Territorial Jurisdiction in the Context of Enforcement of Foreign Awards

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The Delhi High Court in its judgment titled Glencore International AG v. Hindustan Zinc Limited OMP (EFA)(COMM) 9 & 10 of 2019 decided on 8th June 2020, examined the question of territorial jurisdiction of a Court in the context of enforcement of foreign awards.

Brief facts of the case were that the Decree Holder, Glencore International AG, had London seated foreign arbitral awards in its favour. Accordingly, Decree Holder filed two enforcement petitions before the Delhi High Court seeking enforcement and execution of the foreign awards against the Judgment Debtor, Hindustan Zinc Limited.

Subsequently, the Judgment Debtor filed applications objecting to the maintainability of the enforcement petitions within the jurisdiction of the Delhi High Court. Senior Counsel appearing for the Judgment Debtor primarily averred as follows:-

  • That no part of the cause of action in respect of the subject matter of the awards had arisen within the jurisdiction of the Delhi High Court; and
  • The only asset identified by the Decree Holder within the jurisdiction of the Court, for the purpose of enforcement is a property, which is not owned by the Judgment Debtor but on lease from the Government of India. The onus is on the Decree Holder to identify property for the purpose of execution. Since the Judgment Debtor does not have disposing power over the property identified by the Decree Holder, it cannot be attached or sold in execution of the decree. 

Senior Counsel for the Decree Holder countered the Judgment Debtor’s objections submitting as follows:-

  • In view of explanation to Section 47 of the Arbitration and Conciliation Act, 1996 (as amended) (‘Act’) which defines ‘Court’, the only relevant factor to establish territorial jurisdiction is the location of assets and property of the Judgment Debtor. The subject matter of the awards being money, the questions forming the subject matter of the award would be a question relating to money i.e. assets of the Judgment Debtor.
  • Judgment Debtor’s property identified, is non-residential in nature and is not subject to the Rent Control Law. Further, Judgment Debtor has failed to show any statutory bar to the disposition of leasehold interest and the tenancy is not a residential tenancy, so as to be exempted under Section 60 of the Code of Civil Procedure, 1908, which deals with property liable to attachment and sale in execution of a decree. 
  • Even otherwise, even if the assets are not sufficient to satisfy the decree, this aspect will not be relevant at the stage of determining the enforceability of foreign awards.

After hearing the contentions of the respective parties and examining the position of law, the Delhi High Court drew a prima-facie conclusion that it would have jurisdiction to entertain the enforcement petitions. However, to adjudicate the issue finally, the Court directed the Judgment Debtor to file an Affidavit in Form 16-A, Appendix E CPC, and disclose all its assets moveable & immoveable and tangible/intangible.

Importantly, in arriving at its prima-facie conclusion on the jurisdiction, the Court made certain material observations on the jurisdiction of a Court under Part II of the Act. These observations are summarized below:-

  • Arbitration can be at a neutral Forum between the two parties and the assets may or may not be at either of the two places. This is the Forum where parties to an arbitration agreement agree to the arbitration proceedings being held and are the subject matter of the arbitration. However, if enforcement of the award is filed, it is maintainable only where the properties/assets of the Judgment Debtor are located which may or may not be the chosen place of the parties for the subject matter of arbitration;
  • There is a difference in the subject matter of arbitration and subject matter of the award which is borne out from a reading of Section 2(1)(e) of and explanation to Section 47 of the Act. This aspect has also been dealt with by the Bombay High Court in Tata International Ltd., Mumbai vs. Trisuns Chemical Industry Ltd., Kutch 2002 (2) BomCR 88 and Wireless Developers Inc. vs. India Games Ltd. 2012 (2) ALLMR 790;
  • The Court placed reliance on the two judgments above. Particularly emphasis was laid on the finding that, at the stage of arbitration, the subject matter could be a contract, and therefore, the place where the contract was entered into or such related issues would be material to decide the jurisdiction. However, once arbitration is concluded, and the stage is of enforcement then the question that has to be examined is the subject matter of the award. Where the award is a money award, the enforcement would lie in a Court that is able to enforce the award. Thus, where the properties, moveable or immoveable, are located would be the place of enforcement of the award and issues such as the residence or the place of business of the Respondent would be of little use;
  • Relying on the Supreme Court’s decision in Brace Transport Corporation of Monrovia, Bermuda vs. Orient Middle East Lines Ltd., Saudi Arabia & Ors. 1995 Supp (2) SCC 280, the Court reiterated that a foreign award is a deemed decree when allowed to be enforced and can be enforced anywhere depending on the location of the assets of the Judgment Debtor or where its money lies. It is in the nature of forum hunting.

Therefore, the Delhi High Court appreciated and accepted the Decree Holder’s submissions on the difference between jurisdiction of a Court under Part I and Part II of the Act. 

Essentially, a Decree Holder in whose favour a foreign award is passed and which is otherwise complete in all respects, can go forum shopping and locate the assets of the losing party for executing the award. Factors such as the underlying cause of action, place of signing of the contract, seat of arbitration are irrelevant for bringing an enforcement action under Part II of the Act.

This Article is written by Mr. Sidhant Kapoor, Senior Associate, CSL Chambers.

Sidhant Kapoor, Senior Associate, CSL Chambers
Sidhant Kapoor, Senior Associate, CSL Chambers

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