NPAC’s Arbitration Review: The ‘immediate’ potential enforceability of foreign awards

NPAC’s Arbitration Review: The ‘immediate’ potential enforceability of foreign awards

Dr Amit George and Amol Acharya

Section 34 (3) of Part I of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’) prescribes the outer time limit for challenging an arbitral award as three (‘3’) months from the date of receipt of the arbitral award, extendable up to a further maximum period of thirty (‘30’) days. Ancillary thereto, Section 36 of the Arbitration Act provides that after the aforesaid prescribed permissible period of challenge has expired, an award can be enforced as a decree of the Court. Interpreting the effect of the latter provision, it has been the consistent position that an arbitral award which falls within the scope of Part I of the Act i.e. a domestic award, can only be sought to be enforced after the aforesaid period expires.[1]

While the aforesaid legal position qua a domestic award is relatively uncontroversial, the situation is more complicated in the context of a foreign award as defined under Section 44 of the Arbitration Act. A question arises as to when a foreign award can be said to be ripe for enforcement? On a related note, can it be said as a general proposition that there is a certain minimum ‘waiting period’ before which the said foreign award can be sought to be enforced?

It is relevant at this stage to clarify that the term ‘enforcement’ in this context is being used in reference to the filing of an application for enforcement of the foreign award under Sections 48 and 49 of the Arbitration Act before a competent Court in India. In Fuerst Day Lawson Ltd v. Jindal Exports Ltd.[2] the Supreme Court explained the scheme of the Arbitration Act in relation to the enforcement of a foreign award as amounting to different stages within the same proceeding viz. first deciding as to enforceability, and then proceeding onwards to take effective steps for execution. Thus, while the aspect of enforceability is required to be tested by the concerned Court on the merits when so approached, a preliminary question arises as to what is the ‘minimum’ time period, if any, within which a Court can be approached by an interested party.

The High Court of Delhi in a recent unreported decision in Rishima SA Investments LLC (Mauritius) v. Shristi Infrastructure Development Corporation Ltd. & Anr.[3], had occasion to consider the aforesaid issue. It was urged before the High Court that the attempted enforcement of a foreign award, emanating out of proceedings with Singapore as the seat of arbitration, would have to await the expiry of the timeline for challenge to an award as prescribed under the UNCITRAL Model Law (‘Model Law’). The provision in the Model Law as relied upon before the High Court is as under:

“Article 34: Application for setting aside as exclusive recourse against arbitral award

(1) …

(2) …

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral tribunal.”

Taking note of the aforesaid submission, the High Court prima-facie found no merit in the same. The High Court held that unlike Section 36 of the Arbitration Act, which specifically limited enforcement till after the expiry of the permissible challenge period, Article 34 of the Model Law did not contain any such proscription, and on the contrary only contained a general provision as to the outer limit for a challenge to an arbitral award. The Court, therefore, surmised that in the absence of a demonstration that there was a provision similar to Section 36 of the Arbitration Act either in the applicable Singaporean Law or the Model Law, there was no such minimum ‘waiting period’ for which the beneficiary of the foreign award would have to pause before attempting enforcement under Sections 48 and 49 of the Arbitration Act.[4] This approach of the High Court also seems to be in consonance with Section 48 (1) (e) of the Arbitration Act, which provides inter-alia that it is for the party resisting enforcement of a foreign award to demonstrate that “the award has not yet become binding on the parties”.

The aforesaid decision of the High Court provides clarity on the issue of the timeline for attempting enforcement of a foreign award under Sections 48 and 49 of the Arbitration Act, and paves the way for potential immediate enforcement action pursuant to the passing of a foreign award.

[1] Reference in this regard may be made to the judgments of the Supreme Court in Union of India v. Popular Construction Co. (2001) 8 SCC 470, particularly paragraph no. 16 thereof, and in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245, particularly paragraph no. 52 thereof.

[2] (2001) 6 SCC 356,

[3] Order dated 30.05.2019 in O.M.P. (EFA) (COMM.) No. 5/2019.

[4] For the record, the order of the High Court was appealed against in the Supreme Court. However, the Supreme Court by order dated 19.07.2019 in Civil Appeal No. 5696 of 2019 did not interfere with the finding of the High Court in relation to the present issue.

The authors are advocates practicing before the High Court of Delhi.

Members of the Nani Palkivala Arbitration Arbitration Centre (NPAC) will be writing a weekly column for Bar & Bench analyzing the latest developments on the law of arbitration.

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