Period for enforcement of foreign award: Government Of India vs Vedanta Limited,
Special Leave to Appeal(C) No. 7172/2020
Facts of the case
The disagreement stemmed from Article 15 of the parties' 1994 Production Sharing Contract (PSA). The rule above set a "cap" on the payment of development costs to build a 35000-barrel-per-day oil-production capacity to a specific "sum." In 2008, the Malaysian Arbitral Tribunal ruled in favour of Vedanta Limited & Others.
The Indian government filed a public-policy challenge in the Malaysian High Court against the award. Nevertheless, the Malaysian High Court found no grounds to interfere with the award after applying the Malaysian Arbitration Act, 2005. Following the dismissal of the Indian government's appeal to the Malaysian Court of Appeal in 2014, the Indian government sought leave to appeal to the Malaysian Federal Court, which was ultimately dismissed in 2016.
Meanwhile, the Respondent filed an application with the Hon'ble Delhi High Court for the enforcement of the foreign award under Sections 47 and 49 of the Arbitration and Conciliation Act 1996 (Arbitration Act), where the single-judge directed the award's enforcement and rejected the Government of India's arguments, including those relating to limitation and public policy. The Indian government, the aggrieved, sought an appeal with the Supreme Court.
The Court first addressed the legislation on the time restriction for applying to the execution of a foreign award. The Court cited its previous decision in Bank of Baroda v. Kotak Mahindra Bank CIVIL APPEAL NO.2175 of 2020 to explain that because Article 136 of the Limitation Act, 1963 only applies to rulings of a civil court in India, the enforcement of a foreign award would be covered by a residuary provision, namely Article 137 of the Limitation Act, which recommends three years from the time the right to apply accrues.
The Supreme Court then investigated whether the foreign award was against Indian public policy. The Court relied on the Supreme Court's decision in Renusagar Power Ltd v. General Electric Co, 1994 Supp (1) SCC 644 to find that the public policy defence should only be used where enforcing the award would offend the forum state's fundamental principles of morality and justice. The Court then cited Albert van den Berg's Commentary on "The New York Arbitration Convention, 1958: Towards a Uniform Judicial Understanding" as well as ICCI's guidance to find that there will be no merits assessment.
- The time limit for filing enforcement of a foreign award
The Supreme Court's decision in Vedanta is a positive development. The Court has finally clarified the issue in calculating the statute of limitations for filing enforcement proceedings, which had been waiting for a long time due to contradictory High Court decisions. The Supreme Court has granted liberty to seek condonation of delay in applying for the enforcement of the award. It has expounded that ambiguity on the limitation period issue is sufficient ground to condone delays, so the decision will not affect those who did not act within the three years.
The notion of "public policy" is not unchangeable. By definition, ‘public policy is impossible to define precisely. The doctrine of public policy is a branch of common law, and precedents regulate it just like any other branch of common law. Renusagar Power v. General Electric Co. brought the issue of the scope and evolution of "public policy" before the Supreme Court of India in Renusagar Power v. General Electric Co. 1994 Supp (1) SCC 644 In this decision, the Court stated that the defence of public policy should be construed narrowly and that it should be permissible concerning a foreign award only if the award violates (i) Indian fundamental policy; (ii) Indian interest; (iii) justice or morality.
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