2025 (3) TMI 785 - HC - Companies Law

Delhi HC enforces foreign arbitral award of EUR 5.5 million despite FEMA violation claims and double recovery objections

Mercedes-Benz Group Ag (Previously Daimler Ag) Versus Minda Corporation Limited

The Delhi HC enforced a foreign arbitral award directing payment of EUR 5.5 million from the judgment debtor to the decree holder. The court rejected ... Validity of Foreign Arbitral Award - Enforcement of the Award would be violative of the provisions of FEMA or not - remittance of Euro 5.5 million by Minda Corporation Limited to Mercedes Benz AG pursuant to the consent award passed in the arbitration proceedings - overlap between the settlement with the Liquidator of Minda Germany and Consent Award with Minda India - benefit of ‘double dip’ by virtue of the payments agreed by Minda India under the settlement - Whether the enforcement of the Award would be contrary to the public policy of India, as per Section 48(2)(b) of the A&C Act? HELD THAT:- Considering in the instant case, the issue of violation of provisions of FEMA is not germane to the matter anymore considering the post facto approval of the RBI Only issue would be whether ‘fundamental policy of law’ would cover the principal objection of the JD that they did not have visibility of the ‘Bilgery Settlement’ and therefore, could not ascertain whether there was a ‘double dip’ by the DH (i.e. recovery both from the Liquidator of Minda Germany and also from Minda India), or if there was a waiver in the ‘Bilgery Settlement.’ - Needless to state, both these aspects become a non-issue since the Consent Award was passed with the JD having full knowledge of what was before them. The Settlement Agreement itself, would show that the agreement was the ‘entire agreement’ between the parties, superseded and extinguished all previous agreements, promises, assurances, warranties, and parties has agreed that no other claim shall lie between them with respect to the matters being settled. Firstly, the parties have unconditionally and irrevocably waived any or all claims against each other existing prior to the date of the settlement; secondly, the request for ‘Bilgery Settlement’ had been made prior to the settlement with Minda India and a motion was filed before a court in Germany for disclosure, which had been rejected by the courts in Germany. This would obviously preclude the JD from raising this issue yet again, post the Consent Award; thirdly and more specifically, regards the issue of ‘double dip’, the communication of 28th September 2021 recorded Minda India’s confirmation to render an Award by consent and the preamble of the settlement leaves no doubt of the DH’s confirmation that it will not benefit from any ‘double dip’ by virtue of payments agreed under the settlement. As regards the waiver, DH had filed an affidavit before this Court, pursuant to order dated 17th November 2023. The said affidavit of 22nd November 2023 also confirmed the enforcement of the Award will not result in a double benefit to the decree holder and that there was no overlap between the settlement with Minda Germany and the Consent Award with Minda India. The JD, therefore, had consistently confirmed that they were agreeing to settlement, not only through the communication dated 28th September 2021 but also as per clause 3(i) of the Settlement Agreement and agreed to passing of the Consent Award. The objections being pressed by the JD to the enforcement are not bona fide, unjust, unreasonable and a clear attempt to obstruct the enforcement, deploying one stratagem or the other. The Court deprecates the stand taken by the JD, particularly, having fully and knowingly entered into a settlement and agreed to a Consent Award being passed, in complete know of facts and circumstances available to them, relating to the previous ‘Bilgery Settlement’. Accordingly, it is directed, that the Foreign Award dated 29th November 2021 passed by an Arbitral Tribunal comprising of Dr. Fabian Von Schlabrendorff, Dr. Ulrich Trost, And Mr. Arne Fuchs in Stuttgart, Germany under the Rules of Arbitration of the International Chambers of Commerce, 2012 in ICC Case No. 22523/FS, be enforced as a decree of this Court, per section 49 of the A&C Act. As JD was directed to deposit the entire amount, being EUR 5.5 million, in terms of the Arbitral Award with the Registrar General of this Court in an interest-bearing deposit. The said amount is approximately Rs. 52 Crores and has since been deposited by JD before the Registry of this Court, as noted in the order of this Court dated 20th May 2024. 1. ISSUES PRESENTED and CONSIDEREDThe primary legal issues considered in this judgment were:- Whether the enforcement of the foreign Arbitral Award dated 29th November 2021, passed by the Arbitral Tribunal in Stuttgart, Germany, should be allowed under the Arbitration and Conciliation Act, 1996.- Whether the objections raised by the Judgment Debtor (JD) regarding a potential 'double dip' recovery by the Decree Holder (DH) were valid.- Whether the issuance of the Letter of Comfort by Minda Corporation, India, without prior permission from RBI, contravened the Foreign Exchange Management Act (FEMA) regulations.- Whether the enforcement of the Award would be contrary to the public policy of India, as per Section 48(2)(b) of the A&C Act.2. ISSUE-WISE DETAILED ANALYSISEnforcement of the Foreign Arbitral Award- Legal Framework and Precedents: The enforcement of foreign awards in India is governed by Part II, Chapter I of the A&C Act, which applies to 'New York Convention Awards'. Section 48 of the A&C Act outlines the grounds on which enforcement can be refused.- Court's Interpretation and Reasoning: The Court noted that the JD did not invoke any of the conditions under Section 48(1) that would prevent enforcement. The objections were primarily under Section 48(2)(b), relating to public policy.- Key Evidence and Findings: The Consent Award was passed with the JD's full knowledge and agreement, as evidenced by communications and the Settlement Agreement itself.- Application of Law to Facts: The Court found that the JD's objections were not bona fide and were an attempt to obstruct enforcement.- Conclusions: The Court directed that the Foreign Award be enforced as a decree of the Court.Objections of 'Double Dip' Recovery- Legal Framework and Precedents: The concept of 'double dip' refers to recovering the same amount twice from different entities.- Court's Interpretation and Reasoning: The Court noted that the Settlement Agreement and the Consent Award explicitly stated that the DH would not benefit from any 'double dip'.- Key Evidence and Findings: The DH had filed an affidavit confirming no overlap between the amounts received from the Liquidator of Minda Germany and the Consent Award with Minda India.- Application of Law to Facts: The Court found that the JD had knowledge of all relevant settlements and had agreed to the Consent Award.- Conclusions: The objections regarding 'double dip' were rejected.Regulatory Issues under FEMA- Legal Framework and Precedents: The Foreign Exchange Management Act regulates foreign exchange transactions in India, and any contraventions require RBI approval.- Court's Interpretation and Reasoning: The RBI had granted post facto approval for the transaction, subject to compounding of the contravention.- Key Evidence and Findings: The RBI's communication dated 13th May 2022 confirmed no objection to the remittance.- Application of Law to Facts: The Court noted that the issue of FEMA was not determinative due to the RBI's approval.- Conclusions: The regulatory issues under FEMA were resolved, and the objections were not tenable.Public Policy Objection- Legal Framework and Precedents: Section 48(2)(b) of the A&C Act allows refusal of enforcement if it is contrary to the public policy of India.- Court's Interpretation and Reasoning: The Court referred to precedents like Cruz City and Vijay Karia, emphasizing minimal interference with foreign awards.- Key Evidence and Findings: The JD's objections were found to be an attempt to resist enforcement without valid grounds.- Application of Law to Facts: The Court found no contravention of the fundamental policy of Indian law.- Conclusions: The public policy objections were dismissed.3. SIGNIFICANT HOLDINGS- The Court held that the Foreign Award dated 29th November 2021 should be enforced as a decree of the Court.- The objections raised by the JD were rejected as being unjust and unreasonable.- The Court directed the Registry to release the deposited amount with accrued interest to the DH.- The JD was further directed to remit any balance amounts due within three weeks, failing which the decree would be executed under Order XXI of CPC.