GOVERNMENT OF INDIA versus 1.VEDANTA LIMITED (FORMERLY CAIRN INDIA LTD.) 2. RAVVA OIL (SINGAPORE) PTE. LTD. 3. VIDEOCON INDUSTRIES LIMITED
[2020] 12 S.C.R. 1, Supreme Court of India, 2020
Outcome: Dismissed (Dismissed)
Segment: Ratio
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[2020] 12 S.C.R. 1
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GOVERNMENT OF INDIA
v.
1. VEDANTA LIMITED (FORMERLY CAIRN INDIA LTD.)
2. RAVVA OIL (SINGAPORE) PTE. LTD.
3. VIDEOCON INDUSTRIES LIMITED
(Civil Appeal No. 3185 of 2020)
SEPTEMBER 16, 2020
[S. ABDUL NAZEER, INDU MALHOTRA AND
ANIRUDDHA BOSE, JJ.]
Arbitration and Conciliation Act, 1996 – ss.47 and 49 –
Foreign award – Limitation for filing enforcement/execution petition
for enforcement of a foreign award – Held: Period of limitation for
filing a petition for enforcement of a foreign award u/ss.47 and 49,
would be governed by Art.137 of the Limitation Act, which prescribes
a period of three years from when the right to apply accrues –
Limitation Act, 1963 – Art. 137.
Arbitration and Conciliation Act, 1996 – ss. 44, 46, 47 and
48 – Scheme of the Act for enforcement of New York Convention
awards – Held: Part II Chapter 1 of the Act, pertains to enforcement
of New York Convention awards – The enforcement Court cannot
set aside a foreign award, even if the conditions u/s.48 are made
out – Power to set aside a foreign award vests only with the court at
the seat of arbitration, since supervisory or primary jurisdiction is
exercised by the curial courts at the seat of arbitration –The
enforcement court is not to correct the errors in the award u/s.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 – If the Court is satisfied that the application u/s.48
is
without merit, and the foreign award is found to be enforceable,
then u/s.49, the award shall be deemed to be a decree of “that Court”
– Limited purpose of the legal fiction is enforcement of the foreign
award – New York Convention on the Recognition and Enforcement
of Foreign Awards, 1958 – Arts. IV & V.
Arbitration – Foreign award – Limitation for enforcement /
execution of a foreign award – Lex fori – Held: 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.
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Arbitration – Arbitral award – Foreign award – Limitation
period for filing the enforcement / execution petition for enforcement
of a foreign award in India – Held:  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 – s.43 however provides that the Limitation Act,
1963 shall apply to arbitrations, as it applies to proceedings in
court – Arbitration and Conciliation Act, 1996 – s.43 – Limitation
Act, 1963.
Arbitration and Conciliation Act, 1996 – s.36 – Award in
arbitral proceeding – Domestic award – Statutory fiction created
u/s.36 for limited purpose of enforcement of a ‘domestic award’ as
a decree of the court – Held: By deeming fiction, a domestic award
is deemed to be a decree of the court, even though it is as such not
a decree passed by a civil court – 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.
Arbitration – Foreign award – Held: Foreign awards are not
decrees of an Indian civil court – By a legal fiction, s.49 provides
that a foreign award, after it is granted recognition and enforcement
u/s.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 u/ss.47
and 49 for enforcement of the foreign award – Art.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 –  Limitation Act, 1963 – Art. 136 – Arbitration and
Conciliation Act, 1996 – ss.47, 48 and 49 – Legal Fiction.
Arbitration and Conciliation Act, 1996 – Foreign award –
Applicable law at the enforcement stage – Held: Enforcement court
does not sit in appeal over the findings of the seat court –
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
– On facts, the Malaysian Courts being the seat courts were justified
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in applying the Malaysian Act to the public policy challenge raised
by the Government of India – However, merely because the
Malaysian Courts upheld the award in question, it would not be an
impediment for the Indian courts to examine whether the award
was opposed to the public policy of India u/s.48 of the Indian
Arbitration Act, 1996 – The enforcement court would examine the
challenge to the award in accordance with the grounds available
u/s.48 of the Act, without being constrained by the findings of the
Malaysian Courts – 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.
Arbitration and Conciliation Act, 1996 – s.48 – Enforcement
of foreign awards – Public policy defence for refusing enforcement
u/s.48 of the Act – s.48 was amended by Act 3 of 2016 – Effect of,
whether retrospective or prospective – Held: By this amendment,
the public policy ground was given a narrow and specific
construction by statute, by the insertion of two Explanations – The
amendments made to s.48 by the 2016 Amendment Act are substantive
amendments which were incorporated to make the definition of
“public policy” narrow by statute – The two Explanations in s.48
begin with the words “For the avoidance of any doubt.” – However,
since the amendments 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.”
Arbitration – Foreign Award – Enforcement of – Limits of
judicial intervention on grounds of public policy of the enforcement
State – Plea that the award in question may not be enforced, since it
is contrary to the basic notions of justice – Held: On facts, not
tenable, for two reasons – Firstly, the Appellants did not make out a
case of violation of procedural due process in the conduct of the
arbitral proceedings – Requirement of procedural fairness
constitutes a fundamental basis for the integrity of the arbitral
process – Fair and equal treatment of the parties is a non-derogable
and mandatory provision, on which the entire edifice of the alternate
dispute resolution mechanism is based – In the present case, no
such violation was alleged – Secondly, the Appellants did not make
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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out as to how the award was in conflict with the basic notions of
justice, or in violation of the substantive public policy of India.
Legal fiction – Object of – Held: Legal fictions are created
only for some definite purpose – A legal fiction is to be limited to
the purpose for which it was created, and it would not be legitimate
to travel beyond the scope of that purpose, and read into the
provision, any other purpose how so attractive it may be.
Dismissing the appeal, the Court
HELD: Limitation for filing an enforcement/execution
petition of a foreign award under Section 47 of the Arbitration
and Conciliation Act, 1996
1.1. 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. Article III of the New York Convention on the
Recognition and Enforcement of Foreign Awards, 1958 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. 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. 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. 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”. [Part A, Para VII (ii), (iii), (iv), (v) and (vi)]
[51-B-C; 52-A-G]
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1.2. Section 36 of the Arbitration and Conciliation 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. By this deeming
fiction, a domestic award is deemed to be a decree of the court,
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. [Part A, Para VII (vii)]
[53-D-F]
1.3. 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. 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. 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. 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. [Part A, Para VII
(ix), (x) and (xi)][55-E-H; 56-A-C; 60-C-E]
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC.
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1.4. 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. 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. [Part A, Para VII (xiv) and (xv)][57-
F-H; 58-A-C]
Scheme of the 1996 Act for enforcement of New York
Convention awards
2.1. Part II Chapter 1 of the Arbitration and Conciliation
Act, 1996 pertains to the enforcement of New York Convention
awards. 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. [Part B, Para
(ii)(a)][60-F-H; 61-A-C]
2.2. Section 48 replicates Article V of the New York
Convention, and sets out the limited conditions on which the
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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,
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. [Part B, Para (ii)(h)][66-A-C]
2.3. 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. [Part B, Para (ii)(i)][66-D-F]
2.4. The opening words of Section 48 use permissive, rather
than mandatory language, that enforcement “may be” refused.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. [Part B, Para (ii)(j)][66-G; 67-A-C]
2.5.The grounds for refusing enforcement of foreign awards
contained in Section 48 are exhaustive, which is evident from
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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. 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.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. [Part B,
Para (ii)(k), (l) and (m)][67-D; 68-A-D]
Whether the Malaysian Courts were justified in applying
the Malaysian law of public policy while deciding the challenge to
the foreign award?
3.1. The enforcement court does not sit in appeal over the
findings of the seat court. 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.
[Part C, Discussion and Findings, Para (i)][77-D-E]
3.2. 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
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arbitration, and not the State whose laws govern the substantive
contract. [Part C, Discussion and Findings, Para (ii)][77-E-G]
3.3. 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.
[Part C, Discussion and Findings, Para (iii)][79-B]
3.4. 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. The law governing the arbitration agreement must
be determined separately from the law applicable to the
substantive contract. 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. 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 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
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of a non-derogable nature. 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. [Part C, Discussion and Findings, Para
(iv)][79-D-G; 80-A-F]
3.5. 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. [Part C, Discussion and Findings, Para (v)][80-F-G; 81-A-
B]
Whether amendments made to Section 48 of the Arbitration
and Conciliation Act, 1996, by Act 3 of 2016 have retrospective
application?
4. This issue is required to be determined in accordance
with the conditions laid down in Section 48 of the Arbitration and
Conciliation Act, 1996. 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 amendments made to Section 48 by the 2016
Amendment Act are substantive amendments, which have been
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incorporated to make the definition of “public policy” narrow by
statute. 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.” [Part D,
Para (i),  (vii), (ix)][81-F; 88-D; 89-C-G]
Whether the foreign award is in conflict with the Public
Policy of India?
5.1. 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.
[Part D, Para (xviii)][95-H; 96-A-B]
5.2. The Appellants have contended that the award may
not be enforced, since it is contrary to the basic notions of justice.
This submission cannot be accepted for the following reasons.
Firstly, the Appellants have not made out a case of violation of
procedural due process in the conduct of the arbitral proceedings.
The requirement of procedural fairness constitutes a fundamental
basis for the integrity of the arbitral process. Fair and equal
treatment of the parties is a non-derogable and mandatory
provision, on which the entire edifice of the alternate dispute
resolution mechanism is based. In the present case, there is no
such violation alleged. Secondly, the Appellants have not made
out as to how the award is in conflict with the basic notions of
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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justice, or in violation of the substantive public policy of India.
[Part D, Para (xix) ][96-D-F]
Bengal Immunity v. State of Bihar & Ors., [1955] 2 SCR
603 – followed.
Umesh Goyal v. Himachal Pradesh Co-op Group
Housing Society Ltd. (2016) 11 SCC 313 : [2016]
6 SCR 703; Sundaram Finance Ltd. v. Abdul Saman
and Anr. (2018) 3 SCC 622 : [2018] 10 SCR 451; Param
Singh Patheja v. ICDS Ltd. (2006) 13 SCC 322 : [2006]
8 Suppl. SCR 178; State of Karnataka v. State of Tamil
Nadu, (2017) 3 SCC 274 : [2018] 5 SCR 829; Bank of
Baroda v. Kotak Mahindra Bank, (2020) SCC OnLine
324; Fuerst Day Lawson Limited v. Jindal Exports
Limited (2001) 6 SCC 356 : [2001] 3 SCR 479;
Sumitomo Corporation v. CDC Financial Services
(Mauritius) Limited (2008) 4 SCC 91 : [2008]
3 SCR 309; Sedco Forex International Drill v.
Commissioner of Income Tax, Dehradun (2005) 12 SCC
717 : [2005] 5 Suppl. SCR 302 and Ssangyong
Engineering & Construction Co. Ltd. v. NHAI, (2019)
15 SCC 131 : [2019] 7 SCR 522 – relied on.
BCCI v. Kochi Cricket (P) Ltd. (2018) 6 SCC
287: [2018] 2 SCR 829; Bank of Baroda v. Kotak
Mahindra Bank (2020) SCC Online SC 324; Renusagar
Power Co. Ltd. v. General Electric Co. (1994) 1 Suppl.
SCC 644 : [1993] 3 Suppl. SCR 22; Reliance Industries
v. Union of India, (2014) 7 SCC 603 : [2014] 6
SCR 456; LMJ International Limited v. Sleepwell
Industries Co. Ltd. (2019) 5 SCC 302 : [2019]
4 SCR 617; Shakti Bhog Food Industries Ltd. v. the
Central Bank of India, (2020) SCC OnLine SC 482;
Shri Lal Mahal Ltd v. Progretto Grano Spa, (2014) 2
 SCC 433 : [2013] 13 SCR 599; Bharat Aluminium Co.
v. Kaiser Aluminium Technical Services Inc. (2012) 9
SCC 648; Cairn India Limited v. Union of India (2020)
SCC Online SC 324; The Kerala State E l e c t r i c i t y
Board, Trivandrum v. T.P. Kunhaliumma (1976) 4 SCC
634 : [1977] 1 SCR 996; Kandla Export Corporation
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and Anr. v. OCI Corporation and Anr., (2018) 14 SCC
715 : [2018] 1 SCR 915; ONGC v. Saw Pipes (2003) 5
SCC 705 : [2003] 3 SCR 691; BALCO v. Kaiser
Aluminium (2012) 9 SCC 552 : [2012] 12 SCR 327;
Shri Lal Mahal Ltd. v. Progetto Grano SPA (2014) 2
SCC 433 : [2013] 13 SCR 599; Renusagar Power Co.
v. General Electric Co. (1994) 1 Suppl. SCC 644
: [1993] 3 Suppl. SCR 22; ONGC v. Western Geco
(2014) 9 SCC 263; Renusagar Power Co. Ltd. v.
General Electric Company & Anr., 1994 AIR 860 :
[1993] 3 Suppl. SCR 22; Escorts Limited v. Universal
Tractor Holding LLC (2013) 10 SCC 717 : [2013] 2
SCR 389; PEC Limited v. Austbulk Shipping (2019) 11
SCC 620 : [2018] 13 SCR 830; LMJ International Ltd.
v. Sleepwell Industries (2019) 5 SCC 302 : [2019] 4
SCR 617 and Vijay Karia & Ors. v. Prysmian Cavi E
Sistemi SRL & Ors., (2020) SCC OnLine 177 – referred
to.
Noy Vallesina Engineering Spa v. Jindal Drugs Limited
2006 (3) Arb LR 510; Louis Dreyfous Commodities
Suisse v. Sakuma Exports Limited (2015) 6 Bom CR
258; Imax Corporation v. E-City Entertainment (I) Pvt.
Limited (2020) 1 AIR Bom 82; M/s. Compania Naviera
‘SODNOC’ v. Bharat Refineries Limited (2008) 1 Arb
LR 344; In re Consolidated Rail Corp 867 F Supp 25,
30 (DDC 1994) M Flatow v. Islamic Republic of Iran
and FMC Corp 1999 US Dist LEXIS 18957; (2000)
XXV Ybk Comm Arbn 641; Maritime Enterprises Ltd
v. Agromar Lineas Ltd. (1989) XIV Ybk Comm Arbn
693; Minister of Public Works of the Government of the
State of Kuwait v. Sir
Fredrick Snow & Partners [1983]
1 WLR 818 CA; Northern Sales Company Ltd. v. Comp
Maritima Villa Nova SA, Federal Court of Appeal,
Winnipeg, Manitoba, 20 November 1991, (1993)
XVIII Ybk Comm Arbn 363; Good Challenger Nave
Gante v. Metalexportimport [2003] EWHC 10 (Comm);
Shivnath Rai Harnarain India Co. v. G. G. Rotterdam
164 (2009) DLT 197; Usha Drager Pvt. Ltd. v.
Dragerwerk AG, (170) DLT 628; Conros Steels Pvt.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC.
A
B
C
D
E
F
G
H
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SUPREME COURT REPORTS
[2020] 12 S.C.R.
Ltd. v. Lu Qin (Hong Kong) Company Ltd. and Ors.,
2015 (1) Arb LR 463 (Bombay) : (2015) 2 Bom CR 1;
Cruz City I Mauritius Holdings v. Unitech Ltd. (2017)
239 DLT 649; PT Asuransi Jasa Indonesia (Persero)
v. Dexia Bank SA [2006] SGCA 41; Government of
India v. Cairn Energy Pty. Ltd. & Anr. [2011] 6 MLJ
441 and Hindustan Construction Co. Ltd v. Union of
India & Ors. 2019 (6) Arb LR 171 (SC)– referred to.
Parsons & Whittemore Overseas Co. Inc. v. Societe
Generale De L’industrie du Papier (RAKTA) 508 F. 2d
969 (2nd Cir 1974); BCB Holdings Limited and The
Belize Bank Limited v. The Attorney General of Belize,
Caribbean Court of Justice, Appellate Jurisdiction, 26
July 2013, [2013] CCJ 5 (AJ); Traxys Europe S.A. v.
Balaji Coke Industry Pvt Ltd., Federal Court, Australia,
23 March 2012, [2012] FCA 276; Uganda Telecom
Ltd. v. Hi-Tech Telecom Pty Ltd., Federal Court,
Australia, 22 February 2011, [2011] FCA 131;
Petrotesting Colombia S.A. & Southeast Investment
Corporation v. Ross Energy S.A., Supreme Court of
Justice, Colombia, 27 July 2011; Hebei 
Import 
&
Export Corp. v. Polytek Engineering Co. Ltd., Court of
Final Appeal, Hong Kong, 9 February 1999, [1999] 2
HKC 205; Brostrom Tankers AB v. Factorias Vulcano
S.A., High Court, Dublin, Ireland, 19 May 2004, XXX
Y.B. Com. Arb. 591 (2005); International Navigation
Ltd. v. Waterside Ocean Navigation Co. Inc. 737 F.2d
150 (Second Circuit, 1984); Telenor Mobile
Communications v.
Storm LLC 524 F.Supp. 2d 332
(SDNY 2007); PT Asuransi Jasa Indonesia (Persero)
v. Dexia Bank SA [2006] SGCA 41 and Dongwoo Mann
+ Hummel Co. Ltd. v Mann + Hummel GmbH.  [2008]
SGHC 67 – referred to.
Development Corporation v. Balli Trading) Yearbook
Commercial Arbitration XXIV (1999) pp.732-738
(U.K. No.52); Paklito Investment Ltd. v. Klockner East
Asia) Yearbook Commercial Arbitration XIX (1994)
pp.664-674 (Hong Kong No.6); British Virgin Islands,
A
B
C
D
E
F
G
H
15
Court of Appeal, 18 June 2008 (IPOC International
Growth Fund Limited v L.V. Finance Group Limited)
Yearbook Commercial Arbitration XXXIII (2008)
pp.408-432 (British Virgin Islands No.1) 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; United Kingdom: High Court, Queen’s Bench
Division (Commercial Court), 20 January 1997 (China
Agribusiness); Supreme Court of Hong Kong, High
Court, 16 December 1994 (Nanjing Cereals, Oils &
Foodstuffs Import & Export Corporation v. Luckmate
Commodities Trading Ltd.) Yearbook
Commercial
Arbitration XXI (1996) pp. 542-545 (Hong Kong
No.9); The Conflict of Laws, Dicey, Morris and
Collins, (15th ed.) Volume 1, Chapter 16, paragraph
16-035, p. 843. Russel on Arbitration, Sweet &
Maxwell (24th Edition, 2015); The New York
Convention of 1958, Kluwer, 1981, pp. 267-268, cited
in Redfern and Hunter, Law and Practice of
International Commercial Arbitration, fifth edn., 2009,
p. 639, para 11.60; Malhotra’s Commentary on the Law
of Arbitration, 4th Edition, Vol. 2, Pg. 1163-1164,
Wolters Kluwer – referred to.
Case Law Reference
[2018] 2 SCR 829
referred to
Part A, Para V(a)(iii)
[1993] 3 Suppl. SCR 22
referred to
Part A, Para V(b)
[2014] 6 SCR 456
referred to
Part A, Para V(b)(vii)
[2001] 3 SCR 479
relied on
Part A, Para VI(a)(vi)
[2019] 4 SCR 617
referred to
Part A, Para VI(a)(vi)
[2013] 13 SCR 599
referred to
Part A,
Para VI(a)(vii)
(2012) 9 SCC 648
referred to
Part A, Para VI(a)(ix)
[2016] 6 SCR 703
relied on
Part A, Para VII(vii)
[2018] 10 SCR 451
relied on
Part A, Para VII(vii)
[2006] 8 Suppl. SCR 178 relied on
Part A, Para VII(vii)
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC.
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B
C
D
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[2020] 12 S.C.R.
[1955] 2 SCR 603
followed
Part A, Para VII(viii)
[2018] 5 SCR 829
relied on
Part A, Para VII(viii)
[1977] 1 SCR 996
referred to
Part A, Para VII(xi)
[2011] 11 SCR 1
referred to
Part A, Para VII(xv)
[2018] 1 SCR 915
referred to
Part A, Para VII(xv)
[2008] 3 SCR 309
relied on
Part A, Para VII(xv)
[2013] 2 SCR 389
referred to
Part B, Para (ii)(a)
[2018] 13 SCR 830
referred to
Part B, Para (ii)(e)
[2019] 4 SCR 617
referred to
Part B, Para (ii)(f)
[2003] 3 SCR 691
referred to
Part C, Para (vi)
[2012] 12 SCR 327
referred to
Part C, Para (x)
[2013] 13 SCR 599
referred to
Part D, Para (ii)
[1993] 3 Suppl. SCR 22
referred to
Part D, Para (iii)
(2014) 9 SCC 263
referred to
Part D, Para (vi)
[2005] 5 Suppl. SCR 302 relied on
Part D, Para (ix)
[2019] 7 SCR 522
relied on
Part D, Para (ix)
[1993] 3 Suppl. SCR 22 
referred to
Part D, Para (xv)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3185
of 2020.
From the Judgment and Order dated 19.02.2020 of the High Court
of Delhi at New Delhi in O.M.P. (EFA) (COMM.) No. 15 of 2020.
K. K. Venugopal, AG, Tushar Mehta, SG, Gourab Banerji, Harish
Salve, C.A. Sundaram, Akhil Sibal, Sr. Advs., K. R. Sasiprabhu,
Ms. Neelu Mohan, Tushar Bhardwaj, Vinayak Maini, Madhur Baya,
Ms. Chetna Nayantara Rai, Sameer Parekh, M/s. Parekh & Co., Anirudh
Das, Aashish Gupta, Arjun Pal, Anirudh Lekhi, Ms. Rohini Musa,
Abhishek Gupta and S.S. Shroff, Advs. for the appearing parties.
A
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 The following Judgment of the Court was delivered :
JUDGMENT
INDEX*
I
Background Facts
2
II
Relevant Terms of the Production Sharing
Contract
3
III
Genesis of Dispute
8
IV
Challenge to the Award before the Seat Courts at
Kuala Lumpur
13
V
Submissions on behalf of the Appellants
15
VI
Submissions on behalf of the Respondents
22
VII
Discussion and Analysis
28
Part A
Limitation for filing an enforcement/ execution
petition of a foreign award under Section 47
of the 1996 Act
28
Part B
Scheme of the 1996 Act for enforcement of
New York Convention awards
37
Part C
Whether the Malaysian Courts were justified in
applying the Malaysian law of public policy
while deciding the challenge to the foreign
award?
44
Part D
Whether the foreign award is in conflict with the
Public Policy of India?
54
INDU MALHOTRA, J.
1. Leave granted.
2. The present Civil Appeal has been filed by the Government of
India to challenge the Judgment and Order dated 19 February 2020 passed
by the Delhi High Court, wherein the application under Section 48 of the
Arbitration and Conciliation Act, 1996 being I.A. No. 3558 of 2015 filed
by the Government of India has been dismissed; the Application filed
under Section 47 read with 49 being O.M.P. (EFA) (Comm) 15 of 2016
for the enforcement of the foreign award by the Respondents, and the
I.A. No. 20149 of 2014 for condonation of delay in filing the execution
petition by the Respondents were allowed.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
*The Index is as per the Original Judgment.
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I. Background Facts
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.
II. Relevant Terms of the Production Sharing Contract
The dispute between the Parties emanates from Article 15 of the
PSC which inter alia provides for the recoverability of Base
Development Costs (“BDC”) incurred by the Respondents-Claimants
for the development of the Ravva Field. The relevant clauses of the
PSC are extracted hereinbelow :
A
B
C
D
E
F
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(i) Article 11.2 of the PSC reads as :
“11.2
Ravva Development Plan
Appendix 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 Drilling
Estimated Average Well Cost (in US dollars)
TOTAL COST OF AVERAGE WELL $ 2,430,000
Attachment 10
Ravva Field Development Capital Costs
ITEM
COST
US $ million
Development of R10 and R17 Blocks
Oil and Associated Gas Reserves
Drill and Complete 19 Wells
SPM and Tanker Loading Line
Four Platforms
  201.1
Production/Injection Pipelines to/from Shore
Infield Flowlines
Onshore Oil Process Facilities
Onshore Oil Storage
Gas Treatment and Compression
Water Injection
Gas Lift Pipeline and Compression
Project Management etc.
Development of R1,7,9
Non-Associated Gas Reserves
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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[2020] 12 S.C.R.
Drill and Complete 2 Wells
16.9
One Monopod Tower
Production Pipeline to Shore
Onshore Gas Treatment Plan
                          TOTAL
218.0
Note: 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 15
RECOVERY OF COSTS FOR OIL AND GAS
15.1
15.2
15.3
15.4
15.5 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 Article 15.5 (a) and
subject to the remaining provisions of this Article 15.5, the
Contractor shall not, for the purposes only of determining
A
B
C
D
E
F
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21
the volume of Petroleum to which Contractor shall be entitled
under Article 15.1 as Cost Petroleum, claim as Contract Costs
Contractor’s Development Costs incurred after the Effective
Date in connection with Development operations under the
Ravva Development Plan which exceed Contractor’s Base
Development Costs (as hereinafter defined) by more than five
percent (5%).
(c) For the purpose of this Article 15.5 “Contractor’s 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;
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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[2020] 12 S.C.R.
(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 this Article 15.5
the Contractor’s 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
Article 15.5(d), the Parties agree as follows:
(i) Costs relating to Site Restoration and exploration and
appraisal drilling shall not be subject to the limit on
Contractor’s Development Costs as provided in Article
15.5(b);
(ii) the costs of developing the reserves and/or potential
reserves and/or Satellite Fields referred to in Article
15.5(d) (i) shall not be subject to the limit on Contractor’s
Development Costs as provided in Article 15.5(b)
notwithstanding 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 Contractor’s 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 Article 15.5(d) (iii) due to delay in obtaining
necessary
approval;
(bb) material changes to the Ravva Development Plan
necessitated by Contractor’s review of data provided to
the Companies by the Government and/or ONGC after
A
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23
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 Article 15.5(d)(v);
(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 Contractor’s base Development Costs to fairly
reflect the circumstances in the question PROVIDED
THAT in the case of delays referred to in Article 15.5 (e)
(ii) (aa) the Management Committee shall not be obliged
to consider any increase where such delay has been
caused by the Contractor’s 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
Article 15.5(e) (iii) has arisen, or resulted in the
Contractor’s 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
Contractor’s 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
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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[2020] 12 S.C.R.
Article 15.5(e)(iii), 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 CONTRACT
“33.1 Indian Law to Govern
Subject to the provisions of Article 34.12 this Contract
shall be governed and interpreted in accordance with
the laws of India.
33.2 Law of India Not to be Contravened
Subject 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 arbitration
“34.1…
34.2 References to Sole expert
Matters 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.
A
B
C
D
E
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34.3 Unresolved Disputes
Subject to the provisions of this Contract, the Parties
hereby agree that any matter, unresolved dispute,
difference or claim, which cannot be agreed or settled
amicably within twenty one (21) days may be submitted
to a sole expert (where Article 34.2 applies), or otherwise
to an arbitral tribunal for final decision as hereinafter
provided.
…
34.12 Venue and Law of Arbitration Agreement
The venue of sole expert, conciliation or arbitration
proceedings pursuant to this Article, unless the Parties
otherwise agree, shall be Kuala Lumpur, Malaysia and
use the English Language. In so far as practicable, the
Parties shall continue to implement the terms of this
Contract notwithstanding the initiation of arbitral
proceedings and any pending claim or dispute.
Notwithstanding the provisions of Article 33.1 the
arbitration agreement contained in Article 34 shall be
governed by the laws of England.”
(emphasis supplied)
III.  Genesis of the Dispute
(i)
The PSC contained a Development Plan for the
“Existing Discoveries” known as the Ravva Development
Plan. The scheme of the PSC was that the Claimants would
incur the costs of the petroleum operations, and were entitled
to recover their costs from the petroleum produced. The
Government and the Claimants would receive their
respective share in the ratio fixed under the PSC.
(ii)
Article 15 of the PSC provided for recovery of costs
for oil and gas; Article 15.1 is a general provision with
respect
to contract costs; Article 15.2 to 15.4 pertain to
exploration costs. The disputes have arisen on the
interpretation of Article 15.5 which pertains to Development
Costs. Article 15.5(c) defines the Contractor’s Base
Development Costs, and enumerates a list of facilities and
other matters required to be constructed by the Claimants.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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SUPREME COURT REPORTS
[2020] 12 S.C.R.
The Contractor’s Base Development Costs were the costs
incurred after the effective date, relating to the construction
and / or establishment of such facilities as are necessary to
produce, process and transport petroleum within the
“Existing Discoveries” in order to enable crude oil
production of 35,000 Barrels of Oil Per Day (“BOPD”) in
accordance with the Ravva Development Plan. The
facilities included the construction of offshore tanker loading
facilities for tankers upto 120,000 DWT; wellhead platforms
capable of supporting upto a total of 24 Development Wells;
process facilities; storage facilities with a nominal capacity
of 500,000 Barrels; the drilling of 19 Development Wells
and 2 Gas Production Wells, etc. Article 15.5(b) and (c)
recorded the Agreement between the parties that the
Contractor’s Base Development Costs shall be the “sum
of US $ 188.98 million plus five percent”.
It was envisaged that the production profile of 35,000
BOPD would be reached after about two years, and the
said production figure would be maintained as a plateau
production for 6 years thereafter. A total field production
life of 14 years was estimated.
(iii)
The Contractor’s Base Development Costs were agreed
on certain assumptions and / or factors set out in Article
15.5(d), including the range of physical reservoir
characteristics not being materially different from the ranges
on which the Ravva Development Plan was based.
(iv)
There are specific exclusions contained in Article
15.5(e)(i) and (ii), and sub-Article (e)(iii) which set out the
circumstances in which the agreed amount of the
Contractor’s Base Development Costs may be increased
by the Management Committee; or in default by an expert,
as provided in the dispute resolution clause.
(v)
During the working of the PSC, the production rate of
35,000 BOPD was achieved in 1997-1998. By 1998-1999,
when the complete extent of the reserves in the Ravva
Field was known, the Claimants requested the Government
of India to permit an increased production of 50,000 BOPD.
A
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C
D
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27
This increase was approved by the Management Committee
on 25.03.1998, and by the Government on 01.04.1999. By
1999-2000, the increased rate of production at 50,000 BOPD
was achieved. This rate of production was maintained till
2008-2009, after which it decreased to 40,000 BOPD. The
oil fields were found to be enormously profitable for both
parties.
(vi)
The Claimants submitted that by 1999-2000, they had
incurred Development Costs to the tune of about US $ 220
million to achieve the production rate of 35,000 BOPD. The
Claimants sought that the ‘cap’ in Article 15.5 should be
increased accordingly. After 1999-2000 and until 2007-2008,
the Claimants incurred Development Costs totalling a further
US $ 278 million, which they contended that they were
entitled to recover as Cost Petroleum, since the ‘cap’ would
no longer apply post 1999-2000.
The Claimants claimed that they were entitled to more
than US $ 264.35 million with respect to Development Costs
incurred in 1994-1995 until 2008-2009.
(vii)
On the other hand, the Government contended that all
the Development Costs claimed by the Claimants were
incurred in connection with the Ravva Plan, and were
subject to the ‘cap’ on such costs as provided by Articles
15.5(b) and (c), notwithstanding the increased quantity of
production. The exceptions, were however not subject to
the ‘cap’, and were properly recovered from Cost Petroleum
under Article 15.5(a) which totalled to US $ 65.95 million.
(viii)
The Government
contended that the work contemplated
by the Ravva Plan, as per Article 15.5(c) was not completed
till 1999-2000, when only 14 wells had been drilled; the
remaining 7 wells stipulated in Article 15.5(c)(xi) were drilled
by 2007-2008. Consequently, the ‘cap’ on the Contractor’s
Base Development Costs would apply to the whole of the
costs incurred till 2007-2008, and not the costs incurred till
1999-2000. The Claimants were not entitled to claim more
than the Cost Petroleum agreed at US $ 198.43 million plus
US $ 65.95 million (towards exceptions).
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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(ix)
The Government raised counter claims equivalent to the
amounts which the Claimants had claimed as Cost
Petroleum, in excess of the agreed amount of US $ 198.43
million plus US $ 65.95 million.
(x)
On 18.08.2008, the disputes were referred to arbitration
under Article 34 of the PSC. The Claimants nominated Mr.
Andrew Berkeley as its nominee-arbitrator; the Government
of India appointed Hon’ble Dr. Justice Adarsh Sein Anand
(former Chief Justice of India) as its nominee-arbitrator.
The nominee arbitrators appointed Rt. Hon’ble Sir Anthony
Evans as the presiding arbitrator.
(xi) The tribunal passed the Award on 18.01.2011 inter alia
holding that :
a)
The Claimants constructed facilities which were
necessary to produce, process, store and transport
Petroleum within the Existing Discoveries to enable
Crude Oil production of 35,000 BOPD. The Base
Development Costs under Article 15.5(c) was to be
interpreted with reference to the object of achieving a
production profile of 35,000 BOPD, and the facilities
contemplated to achieve that profile. The Claimants
achieved the target of 35,000 BOPD by 1999-2000 by
drilling of 14 wells, and incurred Development Costs of
US $ 220,737,381.
Article 15.5(b) and (c) imposed a cap on the
Development Costs to the agreed figure of US $ 188.98
million plus 5%. The Claimants were not entitled to
recover Development Costs in excess of US $ 198.43
million in view of the cap provided under
Article 15.5(c)
of the PSC for the period 1994-95 to 1999-2000.
b)
The Claimants had wrongly recovered US $
22,307,381 in excess of the capped figure of US $ 198.43
million as Base Development Costs during the period
1994-95 to 1999-2000. The Government of India was
entitled to be credited with the said amount in the final
settlement of cost recovery accounts.
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c)
The PSC contained certain exceptions where the
Claimants might incur Development Costs in excess of
those anticipated under the PSC and Ravva
Development Plan. These exceptions were covered
under Article 15.5(d) and (e) for increase of the BDC
cap by the Management Committee.
d)
During exploration in 1998-1999, when the complete
extent of the reserves in the Ravva Field came to be
known, the Management Committee approved an
increase in the production profile from 35,000 to 50,000
BOPD. The Respondents proceeded to develop the
Ravva Field to achieve the production rate of 50,000
BOPD, and drilled 7 additional wells.
e)
The tribunal accepted the evidence of the Expert
Witness produced by the Claimants, which found that
the enlarged reservoir known as Block A/D in the Ravva
Field, showed a range of physical characteristics which
were “materially different” from those on which the
Ravva Development Plan was based. The range of
relevant characteristics which were different from what
was anticipated included the fault line on the north-west
boundary, which was found not to be sealed, but to be
porous; the permeability of the rocks was found to be
greater leading to increased production pressures; the
oil / water contact levels were found to be different.
Article 15.5(e)(iii)(dd) provided that a request for an
increase in the BDC cap could be made, since materially
different characteristics were encountered in the drilling
of the additional wells. In such
circumstances, Claimants
would be entitled to recover the increased amounts,
notwithstanding the limit imposed by Article 15.5(b) and
(c).
The tribunal held that the Respondents were entitled
to recover US $ 278,871,668 from the Cost Petroleum
towards Development Costs incurred by the
Respondents for the period 2000-01 to 2008-09.
f) The Award declared as under :
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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“We therefore declare an award, as follows :
A.
On the true construction of Article 15.5 of the
Production Sharing Contract 20th October 1994 (the
PSC), all Development Costs incurred by the
Claimants after the date of the PSC in connection
with development operations under the Ravva
Development Plan are subject (as regards cost
recovery from Cost Petroleum) to the cap imposed
by Article 15.5 (b) of the PSC, namely, the amount
defined as Base Development Cost by Article
15.5(c) plus 5%;
B.
The figure stated in Article 15.5(c) of the PSC,
namely, US $ 188.98 million, was agreed as the limit
for Base Development Cost to be cost-recovered by
the Claimants in connection with the Ravva
Development Plan as it was agreed in August /
October 1993;
C.
The Claimants incurred Development Costs totalling
$ 220,737,381 in connection therewith up to and
including the contract year (31 March annually)
1999/2000;
D. The Claimants were not entitled to cost-recover such
costs in excess of the agreed amount plus five
percent (5 %) namely, $ 198.43 million;
E.
That the Claimants incurred Development Costs in
connection therewith from contract years 2000/
2001 until 2008/2009 in the sum of $ 278,871,668;
F.
That in response to the Claimant’s request, the
amount of Base Development Cost in respect of such
period shall be increased by $ 278,871,668
pursuant to Article 15.5(e)(iii)(dd) of the PSC;
G.
That the Claimants were entitled to
recover all of
such costs from Cost Petroleum, namely,
$ 278,871,668 made up as follows
accepted by the Respondent $ 65, 952, 604
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increase under (f) above
$ 212, 919, 064
Total
$ 278, 871, 668
H. That the Claimants are and shall be entitled to cost-
recover further Base Development Cost incurred
by them in connection with the Ravva Development
Plan after the contract years 2008/2009, if and to
the extent that
a. Such costs are incurred in further development
of the reserves defined by this Award as being
materially different from the physical
characteristics of the reservoir on which the
original (1993) Ravva Development Plan was
based; and / or
b. The amount of the cap under Article 15.5(b) of
the PSC may be increased hereafter pursuant
to Article 15.5(e)(iii) of the PSC; and / or
c.
As the parties may agree;
But not otherwise;
I.
That the Respondent is entitled to be credited
with the sum of $ 22,307,381 in the final
settlement of cost recovery accounts in relation
to Development Cost incurred during contract
years 1994/5 to 1999/2000 in excess of $ 198.43
million.”
(xii) The Respondents-Claimants submit that vide their letter
dated 29.04.2011 addressed to the Government of India,
the revised costs recovery account statements as per the
Award were enclosed, and credit of the excess
Development Costs of US $22,307,381 was given to the
Government of India.
IV. Challenge to the Award before the Seat Courts at Kuala
Lumpur
(i)
On 15.04.2011, the Government of India challenged the
Award under Section 37 of the Malaysian Arbitration Act,
2005 before the Malaysian High Court, on three
principal
grounds:
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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a) the Award deals with a dispute not contemplated by or
not falling within the terms of the submission to
arbitration;
b) the Award contains decisions on matters beyond the
scope of the submission to arbitration; and
c) the Award is in conflict with public policy.
(ii)
The High Court vide Order dated 30.08.2012 rejected
the challenge to the Award holding that the requirements of
Sections 37(1)(a)(iv) and (v) and Section 37(1)(b)(ii) of the
Malaysian Act have not been met, to sustain the challenge
to the award. The Award did not involve any “new
difference,” which would have been relevant for
determination by the arbitral tribunal. The High Court found
no reason which would merit intervention with the Award.
(iii)
Aggrieved by the Order dated 30.08.2012, the
Government of India preferred an Appeal before the
Malaysian Court of Appeal, which was dismissed vide Order
dated 27.06.2014. The Malaysian Court of Appeal held that
the tribunal had given effect to the agreement between the
parties under the terms of the PSC. There was no
determination by the tribunal which was outside the
submissions of the parties.
(iv)
On 10.07.2014, a show cause notice was issued by the
Government to the Respondents-Claimants, raising a
demand of US $ 77 million towards the Government’s share
of Profit Petroleum under the PSC. The Respondents were
directed to show cause as to why the said amount ought
not to be directly recovered from the
amounts payable by
the Oil Marketing Companies.
(v)
On 21.07.2014, the Government filed an Application for
Leave to Appeal before the Malaysian Federal Court, which
was rejected vide Order dated 17.05.2016.
(vi)
During the pendency of the Application for Leave to
Appeal before the Malaysian Federal Court, on 14.10.2014,
the Respondents-Claimants filed a Petition for enforcement
under Sections 47 read with 49 of the 1996 Act before the
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Delhi High Court, along with an application for condonation
of delay.
(vii)
The Government filed an Application under Section 48
resisting the enforcement of the Award before the Delhi
High Court inter alia on the ground that the enforcement
petition was filed beyond the period of limitation; the
enforcement of the Award was contrary to the public policy
of India, and contained decisions on matters beyond the
scope of the submission to arbitration.
(viii)
The Delhi High Court rejected the Petition under Section
48 vide the impugned judgment dated 19.02.2020, allowed
the application for condonation of delay filed by the
Respondents / Claimants, and directed the enforcement of
the Award.
(ix)
Aggrieved by the judgment of the High Court, the
Government has filed the present Civil Appeal before this
Court. This Court issued notice vide Order dated
17.06.2020, and directed the parties to maintain status quo
till further orders.
(x)
Subsequently, the Respondents filed I.A. No. 61469 of
2020 for Modification of the Order of status quo dated
17.06.2020, and for interim directions. The I.A. was taken
up for hearing on 22.07.2020, when the Order of status
quo was partially modified, and a direction was issued that
the sales revenues be paid directly by the Oil Marketing
Companies to the Respondents as per the Orders dated
28.05.2020 and 04.06.2020 passed by the Delhi High Court.
The Order of status quo would, however, continue to
operate with respect to the bank
guarantees / deposits of
US $ 93 million, during the pendency of the present
proceedings.
V. Submissions on behalf of the Appellants
Shri. K.K. Venugopal, Learned Attorney General for
India instructed by Mr. K.R. Sasiprabhu, Advocate
represented the Government of India. It was submitted that
the enforcement of the Award was liable to be refused on
the following principal grounds:
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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(a)
Maintainability of the Petition
(i)
The Appellants raised an objection to the
maintainability of the application on the ground that the
petition for enforcement / execution of the foreign award
under Section 47 was barred by limitation.
Since there is no specific provision in the Limitation
Act for enforcement of foreign awards, it would necessarily
fall under the residuary provision – Article 137.
(ii)
Article 137 applies to the enforcement of foreign
awards, which provides a period of 3 years from “when
the right to apply accrues”. It was submitted that the right
to apply would accrue from the date of making the award.
In the present case, the Award was passed on
18.01.2011, and the petition for enforcement / execution
was filed by the Respondents on 14.10.2014. The petition
was barred by 268 days beyond the period of limitation.
(iii)
The execution petition for the purposes of the
Limitation Act, has to be treated as an application under
the provisions of Order XXI of the CPC. The execution of
a foreign award under Section 49 of the 1996 Act, is carried
out under Order XXI CPC, as held in BCCI v Kochi
Cricket (P) Ltd.1
(iv)
Section 5 of the Limitation Act, 1963 excludes an
application filed under Order XXI, CPC.
Section 5 reads as under:-
“5. Extension of prescribed period in certain
cases. – Any appeal or any application, other
than an application under any of the provisions
of Order XXI of the Code of Civil
Procedure, 1908
(5 of 1908), may be admitted after the prescribed
period, if the appellant or the applicant satisfies
the court that he had sufficient cause for not
preferring the appeal or making the application
within such period.”
(emphasis supplied)
1 (2018) 6 SCC 287.
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Consequently, the delay in filing the application for
enforcement / execution could not be condoned.
(v)
Even if it is presumed that the Respondents could
invoke the provisions of Section 5 of the Limitation Act, the
Respondents failed to show sufficient cause for condonation
of delay in filing the enforcement petition. The ground of
pendency of the challenge to the award before the courts
in Malaysia, could not be a sufficient ground for condonation
of delay.
(vi)
It was submitted that the High Court erroneously held
that an application for enforcement of an arbitral award
would be governed by the limitation period of 12 years under
Article 136 of the Schedule to the Limitation Act, 1963.
Article 136 deals with an application for execution
of any decree or order of a civil court. This finding is contrary
to the express holding in Bank of Baroda v Kotak
Mahindra Bank,2 wherein it has been held that the period
of limitation of 12 years prescribed by Article 136 of the
Schedule to the Limitation Act, applies only to a decree or
order passed by an Indian court. A foreign award could not
be treated to be a decree of a civil court.
(vii)
It was submitted that the reasoning of the Delhi High
Court is contrary to the provisions of the 1996 Act, since it
has ignored the express words of Section 49, which provides
that the court would require to be “satisfied that the foreign
award is enforceable under this Chapter”. It was
submitted that this is further supported
by the language of
Section 46 of the Act which pre-supposes an inquiry before
the award is said to achieve the status of the decree of a
court. The purposive interpretation adopted by the Ld. single
judge, could not be used to negate the express terms of the
statute.
(viii)
For the purpose of making a foreign award
enforceable, the procedure available under Part II of the
Act is required to be followed. A petition for enforcement
and execution of such foreign award by way of a composite
2 2020 SCC OnLine SC 324.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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petition is required to be filed under Section 47. A foreign
award does not become a decree until and unless it passes
the muster of Sections 47 to 49, only after which it acquires
the status of a decree. It was only after the Court adjudicates
on the enforceability of the foreign award under Sections
47 to 48, would the foreign award be deemed to be a decree
of that Court. Post such adjudication, the foreign award is
declared as a deemed decree under Section 49 of the Act.
The foreign award has no legal sanctity, till an
affirmative decision is obtained under Section 48 of the 1996
Act. The foreign award gets the imprimatur of the Court,
before it can be enforced as a deemed decree under Section
49 of the 1996 Act.
(ix)
Section 49 provides that where the Court is satisfied
that the foreign award is enforceable, it shall be deemed to
be a decree of the Court. The limited purpose of the deeming
fiction was to apply the machinery provided under Order
XXI of the CPC to enable Indian Courts to execute foreign
awards. The foreign award does not transform into a decree
of a civil court in India. The foreign award does not lose its
character as an arbitral award. It is only presumed to be a
decree of the Court, for the purposes of execution.
(b)
Challenge on grounds of Public Policy of India
The Government inter alia contended that the foreign
Award is in conflict with the Public Policy of India as
expounded in the
Renusagar3 judgment. This Court in
Renusagar held that public policy of India, in the context
of foreign awards would be: (a) fundamental policy of Indian
law; or (b) the interests of India; or (c) justice or morality.
(i)
The PSC related to the exploration and development
of petroleum in its natural state in the Territorial Waters
and Continental Shelf of India, which is vested in the Union
of India. The Government was desirous that the petroleum
resources be exploited in the overall interests of India in
accordance with good international petroleum industry
practices.
3 1994 Supp (1) SCC 644.
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The PSC in recital (1) expressly states that petroleum
being a natural resource is vested in the Government of
India under Article 297 of the Constitution of India. Since
the PSC related to the exploration of a natural resource,
there was an inherent character of national and public
interest in the implementation of the PSC, and the natural
gas was held in the sovereign trust of the people of India.
The sovereignty over the petroleum produced would continue
to remain with the nation, since the natural gas is a resource
which falls squarely within the purview of Article 297 of
the Constitution of India.
(ii)
The learned A.G. submitted on behalf of the
Government of India that the Award was in conflict with
the public policy of India. The tribunal had ignored various
clauses of Article 15.5(c) read with the Ravva Development
Plan, and particularly Attachment 10 thereto, which
contained the basis of computation of the “sum” of US $
188.98 million payable to the Respondents as Base
Development Costs.
Article 15.5(c) of the PSC read with the Ravva
Development Plan formed the basis of the dispute between
the Parties. Article 15.5(c) provided that the Base
Development Cost shall mean the costs incurred after the
Effective Date relating to the construction and / or
establishment of such facilities as were necessary to produce
Petroleum from within the Existing Discoveries in order to
enable crude oil production of 35,000 BOPD in accordance
with the Ravva
Development Plan. Such costs “shall include,
but not be limited to” costs incurred in relation to the list of
facilities mentioned therein.
Sub-clause (xi) under Article 15.5(c) of the PSC
specifically referred to the “drilling of nineteen (19) Oil Wells
and two (2) Gas Production Wells”. Under Article 15.5(c),
the parties had expressly agreed that the Contractor’s Base
Development Costs shall be the “sum” of US $ 188.98
million, as indicated in the Ravva Development Plan, which
was an integral part of the PSC. The sum of US $ 188.98
million took into consideration the drilling of 21 wells as
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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also the construction of facilities mentioned in Article 15.5(c)
of the PSC.
The tribunal proceeded on the false assumption that
every aspect of Article 15.5 (c), must be subjugated to the
achievement of 35,000 BOPD.
The failure of the tribunal to look into all the relevant
documents, particularly Attachment 10 to the Ravva
Development Plan, which formed an integral part of the
PSC, and contained the computation of the amount payable
as Base Development Costs, would shock the conscience
of the Court, and the award would be in conflict with the
basic notions of justice.
(iii)
The Ld. A.G. contended that the said Plan contained
the computation of the sum of US $ 188.98 million to be
paid towards Base Development Cost under Article 15.5(c)
of the PSC. The Ravva Plan provided the approximate cost
of drilling one well in the Ravva Field as being US $ 2.43
million.
Attachment 10 to Addendum 2 of the Ravva
Development Plan sets out the Development of R10 and
R17 blocks – Oil and Associated Gas Reserves. It provides
for the drilling and completion of 19 wells, SPM and Tanker
Loading Lines, Four platforms, production/ injection
pipelines to/from shore in-field flow lines, Onshore oil
process facilities, Onshore oil storage, Gas treatment and
compression, Water injection, Gas lift pipeline and
Compression, Project Management, etc., for which an
amount of US $ 201.1 million was earmarked.
The total amount payable for the Ravva
Development
Cost (i.e. 210.1 + 16.9) was US $ 218 million. After
deducting US $ 18 million towards abandonment costs and
US $ 11.32 million towards import duty, the amount payable
would work out to US $ 188.98 million, which is the amount
mentioned in Article 15.5(c) of the PSC.
(iv)
The tribunal on the basis of one isolated criteria
mentioned in Article 15.5 (c) of achieving 35,000 BOPD
passed the Award in favour of the Claimants. In fact, the
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Claimants failed to fulfil the other requirements stated in
Article 15.5(c) inter alia with respect to development
facilities, which included the drilling of 19 oil wells and 2
gas reserves. This was specifically mentioned in the Ravva
Development Plan, which was an integral part of the PSC
as stated in Article 11.2 of the PSC. By deciding the claim
on the basis of one isolated criteria, it had given a go-by to
all the other conditions, which would amount to re-writing
the mandatory terms of the contract between the parties,
and foisting the Government with obligations, which were
never agreed to. The net result of the arbitral award was
that the Government of India suffered a huge loss to the
tune of approximately Rs.1,600 crores, which would be
contrary to the interests of India.
The tribunal’s interpretation of Article 15.5(c) had
the effect of substituting the plain language of sub-clause
(xi) of the said Article, with a new stipulation that the cost
of construction of the wells in the Ravva Field would be
borne by the Government, once the production capacity of
35,000 BOPD was achieved. This interpretation rendered
the stipulation of drilling 19 oil wells and 2 gas wells contained
in Article 15.5(c)(xi) as nugatory. The tribunal omitted any
reference to Attachment 10 of the Ravva Development Plan,
which was crucial to the determination of the dispute, and
formed an integral part of the PSC, since it contained the
basis of the computation of the amount
payable towards
Base Development Cost. Such an Award would shock the
conscience of the Court, and would be in conflict with the
public policy of India, and contrary to the interests of India.
The daily rate of production specified in Article
15.5(c) i.e. 35,000 BOPD, was the ‘plateau’ rate of
production which had to be achieved and maintained for a
period of 6 years of the contract period. It was not a one-
time target to be achieved by the Respondents. The plateau
rate of production of 35,000 BOPD could not have been
related to the cap of US $ 188.98 million, which related
only to the costs incurred for setting up specified facilities
under Article 15.5(c), including the 21 wells.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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The tribunal failed to note that the cap of US $ 188.98
million was relatable to the facilities mentioned in Article
15.5(c) of the PSC, which expressly included the drilling
and completion of 19 oil wells and two gas wells. The tribunal
erred in holding that the cap of US $188.98 million related
only to the achievement of a production target of 35,000
BOPD, and adjusted the capped figure of US $ 188 million
upon the drilling of 14 wells, when the production capacity
of 35,000 BOPD was achieved. The tribunal held that the
costs with respect to the 7 wells drilled thereafter, amounting
to US $ 278 million, would have to be borne by the
Government to the Respondents.
(v)
It was further submitted that the Counter Claim raised
by the Government was summarily disposed of in paragraph
100 of the Award, and the tribunal gave a finding which
was contrary to the express provisions of the contract.
(vi)
It was submitted that Clauses 33.1 and 33.2 of the
PSC provided that the PSC was governed and interpreted
in accordance with Indian law. The Malaysian Courts at
the seat of arbitration had erroneously applied the Malaysian
Arbitration Act (Act 646), 2005 while deciding the challenge
to the Award. The Award was to be tested on the basis of
Indian law, as mandated by Article 33 of the PSC. The
PSC was to be interpreted as per Indian law.
(vii)
Reliance was placed on paragraph 76.4 of the
judgment in Reliance Industries v. Union of
India,4
wherein this Court in the penultimate paragraph of that
judgment had observed that since the substantive law
governing the contract is Indian law, even the Courts in
England (seat of arbitration), would be required to decide
the issue of arbitrability by applying the Indian law of public
policy.
In this case, the Malaysian Courts had erroneously
applied the Arbitration Act of Malaysia to uphold the validity
of the award.
4 (2014) 7 SCC 603.
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VI.  Submissions on behalf of the Respondents
The Respondents were represented by Mr. C.A. Sundaram and
Mr. Akhil Sibal, Senior Advocates.
(a) On Limitation
(i)
It was contended that under Section 49 of the 1996
Act, the foreign award becomes a decree of an Indian court
after the objections to the award are adjudicated by the
enforcement court.
(ii)
Article 136 of the Limitation Act prescribes a period
of 12 years from the date of the decree of the civil court,
which would be the appropriate provision for execution of
a foreign award. In the present case, the foreign award
was passed on 18.01.2011, and the Respondents had a period
of 12 years to seek enforcement of the award i.e. till
17.01.2023. The execution petition was, therefore, filed
within the period of limitation.
(iii)
In the alternative, it was contended that if Article
137 of the Limitation Act is held to be applicable for the
enforcement of foreign awards, the limitation period would
commence from “when the right to apply accrues”, which
does not necessarily mean the date of the award. Had this
been the intention of the legislature, it would have been
expressly provided so. The right to apply may accrue even
on a later date, as it has in the present case.
(iv)
The Award was passed on 18.01.2011 granting a
declaration in favour of the Respondents-Claimants. The
counter claim of the Government of India was partly
allowed, directing the Respondents to revise the cost
recovery statements.
Consequently, an amount of US $ 22
million became payable by the Respondents-Claimants to
the Government of India.
On 10.07.2014, the Government of India issued a
notice to the Claimants to show cause as to why US $ 77
million ought not to be directly recovered from the amounts
payable by the Oil Marketing Companies.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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It was thus contended that the right to apply for
enforcement of the award accrued on 10.07.2014.
(v)
It was further contended that the period of limitation
would commence from the date when the award attained
finality at the seat of arbitration. In the present case, the
award attained finality at the seat court on 10.05.2016, when
the Federal Court of Malaysia rejected the application of
the Government of India seeking leave to appeal.
(vi)
It was submitted that irrespective of whether
limitation under Article 136 or 137 is applicable for
enforcement of foreign awards, Section 5 would be
applicable in both cases. Section 5 of the Limitation Act is
applicable to any appeal, or any application.
The application for enforcement / execution was filed
by the Respondent-Claimants under Sections 47 and 49 of
the 1996 Act, which was a composite application, as per
the judgments in Fuerst Day Lawson Limited v. Jindal
Exports Limited5 and LMJ International Limited v.
Sleepwell Industries Co. Ltd.6
(vii)
It was further contended that limitation is a mixed
question of fact and law. Reliance was placed on Article
113 of the Limitation Act, which provides that any suit for
which no period of limitation is provided elsewhere in
Schedule, the period of limitation is 3 years from the date
when the right to sue accrues. The Counsel placed reliance
on the judgment of this Court in Shakti Bhog Food
Industries Ltd. v the Central Bank of
India7. Article 137
is similar to the residuary provision in Article 113 for filing
applications, for which no period of limitation has been
provided elsewhere in this division, and provides a period
of 3 years from the date when the right to apply accrues.
If the substantive application was filed under Sections
47 and 49 of the 1996 Act, it would not fall under Order
XXI of the CPC, and hence an application under Section 5
5 2001 (6) SCC 356.
6 2019 (5) SCC 302.
7 2020 SCC OnLine SC 482.
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of the Limitation Act, 1963 would be maintainable.
Furthermore, since there was uncertainty in the law, as the
Madras High Court had held limitation for enforcement of
a foreign award to be 12 years, while the Bombay High
Court treated this as 3 years, there was sufficient ground
to condone the delay.
It was submitted that there is a difference between
the execution of a foreign decree under Order XXI of the
CPC, and the enforcement of a foreign award under Section
49 of the 1996 Act. Further, even though Section 36 refers
to the enforcement of a domestic award in accordance with
the provisions of the CPC, Section 49 does not refer to the
CPC.
The application for enforcement of the foreign award
was thus a substantive application under Section 47 of the
1996 Act, and not one under Order XXI of the CPC. The
provisions of Section 5 would consequently apply to the
application for enforcement, and the High Court was
empowered to condone the delay in filing the application.
(b) On Public Policy of India
(i)
It was submitted that the dispute between the parties
pertains to the interpretation of Article 15.5(c) of the PSC,
which provides for recoverability of Base Development
Costs incurred by the Respondent-Claimants in the Ravva
Field.
Article 15.5(c) stipulated that the Respondents were
entitled to recover US $ 198 million ($ 188 million + 5%) as
BDC for the facilities which they developed to achieve a
production capacity of 35,000 BOPD. At the time when
the
PSC was entered into, it was envisaged that for
achieving the production capacity of 35,000 BOPD, 21 wells
would be required. However, the production capacity was
achieved by the Respondents with the construction of 14
wells.
(ii)
The Respondents claimed recoverability of BDC as follows:
(a) US $ 220 million for achieving a production profile of
35,000 BOPD, spent by 1999/2000; and
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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(b) US $ 278 million for raising the production profile from
35,000 BOPD to 50,000 BOPD, spent from 2000/2001
to 2008/2009.
(iii)
The Respondents contended that the cap of US $
198.43 million was applicable only to such facilities as were
required to achieve the production capacity of 35,000 BOPD,
which in this case was achieved by the drilling of 14 wells.
The Respondents were not required to develop the 21 wells
enlisted in Article 15.5(c) of the PSC within the cap of US
$ 198.43 million.
(iv)
The tribunal had correctly interpreted Article 15.5(c)
of the PSC, holding that the cap of US $ 198 million on the
BDC applied to costs incurred for achieving the production
profile of 35,000 BOPD. Since the Respondents had
achieved the production capacity of 35,000 BOPD by 1999-
2000 by drilling of 14 wells, the Respondents were entitled
to recover US $ 198.43 million.
(v)
With respect to the balance 7 wells, it was found that
the Ravva Field featured materially different physical
reservoir characteristics than those originally perceived
when the PSC was executed. Accordingly, the trigger under
Article 15.5(e)(iii)(dd) came into operation during the period
commencing from 1999-2000 to 2007-2008. For the drilling
of the remaining 7 wells, the Respondents were entitled to
an additional sum of US $ 278 million.
(vi)
It was contended that under the Award, the tribunal
had made declarations in favour of the parties. The tribunal
had upheld the manner in which the Respondents-Claimants
had computed and recovered the costs due to them under
the PSC. The tribunal had declared a sum of US $ 22 million
as payable by the Respondents to the Government of India,
which was paid after the Award was passed.
(vii)
It was contended that the issue of interpretation of
the PSC, and a review of the merits of the Award, could
not be raised under Section 48 of the 1996 Act. The scope
of inquiry under Section 48 is limited, and the Appellants
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cannot invite the Court to take a “second look” at the Award
by seeking a review on merits.
Reliance was placed on the judgment of this Court in
Shri Lal Mahal Ltd v Progretto Grano Spa,8 wherein it
was held that:
“45. Moreover, Section 48 of the 1996 Act does not give an
opportunity to have a ‘second look’ at the foreign award in
the award - enforcement stage. The scope of inquiry under
Section 48 does not permit review of the foreign award on
merits. Procedural defects (like taking into consideration
inadmissible evidence or ignoring/rejecting the evidence
which may be of binding nature) in the course of foreign
arbitration do not lead necessarily to excuse an award from
enforcement on the ground of public policy.
 x x x
47. 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.
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 objections raised by
the appellant do not fall in any of these categories and,
therefore, the foreign awards cannot be held to be contrary
to public policy of India as contemplated under Section
48(2)(b).”
This view is further fortified by Explanation 2 of Section 48(2) of
the Act which
clarifies 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”.
(viii)
Reliance was placed on the judgment of this Court in
Vijay Karia v Prysmian Cavi E Sistemi Srl9, wherein it
was held that the enforcement of a foreign award cannot
8 (2014) 2 SCC 433.
9 2020 SCC OnLine SC 177.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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be refused by taking a different interpretation of the
contract. The Supreme Court held that :
“45. The U.S cases show that given the “pro-
enforcement bias” of the New York Convention,
which has been adopted in Section 48 of the
Arbitration Act, 1996 - the burden of proof on parties
seeking enforcement has now been placed on parties
objecting to enforcement and not the other way
around; in the guise of public policy of the country
involved, foreign awards cannot be set aside by
second guessing the arbitrator’s interpretation of the
agreement of the parties; the challenge procedure
in the primary jurisdiction gives more leeway to
Courts to interfere with an award than the narrow
restrictive grounds contained in the New York
Convention when a foreign award’s enforcement is
resisted.
x x x
96   … As has been held, referring to some of the
judgments quoted hereinabove, in particular Shri Lal
Mahal (supra), the interpretation of an agreement
by an arbitrator being perverse is not a ground that
can be made out under any of the grounds contained
in Section 48(1)(b). Without therefore getting into
whether the tribunal’s interpretation is balanced,
correct or even plausible, this ground is rejected.”
(emphasis supplied)
(ix)
The Respondents contended that the parties had
voluntarily chosen Kuala Lumpur, Malaysia as the seat of
arbitration. Having made such a choice, the Government
could not invite Indian courts to revisit the
merits of its case
under the guise of Indian public policy. In this regard, reliance
was placed on the judgment of this Court in Bharat
Aluminium Co. v Kaiser Aluminium Technical Services
Inc10 wherein it was held that :
10 (2012) 9 SCC 648.
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“116. The legal position that emerges from a conspectus
of all the decisions, seems to be, that the choice of
another country as the seat of arbitration inevitably
imports an acceptance that the law of that country
relating to the conduct and supervision of arbitrations
will apply to the proceedings.
x x x
163. In our opinion, the aforesaid judgment does not
lead to the conclusion that the parties were left without
any remedy. Rather the remedy was pursued in England
to its logical conclusion. Merely, because the remedy in
such circumstances may be more onerous from the view
point of one party is not the same as a party being left
without a remedy. Similar would be the position in cases
where parties seek interim relief with regard to the
protection of the assets. Once the parties have chosen
voluntarily that the seat of the arbitration shall be
outside India, they are impliedly also understood to have
chosen the necessary incidents and consequences of
such choice. We, therefore, do not find any substance
in the submissions made by the learned counsel for the
appellants, that if applicability of Part I is limited to
arbitrations which take place in India, it would leave
many parties remediless.”
(emphasis supplied)
(x)
The Counsel submitted that the view taken by the
Tribunal was a plausible view, since Article 15.5(e)(iii)(dd)
is an exception i.e. when there is a change in the range of
the physical reservoir, the cap on the Base Development
Costs may be
increased. The present case fell in this
exception. It was argued that Clause 15.5(c) defined the
“Base Development Costs” to mean costs incurred after
the effective date relating to the construction and/or
establishment of such facilities “as are necessary” to
produce petroleum in order to enable crude oil production
of 35,000 BOPD in accordance with the Ravva
Development Plan. It was argued that the target to be
achieved by the Claimants was to produce 35,000 BOPD.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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The tribunal correctly relied on Article 15.5(e)(iii)(dd)
to hold that the Respondents were entitled to request for an
increase in the Base Development Costs, when the range
of physical reservoir characteristics of the Existing
Discoveries were found to be materially different from those
on which the Ravva Development Plan was based. The
Respondents had achieved the target of 35,000 BOPD by
1999-2000 with the drilling of 14 wells. The further wells
which were drilled subsequently would take into account
the changed physical characteristics of the existing reserves.
The tribunal had correctly interpreted Article 15.5(c)(xi) to
hold that it was not an undertaking given by the Respondents
to drill 21 wells, even though only 14 were required.
The Award therefore was not in conflict with the
public policy of India, and did not attract the grounds for
refusal of enforcement envisaged under Section 48 of the
1996 Act.
VII.  Discussion and Analysis
Part A
Limitation for filing an enforcement / execution
petition of a foreign award under Section 47 of the
1996 Act
      (i)
On this issue, divergent views have been taken
by some High Courts with respect to the period of
limitation for filing a petition for enforcement of a foreign
award under the 1996 Act. It has therefore become
necessary to settle the law on this issue.
Noy Vallesina Engineering Spa v Jindal Drugs
Limited11
A single judge of the Bombay High Court held
that
there is no period of limitation provided by any of
the Articles in the Schedule to the Limitation Act, for
making an application for execution of a foreign award.
It was held that the enforcement of a foreign award
must take place in two stages. In the first stage, the
11 2006 (3) Arb LR 510.
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enforceability of the foreign award would be decided,
which would be governed by the residuary provision i.e.
Article 137 which provides for 3 years from when the
right to apply accrues. After the issue of enforceability
of award is determined, the award is deemed to be a
decree, and the execution of the award as a deemed
decree would be governed by Article 136 which provides
a period of 12 years.
Louis Dreyfous Commodities Suisse v Sakuma
Exports Limited12
Another view was taken by another single judge
of the Bombay High Court in this case, wherein it was
held that the period of limitation for enforcement of a
foreign award would be 3 years from the date when the
right to apply accrues i.e. Article 137 of the Limitation
Act.
Imax Corporation v E-City Entertainment (I) Pvt.
Limited13
In Imax, a third view was taken by another single
judge of the Bombay High Court, which followed the
judgment in Fuerst Day Lawson,14 and held that since
the foreign award is already stamped as a decree, the
award holder may apply for enforcement after steps
are taken for the execution of the award under Sections
47 and 49 of the 1996 Act. In one proceeding there may
be different stages, the first stage being that the court
would be required to decide on the enforceability of the
award, having regard to the requirement of the said
provisions; and thereafter, proceed to take further steps
for execution of the award. It was concluded that Article
136 of the Limitation Act would
be applicable for the
enforcement of a foreign award.
12 (2015) 6 Bom CR 258.
13 (2020) 1 AIR Bom 82.
14 (2001) 6 SCC 356.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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M/s. Compania Naviera ‘SODNOC’ v Bharat
Refineries Limited15
A single judge of the Madras High Court held that
under the 1996 Act since the foreign award is already
stamped as a decree, the award holder can straight away
apply for enforcement of the foreign award as a decree
holder, and would have a period of 12 years for
enforcement.
Cairn India Limited v Union of India16
The Delhi High Court in the impugned Judgment
in this case held that Article 136 of the Limitation Act
would be applicable for the enforcement of a foreign
award. The execution of the award takes place in three
stages: access, recognition and enforcement. Section 47
deals with the first and second stages i.e. access and
recognition. A foreign award which passes the gateway
of Section 47 is at that stage enforceable on its own
strength as a ‘foreign decree’, and is not necessarily
dependent on whether or not it goes through the process
of Section 48. Such a foreign award is treated as being
equivalent to a foreign decree, whose enforcement may
be refused only under Section 48. Section 48 pre-
supposes that a foreign award is a decree whose
execution can be resisted by a party against whom it is
sought to be executed, if it is able to discharge the burden
that the objections can be sustained under one or more
of the clauses of sub-section (1) and/or sub-section (2)
of Section 48 of the 1996 Act.
The Delhi High Court held that Article 136 of the
Limitation Act would be applicable for filing a petition
for enforcement of a foreign award. Even if it is assumed
that Article 137 of the Limitation Act is applicable,
sufficient grounds for condonation of delay had been
urged since the Applicants were under the bona fide
belief that the period of limitation for enforcement of a
15 (2008) 1 Arb LR 344.
16 2020 SCC Online SC 324.
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foreign award was 12 years from the date of the Award,
as held in Compania Naviera (supra) by the Madras
High Court.
     (ii)
Given the conflicting stands taken by various High
Courts, we will now discuss this issue.
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.17 Article III of the New
York Convention on the Recognition and Enforcement
of Foreign Awards, 1958 provides that :
“Each Contracting State shall recognize arbitral
awards as binding and enforce them in
accordance with the rules of procedure of the
territory where the award is relied upon, under
the conditions laid down in the following Articles.
There shall not be imposed substantially more
onerous conditions or higher fees or charges on
the recognition or enforcement of arbitral awards
to which this Convention applies than are imposed
in the recognition or enforcement of domestic
arbitral awards.”
     (emphasis supplied)
    (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 41st Session dated
16th 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
17 In re Consolidated Rail Corp 867 F Supp 25, 30 (DDC
1994) M Flatow v Islamic
Republic of Iran and FMC Corp 1999 US Dist LEXIS 18957; (2000) XXV Ybk Comm
Arbn 641; Maritime Enterprises Ltd v Agromar Lineas Ltd (1989) XIV Ybk Comm
Arbn 693 ; Minister of Public Works of the Government of the State of Kuwait v Sir
Fredrick Snow & Partners [1983] 1 WLR 818 CA; Northern Sales Company Ltd v
Comp Maritima Villa Nova SA, Federal Court of Appeal, Winnipeg, Manitoba, 20
November 1991, (1993) XVIII Ybk Comm Arbn 363; Good Challenger Nave Gante v
Metalexportimport  [2003] EWHC 10 (Comm).
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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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.18
   (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”.
18 Report of the General Assembly of the UN Commission on International Trade Law
in its 41st Session dated 16th June – 3rd July, 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) (UN Doc A/CN.9/
656/Add.1).
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Articles 136 and 137 read as :
Description of the Application 
Period 
of 
Limitation
Time 
from 
which 
period 
begins to run
136. For the execution of any decree 
(other than a decree granting a 
mandatory injunction) or order of 
any civil court.
 Twelve Years
When the decree or order 
becomes enforceable or where 
the decree or any subsequent 
order directs any payment of 
money or the delivery of any 
property to be made at a 
certain date or at recurring 
periods, 
when 
default 
in 
making 
the 
payment 
or 
deliver in respect of which 
execution is sought, takes 
place:
Provided that an application 
for 
the 
enforcement 
or 
execution of a decree granting 
a perpetual injunction shall not 
be subject to any period of 
limitation.
137. Any other application for 
which no period of limitation 
is provided elsewhere in this 
division.
Three years 
When the right to apply accrues. 
(emphasis supplied)
  (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
proceeding19. By this deeming fiction, a domestic award
is deemed to be a decree of the court20, 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.
In Param Singh Patheja v ICDS Ltd.21, this Court in the context
of a domestic award, held that the fiction is not intended to make an
award a decree for all purposes, or under all statutes, whether state or
central. It is a legal fiction which must be limited to the purpose for
19 Umesh Goyal v Himachal Pradesh Co-op Group Housing Society Ltd. (2016) 11
SCC 313.
20 Sundaram Finance Ltd. v Abdul Saman and Anr. (2018) 3 SCC 622.
21 (2006) 13 SCC 322.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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which it was created. Paragraphs 39 and 42 of the judgment in Param
Singh Patheja read as :
“39. Section 15 of the Arbitration Act, 1899 provides for
“enforcing” the award as if it were a decree. Thus a final
award, without actually being followed by a decree (as was
later provided by Section 17 of the Arbitration Act of 1940),
could be enforced i.e. executed in the same manner as a decree.
For this limited purpose of enforcement, the provisions of CPC
were made available for realizing the money awarded.
However, the award remained an award and did not become
a decree either as defined in CPC and much less so far the
purposes of an entirely different statute such as the Insolvency
Act are concerned.
…
42. The words “as if” demonstrate that award and decree or
order are two different things. The legal fiction created is for
the limited purpose of enforcement as a decree. The fiction is
not intended to make it a decree for all purposes under all
statutes, whether State or Central.”
(emphasis supplied)
(viii)
A Constitution Bench of this Court in Bengal
Immunity v State of Bihar & Ors.,22 held that legal
fictions are created only for some definite purpose. A
legal fiction is to be limited to the purpose for which it
was created, and it would not be legitimate to travel
beyond the scope of that purpose, and read into the
provision, any other purpose how so attractive it may
be.
In State of Karnataka v State of Tamil
Nadu,23 this
Court held that :
“74. The Report of the Commission as the
language would suggest, was to make the final
decision of the Tribunal binding on both the States
and once it is treated as a decree of this Court,
then it has the binding effect. It was suggested to
22 (1955) 2 SCR 603.
23 2017 (3) SCC 274.
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make the award effectively enforceable. The
language employed in Section 6(2) suggests that
the decision of the Tribunal shall have the same
force as the order or decree of this Court. There
is a distinction between having the same force as
an order or decree of this Court and passing of a
decree by this Court after due adjudication.
Parliament has intentionally used the words from
which it can be construed that a legal fiction is
meant to serve the purpose for which the fiction
has been created and not intended to travel beyond
it. The purpose is to have the binding effect of
the Tribunal’s award and the effectiveness of
enforceability. Thus, it has to be narrowly
construed regard being had to the purpose it is
meant to serve.”
(emphasis supplied)
(ix)
In Bank of Baroda v Kotak Mahindra Bank,24
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
24 (2020) SCC OnLine 324.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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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.
A three judge bench of this Court in The Kerala
State Electricity Board, Trivandrum v T.P.
Kunhaliumma25 held that the phrase “any other
application” in Article 137 cannot be interpreted on the
principle of ejusedem generis to be applications under
the Civil Procedure Code. The phrase “any other
application” used in Article 137 would include petitions
within the word “applications,” filed under any special
enactment. This would be evident from the definition of
“application” under Section 2(b) of the Limitation Act,
which includes a petition. Article 137 stands in isolation
from all other Articles in Part I of the Third Division of
the Limitation Act, 1963.
(xii)
The exclusion of an application filed under any of
the provisions of Order XXI of the CPC from the purview
of
Section 5 of the Limitation Act, was brought in by the
present Limitation Act, 1963. Under the previous
Limitation Act, 1908 there were varying periods of
limitation prescribed by Articles 182 and 183 of the said
Act, as well as Section 48 of the CPC, 1908. Article 182
provided that the period of limitation for execution of a
decree or order of any civil court was 3 years, and in
case where a certified copy of the decree or order was
25 (1976) 4 SCC 634.
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registered, the period of limitation was 6 years. Article
183 provided that the period of limitation to enforce a
decree or order of a High Court was 6 years. Section
48 of the CPC (which has since been repealed by Section
28 of the Limitation Act of 1963) provided that the period
of limitation for execution of a decree was 12 years.
(xiii)
The Law Commission in its 3rd Report dated 21st
July 1956 noted that different time limits were prescribed
for filing an application for execution of decrees or orders
of civil courts. It was recommended that the time limit
should be absolute, and there should be no scope for
any further extension of time by acknowledgments.
There was no justification for making a distinction
between decrees or orders passed by the High Court in
exercise of original civil jurisdiction, and other decrees.
The maximum period of limitation for the execution of a
decree or order of any civil court was fixed at twelve
years in the new Limitation Act, 1963 from the date
when the decree or order became enforceable.
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
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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position that the Arbitration Act is a self-contained code.26
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 Government’s 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 /
26 Fuerst Day Lawson Ltd. v Jindal Exports Ltd. (2011) 8 SCC 333. Kandla Export
Corporation and Anr. v. OCI Corporation and Anr., (2018) 14 SCC 715; Shivnath Rai
Harnarain India Co. v. G.G. Rotterdam 164 (2009) DLT 197; Usha Drager Pvt. Ltd. v.
Dragerwerk AG, (170) DLT 628; Sumitomo Corporation v. CDC Financial Services
(Mauritius) Limited (2008) 4 SCC 91; Conros Steels Pvt. Ltd. v. Lu Qin (Hong Kong)
Company Ltd. and Ors., 2015 (1) Arb LR 463 (Bombay): (2015) 2 Bom CR 1.
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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.
Part B
Scheme of the 1996 Act for enforcement of New
York Convention awards
On account of certain anomalies in the impugned
judgment with respect to the enforcement of foreign
awards, it has become necessary to discuss the scheme
contemplated under Chapter I Part II of the 1996 Act.
(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 that …
20.8
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) and /
or sub-section (2) of Section 48 of the
1996 Act.”
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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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.
The scheme of the 1996 Act for enforcement
of New York Convention awards is as follows :
(a)
Part II Chapter 1 of the Arbitration
and
Conciliation Act, 1996 pertains to the enforcement
of New York Convention awards.
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
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and was done away with by the New York
Convention, which superseded it.27.
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.
(b)
Section 44 of the 1996 Act provides that a New
York Convention award would be enforceable, if
the award is with respect to a commercial dispute,
covered by a written agreement in a State with
which the Government of India has a reciprocal
relationship, as notified in the Official Gazette.
(c)
Section 46 provides that a foreign award which
is enforceable under Chapter 1 of Part II of the
1996 Act, shall be treated as final and binding on
the parties, and can be relied upon by way of
defence, set off, or otherwise, in any legal
proceeding in India.
(d)
Section 47 sets out the procedure for filing the
petition for enforcement / execution of a foreign
award. This section replicates Article IV (1) of the
New York Convention which requires the applicant
to file the authenticated copy of the original award,
or a certified copy thereof, alongwith the original
agreement referred to in Article II, or a certified
copy thereof, at the time of filing the petition.
(e)
Section 47 provides that the application shall be
filed alongwith the following evidence i.e. :
1. the original award,
or an authenticated copy, in
accordance with the laws of the seat of
arbitration;
27 Refer to Renusagar Power Co. Ltd. v General Electric Co. (1994) Suppl. (1) SCC
644, para 41. See also Escorts Limited v Universal Tractor Holding LLC (2013) 10
SCC 717.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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2. the original arbitration agreement, or certified
copy thereof;
3. such evidence, as may be necessary to prove
that the award is a foreign award.
In PEC Limited v Austbulk Shipping,28 this
Court held that even though Section 47 provides
that the award holder “shall” produce such
evidence alongwith the application for enforcement
of a foreign award, this being a procedural
requirement, a pragmatic, flexible and non-formalist
approach must be taken. The non-production of
documents at the initial stage, should not entail a
dismissal of the application for enforcement. The
party may be permitted to produce the evidence
during the course of the proceedings, to enable the
Court to decide the enforcement petition. It was
observed that excessive formalism in the matter of
enforcement of foreign awards must be
deprecated.
(f)
The award holder is entitled to apply for
recognition and enforcement of the foreign award
by way of a common petition. In Fuerst Day
Lawson Ltd. v Jindal Exports Ltd.,29 this Court
held that a proceeding seeking recognition and
enforcement of a foreign award has different stages
: in the first stage, the Court would decide about
the enforceability of the award having regard to
the requirements of Sections 47 and 48 of the 1996
Act. Once the enforceability of the foreign award
is decided, it would proceed to take further effective
steps for the execution of the award. The relevant
extract from the
judgment reads as:
“31. Prior to the enforcement of the Act, the
Law of Arbitration in this country was
substantially contained in three enactments
28 (2019) 11 SCC 620.
29 (2001) 6 SCC 356.
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namely (1) The Arbitration Act, 1940, (2) The
Arbitration (Protocol and Convention) Act,
1937 and (3) The Foreign Awards (Recognition
and Enforcement) Act, 1961. A party holding
a foreign award was required to take recourse
to these enactments. Preamble of the Act makes
it abundantly clear that it aims at to
consolidate and amend Indian laws relating
to domestic arbitration, international
commercial arbitration and enforcement of
foreign arbitral awards. The object of the Act
is to minimize supervisory role of court and to
give speedy justice. In this view, the stage of
approaching court for making award a rule
of court as required in Arbitration Act, 1940
is dispensed with in the present Act. If the
argument of the respondent is accepted, one
of the objects of the Act will be frustrated and
defeated. Under the old Act, after making
award and prior to execution, there was a
procedure for filing and making an award a
rule of court i.e. a decree. Since the object of
the act is to provide speedy and alternative
solution of the dispute, the same procedure
cannot be insisted under the new Act when it
is advisedly 
eliminated. 
If 
separate
proceedings are to be taken, one for deciding
the enforceability of a foreign award and the
other thereafter for execution, it would only
contribute to protracting the litigation and
adding to the sufferings of a litigant in terms
of money, time and energy. Avoiding such
difficulties is one of the objects of the Act as
can be
gathered from the scheme of the Act
and particularly looking to the provisions
contained in Sections 46 to 49 in relation to
enforcement of foreign award. In para 40 of
the Thyssen judgment already extracted above,
it is stated that as a matter of fact, there is not
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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much difference between the provisions of the
1961 Act and the Act in the matter of
enforcement of foreign award. The only
difference as found is that while under the
Foreign Award Act a decree follows, under the
new Act the foreign award is already stamped
as the decree. Thus, in our view, a party
holding foreign award can apply for
enforcement of it but the court before taking
further effective steps for the execution of the
award has to proceed in accordance
with Sections 47 to 49. In one proceeding there
may be different stages. In the first stage the
Court may have to decide about the
enforceability of the award having regard to
the requirement of the said provisions. Once
the court decides that foreign award is
enforceable, it can proceed to take further
effective steps for execution of the same. There
arises no question of making foreign award
as a rule of court/decree again. If the object
and purpose can be served in the same
proceedings, in our view, there is no need to
take two separate proceedings resulting in
multiplicity of litigation. It is also clear from
objectives contained in para 4 of the Statement
of 
Objects 
and 
Reasons, Sections
47 to 49 and Scheme of the Act that every final
arbitral award is to be enforced as if it were a
decree of the court. The submission that the
execution petition could not be permitted to
convert as an application under Section 47 is
technical and is of no consequence in
the view
we have taken. In our opinion, for
enforcement of foreign award there is no need
to take separate proceedings, one for deciding
the enforceability of the award to make rule
of the court or decree and the other to take up
execution thereafter. In one proceeding, as
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already stated above, the court enforcing a
foreign award can deal with the entire matter.
Even otherwise, this procedure does not
prejudice a party in the light of what is stated
in para 40 of the Thyssen judgment.
(emphasis supplied)
In a recent judgment rendered in LMJ
International Ltd. v. Sleepwell Industries30, 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). The
Explanation to Section 47 has been amended, which
now reads as:
“47. Evidence – (1)…
(2)…
[Explanation.- In this section and in the
sections following in this Chapter, “Court”
means the High Court having original
jurisdiction to decide the questions forming
the subject matter of the arbitral award if
the same had been the subject-matter of a
suit on its original civil jurisdiction and in
other cases, in the High Court having
jurisdiction to hear appeals from decrees
of courts subordinate to such High Court.”
    (emphasis supplied)
30 (2019) 5 SCC 302.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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(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,31 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. 32 The use of the words “may
31 Malhotra’s Commentary on the Law of Arbitration, 4th Edition, Vol. 2, Pg. 1163-
1164, Wolters Kluwer.
32 Refer to Vijay Karia & Ors. v Prysmian Cavi E Sistemi SRL & Ors., 2020 SCC
OnLine 177.
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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.33 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.34 A court may also take
the view that the violation is not such as to prevent
enforcement of the award in international
relations.35
(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
33 This has been eloquently stated by the Supreme Court of Hong Kong in a 1994
decision which confirmed that: ‘…the grounds of opposition are not to be inflexibly
applied. The residual discretion enables the enforcing Court to achieve a just result in
all the circumstances’. See Hong Kong, Supreme Court, 13 July, 1994, China Nanhai
Oil Joint Service Corp v Gee Tai Holdings Co. Ltd., Yearbook Commercial Arbitration,
XX-1995, 671, 677. See also Westacre Investments Inc. v Jugoimport-SDRP Holding
Co. Ltd. [1999] APP. L.R. 05/12; Cruz City 1 Mauritius Holdings v Unitech Limited,
2017 (3) ArbLR 20 (Delhi) : 239 (2017)
DLT 649 [the petition for special leave to
appeal against this decision has been dismissed by the Supreme Court vide Order dated
19 January 2018 in SLP (Civil) No. 32244/2017]. British Virgin Islands, Court of
Appeal, 18 June 2008 (IPOC International Growth Fund Limited v L.V. Finance Group
Limited) Yearbook Commercial Arbitration XXXIII (2008) pp.408-432 (British Virgin
Islands No.1); United Kingdom : High Court, Queen’s Bench Division (Commercial
Court), 20 January 1997 (China Agribusiness Development Corporation v Balli Trading)
Yearbook Commercial Arbitration XXIV (1999) pp.732-738 (U.K. No.52).
34 Hong Kong : Supreme Court of Hong Kong, High Court, 15 January 1993 (Paklito
Investment Ltd. v Klockner East Asia) Yearbook Commercial Arbitration XIX (1994)
pp.664-674 (Hong Kong No.6); Supreme Court of Hong Kong, High Court, 16 December
1994 (Nanjing Cereals, Oils & Foodstuffs Import & Export Corporation v Luckmate
Commodities Trading Ltd.) Yearbook Commercial Arbitration XXI (1996) pp. 542-545
(Hong Kong No.9);
35 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.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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“only if” the applicant furnishes proof of any of
the conditions contained in that provision.36
(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.
Part C
Whether the Malaysian Courts were justified in
applying the Malaysian law of public policy while
deciding the challenge to the foreign award?
The Ld. A.G. raised the ground that the Malaysian
courts, while deciding the challenge to the Award, ought
to have applied the substantive law of the contract, which
was Indian law, and particularly the issue regarding
conflict with the public policy ought to have been decided
in accordance with the law expounded by the Supreme
Court in paragraph 76.4 of the judgment in Reliance37
(supra).
This Court vide Order dated 24.08.2020 appointed
Mr. Gourab Banerji, Senior Advocate, as Amicus Curiae
to assist on this limited issue.
Submissions of the Amicus Curiae :
Mr. Gourab Banerji, learned Amicus appeared
before this Court on 26.08.2020, and made oral
36 Cruz City I Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649.
37 Reliance Industries v. Union of India (2014) 7 SCC 603.
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submissions with respect to the law which would be
applicable at the stage of challenge before the seat court,
and the law applicable at the enforcement stage.
The learned Amicus inter alia submitted that:
      (i)
The applicable law will have to be judged with
reference to the specific ground of challenge raised for
setting aside the Award.
The Government of India challenged the arbitral
award before the Malaysian High Court on three
grounds:
a. The Award dealt with a dispute not contemplated
by, or not falling within the terms of the submission
to arbitration;
b. The Award contains decisions on matters beyond
the scope of the submission to arbitration; and
c. The Award is in conflict with public policy.
The first two grounds relate to excess of
jurisdiction, which are covered by Sections 37(1)(a)(iv)
and (v) of the Malaysian Act, while the third ground
concerns public policy, which is covered by Article
37(2)(b)(ii) of the said Act.
      (ii)
A perusal of Articles 33.1 and 33.2 of the PSC
would show that the substantive law of the contract is
Indian law. The arbitration agreement is governed by
“the laws of England” as provided by Article 34.12 of
the PSC. Since the seat of arbitration was in Kuala
Lumpur, Malaysia, the curial law would be the Malaysian
law.
     (iii)
Malaysia has adopted the UNCITRAL Model
Law. Section 37 of the (Malaysian) Arbitration Act 2005
(“Malaysian Act”) is modelled on Article 34 of the
UNCITRAL Model Law, and incorporates
all its grounds.
Section 37 of the Malaysian Arbitration Act reads as
follows :
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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“Application for setting aside
37. (1) An award may be set aside by the High
Court only if—
(a) the party making the application provides
proof that—
(i) a party to the arbitration agreement was under
any incapacity;
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it, or,
failing any indication thereon, under the laws of
Malaysia;
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present that party’s case;
(iv) the award deals with a dispute not
contemplated by or not falling within the terms of
the submission to arbitration;
(v) subject to subsection (3), the award contains
decisions on matters beyond the scope of the
submission to arbitration; or
(vi) the composition of the arbitral tribunal or
the arbitral procedure was not in accordance with
the agreement of the parties, unless such
agreement was in conflict with a provision of this
Act from which the parties cannot derogate, or,
failing such agreement, was not in accordance
with this Act; or
(b) the High Court finds that—
(i) the subject matter of the dispute is not capable
of settlement by arbitration under the laws of
Malaysia; or
(ii) the award is in conflict with the public policy
of Malaysia
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(2) Without limiting the generality of
subparagraph (1)(b)(ii), an award is in conflict
with the public policy of Malaysia where—
(a) the making of the award was induced or
affected by fraud or corruption; or
(b) a breach of the rules of natural justice
occurred—
(i) during the arbitral proceedings; or
(ii) in connection with the making of the award.
(3) Where the decision on matters submitted to
arbitration can be separated from those not so
submitted, only that part of the award which
contains decisions on matters not submitted to
arbitration may be set aside.”
(emphasis supplied)
     (iv)
The Malaysian Act provides that the public policy
defence is to be decided in accordance with Malaysian
law, which is consistent with the Convention on the
Recognition & Enforcement of Foreign Arbitral Awards,
1958. The seat court while deciding the public policy
challenge, would decide the same in accordance with
its own domestic public policy.
      (v)
With respect to the challenge on the ground of
“excess of jurisdiction,” it was submitted that the correct
position in law is that the issue of excess of jurisdiction
would be governed by English law, since Article 34.12
of the PSC provides that the arbitration agreement
contained in Article 34 shall be governed by the laws of
England.
Even though the substantive law of the contract
was Indian law, it would not be applicable for deciding
the challenge to the issue of excess of jurisdiction.
     (vi)
The Malaysian
High Court rejected the challenge
made by the Government of India to the award, and
also the reliance placed on the decision of the Indian
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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Supreme Court in ONGC v Saw Pipes38. While doing
so, the High Court commented that the Court of Appeal
in Singapore in PT Asuransi Jasa Indonesia (Persero)
v Dexia Bank SA39 had not followed the decision of the
Supreme Court of India in the Saw Pipes case. The
learned Amicus submitted that these observations of the
Malaysian High Court were wholly unnecessary to the
issues in question.
    (vii)
It was submitted that the High Court of Malaysia
gave contradictory findings with respect to the applicable
law while deciding the issue of excess of jurisdiction.
Initially, in paragraphs 159 and 161, the Malaysian High
Court was of the view that the seat being in Kuala
Lumpur, the applicable law to such a challenge would
be under Section 37(1)(a)(iv) and (v) of the Malaysian
law, being the curial law. Paragraphs 158 to 161 read
as:
“Applicable law
158. I pause here to deal with this matter of the
applicable law. The Plaintiff has contended that
read with section 30, the Court should set aside
the Award under subparagraphs 37(1)(a)(iv) and
(v); and (b)(ii). By virtue of section 30, the
substantive law of the contract is Indian law of
contracts. On the arguments that it had canvassed
and which I had set out earlier, the Plaintiff
contended that the Court should set aside the
Award relying on the Indian Supreme Court
decision in Saw Pipes.
159. With respect, I must disagree. When dealing
with challenges under sub paragraph
37(1)(a)(iv)
and (v); and (b)(ii), the challenge is not determined
by reference to he substantive law of the contract.
As the seat of the arbitration is Kuala Lumpur,
the curial law is that of the seat, that is, Malaysian
38 (2003) 5 SCC 705.
39 [2006] SGCA 41.
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law; and it remains so even after the Award has
been granted or handed down.
160. The Federal Court in The Government of
India v Cairn Energy India Pty. Ltd. & Anor.
[2011] 6 MLJ 441, 455 was not inclined to follow
the decision of the Indian Supreme Court in
Sumitomo Heavy Industries Ltd. v ONGC Ltd. AIR
1998 SC 825, although endorsed subsequently
in M/s. Dosco India Ltd. v M/s. Doosan Infracore
Co. Ltd. (Arbitration Petition No 5 of 2008) 2010
(9) UJ 4521 (SC) that took an otherwise positio :
“…Thus, in this case as Kuala Lumpur was
selected as the juridical seat of arbitration, the
curial law is the laws of Malaysia, and we so hold.
And we would add that it is vital for parties to
follow the mandatory rules of the seat of
arbitration since the application of such
mandatory procedural rules (curial law) of the
seat will remain subject to the jurisdiction and
control of the courts of the seat of the arbitration
including when considering applications to set
aside awards. We are therefore not persuaded that
the decision of the Indian Supreme Court should
be applied.”
161. Although Indian law is the substantive law
or proper law of the contract or PSC, and English
law is the law of the arbitration agreement; that
in no way means that Indian lex arbitri applies
on the determination of an application under
section 37.”
(emphasis supplied)
In paragraph 165, the High Court, however,
observed that English law was the substantive law
of the arbitration agreement
and answers any
questions on the jurisdiction of the arbitral tribunal.
“165. I appreciate that the Court of Appeal in PT
Asuransi was expressing its views in the context
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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of a challenge on the ground of a conflict with
public policy. This position however, maintains
even when dealing with the other grounds relied
on here as the Indian law on “excess of
jurisdiction” is not the applicable law. I agree
with the Defendants that English law which is the
substantive law of the arbitration agreement
answers any questions on the jurisdiction of the
Arbitral Tribunal. This was recognised in
Sumitomo Heavy Industries v Oil and Natural Gas
Commission 1995 1 Lloyds’ Rep 45. ..”
(emphasis supplied)
The High Court of Malaysia placed reliance on
the judgment of Potter, J. in Sumitomo Heavy
Industries Ltd. v Oil and Natural Gas
Commission,40 the relevant portion of which reads
as follows:
“...(2) The proper law of the arbitration
agreement, i.e. the law governing rights and
obligations of the parties arising from their
agreement to arbitrate and, in particular, their
obligation to submit their disputes to arbitration
and to honour an award. This includes inter alia
questions as to the validity of the arbitration
agreement, the validity of the notice of arbitration,
the constitution of the tribunal and the question
whether an award lies within the jurisdiction of
the arbitrator…”
(emphasis supplied)
(viii) The Government of India filed an appeal before
the Malaysian Court of Appeal. The Court of Appeal
in paragraph 31 of the judgment, wherein it is opined
that :
“31. It is the contention of the
Appellant that the
applicable law to be applied in the High Court
40 [1994] 1 Lloyd’s Law Reports 45.
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proceeding is Indian curial law. This was rejected
by the learned Judge and we agree with the same
as we are of the view that the law is settled by the
Federal Court in the case of The Government of
India v Cairn Energy India Pty Ltd & Anor [2011]
6 MLJ 441 …”
(emphasis supplied)
(ix)
In the decision of the Federal Court in the Government
of India v Cairn Energy Pty. Ltd. & Anor,41 the
Government of India referred five questions to the Federal
Court, of which questions 1 and 2 are relevant, and are
set out below :
“1.
Where an award from an international
commercial arbitration is submitted for review
before the Malaysian courts under S.24(2) of
the Arbitration Act 1952 and the contract
provides for the application of one foreign law
to govern the contract (namely the laws of
India) and another foreign law to govern the
arbitration agreement (namely the laws of
England), is it proper for the Malaysian Court
to apply Malaysian law exclusively to decide
the scope of intervention in arbitration awards
or the dispute at hand where the seat of
arbitration is in Malaysia?
2.
If English law is to apply as the choice of the
parties, whether the appropriate law is that as
stated in the English Arbitration Act 1979
(amending the English Arbitration Act 1950)
which provides for an appeal to the High Court
on any question of law arising out of an
award”
The first question related to the seat of arbitration. The Government
of India contended that the English Law was
applicable, and that the
Malaysian Court of Appeal ought to have applied the appellate power
under the English Arbitration Act, 1979.
41 [2011] 6 MLJ 441.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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The Federal Court however, held that this was an issue of curial
law, and the curial law ought to be the law of the seat of arbitration. The
Federal Court of Malaysia in paragraph 25 held that :
“[25] It is therefore clear that the English Court of Appeal
clearly sets out that the curial law ought to be that of the seat
of arbitration. As stated above, our courts have adopted a
similar position. Thus, in this case as Kuala Lumpur was
selected as the juridical seat of arbitration, the curial law is
the laws of Malaysia and we so hold. And we would add that
it is vital for parties to follow the mandatory rules of the seat
of arbitration since the application of such mandatory
procedural rules (curial law) of the seat will remain subject
to the jurisdiction and control of the courts of the seat of the
arbitration including when considering applications to set
aside awards. We are therefore not persuaded that the
decisions of the Indian Supreme Court should be applied.”
(emphasis supplied)
(x) It was submitted that the court at the seat of arbitration, would
have exclusive jurisdiction to annul or set aside a foreign award. The
learned Amicus placed reliance on the judgment of the Constitution Bench
in BALCO v Kaiser Aluminium,42 and made specific reference to :
“153.…The expression under the law is the reference only to
the procedural law/curial law of the country in which the
award was made and under the law of which
the award was
made. It has no reference to the substantive law of the contract
between the parties. In such view of the matter, we have no
hesitation in rejecting the submission of the learned counsel
for the appellants.”
(emphasis supplied)
The Malaysian Courts rightly examined the public policy challenge
in accordance with the Malaysian Act, being the curial law of the
arbitration.
With respect to the challenge on the ground of excess of jurisdiction,
it was submitted that it ought to have been tested on the basis of the
proper law of the arbitration agreement i.e. the English law.
42 (2012) 9 SCC 552.
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On the applicable law at the enforcement stage, the Courts would
determine the same as per the public policy of India.
Discussion and Findings
(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.
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The constitution bench in BALCO v Kaiser Aluminium43
held that :
“76. It must be pointed out that the law of the seat or
place where the arbitration is held, is normally the law
to govern that arbitration. The territorial link between
the place of arbitration and the law governing that
arbitration is well established in the international
instruments, namely, the New York Convention of 1958
and the Uncitral Model Law of 1985. …
….
….
…
123. Thus, it is clear that the regulation of conduct of
arbitration and challenge to an award would have to
be done by the courts of the country in which the
arbitration is being conducted. Such a court is then the
supervisory court possessed of the power to annul the
award. This is in keeping with the scheme of the
international instruments, such as the Geneva
Convention and the New York Convention as well as
the Uncitral Model Law. It also recognises the territorial
principle which gives effect to the sovereign right of a
country to regulate, through its national courts, an
adjudicatory duty being performed in its own country.
By way of a comparative example, we may reiterate the
observations made by the Court of Appeal, England in
C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)]
wherein it is observed that:
“It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies
seeking to attack the award.”
In the aforesaid case, the Court of Appeal
had approved
the observations made in A v. B [(2007) 1 All ER (Comm)
591 : (2007) 1 Lloyd’s Rep 237] wherein it is observed
that:
43 (2012) 9 SCC 552.
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“… an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. Any claim
for a remedy … as to the validity of an existing interim
or final award is agreed to be made only in the courts
of the place designated as the seat of arbitration.”
(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.44 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
44 Collins, in Lew (ed.), Contemporary Problems in International Arbitration (1986)
p.126 at 127-131.
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procedure, which is referred to as the lex arbitri, and is
expressed in the choice of the seat of arbitration.45
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.46
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
45 The Conflict of Laws, Dicey, Morris and Collins, (15thed.) Volume 1, Chapter 16,
paragraph 16-035, p. 843.
46 Russel on Arbitration, Sweet & Maxwell (24th Edition, 2015).
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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 Reliance47 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 paragraphs 76.1 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.
Part D
Whether the foreign award is in conflict with the
Public Policy of India?
      (i)
This issue is required to be determined in
accordance with the conditions laid down in
Section 48
of the 1996 Act, which reads as :
“48. Conditions for enforcement of foreign awards. – (1)
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 that—
(a) the parties to the agreement referred to in Section 44 were,
under the law applicable to them, under some incapacity, or
the said agreement is not valid under the law to which the
47 (2014) 7 SCC 603.
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parties have subjected it or, failing any indication thereon,
under the law of the country where the award was made; or
(b) the party against whom the award is invoked was not given
proper notice of the appointment of the arbitrator or of the
arbitral proceedings or was otherwise unable to present his
case; or
(c) the award deals with a difference not contemplated by or
not falling within the terms of the submission to arbitration,
or it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, that
part of the award which contains decisions on matters
submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance
with the law of the country where the arbitration took place;
or
(e) the award has not yet become binding on the parties, or
has been set aside or suspended by a competent authority of
the country in which, or under the law of which, that award
was made.
(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.—Without prejudice to the generality of clause
(b) of this section, it is hereby declared, for the avoidance of
any doubt, that an award is in conflict with the public policy
of India if the making of the award was induced or affected
by fraud or corruption.”
(3) …
’’
(emphasis supplied)
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(ii)
The public policy defence for refusing enforcement under
Section 48 of the 1996 Act was interpreted by a three-
judge bench of this Court in Shri Lal Mahal Ltd. v Progetto
Grano SPA48. This Court held that the law as expounded in
the Renusagar judgment, would be applicable to the ambit
and scope of Section 48(2)(b) even under the 1996 Act.
The relevant extract from the judgment reads as:
“27. In our view, what has been stated by this Court in
Renusagar with reference to Section 7(1)(b)(ii) of the
Foreign Awards Act must equally apply to the ambit and
scope of Section 48(2)(b) of the 1996 Act. In Renusagar
it has been expressly exposited that the expression
“public policy” in Section 7(1)(b)(ii) of the Foreign
Awards Act refers to the public policy of India. The
expression “public policy” used in Section 7(1)(b)(ii)
was held to mean “public policy of India”. A distinction
in the rule of public policy between a matter governed
by the domestic law and a matter involving conflict of
laws has been noticed in Renusagar. For all this there
is no reason why Renusagar3 should not apply as
regards the scope of inquiry under Section 48(2)(b).
Following Renusagar, we think that for the purposes of
Section 48(2)(b), the expression “public policy of
India” must be given narrow meaning and the
enforcement of foreign award would be refused on the
ground that it is contrary to public policy of India if it
is covered by one of the three categories enumerated in
Renusagar. Although the same expression ‘public policy
of India’ is used both in Section 34(2(b)(ii) and Section
48(2)(b) and the concept of ‘public policy in India’ is
same in nature in both the Sections but, in our view, its
application differs in degree insofar as these two
Sections are concerned. The application of ‘public
policy of India’ doctrine for the purposes of Section
48(2)(b) is more limited than the application of the same
expression in respect of the domestic arbitral award.
x x x
48 (2014) 2 SCC 433.
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29. We accordingly hold that enforcement of foreign
award would be refused under Section 48(2)(b) only
if such enforcement would be contrary to (1)
fundamental policy of Indian law; or (2) the interests
of India; or (3) justice or morality. The wider
meaning given to the expression “public policy of
India” occurring in Section 34(2)(b)(ii) in Saw
Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC
705] is not applicable where objection is raised to
the enforcement of the foreign award under Section
48(2)(b).
x x x
45. Moreover, Section 48 of the 1996 Act does not
give an opportunity to have a ‘second look’ at the
foreign award in the award-enforcement stage. The
scope of inquiry Under Section 48 does not permit
review of the foreign award on merits. Procedural
defects (like taking into consideration inadmissible
evidence or ignoring/rejecting the evidence which
may be of binding nature) in the course of foreign
arbitration do not lead necessarily to excuse an award
from enforcement on the ground of public policy.
x x x
47. 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. 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 objections raised by the appellant do not fall in
any of these categories and, therefore, the foreign
awards cannot be held to be contrary to public policy
of India as contemplated under Section 48(2)(b).”
(emphasis supplied)
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(iii)
In Renusagar Power Co. v General Electric Co.49
(“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 x
66. 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
49 1994 Supp (1) SCC 644.
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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.
(iv)
The Counsel for the Respondents submitted that it was
the amended Section 48, which would be applicable to the
present case; or alternately, that the amendments effected
by the 2016 Amendment Act would have retrospective
effect.
(v)
We will now briefly touch upon the amendments made
to Section 48, and consider the issue whether the
amendments have retrospective application, and are
applicable to the present case.
Section 48 was amended by Act 3 of 2016, which came
into force w.e.f. 23.10.2015. These amendments were
incorporated on the basis of the 246th Report of the Law
Commission. The relevant extracts from the 246th Report
with respect to the amendments in Section 48 are set out
hereunder :
“SETTING ASIDE OF DOMESTIC AWARDS AND
RECOGNITION / ENFORCEMENT OF FOREIGN
AWARDS
34. Once an arbitral award is made, an aggrieved party
may apply for the setting aside of such award. Section
34 of the Act deals with setting aside a domestic award
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and a domestic award resulting from an international
commercial arbitration whereas section 48 deals with
conditions for enforcement of foreign awards. As the
Act is currently drafted, the grounds for setting aside
(under section 34) and conditions for refusal of
enforcement (section 48) are in pari materia. The Act,
as it is presently drafted, therefore, treats all three types
of awards – purely domestic award (i.e. domestic award
not resulting from an international commercial
arbitration), domestic award in an international
commercial arbitration and a foreign award – as the
same. The Commission believes that this has caused some
problems. The legitimacy of judicial intervention in the
case of a purely domestic award is far more than in
cases where a court is examining the correctness of a
foreign award or a domestic award in an international
commercial arbitration.
x x x
37. In this context, the Commission has further
recommended the restriction of the scope of “public
policy” in both sections 34 and 48. This is to bring the
definition in line with the definition propounded by the
Supreme Court in Renusagar Power Plant Co Ltd v
General Electric Co, AIR 1994 SC 860 where the
Supreme Court while construing the term “public
policy” in section 7(1)(b)(ii) of Foreign Awards
(Recognition and Enforcement) Act, 1961 held that an
award would be 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”. The formulation proposed by
the Commission is even tighter and does not include the
reference to “interests of India”, which is vague and is
capable of interpretational misuse, especially in the
context of challenge to awards arising out of
international commercial arbitrations (under S 34) or
foreign awards (under S 48). Under the formulation of
the Commission, an award can be set aside on public
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policy grounds only if it is opposed to the “fundamental
policy of Indian law” or it is in conflict with “most basic
notions of morality or justice.”
(emphasis supplied)
(vi)
After the judgment of the Supreme Court in ONGC v
Western Geco50, which had expanded the power of judicial
review, the Law Commission submitted a Supplementary
Report on “Public Policy.” It was recommended that a
clarification needs to be incorporated to ensure that the
phrase “fundamental policy of Indian law” is narrowly
construed.  It was recommended that a new Explanation
being Explanation 2 be inserted into Section 34(2)(b)(ii) i.e.:
“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.”
(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
50 (2014) 9 SCC 263.
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(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.
(3)...
’’
(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, Dehradun51
51 (2005) 12 SCC 717.
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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,52 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.
(x)
Section 26 of the 2016 Amendment Act provided that :
“26. Act not to apply to pending arbitral proceedings. –
Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the
provisions of section 21 of the principal Act, before the
commencement of this Act unless the parties otherwise
agree but this Act shall apply in relation to arbitral
proceedings commenced on or after the date of
commencement of this Act.”
(xi)
Section 26 of the Amendment Act came up for consideration
before this Court in BCCI v.
Kochi Cricket Pvt Ltd.53
(“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
52 (2019) 15 SCC 131.
53 2018 6 SCC 287.
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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.,54 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.
(xv)
We will now consider the issue whether the award in the
present case is in conflict with
the public policy of India,
and contrary to the basic notions of justice, as submitted on
behalf of the Appellants.
Applying the unamended Section 48 to the present case,
this Court in the Renusagar judgment had placed reliance
54 2019 (6) Arb LR 171 (SC).
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on the enunciation of the law on international public policy
in the judgment of the U.S. Court of Appeals for the 2nd
Circuit in Parsons & Whittemore Overseas Co. Inc. v.
Societe Generale De L’industrie du Papier (RAKTA),55
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 defendant’s 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 Convention’s 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 commentator’s view, the Convention’s
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 Convention’s basic
effort to remove preexisting obstacles to enforcement.
[See Straus, Arbitration of Disputes between
55 508 F. 2d 969 (2nd Cir 1974).
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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 Convention’s 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 state’s 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 Convention’s 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 Convention’s 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.56 In International Navigation Ltd. v Waterside Ocean
56 See, e.g., BCB Holdings Limited and The Belize Bank Limited  v The Attorney General
of Belize, Caribbean Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ
5 (AJ); Traxys Europe S.A. v Balaji Coke Industry Pvt Ltd., Federal Court, Australia, 23
March 2012, [2012] FCA 276; Uganda Telecom Ltd. v. Hi-Tech Telecom Pty Ltd.,
Federal Court, Australia, 22 February 2011, [2011] FCA 131; Petrotesting Colombia
S.A. & Southeast Investment Corporation v. Ross Energy S.A., Supreme Court of Justice,
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]
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Navigation Co. Inc.,57 the Court of Appeals, Second Circuit, U.S.A.
held that the public policy defence must be interpreted in light of the
overriding object of the New York Convention. The Court applied the
judgment in Parsons (supra), and held that the public policy defence
should apply only where enforcement of the award would violate the
basic notions of morality and justice of the forum state. Any interference
by the national court in international arbitration on this ground should be
minimal, and public policy under the New York Convention should be
interpreted narrowly. This position was followed in the Southern District
of New York in Telenor Mobile Communications v Storm LLC.58 It
was opined that to refuse enforcement on the ground of public policy,
the decision would have to directly contradict the foreign law in such a
manner, so as to make compliance with one a violation of the other.
(xvi)
Albert van den Berg in his commentary on “The New
York Arbitration Convention, 1958: Towards a Uniform
Judicial Interpretation” 59  opines that the scope of jurisdiction
of the enforcement court is :
“It is a generally accepted interpretation of the
Convention that the court before which the enforcement
of the foreign award is sought may not review the merits
of the award. The main reason is that the exhaustive list
of grounds for refusal of enforcement enumerated in
Article V does not include a mistake in fact or law
by
the arbitrator. Furthermore, under the Convention the
task of the enforcement judge is a limited one. The
control exercised by him is limited to verifying whether
an objection of a respondent on the basis of the grounds
for refusal of Article V (1) is justified and whether the
enforcement of the award would violate the public policy
of the law of his country. This limitation must be seen in
Colombia, 27 July 2011; Hebei Import & Export Corp. v. Polytek Engineering Co. Ltd.,
Court of Final Appeal, Hong Kong, 9 February 1999, [1999] 2 HKC 205; Renusagar
Power Co. Ltd. v. General Electric Company & Anr., Supreme Court, India, 7 October
1993, 1994 AIR 860; Brostrom Tankers AB v. Factorias Vulcano S.A., High Court,
Dublin, Ireland, 19 May 2004, XXX Y.B. Com. Arb. 591 (2005).
57 737 F.2d 150 (Second Circuit, 1984).
58 524 F.Supp. 2d 332 (SDNY 2007).
59 The New York Convention of 1958, Kluwer, 1981, pp. 267-268, cited in Redfern and
Hunter, Law and Practice of International Commercial Arbitration, fifth edn., 2009, p.
639, para 11.60.
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the light of the principle of international commercial
arbitration that a national court should not interfere
with the substance of the arbitration.”
    (emphasis supplied)
(xvii)
It would be useful to refer to the recommendations of
the International Law Association in the 70th 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 State’s 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
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
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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.
(xix)
Given the well-settled position in law with respect to the
finality of awards in international commercial arbitrations,
and the limits of judicial intervention on the grounds of public
policy of the enforcement State, we will advert to the facts
of the present case.
The Appellants have contended that the award may not
be enforced, since it is contrary to the basic notions of justice.
We are unable to accept this submission for the following
reasons :
(a)
firstly, the Appellants have not made out a case of
violation of procedural due process in the conduct of
the arbitral proceedings. The requirement of procedural
fairness constitutes a fundamental basis for the integrity
of the arbitral process. Fair and equal treatment of the
parties is a non-derogable and mandatory provision, on
which the entire edifice of the alternate dispute
resolution mechanism is based. In the present case,
there is no such violation alleged.
(b)
secondly, the Appellants have not made out as to
how the award is in conflict with the basic
notions of
justice, or in violation of the substantive public policy
of India.
In the seminal judgment of Parsons (supra), which
has been followed in various jurisdictions, including by
the Indian Supreme Court in the Renusagar case, it
was held that enforcement may be refused only if it
violates the enforcement State’s most basic notions of
morality and justice, which has been interpreted to mean
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that there should be great hesitation in refusing
enforcement, unless it is obtained through “corruption
or fraud, or undue means.”
The Singapore Court of Appeal in PT Asuransi
Jasa Indonesia (Persero) v Dexia Bank SA,60 while
interpreting international public policy, opined that :
“59 Although the concept of public policy of the State is not
defined in the Act or the Model Law, the general consensus
of judicial and expert opinion is that public policy under the
Act encompasses a narrow scope. In our view, it should only
operate in instances where the upholding of an arbitral award
would “shock the conscience” (see Downer Connect ([58]
supra) at [136]), or is “clearly injurious to the public good
or … wholly offensive to the ordinary reasonable and fully
informed member of the public” (see Deutsche Schachbau v
Shell International Petroleum Co Ltd [1987] 2 Lloyds’ Rep
246 at 254, per Sir John Donaldson MR), or where it violates
the forum’s most basic notion of morality and justice: see
Parsons & Whittemore Overseas Co Inc v Societe Generale
de L’Industrie du Papier (RAKTA) 508 F 2d, 969 (2nd Cir,
1974) at 974. This would be consistent with the concept of
public policy that can be ascertained from the preparatory
materials to the Model Law. As was highlighted in the
Commission Report (A/40/17), at para 297 (referred to in A
Guide to the UNCITRAL Model Law on International
Commercial Arbitration: Legislative History and Commentary
by Howard M Holtzmann and
Joseph E Neuhaus (Kluwer,
1989) at 914):
In discussing the term ‘public policy’, it was understood
that it was not equivalent to the political stance or international
policies of a State but comprised the fundamental notions and
principles of justice… It was understood that the term ‘public
policy’, which was used in the 1958 New York Convention
and many other treaties, covered fundamental principles of
law and justice in substantive as well as procedural respects.
Thus, instances such as corruption, bribery or fraud and
60 [2006] SGCA 41.
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similar serious cases would constitute a ground for setting
aside.”
   (emphasis supplied)
This judgment has been recently affirmed by the Singapore High
Court in Dongwoo Mann + Hummel Co. Ltd. v Mann + Hummel
GmbH.61
(c)
The gravamen of the challenge of the Appellants is
that the tribunal has given an erroneous interpretation of
the terms of the PSC read with the Ravva Development
Plan, which would amount to re-writing the contract.
The view taken by the tribunal is based on an
interpretation of Article 15.5 (c) read with the exceptions
contained in Article 15.5 (e)(iii)(dd). The tribunal held that
the exception came into play on account of the range of
physical reservoir characteristics being materially different,
from what was contemplated in the Ravva Development
Plan.
The tribunal relied upon the evidence of the Expert
Witness produced by the Claimants who deposed that the
enlarged reservoir known as Block A/D showed a range of
physical characteristics, which were “materially different”
from those of the Fault Blocks defined in Article 11.1 of the
PSC, on which the Ravva Development Plan was based.
Since there was a material change in the physical reservoir
characteristics of the existing reserves, Article 15.5
(e)(iii)(dd) would get triggered, which would enable the
Claimants to request for an increase in the capped figure
of Base Development Costs under Article 15.5(e)(iii)(dd).
The tribunal noted that the PSC
was entered into for
a period of 25 years and the parties envisaged the possibility
that the Respondents may incur Development Costs greater
than those anticipated when the Ravva Development Plan
and the PSC were executed. Article 15.5(d) and (e) were
events where the capped figure under Article 15.5 (c) could
be increased by the Management Committee.
61 [2008] SGHC 67.
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The tribunal held that the cap on Base Development
Costs under Article 15.5(c) was to be read with reference
to the object of the Plan to achieve the production profile of
35,000 BOPD. The production profile of 35,000 BOPD was
achieved on the drilling of 14 wells by about 31st March
1999. The reference to 21 wells under Article 15.5(c)(xi)
was interpreted as being an estimate of the number of wells
contemplated by the parties in 1993, which would be
required to achieve the object of achieving the production
profile of 35,000 BOPD. It could not be construed to be an
undertaking by the Claimants to drill 21 wells, even though
the targeted production profile of 35,000 BOPD had been
achieved by the drilling of 14 wells.
The remaining 7 wells were drilled subsequently, not
for the purposes of the Ravva Development Plan, but to
take into account the changed physical characteristics of
the existing reserves which were encountered. The costs
of US $ 278 million was incurred by the Respondents as a
result of events which fell within Article 15.5(e)(iii)(dd).
In 1998-1999 when the complete extent of the
reserves in the Ravva Field was known, the Management
Committee, approved an increase in the production profile
from 35,000 BOPD to 50,000 BOPD on 25 March 1998.
The Respondents proceeded to develop the Ravva Field to
enable a production rate of 50,000 BOPD, and drilled 7
wells. The Respondents incurred costs of $ 278,871,668
million towards the drilling of the 7
wells.
(d)
The Appellants herein filed a counter claim, seeking
sums equivalent to the amount which the Respondents had
claimed as Cost Petroleum, in excess of the agreed figure
of US $ 198 million limit.
On the interpretation of Article 15.5(c) of the PSC, and the
circumstances in which the PSC and the Ravva
Development Plan, were executed, the tribunal held that
the Respondents were entitled to costs of US $ 278 million,
in excess of the US $ 198 million. The counter claim of the
Appellants to the extent of US $ 22 million was allowed by
the tribunal.
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(e)
The Appellants are aggrieved by the interpretation
taken by the tribunal with respect to Article 15.5 (c) of the
PSC and its other sub-clauses. The interpretation of the
terms of the PSC lies within the domain of the tribunal. It is
not open for the Appellants to impeach the award on merits
before the enforcement court. The enforcement court
cannot re-assess or re-appreciate the evidence led in the
arbitration. Section 48 does not provide a de facto appeal
on the merits of the award. The enforcement court
exercising jurisdiction under Section 48, cannot refuse
enforcement by taking a different interpretation of the terms
of the contract.
(f)
We feel that the interpretation taken by the tribunal
is a plausible view, and the challenge on this ground cannot
be sustained, to refuse enforcement of the Award.
(g)
With respect to the submission made on behalf of
the Appellants that the Production Sharing Contracts are
“special contracts” pertaining to the exploration of natural
resources, which concerns the public policy of India, we
are of the view that the disputes raised by the Claimants
emanate from the rights and obligations of the parties under
the PSC. The Award is not contrary to the fundamental
policy of Indian law, or in conflict with the notions of justice,
as discussed hereinabove. The term of the PSC was for a
period of 25 years from 28.10.1994, which ended on
27.10.2019. We have been informed that the term
of the
PSC has since been extended for a further period of 10
years, through the mutual agreement between the parties.
This itself would reflect that the performance of the
obligations under the PSC were not contrary to the interests
of India.
(xx)
We conclude that the enforcement of the foreign award
does not contravene the public policy of India, or that it is
contrary to the basic notions of justice.
We affirm the judgment of the Delhi High Court dated
19.02.2020 passed in I.A. No. 3558 / 2015 rejecting the
Application filed under Section 48 of the 1996 Act, and
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confirm the order of enforcement passed on the petition
under Sections 47 read with 49 for enforcement of the
award, even though for different reasons.
The interim Orders of status quo dated 17.06.2020 and
22.07.2020 passed by this Court stand vacated. The Award
dated 18.01.2011 passed by the tribunal is held to be
enforceable in accordance with the provisions of Sections
47 and 49 of the Arbitration & Conciliation Act, 1996.
(xxi)
Before we part with this judgment, we record our sincere
appreciation of the assistance rendered by the Ld. Amicus
Curiae, Shri Gourab Banerji, Senior Advocate at short notice.
We also record our appreciation of the valuable
assistance provided by the Ld. Attorney General for India,
Shri K.K. Venugopal, and Mr. Tushar Mehta, Solicitor
General of India, Senior Advocates, who represented the
Appellants, and Mr. C.A. Sundaram and Mr. Akhil Sibal,
Senior Advocates, who appeared on behalf of the
Respondents, and assisted us through oral and written
submissions.
(xxii)
The Civil Appeal is accordingly dismissed, with no order
as to costs.
All pending applications are accordingly disposed of.
Ordered accordingly.
Devika Gujral
Appeal dismissed.
GOVERNMENT OF INDIA v. VEDANTA LIMITED (FORMERLY
CAIRN INDIA LTD.) ETC. [INDU MALHOTRA, J.]