VIJAY KARIA & ORS. v. PRYSMIAN CAVI E SISTEMI SRL & ORS.

A available, no challenge was ever made in the courts in England to the four awards. He defended the judgment of the learned Single Judge of the High Court and said that if the awards were read, it would be clear that the arbitrator adopted an extremely balanced approach, despite extreme provocation from Shri Vijay Karia, who only started alleging bias when he realized that the ‘Second Partial Final Award’ relating to B who was in material breach, would be decided against him. Despite this, the learned arbitrator dispassionately considered every single claim and counter-claim made by the parties. This being the case, none of the grounds mentioned in Section 48 of the Arbitration Act would be available in the form of objections to such well-reasoned and balanced awards. In C particular, Shri Sibal stressed that since the decision of this Court in Renusagar Power Plant Co. Ltd. v. General Electric Co. (1994) Supp (1) SCC 644, any interference on the merits of the decision of the arbitral tribunal would be outside the ken of Section 48 of the Arbitration Act. Shri Sibal stressed the fact that Dr. Singhvi had argued this matter as if it was a first appeal on merits, and that each and every ground D taken, if properly viewed, was really to invite this Court to interfere on the merits of the awards, which would be clearly outside the grounds contained in Section 48 of the Arbitration Act.

31Copy pinpoint31. Shri Sibal stressed the fact that the central point of this case was as to who was in material breach of the provisions of the JVA. E Once the learned arbitrator held that it was the Appellants and not the Respondent No.1 who materially breached the terms of the JVA, in that post the integration period, the appointed CEO, who was to be in-charge of the day to day affairs of Ravin, was never allowed to take over such charge, would make it clear that this most material breach committed by the Appellants on facts, as held by the learned arbitrator, could not be interfered with given the parameters of the Court’s jurisdiction under Section 48 of the Arbitration Act. Once this was so, everything else followed, as a result of which it was the Respondent No.1 who was to buy-out the Appellants’ 49% stake in Ravin at a price arrived at by a well-known independent valuer, Deloitte, at a date that was correctly fixed by the arbitral tribunal. This being the heart of the case, all the contentions of Dr. Singhvi raising objections to the four awards in question must fall, as every argument, though dressed up as arguments falling within three grounds under Section 48, are really arguments addressing the merits of the case. Without prejudice to this central argument, Shri H Sibal took up every single point that was argued and answered each

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point. So far as the Jaguar Communication Consultancy Services Private A Limited point was concerned, Shri Sibal stated that at no point did the Appellant amend its counter-claim to include such argument, which was in fact raised orally as an afterthought at the fag end of the proceedings. Secondly, as Shri Sibal’s case of ouster was accepted by the arbitral tribunal, the claim of the Appellants that it was really the other way around was specifically addressed by the learned arbitrator and dismissed, inter alia on the ground that ouster was not at all pleaded by the Appellants. So far as the Ravin trademark is concerned, it is clear that the Appellant’s own counsel made it clear that he would not be pressing the point – the point being as to whether it was at all open to go into registration of trademark of Ravin under separate license agreements which had separate arbitration clauses for arbitration in Italy. This was argued by both sides and dealt with by the arbitrator as a jurisdictional issue which was turned down by the arbitrator stating that the registration of the Ravin trademark was an issue which would be outside the JVA and hence not arbitrable. So far as ACPL was concerned, the learned arbitrator made it clear that Shri Vijay Karia knew all along that ACPL would come to Respondent No.1 as a result of the ‘Draka acquisition’ and never objected, but in fact congratulated the Respondent No.1 on making such acquisition. That ACPL was in a competing business was taken much later as an afterthought, Shri Vijay Karia admitting in cross- examination that ACPL’s business was so small that it could be disregarded altogether. Also, Shri Sibal adverted to a Procedural Order made by the learned arbitrator, in which it was stated that since ACPL was not a party to the arbitration, the Appellants could approach the Court in England to get a direction that ACPL produce the documents asked for by them. This was never done. Further, Shri Sibal made it clear that ACPL was not a subsidiary of Respondent No.1, but was an indirect subsidiary of Respondent No.1’s parent company, consequent upon the ‘Draka acquisition’, with a separate Board of Directors; and being a different person in law and fact, who is not a party to the arbitral proceedings, the learned arbitrator’s Procedural Order, which was never challenged and never followed, was a complete answer to the contention that an adverse inference ought to be drawn. So far as the interpretation of the JVA was concerned, Shri Sibal made it clear that it was interpreted fairly, given the fact that there was no challenge to any part of the First Partial Final Award, except the interpretation given to Clause 21.1, which was an interpretation given by the learned arbitrator keeping in mind the H

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A commercial background and commercial efficacy doctrine. According to Shri Sibal, not only was it a possible interpretation, it was also a correct interpretation. So far as the direct sales of Respondent No.1 in India were concerned, the tribunal took into account all the material evidence and dismissed, after a full hearing, the counter-claim of the Appellants in this behalf. When it came to the Final Award, Shri Sibal pointed out that on facts Deloitte was appointed by consent long after the valuer that was chosen by lots finally stated its inability to conduct the valuation due to the Appellants dragging their feet in this behalf. Secondly, such valuation was conducted strictly as per the formula contained in the JVA, which was Clause 17.1 read with Schedule X of the JVA. He was at pains to point out that though Power Plus Company LLC (hereinafter referred to as “Power Plus”) was mentioned specifically in the JVA, yet nothing about Power Plus was mentioned in the formula for valuation. Shri Sibal also refuted any so called inconsistencies in the awards, stating that given the interpretation of the JVA by the arbitrator in the First Partial Final Award, all the awards that followed were in accord with the interpretation so given. He also stated that the arbitrator considered material breach with an even hand and arrived at the obvious conclusion on facts that since the CEO was never allowed to function, it was the Appellants and not the Respondent No.1 who had materially breached the terms of the JVA. Shri Sibal then went into the bogey raised re E M/s. Gilbert Tweed Associates. He maintained that the Respondent No.1 had no idea as to who M/s Gilbert Tweed Associates was and came to know that the agent, M/s Key2People, who was employed by the Respondent No.1, had in turn employed M/s Gilbert Tweed Associates, who published an advertisement to employ certain persons. From this, to jump to and try to make out a ground that the arbitrator was biased is a F huge leap not warranted either in fact or law. Shri Sibal then argued that the award, in that it directed a sale of shares at a 10% discount, did not in any manner contravene the Foreign Exchange Management Act, 1999 and Rules thereunder. He took us through the relevant Rules and argued that unlike the Foreign Exchange Regulation Act, 1973 (hereinafter G referred to as “FERA”), FEMA did not contain Section 47 of FERA which voided agreements that were made contrary to FERA. According to him, the FEMA regime is a permissive regime and any violation of the Rules could be monitored by the Reserve Bank of India by way of a direction of the sale of the shares without the discount, if at all. In any case, the Appellants would be estopped from taking this plea, having H

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entered into a solemn agreement with the Respondent No.1 which they cannot go against. In any case, at worst, a violation of the Rules made under FEMA, by which shares would be sold not at market price but at something lower, contrary to the Rules, would also amount to a mere violation of law, which is far removed from a violation of any fundamental policy of Indian law, as foreign exchange is coming into the country and not going out therefrom.

32Copy pinpoint32. Shri K.V. Viswanathan, learned senior advocate appearing on behalf of the Respondent No. 1, also supported the submissions made by Shri Sibal. In particular, he dealt with the judgments cited by Shri Nakul Dewan and cited judgments of his own to show that the parameters contained in Section 48 of the Arbitration Act for resisting enforcement of foreign awards are extremely narrow, and the Court can in no circumstance go into the merits of a foreign award. He was at pains to point out that as a full hearing had been given and every opportunity extended by the learned arbitrator to both parties, no ground relatable to breach of natural justice or any prejudice as a result was made out on the facts. He then made it clear that public policy must be understood in the narrow sense as understood and exposited by Renusagar (supra) and the later decisions of this Court. There was also nothing in the awards that would shock the conscience of the Court to attract the most basic notions of justice exception contained in Section 48. E Enforcement of Foreign Awards under Section 48

33Copy pinpoint33. Having heard learned counsel on both sides, it is important to first set out the relevant parts of Section 48 of the Arbitration Act. Section 48 reads as follows: “48.Conditions for enforcement of foreign awards.—(1) F Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that — xxx xxx xxx G (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; xxx xxx xxx H

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A (2) Enforcement of an arbitral award may also be refused if the court finds that— (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, 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.”

34Copy pinpoint34. One of the first judgments which construed pari materia provisions in the Foreign Awards Act, 1961 was the celebrated judgment in Renusagar (supra). This judgment was given pride of place in the recent judgment of Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI) Civil Appeal No. 4779 of 2019, in which this court referred to Renusagar (supra) as follows: “33. In Renusagar (supra), this Court dealt with a challenge to a F foreign award under Section 7 of the Foreign Awards (Recognition and Enforcement) Act, 1961 [“Foreign Awards Act”]. The Foreign Awards Act has since been repealed by the 1996 Act. However, considering that Section 7 of the Foreign Awards Act contained grounds which were borrowed from Article V of the G Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [“New York Convention”], which is almost in the same terms as Sections 34 and 48 of the 1996 Act, the said judgment is of great importance in understanding the parameters of judicial review when it comes to either foreign awards or international commercial arbitrations being held in India, the grounds H

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for challenge/refusal of enforcement under Sections 34 and 48, A respectively, being the same. After referring to the New York Convention, this Court delineated the scope of enquiry of grounds under Sections 34/48 (equivalent to the grounds under Section 7 of the Foreign Awards Act, which was considered by the Court), and held: B “34. Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of clauses (a) to (e) of Article I had to be fulfilled and in Article II, it was prescribed that even if the conditions laid down in Article I were fulfilled recognition and enforcement of the award would be refused if the Court was satisfied in C respect of matters mentioned in clauses (a), (b) and (c). The principles which apply to recognition and enforcement of foreign awards are in substance, similar to those adopted by the English courts at common law. (See: Dicey & Morris, The Conflict of Laws, 11th Edn., Vol. I, p. 578). It was, however, felt that the D Geneva Convention suffered from certain defects which hampered the speedy settlement of disputes through arbitration. The New York Convention seeks to remedy the said defects by providing for a much more simple and effective method of obtaining recognition and enforcement of foreign awards. Under the New York Convention the party against whom the E award is sought to be enforced can object to recognition and enforcement of the foreign award on grounds set out in sub- clauses (a) to (e) of clause (1) of Article V and the court can, on its own motion, refuse recognition and enforcement of a foreign award for two additional reasons set out in sub-clauses F (a) and (b) of clause (2) of Article V. None of the grounds set out in sub-clauses ( a ) to ( e) of clause (1) and sub- clauses ( a ) and ( b) of clause (2) of Article V postulates a challenge to the award on merits.

35Copy pinpoint35. Albert Jan van den Berg in his treatise The New York G Arbitration Convention of 1958 : Towards a Uniform Judicial Interpretation, has expressed the view: “It is a generally accepted interpretation of the Convention that the court before which the enforcement of the foreign award is sought may not review the merits of the award. The H

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A main reason is that the exhaustive list of grounds for refusal of enforcement enumerated in Article V does not include a mistake in fact or law by the arbitrator. Furthermore, under the Convention the task of the enforcement judge is a limited one. The control exercised by him is limited to verifying whether an objection of a respondent on the basis of the grounds for B refusal of Article V(1) is justified and whether the enforcement of the award would violate the public policy of the law of his country. This limitation must be seen in the light of the principle of international commercial arbitration that a national court should not interfere with the substance of the arbitration.” (p. C 269)

36Copy pinpoint36. Similarly Alan Redfern and Martin Hunter have said: “The New York Convention does not permit any review on the merits of an award to which the Convention applies and, in this respect, therefore, differs from the provisions of some systems of national law governing the challenge of an award, where an appeal to the courts on points of law may be permitted.” (Redfern & Hunter, Law and Practice of International Commercial Arbitration, 2nd Edn., p. 461.)

37Copy pinpoint37. In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. F xxx xxx xxx 65.This would imply that the defence of public policy which is permissible under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that under Article I(e) of the Geneva Convention Act of 1927, G it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol & Convention Act of 1837 which requires that the enforcement H

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of the foreign award must not be contrary to the public policy A or the law of India. Since the expression “public policy” covers the field not covered by the words “and the law of India” which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. B

66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy C of the country in which the award is set to be enforced. There is nothing to indicate that the expression “public policy” in Article V(2) (b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article I(c) of the Geneva D Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937. This would mean that “public policy” in Section 7(1)(b)(ii) has been used in a narrower sense and in order to attract the bar of public policy the enforcement of the award must invoke something more than the violation of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression “public policy” in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria, it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.” G (emphasis supplied)

35. The judgment of Shri Lal Mahal Ltd. v. Progetto Grano SPA (2014) 2 SCC 433 is important in that it made it clear that the Renusagar (supra) position would continue to apply to cases which arose under Section 48(2)(b), the wider meaning given “to public policy H

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A of India” in the domestic sphere not being applicable. In doing so it overruled the judgment in Phulchand Exports Ltd. v. O.O.O Patriot (2011) 10 SCC 300 as follows: “28. We are not persuaded to accept the submission of Mr. Rohinton F. Nariman that the expression “public policy of B India” in Section 48(2)(b) is an expression of wider import than the “public policy” in Section 7(1)(b)(ii) of the Foreign Awards Act. We have no hesitation in holding that Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] must apply for the purposes of Section 48(2)(b) of the 1996 Act. Insofar as the proceeding for setting aside an award under C Section 34 is concerned, the principles laid down in Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] would govern the scope of such proceedings.

29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression “public policy of India” occurring in Section 34(2)(b)(ii) in Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b).

30. It is true that in Phulchand Exports [Phulchand Exports Ltd. v. O.O.O. Patriot, (2011) 10 SCC 300 : (2012) 1 SCC (Civ) 131] a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) accepted the submission made on behalf of the appellant therein that the meaning given to the expression “public policy of India” in Section 34 in Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] must be applied to the same expression occurring in Section 48(2)(b) of the 1996 Act. However, in what we have discussed above it must be held that the statement in para 16 of the Report that the expression “public policy of India G used in Section 48(2)(b) has to be given a wider meaning and the award could be set aside, if it is patently illegal” does not lay down correct law and is overruled. xxx xxx xxx

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45. Moreover, Section 48 of the 1996 Act does not give an A opportunity to have a “second look” at the foreign award in the award enforcement stage. The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or ignoring/rejecting the evidence which may be of binding nature) B in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy.

46. In what we have discussed above, even if it be assumed that the Board of Appeal erred in relying upon the report obtained by the buyers from Crepin which was inconsistent with the terms on which the parties had contracted in the contract dated 12-5-1994 C and wrongly rejected the report of the contractual agency, in our view, such errors would not bar the enforceability of the appeal awards passed by the Board of Appeal.”

36. In LMJ International Ltd. v. Sleepwell Industries (2019) 5 SCC 302, an ex-parte award was passed in London which was sought D to be executed by the Respondents in the High Court of Calcutta. The learned Single Judge of the High Court passed a common order in the execution cases rejecting objections taken regarding the maintainability of the applications. Against this, a review petition was rejected by the High Court and so were Special Leave Petitions before this Court. What E was argued before this Court was that grounds as to maintainability had been taken, as a result of which grounds under Section 48 of the Arbitration Act were not actually argued as objections before the Single Judge. This plea of the appellant was rejected by this Court, given the object of Section 48 of the Act. Since the appellant “might and “ought” to have taken these grounds, before the learned Single Judge these grounds were barred by an application of doctrine of constructive res judicata as follows: “17. Be that as it may, the grounds urged by the petitioner in the earlier round regarding the maintainability of the execution case could not have been considered in isolation and dehors the issue of enforceability of the subject foreign awards. For, the same was intrinsically linked to the question of enforceability of the subject foreign awards. In any case, all contentions available to the petitioner in that regard could and ought to have been raised specifically and, if raised, could have been examined by the Court H

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A at that stage itself. We are of the considered opinion that the scheme of Section 48 of the Act does not envisage piecemeal consideration of the issue of maintainability of the execution case concerning the foreign awards, in the first place; and then the issue of enforceability thereof. Whereas, keeping in mind the legislative intent of speedy disposal of arbitration proceedings and limited interference by the courts, the Court is expected to consider both these aspects simultaneously at the threshold. Taking any other view would result in encouraging successive and multiple round of proceedings for the execution of foreign awards. We cannot countenance such a situation keeping in mind the avowed object of the Arbitration and Conciliation Act, 1996, in particular, while dealing with the enforcement of foreign awards. For, the scope of interference has been consciously constricted by the legislature in relation to the execution of foreign awards. Therefore, the subject application filed by the petitioner deserves to be rejected, being barred by constructive res judicata, as has been justly observed by the High Court in the impugned judgment. xxx xxx xxx

20. Suffice it to observe that the Arbitral Tribunal has considered all aspects of the matter and even if it has committed any error, the same could, at best, be a matter for correction by way of appeal to be resorted to on grounds as may be permissible under the English law, by which the subject arbitration proceedings are governed. We may not be understood to have expressed any opinion on the correctness of those issues.”

F 37. At this stage it is important to advert to amendments that were made by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as the “2015 Amendment Act”). Section 48 was amended to delete the ground of “contrary to the interest of India”. Also, what was important was to reiterate the Renusagar (supra) position, 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 (vide Explanation 2 to Section 48(2)).

38Copy pinpoint38. It will be noticed that in the context of challenge to domestic awards, Section 34 of the Arbitration Act differentiates between international commercial arbitrations held in India and other arbitrations held in India. So far as “the public policy of India” ground is concerned,

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both Sections 34 and 48 are now identical, so that in an international commercial arbitration conducted in India, the ground of challenge relating to “public policy of India” would be the same as the ground of resisting enforcement of a foreign award in India. Why it is important to advert to this feature of the 2015 Amendment Act is that all grounds relating to patent illegality appearing on the face of the award are outside the scope of interference with international commercial arbitration awards made in India and foreign awards whose enforcement is resisted in India. In this respect, it is important to advert to paragraphs 30 and 43 of Ssangyong (supra) as follows: “30. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders C (supra), while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the D ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. E xxx xxx xxx

43. We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent “errors of jurisdiction”, it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation (which would include going beyond the terms of the contract), could be said to have been fairly comprehended as “disputes” within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator is alleged to have wandered outside the contract and dealt with matters not allotted to him, this would be a jurisdictional error which could be corrected on the ground of “patent illegality”, which, as we have seen, would not apply to international commercial arbitrations that are decided under Part II of the 1996 Act. To bring in by the backdoor grounds relatable to Section 28(3) of the 1996 Act to be H

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A matters beyond the scope of submission to arbitration under Section 34(2)(a)(iv) would not be permissible as this ground must be construed narrowly and so construed, must refer only to matters which are beyond the arbitration agreement or beyond the reference to the arbitral tribunal.” B This statement of the law applies equally to Section 48 of the Arbitration Act.

39Copy pinpoint39. Indeed, this approach has commended itself in other jurisdictions as well. Thus, in Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power Co. (2010) SGHC 62, the Singapore High Court, after setting out the legislative policy of the Model Law that the ‘public policy’ exception is to be narrowly viewed and that an arbitral award that shocks the conscience alone would be set aside, went on to hold: “48. It is clear, therefore, that in order for SSGC to have succeeded on the public policy argument, it had to cross a very high threshold and demonstrate egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice. Nothing of the sort had been pleaded or proved by SSGC, and its ambiguous contention that the Award was “perverse” or “irrational” could not, of itself, amount to a breach of public policy.” E General approach to enforcement and recognition of Foreign Awards

40Copy pinpoint40. The USA was a late signatory to the New York Convention, acceding to the Convention only in 1970. However, in an early judgment of the U.S Court of Appeals, Second Circuit, namely Parsons & Whittemore Overseas Co. v. Societe Generale De L’Industrie Du Papier 508 F.2d 969 (1974), the Court in a succinct paragraph pointed out the change made by the New York Convention when compared with the older Geneva Convention of 1927 as follows: “In 1958 the Convention was adopted by 26 of the 45 states participating in the United Nations Conference on Commercial Arbitration held in New York. For the signatory state, the New York Convention superseded the Geneva Convention of 1927, 92 League of Nations Treaty Ser. 302.The 1958 Convention’s basic thrust was to liberalize procedures for enforcing foreign arbitral awards: While the Geneva Convention placed the burden of proof

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on the party seeking enforcement of a foreign arbitral award and did not circumscribe the range of available defences to those enumerated in the convention, the 1958 Convention clearly shifted the burden of proof to the party defending against enforcement and limited his defenses to seven set forth in Article V. See Contini, International Commercial Arbitration, 8 Am.J.Comp.L. 283, 299 B (1959). Not a signatory to any prior multilateral agreement on enforcement of arbitral awards, the United States declined to sign the 1958 Convention at the outset. The United States ultimately acceded to the Convention, however, in 1970, (1970) 3 U.S.T. 2517, T.I.A.S. No. 6997, and implemented its accession with 9 U.S.C. 201-208. Under 9 U.S.C. 208, the existing Federal C Arbitration Act, 9 U.S.C. 1-14, applies to the enforcement of foreign awards except to the extent to which the latter may conflict with the Convention. See generally, Comment, International Commercial Arbitration under the United Nations Convention and the Amended Federal Arbitration Statute, 47 Wash.L.Rev. 441 D (1972).” The Court then went on to hold: “Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its E supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention’s basic effort to remove pre-existing obstacles to enforcement. See Straus, Arbitration of Disputes between Multinational Corporations, in New Strategies for Peaceful Resolution of International Business F Disputes 114-15 (1971); Digest of Proceedings of International Business Disputes Conference, April 14, 1971, in id. at 191 (remarks of Professor W. Reese). Additionally, considerations of reciprocity— considerations given express recognition in the Convention itself — counsel courts to invoke the public policy G defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States. We conclude, therefore, that the Convention’s public policy defense should be construed narrowly. Enforcement of foreign H

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A arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice. xxx xxx xxx Although the Convention recognizes that an award may not be enforced where predicated on a subject matter outside the arbitrator’s jurisdiction, it does not sanction second-guessing the arbitrator’s construction of the parties’ agreement. The appellant’s attempt to invoke this defense, however, calls upon the court to ignore this limitation on its decision-making powers and usurp the arbitrator’s role. The district court took a proper view of its own jurisdiction in refusing to grant relief on this ground.” (emphasis supplied)

41Copy pinpoint41. This judgment was followed in Compagnie des Bauxites de Guinee v. Hammermills Inc. (1992) WL 122712 where the US D District Court, District of Colombia followed Parsons (supra) as follows: “The principal purpose of the Convention and its implementation by Congress was to “remove pre-existing obstacles to enforcement” of foreign arbitration awards. Parsons & Whittemore Overseas Co. v. Societe Generale de L’Industrie E du Papier, 508 F.2d 969, 973 (2d Cir.1974). To facilitate this policy, which applies with special force in the field of international commerce, see Mitsubishi Motors Corp. v. Soler Chrysler– Plymouth, Inc., 473 U.S. 614, 625 (1985), the courts have developed a “general pro-enforcement bias,” Parsons & F Whittemore Overseas Co., 508 F.2d at 973, under which the burden of proof rests on the party challenging the arbitration award, Dworkin Cosell Interair Courier Servs., Inc. v. Avraham, 728 F.Supp. 156, 158 (S.D.N.Y.1989); Overseas Private Invest. Corp. v. Anaconda Co., 418 F.Supp. 107, 110 (D.D.C.1976), and the grounds for refusing to recognize arbitral awards are G narrowly construed, Parsons & Whittemore Overseas Co., 508 F.2d at 976–77. xxx xxx xxx The few courts to address this provision of the Convention have concluded that the provision “essentially sanctions the application H

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of the forum state’s standards of due process.” See Parsons & A Whittemore Overseas Co., 508 F.2d at 975; Geotech Lizenz AG v. Evergreen Systems, Inc., 697 F.Supp. 1248, 1263 (E.D.N.Y.1988) (citing Parsons & Whittemore Overseas Co.). Due process requires notice “reasonably calculated, under all the circumstances, to apprise interested persons of the pendency of B the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).”

42Copy pinpoint42. In Certain Underwriters at Lloyd’s London v. BCS Ins. Co. 239 F.Supp.2d 812 (2003), the US District Court, N.D Illinois referred to the Federal Arbitration Act and went on to hold that the review of a C panel decision is “grudgingly narrow”. (See paragraphs 2 and 3).

43Copy pinpoint43. In Karaha Bodas Co., L.L.C v. Perusahaan Pertambagan Minyak 364 F.3d 274 (2004), the United States Court of Appeals for the 5th Circuit analysed the New York Convention thus: D “The New York Convention provides a carefully structured framework for the review and enforcement of international arbitral awards. Only a court in a country with primary jurisdiction over an arbitral award may annul that award. Courts in other countries have secondary jurisdiction; a court in a country with secondary jurisdiction is limited to deciding whether the award may be enforced in that country. The Convention “mandates very different regimes for the review of arbitral awards (1) in the countries in which, or under the law of which, the award was made, and (2) in other countries where recognition and enforcement are sought.” Under the Convention, “the country in which, or under the arbitration law of which, an award was made” is said to have primary jurisdiction over the arbitration award. All other signatory states are secondary jurisdictions, in which parties can only contest whether that state should enforce the arbitral award. It is clear that the district court had secondary jurisdiction and considered only whether to enforce the Award in the United States. G Article V enumerates specific grounds on which a court with secondary jurisdiction may refuse enforcement. In contrast to the limited authority of secondary-jurisdiction courts to review an arbitral award, courts of primary jurisdiction, usually the courts of the country of the arbitral situs, have much broader discretion to H

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A set aside an award. While courts of a primary jurisdiction country may apply their own domestic law in evaluating a request to annul or set aside an arbitral award, courts in countries of secondary jurisdiction may refuse enforcement only on the grounds specified in Article V. B The New York Convention and the implementing legislation, Chapter 2 of the Federal Arbitration Act (“FAA”), provide that a secondary jurisdiction court must enforce an arbitration award unless it finds one of the grounds for refusal or deferral of recognition or enforcement specified in the Convention. The Court may not refuse to enforce an arbitral award solely on the ground that the arbitrator may have made a mistake of law or fact. “Absent extraordinary circumstances, a confirming court is not to reconsider an arbitrator’s findings.” The party defending against enforcement of the arbitral award bears the burden of proof. Defences to enforcement under the New York Convention are construed narrowly “to encourage the recognition and enforcement of commercial arbitration agreements in international contracts…”” (emphasis supplied)

44Copy pinpoint44. Likewise, in Admart AG v. Stephen and Mary Birch Foundation Inc. 457 F.3d 302 (2006), the U.S Court of Appeals, 3rd E Circuit, after setting out Article V of the New York Convention, held as follows: “To carry out the policy favoring enforcement of foreign arbitral awards, courts have strictly applied the Article V defenses and generally view them narrowly. See China Minmetals, 334 F.3d F at 283. In Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir.1997), the court emphasized the limited power of review granted to district courts under the Convention. The court examined the distinction between awards rendered in the same nation as the site of the arbitral proceeding and those rendered in a foreign country. The court concluded that more flexibility was available when the arbitration site and the site of the confirmation proceeding were within the same jurisdiction. Id. at 22–23. However, “the [C]onvention is equally clear that when an action for enforcement is brought in a foreign state, the state may refuse to enforce the award only on the grounds explicitly set forth in Article V of the Convention.” Id. at 23. xxx xxx xxx

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In the same vein, in Parsons & Whittemore Overseas Co., Inc. A v. Societe Generale de L’Industrie du Papier (RAKTA), 508 F.2d 969 (2d Cir.1974), the Court of Appeals reviewed the grounds for refusal contained in the Convention and said that the public policy defense is available “only where enforcement would violate the forum state’s most basic notions of morality and justice.” Id. B at 974. Similarly, the court noted that an award cannot be enforced under the Convention where it is “predicated on a subject matter outside the arbitrator’s jurisdiction,” but the Convention does not “sanction second-guessing the arbitrator’s construction of the parties’ agreement.” Id. at 977.”

45Copy pinpoint45. The U.S cases show that given the “pro-enforcement bias” C of the New York Convention, which has been adopted in Section 48 of the Arbitration Act, 1996 - the burden of proof on parties seeking enforcement has now been placed on parties objecting to enforcement and not the other way around; in the guise of public policy of the country involved, foreign awards cannot be set aside by second guessing the D arbitrator’s interpretation of the agreement of the parties; the challenge procedure in the primary jurisdiction gives more leeway to Courts to interfere with an award than the narrow restrictive grounds contained in the New York Convention when a foreign award’s enforcement is resisted. Discretion of the Court to Enforce Foreign Awards E

46Copy pinpoint46. Thus far, it is clear that enforcement of a foreign award may under Section 48 of the Arbitration Act be refused only if the party resisting enforcement furnishes to the Court proof that any of the stated grounds has been made out to resist enforcement. The said grounds are watertight – no ground outside Section 48 can be looked at. Also, the F expression used in Section 48 is “may”. Shri Viswanathan has argued that “may” would vest a discretion in a Court enforcing a foreign award to enforce such award despite the fact that one or more grounds may have been made out to resist enforcement. For this purpose, he relied upon Sections 45 to 47, which contain the word “shall” in contradistinction to the word “may”. He also relied upon Article V of the New York G Convention which also uses the word “may”.

47Copy pinpoint47. Gary Born in International Commercial Arbitration, Vol. II (2009) puts it thus: “No Obligation under New York Convention to Deny H Recognition of Awards

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A Nothing in the New York Convention requires a Contracting State ever to deny recognition to an arbitral award. The Convention requires only that Contracting States recognize awards (and arbitration agreements) in specified circumstances. Nothing in Article V, nor the basic structure and purpose of the Convention, imposes the opposite obligation not to recognize an award (or arbitration agreement). Article III of the Convention requires Contracting States to recognize arbitral awards made abroad, subject to procedural requirements no more onerous than those for domestic awards, provided that the minimal proof requirements of Article IV are satisfied. Articles V(I) and V(2) then provide exceptions to this affirmative obligation, beginning with the prefatory statement that “[r]ecognition and enforcement of the awards may be refused” in certain circumstances. The most significant aspect of this provision is its structure, which is to establish an affirmative obligation to recognize arbitral awards, subject to specified exceptions – but not to establish an affirmative obligation to deny recognition. Critically, the Article V(I) exceptions are just that: exceptions to an affirmative obligation, and not affirmative obligations in their own right. E Although the matter can be debated, the text of Article V supports this structural conclusion. The English language text of Article V is unmistakably permissive, providing that Contracting States “may” refuse recognition of an award; the Russian and Chinese versions of the Convention are identical in meaning. The Spanish version of Article V also indicates that recognition may be denied, without indicating that it must be. The only exception is the French text, which has been relied on by some authorities as supposedly establishing an obligation to deny recognition to awards that have been annulled in the arbitral seat. In fact, the better view appears to be that the French text is ambiguous, assuming that awards falling within one of Article V’s exceptions would not be enforced, but not affirmatively requiring this result. This is also consistent with Article VII of the Convention, which provides that the Convention shall not “deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of

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the country where such award is sought to be relied upon.” This A provision expresses a fundamental objective of the Convention – which was to facilitate, not limit, the circumstances in which international arbitral awards could be recognized. Indeed, there is not a hint in the drafting history of the Convention of any intention to prevent Contracting States from recognizing foreign awards under provisions of local law that are more liberal than Article V.”

48Copy pinpoint48. Redfern and Hunter on International Arbitration, 6th Edn. (2015) states: “11.59 Fourthly, even if grounds for refusal of recognition and enforcement of an award are proved to exist, the enforcing court is not obliged to refuse enforcement. The opening lines of Article V(1) and (2) of the Convention say that enforcement ‘may’ be refused; they do not say that it ‘must’ be refused. The language is permissive, not mandatory. The same is true of the Model Law.”

49Copy pinpoint49. Likewise, Albert Jan van den Berg’s The New York D Arbitration Convention of 1958 (1981) states: “It is to be noted that the opening lines of both the first and the second paragraph of Article V employ a permissive rather than mandatory language: enforcement “may be” refused. For the first paragraph it means that even if a party against whom the award E is invoked proves the existence of one of the grounds for refusal of enforcement, the court still has a certain discretion to overrule the defence and to grant the enforcement of the award. Such overruling would be appropriate, for example, in the case where the respondent can be deemed to be estopped from invoking the ground for refusal.” F

50Copy pinpoint50. Russel on Arbitration, Sweet & Maxwell (24th Edn., 2015) states: “8-033 Opposing enforcement of a New York Convention Award G As stated above, subject to production of the required documents the court has no discretion but to recognise and enforce a New York Convention award unless the party opposing enforcement proves one or more of the grounds specified in s.103 of the Arbitration Act 1996. These grounds of refusal are exhaustive, H

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A and if none of the grounds is present the award will be enforced. Much has been written about these grounds and a detailed analysis of their international application is beyond the scope of this book but they will be treated summarily in this chapter. The onus of proving the existence of a ground rests upon the party opposing enforcement, but that may not be the end of the matter. There is B an important public policy in the enforcement of awards and the courts should only refuse to enforce an award under s.103 in a clear case. xxx xxx xxx C 8-035 Discretion The court also has a discretion to allow enforcement even in circumstances where one or more of the grounds are made out. This discretion is not to be exercised arbitrarily however because the word “may” in s.103(2) is intended to refer to the corresponding word in the New York Convention. In any event the discretion is a very narrow one. If one or more of the grounds in s.103(2) is made out, the strong presumption is that the award will not be enforced. The discretion to enforce notwithstanding will not be exercised where the award in question was subject to a fundamental or structural defect. The discretion may however be available where “despite the original existence of one or more of the listed circumstances, the right to rely on them had been lost by, for example, another agreement or estoppel”,

F Or where there are circumstances “which might on some recognisable legal principles affect the prima facie right to have an award set aside arising in cases listed in s.103(2).”

51Copy pinpoint51. An interesting judgment of the U.K. Supreme Court is reported G as Dallah Real Estate and Tourism Holding Co. v. The Ministry of Religious Affairs, Government of Pakistan (2010) UKSC 46. In this judgment - given the resistance to a foreign award in the U.K - the discretion of a Court to enforce such award, even if grounds to resist the award have been made out, was set out thus: H

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“Per Lord Mance: A Discretion

67. Dallah has a fall-back argument, which has also failed in both courts below. It is that s.103(2) of the 1996 Act and Article V(1) of the New York Convention state that “Recognition and enforcement of the award may be refused” if the person against B whom such is sought proves (or furnishes proof of) one of the specified matters. So, Miss Heilbron submits, it is open to a court which finds that there was no agreement to arbitrate to hold that an award made in purported pursuance of the non-existent agreement should nonetheless be enforced. In Dardana Ltd v C Yukos Oil Company [2002] 1 All ER (Comm) 819 I suggested that the word “may” could not have a purely discretionary force and must in this context have been designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have enforcement or recognition refused (paras 8 and 18). I also suggested as possible examples of such circumstances another agreement or estoppel.

68. S.103(2) and Article V in fact cover a wide spectrum of potential objections to enforcement or recognition, in relation to some of which it might be easier to invoke such discretion as the word “may” contains than it could be in any case where the objection is that there was never any applicable arbitration agreement between the parties to the award. Article II of the Convention and ss.100(2) and 102(1) of the 1996 Act serve to underline the (in any event obviously fundamental) requirement that there should be a valid and existing arbitration agreement behind an award sought to be enforced or recognised. Absent some fresh circumstance such as another agreement or an estoppel, it would be a remarkable state of affairs if the word “may” enabled a court to enforce or recognise an award which it found to have been made without jurisdiction, under whatever law it held ought to be recognised and applied to determine that issue.

69. The factors relied upon by Dallah in support of its suggestion that a discretion should be exercised to enforce the present award amount for the most part to repetition of Dallah’s arguments for H

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A saying that there was an arbitration agreement binding on the Government, or that an English court should do no more than consider whether there was a plausible or reasonably supportable basis for its case or for the tribunal’s conclusion that it had jurisdiction. But Dallah has lost on such points, and it is impossible to re-deploy them here. The application of s.103(2) and Article B V(1) must be approached on the basis that there was no arbitration agreement binding on the Government and that the tribunal acted without jurisdiction. General complaints that the Government did not behave well, unrelated to any known legal principle, are equally unavailing in a context where the Government has proved that it C was not party to any arbitration agreement. There is here no scope for reliance upon any discretion to refuse enforcement which the word “may” may perhaps in some other contexts provide. xxx xxx xxx Per Lord Collins: D Discretion

126. The court before which recognition or enforcement is sought has a discretion to recognise or enforce even if the party resisting recognition or enforcement has proved that there was no valid arbitration agreement. This is apparent from the difference in wording between the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 and the New York Convention. The Geneva Convention provided (article 1) that, to obtain recognition or enforcement, it was necessary that the award had been made in pursuance of a submission to arbitration which was valid under the law applicable thereto, and contained (article 2) mandatory grounds (“shall be refused”) for refusal of recognition and enforcement, including the ground that it contained decisions on matters beyond the scope of the submission to arbitration. Article V(1)(a) of the New York Convention (and section 103(2)(b) of the 1996 Act) provides: “Recognition and enforcement of the award may be refused …” See also van den Berg, p 265; Paulsson, May or Must Under the New York Convention: An Exercise in Syntax and Linguistics (1998) 14 Arb Int 227.

127. Since section 103(2)(b) gives effect to an international convention, the discretion should be applied in a way which gives H

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effect to the principles behind the Convention. One example A suggested by van den Berg, op cit, p 265, is where the party resisting enforcement is estopped from challenge, which was adopted by Mance LJ in Dardana Ltd v Yukos Oil Co [2002] 2 Lloyd’s Rep 326, para 8. But, as Mance LJ emphasised at para 18, there is no arbitrary discretion: the use of the word “may” B was designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have an award set aside arising in the cases listed in section 103(2). See also Kanoria v Guinness [2006] 1 Lloyd’s Rep 701, para 25 per Lord Phillips CJ. Another possible example would be where there has been no prejudice to the party resisting C enforcement: China Agribusiness Development Corpn v Balli Trading [1998] 2 Lloyd’s Rep 76. But it is not easy to see how that could apply to a case where a party had not acceded to an arbitration agreement.

128. There may, of course, in theory be cases where the English D court would refuse to apply a foreign law which makes the arbitration agreement invalid where the foreign law outrages its sense of justice or decency (Scarman J’s phrase in In the Estate of Fuld, decd (No 3) [1968] P 675, 698), for example where it is discriminatory or arbitrary. The application of public policy in the New York Convention (article V(2)(b)) and the 1996 Act (section E 103(3)) is limited to the non-recognition or enforcement of foreign awards. But the combination of (a) the use of public policy to refuse to recognise the application of the foreign law and (b) the discretion to recognise or enforce an award even if the arbitration agreement is invalid under the applicable law could be used to avoid the application of a foreign law which is contrary to the court’s sense of justice. xxx xxx xxx

130. In the United States the courts have refused to enforce awards which have been set aside in the State in which the award was made, on the basis that the award does not exist to be enforced if it has been lawfully set aside by a competent authority in that State: Baker Marine (Nigeria) Ltd v Chevron (Nigeria) Ltd, 191 F 3d 194 (2d Cir 1999); TermoRio SA ESP v Electranta SP, 487 F 3d 928 (DC Cir 2007). But an Egyptian award which H

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A had been set aside by the Egyptian court was enforced because the parties had agreed that the award would not be the subject of recourse to the local courts: Chromalloy Aeroservices v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996). That decision was based both on the discretion in the New York Convention, article V(1) and on the power under article VII(1) (see Karaha B Bodas Co v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F 3d 357, 367 (5th Cir 2003)) and whether it was correctly decided was left open in TermoRio SA ESP v Electranta SP, ante, at p 937.

131. The power to enforce notwithstanding that the award has been set aside in the country of origin does not, of course, arise in this case. The only basis which Dallah puts forward for the exercise of discretion in its favour is the Government’s failure to resort to the French court to set aside the award. But Moore-Bick LJ was plainly right in the present case (at para 61) to say that the failure by the resisting party to take steps to challenge the jurisdiction of the tribunal in the courts of the seat would rarely, if ever, be a ground for exercising the discretion in enforcing an award made without jurisdiction. There is certainly no basis for exercising the discretion in this case.”

52Copy pinpoint52. A learned single judge of the Delhi High Court in Cruz City 1 Mauritius Holdings v. Unitech Limited (2017) 239 DLT 649, adverted to this issue and held: “28. Whilst this court accepts the contention that the use of the word “may” as used in the context of Section 48 of the Act does F not confer an absolute discretion on the courts, it is not possible to accept that the word “may” should be read as “shall” and the court is compelled to refuse enforcement, if any of the grounds under Section 48 are established. First of all, the plain meaning of the word “may” is not “shall”; it is used to imply discretion and connote an option as opposed to compulsion. G

29. In re, Nichols v. Baker: 59 LJ Ch 661, Cotton L.J. observed that ‘“May’ can never mean must, so long as the English language retains its meaning; but it gives a power and then it may be a question, in what cases, when any authority or body

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has a power given it by the word ‘may’, it becomes its duty to exercise that power”.

30. In Official Liquidator v. Dharti Dhan (P) Ltd.: (1977) 2 SCC 166 the Supreme Court had explained that in certain cases where the legal and factual context in which the discretionary power is to be exercised is specified, it is also annexed with a duty to exercise it in that manner. Keeping the aforesaid in mind, there can be no cavil that since Section 48 of the Act enables the court to refuse enforcement of a foreign award on certain grounds, this court would be required to do so; however, if there are good reasons founded on settled principles of law, the court is not precluded from declining the same. The word “may” in Section 48(1) and C (2) of the Act must be interpreted as used in a sense so as not to fetter the courts to refuse enforcement of a foreign award even if the grounds as set out in Section 48 are established, provided there is sufficient reason to do so. Viewed from this perspective, the considerations that this court may bear while examining grounds as set out under Section 48(1) (enacted to give effect to Article V(1) of the New York convention) may be materially different from the consideration that this court may bear while examining the issue of declining enforcement of a foreign award on the ground of public policy (Section 48(2) of the Act). Whereas the grounds as set out under Section 48(1) essentially concern the structural integrity of the arbitral process and inter party rights therefore considerations such as the conduct of parties, balancing of the inter se rights etc are of material significance but such considerations may not be of any significant relevance in considering whether enforcing the award contravenes the public policy of India.

31. It is necessary to bear in mind that Section 48 of the Act is a statutory expression of Article V of the New York Convention and is similarly worded. The object of Article V of the New York Convention is to enable the signatory States to retain the discretion to refuse enforcement of a foreign award on specified grounds and none other; it does not compel the member States to decline enforcement of foreign awards. Article V of the convention thus sets out the maximum leeway available to member States to refuse enforcement of a foreign award. This view has also been accepted H

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A by courts in the United States. In Chromalloy Aeroservices. v. The Arab Republic of Egypt: 939 F. Supp. 907 (DDC 1996), an Egyptian award, which was set aside by an Egyptian court, was enforced notwithstanding Article V(1)(e) of the New York Convention.

B 32. The principle that courts may enforce a foreign award notwithstanding that one or more of the specified grounds have been established, is also accepted in the United Kingdom. (See: China Agribusiness Development Corporation v. Balli Trading: [1998] 2 Lloyd’s Rep 76). C xxx xxx xxx

37. The grounds as set out in Section 48 of the Act for refusing enforcement of the award encompass a wide spectrum of acts and factors as they are set in broad terms. While in some cases, it may be imperative to refuse the enforcement of the award while D in some other, it may be manifestly unjust to do so. Section 48 is enacted to give effect to Article V of the New York Convention, which enables member States to retain some sovereign control over enforcement of foreign awards in their territory. The ground that enforcement of an award opposed to the national public policy would be declined perhaps provides the strongest expression of a E Sovereign’s reservation that its executive power shall not be used to enforce a foreign award which is in conflict with its policy. The other grounds mainly relate to the structural integrity of the arbitral process with focus on inter party rights.

38. In terms of Sub-section (1) of Section 48 of the Act, the Court F can refuse enforcement of a foreign award only if the party resisting the enforcement furnishes proof to establish the grounds as set out in Section 48(1) of the Act. However, the court may refuse enforcement of a foreign award notwithstanding that a party resisting the enforcement has not provided any/sufficient G proof of contravention of public policy. In such cases, the Court is not precluded from examining the question of public policy suo motu and would refuse to enforce the foreign award that is found to offend the public policy of India. The approach of the court while examining whether to refuse enforcement of a foreign award would also depend on the nature of the defence established. H

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39. Even where public policy considerations are to be weighed, it is not difficult to visualise a situation where both permitting as well as declining enforcement would fall foul of the public policy. Thus, even in cases where it is found that the enforcement of the award may not conform to public policy, the courts may evaluate and strike a balance whether it would be more offensive to public policy to refuse enforcement of the foreign award - considering that the parties ought to be held bound by the decision of the forum chosen by them and there is finality to the litigation - or to enforce the same; whether declining to enforce a foreign award would be more debilitating to the cause of justice, than to enforce it. In such cases, the court would be compelled to evaluate the nature, extent and other nuances of the public policy involved and adopt a course which is less pernicious. xxx xxx xxx

43. Thus, whilst there is no absolute or open discretion to reject the request for declining to enforce a foreign award, it cannot be accepted that it is totally absent. The width of the discretion is narrow and limited, but if sufficient grounds are established, the court is not precluded from rejecting the request for declining enforcement of a foreign award.”

53Copy pinpoint53. When the grounds for resisting enforcement of a foreign award under Section 48 are seen, they may be classified into three groups – grounds which affect the jurisdiction of the arbitration proceedings; grounds which affect party interest alone; and grounds which go to the public policy of India, as explained by Explanation 1 to Section 48(2). Where a ground to resist enforcement is made out, by which the very jurisdiction of the tribunal is questioned - such as the arbitration agreement itself not being valid under the law to which the parties have subjected it, or where the subject matter of difference is not capable of settlement by arbitration under the law of India, it is obvious that there can be no discretion in these matters. Enforcement of a foreign award made without jurisdiction cannot possibly be weighed in the scales for a discretion to be exercised to enforce such award if the scales are tilted in its favour.

54Copy pinpoint54. On the other hand, where the grounds taken to resist enforcement can be said to be linked to party interest alone, for example, that a party has been unable to present its case before the arbitrator, and which ground is capable of waiver or abandonment, or, the ground being H

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A made out, no prejudice has been caused to the party on such ground being made out, a Court may well enforce a foreign award, even if such ground is made out. When it comes to the “public policy of India” ground, again, there would be no discretion in enforcing an award which is induced by fraud or corruption, or which violates the fundamental policy of Indian law, or is in conflict with the most basic notions of morality or justice. It B can thus be seen that the expression “may” in Section 48 can, depending upon the context, mean “shall” or as connoting that a residual discretion remains in the Court to enforce a foreign award, despite grounds for its resistance having been made out. What is clear is that the width of this discretion is limited to the circumstances pointed out hereinabove, in C which case a balancing act may be performed by the Court enforcing a foreign award. The Natural Justice Ground under Section 48

55Copy pinpoint55. Shri Sibal has argued that the expression “or was otherwise unable to present his case” occurring in Section 48(1)(b) of the Act D must be read along with the words preceding it noscitur a sociis, and, given the fact that the grounds for resistance of enforcement have to be construed narrowly in the case of ambiguity, this expression cannot possibly go beyond the hearing before the arbitrator and to the award rendered by the arbitrator. Shri Nakul Dewan, on the other hand, argued E that the expression “unable to present his case” was co-terminus with breach of natural justice which went to not only the hearing before the arbitrator, but also to the award, in that, if the arbitrator were not to give a finding on a material issue or were not to decide a claim or counter- claim, this would breach the broader requirements of the audi alteram partem rule of natural justice and would, therefore, be covered by Section F 48(1)(b) of the Act.

56Copy pinpoint56. This Court in Ssangyong (supra) has dealt with this aspect of Section 48 as follows: “37. Under the rubric of a party being otherwise unable to present G its case, the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the Tribunal, on which the parties have had no opportunity to comment, the ground under Section 34(2)(a)(iii) would be made out. In New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – Commentary, edited by Dr. Reinmar H Wolff (C.H. Beck, Hart, Nomos Publishing, 2012), it is stated:

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“4. Right to Comment A According to the principle of due process, the tribunal must grant the parties an opportunity to comment on all factual and legal circumstances that may be relevant to the arbitrators’ decision- making. a) Right to Comment on Evidence and Arguments B Submitted by the Other Party As part of their right to comment, the parties must be given an opportunity to opine on the evidence and arguments introduced in the proceedings by the other party. The right to comment on the counterparty’s submissions is regarded as a fundamental tenet of C adversarial proceedings. However, in accordance with the general requirement of causality, the denial of an opportunity to comment on a particular piece of evidence or argument is not prejudicial, unless the tribunal relied on this piece of evidence or argument in making its decision. D In order to ensure that the parties can exercise their right to comment effectively, the arbitral tribunal must grant them access to the evidence and arguments submitted by the other side. Affording a party the opportunity to make submissions or to give its view without also informing it of the opposing side’s claims and arguments typically constitutes a violation of due process, unless specific non-disclosure rules apply (e.g., such disclosure would constitute a violation of trade secrets or applicable legal privileges). In practice, national courts have afforded arbitral tribunals considerable leeway in setting and adjusting the procedures by which parties respond to one another’s submissions and evidence, reasoning that there were “several ways of conducting arbitral proceedings.” Accordingly, absent any specific agreement by the parties, the arbitral tribunal has wide discretion in arranging the parties’ right to comment, permitting or excluding the introduction of new claims, and determining which party may have the final word. b) Right to Comment on Evidence Known to or Determined by the Tribunal

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A The parties’ right to comment also extends to facts that have not been introduced in the proceedings by the parties, but that the tribunal has raised sua sponte, provided it was entitled to do so. For instance, if the tribunal gained “out of court knowledge” of circumstances (e.g., through its own investigations), it may only rest its decision on those circumstances if it informed both parties in advance and afforded them the opportunity to comment thereon. The same rule applies to cases where an arbitrator intends to base the award on his or her own expert knowledge, unless the arbitrator was appointed for his or her special expertise or knowledge (e.g., in quality arbitration). Similarly, a tribunal must give the parties an opportunity to comment on facts of common knowledge if it intends to base its decision on those facts, unless the parties should have known that those facts could be decisive for the final award.”(emphasis in original) In Fouchard, Gaillard, Goldman on International Commercial D Arbitration (Kluwer Law International, 1999) [“Fouchard”] it is stated: “In some rare cases, recognition or enforcement of an award has been refused on the grounds of a breach of due process. One example is the award made in a quality arbitration where the E defendant was never informed of the identity of the arbitrators hearing the dispute [Danish buyer v German (F.R.) seller, IV Y.B. Comm. Arb. 258 (1979) (Oberlandesgericht Cologne)]. It also occurred in a case where various documents were submitted by one party to the arbitral tribunal but not to the other party [G.W.I. Kersten & Co. B.V. v. Société Commerciale Raoul Duval F et Co., XIX Y.B. Comm. Arb. 708 (Amsterdam Court of Appeals) (1992)], in another case where the defendant was not given the opportunity to comment on the report produced by the expert appointed by the tribunal [Paklito Inv. Ltd. v. Klockner East Asia Ltd., XIX Y.B. Comm. Arb. 664, 671 (Supreme Court of G Hong Kong) (1994)], and again where the arbitral tribunal criticized a party for having employed a method of presenting evidence which the tribunal itself had suggested [Iran Aircraft Indus. v Avco Corp., 980 F.2d 141 (2nd Cir. 1992)].”(at p. 987) Gary Born (supra) states: H

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“German courts have adopted similar reasoning, holding that the A right to be heard entails two related sets of rights: (a) a party is entitled to present its position on disputed issues of fact and law, to be informed about the position of the other parties and to a decision based on evidence or materials known to the parties [See, e.g., Judgment of 5 July 2011, 34 SCH 09/11, II(5)(c)(bb) B (Oberlandesgericht Munchen)]; and (b) a party is entitled to a decision by the arbitral tribunal that takes its position into account insofar as relevant [See, e.g., Judgment of 5 October 2009, 34 Sch 12/09 (Oberlandesgericht Munchen)]. Other authorities provide comparable formulations of the content of the right to be heard [See, e.g., Slaney v. Int’l Amateur Athletic Foundation, C 244 F.3d 580, 592 (7th Cir. 2001) (at p. 3225) Similarly, in Redfern and Hunter (supra): “11.73. The national court at the place of enforcement thus has a limited role. Its function is not to decide whether or not the award is correct, as a matter of fact and law. Its function is simply to decide whether there has been a fair hearing. One mistake in the course of the proceedings may be sufficient to lead the court to conclude that there was a denial of justice. For example, in a case to which reference has already been made, a US corporation, which had been told that there was no need to submit detailed invoices, had its claim rejected by the Iran-US Claims Tribunal, for failure to submit detailed invoices! The US court, rightly it is suggested, refused to enforce the award against the US company [Iran Aircraft Ind v Avco Corp. 980 F.2d. 141 (2nd Cir. 1992)]. In different circumstances, a German court held that an award that was motivated by arguments that had not been raised by the parties or the tribunal during the arbitral proceedings, and thus on which the parties had not had an opportunity to comment, violated due process and the right to be heard [See the decision of the Stuttgart Court of Appeal dated 6 October 2001 referred to in Liebscher, The Healthy Award, Challenge in International G Commercial Arbitration (Kluwer law International, 2003), 406]. Similarly, in Kanoria v Guinness, [2006] EWCA Civ. 222, the English Court of Appeal decided that the respondent had not been afforded the chance to present its case when critical legal arguments were made by the claimant at the hearing, which the H

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A respondent could not attend due to a serious illness. In the circumstances, the court decided that ‘this is an extreme case of potential injustice’ and resolved not to enforce the arbitral award. 11.74. Examples of unsuccessful ‘due process’ defences to enforcement are, however, more numerous. In Minmetals B Germany v Ferco Steel, [1999] CLC 647, the losing respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the arbitral tribunal had obtained through its own investigation. An English court rejected this defence on the basis that the respondent was eventually given an opportunity to ask for the disclosure of evidence C at issue and comment on it, but declined to do so. The court held that the due process defence to enforcement was not intended to accommodate circumstances in which a party had failed to take advantage of an opportunity duly accorded to it.”

57Copy pinpoint57. This Court’s judgment in Sohan Lal Gupta v. Asha Devi D Gupta (2003) 7 SCC 492, lays down the ingredients of a fair hearing as follows: “23. For constituting a reasonable opportunity, the following conditions are required to be observed:

E 1. Each party must have notice that the hearing is to take place.

2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses.

3. Each party must have the opportunity to be present throughout the hearing. F

4. Each party must have a reasonable opportunity to present evidence and argument in support of his own case.

5. Each party must have a reasonable opportunity to test his opponent’s case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. G

6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument.”

58Copy pinpoint58. A recent Delhi High Court judgment in Glencore International H AG v. Dalmia Cement (Bharat) Limited 2017 SCC OnLine Del 8932 puts it thus:

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“25. The inability to present a case as contemplated under section A 48(1)(b) of the Act (which is pari materia to Article V(I)(b) of the New York Convention) must be such so as to render the proceedings violative of the due process and principles of natural justice. It is rudimentary that for a fair decision each party must have full and equal opportunity to present their respective cases and this includes due notice of proceedings. In the event a party opposing the enforcement of a foreign award is able to present sufficient proof of such infirmity in the arbitral proceedings, the courts may decline to enforce the foreign award.

26. A clear distinction needs to be drawn between cases where a party is unable to present its case, rendering the arbitral award susceptible to challenge as falling foul of the minimal standards of due process/natural justice and cases where the arbitral tribunal does not accept the case sought to be set up by a party. The latter case, obviously, does not give rise to a ground as mentioned in section 48(1)(b) of the Act, even if the decision of the arbitral tribunal is erroneous.”

59Copy pinpoint59. The English judgments advocate applying the test of a person being prevented from presenting its case by matters outside his control. This was done in Minmetals Germany GmbH v. Ferco Steel Ltd. (1999) C.L.C. 647 as follows: E “In my judgment, the inability to present a case to arbitrators within s.103(2)(c) contemplates at least that the enforcee has been prevented from presenting his case by matters outside his control. This will normally cover the case where the procedure adopted has been operated in a manner contrary to the rules of natural F justice. Where, however, the enforcee has, due to matters within his control, not provided himself with the means of taking advantage of an opportunity given to him to present his case, he does not in my judgment, bring himself within that exception to enforcement under the convention. In the present case that is what has happened” G

60Copy pinpoint60. Likewise, in Ajay Kanoria v. Tony Guinness (2006) EWCA Civ 222 the Court of Appeal in England referred to Minmetals (supra) with approval as follows:

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A “23. There is not much authority on the meaning of section 103(2)(c) of the 1996 Act. In Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315 , 326, Colman J observed: “In my judgment, the inability to present a case to arbitrators within section 103(2)(c) contemplates at least that the enforcee has been B prevented from presenting his case by matters outside his control. This will normally cover the case where the procedure adopted has been operated in a manner contrary to the rules of natural justice.””

61Copy pinpoint61. An application of this test is found in Jorf Lasfar Energy C Co. v. AMCI Export Corp. 2008 WL 1228930, where the U.S District Court, W.D. Pennsylvania decided that if a party fails to obey procedural orders given by the arbitrator, it must suffer the consequences. If evidence is excluded because it is not submitted in accordance with a procedural order, a party cannot purposefully ignore the procedural directives of the decision-making body and then successfully claim that the procedures were unfair or violative of due process. Likewise, in Dongwoo Mann+Hummel Co. Ltd. v. Mann+Hummel GmbH (2008) SGHC 275, the Singapore High Court held: “145. A deliberate refusal to comply with a discovery order is not per se a contravention of public policy because the adversarial procedure in arbitration admits of the possible sanction of an adverse inference being drawn against the party that does not produce the document in question in compliance with an order. The tribunal will of course consider all the relevant facts and circumstances, and the submissions by the parties before the tribunal decides whether or not to draw an adverse inference for the non-production. Dongwoo also had the liberty to apply to the High Court to compel production of the documents under s 13 and 14 of the IAA, if it was not content with merely arguing on the question of adverse inference and if it desperately needed the production by M+H of those documents for its inspection so that it could properly argue the point on drawing an adverse inference. However, Dongwoo chose not to do so.

146. Further, the present case was not one where a party hides even the existence of the damning document and then dishonestly denies its very existence so that the opposing party does not even have the chance to submit that an adverse inference ought to be

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drawn for non-production. M+H in fact disclosed the existence of the documents but gave reasons why it could not disclose them. Here, Dongwoo had the full opportunity to submit that an adverse inference ought to be drawn, but it failed to persuade the tribunal to draw the adverse inference. The tribunal examined the other evidence before it, considered the submissions of the parties and rightfully exercised its fact finding and decision making powers not to draw the adverse inference as it was entitled to do so. It would appear to me that the tribunal was doing nothing more than exercising its normal fact finding powers to determine whether or not an adverse inference ought to be drawn.”

62Copy pinpoint62. Other English judgments deal with the expression “unable to present his case” as a breach of a facet of natural justice at the hearing stage only. Thus, in Gbangbola v. Smith and Sheriff 1998 3 All ER 730, the Court held: “A tribunal does not act fairly and impartially if it does not give a party an opportunity of dealing with arguments which have not been advanced by either party. It is not suggested by the claimant contractor that either of the two points mentioned in the arbitrator’s letter was raised by it in the arbitration as being influential on the overall burden and determination of costs. Unless such an opportunity is given there is danger that the final result will not be determined fairly against the party who would be ordered to pay the costs. That is indeed the position as regards both the first and second points.” Likewise, in Bahman Irvani v. Ali Irvani 1999 WL 1142456, the Court found: F “181. …Nor was it satisfactory that Mr Amin’s questions were only replied to with the award, instead of being dealt with in advance of the award so that comment could be advanced.”

63Copy pinpoint63. Another facet of “unable to present his case” was stated in Van Der Giessen-De-Noord Shipbuilding Division B.V. v. Imtech G Marine & Offshore B.V. (2008) EWHC 2904 (Comm). The UK Court held: “In those circumstances it has breached its duty of fairness by ignoring the agreed position of the parties that a claim under this head should not include the cabling for the HVAC equipment. In H

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A “double-counting” in this respect, the Tribunal has awarded Imtech more than it asked for, or could reasonably ask for. GN submits that the double-counting is probably a very significant part of the €1,000,000 awarded, on the basis that the Tribunal had previously awarded a larger amount under the HVAC claim (Claim 1, VTC 1). Whatever the size of the double-counting may be, it is unlikely to be minimal. I am satisfied that GN has been caused substantial injustice by having, on the face of the Award, to pay more than it should to Imtech for extra work.” This finding was given pursuant to Section 68 of the Arbitration Act, 1996 (U.K) by which a “serious irregularity” would lead to the award being set aside or remitted or being declared to be of no effect in whole or in part.

64Copy pinpoint64. In Malicorp Limited v. Government of Arab Republic of Egypt (2015) EWHC 361 (Comm), the U.K Court held that the Government of Egypt had no warning of the manner in which the award was made. The Court held: “41. In these circumstances I have no doubt whatsoever that the award of damages under article 142 must have been a complete surprise to Egypt. So, too, must have been the basis upon which such an award was made – apportioning to the Republic 10% E responsibility for the relevant mistake, and allowing as the major part of the award a substantial sum for loss of profit. It would have been astonishing, if there had been any suggestion that this was in contemplation, that Egypt would fail to protest that the tribunal ought to make a finding on its case on fraud rather than F allocate responsibility on the footing of a good faith mistake on the part of Malicorp. It would similarly have been astonishing, if there had been any suggestion that damages in place of reinstatement were contemplated, that Egypt would fail to protest that such damages could not properly incorporate an element for loss of profit. There were undoubtedly strong arguments for Egypt G to advance in these respects among others. The notion that, in the absence of any mention of these matters, Egypt could and should have anticipated the basis of proceeding adopted in the Cairo award, is to my mind manifestly repugnant to elementary principles of fairness. H

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42. The failure of the tribunal to ensure that Egypt had warning of these matters can only constitute a serious breach of natural justice. In so far as I have any discretion to enforce the award despite that breach, I decline to do so: the breach is too serious, and the consequences for Egypt are too grave. It is suggested that the hearing be reconvened so that Mr Soliman can give evidence and be cross-examined. I decline to take this course: for the reasons given above, Mr Soliman’s statement cannot assist Malicorp.”

65Copy pinpoint65. The judgments from the Singapore Courts are also instructive. In Soh Beng Tee & Co. v. Fairmount Development Pte Ltd. (2007) SGCA 28, the Court fleshed out what was meant by “fair hearing” for the purposes of Section 48(1)(a)(vii) of the Arbitration Act, 2002 (Singapore) as follows: “59. These cases must be read in the context of the current judicial climate which dictates that courts should not without good reason interfere with the arbitral process, whether domestic or international. It is incontrovertible that international practice has now radically shifted in favour of respecting and preserving the autonomy of the arbitral process in contrast to the earlier practice of enthusiastic curial intervention: see, for instance, Arbitration Act 1996 ([27] supra) at p 1 on the English position; and Robert E Morgan, The Arbitration Ordinance of Hong Kong: A Commentary (Butterworths Asia, 1997) on the position in Hong Kong, which also essentially reflects the English practice. As rightly observed in Weldon Plant Ltd v The Commission for the New Towns [2001] 1 All ER (Comm) 264 (“Weldon”) at [22], “[a]n award should be read supportively … [and] given a reading which is likely to uphold it rather than to destroy it”. Similarly, in Vee Networks Ltd v Econet Wireless International Ltd [2005] 1 Lloyd’s Rep 192, the court, at [90], held: Above all it is not normally appropriate for the court to try the material issue in order to ascertain whether substantial injustice has been caused. To do so would be an entirely inappropriate inroad into the autonomy of the arbitral process. xxx xxx xxx

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A 65. The foregoing survey of case law and principles may be further condensed into the following core principles: (a) Parties to arbitration have, in general, a right to be heard effectively on every issue that may be relevant to the resolution of a dispute. The overriding concern, as Goff LJ aptly noted in B The Vimeira ([45] supra), is fairness. The best rule of thumb to adopt is to treat the parties equally and allow them reasonable opportunities to present their cases as well as to respond. An arbitrator should not base his decision(s) on matters not submitted or argued before him. In other words, an arbitrator should not make bricks without straw. Arbitrators who exercise unreasonable C initiative without the parties’ involvement may attract serious and sustainable challenges. (b) Fairness, however, is a multidimensional concept and it would also be unfair to the successful party if it were deprived of the fruits of its labour as a result of a dissatisfied party raising a D multitude of arid technical challenges after an arbitral award has been made. The courts are not a stage where a dissatisfied party can have a second bite of the cherry. (c) Indeed, the latter conception of fairness justifies a policy of minimal curial intervention, which has become common as a matter of international practice. To elaborate, minimal curial intervention is underpinned by two principal considerations. First, there is a need to recognise the autonomy of the arbitral process by encouraging finality, so that its advantage as an efficient alternative dispute resolution process is not undermined. Second, having opted for arbitration, parties must be taken to have acknowledged and accepted the attendant risks of having only a very limited right of recourse to the courts. It would be neither appropriate nor consonant for a dissatisfied party to seek the assistance of the court to intervene on the basis that the court is discharging an appellate function, save in the very limited circumstances that have been statutorily condoned. Generally speaking, a court will not intervene merely because it might have resolved the various controversies in play differently. (d) The delicate balance between ensuring the integrity of the arbitral process and ensuring that the rules of natural justice are complied with in the arbitral process is preserved by strictly

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adhering to only the narrow scope and basis for challenging an arbitral award that has been expressly acknowledged under the Act and the IAA. In so far as the right to be heard is concerned, the failure of an arbitrator to refer every point for decision to the parties for submissions is not invariably a valid ground for challenge. Only in instances such as where the impugned decision reveals a B dramatic departure from the submissions, or involves an arbitrator receiving extraneous evidence, or adopts a view wholly at odds with the established evidence adduced by the parties, or arrives at a conclusion unequivocally rejected by the parties as being trivial or irrelevant, might it be appropriate for a court to intervene. In short, there must be a real basis for alleging that the arbitrator has conducted the arbitral process either irrationally or capriciously. To echo the language employed in Rotoaira ([55] supra), the overriding burden on the applicant is to show that a reasonable litigant in his shoes could not have foreseen the possibility of reasoning of the type revealed in the award. It is only in these very limited circumstances that the arbitrator’s decision might be considered unfair. (e) It is almost invariably the case that parties propose diametrically opposite solutions to resolve a dispute. They may expect the arbitrator to select one of these alternative positions. The arbitrator, however, is not bound to adopt an either/or approach. He is perfectly entitled to embrace a middle path (even without apprising the parties of his provisional thinking or analysis) so long as it is based on evidence that is before him. Similarly, an arbitrator is entitled – indeed, it is his obligation – to come to his own conclusions or inferences from the primary facts placed before him. In this context, he is not expected to inexorably accept the conclusions being urged upon him by the parties. Neither is he expected to consult the parties on his thinking process before finalising his award unless it involves a dramatic departure from what has been presented to him. G (f) Each case should be decided within its own factual matrix. It must always be borne in mind that it is not the function of the court to assiduously comb an arbitral award microscopically in attempting to determine if there was any blame or fault in the arbitral process; rather, an award should be read generously such H

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A that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied.” (emphasis supplied)

66Copy pinpoint66. In JVL Agro Industries Ltd v. Agritrade International Pte Ltd. (2016) SGHC 126, the Court held that the natural justice provision B contained in Section 24(b) of the International Arbitration Act (Singapore) was breached when new points are taken up by the arbitrator, i.e. points not argued by either party, which formed the basis of the award. Since these new points were not put to the parties, natural justice was said to be breached in the facts of that case. Likewise, in G. D. Midea Air C Conditioning Equipment Co. v. Tornado Consumer Goods Ltd. (2017) SGHC 193, the Court found: “65. A party seeking to set aside an arbitral award under Art 34(2)(a)(ii) of the Model Law or s 24(b) of the IAA must establish (a) which rule of natural justice was breached; (b) how that rule was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach prejudiced the party’s rights: Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [29].

66. The crux of Midea’s case was that the Tribunal’s finding on cl 4.2 breached the fair hearing rule because Midea was denied a full opportunity to present its case. As stated earlier (see [62] above), the issue of a breach of cl 4.2 did not arise in the Arbitration; the Tribunal made its finding on cl 4.2 without giving notice to the parties. The Tribunal’s breach was clearly connected to the making of the Award as its finding on cl 4.2 was the basis upon which the impugned findings in the Award (including the finding that Midea was not entitled to terminate the MBA) were made. I agreed with Midea that the Tribunal’s finding on cl 4.2 was in breach of the rules of natural justice.”

67Copy pinpoint67. A Hong Kong Judgment reported as Hebei Import & Export G Corporation v. Polytek Engineering Company Ltd. (1992) 2 HKC 205, found that the tribunal in the course of proceedings received communications from only one party, in the absence of the other, the other party being kept in the dark as to what those communications were. On this point, therefore it was held: H

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“On the other hand, we think it is quite clear that the defendant did not have the opportunity of hearing what was presented to the Chief Arbitrator by the plaintiff’s employees during the inspection of the equipment and hence was not able to present its side of the case before the experts prepared their report. This was to some extent mitigated by the provision of a copy of the experts’ report and the chance to comment on it. But neither the reply from the Tribunal or the report mentioned what transpired during the briefing session. In the peculiar circumstances of this case, we think that the Tribunal should have held further hearings with regard to the matters which had arisen from the inspection and the experts’ report. There was no request or consent that an oral hearing could be omitted. In our view, the defendant has a legitimate complaint that there was a breach of Art 32 of the Arbitration rules and Art 45 of the PRC Arbitration Law. It can be said that the defendant did not have a proper opportunity to present its case to the Tribunal after the inspection and the compilation of the experts’ report.” D

68Copy pinpoint68. Shri Nakul Dewan, however, relied upon a number of judgments to buttress his submission that failure to deal with material issues would fall within Section 48(1)(b) of the Arbitration Act, as a result of which a foreign award could not be enforced. He cited Ascot Commodities NV v. Olam International Ltd. 2001 WL 1560709, for this proposition. This judgment was delivered keeping in mind Section 68 of the Arbitration E Act, 1996 (U.K), which states as follows: “68. Challenging the award: serious irregularity. (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant— xxx xxx xxx

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