Rajasthan High Court Declares GAFTA London Award Enforceable As Decree; Reiterates Narrow Scope Of “Public Policy” U/S 48 Arbitration Act

The Rajasthan High Court dismissed objections against the enforcement of a foreign award raised by Raj Grow Impex LLP stating that the scope of interference is extremely narrow at the enforcement stage and that an award holder having won before both the tribunal and appellate tribunals should not be left to feel that he has won the battle but lost the war. Justice Anoop Kumar Dhand held that “since this Court in the scope of Section 48 is not entitled to examine merits of the foreign award, therefore, arguments on merits advanced by the respondent need not be entered into in greater details. In proceedings seeking enforcement of the foreign award and making the foreign award a decree of this Court, this Court cannot sit in appeal on the findings recorded by the Arbitral Tribunal.” Background: Kingsroad Handelsges (Petitioner) and Raj Grow Impex LLP. (Respondent) had entered into three contracts on 3rd September 2018 for supply of 4188.740 MT of Whole Yellow Peas (Russian origin) with delivery at Kolkata port. A dispute arose on account of non-payment and contractual defaults. The matter was referred to Grain and Feed Trade Association (GAFTA), Arbitration Tribunal, London which held the respondent responsible for breaching the contracts and directed payment of over USD 999,000 with interest. The appeal filed by the respondent before GAFTA Board of Appeal against the tribunal's award was also dismissed holding that the buyer was in breach of its contractual obligations and therefore it enhanced the award amount. Despite the award attaining finality abroad, the respondent failed to comply which compelled the petitioner to approach the Rajasthan High Court under section 47 to 49 seeking enforcement of the award by treating it as Indian Court's decree. The respondent objected on the ground that the foreign award violated Indian Public Policy. It was further argued that certain payments were made outside India by bypassing domestic port related obligations which caused losses to the Indian Exchequer. Such conduct breached Clauses 12-H and 21 of the underlying contracts and therefore against the fundamental policy of Indian Law. Findings: The court at the outset delineated the limited scope of interference under section 48 of the Act which incorporates India's obligations under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. It held that “the contention of the respondent that there was patent illegality in the award cannot be countenanced as a valid ground for rejecting enforcement… The grounds for refusing enforcement are limited to where the award is contrary to (i) fundamental policy of Indian law, (ii) interest of India, or (iii) justice or morality". Relying on Shri Lal Mahal and Renusagar, the court held that patent illegality as a ground for challenge under section 34 does not apply on foreign awards under section 48 of the Act. It held that “Section 48 does not give power to review the foreign award on merit at the enforcement stage. Procedural defects or errors in appreciation of evidence do not lead to refusal of enforcement on public policy grounds.” Citing the Supreme Court's judgments in Vedanta and Avitel Post, it reiterated a narrow interpretation of public policy consistent with the New York Convention (1958). Quoting from Avitel, it observed that “this sort of challenge where arbitral bias or public policy is raised at the enforcement stage must be discouraged. Courts must send out a clear message that Indian courts will ensure enforcement of a foreign award unless it is demonstrable that there is a clear violation of morality and justice.” The court further held that under New York Convention and consistent Supreme Court's precedents, the courts are not permitted to have a second look at foreign awards. It relied on the Supreme Court's judgment in Shri Lal Mahal where it was held that “Section 48 of the 1996 Act does not give an opportunity to have a 'second look' at the foreign award in the enforcement stage. The scope of inquiry does not permit review on merits.” The court also referred to the English Arbitration Act, 1996 particularly sections 67-73 which provide that a challenge to an arbitral award can be made within 28 days. Since the respondent did not challenge the award within the prescribed time period, it was now precluded from challenging the award on merits in India. Further referring to Eitzen Bulk, the court held that once the award attains finality in its seat of arbitration, Indian Courts cannot reopen or relitigate the issues. The court concluded that “since this Court in the scope of Section 48 is not entitled to examine merits of the foreign award, therefore, arguments on merits advanced by the respondent need not be entered into in greater details. In proceedings seeking enforcement of the foreign award and making the foreign ...

Rajasthan High Court Declares GAFTA London Award Enforceable As Decree; Reiterates Narrow Scope Of “Public Policy” U/S 48 Arbitration Act

Mohd Malik Chauhan

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