[Nandini Garg is a 4th year B.A. LL.B. (Hons.) student at National Law Institute University in Bhopal.]
Recently the Delhi High Court in Daiichi Sankyo Company Limited v. Malvinder Mohan Singh and Ors. allowed the Japanese investor, Daiichi Sanyko, to enforce a foreign arbitral award against its Indian investee and recover Rs. 3500 crores from it. The erstwhile promoters of the investee company, Malvinder and Shivinder Singh, were found to have misled Daiichi Sankyo about the “genesis, nature and severity of the US regulatory investigations”. The judgment addresses some very important issues regarding the enforceability of foreign arbitral awards in India.
In the year 2008, Daiichi Sankyo invested $ 4.6 billion in the Indian giant drug-maker Ranbaxy Laboratories. In 2013, Ranbaxy pleaded guilty to charges related to drug safety and agreed to pay $500 million in civil and criminal fines under a settlement with the US Department of Justice. Daiichi Sankyo claimed that it was unaware of the pending investigations and other potential liabilities at the time of making investment, and was induced to acquire shares in Ranbaxy. The matter was brought up before the Singapore ICC tribunal which ruled in favour of Daiichi Sankyo.
For the enforcement of this arbitral award, Daiichi Sankyo moved the Delhi High Court. Ranbaxy pleaded that the award sought to be enforced stands vitiated because it suffers from the non-compliance of statutory provisions such as section 19 of the Indian Contract 1872, section 17 of the Limitation Act, etc. It was urged that in terms of section 48(2) of the Arbitration and Conciliation Act, 1996 [the “Arbitration Act”],the enforcement of the Singaporean tribunal award would be contrary to the public policy of India and also in contravention of the fundamental policy of Indian law. Daiichi Sankyo, on the other hand, argued that patent illegality cannot be considered as a ground for refusing enforcement of a foreign award under section 48 nor can there be a review of the merits of the dispute.
Approach of the Courts
The scope of objections to the enforceability of the foreign arbitral awards is limited to section 48 of the Arbitration Act. The Court examined the relevant parameters of section 48 for the refusal of enforcement of foreign arbitral award. While considering the enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award nor does it enquire as to whether, while rendering foreign award, some error has been committed.
Section 48(2)(b) of the Arbitration Act provides that the enforcement of an arbitral award may be refused if it is contrary to the public policy of India.The Supreme Court in Renusagar Power Co. Ltd v. General Electric Co. held as follows:
65. … In this context, it would also be of relevance to mention that under Article I(e) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol & Convention Act of 1837 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression “public policy” covers the field not covered by the words “and the law of India” which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required…
The defence of public policy should be narrowly construed. A contravention of a provision of law is insufficient to invoke the defence of public policy when it comes to enforcement of a foreign award. Under section 48(2)(b), the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to: (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The expression ‘fundamental policy of Indian law’ refers to the principles and the legislative policy on which Indian statutes and laws are founded. Similarly mere contravention of statutory provisions will not attract the bar of ‘fundamental policy of Indian law’.
The principles laid down in the aforementioned cases were reaffirmed by the Court in Daiichi Sankyo. It was held that the alleged contravention of the statutory provisions could not hinder the enforcement of the arbitral award of the Singapore ICC tribunal. A non-intrusive approach is adopted for the enforceability of foreign arbitral awards in India. A high threshold limit is set for the contravention of ‘public policy’ or ‘fundamental policy of Indian law’. The judgment ensures investor-protection and paves the way for ease of enforcement of foreign arbitral awards in India.
– Nandini Garg
See Lal Mahal.
XSTRATA Coal Marketing AG v. Dalmia Bharat (Cement) Ltd., 2016 (6) Arb LR 270 (Delhi).