Listen to this articleGovernment of India v Vedanta Limited & others
CIVIL APPEAL NO. 3185 OF 2020 (Arising out of SLP (Civil) No.7172 of 2020) decided on September 16, 2020.
BENCH- S. Abdul Nazeer, Indu Malhotra, Aniruddha, JJ.
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 tender was floated to invite bids. Pursuant thereto, 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 various parties.
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 Award was delivered and 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:
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.
Procedural Facts
· The Malaysian 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.
· 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.
· 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.
· 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.
· During the pendency of the Application for Leave to Appeal before the Malaysian Federal Court, on 14.10.2014, the Respondents filed a Petition for enforcement under Sections 47 read with 49 of the 1996 Act before the Delhi High Court, along with an application for condonation of delay.
· 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.
· 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, and directed the enforcement of the Award
· 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.
ISSUE
Whether the petition is maintainable inspite of the fact that the petition for enforcement / execution of the foreign award under Section 47 was barred by limitation?
[See 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.]
HELD
The Court held that held 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 because 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.
View of Supreme Court on Limitation
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. 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”.
Section 36 of the Arbitration Act, 1996 creates a statutory fiction for the limited purpose of enforcement of a ‘domestic award’ as a decree of the court, even though it is otherwise an award in an arbitral proceeding. 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.
Foreign awards are not decrees of an Indian civil court. By a legal fiction, Section 49 provides that a foreign award, after it is granted recognition and enforcement under Section 48, would be deemed to be a decree of “that Court” for the limited purpose of enforcement. The phrase “that Court” refers to the Court which has adjudicated upon the petition filed under Sections 47 and 49 for enforcement of the foreign award. In our view, Article 136 of the Limitation Act would not be applicable for the enforcement / execution of a foreign award, since it is not a decree of a civil court in India. 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.
ISSUE
Whether the said foreign award is in conflict with the Public Policy of India?
HELD
The Court held 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.