On 17th Sep, 2020 The Supreme Court of India in the case of Government of India versus Vedanta Limited & Ors Comprising of Justice S. Abdul Nazeer, Justice Indu Malhotra and Justice Aniruddha Bose stated in a 66 page judgment that the Enforcement Court cannot be set aside the enforcement of Foreign Arbitral Award.
Factual Background
In 1993, the Government of India was desirous of exploring and developing the petroleum resources in the Ravva Gas and Oil Fields for which a global competitive tender was floated to invite bids. The Production Sharing Contract (PSC) was for a period of 25 years, and the development and exploration of the Ravva Field was to be conducted in terms of the ‘Ravva Development Plan’. The Respondents were required to carry out Petroleum Operations in the Ravva Field as per the said Plan. The Ravva Development Plan inter alia contemplated the drilling of 19 oil and 2 gas wells in the Ravva Field.
The dispute between the Parties emanates from Article 15 of the PSC which inter alia provides for the recoverability of Base Development Costs (“BDC”) incurred by the Respondents-Claimants for the development of the Ravva Field.
Submissions on behalf of the Appellant
Shri. K.K. Venugopal, Learned Attorney General for India instructed by Mr. K.R. Sasiprabhu, Advocate represented the Government of India. It was submitted that the enforcement of the Award was liable to be refused on the following principal grounds:
- Maintainability of the Petition- The Appellants raised an objection to the maintainability of the application on the ground that the petition for enforcement / execution of the foreign award under Section 47 was barred by limitation. Since there is no specific provision in the Limitation Act for enforcement of foreign awards, it would necessarily fall under the residuary provision – Article 137.
- Challenge on grounds of Public Policy of India- The Government inter alia contended that the foreign Award is in conflict with the Public Policy of India.
Submissions on behalf of the respondent
- On Limitation - It was contended that under Section 49 of the 1996 Act, the foreign award becomes a decree of an Indian court after the objections to the award are adjudicated by the enforcement court.
- On Public Policy of India- It was submitted that the dispute between the parties pertains to the interpretation of Article 15.5(c) of the PSC, which provides for recoverability of Base Development Costs incurred by the Respondent-Claimants in the Ravva Field.
Court Analysis and Discussion
The Court in its analysis cleared some of the important aspects as in context to factual status and in regards to arbitration.
- Limitation for filing an enforcement / execution petition of a foreign award under Section 47 of the 1996 Act
The petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act, 1963. In any event, there are sufficient grounds to condone the delay, if any, in filing the enforcement / execution petition under Sections 47 and 49, on account of lack of clarity with respect to the period of limitation for enforcement of a foreign award.
- Scheme of the 1996 Act for enforcement of New York Convention awards
The enforcement court is not to correct the errors in the award under Section 48, or undertake a review on the merits of the award, but is conferred with the limited power to “refuse” enforcement if the grounds are made out. If the Court is satisfied that the application under Section 48 is without merit, and the foreign award is found to be enforceable, then under Section 49, the award shall be deemed to be a decree of “that Court”. The limited purpose of the legal fiction is for the purpose of the enforcement of the foreign award. The concerned High Court would then enforce the award by taking recourse to the provisions of Order XXI of the CPC.
The opening words of Section 48 use permissive, rather than mandatory language, that enforcement “maybe” refused. relations. The enforcement court is not to correct the errors in the award under Section 48, or undertake a review on the merits of the award, but is conferred with the limited power to “refuse” enforcement, if the grounds are made out
- Whether the Malaysian Courts were justified in applying the Malaysian law of public policy while deciding the challenge to the foreign award?
The Malaysian Courts rightly examined the public policy challenge in accordance with the Malaysian Act, being the curial law of the arbitration. With respect to the challenge on the ground of excess of jurisdiction, it was submitted that it ought to have been tested on the basis of the proper law of the arbitration agreement i.e. the English law. On the applicable law at the enforcement stage, the Courts would determine the same as per the public policy of India.
The Court stated that the Appellants are aggrieved by the interpretation taken by the tribunal with respect to Article 15.5 (c) of the PSC and its other sub-clauses. The interpretation of the terms of the PSC lies within the domain of the tribunal. It is not open for the Appellants to impeach the award on merits before the enforcement court. The enforcement court cannot re-assess or re-appreciate the evidence led in the arbitration. Section 48 does not provide a de facto appeal on the merits of the award. The enforcement court exercising jurisdiction under Section 48, cannot refuse enforcement by taking a different interpretation of the terms of the contract.
Further, the Court in its Judgment stated that the interpretation taken by the tribunal is a plausible view, and the challenge on this ground cannot be sustained, to refuse enforcement of the Award.
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