This is a case of arbitration in which the Supreme Court demonstrated 'a balancing act' played by the courts while determining the enforceability of a foreign award. The judgment further clarified and set the threshold of Article 136 of the Constitution for challenging enforcement of a foreign award under section 48 of the Act.

Facts

Respondents in the matter had initiated arbitration under the London Court of International Arbitration Rules (2014) against the appellants, alleging material breach of some contractual obligations. The appellants, in turn, had raised various counterclaims against the respondents. On the basis of jurisdiction, material breaches, and counterclaims raised by the appellant, the arbitrator had pronounced three partial final awards. Eventually, the final award was passed in April 2017.

The four awards in question were not challenged before the courts of England, although the provision for such a challenge was available to the appellants. These awards were challenged for the first time when they were sought to be enforced before the High Court of Bombay. However, the challenge was rejected by the Bombay High Court, stating that none of the grounds raised to resist enforcement of the awards fell within the scope of the narrow exceptions provided in Section 48 of the Arbitration Act. Thereafter, the Appellants preferred a special leave petition before the Apex Court, under Article 136 of the Constitution of India.

Issue

The issue before the Court, in this case, was whether a court could still enforce a foreign award even if some grounds under Section 48 of the 1996 Act were made out.

Judgment

The Court took this opportunity to clarify that the scope of intervention of a Court under Article 136 of the Constitution of India is extremely limited and cannot be used to circumvent legislative policy set out in the Arbitration Act. Having established this, the Court proceeded to discuss the matter at hand in the context of international jurisprudence on enforcement of foreign arbitral awards and recognizing the "pro-enforcement bias" being adopted in countries where execution is sought. The Court also observed that Courts in a country of primary jurisdiction i.e., a country where the award has been rendered has far more power when it comes to review of an arbitral award, as compared to the Courts in countries of secondary jurisdiction i.e., the countries where the execution of the foreign award is sought. In the circumstances of this case, India being a country of secondary jurisdiction, the Courts in India have very limited scope to interfere with a foreign arbitral award.

Further, the Court stated that ground of violation of principles of "natural justice" may be invoked for resisting enforcement of a foreign arbitral award only if it is such that the party resisting enforcement was not given a fair chance of hearing. The onus seems to be on the party seeking the advantage of this ground to prove that it was not given a fair chance to present its case. As far as the "public policy" ground goes, the Court was of the view that failure of the arbitral tribunal to consider an issue which goes to the root of the matter or contravention of "fundamental policy" of Indian law may be valid grounds for resisting enforcement. However, contravention of "fundamental policy" is not to be equated with contravention of just about any statute or statutory provision, which may be easily rectifiable in nature. The appellant here tried to plead breach of a Foreign Exchange Management Act, 1999 provision as a violation of "fundamental policy", but this argument was outright declined by the Court.