Limitation for filing an enforcement/ execution petition of a foreign award under Section 47 of the 1996 Act;Scheme of the 1996 Act for enforcement of New York Convention awards;Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award?; Whether the foreign award is in conflict with the Public Policy of India? ;

 Part A-  Limitation for filing an enforcement/ execution petition of a foreign

award under Section 47 of the 1996 Act - 28

Part B - Scheme of the 1996 Act for enforcement of New York Convention

awards - 37

Part C - Whether the Malaysian Courts were justified in applying the

Malaysian law of public policy while deciding the challenge to the

foreign award? 44

Part D - Whether the foreign award is in conflict with the Public Policy of

India? - 54

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3185 OF 2020

(Arising out of SLP (Civil) No.7172 of 2020)

GOVERNMENT OF INDIA …APPELLANTS

Versus

1. VEDANTA LIMITED

(Formerly Cairn India Ltd.)

2. RAVVA OIL (SINGAPORE) PTE. LTD.

3. VIDEOCON INDUSTRIES LIMITED … RESPONDENTS

J U D G M E N T

 INDEX

I Background Facts 2

II Relevant Terms of the Production Sharing Contract 3

III Genesis of Dispute 8

IV Challenge to the Award before the Seat Courts at Kuala Lumpur 13

V Submissions on behalf of the Appellants 15

VI Submissions on behalf of the Respondents 22

VII Discussion and Analysis 28

 Part A Limitation for filing an enforcement/ execution petition of a foreign

award under Section 47 of the 1996 Act

28

 Part B Scheme of the 1996 Act for enforcement of New York Convention

awards

37

 Part C Whether the Malaysian Courts were justified in applying the

Malaysian law of public policy while deciding the challenge to the

foreign award?

44

 Part D Whether the foreign award is in conflict with the Public Policy of

India?

54

2

INDU MALHOTRA, J.

Leave granted.

The present Civil Appeal has been filed by the Government of India to challenge

the Judgment and Order dated 19 February 2020 passed by the Delhi High Court,

wherein the application under Section 48 of the Arbitration and Conciliation Act, 1996

being I.A. No. 3558 of 2015 filed by the Government of India has been dismissed; the

Application filed under Section 47 read with 49 being O.M.P. (EFA) (Comm) 15 of 2016

for the enforcement of the foreign award by the Respondents, and the I.A. No. 20149 of

2014 for condonation of delay in filing the execution petition by the Respondents were

allowed.

I. Background Facts

In 1993, the Government of India was desirous of exploring and developing the

petroleum resources in the Ravva Gas and Oil Fields (lying 10 to 15 kms offshore in the

Bay of Bengal), for which a global competitive tender was floated to invite bids. Pursuant

thereto, Videocon International Ltd. and Command Petroleum Holdings NV, the

predecessors of the Respondents submitted their bid to develop the Ravva Field along

with other bidders. The contract for this petroleum development was to be given on a

production sharing basis through a Production Sharing Contract.

On 28.10.1994, the Production Sharing Contract (the “PSC”) was executed

between the Government of India and the following parties to commercially explore and

develop the Ravva Oil and Gas Field:

(a) Command Petroleum (India) Pvt. Ltd, an Australian Company

established under the laws of the State of New South Wales, which

has since been renamed as Cairn Energy India Pty. Ltd;

(b) Ravva Oil (Singapore) Pty. Ltd, a company established under the

laws of Singapore;

(c) Videocon Industries Limited, a company established under the laws

of India; and

(d) Oil and Natural Gas Corporation Ltd (ONGC).

3

The PSC was for a period of 25 years, and the development and exploration of the

Ravva Field was to be conducted in terms of the ‘Ravva Development Plan’. As per

Articles 11.1 and 11.2 of the PSC, Addendums 1 and 2 to the Rvva Development Plan

were annexed to the PSC as Appendix F. The Respondents were required to carry out

Petroleum Operations in the Ravva Field as per the said Plan. The Ravva Development

Plan inter alia contemplated the drilling of 19 oil and 2 gas wells in the Ravva Field.

II. Relevant Terms of the Production Sharing Contract

The dispute between the Parties emanates from Article 15 of the PSC which inter

alia provides for the recoverability of Base Development Costs (“BDC”) incurred by the

Respondents-Claimants for the development of the Ravva Field. The relevant clauses of

the PSC are extracted hereinbelow :

(i) Article 11.2 of the PSC reads as :

“11.2 Ravva Development Plan

Appendix F to this contract shall constitute the approved development plan for the

Existing Discoveries (hereinafter to as “the Ravva Development Plan”). The

Ravva Development Plan shall be deemed to have been approved by the

Managing Committee.”

(ii) The Proposed Development Plan for the Ravva Field (including Addendums 1 and

2), which was accepted by the Parties as the approved Ravva Development Plan,

states as follows :

Ravva Field Development Drilling

Estimated Average Well Cost (in US dollars)

TOTAL COST OF AVERAGE WELL $ 2,430,000

Attachment 10

Ravva Field Development Capital Costs

ITEM COST

US $ million

Development of R10 and R17 Blocks

Oil and Associated Gas Reserves

Drill and Complete 19 Wells

SPM and Tanker Loading Line

Four Platforms

Production/Injection Pipelines to/from Shore

201.1

4

Infield Flowlines

Onshore Oil Process Facilities

Onshore Oil Storage

Gas Treatment and Compression

Water Injection

Gas Lift Pipeline and Compression

Project Management etc.

Development of R1,7,9

Non-Associated Gas Reserves

Drill and Complete 2 Wells

One Monopod Tower

Production Pipeline to Shore

Onshore Gas Treatment Plan

16.9

 TOTAL 218.0

Note: This would be the project, as further defined in the Development Plan,

which would be the subject of the cost variation condition. The cost stated

includes Import Duty but does not include expenditures related to exploration and

appraisal or field abandonment. The difference between the US $218 million total

and the estimated US $ 236 million total project capital cost quoted in Section 1

of the accompanying letter is the US $ 18 million abandonment cost.”

 (emphasis supplied)

(iii) Article 15.5 of the PSC provides for the procedure of recovery of Development

Costs incurred by the Respondents in the exploration, discovery and production of

oil and gas from the Ravva Oil and Gas Field. Article 15.5 is extracted hereinbelow:

“Article 15

RECOVERY OF COSTS FOR OIL AND GAS

15.1

15.2

15.3

15.4

15.5 Recovery of Development Costs and 5% Cost Cap

(a) Development Costs incurred by the Contractor in the Contract Area shall

be aggregated, and the Contractor shall be entitled to recover out of Cost

Petroleum the aggregate of such Development Costs at the rate of one hundred

percent (100%) per annum.

(b) Notwithstanding the provisions of Article 15.5 (a) and subject to the

remaining provisions of this Article 15.5, the Contractor shall not, for the

purposes only of determining the volume of Petroleum to which Contractor 

5

shall be entitled under Article 15.1 as Cost Petroleum, claim as Contract Costs

Contractor's Development Costs incurred after the Effective Date in connection

with Development operations under the Ravva Development Plan which exceed

Contractor's Base Development Costs (as hereinafter defined) by more than five

percent (5%).

(c) For the purpose of this Article 15.5 "Contractor's Base Development

Costs” means costs incurred after the Effective Date relating to the construction

and/or establishment of such facilities as are necessary to produce, process,

store and transport Petroleum from within the Existing Discoveries, in order to

enable Crude Oil production of 35,000 BOPD in accordance with the Ravva

Development Plan plus such costs as are allowed pursuant to Section 3.3 of the

Accounting Procedure. Such costs shall include, but not be limited to costs

incurred in relation to the following facilities and matters in connection

therewith, such as:

(i) Offshore tanker loading facilities for tankers up to 120,000 DWT;

(ii) Wellhead platforms capable of supporting up to total of 24 development

wells;

(iii) Follow lines necessary to transport well fluids ashore for processing;

(iv) Process facilities onshore for processing up to 40,000 Barrels of fluid per

day;

(v) Storage facilities with a nominal capacity of 500,000 Barrels;

(vi) Facilities to allow injection of water into the reservoirs for the purposes of

reservoir pressure maintenance;

(vii) Construction of an onshore supply base to support production operations;

(viii) Environmental studies;

(ix) Geophysical, geological and petroleum engineering studies;

(x) The drilling of nineteen (19) Development Wells and two (2) Gas

Production Wells;

(xi) Facilities for developing, transporting and processing NANG;

(xii) Project insurance; and

(xiii) Project Management.

The Parties agree that for the purposes of this Article 15.5 the Contractor's Base

Development Costs shall be the sum of US $188.98 million (as indicated in the

August 1993 Addendum to the Ravva Development Plan.)

….

6

(i) Having regard, inter alia, to the matters referred to in Article 15.5(d), the Parties

agree as follows:

(i) Costs relating to Site Restoration and exploration and appraisal

drilling shall not be subject to the limit on Contractor’s Development

Costs as provided in Article 15.5(b);

(ii) the costs of developing the reserves and/or potential reserves

and/or Satellite Fields referred to in Article 15.5(d) (i) shall not be subject

to the limit on Contractor's Development Costs as provided in Article

15.5(b) notwithstanding that the development of such reserves and/or

potential reserves and/or Satellite Fields may include shared flow lines,

injection lines, gas-lift lines and other facilities with those constructed as

part of the Ravva Development Plan;

(iii) In the event that the Contractor's Base Development Costs are

exceeded by more than five per cent (5%) as a result of:

(aa) delays in carrying out the Development Operations referred to in

Article 15.5(d) (iii) due to delay in obtaining necessary approval;

(bb) material changes to the Ravva Development Plan necessitated by

Contractor's review of data provided to the Companies by the Government

and/or ONGC after the Effective Date pursuant to Article 8.1) (iv), where

the Companies are able to establish that had such data been available

prior to the Effective Date in the Companies, acting reasonably, would

have included such changes in the Ravva Development Plan;

(cc) a material change to the international market conditions referred to in

Article 15.5(d)(v);

(dd) the range of physical reservoir characteristics being materially

different from the ranges for such characteristics on which the Ravva

Development Plan has been based;

(ee) a variation to the Ravva Development Plan approved by the

Management Committee; or

(ff) an event of force majeure as provided in Article 32;

Then the Management Committee shall, at the request of the operator, in a

meeting convened under Article 6,7, promptly consider what, if any,

increase should be made to the Contractor's base Development Costs to

fairly reflect the circumstances in the question PROVIDED THAT in the

case of delays referred to in Article 15.5 (e) (ii) (aa) the Management

Committee shall not be obliged to consider any increase where such delay

has been caused by the Contractor's failure to act in a diligent manner.

(e) In the event that:

7

(i) There is any dispute between the parties, whether or to what extent,

a circumstance referred to in Article 15.5(e) (iii) has arisen, or

resulted in the Contractor’s Base Development Costs being

exceeded by more than five percent (5%); or

(ii) The Management Committee is unable to agree whether an

increase should be made to the Contractor’s Base Development

Costs, or is unable to agree on the amount of any such increase;

then at any time after thirty (30) days from the date of the

Management Committee meeting referred to in Article 15.5(e)(iii),

any Party shall be at liberty to refer the matter to a sole expert for

decision in accordance with the provisions of Article 34.2.”

 (emphasis supplied)

(iv) Article 33 of the PSC provides the law applicable to the PSC, and reads as under:

“Article 33: APPLICABLE LAW AND LANGUAGE OF THE CONTRACT

“ 33.1 Indian Law to Govern

Subject to the provisions of Article 34.12 this Contract shall be governed and

interpreted in accordance with the laws of India.

33.2 Law of India Not to be Contravened

Subject to Article 17.1 nothing in this Contract shall entitle the Contractor to

exercise the rights, privileges and powers conferred upon it by this Contract in a

manner which will contravene the laws of India.”

 (emphasis supplied)

(v) Article 34.12 of the PSC reads as under :

“Article 34: Sole expert, conciliation and arbitration

“34.1…

34.2 References to Sole expert

Matters which, by the terms of this contract, the Parties have agreed to refer to a

sole expert and any other matter, which the Parties may agree to so refer, shall be

referred to an independent and impartial person of international standing with

relevant qualifications and experience, appointed by agreement between the

Parties. Any sole expert appointed shall be acting as an expert, and not as an

arbitrator, and the decision of the sole expert on matters referred to him shall be

final and binding on the Parties, and not subject to arbitration. If the Parties are

unable to agree on a sole expert, the matter may be referred to arbitration.

8

34.3 Unresolved Disputes

Subject to the provisions of this Contract, the Parties hereby agree that any

matter, unresolved dispute, difference or claim, which cannot be agreed or settled

amicably within twenty one (21) days may be submitted to a sole expert (where

Article 34.2 applies), or otherwise to an arbitral tribunal for final decision as

hereinafter provided.

…

34.12 Venue and Law of Arbitration Agreement

The venue of sole expert, conciliation or arbitration proceedings pursuant to this

Article, unless the Parties otherwise agree, shall be Kuala Lumpur, Malaysia and

use the English Language. In so far as practicable, the Parties shall continue to

implement the terms of this Contract notwithstanding the initiation of arbitral

proceedings and any pending claim or dispute. Notwithstanding the provisions of

Article 33.1 the arbitration agreement contained in Article 34 shall be governed

by the laws of England.”

 (emphasis supplied)

III. Genesis of the Dispute

(i) The PSC contained a Development Plan for the “Existing Discoveries”

known as the Ravva Development Plan. The scheme of the PSC was that the

Claimants would incur the costs of the petroleum operations, and were entitled to

recover their costs from the petroleum produced. The Government and the

Claimants would receive their respective share in the ratio fixed under the PSC.

(ii) Article 15 of the PSC provided for recovery of costs for oil and gas; Article

15.1 is a general provision with respect to contract costs; Article 15.2 to 15.4 pertain

to exploration costs. The disputes have arisen on the interpretation of Article 15.5

which pertains to Development Costs. Article 15.5(c) defines the Contractor’s Base

Development Costs, and enumerates a list of facilities and other matters required to

be constructed by the Claimants. The Contractor’s Base Development Costs were

the costs incurred after the effective date, relating to the construction and / or

establishment of such facilities as are necessary to produce, process and transport

petroleum within the “Existing Discoveries” in order to enable crude oil production

of 35,000 Barrels of Oil Per Day (“BOPD”) in accordance with the Ravva

Development Plan. The facilities included the construction of offshore tanker

loading facilities for tankers upto 120,000 DWT; wellhead platforms capable of

supporting upto a total of 24 Development Wells; process facilities; storage facilities 

9

with a nominal capacity of 500,000 Barrels; the drilling of 19 Development Wells

and 2 Gas Production Wells, etc. Article 15.5(b) and (c) recorded the Agreement

between the parties that the Contractor’s Base Development Costs shall be the “sum

of US $ 188.98 million plus five percent”.

It was envisaged that the production profile of 35,000 BOPD would be

reached after about two years, and the said production figure would be maintained

as a plateau production for 6 years thereafter. A total field production life of 14

years was estimated.

(iii) The Contractor’s Base Development Costs were agreed on certain

assumptions and / or factors set out in Article 15.5(d), including the range of

physical reservoir characteristics not being materially different from the ranges on

which the Ravva Development Plan was based.

(iv) There are specific exclusions contained in Article 15.5(e)(i) and (ii), and

sub-Article (e)(iii) which set out the circumstances in which the agreed amount of

the Contractor’s Base Development Costs may be increased by the Management

Committee; or in default by an expert, as provided in the dispute resolution clause.

(v) During the working of the PSC, the production rate of 35,000 BOPD was

achieved in 1997-1998. By 1998-1999, when the complete extent of the reserves in

the Ravva Field was known, the Claimants requested the Government of India to

permit an increased production of 50,000 BOPD. This increase was approved by

the Management Committee on 25.03.1998, and by the Government on 01.04.1999.

By 1999-2000, the increased rate of production at 50,000 BOPD was achieved. This

rate of production was maintained till 2008-2009, after which it decreased to 40,000

BOPD. The oil fields were found to be enormously profitable for both parties.

(vi) The Claimants submitted that by 1999-2000, they had incurred

Development Costs to the tune of about US $ 220 million to achieve the production

rate of 35,000 BOPD. The Claimants sought that the ‘cap’ in Article 15.5 should be

increased accordingly. After 1999-2000 and until 2007-2008, the Claimants incurred

Development Costs totalling a further US $ 278 million, which they contended that

they were entitled to recover as Cost Petroleum, since the ‘cap’ would no longer

apply post 1999-2000.

10

The Claimants claimed that they were entitled to more than US $ 264.35

million with respect to Development Costs incurred in 1994-1995 until 2008-2009.

(vii) On the other hand, the Government contended that all the Development

Costs claimed by the Claimants were incurred in connection with the Ravva Plan,

and were subject to the ‘cap’ on such costs as provided by Articles 15.5(b) and (c),

notwithstanding the increased quantity of production. The exceptions, were however

not subject to the ‘cap’, and were properly recovered from Cost Petroleum under

Article 15.5(a) which totalled to US $ 65.95 million.

(viii) The Government contended that the work contemplated by the Ravva Plan,

as per Article 15.5(c) was not completed till 1999-2000, when only 14 wells had

been drilled; the remaining 7 wells stipulated in Article 15.5(c)(xi) were drilled by

2007-2008. Consequently, the ‘cap’ on the Contractor’s Base Development Costs

would apply to the whole of the costs incurred till 2007-2008, and not the costs

incurred till 1999-2000. The Claimants were not entitled to claim more than the

Cost Petroleum agreed at US $ 198.43 million plus US $ 65.95 million (towards

exceptions).

(ix) The Government raised counter claims equivalent to the amounts which the

Claimants had claimed as Cost Petroleum, in excess of the agreed amount of US $

198.43 million plus US $ 65.95 million.

(x) On 18.08.2008, the disputes were referred to arbitration under Article 34 of

the PSC. The Claimants nominated Mr. Andrew Berkeley as its nominee-arbitrator;

the Government of India appointed Hon’ble Dr. Justice Adarsh Sein Anand (former

Chief Justice of India) as its nominee-arbitrator. The nominee arbitrators appointed

Rt. Hon’ble Sir Anthony Evans as the presiding arbitrator.

(xi) The tribunal passed the Award on 18.01.2011 inter alia holding that :

a) The Claimants constructed facilities which were necessary to produce,

process, store and transport Petroleum within the Existing Discoveries to

enable Crude Oil production of 35,000 BOPD. The Base Development

Costs under Article 15.5(c) was to be interpreted with reference to the

object of achieving a production profile of 35,000 BOPD, and the facilities

contemplated to achieve that profile. The Claimants achieved the target of 

11

35,000 BOPD by 1999-2000 by drilling of 14 wells, and incurred

Development Costs of US $ 220,737,381.

Article 15.5(b) and (c) imposed a cap on the Development Costs to the

agreed figure of US $ 188.98 million plus 5%. The Claimants were not

entitled to recover Development Costs in excess of US $ 198.43 million in

view of the cap provided under Article 15.5(c) of the PSC for the period

1994-95 to 1999-2000.

b) The Claimants had wrongly recovered US $ 22,307,381 in excess of the

capped figure of US $ 198.43 million as Base Development Costs during

the period 1994-95 to 1999-2000. The Government of India was entitled to

be credited with the said amount in the final settlement of cost recovery

accounts.

c) The PSC contained certain exceptions where the Claimants might incur

Development Costs in excess of those anticipated under the PSC and Ravva

Development Plan. These exceptions were covered under Article 15.5(d)

and (e) for increase of the BDC cap by the Management Committee.

d) During exploration in 1998-1999, when the complete extent of the

reserves in the Ravva Field came to be known, the Management Committee

approved an increase in the production profile from 35,000 to 50,000

BOPD. The Respondents proceeded to develop the Ravva Field to achieve

the production rate of 50,000 BOPD, and drilled 7 additional wells.

e) The tribunal accepted the evidence of the Expert Witness produced by

the Claimants, which found that the enlarged reservoir known as Block A/D

in the Ravva Field, showed a range of physical characteristics which were

“materially different” from those on which the Ravva Development Plan

was based. The range of relevant characteristics which were different from

what was anticipated included the fault line on the north-west boundary,

which was found not to be sealed, but to be porous; the permeability of the

rocks was found to be greater leading to increased production pressures; the

oil / water contact levels were found to be different. Article 15.5(e)(iii)(dd)

provided that a request for an increase in the BDC cap could be made, since 

12

materially different characteristics were encountered in the drilling of the

additional wells. In such circumstances, Claimants would be entitled to

recover the increased amounts, notwithstanding the limit imposed by

Article 15.5(b) and (c).

The tribunal held that the Respondents were entitled to recover US $

278,871,668 from the Cost Petroleum towards Development Costs incurred

by the Respondents for the period 2000-01 to 2008-09.

f) The Award declared as under :

“We therefore declare an award, as follows :

A. On the true construction of Article 15.5 of the Production Sharing

Contract 20th October 1994 (the PSC), all Development Costs

incurred by the Claimants after the date of the PSC in connection with

development operations under the Ravva Development Plan are

subject (as regards cost recovery from Cost Petroleum) to the cap

imposed by Article 15.5 (b) of the PSC, namely, the amount defined as

Base Development Cost by Article 15.5(c) plus 5%;

B. The figure stated in Article 15.5(c) of the PSC, namely, US $ 188.98

million, was agreed as the limit for Base Development Cost to be costrecovered by the Claimants in connection with the Ravva Development

Plan as it was agreed in August / October 1993;

C. The Claimants incurred Development Costs totalling $ 220,737,381 in

connection therewith up to and including the contract year (31 March

annually) 1999/2000;

D. The Claimants were not entitled to cost-recover such costs in excess of

the agreed amount plus five percent (5 %) namely, $ 198.43 million;

E. That the Claimants incurred Development Costs in connection therewith

from contract years 2000/2001 until 2008/2009 in the sum of $

278,871,668;

F. That in response to the Claimant’s request, the amount of Base

Development Cost in respect of such period shall be increased by $

278,871,668 pursuant to Article 15.5(e)(iii)(dd) of the PSC;

G. That the Claimants were entitled to recover all of such costs from Cost

Petroleum, namely, $ 278,871,668 made up as follows

13

accepted by the Respondent $ 65, 952, 604

increase under (f) above $ 212, 919, 064

Total $ 278, 871, 668

H. That the Claimants are and shall be entitled to cost-recover further Base

Development Cost incurred by them in connection with the Ravva

Development Plan after the contract years 2008/2009, if and to the

extent that

a. Such costs are incurred in further development of the reserves defined

by this Award as being materially different from the physical

characteristics of the reservoir on which the original (1993) Ravva

Development Plan was based; and / or

b. The amount of the cap under Article 15.5(b) of the PSC may be

increased hereafter pursuant to Article 15.5(e)(iii) of the PSC; and /

or

c. As the parties may agree;

But not otherwise;

I. That the Respondent is entitled to be credited with the sum of $

22,307,381 in the final settlement of cost recovery accounts in relation

to Development Cost incurred during contract years 1994/5 to

1999/2000 in excess of $ 198.43 million.”

(xii) The Respondents-Claimants submit that vide their letter dated 29.04.2011

addressed to the Government of India, the revised costs recovery account statements

as per the Award were enclosed, and credit of the excess Development Costs of US

$22,307,381 was given to the Government of India.

IV. Challenge to the Award before the Seat Courts at Kuala Lumpur

(i) On 15.04.2011, the Government of India challenged the Award under

Section 37 of the Malaysian Arbitration Act, 2005 before the Malaysian High Court,

on three principal grounds:

a) the Award deals with a dispute not contemplated by or not falling within

the terms of the submission to arbitration;

b) the Award contains decisions on matters beyond the scope of the

submission to arbitration; and

c) the Award is in conflict with public policy.

14

(ii) The High Court vide Order dated 30.08.2012 rejected the challenge to the

Award holding that the requirements of Sections 37(1)(a)(iv) and (v) and Section

37(1)(b)(ii) of the Malaysian Act have not been met, to sustain the challenge to the

award. The Award did not involve any “new difference,” which would have been

relevant for determination by the arbitral tribunal. The High Court found no reason

which would merit intervention with the Award.

(iii) Aggrieved by the Order dated 30.08.2012, the Government of India

preferred an Appeal before the Malaysian Court of Appeal, which was dismissed

vide Order dated 27.06.2014. The Malaysian Court of Appeal held that the tribunal

had given effect to the agreement between the parties under the terms of the PSC.

There was no determination by the tribunal which was outside the submissions of

the parties.

(iv) On 10.07.2014, a show cause notice was issued by the Government to the

Respondents-Claimants, raising a demand of US $ 77 million towards the

Government’s share of Profit Petroleum under the PSC. The Respondents were

directed to show cause as to why the said amount ought not to be directly recovered

from the amounts payable by the Oil Marketing Companies.

(v) On 21.07.2014, the Government filed an Application for Leave to Appeal

before the Malaysian Federal Court, which was rejected vide Order dated

17.05.2016.

(vi) During the pendency of the Application for Leave to Appeal before the

Malaysian Federal Court, on 14.10.2014, the Respondents-Claimants filed a Petition

for enforcement under Sections 47 read with 49 of the 1996 Act before the Delhi

High Court, along with an application for condonation of delay.

(vii) The Government filed an Application under Section 48 resisting the

enforcement of the Award before the Delhi High Court inter alia on the ground that

the enforcement petition was filed beyond the period of limitation; the enforcement

of the Award was contrary to the public policy of India, and contained decisions on

matters beyond the scope of the submission to arbitration.

(viii) The Delhi High Court rejected the Petition under Section 48 vide the

impugned judgment dated 19.02.2020, allowed the application for condonation of 

15

delay filed by the Respondents / Claimants, and directed the enforcement of the

Award.

(ix) Aggrieved by the judgment of the High Court, the Government has filed the

present Civil Appeal before this Court. This Court issued notice vide Order dated

17.06.2020, and directed the parties to maintain status quo till further orders.

(x) Subsequently, the Respondents filed I.A. No. 61469 of 2020 for

Modification of the Order of status quo dated 17.06.2020, and for interim directions.

The I.A. was taken up for hearing on 22.07.2020, when the Order of status quo was

partially modified, and a direction was issued that the sales revenues be paid directly

by the Oil Marketing Companies to the Respondents as per the Orders dated

28.05.2020 and 04.06.2020 passed by the Delhi High Court. The Order of status quo

would, however, continue to operate with respect to the bank guarantees / deposits

of US $ 93 million, during the pendency of the present proceedings.

V. Submissions on behalf of the Appellants

Shri. K.K. Venugopal, Learned Attorney General for India instructed by

Mr. K.R. Sasiprabhu, Advocate represented the Government of India. It was

submitted that the enforcement of the Award was liable to be refused on the

following principal grounds:

(a) Maintainability of the Petition

(i) The Appellants raised an objection to the maintainability of the application

on the ground that the petition for enforcement / execution of the foreign award

under Section 47 was barred by limitation.

Since there is no specific provision in the Limitation Act for enforcement of

foreign awards, it would necessarily fall under the residuary provision – Article 137.

(ii) Article 137 applies to the enforcement of foreign awards, which provides a

period of 3 years from “when the right to apply accrues”. It was submitted that the

right to apply would accrue from the date of making the award.

In the present case, the Award was passed on 18.01.2011, and the petition

for enforcement / execution was filed by the Respondents on 14.10.2014. The

petition was barred by 268 days beyond the period of limitation.

16

(iii) The execution petition for the purposes of the Limitation Act, has to be

treated as an application under the provisions of Order XXI of the CPC. The

execution of a foreign award under Section 49 of the 1996 Act, is carried out under

Order XXI CPC, as held in BCCI v Kochi Cricket (P) Ltd.

1

(iv) Section 5 of the Limitation Act, 1963 excludes an application filed under

Order XXI, CPC.

Section 5 reads as under:-

“5. Extension of prescribed period in certain cases. – Any appeal or any

application, other than an application under any of the provisions of Order

XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after

the prescribed period, if the appellant or the applicant satisfies the court that

he had sufficient cause for not preferring the appeal or making the application

within such period.”

(emphasis supplied)

Consequently, the delay in filing the application for enforcement / execution could

not be condoned.

(v) Even if it is presumed that the Respondents could invoke the provisions of

Section 5 of the Limitation Act, the Respondents failed to show sufficient cause for

condonation of delay in filing the enforcement petition. The ground of pendency of

the challenge to the award before the courts in Malaysia, could not be a sufficient

ground for condonation of delay.

(vi) It was submitted that the High Court erroneously held that an application

for enforcement of an arbitral award would be governed by the limitation period of

12 years under Article 136 of the Schedule to the Limitation Act, 1963.

Article 136 deals with an application for execution of any decree or order of

a civil court. This finding is contrary to the express holding in Bank of Baroda v

Kotak Mahindra Bank,2 wherein it has been held that the period of limitation of 12

years prescribed by Article 136 of the Schedule to the Limitation Act, applies only

to a decree or order passed by an Indian court. A foreign award could not be treated

to be a decree of a civil court.

1

(2018) 6 SCC 287.

2 2020 SCC OnLine SC 324.

17

(vii) It was submitted that the reasoning of the Delhi High Court is contrary to

the provisions of the 1996 Act, since it has ignored the express words of Section 49,

which provides that the court would require to be “satisfied that the foreign award is

enforceable under this Chapter”. It was submitted that this is further supported by

the language of Section 46 of the Act which pre-supposes an inquiry before the

award is said to achieve the status of the decree of a court. The purposive

interpretation adopted by the Ld. single judge, could not be used to negate the

express terms of the statute.

(viii) For the purpose of making a foreign award enforceable, the procedure

available under Part II of the Act is required to be followed. A petition for

enforcement and execution of such foreign award by way of a composite petition is

required to be filed under Section 47. A foreign award does not become a decree

until and unless it passes the muster of Sections 47 to 49, only after which it

acquires the status of a decree. It was only after the Court adjudicates on the

enforceability of the foreign award under Sections 47 to 48, would the foreign

award be deemed to be a decree of that Court. Post such adjudication, the foreign

award is declared as a deemed decree under Section 49 of the Act.

The foreign award has no legal sanctity, till an affirmative decision is

obtained under Section 48 of the 1996 Act. The foreign award gets the imprimatur

of the Court, before it can be enforced as a deemed decree under Section 49 of the

1996 Act.

(ix) Section 49 provides that where the Court is satisfied that the foreign award

is enforceable, it shall be deemed to be a decree of the Court. The limited purpose of

the deeming fiction was to apply the machinery provided under Order XXI of the

CPC to enable Indian Courts to execute foreign awards. The foreign award does not

transform into a decree of a civil court in India. The foreign award does not lose its

character as an arbitral award. It is only presumed to be a decree of the Court, for

the purposes of execution.

18

(b) Challenge on grounds of Public Policy of India

The Government inter alia contended that the foreign Award is in conflict

with the Public Policy of India as expounded in the Renusagar3

judgment. This

Court in Renusagar held that public policy of India, in the context of foreign awards

would be: (a) fundamental policy of Indian law; or (b) the interests of India; or (c)

justice or morality.

(i) The PSC related to the exploration and development of petroleum in its

natural state in the Territorial Waters and Continental Shelf of India, which is vested

in the Union of India. The Government was desirous that the petroleum resources be

exploited in the overall interests of India in accordance with good international

petroleum industry practices.

The PSC in recital (1) expressly states that petroleum being a natural

resource is vested in the Government of India under Article 297 of the Constitution

of India. Since the PSC related to the exploration of a natural resource, there was an

inherent character of national and public interest in the implementation of the PSC,

and the natural gas was held in the sovereign trust of the people of India. The

sovereignty over the petroleum produced would continue to remain with the nation,

since the natural gas is a resource which falls squarely within the purview of Article

297 of the Constitution of India.

(ii) The learned A.G. submitted on behalf of the Government of India that the

Award was in conflict with the public policy of India. The tribunal had ignored

various clauses of Article 15.5(c) read with the Ravva Development Plan, and

particularly Attachment 10 thereto, which contained the basis of computation of the

“sum” of US $ 188.98 million payable to the Respondents as Base Development

Costs.

Article 15.5(c) of the PSC read with the Ravva Development Plan formed

the basis of the dispute between the Parties. Article 15.5(c) provided that the Base

Development Cost shall mean the costs incurred after the Effective Date relating to

the construction and / or establishment of such facilities as were necessary to

produce Petroleum from within the Existing Discoveries in order to enable crude oil

3 1994 Supp (1) SCC 644. 

19

production of 35,000 BOPD in accordance with the Ravva Development Plan. Such

costs “shall include, but not be limited to” costs incurred in relation to the list of

facilities mentioned therein.

Sub-clause (xi) under Article 15.5(c) of the PSC specifically referred to the

“drilling of nineteen (19) Oil Wells and two (2) Gas Production Wells”. Under

Article 15.5(c), the parties had expressly agreed that the Contractor’s Base

Development Costs shall be the “sum” of US $ 188.98 million, as indicated in the

Ravva Development Plan, which was an integral part of the PSC. The sum of US $

188.98 million took into consideration the drilling of 21 wells as also the

construction of facilities mentioned in Article 15.5(c) of the PSC.

The tribunal proceeded on the false assumption that every aspect of Article

15.5 (c), must be subjugated to the achievement of 35,000 BOPD.

The failure of the tribunal to look into all the relevant documents,

particularly Attachment 10 to the Ravva Development Plan, which formed an

integral part of the PSC, and contained the computation of the amount payable as

Base Development Costs, would shock the conscience of the Court, and the award

would be in conflict with the basic notions of justice.

(iii) The Ld. A.G. contended that the said Plan contained the computation of the

sum of US $ 188.98 million to be paid towards Base Development Cost under

Article 15.5(c) of the PSC. The Ravva Plan provided the approximate cost of

drilling one well in the Ravva Field as being US $ 2.43 million.

Attachment 10 to Addendum 2 of the Ravva Development Plan sets out the

Development of R10 and R17 blocks – Oil and Associated Gas Reserves. It

provides for the drilling and completion of 19 wells, SPM and Tanker Loading

Lines, Four platforms, production/ injection pipelines to/from shore in-field flow

lines, Onshore oil process facilities, Onshore oil storage, Gas treatment and

compression, Water injection, Gas lift pipeline and Compression, Project

Management, etc., for which an amount of US $ 201.1 million was earmarked.

The total amount payable for the Ravva Development Cost (i.e. 210.1 +

16.9) was US $ 218 million. After deducting US $ 18 million towards abandonment

costs and US $ 11.32 million towards import duty, the amount payable would work 

20

out to US $ 188.98 million, which is the amount mentioned in Article 15.5(c) of the

PSC.

(iv) The tribunal on the basis of one isolated criteria mentioned in Article 15.5

(c) of achieving 35,000 BOPD passed the Award in favour of the Claimants. In fact,

the Claimants failed to fulfil the other requirements stated in Article 15.5(c) inter

alia with respect to development facilities, which included the drilling of 19 oil

wells and 2 gas reserves. This was specifically mentioned in the Ravva

Development Plan, which was an integral part of the PSC as stated in Article 11.2 of

the PSC. By deciding the claim on the basis of one isolated criteria, it had given a

go-by to all the other conditions, which would amount to re-writing the mandatory

terms of the contract between the parties, and foisting the Government with

obligations, which were never agreed to. The net result of the arbitral award was

that the Government of India suffered a huge loss to the tune of approximately

Rs.1,600 crores, which would be contrary to the interests of India.

The tribunal’s interpretation of Article 15.5(c) had the effect of substituting

the plain language of sub-clause (xi) of the said Article, with a new stipulation that

the cost of construction of the wells in the Ravva Field would be borne by the

Government, once the production capacity of 35,000 BOPD was achieved. This

interpretation rendered the stipulation of drilling 19 oil wells and 2 gas wells

contained in Article 15.5(c)(xi) as nugatory. The tribunal omitted any reference to

Attachment 10 of the Ravva Development Plan, which was crucial to the

determination of the dispute, and formed an integral part of the PSC, since it

contained the basis of the computation of the amount payable towards Base

Development Cost. Such an Award would shock the conscience of the Court, and

would be in conflict with the public policy of India, and contrary to the interests of

India.

The daily rate of production specified in Article 15.5(c) i.e. 35,000 BOPD,

was the ‘plateau’ rate of production which had to be achieved and maintained for a

period of 6 years of the contract period. It was not a one-time target to be achieved

by the Respondents. The plateau rate of production of 35,000 BOPD could not have

been related to the cap of US $ 188.98 million, which related only to the costs 

21

incurred for setting up specified facilities under Article 15.5(c), including the 21

wells.

The tribunal failed to note that the cap of US $ 188.98 million was relatable

to the facilities mentioned in Article 15.5(c) of the PSC, which expressly included

the drilling and completion of 19 oil wells and two gas wells. The tribunal erred in

holding that the cap of US $188.98 million related only to the achievement of a

production target of 35,000 BOPD, and adjusted the capped figure of US $ 188

million upon the drilling of 14 wells, when the production capacity of 35,000 BOPD

was achieved. The tribunal held that the costs with respect to the 7 wells drilled

thereafter, amounting to US $ 278 million, would have to be borne by the

Government to the Respondents.

(v) It was further submitted that the Counter Claim raised by the Government

was summarily disposed of in paragraph 100 of the Award, and the tribunal gave a

finding which was contrary to the express provisions of the contract.

(vi) It was submitted that Clauses 33.1 and 33.2 of the PSC provided that the

PSC was governed and interpreted in accordance with Indian law. The Malaysian

Courts at the seat of arbitration had erroneously applied the Malaysian Arbitration

Act (Act 646), 2005 while deciding the challenge to the Award. The Award was to

be tested on the basis of Indian law, as mandated by Article 33 of the PSC. The PSC

was to be interpreted as per Indian law.

(vii) Reliance was placed on paragraph 76.4 of the judgment in Reliance

Industries v. Union of India,

4 wherein this Court in the penultimate paragraph of that

judgment had observed that since the substantive law governing the contract is

Indian law, even the Courts in England (seat of arbitration), would be required to

decide the issue of arbitrability by applying the Indian law of public policy.

In this case, the Malaysian Courts had erroneously applied the Arbitration

Act of Malaysia to uphold the validity of the award.

4

(2014) 7 SCC 603.

22

VI. Submissions on behalf of the Respondents

The Respondents were represented by Mr. C.A. Sundaram and Mr. Akhil Sibal,

Senior Advocates.

(a) On Limitation

(i) It was contended that under Section 49 of the 1996 Act, the foreign award

becomes a decree of an Indian court after the objections to the award are adjudicated

by the enforcement court.

(ii) Article 136 of the Limitation Act prescribes a period of 12 years from the

date of the decree of the civil court, which would be the appropriate provision for

execution of a foreign award. In the present case, the foreign award was passed on

18.01.2011, and the Respondents had a period of 12 years to seek enforcement of

the award i.e. till 17.01.2023. The execution petition was, therefore, filed within the

period of limitation.

(iii) In the alternative, it was contended that if Article 137 of the Limitation Act

is held to be applicable for the enforcement of foreign awards, the limitation period

would commence from “when the right to apply accrues”, which does not

necessarily mean the date of the award. Had this been the intention of the

legislature, it would have been expressly provided so. The right to apply may accrue

even on a later date, as it has in the present case.

(iv) The Award was passed on 18.01.2011 granting a declaration in favour of

the Respondents-Claimants. The counter claim of the Government of India was

partly allowed, directing the Respondents to revise the cost recovery statements.

Consequently, an amount of US $ 22 million became payable by the RespondentsClaimants to the Government of India.

On 10.07.2014, the Government of India issued a notice to the Claimants to

show cause as to why US $ 77 million ought not to be directly recovered from the

amounts payable by the Oil Marketing Companies.

It was thus contended that the right to apply for enforcement of the award

accrued on 10.07.2014.

(v) It was further contended that the period of limitation would commence

from the date when the award attained finality at the seat of arbitration. In the 

23

present case, the award attained finality at the seat court on 10.05.2016, when the

Federal Court of Malaysia rejected the application of the Government of India

seeking leave to appeal.

(vi) It was submitted that irrespective of whether limitation under Article 136 or

137 is applicable for enforcement of foreign awards, Section 5 would be applicable

in both cases. Section 5 of the Limitation Act is applicable to any appeal, or any

application.

The application for enforcement / execution was filed by the RespondentClaimants under Sections 47 and 49 of the 1996 Act, which was a composite

application, as per the judgments in Fuerst Day Lawson Limited v. Jindal Exports

Limited5

and LMJ International Limited v. Sleepwell Industries Co. Ltd.6

(vii) It was further contended that limitation is a mixed question of fact and law.

Reliance was placed on Article 113 of the Limitation Act, which provides that any

suit for which no period of limitation is provided elsewhere in Schedule, the period

of limitation is 3 years from the date when the right to sue accrues. The Counsel

placed reliance on the judgment of this Court in Shakti Bhog Food Industries Ltd. v

the Central Bank of India7

. Article 137 is similar to the residuary provision in

Article 113 for filing applications, for which no period of limitation has been

provided elsewhere in this division, and provides a period of 3 years from the date

when the right to apply accrues.

If the substantive application was filed under Sections 47 and 49 of the

1996 Act, it would not fall under Order XXI of the CPC, and hence an application

under Section 5 of the Limitation Act, 1963 would be maintainable. Furthermore,

since there was uncertainty in the law, as the Madras High Court had held limitation

for enforcement of a foreign award to be 12 years, while the Bombay High Court

treated this as 3 years, there was sufficient ground to condone the delay.

It was submitted that there is a difference between the execution of a

foreign decree under Order XXI of the CPC, and the enforcement of a foreign award

under Section 49 of the 1996 Act. Further, even though Section 36 refers to the

5 2001 (6) SCC 356.

6 2019 (5) SCC 302.

7 2020 SCC OnLine SC 482.

24

enforcement of a domestic award in accordance with the provisions of the CPC,

Section 49 does not refer to the CPC.

The application for enforcement of the foreign award was thus a substantive

application under Section 47 of the 1996 Act, and not one under Order XXI of the

CPC. The provisions of Section 5 would consequently apply to the application for

enforcement, and the High Court was empowered to condone the delay in filing the

application.

(b) On Public Policy of India

(i) It was submitted that the dispute between the parties pertains to the

interpretation of Article 15.5(c) of the PSC, which provides for recoverability of

Base Development Costs incurred by the Respondent-Claimants in the Ravva Field.

Article 15.5(c) stipulated that the Respondents were entitled to recover US

$ 198 million ($ 188 million + 5%) as BDC for the facilities which they developed

to achieve a production capacity of 35,000 BOPD. At the time when the PSC was

entered into, it was envisaged that for achieving the production capacity of 35,000

BOPD, 21 wells would be required. However, the production capacity was achieved

by the Respondents with the construction of 14 wells.

(ii) The Respondents claimed recoverability of BDC as follows:

(a) US $ 220 million for achieving a production profile of 35,000

BOPD, spent by 1999/2000; and

(b) US $ 278 million for raising the production profile from 35,000

BOPD to 50,000 BOPD, spent from 2000/2001 to 2008/2009.

(iii) The Respondents contended that the cap of US $ 198.43 million was

applicable only to such facilities as were required to achieve the production capacity

of 35,000 BOPD, which in this case was achieved by the drilling of 14 wells. The

Respondents were not required to develop the 21 wells enlisted in Article 15.5(c) of

the PSC within the cap of US $ 198.43 million.

(iv) The tribunal had correctly interpreted Article 15.5(c) of the PSC, holding

that the cap of US $ 198 million on the BDC applied to costs incurred for achieving

the production profile of 35,000 BOPD. Since the Respondents had achieved the 

25

production capacity of 35,000 BOPD by 1999-2000 by drilling of 14 wells, the

Respondents were entitled to recover US $ 198.43 million.

(v) With respect to the balance 7 wells, it was found that the Ravva Field

featured materially different physical reservoir characteristics than those originally

perceived when the PSC was executed. Accordingly, the trigger under Article

15.5(e)(iii)(dd) came into operation during the period commencing from 1999-2000

to 2007-2008. For the drilling of the remaining 7 wells, the Respondents were

entitled to an additional sum of US $ 278 million.

(vi) It was contended that under the Award, the tribunal had made declarations

in favour of the parties. The tribunal had upheld the manner in which the

Respondents-Claimants had computed and recovered the costs due to them under

the PSC. The tribunal had declared a sum of US $ 22 million as payable by the

Respondents to the Government of India, which was paid after the Award was

passed.

(vii) It was contended that the issue of interpretation of the PSC, and a review of

the merits of the Award, could not be raised under Section 48 of the 1996 Act. The

scope of inquiry under Section 48 is limited, and the Appellants cannot invite the

Court to take a “second look” at the Award by seeking a review on merits.

Reliance was placed on the judgment of this Court in Shri Lal Mahal Ltd v

Progretto Grano Spa,

8 wherein it was held that:

“45. Moreover, Section 48 of the 1996 Act does not give an opportunity to

have a ‘second look’ at the foreign award in the award - enforcement

stage. The scope of inquiry under Section 48 does not permit review of the

foreign award on merits. Procedural defects (like taking into

consideration inadmissible evidence or ignoring/rejecting the evidence

which may be of binding nature) in the course of foreign arbitration do

not lead necessarily to excuse an award from enforcement on the ground

of public policy.

x x x

47. While considering the enforceability of foreign awards, the court does

not exercise appellate jurisdiction over the foreign award nor does it

enquire as to whether, while rendering foreign award, some error has

been committed. Under Section 48(2)(b) the enforcement of a foreign

award can be refused only if such enforcement is found to be contrary to

(1) fundamental policy of Indian law; or (2) the interests of India; or (3)

8

(2014) 2 SCC 433.

26

justice or morality. The objections raised by the appellant do not fall in

any of these categories and, therefore, the foreign awards cannot be held

to be contrary to public policy of India as contemplated under Section

48(2)(b).”

This view is further fortified by Explanation 2 of Section 48(2) of the Act

which clarifies that “the test as to whether there is a contravention with the

fundamental policy of Indian law, shall not entail a review on the merits of the

dispute”.

(viii) Reliance was placed on the judgment of this Court in Vijay Karia v

Prysmian Cavi E Sistemi Srl9

, wherein it was held that the enforcement of a foreign

award cannot be refused by taking a different interpretation of the contract. The

Supreme Court held that :

“45. The U.S cases show that given the “pro-enforcement bias” of the

New York Convention, which has been adopted in Section 48 of the

Arbitration Act, 1996 - the burden of proof on parties seeking enforcement

has now been placed on parties objecting to enforcement and not the other

way around; in the guise of public policy of the country involved, foreign

awards cannot be set aside by second guessing the arbitrator’s

interpretation of the agreement of the parties; the challenge procedure in

the primary jurisdiction gives more leeway to Courts to interfere with an

award than the narrow restrictive grounds contained in the New York

Convention when a foreign award’s enforcement is resisted.

x x x

96 … As has been held, referring to some of the judgments quoted

hereinabove, in particular Shri Lal Mahal (supra), the interpretation of an

agreement by an arbitrator being perverse is not a ground that can be

made out under any of the grounds contained in Section 48(1)(b). Without

therefore getting into whether the tribunal’s interpretation is balanced,

correct or even plausible, this ground is rejected.”

(emphasis supplied)

(ix) The Respondents contended that the parties had voluntarily chosen Kuala

Lumpur, Malaysia as the seat of arbitration. Having made such a choice, the

Government could not invite Indian courts to revisit the merits of its case under the

guise of Indian public policy. In this regard, reliance was placed on the judgment of

9 2020 SCC OnLine SC 177. 

27

this Court in Bharat Aluminium Co. v Kaiser Aluminium Technical Services Inc10

wherein it was held that :

“116. The legal position that emerges from a conspectus of all the

decisions, seems to be, that the choice of another country as the seat of

arbitration inevitably imports an acceptance that the law of that country

relating to the conduct and supervision of arbitrations will apply to the

proceedings.

x x x

163. In our opinion, the aforesaid judgment does not lead to the

conclusion that the parties were left without any remedy. Rather the

remedy was pursued in England to its logical conclusion. Merely, because

the remedy in such circumstances may be more onerous from the view

point of one party is not the same as a party being left without a remedy.

Similar would be the position in cases where parties seek interim relief

with regard to the protection of the assets. Once the parties have chosen

voluntarily that the seat of the arbitration shall be outside India, they are

impliedly also understood to have chosen the necessary incidents and

consequences of such choice. We, therefore, do not find any substance in

the submissions made by the learned counsel for the appellants, that if

applicability of Part I is limited to arbitrations which take place in India,

it would leave many parties remediless.”

 (emphasis supplied)

(x) The Counsel submitted that the view taken by the Tribunal was a plausible

view, since Article 15.5(e)(iii)(dd) is an exception i.e. when there is a change in the

range of the physical reservoir, the cap on the Base Development Costs may be

increased. The present case fell in this exception. It was argued that Clause 15.5(c)

defined the “Base Development Costs” to mean costs incurred after the effective

date relating to the construction and/or establishment of such facilities “as are

necessary” to produce petroleum in order to enable crude oil production of 35,000

BOPD in accordance with the Ravva Development Plan. It was argued that the

target to be achieved by the Claimants was to produce 35,000 BOPD.

The tribunal correctly relied on Article 15.5(e)(iii)(dd) to hold that the

Respondents were entitled to request for an increase in the Base Development Costs,

when the range of physical reservoir characteristics of the Existing Discoveries were

found to be materially different from those on which the Ravva Development Plan

was based. The Respondents had achieved the target of 35,000 BOPD by 1999-2000

with the drilling of 14 wells. The further wells which were drilled subsequently

10 (2012) 9 SCC 648.

28

would take into account the changed physical characteristics of the existing

reserves. The tribunal had correctly interpreted Article 15.5(c)(xi) to hold that it was

not an undertaking given by the Respondents to drill 21 wells, even though only 14

were required.

The Award therefore was not in conflict with the public policy of India, and

did not attract the grounds for refusal of enforcement envisaged under Section 48 of

the 1996 Act.

VII. Discussion and Analysis

Part A Limitation for filing an enforcement / execution petition of a foreign award

under Section 47 of the 1996 Act

(i) On this issue, divergent views have been taken by some High Courts with

respect to the period of limitation for filing a petition for enforcement of a foreign

award under the 1996 Act. It has therefore become necessary to settle the law on

this issue.

Noy Vallesina Engineering Spa v Jindal Drugs Limited11

A single judge of the Bombay High Court held that there is no period of

limitation provided by any of the Articles in the Schedule to the Limitation Act, for

making an application for execution of a foreign award. It was held that the

enforcement of a foreign award must take place in two stages. In the first stage, the

enforceability of the foreign award would be decided, which would be governed by

the residuary provision i.e. Article 137 which provides for 3 years from when the

right to apply accrues. After the issue of enforceability of award is determined, the

award is deemed to be a decree, and the execution of the award as a deemed decree

would be governed by Article 136 which provides a period of 12 years.

Louis Dreyfous Commodities Suisse v Sakuma Exports Limited12

Another view was taken by another single judge of the Bombay High Court

in this case, wherein it was held that the period of limitation for enforcement of a

11 2006 (3) Arb LR 510.

12 (2015) 6 Bom CR 258.

29

foreign award would be 3 years from the date when the right to apply accrues i.e.

Article 137 of the Limitation Act.

Imax Corporation v E-City Entertainment (I) Pvt. Limited13

In Imax, a third view was taken by another single judge of the Bombay

High Court, which followed the judgment in Fuerst Day Lawson,

14 and held that

since the foreign award is already stamped as a decree, the award holder may apply

for enforcement after steps are taken for the execution of the award under Sections

47 and 49 of the 1996 Act. In one proceeding there may be different stages, the first

stage being that the court would be required to decide on the enforceability of the

award, having regard to the requirement of the said provisions; and thereafter,

proceed to take further steps for execution of the award. It was concluded that

Article 136 of the Limitation Act would be applicable for the enforcement of a

foreign award.

M/s. Compania Naviera ‘SODNOC’ v Bharat Refineries Limited15

A single judge of the Madras High Court held that under the 1996 Act since

the foreign award is already stamped as a decree, the award holder can straight away

apply for enforcement of the foreign award as a decree holder, and would have a

period of 12 years for enforcement.

Cairn India Limited v Union of India16

The Delhi High Court in the impugned Judgment in this case held that

Article 136 of the Limitation Act would be applicable for the enforcement of a

foreign award. The execution of the award takes place in three stages: access,

recognition and enforcement. Section 47 deals with the first and second stages i.e.

access and recognition. A foreign award which passes the gateway of Section 47 is

at that stage enforceable on its own strength as a ‘foreign decree’, and is not

necessarily dependent on whether or not it goes through the process of Section 48.

13 (2020) 1 AIR Bom 82.

14 (2001) 6 SCC 356.

15 (2008) 1 Arb LR 344.

16 2020 SCC Online SC 324.

30

Such a foreign award is treated as being equivalent to a foreign decree, whose

enforcement may be refused only under Section 48. Section 48 pre-supposes that a

foreign award is a decree whose execution can be resisted by a party against whom

it is sought to be executed, if it is able to discharge the burden that the objections

can be sustained under one or more of the clauses of sub-section (1) and/or subsection (2) of Section 48 of the 1996 Act.

The Delhi High Court held that Article 136 of the Limitation Act would be

applicable for filing a petition for enforcement of a foreign award. Even if it is

assumed that Article 137 of the Limitation Act is applicable, sufficient grounds for

condonation of delay had been urged since the Applicants were under the bona fide

belief that the period of limitation for enforcement of a foreign award was 12 years

from the date of the Award, as held in Compania Naviera (supra) by the Madras

High Court.

(ii) Given the conflicting stands taken by various High Courts, we will now

discuss this issue.

The issue of limitation for enforcement of foreign awards being procedural

in nature, is subject to the lex fori i.e. the law of the forum (State) where the foreign

award is sought to be enforced.17 Article III of the New York Convention on the

Recognition and Enforcement of Foreign Awards, 1958 provides that :

“Each Contracting State shall recognize arbitral awards as binding and

enforce them in accordance with the rules of procedure of the territory

where the award is relied upon, under the conditions laid down in the

following Articles. There shall not be imposed substantially more onerous

conditions or higher fees or charges on the recognition or enforcement of

arbitral awards to which this Convention applies than are imposed in the

recognition or enforcement of domestic arbitral awards.”

 (emphasis supplied)

17 In re Consolidated Rail Corp 867 F Supp 25, 30 (DDC 1994) M Flatow v Islamic Republic of Iran and FMC

Corp 1999 US Dist LEXIS 18957; (2000) XXV Ybk Comm Arbn 641; Maritime Enterprises Ltd v Agromar

Lineas Ltd (1989) XIV Ybk Comm Arbn 693 ; Minister of Public Works of the Government of the State of

Kuwait v Sir Fredrick Snow & Partners [1983] 1 WLR 818 CA; Northern Sales Company Ltd v Comp

Maritima Villa Nova SA, Federal Court of Appeal, Winnipeg, Manitoba, 20 November 1991, (1993) XVIII Ybk

Comm Arbn 363; Good Challenger Nave Gante v Metalexportimport [2003] EWHC 10 (Comm). 

31

(iii) It would be instructive to refer to the Report of the General Assembly of the

United Nations Commission on International Trade Law in its 41st Session dated

16th June – 3

rd July, 2008 with respect to the legislative implementation of the

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New

York 1958) (UN Doc A/CN.9/656/Add.1), wherein it was noted that the Convention

does not prescribe a time limit for making an application for recognition and

enforcement of foreign awards. Article III of the Convention states that recognition

and enforcement of arbitral awards should be done in accordance with the rules of

procedure of the State where the award was to be enforced. The time limit may be

specifically provided in the national legislation for recognition or enforcement of

Convention awards, or it may be a general rule applicable to court proceedings.18

(iv) The limitation period for filing the enforcement / execution petition for

enforcement of a foreign award in India, would be governed by Indian law. The

Indian Arbitration Act, 1996 does not specify any period of limitation for filing an

application for enforcement / execution of a foreign award. Section 43 however

provides that the Limitation Act, 1963 shall apply to arbitrations, as it applies to

proceedings in court.

(v) The Limitation Act, 1963 does not contain any specific provision for

enforcement of a foreign award. Articles 136 and 137 fall in the Third Division of

the Schedule to the Limitation Act. Article 136 provides that the period of limitation

for the execution of any decree or order of a “civil court” is twelve years from the

date when the decree or order becomes enforceable.

(vi) Article 137 is the residuary provision in the Limitation Act which provides

that the period of limitation for any application where no period of limitation is

provided in the Act, would be three years from “when the right to apply accrues”.

18 Report of the General Assembly of the UN Commission on International Trade Law in its 41st Session dated

16th June – 3rd July, with respect to the legislative implementation of the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (New York 1958) (UN Doc A/CN.9/656/Add.1) (UN Doc

A/CN.9/656/Add.1). 

32

Articles 136 and 137 read as :

Description of the Application Period of

Limitation

Time from which period

begins to run

136. For the execution of any

decree (other than a decree

granting a mandatory

injunction) or order of any

civil court.

 Twelve Years When the decree or order

becomes enforceable or

where the decree or any

subsequent order directs

any payment of money or

the delivery of any

property to be made at a

certain date or at recurring

periods, when default in

making the payment or

deliver in respect of which

execution is sought, takes

place:

Provided that an application

for the enforcement or

execution of a decree

granting a perpetual

injunction shall not be

subject to any period of

limitation.

137. Any other application for

which no period of

limitation is provided

elsewhere in this division.

Three years When the right to apply

accrues.

(emphasis supplied)

(vii) Section 36 of the Arbitration Act, 1996 creates a statutory fiction for the

limited purpose of enforcement of a ‘domestic award’ as a decree of the court, even

though it is otherwise an award in an arbitral proceeding19. By this deeming fiction,

a domestic award is deemed to be a decree of the court20, even though it is as such

not a decree passed by a civil court. The arbitral tribunal cannot be considered to be

a ‘court,’ and the arbitral proceedings are not civil proceedings. The deeming fiction

is restricted to treat the award as a decree of the court for the purposes of execution,

even though it is, as a matter of fact, only an award in an arbitral proceeding.

19 Umesh Goyal v Himachal Pradesh Co-op Group Housing Society Ltd. (2016) 11 SCC 313.

20 Sundaram Finance Ltd. v Abdul Saman and Anr. (2018) 3 SCC 622.

33

In Param Singh Patheja v ICDS Ltd.

21

, this Court in the context of a

domestic award, held that the fiction is not intended to make an award a decree for

all purposes, or under all statutes, whether state or central. It is a legal fiction which

must be limited to the purpose for which it was created. Paragraphs 39 and 42 of the

judgment in Param Singh Patheja read as :

“39. Section 15 of the Arbitration Act, 1899 provides for “enforcing” the

award as if it were a decree. Thus a final award, without actually being

followed by a decree (as was later provided by Section 17 of the

Arbitration Act of 1940), could be enforced i.e. executed in the same

manner as a decree. For this limited purpose of enforcement, the

provisions of CPC were made available for realizing the money awarded.

However, the award remained an award and did not become a decree

either as defined in CPC and much less so far the purposes of an entirely

different statute such as the Insolvency Act are concerned.

…

42. The words “as if” demonstrate that award and decree or order are

two different things. The legal fiction created is for the limited purpose of

enforcement as a decree. The fiction is not intended to make it a decree for

all purposes under all statutes, whether State or Central.”

(emphasis supplied)

(viii) A Constitution Bench of this Court in Bengal Immunity v State of Bihar &

Ors.,

22 held that legal fictions are created only for some definite purpose. A legal

fiction is to be limited to the purpose for which it was created, and it would not be

legitimate to travel beyond the scope of that purpose, and read into the provision,

any other purpose how so attractive it may be.

In State of Karnataka v State of Tamil Nadu,

23 this Court held that :

“74. The Report of the Commission as the language would suggest, was to

make the final decision of the Tribunal binding on both the States and

once it is treated as a decree of this Court, then it has the binding effect. It

was suggested to make the award effectively enforceable. The language

employed in Section 6(2) suggests that the decision of the Tribunal shall

have the same force as the order or decree of this Court. There is a

distinction between having the same force as an order or decree of this

Court and passing of a decree by this Court after due adjudication.

Parliament has intentionally used the words from which it can be

construed that a legal fiction is meant to serve the purpose for which the

21 (2006) 13 SCC 322.

22 (1955) 2 SCR 603.

23 2017 (3) SCC 274.

34

fiction has been created and not intended to travel beyond it. The purpose

is to have the binding effect of the Tribunal's award and the effectiveness

of enforceability. Thus, it has to be narrowly construed regard being had

to the purpose it is meant to serve.”

 (emphasis supplied)

(ix) In Bank of Baroda v Kotak Mahindra Bank,

24 this Court took the view that

Article 136 of the Limitation Act deals only with decrees passed by Indian courts.

The Limitation Act was framed keeping in view the suits, appeals and applications

to be filed in Indian courts. Wherever the need was felt to deal with an application /

petition filed outside India, the Limitation Act specifically provided a time period

for that situation. The legislature has omitted reference to “foreign decrees” under

Article 136 of the Limitation Act. The intention of the legislature was to confine

Article 136 to the decrees of a civil court in India. The application for execution of a

foreign decree would be an application not covered under any other Article of the

Limitation Act, and would be covered by Article 137 of the Limitation Act.

(x) Foreign awards are not decrees of an Indian civil court. By a legal fiction,

Section 49 provides that a foreign award, after it is granted recognition and

enforcement under Section 48, would be deemed to be a decree of “that Court” for

the limited purpose of enforcement. The phrase “that Court” refers to the Court

which has adjudicated upon the petition filed under Sections 47 and 49 for

enforcement of the foreign award.

In our view, Article 136 of the Limitation Act would not be applicable for

the enforcement / execution of a foreign award, since it is not a decree of a civil

court in India.

(xi) The enforcement of a foreign award as a deemed decree of the concerned

High Court [as per the amended Explanation to Section 47 by Act 3 of 2016 confers

exclusive jurisdiction on the High Court for execution of foreign awards] would be

covered by the residuary provision i.e. Article 137 of the Limitation Act.

24 (2020) SCC OnLine 324.

35

A three judge bench of this Court in The Kerala State Electricity Board,

Trivandrum v T.P. Kunhaliumma25 held that the phrase “any other application” in

Article 137 cannot be interpreted on the principle of ejusedem generis to be

applications under the Civil Procedure Code. The phrase “any other application”

used in Article 137 would include petitions within the word “applications,” filed

under any special enactment. This would be evident from the definition of

“application” under Section 2(b) of the Limitation Act, which includes a petition.

Article 137 stands in isolation from all other Articles in Part I of the Third Division

of the Limitation Act, 1963.

(xii) The exclusion of an application filed under any of the provisions of Order

XXI of the CPC from the purview of Section 5 of the Limitation Act, was brought in

by the present Limitation Act, 1963. Under the previous Limitation Act, 1908 there

were varying periods of limitation prescribed by Articles 182 and 183 of the said

Act, as well as Section 48 of the CPC, 1908. Article 182 provided that the period of

limitation for execution of a decree or order of any civil court was 3 years, and in

case where a certified copy of the decree or order was registered, the period of

limitation was 6 years. Article 183 provided that the period of limitation to enforce a

decree or order of a High Court was 6 years. Section 48 of the CPC (which has since

been repealed by Section 28 of the Limitation Act of 1963) provided that the period

of limitation for execution of a decree was 12 years.

(xiii) The Law Commission in its 3rd Report dated 21st July 1956 noted that

different time limits were prescribed for filing an application for execution of

decrees or orders of civil courts. It was recommended that the time limit should be

absolute, and there should be no scope for any further extension of time by

acknowledgments. There was no justification for making a distinction between

decrees or orders passed by the High Court in exercise of original civil jurisdiction,

and other decrees. The maximum period of limitation for the execution of a decree

or order of any civil court was fixed at twelve years in the new Limitation Act, 1963

from the date when the decree or order became enforceable.

25 (1976) 4 SCC 634.

36

In this background, the present Limitation Act, 1963 excludes any

application filed under Order XXI from the purview of Section 5 of the Act, with

the object that execution of decrees should be proceeded with as expeditiously as

possible. The period of limitation for execution of the decree of a civil court is now

uniformly fixed at the maximum period of 12 years for decrees of civil courts.

(xiv) In view of the aforesaid discussion, we hold that the period of limitation for

filing a petition for enforcement of a foreign award under Sections 47 and 49, would

be governed by Article 137 of the Limitation Act, 1963 which prescribes a period of

three years from when the right to apply accrues.

(xv) The application under Sections 47 and 49 for enforcement of the foreign

award, is a substantive petition filed under the Arbitration Act, 1996. It is a wellsettled position that the Arbitration Act is a self-contained code.26 The application

under Section 47 is not an application filed under any of the provisions of Order

XXI of the CPC, 1908. The application is filed before the appropriate High Court

for enforcement, which would take recourse to the provisions of Order XXI of the

CPC only for the purposes of execution of the foreign award as a deemed decree.

The bar contained in Section 5, which excludes an application filed under any of the

provisions of Order XXI of the CPC, would not be applicable to a substantive

petition filed under the Arbitration Act, 1996. Consequently, a party may file an

application under Section 5 for condonation of delay, if required in the facts and

circumstances of the case.

(xvi) In the facts of the present case, the Respondents submitted that after the

Award dated 18.01.2011 was passed, the cost account statements were revised, and

an amount of US $ 22 million was paid to the Government of India.

On 10.07.2014, a show cause notice was issued to the respondents, raising a

demand of US $ 77 million, being the Government’s share of Profit Petroleum

26 Fuerst Day Lawson Ltd. v Jindal Exports Ltd. (2011) 8 SCC 333.

Kandla Export Corporation and Anr. v. OCI Corporation and Anr., (2018) 14 SCC 715; Shivnath Rai

Harnarain India Co. v. G.G. Rotterdam 164 (2009) DLT 197; Usha Drager Pvt. Ltd. v. Dragerwerk AG, (170)

DLT 628; Sumitomo Corporation v. CDC Financial Services (Mauritius) Limited (2008) 4 SCC 91; Conros

Steels Pvt. Ltd. v. Lu Qin (Hong Kong) Company Ltd. and Ors., 2015 (1) Arb LR 463 (Bombay): (2015) 2 Bom

CR 1.

37

under the PSC. It was contended that the cause of action for filing the enforcement

petition under Sections 47 and 49 arose on 10.07.2014. The enforcement petition

was filed on 14.10.2014 i.e. within 3 months from the date when the right to apply

accrued.

We hold that the petition for enforcement of the foreign award was filed

within the period of limitation prescribed by Article 137 of the Limitation Act,

1963.

In any event, there are sufficient grounds to condone the delay, if any, in

filing the enforcement / execution petition under Sections 47 and 49, on account of

lack of clarity with respect to the period of limitation for enforcement of a foreign

award.

Part B Scheme of the 1996 Act for enforcement of New York Convention awards

On account of certain anomalies in the impugned judgment with respect to

the enforcement of foreign awards, it has become necessary to discuss the scheme

contemplated under Chapter I Part II of the 1996 Act.

(i) In paragraph 20.5 of the judgment, the High Court has taken the view that a

foreign award which passes the gateway of Section 47, is “at that stage”, treated as

being “equivalent to a foreign decree” whose enforcement can be refused at the

request of the party against whom it is invoked, if it falls within the provisions of

Section 48 of the 1996 Act.

In paragraphs 20.7 and 20.8 of the impugned judgment, it has been held that:

“20.7 A plain reading of Section 49 would show that does not contain anything

which would relate it to Section 48 of the 1996 Act. Pertinently, Section 48

of the 1996 Act opens with the express “Enforcement of a foreign award

may be refused, at the request of the party against whom it is invoked, only

if that party furnishes to the court proof that …

20.8 The provision, to my mind, pre-supposes that a foreign award is a decree

whose execution can only be impeded by a party against whom it is sought

to be executed if it is able to discharge its burden that its objections can be

sustained under one or more clauses of sub-section (1) and / or subsection (2) of Section 48 of the 1996 Act.”

38

In paragraph 21, it has been held that a foreign award is enforceable on its

own strength, and is not necessarily dependent on whether or not it goes through the

process of Section 48 proceedings.

(ii) The aforesaid findings are contrary to the scheme of the Act, since a foreign

award does not become a “foreign decree” at any stage of the proceedings. The

foreign award is enforced as a deemed decree of the Indian Court which has

adjudicated upon the petition filed under Section 47, and the objections raised under

Section 48 by the party which is resisting enforcement of the award.

A foreign award is not a decree by itself, which is executable as such under

Section 49 of the Act. The enforcement of the foreign award takes place only after

the court is satisfied that the foreign award is enforceable under Chapter 1 in Part II

of the 1996 Act. After the stages of Sections 47 and 48 are completed, the award

becomes enforceable as a deemed decree, as provided by Section 49. The phrase

“that court” refers to the Indian court which has adjudicated on the petition filed

under Section 47, and the application under Section 48.

In contrast, the procedure for enforcement of a foreign decree is not

covered by the 1996 Act, but is governed by the provisions of Section 44A read

with Section 13 of the CPC.

The scheme of the 1996 Act for enforcement of New York Convention

awards is as follows :

(a) Part II Chapter 1 of the Arbitration and Conciliation Act, 1996 pertains to

the enforcement of New York Convention awards.

Under the 1996 Act, there is no requirement for the foreign award to be

filed before the seat court, and obtain a decree thereon, after which it becomes

enforceable as a foreign decree. This was referred to as the “double 

39

exequatur,” which was a requirement under the Geneva Convention, 1927 and

was done away with by the New York Convention, which superseded it.27

.

There is a paradigm shift under the 1996 Act. Under the 1996 Act, a party

may apply for recognition and enforcement of a foreign award, after it is

passed by the arbitral tribunal. The applicant is not required to obtain leave

from the court of the seat in which, or under the laws of which, the award was

made.

(b) Section 44 of the 1996 Act provides that a New York Convention award

would be enforceable, if the award is with respect to a commercial dispute,

covered by a written agreement in a State with which the Government of India

has a reciprocal relationship, as notified in the Official Gazette.

(c) Section 46 provides that a foreign award which is enforceable under

Chapter 1 of Part II of the 1996 Act, shall be treated as final and binding on the

parties, and can be relied upon by way of defence, set off, or otherwise, in any

legal proceeding in India.

(d) Section 47 sets out the procedure for filing the petition for enforcement /

execution of a foreign award. This section replicates Article IV (1) of the New

York Convention which requires the applicant to file the authenticated copy of

the original award, or a certified copy thereof, alongwith the original

agreement referred to in Article II, or a certified copy thereof, at the time of

filing the petition.

(e) Section 47 provides that the application shall be filed alongwith the

following evidence i.e. :

1. the original award, or an authenticated copy, in accordance with

the laws of the seat of arbitration;

2. the original arbitration agreement, or certified copy thereof;

3. such evidence, as may be necessary to prove that the award is a

foreign award.

27 Refer to Renusagar Power Co. Ltd. v General Electric Co. (1994) Suppl. (1) SCC 644, para 41.

 See also Escorts Limited v Universal Tractor Holding LLC (2013) 10 SCC 717.

40

In PEC Limited v Austbulk Shipping,28 this Court held that even though

Section 47 provides that the award holder “shall” produce such evidence

alongwith the application for enforcement of a foreign award, this being a

procedural requirement, a pragmatic, flexible and non-formalist approach must

be taken. The non-production of documents at the initial stage, should not

entail a dismissal of the application for enforcement. The party may be

permitted to produce the evidence during the course of the proceedings, to

enable the Court to decide the enforcement petition. It was observed that

excessive formalism in the matter of enforcement of foreign awards must be

deprecated.

(f) The award holder is entitled to apply for recognition and enforcement of the

foreign award by way of a common petition. In Fuerst Day Lawson Ltd. v

Jindal Exports Ltd.,29 this Court held that a proceeding seeking recognition and

enforcement of a foreign award has different stages : in the first stage, the

Court would decide about the enforceability of the award having regard to the

requirements of Sections 47 and 48 of the 1996 Act. Once the enforceability of

the foreign award is decided, it would proceed to take further effective steps

for the execution of the award. The relevant extract from the judgment reads

as:

“31. Prior to the enforcement of the Act, the Law of Arbitration in this

country was substantially contained in three enactments namely (1) The

Arbitration Act, 1940, (2) The Arbitration (Protocol and Convention) Act,

1937 and (3) The Foreign Awards (Recognition and Enforcement) Act,

1961. A party holding a foreign award was required to take recourse to

these enactments. Preamble of the Act makes it abundantly clear that it

aims at to consolidate and amend Indian laws relating to domestic

arbitration, international commercial arbitration and enforcement of

foreign arbitral awards. The object of the Act is to minimize supervisory

role of court and to give speedy justice. In this view, the stage of

approaching court for making award a rule of court as required

in Arbitration Act, 1940 is dispensed with in the present Act. If the

argument of the respondent is accepted, one of the objects of the Act will

be frustrated and defeated. Under the old Act, after making award and

prior to execution, there was a procedure for filing and making an award

a rule of court i.e. a decree. Since the object of the act is to provide speedy

28 (2019) 11 SCC 620.

29 (2001) 6 SCC 356.

41

and alternative solution of the dispute, the same procedure cannot be

insisted under the new Act when it is advisedly eliminated. If separate

proceedings are to be taken, one for deciding the enforceability of a

foreign award and the other thereafter for execution, it would only

contribute to protracting the litigation and adding to the sufferings of a

litigant in terms of money, time and energy. Avoiding such difficulties is

one of the objects of the Act as can be gathered from the scheme of the Act

and particularly looking to the provisions contained in Sections

46 to 49 in relation to enforcement of foreign award. In para 40 of the

Thyssen judgment already extracted above, it is stated that as a matter of

fact, there is not much difference between the provisions of the 1961 Act

and the Act in the matter of enforcement of foreign award. The only

difference as found is that while under the Foreign Award Act a decree

follows, under the new Act the foreign award is already stamped as the

decree. Thus, in our view, a party holding foreign award can apply for

enforcement of it but the court before taking further effective steps for the

execution of the award has to proceed in accordance with Sections

47 to 49. In one proceeding there may be different stages. In the first stage

the Court may have to decide about the enforceability of the award having

regard to the requirement of the said provisions. Once the court decides

that foreign award is enforceable, it can proceed to take further effective

steps for execution of the same. There arises no question of making

foreign award as a rule of court/decree again. If the object and purpose

can be served in the same proceedings, in our view, there is no need to

take two separate proceedings resulting in multiplicity of litigation. It is

also clear from objectives contained in para 4 of the Statement of Objects

and Reasons, Sections 47 to 49 and Scheme of the Act that every final

arbitral award is to be enforced as if it were a decree of the court. The

submission that the execution petition could not be permitted to convert as

an application under Section 47 is technical and is of no consequence in

the view we have taken. In our opinion, for enforcement of foreign award

there is no need to take separate proceedings, one for deciding the

enforceability of the award to make rule of the court or decree and the

other to take up execution thereafter. In one proceeding, as already stated

above, the court enforcing a foreign award can deal with the entire

matter. Even otherwise, this procedure does not prejudice a party in the

light of what is stated in para 40 of the Thyssen judgment.

 (emphasis supplied)

In a recent judgment rendered in LMJ International Ltd. v. Sleepwell

Industries30

, this Court held that given the legislative intent of expeditious

disposal of arbitration proceedings, and limited interference of the courts, the

maintainability of the enforcement petition, and the adjudication of the

objections filed, are required to be decided in a common proceeding.

30 (2019) 5 SCC 302.

42

(g) The enforcement / execution petition is required to be filed before the

concerned High Court, as per the amendment to Section 47 by Act 3 of 2016

(which came into force on 23.10.2015). The Explanation to Section 47 has

been amended, which now reads as:

“47. Evidence – (1)…

(2)…

[Explanation.- In this section and in the sections following in this

Chapter, “Court” means the High Court having original jurisdiction to

decide the questions forming the subject matter of the arbitral award if the

same had been the subject-matter of a suit on its original civil jurisdiction

and in other cases, in the High Court having jurisdiction to hear appeals

from decrees of courts subordinate to such High Court.”

 (emphasis supplied)

(h) Section 48 replicates Article V of the New York Convention, and sets out

the limited conditions on which the enforcement of a foreign award may be

refused.

Sub-sections (1) and (2) of Sections 48 contain seven grounds for refusal to

enforce a foreign award. Sub-section (1) contains five grounds which may be

raised by the losing party for refusal of enforcement of the foreign award,

while sub-section (2) contains two grounds which the court may ex officio

invoke to refuse enforcement of the award,31 i.e. non-arbitrability of the

subject-matter of the dispute under the laws of India; and second, the award is

in conflict with the public policy of India.

(i) The enforcement Court cannot set aside a foreign award, even if the

conditions under Section 48 are made out. The power to set aside a foreign

award vests only with the court at the seat of arbitration, since the supervisory

or primary jurisdiction is exercised by the curial courts at the seat of

arbitration.

The enforcement court may “refuse” enforcement of a foreign award, if the

conditions contained in Section 48 are made out. This would be evident from

the language of the Section itself, which provides that enforcement of a foreign

31 Malhotra’s Commentary on the Law of Arbitration, 4th Edition, Vol. 2, Pg. 1163-1164, Wolters Kluwer.

43

award may be “refused” only if the applicant furnishes proof of any of the

conditions contained in Section 48 of the Act.

(j) The opening words of Section 48 use permissive, rather than mandatory

language, that enforcement “may be” refused. 32 The use of the words “may

be” indicate that even if the party against whom the award is passed, proves the

existence of one or more grounds for refusal of enforcement, the court would

retain a residual discretion to overrule the objections, if it finds that overall

justice has been done between the parties, and may direct the enforcement of

the award.33 This is generally done where the ground for refusal concerns a

minor violation of the procedural rules applicable to the arbitration, or if the

ground for refusal was not raised in the arbitration.34 A court may also take the

view that the violation is not such as to prevent enforcement of the award in

international relations.35

(k) The grounds for refusing enforcement of foreign awards contained in

Section 48 are exhaustive, which is evident from the language of the Section,

which provides that enforcement may be refused “only if” the applicant

furnishes proof of any of the conditions contained in that provision.

36

32 Refer to Vijay Karia & Ors. v Prysmian Cavi E Sistemi SRL & Ors., 2020 SCC OnLine 177.

33 This has been eloquently stated by the Supreme Court of Hong Kong in a 1994 decision which confirmed that:

‘…the grounds of opposition are not to be inflexibly applied. The residual discretion enables the enforcing Court

to achieve a just result in all the circumstances’. See Hong Kong, Supreme Court, 13 July, 1994, China Nanhai

Oil Joint Service Corp v Gee Tai Holdings Co. Ltd., Yearbook Commercial Arbitration, XX-1995, 671, 677.

See also Westacre Investments Inc. v Jugoimport-SDRP Holding Co. Ltd. [1999] APP. L.R. 05/12; Cruz City 1

Mauritius Holdings v Unitech Limited, 2017 (3) ArbLR 20 (Delhi) : 239 (2017) DLT 649 [the petition for

special leave to appeal against this decision has been dismissed by the Supreme Court vide Order dated 19

January 2018 in SLP (Civil) No. 32244/2017].

34 Hong Kong : Supreme Court of Hong Kong, High Court, 15 January 1993 (Paklito Investment Ltd. v Klockner

East Asia) Yearbook Commercial Arbitration XIX (1994) pp.664-674 (Hong Kong No.6);

Supreme Court of Hong Kong, High Court, 16 December 1994 (Nanjing Cereals, Oils & Foodstuffs Import &

Export Corporation v Luckmate Commodities Trading Ltd.) Yearbook Commercial Arbitration XXI (1996) pp.

542-545 (Hong Kong No.9);

British Virgin Islands, Court of Appeal, 18 June 2008 (IPOC International Growth Fund Limited v L.V. Finance

Group Limited) Yearbook Commercial Arbitration XXXIII (2008) pp.408-432 (British Virgin Islands No.1);

United Kingdom : High Court, Queen’s Bench Division (Commercial Court), 20 January 1997 (China

Agribusiness Development Corporation v Balli Trading) Yearbook Commercial Arbitration XXIV (1999)

pp.732-738 (U.K. No.52).

35 Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial

Interpretation, 1981, Kluwer Law and Taxation Publishers at page 265.

36 Cruz City I Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649.

44

(l) The enforcement court is not to correct the errors in the award under

Section 48, or undertake a review on the merits of the award, but is conferred

with the limited power to “refuse” enforcement, if the grounds are made out.

(m) If the Court is satisfied that the application under Section 48 is without

merit, and the foreign award is found to be enforceable, then under Section 49,

the award shall be deemed to be a decree of “that Court”. The limited purpose

of the legal fiction is for the purpose of the enforcement of the foreign award.

The concerned High Court would then enforce the award by taking recourse to

the provisions of Order XXI of the CPC.

Part C Whether the Malaysian Courts were justified in applying the Malaysian law of

public policy while deciding the challenge to the foreign award?

The Ld. A.G. raised the ground that the Malaysian courts, while deciding

the challenge to the Award, ought to have applied the substantive law of the

contract, which was Indian law, and particularly the issue regarding conflict with the

public policy ought to have been decided in accordance with the law expounded by

the Supreme Court in paragraph 76.4 of the judgment in Reliance37 (supra).

This Court vide Order dated 24.08.2020 appointed Mr. Gourab Banerji,

Senior Advocate, as Amicus Curiae to assist on this limited issue.

Submissions of the Amicus Curiae :

Mr. Gourab Banerji, learned Amicus appeared before this Court on

26.08.2020, and made oral submissions with respect to the law which would be

applicable at the stage of challenge before the seat court, and the law applicable at

the enforcement stage.

The learned Amicus inter alia submitted that:

(i) The applicable law will have to be judged with reference to the specific

ground of challenge raised for setting aside the Award.

37

 Reliance Industries v. Union of India (2014) 7 SCC 603.

45

The Government of India challenged the arbitral award before the

Malaysian High Court on three grounds :

a. The Award dealt with a dispute not contemplated by, or not

falling within the terms of the submission to arbitration;

b. The Award contains decisions on matters beyond the scope of

the submission to arbitration; and

c. The Award is in conflict with public policy.

The first two grounds relate to excess of jurisdiction, which are covered by

Sections 37(1)(a)(iv) and (v) of the Malaysian Act, while the third ground concerns

public policy, which is covered by Article 37(2)(b)(ii) of the said Act.

(ii) A perusal of Articles 33.1 and 33.2 of the PSC would show that the

substantive law of the contract is Indian law. The arbitration agreement is governed

by “the laws of England” as provided by Article 34.12 of the PSC. Since the seat of

arbitration was in Kuala Lumpur, Malaysia, the curial law would be the Malaysian

law.

(iii) Malaysia has adopted the UNCITRAL Model Law. Section 37 of the

(Malaysian) Arbitration Act 2005 (“Malaysian Act”) is modelled on Article 34 of

the UNCITRAL Model Law, and incorporates all its grounds. Section 37 of the

Malaysian Arbitration Act reads as follows :

“Application for setting aside

37. (1) An award may be set aside by the High Court only if—

(a) the party making the application provides proof that—

(i) a party to the arbitration agreement was under any incapacity;

(ii) the arbitration agreement is not valid under the law to which the parties

have subjected it, or, failing any indication thereon, under the laws of Malaysia;

(iii) the party making the application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was otherwise

unable to present that party’s case;

(iv) the award deals with a dispute not contemplated by or not falling within the

terms of the submission to arbitration;

(v) subject to subsection (3), the award contains decisions on matters beyond the

scope of the submission to arbitration; or

46

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in

accordance with the agreement of the parties, unless such agreement was in

conflict with a provision of this Act from which the parties cannot derogate, or,

failing such agreement, was not in accordance with this Act; or

(b) the High Court finds that—

(i) the subject matter of the dispute is not capable of settlement by arbitration

under the laws of Malaysia; or

(ii) the award is in conflict with the public policy of Malaysia

(2) Without limiting the generality of subparagraph (1)(b)(ii), an award is in

conflict with the public policy of Malaysia where—

(a) the making of the award was induced or affected by fraud or corruption; or

(b) a breach of the rules of natural justice occurred—

(i) during the arbitral proceedings; or

(ii) in connection with the making of the award.

(3) Where the decision on matters submitted to arbitration can be separated

from those not so submitted, only that part of the award which contains

decisions on matters not submitted to arbitration may be set aside.”

(emphasis supplied)

(iv) The Malaysian Act provides that the public policy defence is to be decided

in accordance with Malaysian law, which is consistent with the Convention on the

Recognition & Enforcement of Foreign Arbitral Awards, 1958. The seat court while

deciding the public policy challenge, would decide the same in accordance with its

own domestic public policy.

(v) With respect to the challenge on the ground of “excess of jurisdiction,” it

was submitted that the correct position in law is that the issue of excess of

jurisdiction would be governed by English law, since Article 34.12 of the PSC

provides that the arbitration agreement contained in Article 34 shall be governed by

the laws of England.

Even though the substantive law of the contract was Indian law, it would

not be applicable for deciding the challenge to the issue of excess of jurisdiction.

(vi) The Malaysian High Court rejected the challenge made by the Government

of India to the award, and also the reliance placed on the decision of the Indian 

47

Supreme Court in ONGC v Saw Pipes38

. While doing so, the High Court

commented that the Court of Appeal in Singapore in PT Asuransi Jasa Indonesia

(Persero) v Dexia Bank SA39 had not followed the decision of the Supreme Court of

India in the Saw Pipes case. The learned Amicus submitted that these observations

of the Malaysian High Court were wholly unnecessary to the issues in question.

(vii) It was submitted that the High Court of Malaysia gave contradictory

findings with respect to the applicable law while deciding the issue of excess of

jurisdiction. Initially, in paragraphs 159 and 161, the Malaysian High Court was of

the view that the seat being in Kuala Lumpur, the applicable law to such a challenge

would be under Section 37(1)(a)(iv) and (v) of the Malaysian law, being the curial

law. Paragraphs 158 to 161 read as :

“Applicable law

158. I pause here to deal with this matter of the applicable law. The

Plaintiff has contended that read with section 30, the Court should set

aside the Award under subparagraphs 37(1)(a)(iv) and (v); and (b)(ii). By

virtue of section 30, the substantive law of the contract is Indian law of

contracts. On the arguments that it had canvassed and which I had set out

earlier, the Plaintiff contended that the Court should set aside the Award

relying on the Indian Supreme Court decision in Saw Pipes.

159. With respect, I must disagree. When dealing with challenges under

sub paragraph 37(1)(a)(iv) and (v); and (b)(ii), the challenge is not

determined by reference to he substantive law of the contract. As the seat

of the arbitration is Kuala Lumpur, the curial law is that of the seat, that

is, Malaysian law; and it remains so even after the Award has been

granted or handed down.

160. The Federal Court in The Government of India v Cairn Energy India

Pty. Ltd. & Anor. [2011] 6 MLJ 441, 455 was not inclined to follow the

decision of the Indian Supreme Court in Sumitomo Heavy Industries Ltd. v

ONGC Ltd. AIR 1998 SC 825, although endorsed subsequently in M/s.

Dosco India Ltd. v M/s. Doosan Infracore Co. Ltd. (Arbitration Petition

No 5 of 2008) 2010 (9) UJ 4521 (SC) that took an otherwise position :

“…Thus, in this case as Kuala Lumpur was selected as the juridical seat

of arbitration, the curial law is the laws of Malaysia, and we so hold. And

we would add that it is vital for parties to follow the mandatory rules of

the seat of arbitration since the application of such mandatory procedural

rules (curial law) of the seat will remain subject to the jurisdiction and

control of the courts of the seat of the arbitration including when

38 (2003) 5 SCC 705.

39 [2006] SGCA 41.

48

considering applications to set aside awards. We are therefore not

persuaded that the decision of the Indian Supreme Court should be

applied.”

161. Although Indian law is the substantive law or proper law of the

contract or PSC, and English law is the law of the arbitration agreement;

that in no way means that Indian lex arbitri applies on the determination

of an application under section 37.”

 (emphasis supplied)

In paragraph 165, the High Court, however, observed that English law was

the substantive law of the arbitration agreement and answers any questions on the

jurisdiction of the arbitral tribunal.

“165. I appreciate that the Court of Appeal in PT Asuransi was expressing

its views in the context of a challenge on the ground of a conflict with

public policy. This position however, maintains even when dealing with

the other grounds relied on here as the Indian law on “excess of

jurisdiction” is not the applicable law. I agree with the Defendants that

English law which is the substantive law of the arbitration agreement

answers any questions on the jurisdiction of the Arbitral Tribunal. This

was recognised in Sumitomo Heavy Industries v Oil and Natural Gas

Commission 1995 1 Lloyds’ Rep 45. ..”

 (emphasis supplied)

The High Court of Malaysia placed reliance on the judgment of Potter, J. in

Sumitomo Heavy Industries Ltd. v Oil and Natural Gas Commission,40 the relevant

portion of which reads as follows:

“...(2) The proper law of the arbitration agreement, i.e. the law governing

rights and obligations of the parties arising from their agreement to

arbitrate and, in particular, their obligation to submit their disputes to

arbitration and to honour an award. This includes inter alia questions as

to the validity of the arbitration agreement, the validity of the notice of

arbitration, the constitution of the tribunal and the question whether an

award lies within the jurisdiction of the arbitrator…”

(emphasis supplied)

(viii) The Government of India filed an appeal before the Malaysian Court of

Appeal. The Court of Appeal in paragraph 31 of the judgment, wherein it is opined

that :

“31. It is the contention of the Appellant that the applicable law to be

applied in the High Court proceeding is Indian curial law. This was

rejected by the learned Judge and we agree with the same as we are of the

40 [1994] 1 Lloyd’s Law Reports 45.

49

view that the law is settled by the Federal Court in the case of The

Government of India v Cairn Energy India Pty Ltd & Anor [2011] 6 MLJ

441 …”

(emphasis supplied)

(ix) In the decision of the Federal Court in the Government of India v Cairn

Energy Pty. Ltd. & Anor,

41 the Government of India referred five questions to the

Federal Court, of which questions 1 and 2 are relevant, and are set out below :

“1. Where an award from an international commercial arbitration is

submitted for review before the Malaysian courts under S.24(2) of the

Arbitration Act 1952 and the contract provides for the application of one

foreign law to govern the contract (namely the laws of India) and another

foreign law to govern the arbitration agreement (namely the laws of

England), is it proper for the Malaysian Court to apply Malaysian law

exclusively to decide the scope of intervention in arbitration awards or the

dispute at hand where the seat of arbitration is in Malaysia?

2. If English law is to apply as the choice of the parties, whether the

appropriate law is that as stated in the English Arbitration Act 1979

(amending the English Arbitration Act 1950) which provides for an appeal

to the High Court on any question of law arising out of an award”

The first question related to the seat of arbitration. The Government of

India contended that the English Law was applicable, and that the Malaysian Court

of Appeal ought to have applied the appellate power under the English Arbitration

Act, 1979.

The Federal Court however, held that this was an issue of curial law, and

the curial law ought to be the law of the seat of arbitration. The Federal Court of

Malaysia in paragraph 25 held that :

“[25] It is therefore clear that the English Court of Appeal clearly sets out

that the curial law ought to be that of the seat of arbitration. As stated

above, our courts have adopted a similar position. Thus, in this case as

Kuala Lumpur was selected as the juridical seat of arbitration, the curial

law is the laws of Malaysia and we so hold. And we would add that it is

vital for parties to follow the mandatory rules of the seat of arbitration

since the application of such mandatory procedural rules (curial law) of

the seat will remain subject to the jurisdiction and control of the courts of

the seat of the arbitration including when considering applications to set

aside awards. We are therefore not persuaded that the decisions of the

Indian Supreme Court should be applied.”

(emphasis supplied)

41 [2011] 6 MLJ 441.

50

(x) It was submitted that the court at the seat of arbitration, would have

exclusive jurisdiction to annul or set aside a foreign award. The learned Amicus

placed reliance on the judgment of the Constitution Bench in BALCO v Kaiser

Aluminium,42 and made specific reference to :

“153.…The expression under the law is the reference only to the

procedural law/curial law of the country in which the award was made

and under the law of which the award was made. It has no reference to the

substantive law of the contract between the parties. In such view of the

matter, we have no hesitation in rejecting the submission of the learned

counsel for the appellants.”

(emphasis supplied)

The Malaysian Courts rightly examined the public policy challenge in

accordance with the Malaysian Act, being the curial law of the arbitration.

With respect to the challenge on the ground of excess of jurisdiction, it was

submitted that it ought to have been tested on the basis of the proper law of the

arbitration agreement i.e. the English law.

On the applicable law at the enforcement stage, the Courts would determine

the same as per the public policy of India.

 Discussion and Findings

(i) In the present case, the law governing the agreement to arbitrate was the

English law as per Article 34.12 of the PSC, which provides that the arbitration

agreement shall be governed by the laws of England. Even though there seems to

have been some confusion in the application of the law governing the agreement to

arbitrate by the seat courts, as pointed out by the learned Amicus, we will not dwell

on this issue, since the enforcement court does not sit in appeal over the findings of

the seat court. Furthermore, in view of the principles of comity of nations, this Court

would not comment on the judgments passed by Courts in other jurisdictions.

The enforcement of the award is a subsequent and distinct proceeding from

the setting aside proceedings at the seat. The enforcement court would

independently determine the issue of recognition and enforceability of the foreign

42 (2012) 9 SCC 552.

51

award in India, in accordance with the provisions of Chapter 1 Part II of the Indian

Arbitration Act, 1996.

(ii) The courts having jurisdiction to annul or suspend a New York Convention

award are the courts of the State where the award was made, or is determined to

have been made i.e. at the seat of arbitration. The seat of the arbitration is a legal

concept i.e. the juridical home of the arbitration. The legal “seat” must not be

confused with a geographically convenient venue chosen to conduct some of the

hearings in the arbitration. The courts at the seat of arbitration are referred to as the

courts which exercise “supervisory” or “primary” jurisdiction over the award. The

“laws under which the award was made” used in Article V (1)(e) of the New York

Convention, is mirrored in Section 48(1)(e) of the Indian Arbitration Act, which

refers to the country of the seat of the arbitration, and not the State whose laws

govern the substantive contract.

The constitution bench in BALCO v Kaiser Aluminium43 held that :

“76. It must be pointed out that the law of the seat or place where the

arbitration is held, is normally the law to govern that arbitration. The

territorial link between the place of arbitration and the law governing that

arbitration is well established in the international instruments, namely, the

New York Convention of 1958 and the Uncitral Model Law of 1985. …

….

….

…

123. Thus, it is clear that the regulation of conduct of arbitration and

challenge to an award would have to be done by the courts of the country

in which the arbitration is being conducted. Such a court is then the

supervisory court possessed of the power to annul the award. This is in

keeping with the scheme of the international instruments, such as the

Geneva Convention and the New York Convention as well as the Uncitral

Model Law. It also recognises the territorial principle which gives effect

to the sovereign right of a country to regulate, through its national courts,

an adjudicatory duty being performed in its own country. By way of a

comparative example, we may reiterate the observations made by the

Court of Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ

1282 (CA)] wherein it is observed that:

“It follows from this that a choice of seat for the arbitration must be a

choice of forum for remedies seeking to attack the award.”

43 (2012) 9 SCC 552.

52

In the aforesaid case, the Court of Appeal had approved the observations

made in A v. B [(2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237]

wherein it is observed that:

“… an agreement as to the seat of an arbitration is analogous to an

exclusive jurisdiction clause. Any claim for a remedy … as to the validity

of an existing interim or final award is agreed to be made only in the

courts of the place designated as the seat of arbitration.”

(iii) The courts before which the foreign award is brought for recognition and

enforcement would exercise “secondary” or “enforcement” jurisdiction over the

award, to determine the recognition and enforceability of the award in that

jurisdiction.

(iv) We will now briefly touch upon the four types of laws which are applicable

in an international commercial arbitration, and court proceedings arising therefrom.

These are :

a) The governing law determines the substantive rights and obligations of the

parties in the underlying commercial contract. The parties normally make a

choice of the governing law of the substantive contract; in the absence of a

choice of the governing law, it would be determined by the tribunal in

accordance with the conflict of law rules, which are considered to be

applicable.

b) The law governing the arbitration agreement must be determined separately

from the law applicable to the substantive contract.44 The arbitration

agreement constitutes a separate and autonomous agreement, which would

determine the validity and extent of the arbitration agreement; limits of

party autonomy, the jurisdiction of the tribunal, etc.

c) The curial law of the arbitration is determined by the seat of arbitration. In

an international commercial arbitration, it is necessary that the conduct of

the arbitral proceedings are connected with the law of the seat of

arbitration, which would regulate the various aspects of the arbitral

proceedings. The parties have the autonomy to determine the choice of law,

44 Collins, in Lew (ed.), Contemporary Problems in International Arbitration (1986) p.126 at 127-131.

53

which would govern the arbitral procedure, which is referred to as the lex

arbitri, and is expressed in the choice of the seat of arbitration.45

The curial law governs the procedure of the arbitration, the

commencement of the arbitration, appointment of arbitrator/s in exercise of

the default power by the court, grant of provisional measures, collection of

evidence, hearings, and challenge to the award.

The courts at the seat of arbitration exercise supervisory or

“primary” jurisdiction over the arbitral proceedings, except if the parties

have made an express and effective choice of a different lex arbitri, in

which event, the role of the courts at the seat will be limited to those

matters which are specified to be internationally mandatory and of a nonderogable nature.

46

d) The lex fori governs the proceedings for recognition and enforcement of the

award in other jurisdictions. Article III of the New York Convention

provides that the national courts apply their respective lex fori regarding

limitation periods applicable for recognition and enforcement proceedings;

the date from which the limitation period would commence, whether there

is power to extend the period of limitation. The lex fori determines the court

which is competent and has the jurisdiction to decide the issue of

recognition and enforcement of the foreign award, and the legal remedies

available to the parties for enforcement of the foreign award.

(v) In view of the above-mentioned position, the Malaysian Courts being the

seat courts were justified in applying the Malaysian Act to the public policy

challenge raised by the Government of India.

The enforcement court would, however, examine the challenge to the award

in accordance with the grounds available under Section 48 of the Act, without being

constrained by the findings of the Malaysian Courts. Merely because the Malaysian

Courts have upheld the award, it would not be an impediment for the Indian courts

45 The Conflict of Laws, Dicey, Morris and Collins, (15th ed.) Volume 1, Chapter 16, paragraph 16-035, p. 843.

46 Russel on Arbitration, Sweet & Maxwell (24th Edition, 2015).

54

to examine whether the award was opposed to the public policy of India under

Section 48 of the Indian Arbitration Act, 1996. If the award is found to be violative

of the public policy of India, it would not be enforced by the Indian courts. The

enforcement court would however not second-guess or review the correctness of the

judgment of the Seat Courts, while deciding the challenge to the award.

(vi) In our view, the observation made in paragraph 76.4 of the

Reliance47judgment does not have any precedential value, since it is an

observation made in the facts of that case, which arose out of a challenge to a final

partial award on the issue of arbitrability of certain disputes. The last sentence in

paragraph 76.4 is not the ratio of that judgment, which is contained in paragraphs

76.1 to 76.3.

(vii) In the present case, the Appellants have challenged the Award inter alia on

the ground of excess of jurisdiction, and as being contrary to the public policy of

India. The observations made in paragraph 76.4 in the Reliance judgment, would not

be applicable to the present case, since the issue of arbitrability has not been raised,

and cannot be relied upon by the Appellants in the present case.

Part D Whether the foreign award is in conflict with the Public Policy of India?

(i) This issue is required to be determined in accordance with the conditions

laid down in Section 48 of the 1996 Act, which reads as :

“48. Conditions for enforcement of foreign awards. – (1) Enforcement of

a foreign award may be refused, at the request of the party against whom

it is invoked, only if that party furnishes to the Court proof that—

(a) the parties to the agreement referred to in Section 44 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 or, failing

any indication thereon, under the law of the country where the award was

made; or

(b) the party against whom the award is invoked was not given proper

notice of the appointment of the arbitrator or of the arbitral proceedings

or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not falling

within the terms of the submission to arbitration, or it contains decisions

on matters beyond the scope of the submission to arbitration:

47 (2014) 7 SCC 603.

55

Provided that, if the decisions on matters submitted to arbitration can be

separated from those not so submitted, that part of the award which

contains decisions on matters submitted to arbitration may be enforced; or

(d) the composition of the arbitral authority or the arbitral procedure was

not in accordance with the agreement of the parties, or, failing such

agreement, was not in accordance with the law of the country where the

arbitration took place; or

(e) the award has not yet become binding on the parties, or has been set

aside or suspended by a competent authority of the country in which, or

under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the Court

finds that—

(a) the subject-matter of the difference is not capable of settlement by

arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of

India.

“Explanation.—Without prejudice to the generality of clause (b) of this

section, it is hereby declared, for the avoidance of any doubt, that an

award is in conflict with the public policy of India if the making of the

award was induced or affected by fraud or corruption.”

(3) … ”

 (emphasis supplied)

(ii) The public policy defence for refusing enforcement under Section 48 of the

1996 Act was interpreted by a three-judge bench of this Court in Shri Lal Mahal

Ltd. v Progetto Grano SPA48

. This Court held that the law as expounded in the

Renusagar60 judgment, would be applicable to the ambit and scope of Section

48(2)(b) even under the 1996 Act. The relevant extract from the judgment reads as:

“27. In our view, what has been stated by this Court in Renusagar with

reference to Section 7(1)(b)(ii) of the Foreign Awards Act must equally

apply to the ambit and scope of Section 48(2)(b) of the 1996 Act. In

Renusagar it has been expressly exposited that the expression “public

policy” in Section 7(1)(b)(ii) of the Foreign Awards Act refers to the

public policy of India. The expression “public policy” used in Section

7(1)(b)(ii) was held to mean “public policy of India”. A distinction in the

rule of public policy between a matter governed by the domestic law and a

matter involving conflict of laws has been noticed in Renusagar. For all

48 (2014) 2 SCC 433.

56

this there is no reason why Renusagar3

should not apply as regards the

scope of inquiry under Section 48(2)(b). Following Renusagar, we think

that for the purposes of Section 48(2)(b), the expression “public policy of

India” must be given narrow meaning and the enforcement of foreign

award would be refused on the ground that it is contrary to public policy

of India if it is covered by one of the three categories enumerated in

Renusagar. Although the same expression ‘public policy of India’ is used

both in Section 34(2(b)(ii) and Section 48(2)(b) and the concept of ‘public

policy in India’ is same in nature in both the Sections but, in our view, its

application differs in degree insofar as these two Sections are concerned.

The application of ‘public policy of India’ doctrine for the purposes of

Section 48(2)(b) is more limited than the application of the same

expression in respect of the domestic arbitral award.

x x x

29. We accordingly hold that enforcement of foreign award would be

refused under Section 48(2)(b) only if such enforcement would be contrary

to (1) fundamental policy of Indian law; or (2) the interests of India; or (3)

justice or morality. The wider meaning given to the expression “public

policy of India” occurring in Section 34(2)(b)(ii) in Saw Pipes [ONGC

Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] is not applicable where

objection is raised to the enforcement of the foreign award under Section

48(2)(b).

x x x

45. Moreover, Section 48 of the 1996 Act does not give an opportunity to

have a 'second look' at the foreign award in the award-enforcement stage.

The scope of inquiry Under Section 48 does not permit review of the

foreign award on merits. Procedural defects (like taking into

consideration inadmissible evidence or ignoring/rejecting the evidence

which may be of binding nature) in the course of foreign arbitration do

not lead necessarily to excuse an award from enforcement on the ground

of public policy.

x x x

47. While considering the enforceability of foreign awards, the court does

not exercise appellate jurisdiction over the foreign award nor does it

enquire as to whether, while rendering foreign award, some error has

been committed. Under Section 48(2)(b) the enforcement of a foreign

award can be refused only if such enforcement is found to be contrary to:

(1) fundamental policy of Indian law; or (2) the interests of India; or (3)

justice or morality. The objections raised by the appellant do not fall in

any of these categories and, therefore, the foreign awards cannot be held

to be contrary to public policy of India as contemplated under Section

48(2)(b).”

(emphasis supplied)

57

(iii) In Renusagar Power Co. v General Electric Co.49 (“Renusagar”), this

Court held that “public policy” comprised of (1) the fundamental policy of Indian

law; (2) interests of India; and (3) justice or morality. It was held that :

“37. In our opinion, therefore, in proceedings for enforcement of a foreign

award under the Foreign Awards Act, 1961, the scope of enquiry before

the court in which award is sought to be enforced is limited to grounds

mentioned in Section 7 of the Act and does not enable a party to the said

proceedings to impeach the award on merit.

x x x

66. Article V(2)(b) of the New York Convention of 1958 and Section

7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of

recognition and enforcement of a foreign award on the ground that it is

contrary to the law of the country of enforcement and the ground of

challenge is confined to the recognition and enforcement being contrary to

the public policy of the country in which the award is set to be enforced.

There is nothing to indicate that the expression "public policy" in Article

V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign

Awards Act is not used in the same sense in which it was used in Article

1(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol

and Convention Act of 1937. This would mean that "public policy" in

Section 7(1)(b)(ii) has been used in a narrower sense and in order to

attract to bar of public policy the enforcement of the award must invoke

something more than the violation of the law of India. Since the Foreign

Awards Act is concerned with recognition and enforcement of foreign

awards which are governed by the principles of private international law,

the expression "public policy" in Section 7(1)(b)(ii) of the Foreign Awards

Act must necessarily be construed in the sense the doctrine of public

policy is applied in the field of private international law. Applying the said

criteria it must be held that the enforcement of a foreign award would be

refused on the ground that it is contrary to public policy if such

enforcement would be contrary to (i) fundamental policy of Indian law; or

(ii) the interests of India; or (iii) justice or morality.”

 (emphasis supplied)

The enforceability of the foreign award will be decided in accordance with

the parameters laid down in Renusagar i.e. whether the award is contrary to the (i)

fundamental policy of Indian law, or (ii) interests of India, or (iii) justice or

morality.

(iv) The Counsel for the Respondents submitted that it was the amended

Section 48, which would be applicable to the present case; or alternately, that the

amendments effected by the 2016 Amendment Act would have retrospective effect.

49 1994 Supp (1) SCC 644.

58

(v) We will now briefly touch upon the amendments made to Section 48, and

consider the issue whether the amendments have retrospective application, and are

applicable to the present case.

Section 48 was amended by Act 3 of 2016, which came into force w.e.f.

23.10.2015. These amendments were incorporated on the basis of the 246th Report

of the Law Commission. The relevant extracts from the 246th Report with respect to

the amendments in Section 48 are set out hereunder :

“SETTING ASIDE OF DOMESTIC AWARDS AND RECOGNITION /

ENFORCEMENT OF FOREIGN AWARDS

34. Once an arbitral award is made, an aggrieved party may apply for the

setting aside of such award. Section 34 of the Act deals with setting aside

a domestic award and a domestic award resulting from an international

commercial arbitration whereas section 48 deals with conditions for

enforcement of foreign awards. As the Act is currently drafted, the

grounds for setting aside (under section 34) and conditions for refusal of

enforcement (section 48) are in pari materia. The Act, as it is presently

drafted, therefore, treats all three types of awards – purely domestic

award (i.e. domestic award not resulting from an international

commercial arbitration), domestic award in an international commercial

arbitration and a foreign award – as the same. The Commission believes

that this has caused some problems. The legitimacy of judicial

intervention in the case of a purely domestic award is far more than in

cases where a court is examining the correctness of a foreign award or a

domestic award in an international commercial arbitration.

x x x

37. In this context, the Commission has further recommended the

restriction of the scope of “public policy” in both sections 34 and 48. This

is to bring the definition in line with the definition propounded by the

Supreme Court in Renusagar Power Plant Co Ltd v General Electric Co,

AIR 1994 SC 860 where the Supreme Court while construing the term

“public policy” in section 7(1)(b)(ii) of Foreign Awards (Recognition and

Enforcement) Act, 1961 held that an award would be contrary to public

policy if such enforcement would be contrary to “(i) fundamental policy of

Indian law; or (ii) the interests of India; or (iii) justice or morality”. The

formulation proposed by the Commission is even tighter and does not

include the reference to “interests of India”, which is vague and is

capable of interpretational misuse, especially in the context of challenge

to awards arising out of international commercial arbitrations (under S

34) or foreign awards (under S 48). Under the formulation of the

Commission, an award can be set aside on public policy grounds only if it

is opposed to the “fundamental policy of Indian law” or it is in conflict

with “most basic notions of morality or justice.”

 (emphasis supplied)

59

(vi) After the judgment of the Supreme Court in ONGC v Western Geco50

,

which had expanded the power of judicial review, the Law Commission submitted a

Supplementary Report on “Public Policy.” It was recommended that a clarification

needs to be incorporated to ensure that the phrase “fundamental policy of Indian

law” is narrowly construed. It was recommended that a new Explanation being

Explanation 2 be inserted into Section 34(2)(b)(ii) i.e. :

“For the avoidance of doubt, the test as to whether there is a

contravention with the fundamental policy of Indian law shall not entail a

review on the merits of the dispute.”

(vii) Section 48 was amended by Act 3 of 2016. By this amendment, the public

policy ground was given a narrow and specific construction by statute, by the

insertion of two Explanations. The amended Section 48 reads as :

“48. Conditions for enforcement of foreign awards. –

(1) …

(2) Enforcement of an arbitral award may also be refused if the Court

finds that—

(a) the subject-matter of the difference is not capable of settlement

by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public

policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an

award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or

corruption or was in violation of Section 75 or Section 81; or

(ii) it is in contravention with the fundamental policy of Indian

law; or

(iii) it is in conflict with the most basic notions of morality or

justice.

Explanation 2.—For the avoidance of doubt, the test as to whether

there is a contravention with the fundamental policy of Indian law shall

not entail a review on the merits of the dispute.

(3)... ”

 (emphasis supplied)

50 (2014) 9 SCC 263.

60

(viii) The highlighted portions show the amendments made to Section 48 by the

2016 Amendment Act. We find that these are substantive amendments, which have

been incorporated to make the definition of “public policy” narrow by statute. It is

relevant to note that the 2016 Amendment has dropped the clause “interests of

India,” which was expounded by the Renusagar judgment.

The newly inserted Explanation 2 provides that the examination of whether

the enforcement of the award is in conflict with the fundamental policy of Indian

law, shall not entail a review on the merits of the dispute.

(ix) The two Explanations in Section 48 begin with the words “For the

avoidance of any doubt.” It cannot, however, be presumed to be clarificatory and

retrospective, since the substituted Explanation 1 has introduced new sub-clauses,

which have brought about a material and substantive change in the section. A new

Explanation 2 has been inserted which states that the test as to whether there is a

contravention with the fundamental policy of Indian law, shall not entail a review on

the merits of the dispute. Since the amendments have introduced specific criteria for

the first time, it must be considered to be prospective, irrespective of the usage of

the phrase “for the removal of doubts.” Reliance is placed on the judgment of this

Court in Sedco Forex International Drill v Commissioner of Income Tax,

Dehradun51

 wherein it was held that an Explanation if it changes the law, it cannot

be presumed to be retrospective, irrespective of the fact that the phrases used are “it

is declared” or “for the removal of doubts”. In Ssangyong Engineering &

Construction Co. Ltd. v NHAI,52 this Court was considering the amendments made

to Section 34, wherein two Explanations to Section 34 had been inserted, which are

identically worded with the two Explanations to Section 48. In that case, a similar

ground of retrospectivity had been urged. This Court held that since the

Explanations had been introduced for the first time, it is the substance of the

amendment which has to be looked at, rather than the form. Even in cases where

“for avoidance of doubt”, something is clarified by way of an amendment, such

51 (2005) 12 SCC 717.

52 (2019) 15 SCC 131.

61

clarification cannot have retrospective effect, if the earlier law has been changed

substantially.

(x) Section 26 of the 2016 Amendment Act provided that :

“26. Act not to apply to pending arbitral proceedings. – Nothing

contained in this Act shall apply to the arbitral proceedings commenced,

in accordance with the provisions of section 21 of the principal Act, before

the commencement of this Act unless the parties otherwise agree but this

Act shall apply in relation to arbitral proceedings commenced on or after

the date of commencement of this Act.”

(xi) Section 26 of the Amendment Act came up for consideration before this

Court in BCCI v. Kochi Cricket Pvt Ltd.53 (“BCCI”). This Court held that the

Amendment Act would apply prospectively to:

(a) “arbitral proceedings” initiated on or after 23.10.2015 i.e. the date on

which the 2015 Amendment Act came into force;

(b) court proceedings commenced on or after 23.10.2015, irrespective

of whether such court proceedings arise out of, or relate to

arbitration proceedings which were commenced prior to, or after the

commencement of the Amendment Act.

(xii) The 2019 Amendment Act (to the Arbitration Act of 1996) inserted Section

87 as a clarificatory amendment, to provide that arbitral proceedings and court

proceedings “arising out of, or in relation to such proceedings” shall constitute a

single set of proceedings, for the applicability of the 2016 Amendment Act. Section

87 was inserted with retrospective effect from 23.10.2015 i.e. the date of coming

into force of the 2016 Amendment Act. Section 15 of the 2019 Amendment Act

provided that Section 26 of the 2015 Amendment Act stood deleted.

(xiii) In Hindustan Construction Co. Ltd v. Union of India & Ors.,54 the Supreme

Court struck down Section 87 of the 2019 Amendment Act, and restored Section 26

of the 2016 Amendment Act to the statute book. It was held in paragraph 54 that :

“54. The result is that the BCCI judgment will, therefore, continue to

apply so as to make applicable salutary amendments made by the 2015

Amendment Act to all court proceedings initiated after 23.10.2015.”

(emphasis supplied)

53 2018 6 SCC 287.

54 2019 (6) Arb LR 171 (SC).

62

(xiv) In view of the aforesaid discussion, we hold that the amended Section 48

would not be applicable to the present case, since the court proceedings for

enforcement were filed by the Respondents-Claimants on 14.10.2014 i.e. prior to the

2016 Amendment having come into force on 23.10.2015.

(xv) We will now consider the issue whether the award in the present case is in

conflict with the public policy of India, and contrary to the basic notions of justice,

as submitted on behalf of the Appellants.

Applying the unamended Section 48 to the present case, this Court in the

Renusagar judgment had placed reliance on the enunciation of the law on

international public policy in the judgment of the U.S. Court of Appeals for the 2nd

Circuit in Parsons & Whittemore Overseas Co. Inc. v. Societe Generale De

L’industrie du Papier (RAKTA),

55 wherein it was held that :

“7. Article V(2)(b) of the Convention allows the court in which

enforcement of a foreign arbitral award is sought to refuse enforcement,

on the defendant’s motion or sua sponte, if ‘enforcement of the award

would be contrary to the public policy of (the forum) country.’ The

legislative history of the provision offers no certain guidelines to its

construction. Its precursors in the Geneva Convention and the 1958

Convention’s ad hoc committee draft extended the public policy exception

to, respectively, awards contrary to ‘principles of the law’ and awards

violative of ‘fundamental principles of the law.’ In one commentator’s

view, the Convention’s failure to include similar language signifies a

narrowing of the defense [Contini, International Commercial Arbitration:

The United Nations Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, Am J Comp L at p. 304]. On the other hand,

another noted authority in the field has seized upon this omission as

indicative of an intention to broaden the defense [Quigley, Accession by

the United States to the United Nations Convention on the Recognition

and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71

(1961)].

8. Perhaps more probative, however, are the inferences to be drawn from

the history of the Convention as a whole. The general pro-enforcement

bias informing the Convention and explaining its supersession of the

Geneva Convention points toward a narrow reading of the public policy

defense. An expansive construction of this defense would vitiate the

Convention’s basic effort to remove preexisting obstacles to enforcement.

[See Straus, Arbitration of Disputes between Multinational Corporations,

in New Strategies for Peaceful Resolution of International Business

Disputes 114-15 (1971); Digest of Proceedings of International Business

55 508 F. 2d 969 (2nd Cir 1974).

63

Disputes Conference, April 14, 1971, at 191 (remarks of Professor W.

Reese)]. Additionally, considerations of reciprocity – considerations given

express recognition in the Convention itself – counsel courts to invoke the

public policy defense with caution lest foreign courts frequently accept it

as a defense to enforcement of arbitral awards rendered in the United

States.

9. We conclude, therefore, that the Convention’s public policy defense

should be construed narrowly. Enforcement of foreign arbitral awards

may be denied on this basis only where enforcement would violate the

forum state’s most basic notions of morality and justice.

x x x

…To read the public policy defence as a parochial device protective of

national political interests would seriously undermine the Convention’s

utility. This provision is not meant to enshrine the vagaries of

international politics under the rubric of “public policy. Rather, a

circumscribe public policy doctrine was contemplated by the Convention’s

framers and every indication is that the United States, in acceding to the

Convention, meant to subscribe to this supranational emphasis. Cf. Scherk

v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct.2449. 41L.Ed. 2d 270, 42

U.S.L.W., 4911, 4915-16 n. 15(1974)”

(emphasis supplied)

The judgment in Parsons has been followed in various other jurisdictions.56

In International Navigation Ltd. v Waterside Ocean Navigation Co. Inc.,

57 the Court

of Appeals, Second Circuit, U.S.A. held that the public policy defence must be

interpreted in light of the overriding object of the New York Convention. The Court

applied the judgment in Parsons (supra), and held that the public policy defence

should apply only where enforcement of the award would violate the basic notions

of morality and justice of the forum state. Any interference by the national court in

international arbitration on this ground should be minimal, and public policy under

the New York Convention should be interpreted narrowly. This position was

followed in the Southern District of New York in Telenor Mobile Communications

56 See, e.g., BCB Holdings Limited and The Belize Bank Limited v The Attorney General of Belize, Caribbean

Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ 5 (AJ); Traxys Europe S.A. v Balaji Coke

Industry Pvt Ltd., Federal Court, Australia, 23 March 2012, [2012] FCA 276; Uganda Telecom Ltd. v. Hi-Tech

Telecom Pty Ltd., Federal Court, Australia, 22 February 2011, [2011] FCA 131; Petrotesting Colombia S.A. &

Southeast Investment Corporation v. Ross Energy S.A., Supreme Court of Justice, Colombia, 27 July 2011;

Hebei Import & Export Corp. v. Polytek Engineering Co. Ltd., Court of Final Appeal, Hong Kong, 9 February

1999, [1999] 2 HKC 205; Renusagar Power Co. Ltd. v. General Electric Company & Anr., Supreme Court,

India, 7 October 1993, 1994 AIR 860; Brostrom Tankers AB v. Factorias Vulcano S.A., High Court, Dublin,

Ireland, 19 May 2004, XXX Y.B. Com. Arb. 591 (2005).

57 737 F.2d 150 (Second Circuit, 1984).

64

v Storm LLC.

58 It was opined that to refuse enforcement on the ground of public

policy, the decision would have to directly contradict the foreign law in such a

manner, so as to make compliance with one a violation of the other.

(xvi) Albert van den Berg in his commentary on “The New York Arbitration

Convention, 1958: Towards a Uniform Judicial Interpretation”

59

 opines that the

scope of jurisdiction of the enforcement court is :

“It is a generally accepted interpretation of the Convention that the court

before which the enforcement of the foreign award is sought may not

review the merits of the award. The main reason is that the exhaustive list

of grounds for refusal of enforcement enumerated in Article V does not

include a mistake in fact or law by the arbitrator. Furthermore, under the

Convention the task of the enforcement judge is a limited one. The control

exercised by him is limited to verifying whether an objection of a

respondent on the basis of the grounds for refusal of Article V (1) is

justified and whether the enforcement of the award would violate the

public policy of the law of his country. This limitation must be seen in the

light of the principle of international commercial arbitration that a

national court should not interfere with the substance of the arbitration.”

 (emphasis supplied)

(xvii) It would be useful to refer to the recommendations of the

International Law Association in the 70th Conference of the ILA held in New Delhi

on 2-6 April 2002, known as the “ILA Recommendations, 2002” on Public Policy,

which have been regarded as reflective of best international practices.

Clause 1 (a) of the General recommendations of the ILA provides that the

finality of awards in international commercial arbitration should be respected, save

in exceptional circumstances, and that such exceptional circumstances are found if

recognition or enforcement of the international arbitral award would be contrary to

international public policy.

Clause 1(d) of the Recommendations state that the expression

“international public policy” is used to designate the body of principles and rules,

which are : (i) fundamental principles, pertaining to justice or morality, that the

State wishes to protect even when it is not directly concerned, (ii) rules designed to

serve the essential political, social or economic interests of the State, these being

58 524 F.Supp. 2d 332 (SDNY 2007).

59 The New York Convention of 1958, Kluwer, 1981, pp. 267-268, cited in Redfern and Hunter, Law and Practice

of International Commercial Arbitration, fifth edn., 2009, p. 639, para 11.60.

65

known as “lois de police” or “public policy rules” and (iii) the duty of the State to

respect its obligations towards other States or international organisations. Clause

3(a) states that the violation of a mere mandatory rule (i.e. a rule that is mandatory,

but does not form part of the State’s international public policy), should not bar its

recognition and enforcement, even when said rule forms part of the law of the

forum, the law governing the contract, the law of the place of performance of the

contract, or the law of the seat of the arbitration.

(xviii) The International Council for Commercial Arbitration (ICCA) Guide to the

Interpretation of the 1958 New York Convention : A Handbook for Judges (2011),

states that while considering the grounds for refusal of a foreign award, the Court

must be guided by the following principles (i) no review on merits; (ii) narrow

interpretation of the grounds for refusal; and (iii) limited discretionary power.

The merits of the arbitral award are not open to review by the enforcement

court, which lies within the domain of the seat courts. Accordingly, errors of

judgment, are not a sufficient ground for refusing enforcement of a foreign award.

(xix) Given the well-settled position in law with respect to the finality of awards in

international commercial arbitrations, and the limits of judicial intervention on the

grounds of public policy of the enforcement State, we will advert to the facts of the

present case.

The Appellants have contended that the award may not be enforced, since it

is contrary to the basic notions of justice. We are unable to accept this submission

for the following reasons :

(a) firstly, the Appellants have not made out a case of violation of procedural

due process in the conduct of the arbitral proceedings. The requirement of

procedural fairness constitutes a fundamental basis for the integrity of the

arbitral process. Fair and equal treatment of the parties is a non-derogable and

mandatory provision, on which the entire edifice of the alternate dispute

resolution mechanism is based. In the present case, there is no such violation

alleged.

66

(b) secondly, the Appellants have not made out as to how the award is in

conflict with the basic notions of justice, or in violation of the substantive

public policy of India.

In the seminal judgment of Parsons (supra), which has been followed in

various jurisdictions, including by the Indian Supreme Court in the Renusagar

case, it was held that enforcement may be refused only if it violates the

enforcement State’s most basic notions of morality and justice, which has been

interpreted to mean that there should be great hesitation in refusing

enforcement, unless it is obtained through “corruption or fraud, or undue

means.”

The Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v

Dexia Bank SA,

60 while interpreting international public policy, opined that :

“59 Although the concept of public policy of the State is not defined in the Act or

the Model Law, the general consensus of judicial and expert opinion is that public

policy under the Act encompasses a narrow scope. In our view, it should only operate

in instances where the upholding of an arbitral award would “shock the conscience”

(see Downer Connect ([58] supra) at [136]), or is “clearly injurious to the public

good or … wholly offensive to the ordinary reasonable and fully informed member of

the public” (see Deutsche Schachbau v Shell International Petroleum Co Ltd [1987]

2 Lloyds’ Rep 246 at 254, per Sir John Donaldson MR), or where it violates the

forum’s most basic notion of morality and justice: see Parsons & Whittemore

Overseas Co Inc v Societe Generale de L’Industrie du Papier (RAKTA) 508 F 2d, 969

(2nd Cir, 1974) at 974. This would be consistent with the concept of public policy that

can be ascertained from the preparatory materials to the Model Law. As was

highlighted in the Commission Report (A/40/17), at para 297 (referred to in A Guide

to the UNCITRAL Model Law on International Commercial Arbitration: Legislative

History and Commentary by Howard M Holtzmann and Joseph E Neuhaus (Kluwer,

1989) at 914):

In discussing the term ‘public policy’, it was understood that it was not equivalent

to the political stance or international policies of a State but comprised the

fundamental notions and principles of justice… It was understood that the term

‘public policy’, which was used in the 1958 New York Convention and many other

treaties, covered fundamental principles of law and justice in substantive as well

as procedural respects. Thus, instances such as corruption, bribery or fraud and

similar serious cases would constitute a ground for setting aside.”

 (emphasis supplied)

This judgment has been recently affirmed by the Singapore High Court in

Dongwoo Mann + Hummel Co. Ltd. v Mann + Hummel GmbH.

61

60 [2006] SGCA 41.

61 [2008] SGHC 67.

67

(c) The gravamen of the challenge of the Appellants is that the tribunal has

given an erroneous interpretation of the terms of the PSC read with the Ravva

Development Plan, which would amount to re-writing the contract.

The view taken by the tribunal is based on an interpretation of Article 15.5

(c) read with the exceptions contained in Article 15.5 (e)(iii)(dd). The tribunal

held that the exception came into play on account of the range of physical

reservoir characteristics being materially different, from what was

contemplated in the Ravva Development Plan.

The tribunal relied upon the evidence of the Expert Witness produced by

the Claimants who deposed that the enlarged reservoir known as Block A/D

showed a range of physical characteristics, which were “materially different”

from those of the Fault Blocks defined in Article 11.1 of the PSC, on which the

Ravva Development Plan was based. Since there was a material change in the

physical reservoir characteristics of the existing reserves, Article 15.5

(e)(iii)(dd) would get triggered, which would enable the Claimants to request

for an increase in the capped figure of Base Development Costs under Article

15.5(e)(iii)(dd).

The tribunal noted that the PSC was entered into for a period of 25 years

and the parties envisaged the possibility that the Respondents may incur

Development Costs greater than those anticipated when the Ravva

Development Plan and the PSC were executed. Article 15.5(d) and (e) were

events where the capped figure under Article 15.5 (c) could be increased by the

Management Committee.

The tribunal held that the cap on Base Development Costs under Article

15.5(c) was to be read with reference to the object of the Plan to achieve the

production profile of 35,000 BOPD. The production profile of 35,000 BOPD

was achieved on the drilling of 14 wells by about 31st March 1999. The

reference to 21 wells under Article 15.5(c)(xi) was interpreted as being an

estimate of the number of wells contemplated by the parties in 1993, which

would be required to achieve the object of achieving the production profile of

35,000 BOPD. It could not be construed to be an undertaking by the Claimants

68

to drill 21 wells, even though the targeted production profile of 35,000 BOPD

had been achieved by the drilling of 14 wells.

The remaining 7 wells were drilled subsequently, not for the purposes of

the Ravva Development Plan, but to take into account the changed physical

characteristics of the existing reserves which were encountered. The costs of

US $ 278 million was incurred by the Respondents as a result of events which

fell within Article 15.5(e)(iii)(dd).

In 1998-1999 when the complete extent of the reserves in the Ravva Field

was known, the Management Committee, approved an increase in the

production profile from 35,000 BOPD to 50,000 BOPD on 25 March 1998.

The Respondents proceeded to develop the Ravva Field to enable a production

rate of 50,000 BOPD, and drilled 7 wells. The Respondents incurred costs of $

278,871,668 million towards the drilling of the 7 wells.

(d) The Appellants herein filed a counter claim, seeking sums equivalent to the

amount which the Respondents had claimed as Cost Petroleum, in excess of

the agreed figure of US $ 198 million limit.

On the interpretation of Article 15.5(c) of the PSC, and the circumstances

in which the PSC and the Ravva Development Plan, were executed, the

tribunal held that the Respondents were entitled to costs of US $ 278 million,

in excess of the US $ 198 million. The counter claim of the Appellants to the

extent of US $ 22 million was allowed by the tribunal.

(e) The Appellants are aggrieved by the interpretation taken by the tribunal

with respect to Article 15.5 (c) of the PSC and its other sub-clauses. The

interpretation of the terms of the PSC lies within the domain of the tribunal. It

is not open for the Appellants to impeach the award on merits before the

enforcement court. The enforcement court cannot re-assess or re-appreciate the

evidence led in the arbitration. Section 48 does not provide a de facto appeal

on the merits of the award. The enforcement court exercising jurisdiction under

Section 48, cannot refuse enforcement by taking a different interpretation of

the terms of the contract.

69

(f) We feel that the interpretation taken by the tribunal is a plausible view, and

the challenge on this ground cannot be sustained, to refuse enforcement of the

Award.

(g) With respect to the submission made on behalf of the Appellants that the

Production Sharing Contracts are “special contracts” pertaining to the

exploration of natural resources, which concerns the public policy of India, we

are of the view that the disputes raised by the Claimants emanate from the

rights and obligations of the parties under the PSC. The Award is not contrary

to the fundamental policy of Indian law, or in conflict with the notions of

justice, as discussed hereinabove. The term of the PSC was for a period of 25

years from 28.10.1994, which ended on 27.10.2019. We have been informed

that the term of the PSC has since been extended for a further period of 10

years, through the mutual agreement between the parties. This itself would

reflect that the performance of the obligations under the PSC were not contrary

to the interests of India.

(xx) We conclude that the enforcement of the foreign award does not contravene

the public policy of India, or that it is contrary to the basic notions of justice.

We affirm the judgment of the Delhi High Court dated 19.02.2020 passed

in I.A. No. 3558 / 2015 rejecting the Application filed under Section 48 of the 1996

Act, and confirm the order of enforcement passed on the petition under Sections 47

read with 49 for enforcement of the award, even though for different reasons.

The interim Orders of status quo dated 17.06.2020 and 22.07.2020 passed

by this Court stand vacated. The Award dated 18.01.2011 passed by the tribunal is

held to be enforceable in accordance with the provisions of Sections 47 and 49 of

the Arbitration & Conciliation Act, 1996.

(xxi) Before we part with this judgment, we record our sincere appreciation of

the assistance rendered by the Ld. Amicus Curiae, Shri Gourab Banerji, Senior

Advocate at short notice.

We also record our appreciation of the valuable assistance provided by the

Ld. Attorney General for India, Shri K.K. Venugopal and Mr. Tushar Mehta,

Solicitor General of India, Senior Advocates, who represented the Appellants, and 

70

Mr. C.A. Sundaram and Mr. Akhil Sibal, Senior Advocates, who appeared on behalf

of the Respondents, and assisted us through oral and written submissions.

(xxii) The Civil Appeal is accordingly dismissed, with no order as to costs.

All pending applications are accordingly disposed of.

Ordered accordingly.

New Delhi ………………………J.

September 16, 2020 (S. ABDUL NAZEER)

………………………J.

 (INDU MALHOTRA)

………………………J.

 (ANIRUDDHA BOSE)