{"id":235886,"date":"2020-09-16T23:08:22","date_gmt":"2020-09-16T17:38:22","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=235886"},"modified":"2020-09-25T00:34:11","modified_gmt":"2020-09-24T19:04:11","slug":"sc-gives-a-go-ahead-to-enforcement-of-malaysian-arbitral-award-in-government-versus-vedanta-says-it-doesnt-contravene-public-policy-of-india","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/09\/16\/sc-gives-a-go-ahead-to-enforcement-of-malaysian-arbitral-award-in-government-versus-vedanta-says-it-doesnt-contravene-public-policy-of-india\/","title":{"rendered":"SC gives a go ahead to enforcement of Malaysian arbitral award in Government versus Vedanta; says it doesn’t contravene public policy of India"},"content":{"rendered":"

Supreme Court: <\/strong>\u00a0The 3-judge bench of SA Nazeer, Indu Malhotra and Aniruddha Bose, JJ has dismissed Central Government\u2019s plea against enforcement of a 2011 foreign award passed in favour of Vedanta Limited in a dispute arising out of a contract for exploring and developing the petroleum resources in the Ravva Gas and Oil Fields. The Court held,<\/p>\n

\u201cthe enforcement of the foreign award does not contravene the public policy of India, or that it is contrary to the basic notions of justice.\u201d<\/span><\/p><\/blockquote>\n

On 19 February 2020 the Delhi High Court had directed the enforcement of the foreign award by the Vedanta Limited.<\/p>\n

On applicability of amended Section 48 of the Arbitration & Conciliation Act, 1996<\/strong><\/span><\/h3>\n

In Renusagar Power Co. v General Electric Co<\/em>.<\/span>, 1994 Supp (1) SCC 644<\/span><\/span><\/a><\/strong>, this Court held that \u201cpublic policy\u201d comprised of (1) the fundamental policy of Indian law; (2) interests of India; and (3) justice or morality.<\/p>\n

Section 48 of the Arbitration and Conciliation Act, 1996 was amended by Act 3 of 2016. By this amendment, the public policy ground was given a narrow and specific construction by statute, by the insertion of two Explanations. The 2016 Amendment has dropped the clause \u201cinterests of India,\u201d which was expounded by the Renusagar judgment<\/p>\n

\u201cThe two Explanations in Section 48 begin with the words \u201cFor the avoidance of any doubt.\u201d It cannot, however, be presumed to be clarificatory and retrospective, since the substituted Explanation 1 has introduced new sub-clauses, which have brought about a material and substantive change in the section. A new Explanation 2 has been inserted which states that the test as to whether there is a contravention with the fundamental policy of Indian law, shall not entail a review on the merits of the dispute.\u201d<\/span><\/p><\/blockquote>\n

The Court, hence, held that since the amendments have introduced specific criteria for the first time, it must be considered to be prospective, irrespective of the usage of the phrase \u201cfor the removal of doubts.\u201d<\/em><\/strong><\/span><\/p>\n

It was, hence, held that the amended Section 48 would not be applicable to the present case, since the court proceedings for enforcement were filed by the Respondents-Claimants on 14.10.2014 i.e. prior to the 2016 Amendment having come into force on 23.10.2015.<\/p>\n

Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award?<\/strong><\/span><\/h3>\n

The Court held that the Malaysian Courts being the seat courts were justified in applying the Malaysian Act to the public policy challenge raised by the Government of India. The enforcement court would, however, examine the challenge to the award in accordance with the grounds available under Section 48 of the Act, without being constrained by the findings of the Malaysian Courts.<\/p>\n

\u201cMerely because the Malaysian Courts have upheld the award, it would not be an impediment for the Indian courts to examine whether the award was opposed to the public policy of India under Section 48 of the Indian Arbitration Act, 1996.\u201d<\/span><\/p><\/blockquote>\n

If the award is found to be violative of the public policy of India, it would not be enforced by the Indian courts. The enforcement court would however not second-guess or review the correctness of the judgment of the Seat Courts, while deciding the challenge to the award.<\/p>\n

Whether the foreign award is in conflict with the Public Policy of India?<\/strong><\/span><\/h3>\n

Rejecting the contention that the award may not be enforced, since it is contrary to the basic notions of justice, the Court noticed that the Government has neither been able to prove that the violation of procedural due process in the conduct of the arbitral proceedings nor have they been able to prove that the award is in conflict with the basic notions of justice, or in violation of the substantive public policy of India.<\/p>\n

The Court noticed that the \u00a0enforcement may be refused only if it violates the enforcement State\u2019s most basic notions of morality and justice, which has been \u00a0interpreted to mean that there should be great hesitation in refusing enforcement, unless it is obtained through \u201ccorruption or fraud, or undue means.\u201d<\/p>\n

On limitation for filing an enforcement\/execution petition of a foreign award under Section 47 of the 1996 Act <\/strong><\/span><\/h3>\n

The Court held that the period of limitation for filing a petition for enforcement of a foreign award under Sections 47 and 49, would be governed by Article 137 of the Limitation Act, 1963 which prescribes a period of three years from when the right to apply accrues.<\/p>\n

The Court noticed:<\/p>\n