Introduction
Enforcement of foreign arbitral awards in India, are undertaken basis the principles laid down under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. Over the years, the issue that remained unsettled was on the period of limitation on commencing action to enforce of foreign awards in India. Indian Courts in the past had taken divergent views while deciding the period of limitation on action being brought before Indian Court. This issue finally stands settled.
A full bench of the Supreme Court (“SC”) in the judgment of Government of India v. Vedanta Limited and Others1, while taking into account the divergent views of various High Courts, settled the long pending debate and held that an application for execution of a foreign arbitral award would be covered under Article 137 of the Limitation Act, 1963 (“Limitation Act”).
Brief Facts
Disputes arose between the Government of India and Vedanta Limited, Ravva Oils (Singapore) Pte. Ltd. and Videocon Industries Limited (“Respondents”) under a Product Sharing Contract (“PCS”) which provided for development to be carried out in terms of a ‘Ravva Development Plan'. The crux of the dispute was in respect of costs incurred by the Respondents for the petroleum operations and the monies to be received by the Government of India under the PCS.
The arbitration award was passed in 2011 pursuant to which the Government of India challenged the award under Section 37 of the Malaysian Arbitration Act, 2005 before the Malaysian High Court and subsequently before the Malaysian Court of Appeal, both courts rejecting the challenge. The Government of India then filed an application for leave to appeal before the Malaysian Federal Court. Whilst the application for leave to appeal was pending, the Respondents filed a petition in India, for enforcement of the arbitral award and an application for condonation of delay in filing such a petition for enforcement.
The Government of India filed an application under Section 48 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), resisting the enforcement proceedings, on the following grounds:
- that the enforcement petition was filed beyond the limitation period;
- the enforcement was contrary to the public policy of India;
- that the application contained matters beyond the scope of the submission to arbitration.
The Delhi High Court dismissed the application filed by the Government of India under Section 48 of the Arbitration Act. The application filed by the Respondents, Section 47 and 49 of the Arbitration Act, for the enforcement of the foreign award; and the application for condonation of delay in filing the execution petition by the Respondents, were allowed by the Delhi High Court. The Government of India went in appeal to the SC against this judgment of the Delhi High Court.
Judgment of the SC
The SC evaluated the divergent views taken by multiple high courts with respect to the period of limitation for filing petition for enforcement of a foreign award under the Indian Arbitration Act. The Bombay High Court2 had held that an enforcement of a foreign award takes place in two stages; first the enforceability is decided which is governed by Article 137 (3 years period) of the Limitation Act and secondly after the enforceability is decided, the award is deemed to be a decree and execution of the foreign award is then governed by Article 136 (12 years period) of the Limitation Act. Another view taken by the Bombay High Court judgment3 holds the limitation period to be 3 years; a contrary Bombay High Court judgment, a single judge Madras High Court judgment and the impugned Delhi High Court judgment4 hold the limitation to be 12 years.
The SC observed that the issue of limitation for enforcement of a foreign award is a procedural one and is to be governed by lex fori.
The limitation period for enforcing a foreign award in India, would be as per the Indian law. The Arbitration Act does not specify limitation period for filing an application for execution/enforcement of a foreign award. Section 43 of the Arbitration Act, however, provides that the Limitation Act would be applicable to arbitrations as it would apply to court proceedings. The Limitation Act also does not specify a time limit for enforcement of a foreign award. Article 136 provides that the period of limitation for execution of any decree or order of a civil court is 12 years from the date when the decree or order becomes enforceable. Article 137 is a residuary provision which provides that the period of limitation for any application where no period of limitation is provided, would be 3 years. The SC noted that Section 36 of the Arbitration Act creates a ‘limited purpose deeming fiction' for enforcement of ‘domestic awards' as a decree of the court, even though it is otherwise an award in arbitration proceedings5. The tribunal therefore cannot be considered a court and the proceedings before it are not construed as court proceedings.
The SC relied upon its judgment in Bank of Baroda v Kotak Mahindra Bank6 which held that Article 136 of the Limitation Act deals with only decrees passed by Indian courts and therefore an application for execution of a foreign decree would be an application not covered under any other article of the Limitation Act and would be covered under Article 137.
The SC while settling this issue, held that foreign awards are not decrees of an Indian civil court. The legal fiction under Section 49 provides that after a foreign award has been granted recognition and enforcement under Section 48, it would be deemed to be a decree of “that Court”. “That Court” refers to the court which has adjudicated upon the petition under Section 47 and 49 for enforcement of the foreign award. The SC further held that Article 136 of the Limitation Act would not be applicable for enforcement/execution of a foreign award since it is not a decree of a civil court in India. The enforcement of a foreign award as a deemed decree of the concerned High Court, would therefore be covered under the residuary provision, i.e. Article 137 of the Limitation Act. The phrase “any other application” under Article 137 would include petitions under any special enactment7. The definition of application under the Limitation Act8, includes a petition.
Lastly, the SC observed that the present Limitation Act excludes any application filed under Order XXI of Code of Civil Procedure, 1908 (“CPC”) from the purview of Section 5 of the Limitation Act. The object of this is that execution of decrees should be proceeded with as expeditiously as possible and therefore the limitation period is uniformly fixed as 12 years for execution of decrees of a civil court. Thus, the SC held that limitation period for filing a petition under Sections 47 and 49 would be a period of 3 years, under Article 137 of the Limitation Act.
The SC further observed that the application under Sections 47 and 49 is a substantive petition filed under the Indian Arbitration Act (a self-contained code), and is not an application filed under any provisions of Order XXI of the CPC. The bar contained in Section 5 of the Limitation Act, which excludes an application filed under any of the provisions of Order XXI of CPC, would not be applicable to a substantive petition under the Indian Arbitration Act. Consequently, a party may file an application under Section 5 for condonation of delay. In the facts of the present case, the SC held that the application under Sections 47 and 49 was filed within the limitation period and in any event, there were sufficient grounds to condone the delay.
The SC judgment conclusively settles the position of limitation period applicable to enforcement of foreign awards. The judgment therefore, is a welcome move and clarifies multiple positions under Sections 47 to 49 of the Arbitration Act.
Footnotes
1 Civil Appeal No. 3185 of 2020 (Arising out of SLP (civil) No. 7172 of 2020
2 2006 (3) Arb LR 510
3 (2015) 6 Bom CR 258
4 (2020) 1 AIR Bom 82; (2008) 1 Arb LR 344; 2020 SCC Online SC 324
5 The SC relied on the following judgments: (2006) 13 SCC 322, (1955) 2 SCR 603, 2017 (3) SCC 274 and (2020) SCC Online 324
6 2020 SCC Online SC 324
7 (1976) 4 SCC 634
8 Section 2(b) of the Limitation Act
Originally Published by Phoenix Legal, February 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
