Supreme Court Reopens the Limitation Period for Enforcement of Foreign Awards

[Smriti Shukla and Yash Raj are third year students of the National University of Study and Research in Law (NUSRL), Ranchi]

In the recent judgment of the Supreme Court in Bank of Baroda v. Kotak Mahindra Bank Ltd. (17 March 2020), the question concerned the limitation period for the execution of the foreign decrees under section 44A of the Civil Procedure Code (CPC) in India. In an attempt to determine the limitation period for the execution of the foreign decrees, the Supreme Court also opened the scope of re-examination of the limitation period for the enforcement of foreign arbitral awards in India that was recently settled by the Delhi High Court in Cairn India Ltd. v. Government of India (19 February 2020). The applicability of the present remark of the Supreme Court on the limitation period for enforcement of foreign awards will require India to reconsider its steps in boosting India’s arbitration ecosystem. In this post, we consider how that may be accomplished.

This post will elucidate the principles propounded by various recent judgements of the courts and how the recent rulings in Cairn India Ltd. and Bank of Baroda are likely to open up the conflict concerning the limitation period for the enforcement of foreign awards in India.

Cairn India Ltd. Case – A Temporary Halt

In Cairn India Ltd., the Delhi High Court was concerned with the question relating to the enforcement of a foreign arbitral award in which the enforcement petition was filed after three years from the date of passing of the arbitral award. The pertinent question was to find whether article 136 or article 137 of the Limitation Act, 1963 would be relevant in ascertaining the limitation period for such foreign awards. Briefly, the case arose out of a production sharing contract (PSC) dated 28 October 1994 concerning Rava Oil and Gas Field. The dispute was taken to the arbitration seat in Malaysia for the clash concerning the recovery of development costs. The tribunal awarded on 18 January 2011, asking the Government of India to pay USD 278.87 million to the petitioners, being Cairn India Limited, Rava Oil (Singapore) Pte Ltd. and Videocon Industries Limited. To the Government’s dismay, the challenge against the award the in higher courts of Malaysia was ultimately rejected. Thereafter, in October 2014, the petitioners filed an enforcement petition under sections 47 and 48 of the Arbitration and Conciliation Act, 1996, which was objected by the Government of India under section 48 of the Act.

Revisiting Previous Judgments

The Delhi High Court, in determining the case, had to deal with the issue of determining the limitation period for filing the enforcement petition of a foreign arbitral award in India. Unsurprisingly, the Government of India argued that the petitioners cannot convince the court for the condonation of delay in bringing up the enforcement petition, as article 137 of the Limitation Act, 1963 is a residuary provision and would govern the limitation period, wherein the period is set at three years.

On the other hand, the petitioners relied on the Madras High Court decision of Compania Naviera SODNOC  v. Bharat Refineries Ltd (2007)in which the petition was  filed under sections 47 and 49 of the Arbitration and Conciliation Act requesting the court to declare the arbitral award made in London as a deemed decree of the court. The Court covertly relied upon article 136 of the Limitation Act wherein, for the execution of any decree, the limitation period is 12 years. It then took the view that a foreign award is stamped as a decree under the Act and that, for the execution of a foreign award, a party has the same time as that of a decree-holder.

Back in 2001, a similar concern arose before the Supreme Court in Fuerst Day Lawson Ltd. v Jindal Exports Ltd (2001) and the Court held on the similar lines as that of Compania case. The Court observed, keeping in view the provisions of Part II of the Arbitration Act, that the object of the Act is to minimise the interference of the court in the arbitral process and speedy disposal of cases. The Court dismissed the contention that the award holding party has to file a fresh and separate application for the enforceability. Quite apart from this, the Court also dismissed other contentions, including that the party has to produce pieces of evidence to satisfy section 47 of the Arbitration and Conciliation Act. Furthermore, section 48 of the Act should also be fulfilled and then it rests upon the discretion of the court to decide the enforceability of the award. And only after the court’s decision about the enforceability that it can be deemed to be a decree under section 49. Following the separate application rule will solely lead to prolonging the litigation process. Hence, the verdict was to enforce the principle to treat every final arbitral award as the decree of the court.

But, in Noy Vallesina Engineering Spa v. Jindal Drug Limited,the Bombay High Court took the contrary and inconsistent view like that in Fuerst Day. Herein, the Bombay High Court relied on the residuary provision, article 137 of the Limitation Act, 1963, for determining the limitation period, i.e., three years from the date when the right to apply for execution of the award accrues. Furthermore, after the court’s satisfaction that the foreign award is to be enforceable in India, the award holder can move to the execution of the award within 12 years. Hence, for the foreign award to be deemed a decree by virtue of section 49 of the Arbitration and Conciliation Act, it has to primarily satisfy the stages contemplated in sections 47 and 48 of the Act. Article 136 of the Limitation Act is attracted after it reaches the stage contemplated under section 49, and at no earlier point.  However, another single judge of the Bombay High court in Imax Corporation v. E-City Entertainment (I) Pvt. Ltd., (2018) 18 SCC 313, considering all the previous judgments (Noy VallesinaCompania NavieraFuerst Day Lawson and Thyssen Stahlunion and Shriram EPC Ltd. v. Rioglass Solar Sa) has taken an inconsistent view that article 136 of the Limitation Act would be applicable in the enforcement of foreign awards.

The Delhi High Court Analysis

The Delhi Court in Cairn India Ltd. was again engaged in the same dilemma relating to limitation concerning foreign arbitral awards. The Court examined the provisions of the Arbitration and Conciliation Act. The Court welcomed and took a step forward in speedy enforcement of foreign awards in India by encouraging the constructive sentiment in global business. Firstly, the Court considered the previous judgments and observed that the enforcement of the foreign award can be largely divided into a stage of access, recognition and enforcement. Secondly, to pass the stage of access, it has to accomplish the requirements mentioned in section 47 of the Arbitration and Conciliation Act.  Thirdly, the court observed that those applications that pass the doorway of section 47 will be treated like a foreign decree. The enforcement of that award can be objected to by the other party only if it falls within the provisions of section 48(1)(a) to (e) or under section 48(2). Fourthly, the word “enforcement” mentioned in section 49 of the Act is used interchangeably with the word ‘execution’ and ‘satisfaction’ and is relevant to the conditions of gaining access and recognition of courts as provided in section 47 of the Arbitration and Conciliation Act. Lastly, the Court summed up with the conclusion that article 136 of the Limitation Act, 1963 would apply to all those awards which crossed the stage of ‘access’ and ‘recognition’ of the court by virtue of section 47 of the Arbitration and Conciliation Act. Therefore, the present enforcement petition before the Court was not time-barred as the limitation period is 12 years in case of foreign arbitral awards.

Foreign Award as a “Deemed Decree” or Not?: Conflict between Cairn India Ltd and Bank of Baroda Case

The verdict of the Delhi High Court was rendered prior to Supreme Court judgment in Bank of Baroda. Nevertheless, the Supreme Court in Bank of Baroda yet again reopened the limitation conundrum by remarking on article 136 of the Limitation Act and stating:

[A]s far as Article 136 of the Act is concerned, we are of the view that the same only deals with decrees passed by Indian courts. The Limitation Act has been framed mainly keeping in view the suits, appeals and applications to be filed in Indian courts and wherever the need was felt to deal with something outside India, the Limitation Act specifically deals with that situation.” [emphasis added]

Furthermore, the Supreme Court notified that the intent of the legislature behind article 136 was to confine decrees of only Indian courts. Evidently, the Supreme Court has deviated from the principle laid down in previous judgments about bearing in mind that, with foreign awards being executable as decrees of Indian courts, the period of limitation for Indian decrees will also be relevant in foreign awards, i.e., article 136 of the Limitation Act. Hence, the Court has reopened the opportunity to have another look at a particular issue.

Smriti Shukla & Yash Raj

About the author

Add comment

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Top Posts & Pages

Topics

Recent Comments

Archives

web analytics

Social Media