Supreme Court Opens New Avenue for Enforcement in Foreign International Commercial Arbitration

[Guest post by Ashutosh Kumar, who is an Advocate practising in India. Views are personal.]

The decision of the Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan (6 July 2017) has opened a new avenue for the enforcement of interim orders and emergency awards in foreign arbitrations involving at least one non-Indian party – or foreign international commercial arbitrations in the parlance of the Arbitration and Conciliation Act, 1996 (the “ACA”). While the decision has been previously discussed here, this post specifically considers the impact of the decision on foreign international commercial arbitrations – an issue that was not considered in the previous post.

In Alka Chandewar, the Supreme Court was required to decide whether an arbitral tribunal in a domestic arbitration could make a reference to an Indian court seeking the initiation of contempt proceedings against a party acting in contempt of its interim order under section 27(5) of the ACA. Section 27 of the ACA principally deals with the provision of court assistance in taking evidence. Section 27(5) of the ACA reads as follows:

Section 27 – Court assistance in taking evidence

(5) Persons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.

The Bombay High Court, in the decision under challenge before the Supreme Court, had interpreted section 27(5) of the ACA restrictively and limited its scope to seeking initiation of contempt proceedings for contempt of orders relating to taking of evidence only.

The Supreme Court reversed the decision of the Bombay High Court and affirmed the right of an arbitral tribunal in a domestic arbitration to make a reference to an Indian court seeking initiation of contempt proceedings against a party acting in contempt of its interim order under section 27(5) of the ACA. It justified the decision on a literal or plain reading of section 27(5) of the ACA, and also on the basis that without such a provision, the object of granting the power to make interim orders to an arbitral tribunal would be defeated.

The decision in Alka Chandewar was based on the provisions of the ACA as they existed before the amendments made by Arbitration and Conciliation (Amendment) Act, 2015 (the “Amendment Act”). Thus, section 17(2) of the ACA, which was added by the Amendment Act, and provides for direct enforcement of interim orders, was not directly relevant to the decision. However, in response to an argument that section 17(2) of the ACA (and not section 27(5) of the ACA) provided the appropriate remedy for breach of interim orders, the Supreme Court held that both sections 17(2) and 27(5) of the ACA could be invoked in case of breach of interim orders.

While the decision in Alka Chandewar will no doubt have an impact on domestic arbitrations, its impact on foreign international commercial arbitrations will likely be far more substantial. The Amendment Act has extended the application of section 27 of the ACA to foreign international commercial arbitrations, subject to an agreement to the contrary (see proviso to section 2(2) of the ACA). Thus, the right to make a reference to an Indian court under section 27(5) of the ACA should also be available to tribunals in such foreign arbitrations. Therefore, tribunals in such foreign arbitrations should be able to make references to Indian courts seeking the initiation of contempt proceedings against parties acting in contempt of their interim orders, including in respect of emergency awards.

It should be noted that section 17(2) of the ACA does not apply to foreign arbitrations. Thus, apart from section 27(5) of the ACA, the only means to implement interim orders and emergency awards granted in foreign arbitrations is for a party to approach an Indian court for interim relief under section 9 of the ACA. Further, it remains to be conclusively decided whether an Indian court in such proceedings is required to take an independent view of the issues involved and can refuse to grant interim relief in support of interim orders or emergency awards. The Delhi High Court, in Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd. (2016), has held that an independent view is necessary. However, the Bombay High Court, in Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd. (2014) (here and here), has taken a different position.

While the right of a tribunal in a foreign international commercial arbitration to make a reference to an Indian court under section 27(5) of the ACA remains to be directly tested and affirmed by the Indian courts, the decision in Alka Chandewar takes India a step forward in its journey to become an arbitration-friendly jurisdiction.

– Ashutosh Kumar

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