GEMINI BAY TRANSCRIPTION PVT. LTD. v. INTEGRATED SALES SERVICE LTD. & ANR.

The Judgment of the Court was delivered by R. F. NARIMAN, J F

1Copy pinpoint1. These appeals raise interesting questions relatable to Part II of the Arbitration and Conciliation Act, 1996 [the “Arbitration Act, 1996”] which provisions deal inter alia with recognition and enforcement of foreign awards. The facts necessary to appreciate the points raised in these appeals are as follows.

2Copy pinpoint2. On 18th September, 2000, a representation agreement was G entered into between Integrated Sales Services Ltd. [“ISS” / Respondent No. 1], a company based in Hong Kong and DMC Management Consultants Ltd. [“DMC”], a company registered in India, whose principal business address is at Nagpur. By this agreement, ISS was to assist DMC to sell its goods and services to prospective customers, and H

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A in consideration thereof was to receive commission. The relevant clauses of the agreement are clauses 2 and 3 which read as follows: - “2. Duties of Representative Representative shall assist Company with its efforts to sell its Goods and Services to prospective customers. Secondly, where acceptable to the Company, identify potential sources of investment and Investors, and assist Company in negotiating the terms of purchase, sale and/or investment.

3Copy pinpoint3. Validity The right of representation under this Agreement is not limited by time. Compensation is due Representative as defined under “Payment” hereinafter. However, if Company finds Representative’s efforts to be unsatisfactory, it will state so in writing with specific and, reasonable guidelines which, if accomplished within six months, shall constitute satisfactory performance, If Representative is unable to substantially- satisfy these guidelines, then Company may cancel this Agreement forthwith. However, compensation for existing or potential customers identified by the Representative, shall continue according to the Payment clause below.”

E 3. The commission payable is then referred to in clause 4. The agreement under clause 8(d) which is “General” then states as follows:- (d) Interpretation, Amendment, Law, Arbitration, and Assignments (i) This Agreement is subject to the laws of the State of Missouri, U.S.A. F (ii) In the event a dispute arises in connection with this Agreement, such dispute shall be referred to a single arbitrator in Kansas City, Missouri, U.S.A. to be appointed by agreement between the parties hereto, or failing agreement to be appointed according to the rules of the American Arbitration, Association the same rules under which any dispute which any dispute shall be decided. (iii) In the event a dispute is committed to arbitration, the party deemed at fault shall reimburse the full cost of the arbitration and legal process to the aggrieved party. (iv) The Agreement shall not be amended in any way other than by agreement in writing, signed by both parties.

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4Copy pinpoint4. It is important to note that this agreement was signed by one A Shri Rattan Pathak as Managing Director of DMC, and by one Shri Terry Peteete, Director of ISS. Though this agreement was entered into on 18th September, 2000, it came into force on 3rd October, 2000. A first amendment to this representation agreement was made between the aforesaid parties, which was signed by one Shri Arun Dev Upadhyaya B [Appellant in CA No. 8345-8346/2018] on behalf of DMC, and Terry Peteete on behalf of ISS. We are not directly concerned with the changes made by this first amendment except to indicate that Arun Dev Upadhyaya, one of the appellants before us, was a signatory on behalf of DMC. Likewise, a second amendment agreement was entered into on 1st January, 2008, again with effect from 3rd October, 2000, in which C various amendments were made to the original representation agreement. We are concerned, with sub-clause (4) of this amendment, which reads as follows: -

4. In modification of clause 8(d)(1) of the Agreement, this Agreement is subject to the laws of the State of Delaware, U.S.A., D and shall survive the expiration of any other clauses in this Amendment.

5Copy pinpoint5. Disputes arose between the parties, as a result of which a notice for arbitration dated 22nd June, 2009 was sent by ISS to Arun Dev Upadhyaya. Ultimately, a statement of claim dated 22nd June, 2009, was E filed before the learned Arbitrator naming Arun Dev Upadhyaya, DMC (India), DMC Global (company registered in Mauritius), Gemini Bay Consulting Limited (company registered in the British Virgin Islands) and Gemini Bay Transcription Private Limited [“GBT” / Appellant in CA No. 8343-8344/2018] as respondents. The statement of claim alleged as follows: - F

6Copy pinpoint6. DMC Management Consultants, through the Chairman (Upadhyaya) and/or with his family, in turn owns or controls all the stock of DMC Global, which has assumed the obligations of DMC Management Consultants under the agreement referred to below, including the agreement for arbitration; and the Chairman G controls and dominates the activities of DMC Global. Both DMC Management Consultants and the Chairman have disregarded the corporate form of DMC Global to effect the wrongs complained of herein, in such a manner and to such an extent that DMC Global should be bound as a party to this arbitration. H

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7Copy pinpoint7. Gemini Bay Consulting Limited (“GBC”) is a company formed in the British Virgin Islands, which is owned and/or controlled and dominated by the Chairman, who has disregarded its corporate form to effect the wrongs complained of herein, and GBC has been used by the Chairman among others as a continuation corporation of DMC Management Consultants and DMC Global B to divert funds away from ISS as complained of herein, in such a manner and to such an extent that GBC should be bound as a party to this arbitration.

8Copy pinpoint8. Gemini Bay Transcription Private Limited (“GBT”) is a company formed in India, with a registered office at the same address as C that of the Chairman, which is owned and/or controlled and dominated by the Chairman, who has disregarded its corporate form to effect the wrongs complained of herein, and GBT has been used by the Chairman among others as a continuation corporation of DMC Management Consultants and DMC Global D to divert funds away from ISS as complained of herein, in such a manner and to such an extent that GBT should be bound as a puny to this arbitration. xxx xxx xxx

13. As the relationship developed, Claimant ISS as Representative E brought to the Company two substantial “PC” customers, identified as MedQuist Transcriptions Ltd, of Mt. Laurel, New Jersey (“MedQuist”), and AssistMed, Inc. of Los Angeles, California (“AssistMed”) (sometimes hereinafter collectively referred to as the “Customer”). ISS acted as representative of the company F with the Customers.

14. Under the original terms of the Representation Agreement, ISS was to receive commission of 20% of the gross revenues to Company from these Customers for so long as they continue to be customers.

G 15. Throughout the relationship between ISS and Respondents, the principal representative of ISS has been Terry Peteete, a resident of Kansas City, Missouri.

16. Throughout the same period, the principal representative of DMC Management Consultants and DMC Global has been the H Chairman, Respondent Arun Dev Upadhyaya. In that regard, the

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Chairman has made regular trips from India to the United States, A approximately 4 trips per year, for business and personal reasons.

17. Those trips have included at least four trips to Kansas City, Missouri, to conduct business with ISS representative Terry Peteete, regarding the subject matter of this arbitration. Therefore, he has purposely availed himself of this jurisdiction, and requiring B his participation in this arbitration in Kansas City, Missouri does not offend traditional or constitutional notions of justice arid fair play. xxx xxx xxx

30. From September 18, 2000, until approximately June 30, 2008, C the relationship among the parties proceeded agreeably. ISS performed its obligations, and upon information and belief, both DMC Management Consultants and DMC Global performed their obligations. xxx xxx xxx D

38. On July 22, 2008, DMC Management Consultants gave notice by email entitled “Contract Termination Notice,” to the two “PC” Customers, MedQuist and Assistmed, of its intention to terminate the Customer contracts 90 days later. (Note that the Customer Contract with MedQuist had been signed by DMC Global, but E was terminated by DMC Management Consultants). DMC Management Consultants requested the Customers “begin the ramping down process 15 days from now,” and further that the “ramping down be completed within a period of 90 days.

39. This purported “ramping down” of the Customer Contracts F by DMC Management Consultants and DMC Global in fact never took place. Upon information and belief, as part of the scheme to divert funds from DMC Management and evade payment to ISS of commissions Respondents caused new contracts to be executed by the Customers with Respondent Gemini Bay Consultants G (GBC). During the same time, the Chairman caused a new company Respondent Gemini Bay Transcriptions (GBT) to be set up as the company that actually performed the work for both PC Customers, and continues to do so today. The employees of both DMC Management employees Consultants and DMC Global became GBT, and work in the same facilities, using the same H

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A equipment, and managed by the same management team. These two July 22, 2008, email termination notices were part of a scheme by Respondents to divert the business from the Customer Contracts away from DMC Management Consultants and DMC Global to GBC and GBT.

B 41. The primary purpose of doing so was to evade the contractual obligations of the Respondents under the Representation Agreement to pay ISS its commissions for revenues earned from these Customers.

42. At all times, DMC Management Consultants and DMC Global C acted under the direct instruction of the Chairman in furthering this scheme to deprive ISS of its commissions.

43. The Chairman dominated and manipulated the activities of DMC Management Consultants and DMC Global for his personal and business advantage, for the sole improper purpose of harming D ISS and breaching his personal obligations and the obligations of his two companies to ISS under the Representation Agreement.

44. The Chairman used the companies as alter egos of himself, and he ignored the corporate forms of both DMC Management Consultants and DMC Global to achieve his improper purpose of E breaching the Representation Agreement.

6. Based on these averments, damages were claimed on the basis of “Accounting for Lost Commissions” as follows:

64. Upon information and belief, the revenues being paid to Respondents by the “PC” Customers since October 22, 2008, F continue at a rate such that the commissions payable under the Representation Agreement for the period since October 22, 2008, is approximately $100,000 per month.

65. Upon information and belief, the amount of lost commissions, past, present and reasonably certain to occur in the future, are G determined at a rate of $100,000 per month for the period of 48 months following the termination date of October 22, 2008, aggregates $4.8 million due and to become due to ISS from Respondents due to their breach of contract.

7. It was then averred: H

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74. By making its claims pursuant to the Representation Agreement A and the corporate law of Delaware in this arbitration, Claimant ISS is not making, and hereby specifically reserves: (i) all claims which may arise in the future, under the Representation Agreement, for commissions which may become payable in a manner other than as described above, and (ii) all claims for any additional right, title, interest and other matters ISS may make at another time or in another forum against any of these Respondents based in tort, fraud, abusive conduct, or any other wrongful conduct under the law of any of the United States. India. Mauritius, or any other jurisdiction, whether for equitable relief, compensatory damages, punitive or exemplary damages, moral damages, or otherwise.

8. To this statement of claim, objections were filed by GBT and Arun Dev Upadhyaya, in which all the aforesaid averments were denied. Meanwhile, a suit was filed by GBT against ISS before the Civil Judge, Senior Division, Nagpur, with the following prayers: - D (i) Pass a decree of declaration in favour of the plaintiff and against the defendants, their agent, servants and all other persons claiming through or under them, declaring therein that the Arbitration Agreement entered into between the Defendant No. 1 and Defendant No. 3, is not binding or enforceable against the Plaintiff E and therefore the defendant Nos. 1 & 2 cannot prosecute/ proceed with any proceeding against the plaintiff or any one claiming through or under the plaintiff, in any manner whatsoever, in the peculiar facts and circumstances of the present case; (ii) Pass a decree of permanent injunction in favour of the plaintiff and against the defendants, their agent, servants and all other persons claiming through or under them, restraining them from prosecuting or proceeding or continuing with any arbitration proceedings against the Plaintiff, based on the so-called Arbitration Agreement entered into between the Defendant No. 1 and Defendant No. 3, the same being not binding or enforceable against the Plaintiff, in the peculiar facts and circumstances of the case and in the interest of justice; (iii) Pass a decree of Rs. 10,00,000/ (Rupees Ten Lacs only) towards compensation in favour of the plaintiff and against H

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A Defendant Nos. 1 and 2, in the peculiar facts and circumstances of the case; (iv) Award costs of the suit against the defendant Nos. 1 & 2; (v) And be further pleased to pass such order/orders and grant such other reliefs, as this Hon’ble Court may deem fit in the given facts and circumstances of the case.

9Copy pinpoint9. Though a temporary injunction was prayed for, it was rejected on 25th January, 2010.

10Copy pinpoint10. On 23rd December, 2009, the learned Arbitrator raised four issues in a preliminary award as follows: - 1)The determination of applicable law; and 2) The jurisdiction of this tribunal over non-signatory parties; and 3) Whether facts warrant piercing the corporate veil of certain corporations; and D 4) Whether certain non-signatory parties to the original agreement should be excluded from this arbitration. Only ISS and DMC filed briefs. DMC’s brief addressed only the issue of applicable law and in spite of the arbitrator’s numerous warnings, other Respondents and non-signatory parties failed to file relevant briefs on the matters and submitted affidavits.

11Copy pinpoint11. Issues 1 and 2 were answered stating that Delaware law is the substantive law which controls the agreement and its interpretation and that, since neither the claimant nor the respondent challenged the validity of the agreement or the validity of the arbitration clause, the Arbitrator has jurisdiction to decide whether a non-signatory to the representation agreement can be bound by the award. The other two issues were stated to require an in-depth review and analysis of factual, testimonial and documentary evidence as a result of which the decision on these two issues was “postponed”. G

12Copy pinpoint12. The learned Arbitrator in his final award dated 28th March, 2010, set out the issues that were to be adjudicated as follows: - I THE UNDERSIGNED ARBITRATOR, Alain Frecon, (the “tribunal”) having been designated in accordance with the arbitration agreement entered into by ISS and DMC Management H

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Consultants Limited, dated September 18 2000, having been duly A sworn, having given the parties full and complete opportunity to present their respective case, and having heard all the proofs and allegations of the parties, including all the witnesses and reviewed all the documents, demonstrative evidence and submissions presented in this case, do hereby Award as follows: B TO BE DECIDED 1) Does the “alter ego” doctrine warrant piercing the corporate veil? 2) Was there a breach of the Representation Agreement and by whom? C

3) Should damages be awarded, and if the answer is yes, how much?

13Copy pinpoint13. After describing the parties and the claim made, Issue 1 which was styled “Alter ego doctrine and piercing of the corporate veil” was D answered as follows: - Before piercing a corporate veil, this tribunal must carefully review a complex set of factual, documentary and testimonial evidence. As Professor William W. Park (Boston University Law Faculty) points out in his well-known (among international arbitrators) article E “Non Signatories and International contracts: an arbitrator’s dilemma” (1, Belinda MacMahon, ed, Oxford University Press (2009), the proverbial devil in the details lurks in the complex fact patterns underlying most situations that might justify extension of arbitration clauses and arbitrators must consider “un faisceau d’indices” (a bundle of criteria) before reaching such a decision F (See page 8). Having found that Delaware law was the applicable law (see Order # 4), we must follow the precedents of the Delaware Court of Chancery. To determine whether the “alter ego” doctrine applies to his case G and whether the corporate veil should be lifted, we must consider [the] “bundle of criteria” including control, whether the corporate form was used as a facade to commit a fraud, and the timing of these events. H

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A The control of DMC by Mr. Upadhyaya, the timing of events and coordination of efforts between him and Mr. Pathak clearly demonstrate that the transfer of the medical business from DMC to Gemini Bay simply was not, and could not be, the result of mere coincidence. Their combined actions and conducts facilitated and orchestrated the use of the corporate forms of DMC and B Gemini Bay to achieve, through deceit, a result which eliminated an otherwise valid and enforceable contract. Mr. Upadhyaya totally controlled the business operations of DMC (a family majority owned business) and his minority shareholding did not prevent him from running the business as he deemed fit (we received for C example no evidence whatsoever that Mr. Upadhyaya’s decisions were ever reviewed/challenged nor even questioned by the board of directors of DMC). Whatever Mr. Upadhyaya decided, whether in coordination with, or with the cooperation of Mr. Pathak and the Board of DMC, that is what DMC would do, and the board always voted in line with Mr. Upadhyaya’s recommendations. D He was as a result, the sole decision maker. The total control and domination of DMC by Mr. Upadhyaya is therefore not questionable, in spite of his minority shareholding. The correlation existing between DMC and Gemini Bayis also, not the result of mere coincidence. Not only did the very existence E of Gemini Bay germinate within the confines of DMC (but for Mr. Pathak’s position as “Managing Director” of DMC, he would have never known about Medquist or AssistMed), but both companies shared (even if ever so temporarily) the same employees, address, telephone numbers, e-mail addresses, SVPs, F customers (primarily Medquist and AssistMed), and shared almost identical contracts with the same customers. Respondents’ affirmations that DMC’s corporate formalities were respected and that some of these facts were only temporary, are simply not convincing or credible and, in totality, we find that the G control of DMC by Mr. Upadhyaya, and the collusion with Mr. Pathak and the use of the corporate forms of DMC and Gemini Bay were simply a “facade” used to shield or cover-up the unjust result of eliminating ISS. The alter ego doctrine is therefore an appropriate justification for lifting the corporate veil.

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14Copy pinpoint14. Under the head “Breach of the representation agreement”, it was recorded that the agreement was not challenged by either party and is therefore valid and enforceable. It was then held: - To determine that question, we must turn to the Representation Agreement. That Agreement was not challenged by either party and is therefore a valid and enforceable Agreement. It is clear and not ambiguous and therefore not subject to interpretation. ISS’s obligations under that Agreement are also clear. ISS must I) sell its Goods and Services (which means the “products and services being offered for sale by the company” (i.e. DMC) and 2) “Where acceptable to the Company (i.e. DMC), identify potential sources of investment and investors, and assist the company in negotiating the terms, purchase, sale and/or investment”(See Clause #2). The Agreement did not specify how many customers, how often. Neither did it specify how many investors, at what price, by what date and since it was for an indefinite term (“is not limited by time” See Clause # 3), it is not legally sustainable to justify the termination of the ISS/DMC business relationship based on the fact that ISS did not find an investor. DMC could terminate that Agreement if “the Company (DMC) E was not satisfied with the Representative efforts provided that it determined “specific and reasonable guidelines” (See Clause # 3). Respondents failed to prove by reliable and relevant evidence that any such “specific and reasonable guidelines” were ever established by the Board of DMC or Mr. Upadhyaya or Mr. Pathak. More importantly, even if DMC could prove that such guidelines had been established, it could not escape the obligation of clause # 4 of the Agreement which specifically provides that “this clause (payment of commissions) survives cancellation of this Agreement for any reason”.

15Copy pinpoint15. Under the head “Did DMC/Gemini Bay try to avoid/eliminate the payment of such commissions to ISS?”, the oral and documentary evidence was referred to as follows: In this respect, Ms. Parker best summarized the situation in her testimony (See Parker’s/deposition at p 16 lines 7 through 16). H

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A Her statement at page 18 (lines II through 25) further demonstrates the purpose and intent of DMC’S decision to abandon the medical transcription business, for the benefit of Gemini Bay minus the payment of commissions to ISS. Her statement was even acknowledged by Mr. Pathak himself when she asked him if the purpose of DMC’s termination was “to cut out the Peteetes” (ISS) B he responded.” In essence that’s what it does”. (See Parker’s deposition at pages 19 lines 18 through 20). Even though we agree with Respondents that DMC had no obligation to remain in the medical transcription business, it could only do so by respecting the terms of the Representation C Agreement by making sure that the “compensation for existing or potential customers identified by the Representative, shall continue according to the Payment Clause” (See Clauses #3 and #4 of the Representation Agreement). The decision by DMC to abandon such business for the stated D purpose (ISS failure to find an investor) does conflict with the terms of the Representation Agreement which did not give DMC an option to terminate it under such rationale and certainly not by refusing (or avoiding) the payment of commissions in violation of Clause # 4 of the Representation Agreement. E Had DMC really and totally left the medical transcription business (without helping any other company to get that business) we could have found a justifiable rationale for it but the payment of commissions could not be avoided (or voided as DMC attempted to do). F In spite of DMC’s announcement to abandon the medical transcription business, Mr. Upadhyaya and Mr. Pathak engaged in a pattern of well-timed efforts and actions which resulted in Gemini Bay receiving that business through an orchestrated chain of events, to the detriment of ISS and avoiding, through deceit, G the payment of commissions. Since Gemini Bay “inherited” the Medquist and AssistMed’s business from DMC, it did so inheriting also the terms and conditions of the ISS/DMC Representation Agreement. To that effect, Gemini Bay is subrogated to DMC and therefore DMC’s breach can be inputted to all Respondents. H

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We therefore find that Mr. Upadhyaya, DMC and Gemini Bay A colluded together and find them jointly and severally liable for breaching the Representation Agreement by terminating it abruptly in violation of the indefinite term of that contract and by refusing to pay commissions as obligated under the Representation Agreement. B

16Copy pinpoint16. In deciding what damages should be paid, the learned Arbitrator found : Respondents DMC, Mr. Arun Dev Upadhyaya and Gemini Bay’s failure to fully cooperate with certain discovery requests of Claimant, rendered the task of proving damages with any reasonable certainty, almost impossible. DMC biased the discovery process by refusing to make its books and records available for inspection by ISS’s agent, Mr. Gupta (See Exhibit 169 page II and following). Mr. Upadhyaya and Gemini Bay further biased the discovery process by refusing to participate directly in the arbitration process. Claimant’s failure to use an independent expert on damages is not a relevant argument because in the absence of documentary proof, no independent expert could have possibly reached a reliable and non-speculative opinion, Under such circumstances, Mr. Peteete’s E intimate understanding of the business was the only and best available option afforded to Claimant. In the absence of such reliable documentary evidence, Claimant cannot be penalized for attempting ‘to prove damages the best way possible’ under the circumstances. Since Delaware law accepts the submission of damage testimony by lay opinion so must this tribunal. F The conduct of Respondents gives us no other alternative but to conclude that damages should be computed as Claimant proposes. In essence, Respondents brought this result upon themselves. Claimant’s request for damages focuses on the commissions due G for finding Medquist and AssistMed and for no other reason (Claimant does not claim any damage for its efforts for trying to find an investor). We find that claim reasonable. We must not however assume that the Gemini Bay/Medquist/ AssistMed Agreements would have, could have, lasted any specific H

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A amount of time in the future and we must determine the most reasonable period of duration. There is no guarantee that either the AssistMed or Medquist contracts would last for the length of their original 3 year term. The Medquist agreement can be terminated any time upon a 90 days’ notice. The AssistMed contract can be terminated without cause with a 120 days’ advance notice (See Exhibit 5 page 3). This tribunal therefore concludes that damages should be limited in time and cannot be assumed to last forever in the future. Claimant’s assumptions that both the Medquist and Assisted contracts would last until 2012 (they are still in force as of the date of this Award), is not entirely satisfactory as it leads us to contemplate future damages. Since however we found a breach of the Representation Agreement, we have a legal basis to award future damages and find that ending damages in 2012 is reasonable under the circumstances. Mr. Upadhyaya’s testimony (re: C-Bay’ D and Mr. Raman Kumar) that the Medquist contract will be terminated in the near future is self-serving, not substantiated by any relevant or reliable information, and therefore, not credible.

17Copy pinpoint17. As a result, the Award was as follows: AWARD E

1. Within thirty (30) days from the date of transmittal of this Award to the Parties, DMC Management Consultants, Ltd, DMC Global, Inc., Arun Dev Upadhyaya, Gemini Bay Consulting Limited and Gemini Bay Transcription Private Limited, hereinafter referred to as Respondents, shall jointly and severally pay to Integrated Sales F Services Ltd, hereinafter referred to as Claimant, the sum of six million, nine hundred and forty-eight thousand, one hundred dollars ($6,948,100.00).

2. In the event that the award is not fully paid within thirty days from the date of this Award, Claimant shall be entitled to also G seek recovery of interest computed from the date of termination of the Representation Agreement (July 22, 2008) on the total sum of the Award at the highest legal rate allowable under Delaware law.

3. The administrative fees and expenses of the International Centre H for Dispute Resolution (ICDR) totalling fourteen thousand dollars

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($14,000.00), and the compensation and expenses of the arbitrator totalling forty-nine thousand, nine hundred and three dollars ($49,903.00), shall be borne entirely, jointly and severally by Respondents. Therefore, Respondents shall jointly and severally reimburse Claimant the sum of sixty-three thousand, nine hundred and three dollars ($63,903.00), representing that portion of said fees and expenses (including the Arbitrator’s fees and expenses) previously incurred by Claimant.

4. Since the arbitration clause did not provide for the award of attorneys’ fees, Claimant and Respondents shall be responsible for their own attorneys’ fees, costs and expenses. C

5. As ordered by this tribunal, all the costs and expenses of the video conference call held on Friday, March 5, 2010 shall be borne exclusively by Respondents but Claimant shall be responsible for the costs and expenses of its attorneys present during that call.

6. This award is in full settlement of all claims and counterclaims submitted to this Arbitration. Any claim or counterclaim not specifically awarded is hereby denied.

18Copy pinpoint18. To enforce the aforesaid Award, the Respondent first knocked at the doors of the Principal District Judge, Nagpur, but given the fact that, being a foreign award, a District Judge would have no jurisdiction to enforce the same, a learned Single Judge of the High Court of Judicature at Bombay, Nagpur Bench, was then approached. By his judgment dated 18th April, 2016, the learned Single Judge expressly recorded:

4. …. The parties have agreed that the question of leading oral evidence in support of their rival contentions does not at all arise and the pure questions of law are raised, which can be decided on the basis of the documents which are admitted and placed on record.

19Copy pinpoint19. After discussing as to whether the ingredients of a foreign award were met, the learned Single Judge found :

16. It is not in dispute that the Representation Agreements in force containing clause 8(d) of arbitration brought into force from 3-/10/-2000 undertaking to submit to arbitration all or any differences concerning the subject--matter capable of settlement H

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A by arbitration, are signed by the Director Terry L. Peteete of the applicant--Company, and by the non--applicant No.3(i) -Rattan Ram Pathak in his capacity as the Managing Director of the non- -applicant No.1- Company. There exists a defined legal relationship in writing in the form of the Representation Agreements. The arbitral award passed on 28/-3/2010 by the International Arbitration B Tribunal is on the differences between the parties to the arbitration agreement. The said award, therefore, satisfies the test of “foreign award”, as defined under Section 44 of the said Act. The question No. (1) is answered accordingly.

20Copy pinpoint20. After discussing in detail certain judgments of this Court, the C learned Single Judge held that the agreement and the arbitration clause cannot be enforced against persons who are non-signatories, even though such non-signatories may participate in the arbitration, as no acquiescence or estoppel can apply to issues relatable to jurisdiction. So holding, the learned Single Judge applied Sections 48(1)(c) to (e) to hold that as D GBT and Arun Dev Upadhyaya were not parties to the arbitration agreement, the award would not be enforceable against them. However, turning down a “public policy plea” by DMC, the learned Single Judge held that the Award would be enforceable against DMC as it was a party to the agreement.

21Copy pinpoint21. A side skirmish took place as to whether an appeal could be filed from the learned Single Judge’s judgment, and arguments were raised based on the application of Section 3 of the Maharashtra High Court (Hearing of Writ Petitions by Division Bench and Abolition of Letters Patent) Act, 1986, to arrive at the conclusion that an appeal against the learned Single Judge’s order would be maintainable (See F judgment dated 23rd June, 2016 of the Bombay HC in Arb Appeal No. 3/2015). Vide judgment dated 30th September, 2016 in Civil Appeal No. 8475-76/2016, this Court, after hearing the parties, then ordered that such appeal would be maintainable but only under Section 50 of the Arbitration Act, 1996.

22Copy pinpoint22. The Division Bench of the High Court, after stating the facts and after observing that the foreign award in this case had not been challenged in the USA, then held that the award could only be challenged under Section 48 if the Delaware law has not been followed on the alter ego principle. Being satisfied that the Arbitrator had properly applied H the Delaware law on the facts of this case, the Court held that none of

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the grounds contained in Section 48 would apply so as to resist enforcement of the foreign award in this case. The Division Bench then held that Section 48 required that the grounds that are pressed to resist enforcement must be “proved”. The Division Bench held that “proof” is of a higher order than mere evidence being adduced and then held that the appellants have miserably failed to “prove” that any of the grounds contained in Section 48 were attracted. As a result, the Division Bench allowed the appeal and set aside the judgment of the Single Judge by the impugned judgment dated 4th January, 2017. A review petition was subsequently dismissed on 24th February, 2017.

23Copy pinpoint23. When the matter came to this Court, in DMC’s Special Leave Petition (SLP (Civil) No. 20802/2016), special leave was granted by an order dated 11th January, 2017, subject to DMC depositing a sum equivalent to 2.5 million US Dollars within three months. If this was not done, leave would automatically stand revoked. DMC defaulted in depositing the aforesaid amount, as a result of which leave stood revoked, which is reflected in our order dated 21th August, 2017. As a result, the foreign Award against DMC is now final and binding.

24Copy pinpoint24. Shri K.V. Vishwanathan, learned Senior Advocate appearing on behalf of GBT, read Sections 44 and 47 of the Arbitration Act, 1996, and then argued that under Section 47(1)(c), the burden of proving that a foreign award may be enforced under Part II is on the person in whose favour that award is made, and that such burden in the case of a non- signatory to an arbitration agreement can only be discharged by adducing evidence which would independently establish that such non-signatory can be covered by the foreign award in question. This not being done in the facts of this case, the threshold burden of proof requirement is not met, as a result of which the enforcement petition ought to have been thrown out on this ground alone. The learned Senior Advocate then drew our attention to Section 48 and in particular sub-section (1) sub-clause (a). According to him, a non-signatory to an arbitration agreement would be directly covered by sub-clause (a) as well as sub-clause (c), and if the Award were to be read, it would be clear that the reasons given are extremely sketchy and based on ipse dixit and not on facts, rendering the Award liable to be set aside on these two grounds. He also added that though Section 48(1)(b) refers to a natural justice ground, the giving of reasons being part of natural justice ought to be included in this ground, and as no proper reasons have been given by the learned Arbitrator, the H

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A Award should be set aside on this ground as well. He then argued that the Award is in any case perverse, and that the two clients of DMC that were shifted to GBT was vital evidence in the case, and the non- examination of these two clients would also vitiate the Award. He cited a number of judgments to buttress these submissions.

25Copy pinpoint25. Shri Vishwanathan also argued that damages were awarded without actual loss having been proved before the learned Arbitrator contrary to the judgment of the Delhi High Court in Agritrade International (P) Ltd. v. National Agricultural Coop. Mktg. Federation of India Ltd., 2012 SCC OnLine Del 896, as a result of which the Award stood vitiated on this ground also. C

26Copy pinpoint26. Shri Harish Salve, learned Senior Advocate appearing on behalf of Arun Dev Upadhyaya, argued that the commission of a tort would be outside contractual disputes that arise under the Arbitration Agreement and that since the cause of action really arose in tort, the Award was vitiated on this ground. He also argued relying heavily upon Dallah Real D Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2010] 3 WLR 1472 [“Dallah”] that a full review based on oral and/or documentary evidence ought to have been undertaken which was not done on the facts of this case, the Division Bench merely echoing the Arbitrator’s findings. He then made a E distinction between Section 46 and Section 35 of the Arbitration Act, and argued that under Section 46, a foreign award is to be treated as binding only on persons as between whom it was made and not on persons who may claim under the parties. He also argued that insofar as his client was concerned, there was no evidence to show his involvement in any manner and that the findings against his client are unreasoned and perfunctory, and on this ground also the Award stands vitiated.

27Copy pinpoint27. Shri Arif Bookwala, learned Senior Advocate appearing on behalf of ISS, supported the Division Bench judgment and took us through the facts pointing out how, as was correctly held by the learned Arbitrator, the address of Shri Arun Dev Upadhyaya, DMC and GBT were all at the very same place in Nagpur. He took us painstakingly through the Award to show that the learned Arbitrator not only applied his mind to the oral and documentary evidence in this case which consisted of Ms.Parker deposing on behalf of ISS, and Shri Pathak and Shri Arun Upadhyaya deposing on behalf of DMC, and then argued that elaborate reasons need not be given in an arbitral award so long as the award H

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happens to be reasoned. He then countered the submissions of Shri A Vishwanathan and Shri Salve by arguing that their clients had conceded before the learned Single Judge that only questions of law arose as a result of which no evidence need be led – which was contrary to the submissions made by Shri Vishwanathan and Shri Salve before us. He then argued that none of the grounds under Section 48 had been made B out as neither Section 48(1)(a) nor Section 48(1)(c) would even remotely deal with non-signatories to an arbitration agreement and that, as no objection qua enforcement of the Award being contrary to public policy being argued by either appellant in the courts below, the appeals should be dismissed. He also referred to various judgments to buttress his submissions. C

28Copy pinpoint28. Having heard the learned counsel for all the parties, it is important to first set out the relevant statutory provisions as under :

44. Definition.—In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether D contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960— (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and E (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. xxx xxx xxx F

46. When foreign award binding.—Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award G shall be construed as including references to relying on an award.

47. Evidence.— (1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court— H

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A (a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) the original agreement for arbitration or a duly certified copy thereof; and B (c) such evidence as may be necessary to prove that the award is a foreign award. xxx xxx xxx

48. Conditions for enforcement of foreign awards.— C (1) 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— (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (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; or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; xxx xxx xxx

29Copy pinpoint29. A reading of Section 44 of the Arbitration and Conciliation Act, 1996 would show that there are six ingredients to an award being a foreign award under the said Section. First, it must be an arbitral award on differences between persons arising out of legal relationships. Second, H

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these differences may be in contract or outside of contract, for example, in tort. Third, the legal relationship so spoken of ought to be considered “commercial” under the law in India. Fourth, the award must be made on or after the 11th day of October, 1960. Fifth, the award must be a New York Convention award – in short it must be in pursuance of an agreement in writing to which the New York Convention applies and be in one of such territories. And Sixth, it must be made in one of such territories which the Central Government by notification declares to be territories to which the New York Convention applies.

30Copy pinpoint30. The expression “legal relationships” has been explained in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 as follows: C

24. … The expression “legal relationship”, again not defined in the Arbitration Act, means a relationship which gives rise to legal obligations and duties and, therefore, confers a right. …

31Copy pinpoint31. Also, the award may deal with differences arising out of breach of contract or tort. D

32Copy pinpoint32. Likewise, what is considered to be “commercial” under the law of India is well explained in the UNCITRAL Model Law as follows:- “The term ‘commercial’ should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring, leasing, construction of works; consulting, engineering, licensing investment, financing: banking; insurance; exploitation agreement or concession, joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail, or road.”

33Copy pinpoint33. In R.M. Investment and Trading Co. (P) Ltd. v. Boeing Co., (1994) 4 SCC 541, at page 546, this court held: G

12. [in] construing the expression “commercial” in Section 2 of the [Foreign Awards (Recognition & Enforcement) Act, 1961] it has to be borne in mind that the “Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by H

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A providing for speedy settlement of disputes arising in such trade through arbitration and any expression or phrase occurring therein should receive, consistent with its literal and grammatical sense, a liberal construction.” [See : Renusagar Power Co. Ltd. v. General Electric Co. [(1984) 4 SCC 679] (SCC at p. 723-24) and Koch Navigation Inc. v. Hindustan Petroleum B Corpn. Ltd. [(1989) 4 SCC 259, 262 (para 8)] The expression “commercial” should, therefore, be construed broadly having regard to the manifold activities which are integral part of international trade today.

34Copy pinpoint34. We now come to Section 47. As the marginal note indicates, this Section provides that the pre-requisites for the enforcement of a foreign award are: (1) the original award or a copy thereof duly authenticated in the manner required by the law of the country in which it is made; (2) the original agreement for arbitration or a duly certified copy thereof, and; (3) such evidence as may be necessary to prove that D the award is a foreign award.

35Copy pinpoint35. Section 47 is based on Article IV of the New York Convention which is contained in Schedule I to the Arbitration Act, 1996. Article IV reads as follows:

E Article IV

1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply: (a) The duly authenticated original award or a duly certified copy thereof; (b) The original agreement referred to in article II or a duly certified copy thereof.

2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.

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36Copy pinpoint36. In his treatise titled International Commercial Arbitration by A Gary B. Born (Wolters Kluwer, 2nd Edn., 2014) [“Gary Born”], the learned author while discussing Article IV of the New York Convention has this to say: Under the convention, it is clear that national arbitration legislation is not permitted to impose more demanding requirements of proof B of the existence of a foreign or nondomestic award than those contained in Article IV; Article IV prescribes a maximum standard of proof of an award and Contracting States may not impose stricter or more onerous requirements of proof. xxx xxx xxx C Article IV was drafted in order to advance the Convention’s general pro-enforcement policies. As one national court put it: “Article IV must be interpreted in accordance with the spirit of the Convention… The Contracting States wished to reduce the obligation for the party seeking recognition and enforcement D of a foreign arbitral award as much as possible.” [Judgment of 15 April 1999, XXVI Y.B. Comm. Arb. 863, 866 (Geneva Cour de justice) (2001)] Consistent with this objective, national courts have generally rejected efforts to complicate the proof requirements under Article E IV, taking a practical and relatively flexible approach towards proof requirements. (at pages 3396-3397)

37Copy pinpoint37. From this, is clear that all the requirements of sub-section (1) F are procedural in nature, the object being that the enforcing court must first be satisfied that it is indeed a foreign award, as defined,and that it is enforceable against persons who are bound by the award. Shri Vishwanathan and Shri Salve’s arguments that to prove that a non- signatory to an arbitral agreement can only be roped in to the aforesaid agreement on evidence being adduced before the enforcing court as to G whether the non-signatory is a person who claims under a party or is otherwise affected by the alter ego doctrine, is disingenuous to say the least. Section 47(1)(c) being procedural in nature does not go to the extent of requiring substantive evidence to “prove” that a non-signatory to an arbitration agreement can be bound by a foreign award. As a H

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A matter of fact, Section 47(1)(c) speaks of only evidence as may be necessary to prove that the award is a foreign award. This Section only has reference to the six ingredients of a foreign award that have been outlined hereinabove, which are contained in the definition section, namely, Section 44. Ingredients 1 to 4 can easily be made out from the foreign award itself as the award would narrate facts which would show the B legal relationship between the ‘persons’ bound by the award (who need not necessarily be parties to the arbitration agreement), and as to whether the award deals with matters that can be considered commercial under the law in force in India. Equally, the date of the foreign award would appear on the face of the foreign award itself. Thus, Section 47(1)(c) C would apply to adduce evidence as to whether the arbitration agreement is a New York Convention agreement. Also, the requisite Central Government notification can be produced under Section 47(1)(c), so that Section 44(b) gets satisfied. To argue that the burden of proof is on the person enforcing the award and that this burden can only be discharged by such person leading evidence to affirmatively show that a non-signatory to an arbitration agreement can be bound by a foreign award is outside Section 47(1)(c). This argument consequently stands dismissed.

38Copy pinpoint38. We now come to Section 48 which deals with enforcement of a foreign award being refused. It is important to notice that when enforcement of a foreign award is resisted, the party who resists it must prove to the court that its case falls within any of the sub-clauses of sub- section (1) or sub-section (2) of Section 48. Since some arguments were made as to the expression “proof” contained in Section 48(1), it is necessary to deal with the same. In Emkay Global Financial Services Ltd. v. Girdhar Sondhi, (2018) 9 SCC 49, a question arose under the pari materia provision contained in Section 34 of the Arbitration Act, 1996 as to what the expression “proof” means therein. After referring to a number of High Court judgments, and to an amendment that has now been made to Section 34, in which the expression “furnishes proof that” is now substituted by “establishes on the basis of the record of the arbitral tribunal that”, this judgment held that the expression “proof” G cannot possibly mean the taking of oral evidence as it will otherwise defeat the object of speedy disposal of Section 34 petitions. This was so stated as follows:

21. It will thus be seen that speedy resolution of arbitral disputes has been the reason for enacting the 1996 Act, and continues to H

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39Copy pinpoint39. Given that foreign awards in convention countries need to be enforced as speedily as possible, the same logic would apply to Section 48, as a result of which the expression “proof” in Section 48 would only mean “established on the basis of the record of the arbitral tribunal” and such other matters as are relevant to the grounds contained in Section 48. B

40Copy pinpoint40. It is important to remember that the New York Convention, which our Act has adopted, has a pro-enforcement bias, and unless a party is able to show that it’s case comes clearly within Sections 48(1) or 48(2), the foreign award must be enforced. Also, the grounds contained in Sections 48(1)(a) to (e) are not to be construed expansively but C narrowly. Thus, in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 [“Ssangyong”], it was held: -

45. 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 D Act, which was considered by the Court), and held : (Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , SCC pp. 671-72 & 681-82, paras 34-37 & 65-66) “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 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 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 award is sought to be enforced can object to recognition and

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enforcement of the foreign award on grounds set out in sub- A 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 (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- B clauses (a) and (b) of Clause (2) of Article V postulates a challenge to the award on merits.

35. Albert Jan van den Berg in his treatise The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation, has expressed the view: C ‘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 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 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. 269) F

36. 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 G 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.)

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A 37. 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. B ***

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 C that under Article I(e) of the Geneva Convention Act of 1927, 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 D of 1837 which requires that the enforcement of the foreign award must not be contrary to the public policy 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.

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 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 G I(c) of the Geneva 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 H

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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.” (emphasis supplied in Ssangyong) C

41Copy pinpoint41. Likewise, in Vijay Karia v. Prysmian Cavi E Sistemi SRL, (2020) 11 SCC 1 [“Vijay Karia”], this Court held:

24. Before referring to the wide-ranging arguments on both sides, it is important to emphasise that, unlike Section 37 of the Arbitration D Act, which is contained in Part I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a “domestic” arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognise and enforce a foreign award but not the other way around (i.e. an order recognising and enforcing an award). This is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely narrow grounds contained in Section 48 of the Act and which have been rejected. This is in consonance with the fact that India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (hereinafter referred to as “New York Convention”) and intends — through this legislation — to ensure that a person who belongs to a Convention country, and who, in most cases, has gone through a challenge procedure to the said award in the country of its origin, must then be able to get such award recognised and enforced in India as soon as possible. This is so that such person may enjoy the fruits of an award which has been challenged and which challenge has been turned down in the country of its origin, subject H

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A to grounds to resist enforcement being made out under Section 48 of the Arbitration Act. …. xxx xxx xxx

44. Indeed, this approach has commended itself in other jurisdictions as well. Thus, in Sui Southern Gas Co. Ltd. v. Habibullah Coastal B Power Co. (Pte) Ltd. [Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power Co. (Pte) Ltd., 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.” xxx xxx xxx

E 50. The US cases show that given the “pro-enforcement bias” 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 F policy of the country involved, foreign awards cannot be set aside by second guessing the 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. G

42Copy pinpoint42. Given these parameters, let us examine arguments of the appellants insofar as Section 48(1)(a) is concerned. If read literally, Section 48(1)(a) speaks only of parties to the agreement being under some incapacity, or the agreement being invalid under the law to which parties have subjected it. There can be no doubt that a non-party to the H agreement, alleging that it cannot be bound by an award made under

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such agreement, is outside the literal construction of Section 48(1)(a). A Also, it must not be forgotten that whereas Section 44 speaks of an arbitral award on differences between “persons”, Section 48(1)(a) refers only to the “parties” to the agreement referred to in Section 44(a). Thus, to include non-parties to the agreement by introducing the word “person” would run contrary to the express language of Section 48(1)(a), when B read with Section 44. Also, it must not be forgotten that these grounds cannot be expansively interpreted as has been held above. The grounds are in themselves specific, and only speak of incapacity of parties and the agreement being invalid under the law to which the parties have subjected it. To attempt to bring non-parties within this ground is to try and fit a square peg in a round hole. C

43Copy pinpoint43. Quite apart from the fact that Section 48(1)(a) was not put forward either before the learned Single Judge or the Division Bench, let us examine the judgment in Dallah (supra) which appears to justify the bringing of a non-signatory to the agreement’s objection to a foreign award under Section 48(1)(a). D

44Copy pinpoint44. In Dallah’s case (supra), a Saudi company applied under the United Kingdom’s Arbitration Act, 1996 for leave to enforce an award against a ministry of the Government of Pakistan. There was no doubt on the facts of that case that the Government was not a party to the arbitration agreement, which was between Dallah and the Awami Hajj E Trust. The Supreme Court of the United Kingdom found, on a trial conducted before it, that the agreement containing the arbitration clause fell to be decided under French law as the law of the country where the award was made, which required that there be a common intention between the parties to the agreement that the Government of Pakistan be bound by the arbitration agreement. It was found, contrary to the F Tribunal’s finding, that the agreement had been deliberately structured to reflect a common intention that only the parties to the agreement were to be bound, a non-party being an outsider. The Tribunal’s award had held on the facts of that case as follows: (para 146 of Dallah) “Certainly, many of the above-mentioned factual elements, if G isolated and taken into a fragmented way, may not be construed as sufficiently conclusive for the purpose of this section. However, Dr Mahmassani believes that when all the relevant factual elements are looked into globally as a whole, such elements constitute a comprehensive set of evidence that may be relied H

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A upon to conclude that the defendant is a true party to the agreement with the claimant and therefore a proper party to the dispute that has arisen with the claimant under the present arbitration proceedings. Whilst joining in this conclusion Dr Shah and Lord Mustill note that they do so with some hesitation, considering that the case lies very close to the line.” B

45Copy pinpoint45. This was referred to as a “weak conclusion” in para 146, and in any case did not conform to French law as the doctrine of alter ego was completely different from common intention of parties to the agreement which was required under French law. As a result, the arbitral award was set aside under Section 103(2)(b) of the UK Act, which is C substantially similar to Section 48(1)(a) of the Indian Arbitration Act, 1996.

46Copy pinpoint46. The leading judgment of Lord Mance JSC set out the facts and posed the question before the Court thus: -

D 2 ...The tribunal in a first partial award dated 26 June 2001 concluded that the Government was a true party to the agreement and as such bound by the arbitration clause, and so that the tribunal had jurisdiction to determine Dallah’s claim against the Government. The central issue before the English courts is whether the Government can establish that, applying French law principles, there was no such “common intention” on the part of the Government and Dallah as would make the Government a party.

47Copy pinpoint47. The learned Judge then noted, in para 11, that the argument made before the Tribunal was that the Trust was either the alter ego of the Government of Pakistan or the Government of Pakistan was the successor to the Trust. Since the ‘alter ego’ argument found favour with the Tribunal, and since it was not pursued before the Supreme Court, the conclusion that the award was bad would necessarily follow. In para 31, Lord Mance JSC made it clear that a court seized of an issue under Section 103(2)(b) will examine, both carefully and with interest, the reasoning and conclusion of an arbitral tribunal which has undertaken a similar examination before arriving at its own conclusion on facts.

48Copy pinpoint48. In a separate concurring judgment, Lord Collins of Mapesbury JSC set out as to why, in His Lordship’s opinion, Article V(1)(a) of the New York Convention (equivalent to Section 103(2)(b) of the UK Act and Section 48(4)(a) of the Indian Arbitration Act, 1996) H would be attracted as follows: -

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77 Although article V(1)(a) (and section 103(2)(b)) deals expressly A only with the case where the arbitration agreement is not valid, the consistent international practice shows that there is no doubt that it also covers the case where a party claims that the agreement is not binding on it because that party was never a party to the arbitration agreement. Thus in Dardana Ltd v Yukos Oil Co B [2002] 2 Lloyd’s Rep 326 it was accepted by the Court of Appeal that section 103(2)(b) applied in a case where the question was whether a Swedish award was enforceable in England against Yukos on the basis that, although it was not a signatory, it had by its conduct rendered itself an additional party to the contract containing the arbitration agreement. In Sarhank Group v Oracle C Corp (2005) 404 F 3d 657 the issue, on the enforcement of an Egyptian award, was whether a non-signatory parent company was bound by an arbitration agreement on the basis that its subsidiary, which had signed the agreement, was a mere shell; and in China Minmetals Materials Import and Export Co Ltd v D Chi Mei Corpn (2003) 334 F 3d 274 enforcement of a Chinese award was resisted on the ground that the agreement was a forgery. See also Born, International Commercial Arbitration (2009), Vol II, pp 2778–2779.

49Copy pinpoint49. Given the conclusion on Section 48(1)(a) when read with Section 44 of the Arbitration Act 1996, we cannot follow what is stated to be “international practice” in trying to fit a non-signatory’s objection to a foreign award being binding upon it under Section 48(1)(a). We therefore distinguish Dallah’s case on facts as well as on law – a non- signatory’s objection cannot possibly fit into Section 48(1)(a) as has been held by us hereinabove. Without delving deep into this problem, it may perhaps be open in an appropriate case for a non-signatory to bring its case within Section 48(2) read with Explanation 1(iii), as explained in Ssangyong (supra) (see paras 70 and 76 in Ssangyong).

50Copy pinpoint50. Shri Vishwanathan relied on a judgment of the Supreme Court of Victoria, Australia, in the case of IMC Aviation Solutions Pty Ltd. v G Altain Khuder LLC [2011] VSCA 248 to submit that, where a party resists enforcement of a foreign award on the ground that it is not a signatory to the arbitration agreement, the enforcing court is duty bound to examine the question of jurisdiction by itself.

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51Copy pinpoint51. In the said case, the Supreme Court of Victoria, after citing Dallah’s case with approval, held that the foreign award in that case cannot be enforced against a party who was not a signatory to the arbitration agreement. This decision was premised on the reasoning that the words ‘the arbitration agreement is not valid’ appearing in Section 8(5)(b) of the Australian International Arbitration Act, 1974 [“Australian B Act”] (which is equivalent to Section 48(1)(a) of the Indian Arbitration Act, 1996) includes the ground that the ‘award-debtor was not a party to the arbitration agreement’.

52Copy pinpoint52. What is important to note is that there is a significant difference in the Australian Act i.e., Section 8(1) of the Australian Act (which is analogous to Section 46 of the Indian Arbitration Act, 1996) which states that “a foreign award is binding …. on the parties to the arbitration agreement in pursuance of which it was made”.

53Copy pinpoint53. The Supreme Court of Victoria, after initially expressing some doubt on whether ‘not being signatory to the agreement’ can be a ground that can be canvassed under Section 8(5)(b), held that, since Section 8(1) clearly does not intend enforcement of foreign awards against non- signatories, such a plea can be brought within the ambit of Section 8(5)(b). The relevant paras are as follows: 135 In our opinion, at stage one, the award creditor must satisfy the Court, on a prima facie basis, of the following matters before the Court may make an order enforcing the award: (a) an award has been made by a foreign arbitral tribunal granting relief to the award creditor against the award debtor;

F (b) the award was made pursuant to an arbitration agreement; and (c) the award creditor and the award debtor are parties to the arbitration agreement. xxx xxx xxx G 156 Thirdly, s 8(1) appears prominently in the scheme of s 8. This is not surprising, as it defines the subject matter of Part II of the Act, namely, that by virtue of the Act, a foreign arbitral award is binding on ‘the parties to the arbitration agreement in pursuance of which it was made’. In thus identifying that which is binding, s H

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