10 November 2021
This article deals with our thoughts on some of the significant issues that may be faced if an arbitration award or decree passed by an arbitral tribunal or court within the territory of the United States of America (“U.S.”) is required to be enforced in India. Enforcing a U.S. arbitral award or decree can turn out to be cumbersome and expensive in India, if not enforced strategically. A pre-enforcement assessment with a comprehensive enforcement strategy would help parties enforce the U.S. award or decree in a time and cost efficient manner. Below we have set out how an arbitral award or decree obtained from the U.S. can be enforced in India.
Enforcement of Arbitral Award in India:
India and the U.S. are both signatories to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 i.e. the New York Convention, 1958. Sections 44 to 52 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) addresses foreign awards passed under the New York Convention. The Central Government of India has notified the U.S. as a ‘reciprocating territory’ for the purpose of enforcement of foreign awards under Part II of the Arbitration Act.
As far as procedure for enforcing an arbitral award from the U.S. in India is concerned, the party applying for the enforcement of the foreign award is required to make an application before the appropriate High Court in India under Section 47 of the Arbitration Act where assets of the judgment debtor is located. The application must be made along with (a) original award or a duly authenticated copy thereof; (b) original arbitration agreement or a duly certified copy thereof; and (c) any evidence required to establish that the award is a foreign award. Although, the Indian Stamp Act 1899 requires stamp duty to be paid on arbitral awards, the Supreme Court of India in M/s. Shri Ram EPC Limited v Rioglass Solar SA has held that foreign arbitral awards are not required to be stamped in order to be enforceable.
Once an application is made for enforcing the foreign award, an opportunity is granted to the counter party to file an objection against enforcement on the following grounds:
a. the parties to the arbitration agreement are under some incapacity, or the arbitration 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;
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;
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:
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;
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.
The Indian Court may also refuse the enforcement of arbitral award if it is of the view that:
a. the subject-matter of the difference is not capable of settlement by arbitration under the law of India;
b. the enforcement of the award would be contrary to the public policy of India.
Further, if an application for the setting aside or suspension of the award has been made to a competent authority in the U.S., the Indian Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the judgment debtor to give suitable security. If the Indian Court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of that Court. The Supreme Court of India in Government of India v. Vedanta Limited & Ors. has held that that the limitation for filing a petition for enforcement of foreign awards is required to be three years from the date when the right to apply accrues. In the case of a delay in filing the enforcement petition, the same can be condoned under Limitation Act, 1963.
Enforcement of Foreign Decree in India:
Foreign decrees are executed in India depending on whether they are a decree from reciprocating territory or a decree from a non-reciprocating territory.
The Code of Civil Procedure, 1908 (“CPC”) governs the execution of foreign decrees in India. A foreign decree can be enforced in India as if, the foreign decree had been passed by an Indian Court, however such foreign decree should have been passed by a superior court of any reciprocating territory.
The U.S. is not a reciprocating territory for the purpose of execution of foreign decrees in India. The decree of a non-reciprocating territory cannot be executed in India in the same manner as that for enforcing a decree of a reciprocating territory. The decree holder must, in order to protect its interest, file a fresh suit before the Indian Court of appropriate jurisdiction based on the foreign decree or the original underlying cause of action, or both. Such decree of the U.S. Court would have only an evidentiary value.
The Bombay High Court in Marine Geotechnics LLC v. Coastal Marine Construction and Engineering Ltd. has taken the view that decrees of both reciprocating and non-reciprocating territories must satisfy the test of conclusiveness as provided under Section 13 of the CPC. Therefore, just as a foreign decree from a reciprocating territory is required to surpass the test of conclusiveness provided under Section 13 of the CPC, a foreign decree from a non-reciprocating territory such as the U.S., for the purpose of enforcement, too is required to surpass the tests of conclusiveness. In other words, a foreign decree is considered not conclusive if:
a. the said foreign decree has not been pronounced by a court of competent jurisdiction;
b. the said foreign decree has not been given on the merits of the case;
c. the said foreign decree appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
d. the proceedings in which the judgment was obtained are opposed to natural justice;
e. the said foreign decree has been obtained by fraud; and
f. the said foreign decree sustains a claim founded on a breach of any law in force in India
If any one of the above grounds are not fulfilled, a foreign decree cannot be said to be conclusive and the Indian Courts may find such a foreign decree to be unreliable for the purpose of deciding the suit.
The decree holder must file a fresh suit within three years from the date of the foreign decree which will be considered as the date on which the cause of action has arisen.
Authors: Renjith Nair, Partner; Assisted by Gayatri Ramchandran, Associate
