Whether Foreign State can claim sovereign immunity against enforcement of arbitral award arising out of the commercial transaction?

  The prior consent of Central Government is not necessary under Section 86(3) of the Code of Civil Procedure to enforce an arbitral award against a Foreign State. {Para 44}

45. A Foreign State cannot claim a Sovereign Immunity against enforcement of an arbitral award arising out of a commercial transaction.

46. Section 36 of the Arbitration and Conciliation Act treats an arbitral award as a „decree‟ of a Court for the limited purpose of enforcement of an award under the Code of Civil Procedure which cannot be read in a manner which would defeat the very underlying rationale of the Arbitration and Conciliation Act namely, speedy, binding and legally enforceable resolution of disputes between the parties.

47. Section 86 of the Code of Civil Procedure is of limited applicability and the protection thereunder would not apply to cases of implied waiver. An arbitration agreement in a commercial contract between a party and a Foreign State is an implied waiver by the Foreign State so as to preclude it from raising a defense against an enforcement action premised upon the principle of Sovereign Immunity.

48. In a contract arising out of a commercial transaction, such as the transactions which are subject matter of the present petitions, a

Foreign State cannot seek Sovereign Immunity for the purpose of stalling execution of an arbitral award rendered against it. Once a Foreign State opts to wear the hat of a commercial entity, it would be bound by the rules of the commercial legal ecosystem and cannot be permitted to seek any immunity, which is otherwise available to it only when it is acting in its sovereign capacity. It is the purpose and nature of the transaction of the Foreign State which would determine whether the transaction, and the contract governing the same, represents a purely commercial activity or whether the same is a manifestation of an exercise of sovereign authority.

IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: 18th June, 2021

OMP (ENF) (COMM) 82/2019 & I.A. No. 7023/2019

KLA CONST TECHNOLOGIES PVT. LTD. Vs THE EMBASSY OF ISLAMIC REPUBLIC OF AFGHANISTAN

 CORAM:  MR. JUSTICE J.R. MIDHA

 Dated: JUNE 18, 2021 

Print Page

Whether Arbitration Act will prevail over Delhi High court Act?

It is first to be noted that the Arbitration and Conciliation Act, 1996 is a special statute vis-à-vis the Delhi High Court Act, which would be a general statute dealing with the jurisdiction and procedure of the High Court. It is well established principle of law that a special provision made on a certain matter would exclude the general provision in its application, with the provision of the special Act prevailing over the provision of a general Act. This principle is expressed in the maxims Generalia Specialibus Non Derogant and Specialia Generalibus Derogant. Reference can be drawn to the judgment of the Supreme Court in Jogendra Lal Saha v. State of Bihar and others, MANU/SC/0282/1991 : AIR 1991 SC 1148 and P.V. Hemalatha v. Kattamkandi Puthiya Maliackal Saheeda and others, MANU/SC/0501/2002 : AIR 2002 SC 2445.

13. The object and intent of the legislature in substituting the Explanation to Section 47 of the Act can be found in the 246th Report of the Law Commission, which has been reproduced hereinabove. The provision therefore, clearly intended to ensure that all challenges to a Foreign Award are made only before the High Court. Such intent cannot be defeated by applying a subsequent general law. In view of the above, the provisions of the Delhi High Court Act cannot be made applicable to the petitions seeking enforcement of the Foreign Awards.

14. In Kandla Export Corporation and Anr. v. M/s. OCI Corporation and Anr., MANU/SC/0112/2018, the Supreme Court relying upon its earlier judgment in Fuerst Day (supra) held that Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 being a general provision vis-a-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to the case of Section 50 of the Act. Applying the above ratio, it would be clear that the Delhi High Court Act would not apply to the petitions seeking enforcement of a Foreign Award under the Arbitration and Conciliation Act, 1996 as amended by the Amendment Act.

IN THE HIGH COURT OF DELHI

Ex. P. 330/2015 and E.A. No. 387/2018

Decided On: 28.11.2018

Precious Sapphires Ltd. Vs. Amira Pure Foods Private Ltd.

Hon'ble Judges/Coram:

Navin Chawla, J.

Print Page

Whether Arbitration award can be enforced against non signatory to arbitration agreement?

The present case relates to a post award situation. The enforcement of the arbitral award has been sought against the Appellant on the basis that it claims under KCP and is bound by the award. Section 35 of the Arbitration and Conciliation Act 1996 postulates that an arbitral award "shall be final and binding on the parties and persons claiming under them respectively". The expression 'claiming under', in its ordinary meaning, directs attention to the source of the right. The expression includes cases of devolution and assignment of interest (Advanced Law Lexicon by P. Ramanatha Aiyar15 ). The expression "persons claiming under them" in Section 35 widens the net of those whom the arbitral award binds. It does so by reaching out not only to the parties but to those who claim under them, as well. The expression "persons claiming under them" is a legislative recognition of the doctrine that besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to the proceedings. Having derived its capacity from a party and being in the same position as a party to the proceedings binds a person who claims under it. The issue in every such a case is whether the person against whom the arbitral award is sought to be enforced is one who claims under a party to the agreement.

22. The submission which was urged on behalf of the Appellant, proceeds on the basis that since the Appellant was not impleaded as a party to the arbitral proceedings, proceedings for the enforcement of the award will not lie against it. This line of submissions clearly misses the central facet of Section 35, which is that a person who claims under a party is bound by the award. The fact that the Appellant was not a party to the arbitral proceedings will not conclude the question as to whether the award can be enforced against it on the ground that it claims under a party. Essentially, the Court is called upon to consider whether the test embodied in Section 35 is fulfilled in the present case, so as to bind the Appellant.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 10025-10026 of 2017

Decided On: 24.04.2018

Cheran Properties Limited  Vs.  Kasturi and Sons Limited and Ors.

Hon'ble Judges/Coram:

Dipak Misra, C.J.I., A.M. Khanwilkar and Dr. D.Y. Chandrachud, JJ.

Citation: (2018) 16 SCC 413

Print Page

Whether court is required to see issue of maintainability and enforceability of foreign arbitration award simultaneously?

 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 de hors 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 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.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NO. 540 OF 2018

LMJ International Ltd. Vs Sleepwell Industries Co. Ltd. 

Dated:February 20, 2019.

A.M. Khanwilkar, J.

Print Page

Whether application for enforcement of foreign arbitral award can be dismissed if necessary documents were not filed along with application?

 It is relevant to note that there would be no prejudice
caused to the party objecting to the enforcement of the
Award by the non-filing of the arbitration agreement at the
time of the application for enforcement. In addition, the
requirement of filing a copy of the arbitration agreement
under the Model Law which was categorized as a formal
requirement was dispensed with. Section 48 which refers
to the grounds on which the enforcement of a foreign
award may be refused does not include the non-filing of the
documents mentioned in Section 47. An application for
enforcement of the foreign award can be rejected only on
the grounds specified in Section 48. This would also lend
support to the view that the requirement to produce
documents mentioned in Section 47 at the time of
application was not intended to be mandatory.
21. Reading the word “shall” in Section 47 of the Act as
“may” would only mean that a party applying for

enforcement of the award need not necessarily produce
before the Court a document mentioned therein “at the
time of the application”. We make it clear that the said
interpretation of the word “shall” as “may” is restricted
only to the initial stage of the filing of the application and
not thereafter.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No .4834 of 2007

P.E.C. LIMITED Vs AUSTBULK SHIPPING SDN BHD

L. NAGESWARA RAO, J.
Dated:NOVEMBER 14, 2018.
Citation: 2019(4) MHLJ 518

Print Page

Supreme Court: Stamping Not Necessary For Enforcement Of Foreign Arbitral Awards In India

 On the other hand, the Madhya Pradesh High Court judgment (supra)
hits nearer home. This judgment, in paragraph 12 thereof, states why foreign
awards do not have to suffer stamp duty in the following terms:
“12. The Law on Arbitration in India was substantially contained
in three enactments namely, The Arbitration Act, 1940, The

Arbitration (Protocol and Convention) Act, 1937 and The
Foreign Awards (Recognition and Enforcement) Act, 1961. It
was widely felt the 1940 Act, which contains the General Law of
Arbitration, has become outdated. The Arbitration and
Conciliation Act, 1996 came in force to consolidate and amend
the Law relating to Domestic Arbitrations, International
Commercial Arbitration, enforcement of foreign arbitral awards
and to define the law relating to conciliation, commission on
international trade in short (UNCITRAL) Model Law and Rules.
Apart from other object, the object of the Act is to provide that
every final arbitral award is enforced in the same manner as if it
were a decree of the Court. While Arbitration and Conciliation
Act, 1996 was enforced, no amendment was made in the
definition of award given in the Indian Stamp Act. Similarly, the
Schedule which lays down the stamp duty payable on award
was not amended by including the foreign award. It appears
that law makers while enforcing the Arbitration and Conciliation
Act, 1996 was of the view that foreign award shall be
enforceable as if it were a decree of the Court, no amendment
was brought either in the definition of award or in the Schedule
relating to payment of stamp duty on award. Since the
definition of award given at Entry No. 11 of the Schedule of the
Indian Stamp Act does not cover the foreign award and one of
the objects to enforce the new Act was to enforce final award
as if it was a decree and keeping in view the law laid down by
the Hon'ble Apex Court in the matter of Fuerst Day Lawson Ltd.
(supra), wherein the Hon'ble Supreme Court has held that
under the new Act the foreign award is already stamped as
decree, this Court is of the view that the petition filed by the
petitioner has no merits and deserves to be dismissed. In view
of this, the petition filed by the petitioner is disposed of holding
that foreign award is already stamped and is enforceable as
decree.”
We, therefore, hold that the learned Single Judge of the Madras High

Court is correct, and the fact that a foreign award has not borne stamp duty
under the Indian Stamp Act, 1899 would not render it unenforceable for the
reasons given in our judgment.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9515 of 2018
(ARISING OUT OF SLP (CIVIL) NO.13913 OF 2018)

M/S SHRIRAM EPC LIMITED Vs RIOGLASS SOLAR SA.

Dated:September 13, 2018.
R.F. NARIMAN, J.
Citation:AIR 2018 SC 4539

Print Page

When court should not decline enforcement of arbitration Award?

 The first and foremost issue to be considered is whether the enforcement of the Award ought to be declined on the ground that Dalmia was unable to present its case. In terms of section 48(1)(b) of the Act, enforcement of a foreign award may be refused, at the request of the party against whom it is sought to be enforced, only if that party furnishes to the court proof that it “was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case”. In the present case, there is no allegation that Dalmia was not given proper notice of the appointment of the arbitral tribunal or the arbitration proceedings.

 The inability to present a case as contemplated under section 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.

In the High Court of Delhi at New Delhi

(Before Vibhu Bakhru, J.)

Glencore International AG 

v.

Dalmia Cement (Bharat) Limited .

EX.P. 75/2015 and EX APPL. (OS) No. 1216-1217/2015

Decided on July 3, 2017

Citation:2017 SCC OnLine Del 8932

Print Page