INTRODUCTIONThe law on arbitration in India is at present
contained in three enactments viz1. The Arbitration Act 19402. The
Arbitration (Protocol and Convention) Act ,19373. The Foreign
Awards (Recognition and Enforcement) Act,1961It was widely felt
that the 1940 act, which contained the general laws of arbitration,
had become outdated. The law commission of India, several
representative of bodies of trade and commerce and expert of the
field of arbitration had experts of the field of arbitration had
proposed amendments to this act to make it more responsive to the
contemporary requirements. It was also recognized that our economic
reforms may not become fully effective if the law dealing with
settlement of both domestic and international commercial disputes
remain out of tune with such reforms.Taking into the consideration
the enforcement of foreign award, it can be enforced in India under
the multilateral international conventions to which India is a
party viz.
1.Geneva Convention of 1927
2.New York Convention of 1958
Further, the award must have been made in the country that has
ratified them. The Geneva convention had has ceased to apply those
awards to which the New York convention applies now.
The arbitration (protocol and convention) act, 1937 came into
effect on 4th march 1937 and provided for the enforcement of
foreign arbitral award to which the Geneva Convention of 1927
applied.
Similarly, the foreign awards (Recognition and Enforcement) act,
which came into force on 30th November, 1961, had been enacted
pursuant to the New York convention of 1958 and it prescribed the
law and procedure for the enforcement of foreign awards in India to
which they said convention applied.The United Nations commission on
international trade law [UNCITRAL] adopted in 1985 the model law on
International Commercial Arbitration. The General Assembly of the
United Nations has recommended that all countries give due
consideration to the said model law ,in view of the desirability of
uniformity of law of arbitral procedures and the specific needs of
international commercial arbitration practice.An important feature
of the said UNCITRAL model law and rules is that they have
harmonized concepts of arbitration and conciliation of different
legal systems of the world and thus contained provisions universal
application.Though the said UNCITRAL model law and rules are
intended to deal with international commercial arbitration and
conciliation, they could with appropriate modifications, serve as a
model for legislation on domestic arbitration and conciliation.
The two previous enactments on such stands repealed and the
arbitration and conciliation act 1961,which is a comprehensive and
uniform law relating to arbitration which has been put on statute
with a view to provide an alternative forum which is less formal
than the court proceedings more effective ,speedy ,quicker and
cheaper.The procedure for enforcement of foreign awards can now be
found in Part [2] of the new 1996 act which maintains the same
scheme for enforcement albeit in a consolidation form.
MEANING OF ARBITRATION UNDER THE ACT
Arbitration means a reference to the decision of one or more
persons, either with or without an umpire of some matter or matters
between the parties as held in COLLINS vs. COLLINS
The essence of arbitration is that the arbitrator decides the
case and his award is in nature of a judgment which is later on
incorporated into a decree of court as held in the case AKBARI
AHMED vs. RAHAMAT
FOREIGN ARBITRATION
Foreign arbitration is an award or arbitration conducted in a
place outside India.The resultant award is an award, if sought to
be enforced in India, constitutes a foreign award,
Section 2(7) of the 1996 act states that an arbitral award made
under \Part [1] of the act shall be considered as a domestic award.
Section 2(2) mandates that Part [1] shall apply where place of
arbitration is in India.
It follows a logical thing that where the place of arbitration
is not in India, Part [1] shall not apply to such arbitration. Thus
an award resulting from such arbitration shall not be considered a
domestic award.However in the case
BHATIA INTERNATIONAL vs. BULK TRADING S.A.The Supreme Court held
that the provisions of Part [1] would apply even in cases of
international arbitration held outside India. The decision has been
criticized for blatantly ignoring the unequivocal wordings of the
statute but nevertheless constitutes the prevailing law on the
point.INDIAN RESERVATIONS
India has made two reservations while ratifying the conventions
namely, that it would apply the conventions to the recognition and
enforcement of an award only if it was made in the territory of
another state that is bound by contract.In pursuance of said
reservations, the two implementing acts of 1937 and 1961 provided
that the government of India would notify the names of the
countries to which the conventions would apply and also the
countries to which have made reciprocal provision for the
enforcement of Indian awards in those countries.
The second reservation was that the India would apply the
convention only to differences arising out of legal relationship
which are considered as commercial under the Indian laws. The
concept of commercial relationship takes place within its ambit all
relationship which arises out of or are ancillary or incidental to
the business dealings between citizens of two states. It takes
within its fold all legal relationships pertaining to international
trade in all its form between the different states. Courts have
interpreted the term commercial dispute under the two acts, in
certain decisions where the question was at issue.It has been held
that the provisions of the conventions and implementing 1937 and
1961 acts earlier and the 1996 act now are designed to sub serve
the cause of facilitating international trade and promotion
interpretation consistent with its literal and grammatical meaning.
The law as settled by the courts in the following cases is relevant
even today for the new 1996 enactments maintain the same
scheme.
In R.M INVESTMENT AND TRADING CO. LTD. vs .BOEING &CO.
It was held that consultancy services for the promotions of the
sales of aircraft manufactured by a foreign company are commercial
services.In RAMJI DAYAWALA & SONS (P) LTD. vs. INVEST IMPORT,It
was held that a party from a country which has not ratified the New
York convention of 1958 cant maintain its application seeking any
benefit from the court under any enactment, made on the basis of
the conventions.
In N.T.P.C vs. SINGER & CO. It was held that an award will
not be tenable if it is opposed to the public policy of the county
in which it is to be enforced. Mere contravention of the public
policy may not attract the bar. It may not be repugnant to the
fundamental policy of Indian law or to justice or morality.FOREIGN
AWARD - COMMERCIAL IN NATURE
CLAUSE (f) of sub section [1] of section 2 of the 1996 act
defines international commercial arbitration and it speaks about
disputes arising out of a legal relationship, whether contracted or
not, considered as commercial under the law in force in India. The
question of commercial relationship has been considered by various
courts in a number of cases.Emphasizing the ambit of an activity
which takes the character of a commercial relationship in the
context of Article 301of the constitution of IndiaThe supreme court
noted in the case
ATIABARI TEA CO. LTD. vs. STATE OF ASSAM
the trade doesnt mean merely traffic in goods i.e. exchange of
commodities for money or other commodities in the complexities of
modern conditions in their sweep are included carriage of persons
and goods by road, rail, air and waterways, contracts, banking,
insurance, etc too numerous to be exhaustively enumerated which may
be called commercial intercourse. On the above logic, the Supreme
Court ruled that a consultancy services for the promotion of sale
is a commercial transaction and any dispute arising there under is
a commercial dispute. Therefore, as far as the meaning of
commercial is concerned, the absence of a formal definition didnt
hinder an expansive interpretation.PROCEDURE OF ENFORCEMENT UNDER
CONVENTIONS
1. The procedure of enforcement of foreign awards under the
conventions are pretty much the same .Any person interested in
enforcing a foreign award may apply in a writing to any court
having jurisdiction over the subject matter of the award. In
addition to filing of the award and agreement on which it is based
as required by the conventions, the act requires that evidence as
to the award being a foreign award has to be filed.
2. The competent court in which the award is to be filed is a
court which will have jurisdiction over the subject matter of the
award. The application will be numbered and registered in the court
as a suit between the applicant as plaintiff and the other parties
are defendants. T he court will direct notice to be given to the
parties, requiring them to show cause as to why the award should
not be filed. The court on being satisfied that the foreign award
being enforceable under the act will pronounce judgments according
to the award. Upon the judgment so pronounced, a decree will follow
as in case of domestic awards. No appeal shall lie from such a
decree except in so far as the decree is in excess of or not in
accordance with h the award.The various high courts, including the
Bombay and Calcutta, have made rules regarding the procedure and
forms to be used for application for the enforcement of foreign
awards.
CHALLENGE TO FOREIGN ARBITRAL AWARDThe challenge under section 9
(b) of the Foreign Awards (Recognition and Enforcement) Act, 1961
its not available when the arbitration clause renders all dispute
subject to laws of India though the arbitration proceedings were
held in England as per terms of said clause in as much the crucial
law operates during the continuance of the proceedings before the
arbitrator as held in the case SWANITOMO HEAVY INDUSTRIES LTD. VS.
O.N.G.C LTD.ENFORCEMENT OF AWARD TO WHICH THE CONVENTIONS DO NOT
APPLYThe awards which are made in the countries that are not a
party to either of the conventions cannot be enforced with the same
facility as in the case of the foreign awards to which the
conventions apply.
Such foreign awards are however enforceable in India on the same
ground as they are applicable in United Kingdom. That is to say
that they can be enforced by an action before a court of law as
held in BADAT & CO. BOMBAY vs. EAST INDIA TRADING CO. which
said that such an award will be enforceable in India under the
common law on the grounds of justice, equity and good conscience?
The principles stated are as follows:- that there was a contract
between the parties where under disputes between them were referred
to arbitration to an arbitral tribunal in a foreign country. That
award is in accordance with the terms of the agreement. That the
award is not invalid according to the law governing arbitration
proceedings obtaining in the country where award was made. That it
was a subsisting award at the time of filing of the suit.
A foreign award will not be enforced by the courts in India if
its enforcement would be contrary to public policy or the laws in
India. A foreign award will be deemed to be against the laws of
India if it violates, for instance, provisions relating to
exchange, control, import-export control or similar mandatory
provisions.
AWARDS UNDER INDIAN PROCEDURAL AWARD
It has been held that the term award used in the Indian
Arbitration act, 1996, mean an award under the act while section 49
of the act provides that a foreign award shall become a decree of
the court where the court is satisfied that the foreign award is
enforceable, there is there is no provision for the issue of a
notice to the affected party before the court expresses such
satisfaction.Section 50 0f the 1996 act provides for an appeal from
an order refusing to:-
Refer the parties to the arbitration under section 45 and
enforce a foreign award under section 48. Such appeal should lie in
the court authorized to hear appeal from the order arising thereto.
There shall be no second appeal, subject however to the right of
appeal to the Supreme Court. There is no right of appeal against
the recording of satisfaction by the court under section 49.AWARD
MADE IN INDIA UNDER FOREIGN PROCEDURAL LAWSAn award made in India
under the foreign procedural law is one to which neither the
arbitration act nor the conventions will apply. Its enforceability
in India depends on the general laws.
AWARD MADE OUTSIDE INDIA UNDER FOREIGN PROCEDURAL LAWS
An award made outside India under the foreign law is a foreign
award. It has to be enforced as per the provisions of the 1996 act
now. In other cases the award made is made in non-reciprocating
country, its enforceability in India depends on the general laws.
AWARDS MADE OUTSIDE INDIA UNDER INDIAN PROCEDURAL LAWSIf the award
is the one to which the conventions applies, it has to be enforced
as a foreign award but as per the judgment of the supreme court in
N.T.P.C vs. THE SINGER & CO. and held that such an award but
will be a foreign award as a domestic award under the Part [1] of
the act.This decision has been criticised as it is given under the
old act 1961. Since the new act is enforced yet the decision still
is good as it has not been over-ruled.NEW YORK CONVENTION
AWARDS
Section 44 actually reproduces Section 2 of the Foreign Awards
[Recognition and Enforcement] Act, 1961.
The scope of this section is actually utilized by any party that
is interested in foreign awards to the court having jurisdiction
over the subject matter.
The differentiation between the awards must apply in writing to
a court and the foreign awards are only those where arbitration
takes place in a convention country.
Awards passed in an arbitration taking place in a non-convention
country would not be a domestic award as held in this case
BHATIA INTERNATIONAL vs. BULK TRADING S.A.
There has to be an agreement in writing between the parties for
invoking Section 45. However, if any of the parties feel that such
an argument is null or void or in-operative or incapable of being
performed that party has the right to approach the competent court
as held in the case.
SHIVNATH RAI HAR NARAIN vs. ITALGRANI S.P.A
According to Section 45, Judicial Authority has power to refer
parties to arbitration. The application must be made in writing and
at any time before the judgment of the court is pronounced in the
suit. Such application should be made before the court where the
suit is pending.
If there is valid arbitration agreement, the suit must be stayed
and the matter referred to arbitration as held in the case.
SOCIETE COMMERCIAL CEREALS etc. vs. S.P.C
If there is expressly excluded clause of arbitration the
application for reference is not maintainable as held in the
case.
STC OWNERS ETC IN THE VESSEL vs. BALPIC CONFIDENCE
According to the Section 46, foreign award shall be binding for
all purposes on for all purposes, on the persons as between whom it
was made and may accordingly be relied on any of those persons by
way of defense, set off or otherwise ant legal proceedings in
India.
Under Section 47, the manner for adducing evidence to prove that
the award is a foreign award.
When the award given in a foreign country (UKRAINS) is valid
under the law of the country the award being governed by the law of
that country then the enforcement of that award of India does not
violate public policy as held in the case.
TRANS OCEAN SHIPPING AGENCY PVT. LTD. vs. BLACK SEA SHIPPING
Section 48 provides that the enforcement of foreign award may be
refused at the request of other party against whom it is invoked,
only if that party furnishes Court some proof.
Also for the enforcement of the foreign award there is no need
to take separate proceedings one for deciding the enforceability of
award to make rule on the court or decree and other to take up
execution after that as held in the case
FUREST DAY LAWSON Ltd vs. JINDAL EXPORTS Ltd.
Under section 49, the court cannot directly enforce foreign
award acting under section 49 of the 1996 Act. Once the court under
section 49 declares it as enforceable there upon it would be deemed
to be a decree executable as per Civil Procedure Code as held in
the case.
TOEPFER INTERNATIONAL ASIA (P) Ltd. vs. THAPAR IPAT Ltd.
Court enforcing a foreign award cannot grant interest beyond the
date of abiter dictum. Under section 50, the court is authorized by
law to hear appeal from the following orders:-
If an order refers to
Refer the party to arbitration
Enforce a foreign award
If under this section any order is passed in appeal, second
appeal cannot be filed against such order. But appeal to the
Supreme Court can be filed.GENEVA CONVENTION AWARDS
This convention has been reproduced more or less same as the New
York convention and has name sake relevance because of the fact
that this cannot be applied to the foreign awards under the New
York Convention.
ENGLISH ARBITRATION ACT 1950 FOREIGN AWARDS
Under this provision is made for the enforcement of arbitral
awards by the Arbitration Act 1950, which actually considerate the
Arbitration Act 1889-1934.The background of this provision is
afforded by a protocol of 1923 and a convention of 1927, both of
which were signed by Great Britain. The convention deals with the
enforcement in one country of arbitral award that is made in other
country.The protocol applies between people subject to jurisdiction
of such powers as may be declared by orders in council to the
parties of convention on the execution of Foreign Arbitral awards
set out in the second schedule to the Arbitration Act, 1950.
In England, foreign award means one which made in pursuance of
agreement under the protocol of 1923, made between the person
subject to the jurisdiction of jurisdiction of signatory states of
1927 convention ,made in the territory to which the convention has
been extended by order in council.
Where the parties choose to refer a dispute to arbitration and
if no case is pending with respect to the subject-matter in
disputes, it is not necessary that the parties should signify their
consent to the award before the same is enforced, as held in the
caseNARAIN DAS VS. VALLABH DAS
There are some conditions to be fulfilled before, for the
enforceability of foreign awards. It must have been made in
pursuance of an agreement for arbitration valid by the law by which
it was governed made by the tribunal provided by the agreement made
in conformity with the law governing the arbitration procedure
become final in the country it was made in respect of a matter
which may be lawfully be referred to arbitration under the English
law and its enforcement may not be against the public policy or the
to the law of England.The second schedule of the Arbitration
(protocol and convention) act, 1937 lays down the convention on the
execution of the foreign arbitral award.
In England, the award cant be final if :- the proceedings for
the testing of its validity are pending in the country in which it
was made.It cant be enforced if it doesnt deal with all the
questions referred to the arbitration or exceeds the scope of
arbitration agreement or if the party against whom it was sought
wasnt given sufficient notice of the arbitration proceedings or was
under the legal incapacity or was not properly represented.
More or less, it is not final when the rules of natural justice
were not adhered to. Proper chance of defending ones case should be
given to a party.TIME LIMITThe act doesnt prescribe any time limit
within which a foreign award must be applied to be enforced.
However, various high courts have held that the period of
limitations would be governed by the residual provisions under the
limitation act i.e. the period would be three years from the date
when the right to apply for the enforcement accrues. The Bombay
high court have held that the right to apply would accrue when the
right i.e. the award is actually received by the applicant as in
the case ORIENT MIDDLE EAST LINES LTD. &ANOTHERS vs. M/S BRACE
TRANSPORT CORPORATION OF MONROVIAPOST ENFORCEMENT FORMALITIES In
the case FUREST DAY LAWSON LTD. vs. JINDAL EXPORT LTD it was held
by the Supreme Court that once the court determines that a foreign
award is enforceable, it can straight away be executed as decree.
In other awards, no other application is required to convert the
judgment into a decree. The court clearly stated in its judgment
that Once the court decides that the foreign award is enforceable;
it can proceed to take further effective steps for execution of the
same. There arises no question of making a foreign award as a rule
of court/decree again. If the object and purpose can be served in
the same proceedings, it doesnt result in the multiplication of
proceedings. It is also clear from the objectives contained in the
Para 4 of the statements of objects and reason, section 47 to 49
and the scheme of act that every final arbitral awards is to be
enforced as if it were a decree of the court. In our opinion,
enforcement of the award, there is no need to take separate
proceedings, one for deciding the enforceability of award to make
rule of the court or decree and other to take up execution
thereafter. In one proceeding, the court can enforce a foreign
award and deal with the matter. One of the interesting features of
the enforcement of a foreign award is that there is no statutory
appeal provided against any decision of the court, rejecting
objections to the award. An appeal shall lie only if the courts
hold the award to be non-enforceable. Hence a decision upholding an
award cant be appealed against. This is Enforcement of a foreign
award is that there is no statutory appeal provided against any
decision of the court rejecting objections to the above. And appeal
shall lie only if the courts hold the award to be non-enforceable.
Hence a decision upholding an award cannot be appealed against this
is in some sense is a negative aspect and can be considered as a
loophole.However, a discretionary appeal would lie to the supreme
court of India under the Article 136 of The Constitution of India.
Such appeals are entertained only if the court feels that there is
a question of fundamental importance or public interest.
CONCLUSION
Viewed in its totality India does not come across as a
jurisdiction which carries an Anti-arbitration bias or more
significantly which carries an Anti-foreign bias. The number of
arbitration in the tribunal, notwithstanding the interventionist
instincts and expanded judicial review, Indian Courts do not cross
the limits and refrain themselves from interfering with the
arbitral awards. Judged on its touchstone India qualifies as an
arbitration friendly jurisdiction.
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tech.firstpost.com
timesofindia.indiatimes.com
www.lawyersclubindia.com indiankanoon.org
www.lawzonline.com www.legalserviceindia.net14
