TaxTMI 
TaxTMI 
2024 (3) TMI 1516
X X X X Extracts X X X X
X X X X Extracts X X X X
....ior counsel appearing for the appellants (Award Debtors). Also heard Mr. Neeraj Kishan Kaul and Mr. Darius Khambata, learned senior counsel appearing for the respondent (Award Holder). 4. The challenge in these appeals is to the order dated 25.04.2023 in the Arbitration Petition No. 833 of 2015 and Notice of Motion No. 2475 of 2016 respectively whereunder, the High Court has facilitated the enforcement of the final Award dated 27.09.2014 issued in the SIAC Arbitration No. 088 of 2012. The appellants' objection to enforcement of the foreign Award, in terms of Section 48 of the Arbitration and Conciliation Act, 1996 (for short "Indian Arbitration Act")was rejected and the High Court also directed that the order of attachment against the Award Debtors shall continue to operate during the execution proceedings to be undertaken by the respondent. Accordingly, the Award Debtors were called upon to place on record disclosure affidavits as regards their properties. Facts 5. This case has a chequered history and it is essential to note the background facts for the present challenge. 5.1. The respondent-HSBC PI Holdings (Mauritius) Limited (for short "HSBC") is a company incorpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inishing the value of their assets upto US$ 50 million. On 27.7.2012, the Emergency Arbitrator made an amendment to Interim Awards granting further relief to HSBC by rejecting to desist investigations against Avitel Dubai and Avitel Mauritius. 5.6. According to HSBC, the appellants made several attempts to delay and frustrate the proceedings. The arbitral tribunal consisted of three members. Mr. Christopher Lau, SC, was the Chairman, while Justice F.I. Rebello (retired) and Dr. Michael Pryles were members of the arbitral tribunal. On 27.09.2014, the tribunal rendered its final award and directed the appellants to pay US$ 60 million as damages for fraudulent misrepresentations. 5.7. The respondent had initiated proceedings under Section 9 of the Indian Arbitration Act before the Bombay High Court. A direction was issued to the appellants to deposit US$ 60 million for the purpose of enforcement of the Award. Aggrieved by the same, the appellants filed a Special Leave Petition before this Court where it was contended, inter alia, that the dispute is non-arbitrable under Indian law as it involved allegations of fraud which included serious criminal offenses such as forgery and im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is HSBC PI Holdings (Mauritius) Limited, which is a subsidiary of HSBC Holdings PLC (United Kingdom). The other subsidiary is HSBC (Singapore) Nominees Pte Ltd. which is alleged to have a contractual association with Wing Tai. The HSBC (Singapore) held 6.29% of Wing Tai's equity capital on a trustee/nominee basis, as of 15.09.2014. But the said Wing Tai has no relationship with the Award Holder and is not part of the HSBC Group. 9. Insofar as the Presiding Arbitrator Mr. Christopher Lau is concerned, the respondent submits that he has been an independent non-executive Director of Wing Tai since 28.10.2013 and also the Chairman of the Audit and the Risk Committee of Wing Tai. But Mr. Lau is not an employee of Wing Tai and therefore it is contended that it is wrong to say that he cannot discharge responsibility as an independent arbitrator or was incapacitated in any manner, in rendering the final Award dated 27.09.2014. 10. Initially, the Award Holders argued before the High Court that bias could not be raised under the concept of "public policy of India". However, later on, submissions were made to demonstrate that even if it is accepted for the sake of argument that the is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, 1958 (for short "New York Convention") [Ratified on 13.7.1960]. The New York Convention superseded the Geneva Convention of 1927 to facilitate the enforcement of foreign Arbitral Awards^[1]. Article V(2) of the New York Convention reads as under: "2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country." 16. The precursors to the New York Convention on the contrary provided for an expansive scope for invoking the public policy ground based on the violation of the "fundamental principles of the law". Although the notion that 'public policy' is 'a very unruly horse' has gained traction over the years [J. Burrough, Richardson v. Mellish, (1824) 2 Bing. 229 at 252.], one would also do well to remember the words of Lord Denning who said that, "With a good man in the saddle, the unruly horse can be kept in control."[Enderby T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6 does not provide an appeal against a foreign award enforced by a judgment of a learned Single Judge of a High Court and therefore the Supreme Court should only entertain the appeal with a view to settle the law. It was noted that the party resisting enforcement can only have "one bite at the cherry" and when it loses in the High Court, the limited scope for interference could be merited only in exceptional cases of "blatant disregard of Section 48". This principle of pro-enforcement bias was further entrenched by the Supreme Court in Union of India v Vedanta [(2020) 10 SCC 1]. 18. At this point, we may also note that Courts in some countries have recognized that when applying their own public policy to Convention Awards, they should give it an international and not a domestic dimension^[2]. The Arbitration legislation in France [Article 1514 of French Code of Civil Procedure 1981], for instance, makes an explicit distinction between national and international public policy, limiting refusal of enforcement only to the latter ground. Scholars have noted that the New York Convention's structure and objectives argue strongly against the notion that reliance should be placed on loc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Award can be refused enforcement on the ground of bias. 22. Even though the New York Convention does not explicitly mention "bias", the possible grounds for refusing recognition of a foreign award are contained in Article V(1)(d)(irregular composition of arbitral tribunal), Article V(1)(b) (due process) and the public policy defence under Article V(2)(b). Courts across the world have applied a higher threshold of bias to prevent enforcement of an Award than the standards set for ordinary judicial review [Reinmar Wolff (ed), A Review of New York Convention: Article-by-Article Commentary (2nd edn Beck/Hart, 2019) 352]. Therefore, Arbitral awards are seldom refused recognition and enforcement, considering the existence of a heightened standard of proof for non - recognition and enforcement of an award, based on alleged partiality [Stavroula Angoura, 'Arbitrator's Impartiality Under Article V(1)(d) of the New York Convention' (2019) 15 (1) AIAJ 29]. It invokes a higher threshold than is applicable in cases of removal of the arbitrator.[Gary Born(n 12)3937] This is for the reasons that, greater risk, efforts, time, and expenses are involved in the non-recognition of an award as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... we must adopt an internationally recognized narrow standard of public policy, when dealing with the aspect of bias. It is only when the most basic notions of morality or justice are violated that this ground can be attracted. This Court in Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI) [(2019) 15 SCC 131] had noted that the ground of most basic notions of morality or justice can only be invoked when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. 26. In view of the above discussion, there can be no difficulty in holding that the most basic notions of morality and justice under the concept of 'public policy' would include bias. However, Courts must endeavor to adopt international best practices instead of domestic standards, while determining bias. It is only in exceptional circumstances that enforcement should be refused on the ground of bias. 27. Let us now turn to the present facts. The Award in this matter was passed in Singapore, a New York Convention Country and notified [Gazette Notification S.O.542(E) dated 06.7.1999] as a reciprocating territory by India. Chapter 1 Par....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... its decision dated September 13, 2014. Therefore, none of the other grounds now being pressed were raised during the arbitration or in the time period available to the appellants to apply, to set aside the Award in Singapore. 29. It needs emphasizing that bonafide challenges to arbitral appointments have to be made in a timely fashion and should not be used strategically to delay the enforcement process. In other words, the Award Debtors should have applied for setting aside of the Award before the Singapore Courts at the earliest point of time. Implications of the IBA Guidelines 30. The High Court in this case applied the reasonable third person test contained in the IBA Guidelines to conclude that there is no requirement of disclosure and bias. The IBA Guidelines are a collective effort of the arbitration community to define as to what constitutes bias. However, bias has to be determined on a case-to-basis but Courts should attempt to apply international standards, while dealing with challenges at the enforcement stage. 31. The implications of the IBA Guidelines and their application will now have to be considered. 32. The IBA Guidelines have also been adopted in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld vitiate the foreign Award, sought to be enforced in India. 35. Adverting to the specific entries in the IBA Guidelines, pertaining to the alleged bias of Mr. Christopher Lau (the Chairman of the Arbitral Tribunal), the High Court reached the following conclusion: 35.1. The circumstance alleged by the award debtor for arbitral bias is the business interaction between one of the group companies of the award holder with independent private companies i.e., Wing Tai and Neptune wherein Mr. Lau was an independent non-executive director. However, neither Wing Tai or Neptune fall within the definition of "affiliate" of the award holder as per the IBA Guidelines. It was therefore concluded that no reasonable third person would conclude that justifiable doubts arise about impartiality or independence of Mr. Lau. Thus, there exists no identity or conflict of interest between Mr. Lau and the award holder, or any of its affiliates including its holding company i.e. HSBC PLC (UK). 35.2. While the award debtors' suggest their case implies a need for disclosure beyond the 'Red' or 'Orange' lists, and the inapplicability of the 'Green list, the 'reasonable third ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld show the reason for the response to Ms. Pauline. It would also additionally confirm that Mr. Christopher Lau during the phase when he acted as the Presiding Arbitrator between the appellants and the respondent, was not subject to any conflict of interest. He is held to have duly complied with the disclosure obligation and no bias or improper conduct can be attributed to rendition of the Award dated 27.09.2014 by Mr. Lau, as the President of the Arbitral Tribunal. 38. Another point on the above aspect i.e. the timing of the communication would also need our attention. The communication by Ms. Pauline was made in the year 2016, much after the final Award was rendered on 27.09.2014. When the explanation of Mr. Christopher Lau in his communication dated 26.04.2016 is examined in the context of the roving query made by the third party, well beyond the Award, we have no hesitation to hold that there was no disability on the part of Mr. Lau to conduct the arbitral proceedings between the appellants and the respondent. 39. We, therefore, conclude that there is no bias factor operating against Mr. Lau that would violate the most basic notions of morality and justice or shock the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....car Wilde, Act III, Lady Windermere's Fan, 1893] As can be noticed, in this case, despite the award being in their favour, the award-holders found themselves embroiled in multiple litigations in different forums by the concerted and unmerited action of the appellants. It will bear mention here, that in every forum the award debtors have lost and Courts' verdicts are in the favour of the award holders. Despite this, the benefit of the foreign award is still to reach the respondents. This sort of challenge where arbitral bias is raised at the enforcement stage, must be discouraged by our Courts to send out a clear message to the stakeholders that Indian Courts would ensure enforcement of a foreign Award unless it is demonstrable that there is a clear violation of morality and justice. The determination of bias should only be done by applying international standards. Refusal of enforcement of foreign award should only be in a rare case where, non- adherence to International Standards is clearly demonstrable. 43. The High Court in this matter has rightly held that the award-debtors have failed to substantiate their allegation of bias, conflict of interest or the failure by the Presi....