Supreme Court of India: Resisting Enforcement Of A Foreign Award When A Party Was “Otherwise Unable To Present Its Case”

Supreme-Court-of-India-1_85138_730x419

Under Section 48(1)(b) of the Arbitration & Conciliation Act, 1996 (‘1996 Act’) enforcement of a foreign award can be resisted in India if the party against whom the award is invoked was “otherwise unable to present his case”. The question that arises as to what does this expression “otherwise unable to present his case” entails?

Meaning of the expression “otherwise unable to present his case”

In Vijay Karia v. Prsymian Cavi E Sistemi SRL[1] the Supreme Court observed that this expression would be a facet of natural justice, which would be breached only if a fair hearing was not given by the arbitrator to the parties. The Court further noted that the object of Section 48 is to enforce foreign awards subject to certain well-defined narrow exceptions and therefore this expression cannot be given an expansive meaning. Thus, it would have to be read in the context and colour of the words preceding the said phrase i.e. “enforcement of a foreign award can be refused if: the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator”. Read along with the first part of Section 48(1)(b), it is clear that this expression would apply at the hearing stage and not after the award has been delivered.

Test to Determine Whether a Party was “otherwise unable to present his case”

A good working test for determining whether a party has been unable to present his case is to see whether factors outside the party’s control have combined to deny the party a fair hearing. Example of such instances are as under:-

  • where no opportunity was given to a party to deal with an argument which goes to the root of the case;
  • findings based on evidence which go behind the back of the party and which results in a denial of justice to the prejudice of the party;
  • additional or new evidence is taken which forms the basis of the award on which a party has been given no opportunity of rebuttal.

These factors would, on the facts of a given case, render a foreign award liable to be set aside on the ground that a party has been unable to present his case. However, this must be with the caveat that such breach be clearly made out on the facts of a given case, and that awards must always be read supportively with an inclination to uphold rather than destroy, given the minimal interference possible with foreign awards under Section 48.[2]

In M/S. Centrotrade Minerals vs Hindustan Copper Ltd. Civ. App. 2562/2006 decided on 2 June 2020, enforcement of a foreign award was resisted based on ground that the party was “otherwise unable to present his case” under Section 48(1)(b) of the Arbitration Act. The Award debtor contended that the expression “otherwise” cannot be read ejusdem generis with words that precede it.

However, the Supreme Court noticed the meaning of the expression “otherwise” as provided in the Law Lexicon to mean that the words ‘or otherwise,’ in law, when used as a general phrase following an enumeration of particulars, are commonly interpreted in a restricted sense, as referring to such other matters as are kindred to the classes before mentioned.

Given the context of the New York Convention, and the fact that the expression “otherwise” is susceptible to two meanings, the Court held that the narrower meaning is to be preferred, which is in consonance with the pro-enforcement bias.

The Court borrowed the reasoning given to the expression “otherwise unable to present his case” as a ground on which a domestic award could be set aside under Section 30 of the Arbitration Act, 1940 (‘Old Act’).

The Court drew an analogy between Section 30 of the Old Act which provides ‘misconduct’ (another facet of natural justice) on the part of an arbitrator as a ground to set aside a domestic award with ‘party otherwise unable to present its case’ under Section 48(1)(b) of the 1996 Act.  The Court noticed that “misconduct” on the part of arbitrator as a ground for setting aside an award under Section 30 of the Old Act is conceptually much wider than a party being unable to present its case before the arbitrator, which is contained in Section 48(1)(b) of the 1996 Act. In three cases decided by the Supreme Court under the Old Act, it refused to set aside the domestic award on the ground of misconduct of the arbitrator where party making such allegations have not proved such misconduct or has not adduced any evidence to substantiate such allegations.

In Minmetals Germany GmbH v. Ferco Steel Ltd.[3] the expression “otherwise unable to present his case” was described to mean that the matters were outside the party’s control and not because of his own failure to take advantage of an opportunity duly accorded to him. In Hari Om Maheshwari v. Vinitkumar Parikh[4] the Supreme Court held that arbitrator’s denial for granting a further opportunity for leading evidence after evidence had already concluded would not be a ground contemplated under Section 30 of the Old Act to set aside the award keeping in mind the object of the Act as an alternate dispute resolution system aimed at speedy resolution of disputes.

Resultantly, the Court allowed enforcement of the foreign award holding that the Award Debtor was given sufficient opportunity on the facts of the case to present its case. While doing so, the court also made an interesting obiter that remanding the matter to the arbitrator to pass a fresh award is outside the jurisdiction of an enforcing court under Section 48 of the 1996 Act.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

 

 

 

 

[1] 2020 (3) SCALE 494

[2] Vijay Karia v. Prsymian Cavi E Sistemi SRL 2020 (3) SCALE 494 at [76]

[3] (1999) 1 All ER (Comm) 315

[4] (2005) 1 SCC 379

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s