Case: GOVERNMENT OF INDIA  Vs. VEDANTA LIMITED (Formerly Cairn India Ltd.),RAVVA OIL (SINGAPORE) PTE. LTD.,VIDEOCON INDUSTRIES LIMITED

In 1993, the Government of India was desirous of exploring and developing the petroleum resources in the Ravva Gas and Oil Fields (lying 10 to 15 kms offshore in the Bay of Bengal), for which a global competitive tender was floated to invite bids. Pursuant thereto, Videocon International Ltd. and Command Petroleum Holdings NV, the predecessors of the Respondents submitted their bid to develop the Ravva Field along with other bidders. The contract for this petroleum development was to be given on a production sharing basis through a Production Sharing Contract.On 28.10.1994, the Production Sharing Contract (the PSC) was executed between the Government of India and the following parties to commercially explore and develop the Ravva Oil and Gas Field:(a) Command Petroleum (India) Pvt. Ltd, an Australian Company established under the laws of the State of New South Wales, which has since been renamed as Cairn Energy India Pty. Ltd;(b) Ravva Oil (Singapore) Pty. Ltd, a company established under the laws of Singapore;(c) Videocon Industries Limited, a company established under the laws of India; and(d) Oil and Natural Gas Corporation Ltd (ONGC).The PSC was for a period of 25 years, and the development and exploration of the Ravva Field was to be conducted in terms of the Ravva Development Plan. As per Articles 11.1 and 11.2 of the PSC, Addendums 1 and 2 to the Rvva Development Plan were annexed to the PSC as Appendix F. The Respondents were required to carry out Petroleum Operations in the Ravva Field as per the said Plan. The Ravva Development Plan inter alia contemplated the drilling of 19 oil and 2 gas wells in the Ravva Field.The relevant clauses of the PSC are extracted hereinbelow :(i) Article 11.2 of the PSC reads as :11.2 Ravva Development PlanAppendix F to this contract shall constitute the approved development plan for the Existing Discoveries (hereinafter to as the Ravva Development Plan). The Ravva Development Plan shall be deemed to have been approved by the Managing Committee.(ii) The Proposed Development Plan for the Ravva Field (including Addendums 1 and 2), which was accepted by the Parties as the approved Ravva Development Plan, states as follows :Ravva Field Development DrillingEstimated Average Well Cost (in US dollars)TOTAL COST OF AVERAGE WELL $ 2,430,000Attachment 10Ravva Field Development Capital CostsITEM COST US $ millionDevelopment of R10 and R17 BlocksOil and Associated Gas ReservesDrill and Complete 19 WellsSPM and Tanker Loading LineFour PlatformsProduction/Injection Pipelines to/from Shore 201.1Infield FlowlinesOnshore Oil Process FacilitiesOnshore Oil StorageGas Treatment and CompressionWater InjectionGas Lift Pipeline and CompressionProject Management etc.Development of R1,7,9Non-Associated Gas ReservesDrill and Complete 2 WellsOne Monopod TowerProduction Pipeline to ShoreOnshore Gas Treatment Plan 16.9TOTAL 218.0Note: This would be the project, as further defined in the Development Plan, which would be the subject of the cost variation condition. The cost stated includes Import Duty but does not include expenditures related to exploration and appraisal or field abandonment. The difference between the US $218 million total and the estimated US $ 236 million total project capital cost quoted in Section 1 of the accompanying letter is the US $ 18 million abandonment cost.(emphasis supplied)(iii) Article 15.5 of the PSC provides for the procedure of recovery of Development Costs incurred by the Respondents in the exploration, discovery and production of oil and gas from the Ravva Oil and Gas Field. Article 15.5 is extracted hereinbelow:Article 15RECOVERY OF COSTS FOR OIL AND GAS15.5 Recovery of Development Costs and 5% Cost Cap(a) Development Costs incurred by the Contractor in the Contract Area shall be aggregated, and the Contractor shall be entitled to recover out of Cost Petroleum the aggregate of such Development Costs at the rate of one hundred percent (100%) per annum.(b) Notwithstanding the provisions of(a) and subject to the remaining provisions of this, the Contractor shall not, for the purposes only of determining the volume of Petroleum to which Contractor shall be entitled underas Cost Petroleum, claim as Contract Costs Contractors Development Costs incurred after the Effective Date in connection with Development operations under the Ravva Development Plan which exceed Contractors Base Development Costs (as hereinafter defined) by more than five percent (5%).(c) For the purpose of thisContractors Base Development Costs means costs incurred after the Effective Date relating to the construction and/or establishment of such facilities as are necessary to produce, process, store and transport Petroleum from within the Existing Discoveries, in order to enable Crude Oil production of 35,000 BOPD in accordance with the Ravva Development Plan plus such costs as are allowed pursuant to Section 3.3 of the Accounting Procedure. Such costs shall include, but not be limited to costs incurred in relation to the following facilities and matters in connection therewith, such as:(i) Offshore tanker loading facilities for tankers up to 120,000 DWT;(ii) Wellhead platforms capable of supporting up to total of 24 development wells;(iii) Follow lines necessary to transport well fluids ashore for processing;(iv) Process facilities onshore for processing up to 40,000 Barrels of fluid per day;(v) Storage facilities with a nominal capacity of 500,000 Barrels;(vi) Facilities to allow injection of water into the reservoirs for the purposes of reservoir pressure maintenance;(vii) Construction of an onshore supply base to support production operations;(viii) Environmental studies;(ix) Geophysical, geological and petroleum engineering studies;(x) The drilling of nineteen (19) Development Wells and two (2) Gas Production Wells;(xi) Facilities for developing, transporting and processing NANG;(xii) Project insurance; and(xiii) Project Management.The Parties agree that for the purposes of thisthe Contractors Base Development Costs shall be the sum of US $188.98 million (as indicated in the August 1993 Addendum to the Ravva Development Plan.)(i) Having regard, inter alia, to the matters referred to in, the Parties agree as follows:(i) Costs relating to Site Restoration and exploration and appraisal drilling shall not be subject to the limit on Contractors Development Costs as provided in(ii) the costs of developing the reserves and/or potential reserves and/or Satellite Fields referred to in) (i) shall not be subject to the limit on Contractors Development Costs as provided innotwithstanding that the development of such reserves and/or potential reserves and/or Satellite Fields may include shared flow lines, injection lines, gas-lift lines and other facilities with those constructed as part of the Ravva Development Plan;(iii) In the event that the Contractors Base Development Costs are exceeded by more than five per cent (5%) as a result of:(aa) delays in carrying out the Development Operations referred to in) (iii) due to delay in obtaining necessary approval;(bb) material changes to the Ravva Development Plan necessitated by Contractors review of data provided to the Companies by the Government and/or ONGC after the Effective Date pursuant to Article 8.1) (iv), where the Companies are able to establish that had such data been available prior to the Effective Date in the Companies, acting reasonably, would have included such changes in the Ravva Development Plan;(cc) a material change to the international market conditions referred to in(dd) the range of physical reservoir characteristics being materially different from the ranges for such characteristics on which the Ravva Development Plan has been based;(ee) a variation to the Ravva Development Plan approved by the Management Committee; or(ff) an event of force majeure as provided in Article 32;Then the Management Committee shall, at the request of the operator, in a meeting convened under Article 6,7, promptly consider what, if any, increase should be made to the Contractors base Development Costs to fairly reflect the circumstances in the question PROVIDED THAT in the case of delays referred to in(e) (ii) (aa) the Management Committee shall not be obliged to consider any increase where such delay has been caused by the Contractors failure to act in a diligent manner.(e) In the event that:(i) There is any dispute between the parties, whether or to what extent, a circumstance referred to in) (iii) has arisen, or resulted in the Contractors Base Development Costs being exceeded by more than five percent (5%); or(ii) The Management Committee is unable to agree whether an increase should be made to the Contractors Base Development Costs, or is unable to agree on the amount of any such increase; then at any time after thirty (30) days from the date of the Management Committee meeting referred to in, any Party shall be at liberty to refer the matter to a sole expert for decision in accordance with the provisions of Article 34.2.(emphasis supplied)(iv) Article 33 of the PSC provides the law applicable to the PSC, and reads as under:Article 33: APPLICABLE LAW AND LANGUAGE OF THE CONTRACT33.1 Indian Law to GovernSubject to the provisions of Article 34.12 this Contract shall be governed and interpreted in accordance with the laws of India33.2 Law of India Not to be ContravenedSubject to Article 17.1 nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India.(emphasis supplied)(v) Article 34.12 of the PSC reads as under :Article 34: Sole expert, conciliation and arbitration34.2 References to Sole expertMatters which, by the terms of this contract, the Parties have agreed to refer to a sole expert and any other matter, which the Parties may agree to so refer, shall be referred to an independent and impartial person of international standing with relevant qualifications and experience, appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert, and not as an arbitrator, and the decision of the sole expert on matters referred to him shall be final and binding on the Parties, and not subject to arbitration. If the Parties are unable to agree on a sole expert, the matter may be referred to arbitration.

Reasoning:
The issue of limitation for enforcement of foreign awards being procedural in nature, is subject to the lex fori i.e. the law of the forum (State) where the foreign award is sought to be enforced.(iii) It would be instructive to refer to the Report of the General Assembly of the United Nations Commission on International Trade Law in its 41 st Session dated 16 th June – 3rd July, 2008 with respect to the legislative implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958) (UN Doc A/CN.9/656/Add.1), wherein it was noted that the Convention does not prescribe a time limit for making an application for recognition and enforcement of foreign awards. Article III of the Convention states that recognition and enforcement of arbitral awards should be done in accordance with the rules of procedure of the State where the award was to be enforced. The time limit may be specifically provided in the national legislation for recognition or enforcement of Convention awards, or it may be a general rule applicable to court proceedings.(iv) The limitation period for filing the enforcement / execution petition for enforcement of a foreign award in India, would be governed by Indian law. The Indian Arbitration Act, 1996 does not specify any period of limitation for filing an application for enforcement / execution of a foreign award. Section 43 however provides that the Limitation Act, 1963 shall apply to arbitrations, as it applies to proceedings in court.(v) The Limitation Act, 1963 does not contain any specific provision for enforcement of a foreign award. Articles 136 and 137 fall in the Third Division of the Schedule to the Limitation Act. Article 136 provides that the period of limitation for the execution of any decree or order of a civil court is twelve years from the date when the decree or order becomes enforceable.(vi) Article 137 is the residuary provision in the Limitation Act which provides that the period of limitation for any application where no period of limitation is provided in the Act, would be three years from when the right to apply accrues.(vii) Section 36 of the Arbitration Act, 1996 creates a statutory fiction for the limited purpose of enforcement of a domestic award as a decree of the court, even though it is otherwise an award in an arbitral proceeding Umesh Goyal v Himachal Pradesh Co-op Group Housing Society Ltd. (2016) 11 SCC 313. . By this deeming fiction, a domestic award is deemed to be a decree of the court Sundaram Finance Ltd. v Abdul Saman and Anr. (2018) 3 SCC 622. , even though it is as such not a decree passed by a civil court. The arbitral tribunal cannot be considered to be a court, and the arbitral proceedings are not civil proceedings. The deeming fiction is restricted to treat the award as a decree of the court for the purposes of execution, even though it is, as a matter of fact, only an award in an arbitral proceeding.(ix) In Bank of Baroda v Kotak Mahindra Bank, (2020) SCC OnLine 324. this Court took the view that Article 136 of the Limitation Act deals only with decrees passed by Indian courts. The Limitation Act was framed keeping in view the suits, appeals and applications to be filed in Indian courts. Wherever the need was felt to deal with an application / petition filed outside India, the Limitation Act specifically provided a time period for that situation. The legislature has omitted reference to foreign decrees under Article 136 of the Limitation Act. The intention of the legislature was to confine Article 136 to the decrees of a civil court in India. The application for execution of a foreign decree would be an application not covered under any other Article of the Limitation Act, and would be covered by Article 137 of the Limitation Act.(x) Foreign awards are not decrees of an Indian civil court. By a legal fiction, Section 49 provides that a foreign award, after it is granted recognition and enforcement under Section 48, would be deemed to be a decree of that Court for the limited purpose of enforcement. The phrase that Court refers to the Court which has adjudicated upon the petition filed under Sections 47 and 49 for enforcement of the foreign award.In our view, Article 136 of the Limitation Act would not be applicable for the enforcement / execution of a foreign award, since it is not a decree of a civil court in India.(xi) The enforcement of a foreign award as a deemed decree of the concerned High Court [as per the amended Explanation to Section 47 by Act 3 of 2016 confers exclusive jurisdiction on the High Court for execution of foreign awards] would be covered by the residuary provision i.e. Article 137 of the Limitation Act.In this background, the present Limitation Act, 1963 excludes any application filed under Order XXI from the purview of Section 5 of the Act, with the object that execution of decrees should be proceeded with as expeditiously as possible. The period of limitation for execution of the decree of a civil court is now uniformly fixed at the maximum period of 12 years for decrees of civil courts.(xiv) In view of the aforesaid discussion, we hold that the period of limitation for filing a petition for enforcement of a foreign award under Sections 47 and 49, would be governed by Article 137 of the Limitation Act, 1963 which prescribes a period of three years from when the right to apply accrues.(xv) The application under Sections 47 and 49 for enforcement of the foreign award, is a substantive petition filed under the Arbitration Act, 1996. It is a well- settled position that the Arbitration Act is a self-contained code. The application under Section 47 is not an application filed under any of the provisions of Order XXI of the CPC, 1908. The application is filed before the appropriate High Court for enforcement, which would take recourse to the provisions of Order XXI of the CPC only for the purposes of execution of the foreign award as a deemed decree. The bar contained in Section 5, which excludes an application filed under any of the provisions of Order XXI of the CPC, would not be applicable to a substantive petition filed under the Arbitration Act, 1996. Consequently, a party may file an application under Section 5 for condonation of delay, if required in the facts and circumstances of the case.(xvi) In the facts of the present case, the Respondents submitted that after the Award dated 18.01.2011 was passed, the cost account statements were revised, and an amount of US $ 22 million was paid to the Government of India.On 10.07.2014, a show cause notice was issued to the respondents, raising a demand of US $ 77 million, being the Governments share of Profit Petroleum under the PSC. It was contended that the cause of action for filing the enforcement petition under Sections 47 and 49 arose on 10.07.2014. The enforcement petition was filed on 14.10.2014 i.e. within 3 months from the date when the right to apply accrued.We hold that the petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act, 1963.In any event, there are sufficient grounds to condone the delay, if any, in filing the enforcement / execution petition under Sections 47 and 49, on account of lack of clarity with respect to the period of limitation for enforcement of a foreign award.(i) In paragraph 20.5 of the judgment, the High Court has taken the view that a foreign award which passes the gateway of Section 47, is at that stage, treated as being equivalent to a foreign decree whose enforcement can be refused at the request of the party against whom it is invoked, if it falls within the provisions of Section 48 of the 1996 Act.In paragraphs 20.7 and 20.8 of the impugned judgment, it has been held that:20.7 A plain reading of Section 49 would show that does not contain anything which would relate it to Section 48 of the 1996 Act. Pertinently, Section 48 of the 1996 Act opens with the express Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that20.8 The provision, to my mind, pre-supposes that a foreign award is a decree whose execution can only be impeded by a party against whom it is sought to be executed if it is able to discharge its burden that its objections can be sustained under one or more clauses of sub-section (1)sub- section (2) of Section 48 of the 1996 Act.In paragraph 21, it has been held that a foreign award is enforceable on its own strength, and is not necessarily dependent on whether or not it goes through the process of Section 48 proceedings.(ii) The aforesaid findings are contrary to the scheme of the Act, since a foreign award does not become a foreign decree at any stage of the proceedings. The foreign award is enforced as a deemed decree of the Indian Court which has adjudicated upon the petition filed under Section 47, and the objections raised under Section 48 by the party which is resisting enforcement of the award.A foreign award is not a decree by itself, which is executable as such under Section 49 of the Act. The enforcement of the foreign award takes place only after the court is satisfied that the foreign award is enforceable under Chapter 1 in Part II of the 1996 Act. After the stages of Sections 47 and 48 are completed, the award becomes enforceable as a deemed decree, as provided by Section 49. The phrase that court refers to the Indian court which has adjudicated on the petition filed under Section 47, and the application under Section 48.In contrast, the procedure for enforcement of a foreign decree is not covered by the 1996 Act, but is governed by the provisions of Section 44A read with Section 13 of the CPC.Under the 1996 Act, there is no requirement for the foreign award to be filed before the seat court, and obtain a decree thereon, after which it becomes enforceable as a foreign decree. This was referred to as the double exequatur, which was a requirement under the Geneva Convention, 1927 and was done away with by the New York Convention, which superseded it. .There is a paradigm shift under the 1996 Act. Under the 1996 Act, a party may apply for recognition and enforcement of a foreign award, after it is passed by the arbitral tribunal. The applicant is not required to obtain leave from the court of the seat in which, or under the laws of which, the award was made.(f) The award holder is entitled to apply for recognition and enforcement of the foreign award by way of a common petition.In a recent judgment rendered in LMJ International Ltd. v. Sleepwell Industries (2019) 5 SCC 302. , this Court held that given the legislative intent of expeditious disposal of arbitration proceedings, and limited interference of the courts, the maintainability of the enforcement petition, and the adjudication of the objections filed, are required to be decided in a common proceeding.(g) The enforcement / execution petition is required to be filed before the concerned High Court, as per the amendment to Section 47 by Act 3 of 2016 (which came into force on 23.10.2015).(h) Section 48 replicates Article V of the New York Convention, and sets out the limited conditions on which the enforcement of a foreign award may be refused.Sub-sections (1) and (2) of Sections 48 contain seven grounds for refusal to enforce a foreign award. Sub-section (1) contains five grounds which may be raised by the losing party for refusal of enforcement of the foreign award, while sub-section (2) contains two grounds which the court may ex officio invoke to refuse enforcement of the award, (Malhotras Commentary on the Law of Arbitration, 4th Edition, Vol. 2, Pg. 1163-1164, Wolters Kluwer.) i.e. non-arbitrability of the subject-matter of the dispute under the laws of India; and second, the award is in conflict with the public policy of India.(i) The enforcement Court cannot set aside a foreign award, even if the conditions under Section 48 are made out. The power to set aside a foreign award vests only with the court at the seat of arbitration, since the supervisory or primary jurisdiction is exercised by the curial courts at the seat of arbitration.The enforcement court may refuse enforcement of a foreign award, if the conditions contained in Section 48 are made out. This would be evident from the language of the Section itself, which provides that enforcement of a foreign award may be refused only if the applicant furnishes proof of any of the conditions contained in Section 48 of the Act.(j) The opening words of Section 48 use permissive, rather than mandatory language, that enforcement may be refused. (Refer to Vijay Karia & Ors. v Prysmian Cavi E Sistemi SRL & Ors., 2020 SCC OnLine 177.) The use of the words may be indicate that even if the party against whom the award is passed, proves the existence of one or more grounds for refusal of enforcement, the court would retain a residual discretion to overrule the objections, if it finds that overall justice has been done between the parties, and may direct the enforcement of the award.This is generally done where the ground for refusal concerns a minor violation of the procedural rules applicable to the arbitration, or if the ground for refusal was not raised in the arbitration. A court may also take the view that the violation is not such as to prevent enforcement of the award in international relations.(Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation, 1981, Kluwer Law and Taxation Publishers at page 265.).(k) The grounds for refusing enforcement of foreign awards contained in Section 48 are exhaustive, which is evident from the language of the Section, which provides that enforcement may be refused only if the applicant furnishes proof of any of the conditions contained in that provision. (Cruz City I Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649.).(l) The enforcement court is not to correct the errors in the award under Section 48, or undertake a review on the merits of the award, but is conferred with the limited power to refuse enforcement, if the grounds are made out.(m) If the Court is satisfied that the application under Section 48 is without merit, and the foreign award is found to be enforceable, then under Section 49, the award shall be deemed to be a decree of that Court. The limited purpose of the legal fiction is for the purpose of the enforcement of the foreign award. The concerned High Court would then enforce the award by taking recourse to the provisions of Order XXI of the CPC.(i) In the present case, the law governing the agreement to arbitrate was the English law as per Article 34.12 of the PSC, which provides that the arbitration agreement shall be governed by the laws of England. Even though there seems to have been some confusion in the application of the law governing the agreement to arbitrate by the seat courts, as pointed out by the learned Amicus, we will not dwell on this issue, since the enforcement court does not sit in appeal over the findings of the seat court. Furthermore, in view of the principles of comity of nations, this Court would not comment on the judgments passed by Courts in other jurisdictions.The enforcement of the award is a subsequent and distinct proceeding from the setting aside proceedings at the seat. The enforcement court would independently determine the issue of recognition and enforceability of the foreign award in India, in accordance with the provisions of Chapter 1 Part II of the Indian Arbitration Act, 1996.(ii) The courts having jurisdiction to annul or suspend a New York Convention award are the courts of the State where the award was made, or is determined to have been made i.e. at the seat of arbitration. The seat of the arbitration is a legal concept i.e. the juridical home of the arbitration. The legal seat must not be confused with a geographically convenient venue chosen to conduct some of the hearings in the arbitration. The courts at the seat of arbitration are referred to as the courts which exercise supervisory or primary jurisdiction over the award. The laws under which the award was made used in Article V (1)(e) of the New York Convention, is mirrored in Section 48(1)(e) of the Indian Arbitration Act, which refers to the country of the seat of the arbitration, and not the State whose laws govern the substantive contract.(iii) The courts before which the foreign award is brought for recognition and enforcement would exercise secondary or enforcement jurisdiction over the award, to determine the recognition and enforceability of the award in that jurisdiction.(iv) We will now briefly touch upon the four types of laws which are applicable in an international commercial arbitration, and court proceedings arising therefrom. These are :a) The governing law determines the substantive rights and obligations of the parties in the underlying commercial contract. The parties normally make a choice of the governing law of the substantive contract; in the absence of a choice of the governing law, it would be determined by the tribunal in accordance with the conflict of law rules, which are considered to be applicable.b) The law governing the arbitration agreement must be determined separately from the law applicable to the substantive contract. (Collins, in Lew (ed.), Contemporary Problems in International Arbitration (1986) p.126 at 127-131) The arbitration agreement constitutes a separate and autonomous agreement, which would determine the validity and extent of the arbitration agreement; limits of party autonomy, the jurisdiction of the tribunal, etc.c) The curial law of the arbitration is determined by the seat of arbitration. In an international commercial arbitration, it is necessary that the conduct of the arbitral proceedings are connected with the law of the seat of arbitration, which would regulate the various aspects of the arbitral proceedings. The parties have the autonomy to determine the choice of law, which would govern the arbitral procedure, which is referred to as the lex arbitri, and is expressed in the choice of the seat of arbitration. The Conflict of Laws, Dicey, Morris and Collins, (15th ed.) Volume 1, Chapter 16, paragraph 16-035, p. 843.The curial law governs the procedure of the arbitration, the commencement of the arbitration, appointment of arbitrator/s in exercise of the default power by the court, grant of provisional measures, collection of evidence, hearings, and challenge to the award.The courts at the seat of arbitration exercise supervisory or primary jurisdiction over the arbitral proceedings, except if the parties have made an express and effective choice of a different lex arbitri, in which event, the role of the courts at the seat will be limited to those matters which are specified to be internationally mandatory and of a non- derogable nature. (Russel on Arbitration, Sweet & Maxwell (24th Edition, 2015).)d) The lex fori governs the proceedings for recognition and enforcement of the award in other jurisdictions. Article III of the New York Convention provides that the national courts apply their respective lex fori regarding limitation periods applicable for recognition and enforcement proceedings; the date from which the limitation period would commence, whether there is power to extend the period of limitation. The lex fori determines the court which is competent and has the jurisdiction to decide the issue of recognition and enforcement of the foreign award, and the legal remedies available to the parties for enforcement of the foreign award.(v) In view of the above-mentioned position, the Malaysian Courts being the seat courts were justified in applying the Malaysian Act to the public policy challenge raised by the Government of India.The enforcement court would, however, examine the challenge to the award in accordance with the grounds available under Section 48 of the Act, without being constrained by the findings of the Malaysian Courts. Merely because the Malaysian Courts have upheld the award, it would not be an impediment for the Indian courts to examine whether the award was opposed to the public policy of India under Section 48 of the Indian Arbitration Act, 1996. If the award is found to be violative of the public policy of India, it would not be enforced by the Indian courts. The enforcement court would however not second-guess or review the correctness of the judgment of the Seat Courts, while deciding the challenge to the award.(vi) In our view, the observation made in paragraph 76.4 of the Reliance ((2014) 7 SCC 603 ) judgment does not have any precedential value, since it is an observation made in the facts of that case, which arose out of a challenge to a final partial award on the issue of arbitrability of certain disputes. The last sentence in paragraph 76.4 is not the ratio of that judgment, which is contained in paragraphs76.1 to 76.3.(vii) In the present case, the Appellants have challenged the Award inter alia on the ground of excess of jurisdiction, and as being contrary to the public policy of India. The observations made in paragraph 76.4 in the Reliance judgment, would not be applicable to the present case, since the issue of arbitrability has not been raised, and cannot be relied upon by the Appellants in the present case.(i) This issue is required to be determined in accordance with the conditions laid down in Section 48 of the 1996 Act,(iii) In Renusagar Power Co. v General Electric Co. 1994 Supp (1) SCC 644. ( Renusagar), this Court held that public policy comprised of (1) the fundamental policy of Indian law; (2) interests of India; and (3) justice or morality. It was held that :37. In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merit.x x x66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy of the country in which the award is set to be enforced. There is nothing to indicate that the expression public policy in Article V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article 1(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937. This would mean that public policy in Section 7(1)(b)(ii) has been used in a narrower sense and in order to attract to bar of public policy the enforcement of the award must invoke something more than the violation of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression public policy in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.(emphasis supplied)The enforceability of the foreign award will be decided in accordance with the parameters laid down in Renusagar i.e. whether the award is contrary to the (i) fundamental policy of Indian law, or (ii) interests of India, or (iii) justice or morality.(vii) Section 48 was amended by Act 3 of 2016. By this amendment, the public policy ground was given a narrow and specific construction by statute, by the insertion of two Explanations. The amended Section 48 reads as :48. Conditions for enforcement of foreign awards. –(1) …(2) Enforcement of an arbitral award may also be refused if the Court finds that—(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or(b) the enforcement of the award would be contrary to the public policy of India.Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or(ii) it is in contravention with the fundamental policy of Indian law; or(iii) it is in conflict with the most basic notions of morality or justice.Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.(emphasis supplied)(viii) The highlighted portions show the amendments made to Section 48 by the 2016 Amendment Act. We find that these are substantive amendments, which have been incorporated to make the definition of public policy narrow by statute. It is relevant to note that the 2016 Amendment has dropped the clause interests of India, which was expounded by the Renusagar judgment.The newly inserted Explanation 2 provides that the examination of whether the enforcement of the award is in conflict with the fundamental policy of Indian law, shall not entail a review on the merits of the dispute.(ix) The two Explanations in Section 48 begin with the words For the avoidance of any doubt. It cannot, however, be presumed to be clarificatory and retrospective, since the substituted Explanation 1 has introduced new sub-clauses, which have brought about a material and substantive change in the section. A new Explanation 2 has been inserted which states that the test as to whether there is a contravention with the fundamental policy of Indian law, shall not entail a review on the merits of the dispute. Since the amendments have introduced specific criteria for the first time, it must be considered to be prospective, irrespective of the usage of the phrase for the removal of doubts. Reliance is placed on the judgment of this Court in Sedco Forex International Drill v Commissioner of Income Tax, Dehradun (2005) 12 SCC 717. wherein it was held that an Explanation if it changes the law, it cannot be presumed to be retrospective, irrespective of the fact that the phrases used are it is declared or for the removal of doubts. In Ssangyong Engineering & Construction Co. Ltd. v NHAI, (2019) 15 SCC 131. this Court was considering the amendments made to Section 34, wherein two Explanations to Section 34 had been inserted, which are identically worded with the two Explanations to Section 48. In that case, a similar ground of retrospectivity had been urged. This Court held that since the Explanations had been introduced for the first time, it is the substance of the amendment which has to be looked at, rather than the form. Even in cases where for avoidance of doubt, something is clarified by way of an amendment, such clarification cannot have retrospective effect, if the earlier law has been changed substantially.(xi) Section 26 of the Amendment Act came up for consideration before this Court in BCCI v. Kochi Cricket Pvt Ltd. 2018 6 SCC 287 . ( BCCI). This Court held that the Amendment Act would apply prospectively to:(a) arbitral proceedings initiated on or after 23.10.2015 i.e. the date on which the 2015 Amendment Act came into force;(b) court proceedings commenced on or after 23.10.2015, irrespective of whether such court proceedings arise out of, or relate to arbitration proceedings which were commenced prior to, or after the commencement of the Amendment Act.(xii) The 2019 Amendment Act (to the Arbitration Act of 1996) inserted Section 87 as a clarificatory amendment, to provide that arbitral proceedings and court proceedings arising out of, or in relation to such proceedings shall constitute a single set of proceedings, for the applicability of the 2016 Amendment Act. Section 87 was inserted with retrospective effect from 23.10.2015 i.e. the date of coming into force of the 2016 Amendment Act. Section 15 of the 2019 Amendment Act provided that Section 26 of the 2015 Amendment Act stood deleted.(xiii) In Hindustan Construction Co. Ltd v. Union of India & Ors., 2019 (6) Arb LR 171 (SC). the Supreme Court struck down Section 87 of the 2019 Amendment Act, and restored Section 26 of the 2016 Amendment Act to the statute book. It was held in paragraph 54 that :54. The result is that the BCCI judgment will, therefore, continue to apply so as to make applicable salutary amendments made by the 2015 Amendment Act to all court proceedings initiated after 23.10.2015.(emphasis supplied)(xiv) In view of the aforesaid discussion, we hold that the amended Section 48 would not be applicable to the present case, since the court proceedings for enforcement were filed by the Respondents-Claimants on 14.10.2014 i.e. prior to the 2016 Amendment having come into force on 23.10.2015.Applying the unamended Section 48 to the present case, this Court in the Renusagar judgment had placed reliance on the enunciation of the law on international public policy in the judgment of the U.S. Court of Appeals for the 2 nd Circuit in Parsons & Whittemore Overseas Co. Inc. v. Societe Generale De Lindustrie du Papier (RAKTA), 508 F. 2d 969 (2nd Cir 1974). wherein it was held that :7. Article V(2)(b) of the Convention allows the court in which enforcement of a foreign arbitral award is sought to refuse enforcement, on the defendants motion or sua sponte, if enforcement of the award would be contrary to the public policy of (the forum) country. The legislative history of the provision offers no certain guidelines to its construction. Its precursors in the Geneva Convention and the 1958 Conventions ad hoc committee draft extended the public policy exception to, respectively, awards contrary to principles of the law and awards violative of fundamental principles of the law. In one commentators view, the Conventions failure to include similar language signifies a narrowing of the defense [Contini, International Commercial Arbitration: The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Am J Comp L at p. 304]. On the other hand, another noted authority in the field has seized upon this omission as indicative of an intention to broaden the defense [Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71 (1961)].8. Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Conventions basic effort to remove preexisting obstacles to enforcement. [See Straus, Arbitration of Disputes between Multinational Corporations, in New Strategies for Peaceful Resolution of International Business Disputes 114-15 (1971); Digest of Proceedings of International Business Disputes Conference, April 14, 1971, at 191 (remarks of Professor W. Reese)]. Additionally, considerations of reciprocity – considerations given express recognition in the Convention itself – counsel courts to invoke the public policy defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States.9. We conclude, therefore, that the Conventions public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum states most basic notions of morality and justice.x x x…To read the public policy defence as a parochial device protective of national political interests would seriously undermine the Conventions utility. This provision is not meant to enshrine the vagaries of international politics under the rubric of public policy. Rather, a circumscribe public policy doctrine was contemplated by the Conventions framers and every indication is that the United States, in acceding to the Convention, meant to subscribe to this supranational emphasis. Cf. Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct.2449. 41L.Ed. 2d 270, 42 U.S.L.W., 4911, 4915-16 n. 15(1974)(emphasis supplied)The judgment in Parsons has been followed in various other jurisdictions.(xvii) It would be useful to refer to the recommendations of the International Law Association in the 70 th Conference of the ILA held in New Delhi on 2-6 April 2002, known as the ILA Recommendations, 2002 on Public Policy, which have been regarded as reflective of best international practices.Clause 1 (a) of the General recommendations of the ILA provides that the finality of awards in international commercial arbitration should be respected, save in exceptional circumstances, and that such exceptional circumstances are found if recognition or enforcement of the international arbitral award would be contrary to international public policy.Clause 1(d) of the Recommendations state that the expression international public policy is used to designate the body of principles and rules, which are : (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned, (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as lois de police or public policy rules and (iii) the duty of the State to respect its obligations towards other States or international organisations. Clause 3(a) states that the violation of a mere mandatory rule (i.e. a rule that is mandatory, but does not form part of the States international public policy), should not bar its recognition and enforcement, even when said rule forms part of the law of the forum, the law governing the contract, the law of the place of performance of the contract, or the law of the seat of the arbitration.(xviii) The International Council for Commercial Arbitration (ICCA) Guide to the Interpretation of the 1958 New York Convention : A Handbook for Judges (2011), states that while considering the grounds for refusal of a foreign award, the Court must be guided by the following principles (i) no review on merits; (ii) narrow interpretation of the grounds for refusal; and (iii) limited discretionary power.The merits of the arbitral award are not open to review by the enforcement court, which lies within the domain of the seat courts. Accordingly, errors of judgment, are not a sufficient ground for refusing enforcement of a foreign award.