Lal Mahal Ltd. Versus Progetto Grano Spa

The Supreme Court held that the foreign awards passed by the Board of Appeal were enforceable under Part II of the 1996 Act. The Court emphasized that ... Enforceability of Foreign Awards - Whether the two appeal awards in favour of the respondent are enforceable u/s 48 of the Arbitration and Conciliation Act - Held that:- The objections raised by the appellant do not fall in any of the categories - the foreign awards cannot be held to be contrary to public policy of India as contemplated under Section 48(2)(b) – it does not give an opportunity to have a ‘second look’ at the foreign award in the award - enforcement stage - the scope of inquiry u/s 48 does not permit review of the foreign award on merits - Procedural defects in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy - enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to fundamental policy of Indian law, the interests of India or justice or morality – appeal decided against appellant. Issues Involved:1. Enforceability of foreign awards under Section 48 of the Arbitration and Conciliation Act, 1996.2. Jurisdiction of the Arbitral Tribunal, GAFTA.3. Interpretation of 'public policy of India' in the context of enforcing foreign awards.4. Finality and validity of certificates issued by inspection agencies under the contract.5. Procedural defects in arbitration and their impact on enforceability.Issue-wise Detailed Analysis:1. Enforceability of Foreign Awards under Section 48 of the Arbitration and Conciliation Act, 1996:The primary issue in this case was whether the appeal awards dated 21.09.1998 passed by the Board of Appeal of the Grain and Feed Trade Association (GAFTA) in favor of the respondent were enforceable under Section 48 of the Arbitration and Conciliation Act, 1996. The Supreme Court examined whether the awards were contrary to the public policy of India, which is a ground for refusing enforcement under Section 48(2)(b). The Court held that the enforcement of foreign awards could only be refused if it was contrary to the fundamental policy of Indian law, the interests of India, or justice or morality. The Court concluded that the objections raised by the appellant did not fall into any of these categories and thus, the awards were enforceable.2. Jurisdiction of the Arbitral Tribunal, GAFTA:The sellers contested the jurisdiction of the Arbitral Tribunal, GAFTA, and filed a petition in the Delhi High Court for a declaration that there was no arbitration agreement between the parties. The petition was dismissed, and the Arbitral Tribunal, GAFTA, passed an interim award holding that it had jurisdiction to decide both preliminary and substantive issues. The sellers challenged the awards in the High Court of Justice at London, which dismissed the appeal, thereby affirming the jurisdiction of the Arbitral Tribunal, GAFTA.3. Interpretation of 'Public Policy of India' in the Context of Enforcing Foreign Awards:The Court examined the scope of the term 'public policy of India' under Section 48(2)(b) and compared it with the interpretation under Section 34. The Court referred to the decisions in Renusagar and Saw Pipes and concluded that the expression 'public policy of India' in Section 48(2)(b) must be given a narrow meaning. The enforcement of a foreign award would be refused only if it was contrary to the fundamental policy of Indian law, the interests of India, or justice or morality. The Court overruled the broader interpretation given in Phulchand Exports and held that the principles laid down in Renusagar must apply to Section 48(2)(b).4. Finality and Validity of Certificates Issued by Inspection Agencies under the Contract:The sellers argued that the Board of Appeal erred in accepting the test report by S.G.S. Geneva instead of the certificate issued by S.G.S. India, which was final under the contract. The Board of Appeal found that the S.G.S. India certificate was not in the contractual form as it did not follow the specified mode of sampling. The Board held that the certification by S.G.S. India was uncontractual and its results were not final. The High Court of Justice at London upheld this finding, and the Supreme Court agreed, stating that procedural defects in the course of foreign arbitration do not necessarily excuse an award from enforcement on the ground of public policy.5. Procedural Defects in Arbitration and Their Impact on Enforceability:The sellers contended that the Arbitral Tribunal, GAFTA, and the Board of Appeal relied on inadmissible evidence and disregarded the finality of the certificate issued by S.G.S. India. The Supreme Court held that Section 48 does not permit a review of the foreign award on merits and that procedural defects do not lead to the refusal of enforcement on the ground of public policy. The Court emphasized that the scope of inquiry under Section 48 does not allow for a 'second look' at the foreign award in the award-enforcement stage.Conclusion:The Supreme Court dismissed the appeal, holding that the foreign awards passed by the Board of Appeal were enforceable under Part II of the 1996 Act. The Court affirmed that the enforcement of foreign awards could only be refused if it was contrary to the fundamental policy of Indian law, the interests of India, or justice or morality. The objections raised by the sellers did not meet these criteria, and thus, the awards were enforceable.