The hon'ble Supreme Court, in a recent judgment passed on February 13, 2020, in the matter titled "Vijay Karia & Ors vs Prysmian Cavi E Sistemi SRL & Ors1 came down strongly on the appellant, imposing a cost of Rs. 50 Lacs and dismissed the civil appeal. It is important to know the factual matrix of the aforesaid case in order to discuss the crux of this article.
BACKGROUND
The apex court adjudicated the dispute between the shareholders arising out of a Joint Venture agreement (JV) signed and executed between the shareholders of one Ravin Cables Limited (RVL) and Prysmian Cavi E Sistemi SRL (respondent), an Italy based company. The appellants are shareholders of RVL, being represented by Mr. Vijay Karia i.e. appellant No. 1, executed the JV with respondent on 19.01.10, by virtue of which, the respondent acquired 51% shareholding in RVL's share. The respondent also paid RVL's shareholders, a substantial consideration towards 'control premium' under a separate 'Control Premium Agreement' executed between the parties. As per the terms of the JV, RVL was to be jointly managed by the CEO & MD till the expiry of the 'integration period' under the JV, i.e. for a further period of 6 months after expiry of the interim period.
However, during that period, the CEO was removed by the appellants and their group of directors opposed the appointment of a CFO who was appointed by the respondent. This intervention in the management and control of RVL cumulated into disputes between the parties. The respondent invoked the arbitration clause under the JV, alleging material breaches of the JV and arbitration was set in motion. The appellants also raised several counter claims alleging material breaches by the respondent. The sole arbitrator allowed all the reliefs sought by respondent and rejected all the counter claims as raised by the appellants. The arbitration was an International Arbitration being the seat at London and was governed by English law and consisted of the sole arbitrator appointed under the London Court of International Arbitration (LCIA) Rules, 2014. The tribunal passed its award in favour of the respondent. The award was never challenged before the English courts, although there exists a provision of appeal/challenge under English Arbitration Act. When the respondent approached the Indian Court i.e. High Court at Mumbai for enforcement, the appellant herein raised objection against the enforcement of the award under the grounds provisioned in Section 48 of the Arbitration and Conciliation Act, 1996 (Act) and the same was dismissed by the hon'ble High Court vide judgment dated 07.01.2019 and the award was held to be enforceable against the appellants.
Thereafter, the appellant(s) approached the apex court under Article 136 of the Constitution and raised its contentions broadly on three grounds i.e. (1) that the appellant was unable to present its case before the Tribunal; (2) that the hon'ble Tribunal failed to deal with the issues as and when raised by the appellant (under Section 48(1)(b)); and (3) that the foreign award is against the public policy of India (under Section 48(2) (b)) in two respects viz., (a) that it is in contravention to the fundamental policy of Indian law; and (b) that it violates the most basic notions of justice.
RULING OF THE COURT
The apex court, in its judgment examined all facets of the issues relating to enforcement of a foreign award in India. court duly examined the scope of Article 136 of the Constitution and made a remark on the appellant for wasting the court's time in adjudicating a matter which has been exhaustively dealt by the arbitrator in the award and by the High Court of Bombay under Section 48 of the Act. The court in Paragraph 24 of the judgment has duly explained the scope of Section 48 r/w 50 of the Act and how it is distinct from Section 37 of the Act wherein the provision of appeal against a domestic award is much wider, as the party can approach the appellate court against the outcome of Section 34 of the Act i.e. even if the application for setting aside the award is refused or granted. The hon'ble court has also tried to explain the legislative intent behind Section 50 of the Act as it does not provide any provision for appeal against the order refusing to enforce the foreign award under Section 48 of the Act. It is important to reiterate the concerned paragraph within Para 24 of the judgment for a better understanding of the issue.
"Before referring to the wide ranging arguments on both sides, it is important to emphasize that, unlike Section 37 of the Arbitration Act, which is contained in Part I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a 'domestic' arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognize and enforce a foreign award but not the other way around (i.e. an order recognizing and enforcing an award).This is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely narrow grounds contained in Section 48 of the Act and which have been rejected."
The hon'ble apex court has also discussed the scope of Article 136 and the scope of the adjudication by this court under Article 136 against the judgment rendered by the High Court under Section 48 of the Act.
Para 24: "Bearing this in mind, it is important to remember that the Supreme Court's jurisdiction under Article 136 should not be used to circumvent the legislative policy so contained. We are saying this because this matter has been argued for several days before us as if it was a first appeal from a judgment recognizing and enforcing a foreign award. Given the restricted parameters of Article 136, it is important to note that in cases like the present - where no appeal is granted against a judgment which recognizes and enforces a foreign award - this Court should be very slow in interfering with such judgments, and should entertain an appeal only with a view to settle the law if some new or unique point is raised which has not been answered by the Supreme Court before, so that the Supreme Court judgment may then be used to guide the course of future litigation in this regard. Also, it would only be in a very exceptional case of a blatant disregard of Section 48 of the Arbitration Act that the Supreme Court would interfere with a judgment which recognizes and enforces a foreign award however inelegantly drafted the judgment may be.
Thereafter the apex court dealt with the contentions raised by the parties and detailed out various precedents pertaining to the subject matter and dismissed the Civil Appeal and imposed a heavy fine of Rs. 50 Lacs against the appellant.
CRUX OF THE ISSUE
The basic tenet which this article seeks to underline is that since the Act provides a party to challenge a domestic award in two stages i.e. under Section 34 and also under Section 37, then why Special Leave Petitions are entertained against the awards in a casual manner. The fundamental intent behind the Act is to provide a swift adjudication of dispute with minimal interference of the court(s). It is to be looked into that the scope pertaining to the challenge of a domestic award under Section 34 and with regard to the challenge against the enforcement of a foreign award under Section 48 are on similar footings. There is a significant difference between Section 37 of the Act and Section 50 in terms of the scope of appeal as under Section 37, a party can appeal against the order of Section 34 irrespective of its outcome but under Section 50, one cannot appeal if the petition under Section 48 is allowed.
The hon'ble apex court in the aforesaid judgment has relied over this issue and has duly tried to explain the scenarios under which a party can approach the apex court under Article 136, when challenge against the enforcement is dismissed. The court has very well phrased the intent of legislature behind Section 50 by stating that only one bite at the cherry is allowed in terms of foreign award and so Special Leave Petitions (SLP) need not be entertained in a routine manner.
The intent behind Section 37 of the Act is still a conundrum which needs to be unfolded by the apex court as it did for Section 50 in the aforesaid judgment. The legislature has already provided two opportunities to a party to approach the court against a domestic award i.e. Section 34 and then Section 37. It is to be noted that the aggrieved party approaches the apex court under Article 136 of the Constitution without any hesitation as it has transformed into an appellate forum. It is stated that as a matter of fact, the public entities approach the apex court under Article 136 against the judgment under Section 37 of the Act in a routine manner and in many cases the petitions gets entertained also on some ground or other. The issue which needs to be checked is the approach of the parties in filing SLP under Article 136 against the judgment of Section 37 as when the legislature has already provided two bites at the cherry, then why numerous bites are allowed unless the cherry falls under the ambit of the various grounds as mentioned under Section 34 and the same failed to be noticed by both the forums. The hon'ble apex court, vide catena of judgments, has duly explained the scenarios under which an award can be challenged under Section 34 and the ambit of Section 37 of the Act, but irrespective of the same, parties approach the Supreme Court under Article 136, in a casual manner. It is to be noted that in most of the SLP's against the judgment under Section 37, the parties try to get the evidence re-appreciated where the same is barred under the eyes of law. The apex court needs to deal with all those SLP's with an iron fist as it did in the aforesaid judgment by imposing such a heavy fine, which in future would surely act as a deterring factor for approaching the apex court under Article 136 against the judgment of Section 48 of the Act.
The Supreme Court needs to reinstate the actual intent of Article 136 i.e. it does not confer upon a party a right to appeal against the judgment rendered by the court under Section 37 in appeal against the order passed under Section 34 of the Act.
CONCLUSION
The parties opting for the Arbitration as a mode of adjudication to resolve their disputes need to abide by the provisions of the Act. In the light of the aforesaid judgment, SLP need not be entertained against the judgment of Section 37 or Section 48. SLP holds a key place in our judicial system; it is only to be exercised in cases where any substantial question of law is involved or gross injustice has taken place but not as a right.
Footnote
1 Civil Appeal No. 1544 of 2020 [Arising out of SLP (Civil) No. 8304 of 2019
Originally published April 2020
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