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of <h1>Foreign arbitral award enforcement and execution against affiliated non-signatories after asset diversion; limitation challenge barred; execution partly allowed.</h1> Res judicata barred reopening the limitation issue because an earlier enforcement order holding the petition within Article 137 involved at least a mixed ... Seeking recognition and enforcement of foreign arbitral awards - prescribed period of limitation - Applicability of res judicata - violation of India's public policy. - lift the corporate veil - impleadment of the 2nd, 3rd and 4th Respondents and levy of execution against them - Whether a third party could be made personally liable to satisfy a decree or a foreign award, even though it was not a party to the arbitration proceedings and no award had been made against it. - HELD THAT:- In the present case, E-City or the other Respondents never challenged this Court’s jurisdiction to entertain a Petition to enforce or execute a foreign award. There were no grounds for such a challenge. The only objection to IMAX’s Petition was that it was filed after the prescribed period of limitation. Therefore, even if the learned Single Judge of this Court (Kulkarni, J.) mistakenly held that IMAX’s Petition was within the three-year limitation period prescribed under Article 137 of the Limitation Act, that decision cannot be regarded as a nullity that could have been disregarded at the final hearing of the same Enforcement or Execution Petition. Besides, there is no ground to hold that the reasoning or finding in Kulkarni J’s order about IMAX’s petition being within the three-year limitation period prescribed under Article 137 of the Limitation Act was erroneous. The first precondition for the exception to the application of the doctrine of res judicata, namely that the issue decided involved a pure question of law and not a question of fact or a mixed question of law and fact, is not fulfilled in the present case. Secondly, the expression “jurisdiction” referred to in Mathura Prasad Jaiswal. [1970 (2) TMI 139 - SUPREME COURT] and explained in N.G. Subbaraya Setty [2018 (4) TMI 1901 - SUPREME COURT], refers to the inherent jurisdiction of a Court or the legal competency of the Court to entertain a suit or a proceeding of a particular nature. The examples given in N.G. Subbaraya Setty’s (supra) case bring home this point very clearly. However, the impropriety is evident, as properties and assets valued at Rs.210 Crores held by E-City (1st Respondent) were diverted solely to defeat execution of the liability award. Secondly, in the present case, there is both control of the Company by the wrongdoers and the impropriety, i.e., the Company's use and misuse of them as a device or façade to conceal their wrongdoings. In fact, the wrongdoers have managed to retain complete control over the diverted properties while, at the same time, attempting to render them immune from execution proceedings to defeat the enforcement and execution of the foreign awards. This is not a case in which IMAX is challenging the orders of this Court that sanction the Schemes of Arrangement. Therefore, the arguments that such orders operate in rem rather than merely in personam need not detain us. Even if such orders were made in compliance with the validly prescribed procedures, that by itself would not prevent the enforcing/executing Court from lifting the corporate veil and addressing the impropriety of diverted properties and assets, given the facts in the present case. There are undoubtedly different considerations that apply in the doctrine of lis pendens. Still, the reference is only to show that a transaction may be legal, in the sense that the statutory formalities have been complied with. However, there may still be impropriety, which will entitle the Court to lift the corporate veil, as was held in Balwant Rai Saluja and Anr. [2014 (8) TMI 1084 - SUPREME COURT] There is a distinction between illegality and impropriety that cannot be ignored. Impropriety may not always overemphasise the form but would stress the substance, the motives, the intentions and the final effect of the disputed transaction. That there was nothing wrong in impleading the 2nd to 4th Respondents in IMAX’s Petition. Besides, execution can be levied against those of E-City’s (1st Respondent’s) properties and assets that were diverted to the 2nd and 3rd Respondents for satisfaction of the foreign awards. However, such execution can be only qua the diverted properties and assets presently held by the 2nd and 3rd Respondents, and not against the 2nd and 3rd Respondents independently. It is clarified that there can be no execution against any other properties or assets independently held by the 2nd and 3rd Respondents’ Companies to satisfy the foreign awards. Insofar as the 4th Respondent is concerned, though there was nothing wrong in its impleadment to IMAX’s Petition, since no properties or assets of E-City (1st Respondent) were diverted to the 4th Respondent, there is no question of levying any execution on the 4th Respondent, its properties or assets. IMAX’s petition is held to have been filed within the prescribed period of limitation. IMAX’s petition for enforcement of the foreign awards could not have been refused on any alleged violation of India's public policy. This appeal was maintainable as against all the Respondents. There was no error in impleading the 2nd to 4th Respondents as parties to IMAX’s petition. The foreign awards are recognised and can be executed unreservedly against the 1st Respondent and against the 2nd and 3rd Respondents to the extent of the properties and assets diverted from E-City [1st Respondent] to them under the schemes of arrangements dated 20.06.2007 and 31.08.2007. However, no execution can be levied against the 4th Respondent. To this extent, Dangre, J’s order will have to be set aside or modified. Now that the foreign awards are recognised, they shall have the status of deemed decrees and be executed in accordance with what is set out above. However, this would require constant monitoring and the timely issuance of directions in execution proceedings, such as the attachment and sale of properties. Such an exercise could be best undertaken by the executing Court, i.e., the learned Single Judge. The 1st Respondent has succeeded in frustrating the enforcement of the foreign awards made between 2006 and 2008. Full advantage was taken of the Master Agreement entered into in 2000, and by taking undue advantage of the pressure on the Indian court’s dockets, payments have been successfully resisted for all these years. During the pendency of the arbitral proceedings, the 1st Respondent improperly diverted its properties and assets worth Rs. 210 crores to the associated companies, i.e. the 2nd and 3rd Respondents, with the sole objective of frustrating the execution of the awards or, in any event, further delaying the matters. To borrow the words of the Hon’ble Supreme Court in Vijay Karia [2020 (2) TMI 628 - SUPREME COURT], the first Respondent is “indulging in speculative litigation with the fond hope that by flinging mud on a foreign tribunal award, some of the mud so flung would stick”. For all these reasons, we impose a cost of Rs 5 lakhs on the 1st Respondent, payable within 4 weeks to the Appellant, IMAX. The parties are directed to appear before the learned Single Judge. - Appeal and the pending applications therein are disposed of in the above terms. Issues: (i) Whether IMAX's petition for recognition and enforcement of the three foreign ICC awards was barred by limitation; (ii) Whether enforcement of the foreign awards could be refused as contrary to India’s public policy; (iii) Whether the appeal under Section 50 was maintainable qua the 2nd, 3rd and 4th Respondents; (iv) Whether the 2nd, 3rd and 4th Respondents could be impleaded and execution levied against them (and to what extent).Issue (i): Whether IMAX's petition was time-barred under the Limitation Act.Analysis: The Court examined the earlier final order of Kulkarni, J. (which held IMAX's petition within limitation), the subsequent dismissal of SLP and review by the Supreme Court, the distinction between overruling a precedent and reversing an inter partes decision, and whether exceptions to res judicata applied (including whether the earlier finding involved a pure question of law going to jurisdiction). The Court found the limitation finding in Kulkarni, J.'s order was a directly decided matter involving mixed questions of law and fact, attained finality inter partes, and was not displaced by later decisions in unrelated proceedings. The Court also considered principles on condonation of delay and lack of clarity prevailing earlier on which Kulkarni, J. relied.Conclusion: The finding that IMAX's petition was within the limitation period is final and binding; in favour of Appellant.Issue (ii): Whether enforcement could be refused on grounds of public policy of India (including alleged FEMA violation and alleged denial of fair hearing).Analysis: The Court applied the narrow construction required for public policy under Section 48(2)(b), reviewed precedent (including Vijay Karia, Cruz City, Gemini Bay and related authorities) distinguishing FERA and FEMA, examined the factual record (including restructuring of the contract and evidence accepted by the tribunal), and evaluated whether alleged procedural unfairness amounted to a ground that shocks conscience. The Court held that mere or alleged breach of FEMA or disagreement with tribunal's factual/evidentiary conclusions are not sufficient to refuse enforcement; a merit-based review is impermissible under Section 48.Conclusion: Enforcement could not be refused on public policy grounds; in favour of Appellant.Issue (iii): Whether the appeal is maintainable qua the 2nd, 3rd and 4th Respondents.Analysis: The Court analysed the scheme of Part II Chapter I (Sections 44–52), the concept of a combined/rolled-up petition for recognition/enforcement and execution (Vedanta and Fuerst Day Lawson), and the scope of Section 50(1)(b). It held that a combined petition is maintainable and that refusing enforcement/recognition and refusal to execute in the same composite order permits an appeal against the composite refusal; splitting appeal rights would frustrate the pro-enforcement objective and cause multiplicity and delay.Conclusion: The appeal is maintainable qua the 2nd, 3rd and 4th Respondents; in favour of Appellant.Issue (iv): Whether the 2nd, 3rd and 4th Respondents could be impleaded and execution levied against them.Analysis: The Court considered the factual sequence of demerger schemes effected after the liability award, the timing and nature of asset transfers, applicable tests for piercing the corporate veil (Balwant Rai Saluja, Ben Hashem/Prest principles), and comparative authorities (Bhatia, Mitsui, Gemini Bay). It distinguished cases where third parties were sought to be held personally liable and focused on IMAX's limited relief — execution only against assets of the 1st Respondent that were diverted to the 2nd and 3rd Respondents. The Court found impropriety and use of corporate form to frustrate enforcement, retained control by the holding company, and held that relief may be moulded to pursue diverted assets without making the 2nd and 3rd Respondents personally liable; no execution against the 4th Respondent's own assets.Conclusion: Impleadment of the 2nd–4th Respondents was permissible; execution may be levied against assets of the 1st Respondent diverted to the 2nd and 3rd Respondents only; no execution against the 4th Respondent; in favour of Appellant (limited to diverted assets).Final Conclusion: The appeal is partly allowed: Kulkarni, J.'s limitation finding is binding; Dangre, J.'s refusal to enforce on public policy and its exclusion of execution against diverted assets must be set aside or modified; the foreign awards are recognised as decrees and remitted for execution against E-City and against assets diverted to the 2nd and 3rd Respondents under the specified schemes; no execution against the 4th Respondent. The matter is remanded for execution and ancillary directions (including interim restraint and costs).Ratio Decidendi: A final inter partes judicial finding on limitation cannot be re-opened at a subsequent stage of the same proceedings by reference to later, unrelated overruling of legal propositions; enforcement of foreign awards under Part II, Chapter I is governed by a pro-enforcement bias and a narrow public policy exception; a combined petition for recognition and execution is maintainable and appealable under Section 50(1)(b); courts may, in execution proceedings, pierce the corporate veil to reach assets improperly diverted to frustrate enforcement, but only to the extent necessary to remedy the impropriety.
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