2021 Supreme(SC) 290

SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, B.R. GAVAI, HRISHIKESH ROY, JJ.
Pasl Wind Solutions Private Limited – Appellant
Versus
Ge Power Conversion India Private Limited – Respondent
Civil Appeal No. 1647 of 2021, SLP (Civil) No. 3936 of 2021
Decided On : 20-04-2021

IMPORTANT POINTS
(1) Enforcement of Foreign Arbitral Award – Nothing stands in way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals.
(2) Freedom of contract needs to be balanced with clear and undeniable harm to public, even if facts of a particular case do not fall within crystallised principles enumerated in well-established ‘heads’ of public policy.
(3) If is found that two Indian nationals have circumvented a law which pertains to fundamental policy of India, such foreign award may then not be enforced under Section 48(2)(b) of Arbitration Act.
(4) There is no clash at all between Section 10 of Commercial Courts Act and explanation to Section 47 of Arbitration Act.
(5) There can be more than one ratio decidendi to a Judgment.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Sections 28, 34 and 44 read with Section 2(2) – Enforcement of Foreign Award – Expression “international commercial arbitration” is specifically spoken of in context of a place of arbitration being outside India, consequence of which is an arbitral award to be made in such place, but which is enforced and recognised under provisions of Part II of Arbitration Act – Context of this expression is different from context of definition of “international commercial arbitration” contained in Section 2(1)(f), which is in context of such arbitration taking place in India which only applies unless the context otherwise requires – Where, in an arbitration which takes place outside India, assets of one of parties are situated in India and interim orders are required qua such assets, including preservation thereof, courts in India may pass such orders – It is an arbitration which takes place between two parties in a territory outside India, New York Convention applying to such territory, thus making it an international commercial arbitration. (Para 14)

(B) Arbitration and Conciliation Act, 1996 – Section 44 – Contract Act, 1872 – Sections 23 and 28 – Whether two companies incorporated in India can choose a forum for arbitration outside India – Context of Section 44 is party-neutral, having reference to the place at which award is made – For this reason, it is not possible to accede to argument that very basis of Section 44 should be altered when two Indian nationals have their disputes resolved in a country outside India – Similarly, it is not possible to accede to argument that expression “unless the context otherwise requires” can be held to undo very basis of Section 44 by converting it from a seat-oriented provision in countries that are signatories to New York Convention to a person-oriented provision in which one of parties to arbitration agreement has to be a foreign national or habitually resident outside India – Section 28(1)(a) of Arbitration Act makes no reference to an arbitration being conducted between two Indian parties in a country other than India, and cannot be held, by some tortuous process of reasoning, to interdict two Indian parties from resolving their disputes at a neutral forum in a country other than India. (Paras 21, 25, 26, 52 and 57)

(C) Arbitration and Conciliation Act, 1996 – Section 48 read with Section 34 – Whether two companies incorporated in India can choose a forum for arbitration outside India – Party autonomy has been held to be the brooding and guiding spirit of arbitration – Nothing stands in way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals – If is found that two Indian nationals have circumvented a law which pertains to fundamental policy of India, such foreign award may then not be enforced under Section 48(2)(b) of Arbitration Act – In an international commercial arbitration between an Indian national habitually resident outside India and an Indian national resident in India, even when arbitration takes place in India resulting in an award being made in India, ground available under Section 34(2A) would not be available, as it would not apply to an international commercial arbitration held in India – Balancing act between freedom of contract and clear and undeniable harm to public must be resolved in favour of freedom of contract as there is no clear and undeniable harm caused to public in permitting two Indian nationals to avail of a challenge procedure of a foreign county when, after a foreign award passes muster under that procedure, its enforcement can be resisted in India on the grounds contained in Section 48 of Arbitration Act, which includes foreign award being contrary to public policy of India. (Paras 58, 59, 60 and 61)

(D) Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 – Sections 10 and 21 – Arbitration and Conciliation Act, 1996 – Section 48 – Enforcement of Foreign Award – There is no clash at all between Section 10 of Commercial Courts Act and explanation to Section 47 of Arbitration Act, as an arbitration resulting in a foreign award, as defined under Section 44 of Arbitration Act, will be enforceable only in a High Court under Section 10(1) of Commercial Courts Act, and not in a district court under Section 10(2) or Section 10(3) – Even a later general law which contains a non-obstante clause does not override a special law. (Paras 66 and 68)

(E) Contract Act, 1872 – Sections 23 and 28 – Freedom of contract – Freedom of contract needs to be balanced with clear and undeniable harm to public, even if facts of a particular case do not fall within crystallised principles enumerated in well-established ‘heads’ of public policy – Exception 1 to Section 28 of Contract Act specifically saves arbitration of disputes between two persons without reference to nationality of persons who may resort to arbitration – Elusive expression “public policy” appearing in Section 23 of Contract Act is a relative concept capable of modification in tune with strides made by mankind in science and law. (Paras 39, 49 and 50)

Facts of the case:

Present appeal raises question as to whether two companies incorporated in India can choose a forum for arbitration outside India and whether an award made at such forum outside India, to which Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958 [New York Convention] applies, can be said to be a “foreign award” under Part II of the Arbitration and Conciliation Act, 1996 and be enforceable as such.

Findings of Court:

Arbitration Act is a special Act vis-à-vis Commercial Courts Act which is general and which applies to procedure governing appeals and applications in cases other than arbitrations as well.

Result : Appeal disposed of. Judgment of High Court upheld.