Enforcement Court U/S 48 Of Arbitration Act Can Refuse To Enforce Foreign Award But Cannot Set It Aside: Delhi High Court

The Delhi High Court Bench of Mr. Justice Jasmeet Singh affirmed that the power to set aside a foreign award lies only with the courts at the seat of the arbitration, which exercise primary/supervisory jurisdiction over the matter. Even if grounds under Section 48 of the Arbitration Act can be made out, the Court being the enforcement court and having only secondary jurisdiction over the foreign award cannot set aside the award but may only “refuse” its enforcement.Brief FactsThis is a petition seeking enforcement and execution of a foreign award dated 21.04.2022 passed by the learned Sole Arbitrator in the arbitration between International Air Transport Association (“IATA”) and Spring Travels Pvt. Ltd. (“STPL”). The arbitration was held under the aegis of ICC International Court of Arbitration and the seat of arbitration was in Singapore.The petitioner-IATA is a trade association for member airlines worldwide, comprising approximately 280 airlines, which represent 83% of total air traffic. IATA, inter alia, promotes safe and reliable air travel and manages the billing and settlement system for its member airlines (or “Carriers”) and accredited travel agents. STPL was appointed as an accredited travel agent by IATA under a Passenger Sales Agency Agreement (“PSA Agreement”) dated 18.01.2005 entered between STPL and IATA members represented by IATA acting for and on behalf of its members. This program facilitated the accredited travel agent to sell air passenger transportation services of the member airlines.Since STPL breached the PSA Agreement by failing to remit the monies in terms of the remittance schedule, IATA claimed a sum of Rs. 1,24,31,69,623 (equivalent to USD 19,125,686 calculated at 1 USD = INR 65) received by STPL from the sale of ticketsplus interest.IATA submitted a request for arbitration dated 29.03.2018 to the Secretariat of the ICC International Court of Arbitration. STPL submitted an answer to the request for arbitration dated 05.06.2018, inter alia, challenging the jurisdiction of the Arbitral Tribunal (“AT”) to hear the claims in the arbitration. On 29.06.2018, the AT was constituted. 12. On 16.05.2019, the learned AT passed the partial award, wherein the objections raised by STPL with respect to the jurisdiction and maintainability of the arbitration proceedings were rejected.STPL challenged the partial award before the Singapore International Commercial Court (“SICC”) in appeal, which was dismissed vide judgment dated 25.03.2020. 14. Subsequent to the passing of the judgment dated 25.03.2020, the arbitral proceedings were resumed, and the learned AT passed the final award dated 21.04.2022.Pursuant to this, the present petition for enforcement has been filed.ContentionsThe respondents submitted that in terms of Section 48(1)(c) read with Section 48(2) of the Arbitration Act, there was no arbitral dispute in the absence of review by Travel Agency Commissioner (“TAC”). For this, reliance is placed upon, inter alia rules of the Handbook, which imply that review by TAC was a mandatory pre-requisite for invoking arbitration. Reliance is placed upon Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum (2022) and SAIL v. J.C. Budharaja, Govt. and Mining Contractor (1999) to state that the arbitrator, being a creature of the agreement, must operate within the four corners of the agreement.That the cost of arbitration was extremely high, which prevented STPL from effectively participating in the proceedings and denied it fair opportunity of being heard.That the foreign award is unenforceable because, under the PSA Agreement and the Handbook, the Carriers whose monies were involved were necessary parties to the proceedings, and IATA's claim could not be maintained in a representative capacity.That AT's finding regarding limitation was perverse as there was no specific finding as to whether Indian limitation law would be applicable or that of Singapore.Per contra, the petitioner submitted that the AT had the requisite jurisdiction, which was not ousted by IATA's failure to seek TAC's review before initiating arbitration. Additionally, it is argued that STPL cannot challenge the jurisdiction at this stage as this Court in enforcement proceedings does not act as an appellate court.That STPL had waived the pre-arbitration requirement by failing to approach the TAC for review within the specified time limit of 30 days.That the issue of alleged financial hardship of STPL and violation of principles of natural justice, the same is denied as STPL willfully absented itself from the proceedings and is now attempting to benefit from its own wrong.Court's AnalysisThe court at the outset discussed the powers of the enforcement court under section 48 of Arbitration Act and referred to the Supreme Court judgment in Union of India v. Vedanta Ltd., (2020) wherein it was held that the power to set aside a foreign award lies only with the courts at the seat of the arbitration, which exercise primary/supervisory...

Enforcement Court U/S 48 Of Arbitration Act Can Refuse To Enforce Foreign Award But Cannot Set It Aside: Delhi High Court

Mohd Malik Chauhan

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