Foreign Arbitral Awards To Be Enforced Under Indian Law, Interpretation Of 'Public Policy' U/S 48(2)(b) A&C Act Is Limited: Delhi HC

"The settled legal position with respect to foreign awards is that, except strictly in terms of grounds of challenge as set out in Section 48 of the A&C Act, 1996, foreign arbitral awards are to be enforced in accordance with law in India. The substantive facts and merits of a particular case are not to be gone into. This position of law has been upheld in a catena of judgments, including the judgment of this Court in Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain (India) Co., [(2008) SCC OnLine Del 1271].”

The bench of Justice Prathiba M. Singh was hearing an enforcement and execution petition for two arbitral awards passed by the International Chambers of Commerce (“ICC”) u/s 47 and 49 of the A&C Act. The Tribunal vide the partial final award had directed that Mr Mukesh Sharma (“Respondent No. 1”) transfer all shares held by him in the International Trade Expocentre Limited (“ITEL”) (“Respondent No. 3”) to the Petitioners/Claimant. The Tribunal vide the final award directed ITE India Private Limited (“ITE”) (“Respondent No. 2”) to transfer all that it holds to the Petitioner/Claimant.

The bench relying upon the ratio laid down in Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (2024 INSC 242) and Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain (India) Co., [(2008) SCC OnLine Del 1271] observed that the Respondent's objections concerning the foreign arbitral award must be within the contours of Section 48 of the A&C Act. The objection about the Arbitral Tribunal granting relief beyond their jurisdiction, i.e., concerning the transfer of shares of the Respondent No. 3, has to be analysed by the Enforcement Court.

The bench observed that the Tribunal's jurisdiction depends entirely upon the construction of the arbitration clause. After examining the arbitration clause in the Shareholder Agreement (“SHA”), it was observed:

“...presence of the arbitration clause, i.e., Article 14 of the SHA, does not prevent the contract from being assigned. The recitals of the SHA clearly state that the parties would also include their respective successors and assigns. Thus, unless and until an expression indicates contrary to the binding of the Petitioner Nos . 2 and 3, as also Respondent No. 2 to the SHA, the said parties will be bound by the agreement."

The Arbitral Tribunal had analysed all documents and oral evidence on record and reached a finding that the SHA is binding on the parties. This observation is also in consonance with the decision of the Bombay High Court in Neilan International Co. Ltd. v. Powerica Ltd.(2024), wherein it was held that the usage of the term "its assignees" in a contract indicates that the original parties had mutually agreed to permit assignment of contractual rights and obligations.

The bench observed that the term 'deadlock' has to be read in the context of the SHA. Thereby, it means a situation wherein the Board of Directors and the shareholders of the Respondent No. 3 do not meet at a common ground, and it gives birth to a situation where communication is completely impeded. Therefore, once there is a deadlock, the Arbitral Tribunal has the jurisdiction to resolve the deadlock. In light of this, it cannot be argued that the Arbitral Tribunal is devoid of jurisdiction.

Lastly, the bench observed that the Supreme Court in Shri Lal Mahal Ltd. v. Progetto Grano Spa (2014) has clarified the scope of the public policy exception to foreign awards. The expression 'public policy of India' u/s 48(2)(b) of the A&C Act has an extremely narrow scope and meaning. Unlike Section 34 of the A&C Act, which allows a broader interpretation of public policy, Section 48(2)(b) of the A&C Act has a circumscribed and limited application when it comes to the enforcement of foreign awards. Even based upon an assumption that the Tribunal's direction concerning the transfer of shares is beyond the scope of the agreement, the same would not bar the enforceability of the impugned arbitral awards.

In the above terms, the bench held that the impugned arbitral awards are enforceable, and imposed a cost ₹ 5 lacs on the Respondent payable to the Petitioners.