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Supreme Court rules out maintainability of an appeal against a foreign arbitration award

The criterion for invoking section 34, 47 and 48 of the Arbitration and Conciliation Act, 1996 were discussed as a dispute arose between an Indian and Italian Company that was referred to the ICC, Paris. This remarkable judgement was passed by the bench of the Supreme Court, consisting of Justice S Ravindra Bhat and Justice Indira Banerjee in the matter of Noy Vallesina Engineering SpA v Jindal Drugs Limited & Ors., [Civil Appeal No. 8607 OF 2010].

Jindal, the respondent was a public limited company set up according to Indian Law which went into agreement with another company from Switzerland, called Enco for the setting up of ascorbic acid plants in India. A year later, Enco with Jindal's consent handed over this responsibility to the appellant, NV Engineering, incorporated under Italian Law. The contract between the companies clearly stated the presence of an Arbitration Clause.

Around the time in 1996, a dispute arose between the two when Jindal approached the International Court of Arbitration (ICC, Paris), which heard the matter and dismissed Jindal's claims. In light of this partial award given by the ICC, Jindal filed a petition at the Bombay High Court. The ICC tribunal in the meanwhile was of the view that the interim order passed by the high court was not binding on it and consequently, proceeded further.

Further, a final award was passed by the ICC which was appealed against at the Bombay High Court, which resulted in both the partial award and interim application pending at the High Court. The appellant urged that the impugned judgment is erroneous because it concludes that proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 can be maintained to challenge a foreign award.

Further, the appellant argued that the foreign awards having been rendered outside India under the ambit of the ICC cannot be challenged merely because a condition in the underlying contract says that the law governing the agreement, would be Indian law, while heavily relying on the judgement in the case of Bharat Aluminium Company vs Kaiser Aluminium Technical Services Inc, [2012 (9) SCC 552].

The Division Bench while setting aside the order of the single judge bench which had ruled that a petition under Section 34 was not maintainable, relied on the judgments of this court, i.e. Bhatia International v. Bulk Trading S. A. & Anr, [(2002) 4 SCC 105] and Venture Global Engineering v. Satyam Computer Services Ltd. & Anr, [2008 (4) SCC 190] to hold that proceedings under Section 34 of the Act could be validly maintained to challenge a foreign award.

The Apex Court opined:
It is noticeable that the decision in Feurest Day Lawson, [(2011) 8 SCC 333] unambiguously ruled out the maintainability of any appeal against an order granting enforcement of a foreign arbitration award. In the present case, both the partial and final awards are foreign awards. Therefore, the provisions of Sections 47/48 were correctly invoked by NV Engineering, for enforcement of the awards (through Application No 156/2005).

Jindal objected to the enforcement proceedings, in accordance with grounds articulated in Part II of the Act. A single judge substantially upheld the award, and proceeded to its enforcement, by a judgment dated 05.06.2006, at the same time rejecting the challenge to enforcement laid out by Jindal. In view of the categorical holdings in the judgments of this court, Jindal's appeal to the Division Bench, (Appeal No. 492/2006) is not maintainable.

However, in view of the above decisions, and the express terms of Section 50, NV Engineering's appeal (Appeal. No. 740/2006), against the order of the single judge (to the extent it refuses enforcement) is maintainable.

Written By: Prime Legal Law Firm
Off Address: 39/2, 2nd floor, K G Road, Bengaluru, Karnataka-560001
Phone no: +9986386002, Email: [email protected]

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