The Supreme Court has, in its recent judgment of Government of India v. Vedanta Limited & Ors.1, settled the law relating to limitation for filing petitions for enforcement and execution of foreign awards in India. The Court held that petitions seeking enforcement/execution of foreign awards are required to be filed within three years from the date when the right to apply accrues and in the event there is any delay in filing such petitions, the same can be condoned under Section 5 of the Limitation Act, 1963 ("Limitation Act").
In 1994, a Product Sharing Agreement ("PSC") was entered into between the Government of India ("Appellant"), Cairn Energy India Pty. Ltd., Ravva Oil (Singapore) Pty. Ltd., Videocon Industries Limited (all "Respondents") and Oil and Natural Gas Corporation Ltd. for the purpose of inter alia exploring and developing petroleum resources in Ravva Gas and Oil Fields. As per Article 15.5 of the PSC, the Respondents were entitled to recover a certain sum of monies as its base development costs (for development of the Ravva Gas and Oil Fields). However, as the Respondents incurred higher development costs than what was contractually agreed upon, the Respondents sought to recover the same from the Appellant. Accordingly, disputes arose between the parties and the parties were referred to arbitration, seated at Kuala Lumpur, Malaysia. An award was passed in 2011, pursuant to which inter alia (a) the Respondents were directed to credit to the Appellant development costs recovered over and above the cap provided in Article 15.5 during the contract years 1994 to 2000; and (b) the Respondents were entitled to recover the entire base development costs incurred for the contract years 2000-2009 ("Award").
The Award was challenged by the Appellant before the Malaysian High Court and the Malaysian Court of Appeal. The said challenge was dismissed by both the courts in 2012 and 2014, respectively, as they found no reason which would merit intervention with the Award.
In 2014, the Respondents filed a petition for enforcement of the award under Section 47, read with Section 49 of the Arbitration and Conciliation Act, 1996 ("Act"), before the Delhi High Court, along with an application for condonation of delay. The Appellant filed an application under Section 48 of the Act, challenging the enforcement of the Award inter alia on the ground that the enforcement petition was filed beyond the period of limitation and that the Award was contrary to the public policy of India. The Delhi High Court rejected the Section 48 application and allowed the application for condonation of delay filed by the Respondents and directed that the award be enforced. This order of the Delhi High Court was challenged by the Appellant before the Supreme Court.
Limitation for filing enforcement petitions and the conflicting decisions of High Courts
Section 47 of the Act sets out the procedure for filing a petition for enforcement/execution of a foreign award. The enforcement of such a foreign award can be resisted by the party against whom it is invoked, and the court may refuse the enforcement if one or more of the grounds specified in Section 48 of the Act are satisfied. Once the court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of that court as per Section 49 of the Act. It is pertinent to note that none of the aforesaid sections specify the time period within which an application for enforcement/execution of a foreign award is required to be filed.
Under the Limitation Act, an application for execution of a decree or order of any civil court is required to be filed within twelve years from the date on which such a decree or order becomes enforceable (Article 136). The residuary provision of the Limitation Act, i.e., Article 137, provides a period of three years from the date when the right to apply accrues, for filing such applications for which no period of limitation is specified in the Limitation Act. There appears to be a difference in opinion on this issue, insofar as some courts are of the view that Article 136 of the Limitation Act would govern enforcement petitions for foreign awards while others have held that such enforcement petitions for foreign awards need to be filed within the time period specified in Article 137 of Limitation Act.
Bombay High Court
In Noy Vallesina Engineering Spa v. Jindal Drugs Limited,2 a Single Judge observed that in order to apply Article 136 of the Limitation Act, the decree or order of which execution is sought must be a decree or order of any civil court. A foreign award does not become a decree the moment it is pronounced by the arbitrator. Only after the enforcement court (while hearing a petition under Section 47 of the Act) records a finding that the foreign award is enforceable, it is deemed to have become a decree of that civil court. In view thereof, the Single Judge concluded that if a party in whose favour the foreign award is passed is desirous of making an application for execution of that award when the court is yet to record its satisfaction that the award is enforceable, the period of limitation for making such an application would be governed by Article 137 of the Limitation Act. Article 136 of the Limitation Act would become applicable only after the award is deemed to be a decree of the Court, which records the finding that it is enforceable by virtue of Section 49 of the Act and at no earlier point of time.
In a subsequent judgment, it was again held that the period of limitation for enforcement of a foreign award would be governed by Article 137 of the Limitation Act.3
Recently, a contrary view was taken by another Single Judge of the Bombay High Court in Imax Corporation v. E-City Entertainment (I) Pvt. Ltd.4 wherein, relying upon the judgment passed by the Supreme Court in Fuerst Day Lawson v. Jindal Exports Ltd5, it was inter alia held that a foreign award is stamped as a decree and hence it can be enforced and executed in one and the same proceeding and the limitation period for filing such an application would be twelve years from the date on which such an award becomes enforceable (as per Article 136 of the Limitation Act). This view appears to be in consonance with the view adopted by the Madras High Court in the matter of M/s. Compania Naviera 'SODNOC' v. Bharat Refineries Limited (discussed later). 6
Delhi High Court
The Delhi High Court has taken the view that the limitation period under Article 136 would be applicable for filing a petition for the enforcement of a foreign award, since a foreign award which has passed the stage of Section 47 of the Act becomes a foreign decree whose enforcement can only be refused under Section 48 of the Act.7
Madras High Court
In the matter of M/s. Compania Naviera 'SODNOC' v. Bharat Refineries Limited,8 the Madras High Court has held that since a foreign award is 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 twelve years for enforcement.
The Supreme Court's Decision
The Supreme Court observed that foreign awards are not decrees of an Indian civil court. A foreign award does not become a foreign decree at any stage of the proceedings. It is only a "deemed decree" of the Indian Court, which is adjudicated upon in the petition filed under Section 47 of the Act and the objections raised under Section 48 by the party resisting enforcement of the award. The phrase "that court" in Section 49 refers to the Indian Court which has adjudicated upon the petition filed under Section 47 and an application under Section 48. In view thereof, Article 136 of the Limitation Act would not be applicable for enforcement/execution of foreign awards since it is not a "decree of a civil court in India".
Accordingly, the period of limitation for filing a petition for enforcement of a foreign award under Section 47, read with Section 49, would be governed by Article 137 of the Limitation Act, which prescribes a limitation period of three years to file such a petition, from when the right to apply accrues.
It was further held that an application under Section 47, read with Section 49 of the Act, are substantive petitions and are not applications filed under Order XXI of the Code of Civil Procedure, 1908 ("CPC"), i.e., Execution of Decrees and Orders. Such petitions for enforcement of a foreign award would take recourse to the provision of Order XXI of the CPC only for the limited purposes of execution of the foreign award as "deemed decree". Therefore, Section 5 of the Limitation Act which inter alia bars extension of limitation periods for any application under Order XXI of the CPC would not be applicable to petitions filed under Section 47 of the Act. Accordingly, a party may file an application for condonation of delay along with a petition under Section 47 of the Act.
The decision of the Supreme Court is a much needed respite as it not only settles the law relating to limitation for filing enforcement/execution petition for a foreign award, but also draws an important distinction between "decree of a civil court in India" and "deemed decree". Acknowledging the lack of clarity and uncertainty created by divergent and contradictory decisions of various High Courts, the Supreme Court has held that petitions filed under Section 47 of the Act will be governed by Article 137 of the Limitation Act. Further, the Supreme Court has also held that a delay in filing such petitions under Section 47 can be condoned, under Section 5 of the Limitation Act. Whilst the petition for enforcement of the foreign award in this judgment was filed within the period of limitation prescribed by Article 137 of the Limitation Act, the Supreme court held that in the event there would have been any delay, the same could have been condoned on account of lack of clarity with respect to the period of limitation for enforcement of a foreign award.
Apart from settling the issue of limitation for filing enforcement/execution petition of a foreign award, some of the other imperative and important takeaways from the said judgement of the Supreme Court are as follows:
- The enforcement court cannot set aside a foreign award, even if the conditions under Section 48 are made out. It may only refuse enforcement of a foreign award. The power to set aside a foreign award only vests with the court at the seat of arbitration.
- Even if one or more of the grounds for refusal of enforcement under Section 48 of the Act are proved to exist, the court still has the discretion to allow enforcement of the foreign award if it finds that overall justice has been done between the parties.
- The grounds for refusing enforcement of foreign awards contained in Section 48 are exhaustive.
- The enforcement court cannot correct errors in the award or review the award on its merits. It can only refuse enforcement, if the limited grounds under Section 48 of the Act are made out.
- Once the enforcement court is satisfied that the foreign award is enforceable, the same is deemed to be decree of that court. The concerned High Court then enforces the award by taking recourse to the provisions of Order XXI of CPC.
To conclude, it can be said that this decision of the Supreme Court explains, with much required clarity, the procedure for enforcement of foreign awards in India and the role the Indian courts have to play in such proceedings.p>Footnotes
1 Judgment dated 16th September, 2020 in Civil Appeal No. 3185 of 2020.
2. 2006 (5) Bom CR 510
3. Louis Dreyfous Commodities Suisse S.A. v. Sakuma Exports Limited, (2015) 6 Bom CR 258.
4. (2020) 1 AIR Bom 82
5. (2001) 6 SCC 356
6. (2008) 1 Arb LR 344
7. Cairn India Limited v. Government of India, Judgement dated 19th February, 2020 in O.M.P. (EFA) (COMM) 15/2016
8. (2008) 1 Arb LR 344
September 28, 2020
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