Enforcing a Foreign Award in India: Procedure, Appeals and Savings

The non obstante clause at the start of section 50(1) was inserted by the 2019 amendment, in the same terms and for the same reason as in section 37(1): to close off a right of appeal claimed under some other statute.

Section 51: the saving

Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted.

A saving of pre-existing rights. Chapter I gives an additional route; it does not take away whatever other route a person might have had. So an award that falls outside section 44, for example because the territory has not been notified, is not necessarily worthless in India; the holder is left to whatever rights existed independently of the Chapter, such as suing on the award as a contract, on ordinary private international law principles.

Do not overstate it. Section 51 preserves rights; it does not create a parallel enforcement machinery, and the practical position of a non-Convention award is much weaker.

Section 52: the two chapters do not overlap

Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies.

Short, and it does exactly what chapter 500 said: an award cannot be pursued under both the New York and the Geneva schemes. If Chapter I applies, Chapter II does not.

PASL Wind Solutions: can two Indian parties choose a foreign seat?

The question this section provoked is a good one, and a student meeting it for the first time usually gets it wrong.

PASL Wind Solutions Private Ltd v. GE Power Conversion India Private Ltd, AIR 2021 SC 2517, decided 20 April 2021, R.F. Nariman J with B.R. Gavai and Hrishikesh Roy JJ.

Facts. Two Indian companies had agreed to arbitrate, and the arbitration was seated in Hong Kong. An objection was taken to the arbitrator's jurisdiction on the ground that two Indian parties could not choose a foreign seat. The parties had chosen a foreign seat but not a foreign substantive law. The question then arose whether the resulting award was a foreign award enforceable under Part II.

Held. The Court rejected the argument that two Indian parties are confined to arbitrating in India. It noted that exception 1 to section 28 of the Indian Contract Act 1872 saves the arbitration of disputes between two persons without reference to their nationality, and that there is nothing in either section 23 or section 28 of the Contract Act which interdicts two Indian parties from getting their disputes arbitrated at a neutral forum outside India.

It also rejected the argument built on section 28(1)(a) and section 34(2A) of the Arbitration Act. Read with sections 2(2), 2(6) and 4, section 28(1)(a) only makes clear that where the place of arbitration is situated in India, in an arbitration other than an international commercial arbitration, the tribunal shall decide in accordance with the substantive law in force in India. Section 28(1)(a) makes no reference to an arbitration conducted between two Indian parties in a country other than India, and cannot be held, by any tortuous process of reasoning, to interdict two Indian parties from resolving their disputes at a neutral forum abroad.

Why it matters. It settles that two Indian parties may choose a foreign seat, and that the award so made is a foreign award enforced under Part II rather than a domestic award challengeable under section 34. It also shows the analytical route: the question is answered from the Contract Act and from the limited reach of section 28(1)(a), not from any general principle that Indians must arbitrate in India.

Note carefully what the case does not say. The parties had chosen a foreign seat, not a foreign substantive law, and the Court's reasoning on section 28(1)(a) turns on the place of arbitration being outside India. Chapter 350 explains the section itself.

A worked example

An award made in Singapore between an Indian company and a Singapore company orders payment of five crore rupees. The Indian company resists enforcement in the Bombay High Court on the ground that it was given inadequate notice of the hearing.

What does the court do? It considers the section 47 evidence and the section 48(1)(b) objection. If it is not persuaded to refuse enforcement, section 49 applies: the Court being satisfied that the award is enforceable, the award is deemed to be a decree of that Court.

Does the winner then apply to execute? It executes the decree. There is no further enforcement order to obtain, because the award has become the Court's decree.

The Indian company wants to appeal against enforcement. It cannot. Section 50(1) allows an appeal only from an order refusing to refer under section 45 or refusing to enforce under section 48. An order enforcing the award is not appealable.

Had the Court refused enforcement, could the winner appeal? Yes, under section 50(1)(b), and there would be no second appeal from the appellate order, though the right to move the Supreme Court is preserved.

Change the parties. Make both companies Indian, still arbitrating in Singapore. On PASL Wind Solutions, that is permissible: there is nothing in section 23 or section 28 of the Contract Act to prevent two Indian parties arbitrating at a neutral forum abroad, and section 28(1)(a) of the Arbitration Act says nothing about arbitrations between Indian parties held outside India. The award remains a foreign award under Part II, and it cannot be challenged under section 34.

What beginners get wrong

Section 49 does not require a separate execution decree. The award is deemed to be a decree of that Court.

An order enforcing a foreign award is not appealable. Only refusals are, under section 50(1).

Section 51 does not create an alternative enforcement route. It saves rights that existed independently of the Chapter.

Two Indian parties may choose a foreign seat, per PASL Wind Solutions, and the resulting award is a foreign award.

Section 52 keeps the chapters apart, so an award is pursued under one scheme or the other, not both.

Quick revision

• Section 49: on being satisfied the award is enforceable, the Court's order is that the award shall be deemed to be a decree of that Court. Contrast section 36(1)'s "as if it were a decree" for domestic awards.
• Section 50(1): notwithstanding any other law, an appeal lies only from an order refusing to refer under section 45 or refusing to enforce under section 48. 50(2): no second appeal; the right of appeal to the Supreme Court is preserved.
• Section 51: nothing in the Chapter prejudices rights a person would have had of enforcing or availing himself of an award had the Chapter not been enacted.
• Section 52: Chapter II does not apply to awards to which Chapter I applies.
• PASL Wind Solutions (20 April 2021): two Indian parties may choose a foreign seat; exception 1 to section 28 of the Contract Act saves arbitration without reference to nationality, nothing in sections 23 or 28 interdicts it, and section 28(1)(a) of the Arbitration Act says nothing about arbitrations between Indian parties held abroad.

Test yourself

1. What happens once a court is satisfied that a foreign award is enforceable? Under section 49 the award shall be deemed to be a decree of that Court. No separate enforcement order or suit on the award is needed.

2. Can a party appeal against an order enforcing a foreign award? No. Section 50(1) permits an appeal only from an order refusing to refer the parties to arbitration under section 45 or refusing to enforce a foreign award under section 48. An order enforcing the award is not among them.

3. What does section 51 preserve? Any rights a person would have had of enforcing an award in India, or of availing himself of an award in India, if Chapter I had not been enacted. It saves pre-existing rights; it does not create a parallel enforcement machinery.

4. May two Indian companies agree to arbitrate in Paris? Yes. In PASL Wind Solutions the Supreme Court held that exception 1 to section 28 of the Indian Contract Act saves arbitration between two persons without reference to nationality, that nothing in sections 23 or 28 of that Act interdicts two Indian parties arbitrating at a neutral forum outside India, and that section 28(1)(a) of the Arbitration Act makes no reference to such an arbitration.

5. An award between two Indian parties is made in Hong Kong. Can it be set aside under section 34? No. It is a foreign award, so Part II governs it and the Indian court's role is to enforce or refuse enforcement under section 48. Setting aside is a Part I remedy, and Part I applies where the place of arbitration is in India.