SC Holds Article 137 Of Limitation Act Applicable In Foreign Award Enforcement Application

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SC held that in case of enforcement of a foreign award, Article 137 of the Limitation Act would be applicable. It also held that Section 48 of the Arbitration Act is limited and does not warrant an inquiry into the merits of an award.

Brief Facts of the Case

The Appellant, Government of India, had floated a tender for development and exploration of the Ravva Gas and Oil Fields in 1993. The Respondent’s predecessors responded to this invitation. The two parties entered into a Production Sharing Contract of a term of 25 years.

Article 15 of the PSC provided for recovery of costs for oil and gas. 

The Claimants-Respondents contended for an increase in the cap in Article 15.5 while the GOI refused to comply. This matter went for arbitration. The GOI challenged the award by the Tribunal before the Malaysian High Court and the Court of Appeals. When the GOI’s Leave to Appeal before the Malaysian Federal Court was pending, the Claimants-Respondents filed a petition for condonation delay before the Delhi High Court. 

The GOI moved to the Delhi HC under Section 48 of the Arbitration Act of 1996 resisting the enforcement. Delhi HC rejected this and allowed condonation.

This has now been appealed against by the GOI before this court.

Arguments

The Learned AGI, KK Venugopal represented the Appellants. He contended that the enforcement of the award in question must be refused on the following grounds:

  1. Section 47 of the Act bars the petition for enforcement or execution of a foreign award on the grounds of limitation.
  2. If enforced, it would be against the Public Policy of India as expounded in the ruling of the Renusagar judgment. 

The Malaysian Courts have erred in applying the Malaysian Arbitration Act of 2005. This is contrary to Clause 33.1 and 33.2 of the PSC and the decision of Reliance Industries v UOI. The judgment had observed that since the substantive law governing the contract is Indian law, even the Courts in England would be required to decide the issue of arbitrability by applying the Indian law of public policy.

Mr C.A. Sundaram and Mr Akhil Sibal, Senior Advocates, represented the Respondents-Claimants. They referred to Section 49 of the 1996 Act. They argued that to be a decree of an Indian Court, the objections to the foreign award must be adjudicated by the enforcement court. Further, Section 48 does not allow a review of the merits of the award and an interpretation of the PSC. The scope of inquiry under Section 48 is limited. The Appellants cannot invite the court to take a second look at the award by seeking a review on merits. 

Court’s Observations

The bench observed that the High Court was wrong in stating that a foreign award does not depend on the proceedings stipulated in Section 48 and is enforceable on its strength. The stages in Section 47 and 48 are mandatory, and only after the award goes through them entirely does it become enforceable as a deemed decree.

Section 48 provides for the grounds when an award can be set aside. The court observed that the enforcement Court could not set aside a foreign award, even if the conditions under Section 48 are made out. 

The enforcement court, under Section 48, does not have the power to correct the errors in the award or to review on the merits of the award. The power conferred under Section 48 is limited to refuse enforcement if the grounds are made out.

The use of in the opening of Section 48 shows that it is permissive and not mandatory. Even if one or more grounds under the provision are established, the court has the discretion to act on it or overrule the objections. The decision must make sure justice is done between the parties. 

The grounds for refusing enforcement of foreign awards contained in Section 48 are exhaustive.

Further, the court opined that in case of a foreign decree Article 137 of the Limitation Act would be applicable. This is because Article 136 is confined to the decrees of civil court in India. 

Also, the Limitation Act, 1963 excludes the purview of Section 5 of the Act from applications under Order XXI. 

Court’s Order

The court noticed that the enforcement petition is filed within three months from the date of the right accrued was within the period of limitation under Article 137. 


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