Back
2024 Supreme(Online)(Chh) 19203
IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR
Deepak Kumar Tiwari, J
Bulk Trading S.A. – Appellant
Versus
Mahendra Sponge And Power Ltd. – Respondent
ARBAP No. 10 of 2023 | ARBAP No. 9 of 2023
For the Appellants/Petitioners: Feresthe D. Sethna, Harshmander Rastogi, Amieya Pant, Mohit Tiwari
For the Respondents: Aashish Anand Barnad, Ashish Mittal, Mehal Jethani
The enforcement of foreign arbitral awards is restricted by narrow statutory grounds. Courts cannot review the merits or findings of fact of an award. Public policy defenses are strictly construed and do not extend to re-evaluating evidence or claims of performance impossibility already adjudicated by the tribunal.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 47, 48, 49 - Enforcement of Foreign Arbitral Award - Scope of judicial review - Enforcement of foreign award cannot be defeated by a review of the merits, disagreement with findings of fact, or alleged procedural irregularities - Grounds for refusal are restricted to those specified in the governing statute. (Paras 8, 12, 13)
(B) Public Policy - Scope of challenge - The doctrine of public policy must be construed narrowly in the context of foreign awards - A challenge on this basis must demonstrate a violation of the fundamental policy of the legal system, or the most basic notions of justice and morality, rather than mere contravention of domestic law. (Paras 9, 13, 14)
(C) Contractual Performance - Force Majeure - Claim of inability to perform obligations due to external health crisis restrictions - Where the sector is subject to exemptions from restrictive measures and performance does not necessitate physical presence, the plea of impossibility of performance, having been duly considered and rejected by the tribunal, does not provide grounds for refusal of enforcement. (Paras 3, 7, 16)
Facts of the case:
Application for enforcement of foreign arbitration and cost awards arising from a commodities sale contract. The responding party failed to procure a mandatory financial instrument, attributing the omission to government-mandated movement restrictions and health crisis protocols. The arbitral tribunal had previously dismissed this defense, noting that the relevant financial sector was exempted from lockdown constraints. The losing party contested the judicial enforcement of these awards.
Findings of Court:
The court determined that the arbitral tribunal had correctly examined the evidence regarding the feasibility of contract performance during the crisis. The tribunal found that the necessary financial services remained operational and that the fulfillment of contractual obligations did not hinge on physical presence. Consequently, no valid ground for refusing enforcement was established.
Issues: The main issue was whether the enforcement of a foreign arbitral award should be denied on the grounds of public policy, based on a contention of contractual impossibility arising from a global health crisis.
Ratio Decidendi: Courts exercising jurisdiction over the enforcement of foreign awards are limited to the grounds prescribed by statute and are explicitly precluded from conducting a merits-based review of the arbitral decision. Because the tribunal reasonably concluded that the obligation could have been fulfilled and that no structural impossibility existed, the challenge failed to meet the high threshold of public policy violation required for non-enforcement.
Result: Applications allowed.
| Table of Content |
|---|
| 1. recognition of foreign arbitral awards under the arbitration and conciliation act, 1996 (Para 1 , 2) |
| 2. respondent's contention that covid-19 restrictions constitute a public policy violation under section 48 (Para 3 , 4 , 5 , 6) |
| 3. scope of judicial review under section 48 is limited and excludes review of merits (Para 7 , 8 , 9 , 10) |
| 4. narrow interpretation of 'public policy' in foreign award enforcement proceedings (Para 11 , 12 , 13 , 14 , 15 , 16) |
| 5. recognition and enforcement of foreign awards as a decree of the court (Para 17 , 18) |
Order On Board
07/11/2024
1. These two Arbitral Applications have been filed under Sections 47, 48 and 49, Chapter 1, Part-II of the Arbitration and Conciliation Act, 1996 read with Order XXI and Section 151 of the CPC for enforcement of the English Arbitral Award dated 11.8.2021 and Cost Award dated 27.3.2023.
2. Indisputably, on 6.3.2020, a contract for sale of 50,000 MT +/- 10% of Coal (Contract) was entered into by and between the parties via exchange of e-mails, which incorporated the Standard Coal Trading Agreement Version 8, General Terms and Conditions (ScoTA). Further, the respondent/judgment debtor was obliged to open a letter of credit (LC) 10 days before the commencement of the delivery period i.e. by no later than 31.3.2020. The respondent/judgment-debtor failed to open the LC by the said date. Such a failure amounted to an event of default entitling the award-holder/applicant to terminate the contract. Subsequently, a dispute was referred and an arbitral award and cost award were passed in favour of the applicant. The respondent/decree-holder challenged the aforesaid awards by way of an appeal under the English Arbitration Award, 1996 and both the awards have attained finality. The merits award and cost award are published in the United Kingdom and as such, governed by the Notification dated 25.10.1976 issued by the Ministry of Commerce in exercise of powers conferred under clause (b) of Section 2 of the Foreign Awards (Recognition and Enforcement Act, 1961), and the same has been published in the Gazette of India on 13.11.1976. Since the property of the respondent/judgment-debtor is located in the territory of the State of Chhattisgarh, both these applications have been filed to recognize the said foreign award(s).
3. Mr. Aashish Anand Barnad, learned counsel for the respondent would submit that enforcement of the said foreign award may be refused in view of Section 48 of the Arbitration and Conciliation Act, 1996 (in short “the Act, 1996”) as the said award would be contrary to the public policy of India. Learned counsel would also submit that due to outbreak of Covid-19 Pandemic, various Notifications/Circulars have been issued under Section 10(2)(l) of the the Disaster Management Act, 2005 (in short “the Act, 2005”), regarding measures to be taken by the Ministries/Departments of Government of India to mitigate the extraordinary situation of the Covid-19 Pandemic. Learned counsel for the respondent would refer to the letter issued by the Home Secretary and the order issued by the National Disaster Management Authority, both dated 24.3.2020, in which, guidelines in this regard have been issued. In Sl. No.4 of the said guidelines, it is directed that commercial and private establishments should be closed down, however there was an exception (at Sl.no.4 b.) to Banks, Insurance offices and ATMs. He would further submit that apart from the said exception, there was a further stipulation at Sl. No.13, whereby, a direction has been given that the organisations/employers must ensure necessary precautions against Covid-19 virus as well as social distance measures as advised by the Health Department from time to time. He further referred to Sl. No.17 of the said guidelines, wherein, it has been mentioned that any person violating these containment measures will be liable to be proceeded against as per the provisions of Sections 51 to 60 of the Act, 2005, besides legal
