2006 (6) TMI 527 - HC - Indian Laws

Foreign arbitration awards enforced in India except for Swiss Franc indemnity. Italian company can enforce against Indian respondent.

Noy Vallesina Engineering Spa A. Versus Jindal Drugs Limited, A Company

Noy Vallesina Engineering Spa A. Versus Jindal Drugs Limited, A Company - 2006 (3) ARBLR 510 Bom, 2006 (5) BomCR 155 Issues Involved:1. Enforcement of Foreign Award2. Period of Limitation for Filing Petition3. Validity of Interim Orders Against Arbitral Tribunal4. Foreign Exchange Regulations and Public Policy5. Jurisdiction of Arbitral Tribunal6. Indemnity and Loss CompensationDetailed Analysis:1. Enforcement of Foreign Award:The petition was filed under Section 47 read with Section 48 of the Arbitration and Conciliation Act, 1996, for the enforcement of foreign awards dated 1.2.2000 and 22.10.2001. The petitioner, an Italian company, entered into agreements with the respondent, an Indian public limited company, for setting up an ascorbic acid plant. Disputes led to arbitration under the International Court of Arbitration (ICC), resulting in a partial award favoring the petitioner and a final award. The respondent challenged the partial award under Section 34, which was dismissed, and the appeal is pending.2. Period of Limitation for Filing Petition:A preliminary objection was raised about the maintainability of the petition being barred by the Law of Limitation. The court examined whether the Limitation Act applies to petitions under Section 47 of the Act. It was held that the Limitation Act does apply, and Article 137, which provides a three-year limitation period, governs such petitions. The petition was filed beyond this period, leading to a delay of three months and two days. The court condoned the delay, acknowledging the petitioner's bonafide belief and the complex nature of the limitation question.3. Validity of Interim Orders Against Arbitral Tribunal:The respondent argued that the final award was unenforceable as it was made in breach of an interim injunction dated 13.3.2000. The court found that the order was a nullity because Section 9 of the Act does not authorize courts to issue interim orders against arbitral tribunals. Additionally, the order was against foreign arbitrators who had not submitted to Indian jurisdiction. Therefore, the final award was not a nullity, and the interim order was deemed non-existent from the date it was made.4. Foreign Exchange Regulations and Public Policy:The respondent contended that enforcing the award would violate the Foreign Exchange Regulations Act (FERA) as the ECAAP was not approved by the Reserve Bank of India (RBI). The court referred to the Supreme Court's judgment in Renusagar Power Co. Ltd. v. General Electric Co., which held that lack of RBI approval does not invalidate a contract or award. The requirement is only for making payments, and ex-post-facto permission can be obtained. Thus, the objection was rejected.5. Jurisdiction of Arbitral Tribunal:The respondent argued that the arbitral tribunal lacked jurisdiction to entertain the petitioner's counterclaims as they arose under ECA, not ECAAP. The court noted that under Section 48, a foreign award cannot be challenged on jurisdictional grounds unless it deals with differences not contemplated by the terms of submission to arbitration. The terms of reference included the counterclaims, and the respondent had not raised this issue before the tribunal. The court found that determining whether ECA substituted ECAAP involves factual inquiries unsuitable for a Section 47 petition.6. Indemnity and Loss Compensation:The respondent challenged the award of Swiss Fr.1,453,316 to the petitioner for loss suffered by Enco, arguing it was beyond the scope of arbitration and contrary to public policy. The court held that there was no evidence Enco suffered a loss or claimed it from the petitioner. Under Indian law, indemnity requires proof of actual loss. The award for indemnifying Enco was contrary to public policy and severable from the rest of the award. Thus, the court refused to enforce this part of the award.Conclusion:The foreign awards were enforceable except for the part awarding Swiss Fr.1,453,316 to the petitioner for Enco's loss. The petition was granted with this exception, and the respondent was given six weeks to file an affidavit.