High court enforces foreign arbitral award

By Krrishan Singhania and Ranbir Krishan, Singhania & Co
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A judgment by Delhi High Court on 27 November 2008 in the case of Glencore Grain Rotterdam v Shivnath Rai Harnarain (India) sets out the important principles to be followed in the enforcement of foreign awards in India, in light of objections raised by the Indian party against enforcement.

The plaintiff entered into 11 contracts with the defendant for the purchase of Indian rice. These contracts were negotiated and concluded through a London-based broker, Jackson Son & Co. The broker sent to both parties their contract confirmation notes. At the end of these notes, the broker stated, “All other terms as per London Rice Brokers Association (LRBA) Contract No. 3.” According to the plaintiff, clause 11 of the LRBA contract is an arbitration clause which provides for the settlement of any dispute under the contract by arbitration of the LRBA.

Krrishan Singhania Partner Singhania & Co
Krrishan Singhania
Partner
Singhania & Co

Clause 14 states that the contract was executed in England and the construction, validity and performance of the contract should be governed by English Law. Disputes arose between the parties, the plaintiff invoked the arbitration clause contained in clause 11 of the LRBA contract and two arbitrators were appointed.

The defendants objected that the arbitrators had no jurisdiction as the 11 contracts drawn were not binding upon them. The arbitrators gave their award in favour of the plaintiff. The petition in Delhi High Court was filed by the plaintiff for enforcement of the award.

The court framed two issues for determination: (i) Whether the petitioner had complied with the provisions contained in section 47(1)(a) to (c) of the Arbitration and Conciliation Act, 1996, for the enforcement of the award; and (ii) If the first issue was decided in the affirmative, whether the respondent had provided proof as required under section 48 of the act, that the enforcement is liable to be refused?

The petitioner produced (a) the original award duly authenticated; (b) duly certified copies of the agreements for arbitration, certified by the Public Notary, Rotterdam; (c) a certificate from the secretary of the LRBA certifying that the attached award was a true and correct copy, finalized and enforceable in England; and (d) the LRBA certificate which was attested and certified by the notary public of the City of London.

The court therefore held that the plaintiff had fulfilled the obligations laid down in section 47(1) of the act.

With regards to the second issue, the defendant sought to resist enforcement of the award under section 48(1) and (2) of the act. The court, relying on the judgment in Renusagar Power Co Ltd v General Electric Co (1994), and the views of Albert Jan Van Den Berg and Redfern and Hunter, held that the scope of enquiry did not enable a party to impeach the award on merits.

Any contest to the enforcement of an award is limited to the conditions set out in section 48 of the act. Seven conditions must be proved by the party resisting the enforcement of the award.

Ranbir Krishan Attorney Singhania & Co
Ranbir Krishan
Attorney
Singhania & Co

The first five conditions as set out in section 48(1) include: (a) the parties to the agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it; (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or the proceedings or was unable to present his case; (c) the award deals with a difference not contemplated by or beyond the scope of the submission to arbitration; (d) the composition of the arbitral authority or procedure was not in accordance with the agreement of the parties, or, failing such an agreement, was not in accordance with the law of the country where the arbitration took place; and (e) the award has not yet become binding on the parties, or has been set aside or suspended by an authority of the country in which that award was made.

The last two conditions as set out in section 48(2) are: (a) the subject matter of the difference cannot be settled by arbitration under the law of India; and (b) the enforcement of the award would be contrary to public policy of India.

The defendant raised three contentions: (i) the arbitral tribunal had no jurisdiction; (ii) the defendant was not given proper notice and (iii) the enforcement of the award would be contrary to the public policy of India.

The court held that there was an arbitration agreement between the parties which the defendant was fully aware of and hence the arbitral tribunal had jurisdiction to arbitrate on the matter. The court also stated that if the defendant failed to contest the matter the blame could not be laid at the door of the arbitrators. The court also maintained that the defendant had failed to clarify how the enforcement of the award would be contrary to the public policy of India, since it didn’t involve elements of fraud or corruption.

The court further observed that a party which holds a foreign arbitral award is entitled to forum shopping and cannot be refused enforcement, withdrawal of similar proceedings in English courts notwithstanding. Consequently, the award was deemed to be a decree of the court under section 49 of the act.

Krrishan Singhania is the managing partner and Ranbir Krishan is an attorney at Singhania & Co, a Mumbai-based law firm. Singhania has 20 years of experience in some of the firm’s core practice areas, which include arbitration, litigation and dispute resolution, aviation, and intellectual property.

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