Foreign award enforcement may be refused for lack of mandatory RBI approval, while merits review and stranger liability remain barred.

A common petition for recognition, enforcement and execution of foreign awards was held maintainable as Part II of the Arbitration and Conciliation Act contemplates a single proceeding with distinct stages. The court reiterated that Section 48 grounds are exhaustive and do not permit merits review, but enforcement can still be refused where a statutory ground is made out. Applying Article 137, the petition was found time-barred. Enforcement was also refused because the transaction required prior RBI approval, which was never obtained, making enforcement contrary to the fundamental policy of Indian law and public policy. Collateral challenge to sanctioned demerger schemes was rejected, non-parties to the arbitration were not impleaded for execution, and the arbitration invocation was not invalid after amalgamation.

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Issues: (i) Whether a common petition for recognition, enforcement and execution of foreign awards was maintainable; (ii) whether the court could review the foreign awards on merits or refuse enforcement on the grounds urged; (iii) whether the petition was barred by limitation; (iv) whether the awards were unenforceable as contrary to public policy for want of prior RBI approval; (v) whether a collateral challenge to the demerger schemes was permissible; (vi) whether respondents who were not parties to the arbitration or award could be impleaded for enforcement and execution; and (vii) whether the invocation of arbitration in the name of IMAX Limited was invalid after its amalgamation.

Issue (i): Whether a common petition for recognition, enforcement and execution of foreign awards was maintainable.

Analysis: The enforcement scheme under Part II of the Arbitration and Conciliation Act permits the court first to examine enforceability under Sections 47 and 48, and thereafter to proceed to execution under Section 49. The statutory framework and the decision in Fuerst Day Lawson support a single proceeding with distinct stages. A separate execution application does not bar the award-holder from seeking recognition and enforcement in the same proceeding.

Conclusion: The common petition was maintainable.

Issue (ii): Whether the court could review the foreign awards on merits or refuse enforcement on the grounds urged.

Analysis: The grounds for refusal under Section 48 are exhaustive and must be construed narrowly. The enforcement court cannot undertake a merits review or correct errors in the award. Objections must fit within the limited statutory grounds, and the burden lies on the party resisting enforcement.

Conclusion: Review on merits was impermissible, but refusal could still follow if a statutory ground under Section 48 was established.

Issue (iii): Whether the petition was barred by limitation.

Analysis: In view of the law declared in Vedanta, enforcement of a foreign award is governed by Article 137 of the Limitation Act. The petition was filed beyond the prescribed period, and no application for condonation of delay accompanied it. The earlier order on limitation was not treated as operating as res judicata in the changed legal position after Vedanta.

Conclusion: The petition was barred by limitation.

Issue (iv): Whether the awards were unenforceable as contrary to public policy for want of prior RBI approval.

Analysis: The agreement itself contemplated RBI approval for the proposed foreign exchange and remittance structure. On the evidence, that approval was not obtained. The court held that enforcement of an award based on a transaction contingent upon mandatory regulatory approval, which was never granted, would offend the fundamental policy of Indian law and public policy under Section 48(2)(b). The court also held that the arbitral process suffered from a fair-hearing defect in the treatment of uncontroverted evidence on the RBI issue.

Conclusion: Enforcement was refused as contrary to public policy and the fundamental policy of Indian law.

Issue (v): Whether a collateral challenge to the demerger schemes was permissible.

Analysis: The demerger schemes had been sanctioned by the competent company court and had attained finality. The petitioner had knowledge of the schemes but did not challenge them directly. A collateral attack on the sanctioned schemes was not permissible in these enforcement proceedings.

Conclusion: The collateral challenge to the demerger schemes was rejected.

Issue (vi): Whether respondents who were not parties to the arbitration or award could be impleaded for enforcement and execution.

Analysis: Foreign awards under Part II are binding between the persons against whom they were made, and Section 48 contemplates objections by the party against whom enforcement is invoked. Non-parties to the arbitration and award cannot be foisted with liability in enforcement proceedings merely on allegations of fraud or asset diversion. The material was insufficient to justify lifting the corporate veil against them at the post-award stage.

Conclusion: Impleadment of the additional respondents for enforcement and execution was unwarranted.

Issue (vii): Whether the invocation of arbitration in the name of IMAX Limited was invalid after its amalgamation.

Analysis: The arbitral tribunal had already considered the corporate amalgamation issue, accepted the substitution of IMAX Corporation for IMAX Limited, and treated the error in name as one of form rather than substance. No ground was made out to reopen that determination in enforcement proceedings.

Conclusion: The invocation of arbitration was not invalid.

Final Conclusion: The foreign awards were declined enforcement in India, and the petitioners' attempt to proceed against the additional respondents and to reopen the sanctioned demerger arrangements failed.

Ratio Decidendi: A foreign award may be refused enforcement where the underlying transaction required mandatory regulatory approval that was never obtained, since enforcement of such an award would contravene the fundamental policy of Indian law; a foreign award under Part II is also enforceable only against the parties to the award and not against strangers to the arbitration at the post-award stage.

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