Foreign Award whose seat is outside India cannot be challenged under S 34 of Arbitration and Conciliation Act,1996

Noy Vallesina Engineering V. Jindal Drugs Limited & Ors.

Civil Appeal No. 8607 of 2010 decided on 26.11.2020

Bench: S. Ravindra Bhatt & Indira Banerjee, JJ.

Facts:

NV Engineering (hereinafter referred as ‘NV’) which is a incorporated under Italian law and involved in the setting-up and construction of plants entered into a contract having arbitration clause for the construction, commission, operation and maintenance of the Ascorbic Acid Plant (“the plant”) with Jindal, a public limited company incorporated under relevant Indian law.

Disputes arose between Jindal and NV. The latter terminated the agreement and claimed damages.

Jindal filed a request for arbitration before the International Court of Arbitration (ICC). After considering the claims and counter claims, the tribunal made a partial award by that award, Jindal’s claims were rejected. NV awarded SFr.44,33,416 (Swiss Francs) compensation as partial awards. Meanwhile, the respondents filed a petition before Bombay High Court under Section 34 of the Arbitration Act, 1996 challenging the partial award awarded by the tribunal. The petition was admitted and notices were issued to ICC. Further, an interm injunction restraining the tribunal from proceeding further and maintaining status quo with respect to the proceeding was passed. However, the ICC tribunal was of the view that the orders of the High Court are not binding on it and proceeded further. NV filed written submission to the tribunal on the issue of interest and cost. Jindal notified the tribunal that they do not intend to make any submission on the issue of interest and cost.

The petition (under Section 34) challenging the partial award was decided by the High Court by an order of a Single Judge which held that the since the partial award was a foreign award, a challenge through a petition was not maintainable under Section 34 of the Act. Jindal preferred an appeal against that order before the Division Bench. During the pendency of the appeal, NV had applied for enforcement of the two awards, i.e. the partial and final awards, under Sections 47 and 48 of the Act. This petition was allowed and Jindal’s objections against the two awards’ enforceability were overruled.

The Division Bench decided Jindal’s challenge appeal and set aside the single judge’s order (which had ruled that a petition under Section 34 was not maintainable). The Division Bench relied on the judgments of this court, i.e. Bhatia International v. Bulk Trading S. A. ((2002) 4 SCC 105) and Venture Global Engineering v. Satyam Computer Services Ltd.( 2008 (4) SCC 190) to hold that proceedings under Section 34 of the Act could be validly maintained to challenge a foreign award.

NV against the order of Division Bench filed an SLP to Supreme Court.

Issue:

Is a letter patent appeal against the Single Judge judgement to the Division Bench of the Bombay High Court by Jindal maintainable?

Held:

The court held that the Jindal’s appeal to the Division Bench of the Bombay High Court was not maintainable.

The Supreme Court placing reliance on the case of Fuerst Day Lawson Ltd. v. Jindal Exports Ltd((2011) 8 SCC 333) held that Section 50 of the Act said that the Arbitration Act, 1940, from its inception and right through to 2004 (in P.S. Sathappan [P.S. Sathappan v. Andhra Bank Ltd., (2004) 11 SCC 672] ) was held to be a self-contained code and if the Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. The Court further said that the remedy of letters patent appeal was not available in relation to the judgment of the learned Single Judge in question in arbitration matters as held in the case of Arun Dev Upadhyaya v. Integrated Sales Service Ltd., (2016) 9 SCC 524.

Issue: Whether a challenge to foreign arbitral award is maintainable under S.34 of the Act?

Held:

The Court held that a challenge to foreign award is not maintainable under S.34 of the Act. The Supreme Court relying upon Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc (2012 (9) SCC 5) (“BALCO Case) held that since the juridical seat of arbitration was London therefore the final as well as partial award cannot be challenged under S.34 of the Act.

In BALCO Case, it was categorically held by the Supreme Court that under S.34 two kinds of award can be challenged; domestic award and foreign award whose seat of arbitration is India. Since, in this case, the seat of arbitration between NV and Jindal was London therefore the award cannot be challenged under S. 34 of the Act.