Cairn India Ltd & Ors vs Government of India, O.M.P.(EFA) (Comm.) No. 15 of 2016: Delhi High Court (decided on 19 February 2020)
Relevant Facts:
The disputes between the Petitioners and Respondent/GoI arose under the Product Sharing Contract (PSC) entered into for the development of Ravva Oil and Gas Field. The increase in production with drilling of wells entailed costs which according to GoI was not payable. This led to disputes. Arbitration was invoked in 2008. The award was passed by the Tribunal in 2011 in favour of the Petitioners.
GoI challenged the Award before the Malaysian High Court which was dismissed in 2012. Aggrieved by the decision of the Malaysian High Court, the GoI preferred an appeal to the Malaysian Court of Appeal which was rejected in 2014.
In 2014, the Petitioners filed their enforcement petition under Section 47 and Section 49 of the Arbitration Act before the Delhi High Court alongwith condonation of delay application. GoI preferred its objections under Section 48.
Issues:
- Is the enforcement petition barred by limitation? Whether Article 136 or Article 137 of the Limitation Act would apply in construing the period of limitation?
- Whether the arbitral tribunal acted beyond its jurisdiction in awarding USD 278.87 million to the Petitioners?
- Whether the objections filed on behalf of the GOI under Section 48 of the Act are merited?
Judgement:
Issue 1:
□ Whether the delay should be condoned?
The Appeal in Malaysia was rejected in June 2014 and therefore, the Petitioner did not have any cause for concern on enforcement until July 2014, whereas the enforcement petition was filed in October 2014. If, the limitation period provided under Article 137 of the Limitation Act is made applicable from the date when the award was passed, the Petitioners had time to file the enforcement petition till 18 January 2014, i.e. 3 years (See Noy Vallesina Engineering Spa v. Jindal Drugs Limited, 2006 SCC OnLine Bom 545) from 18 January 2011. Thus, the delay is of 9 months.
The Court held that the said delay is explained by the conduct of the GoI in not objecting to the adjustments made, in April 2011 till July 2014. The Court condoned the delays as Petitioners, who had to their credit an award would ordinarily be assumed to be interested in enjoying the fruits of the same and not resort to dilatory tactic. On the other hand, GoI has not been able to demonstrate that the said delay was mala fide.
□ Whether to apply Article 136 of Article 137 of the Limitation Act?
օ Contradictory precedents:
- The Madras High Court in Compania Naviera ‘SODNOC v. Bharat Refineries Ltd., 2007 SCC Online Mad 223, relied on Furest Day Lawson Ltd. v. Jindal Exports Ltd., (2001) 6 SCC 356 and held that the period of limitation for filing an enforcement petition was 12 years as prescribed in Article 136 of the Limitation Act.
- On the other hand, Single Judge of the Bombay High Court in Noy Vallesina Engineering Spa v. Jindal Drugs Limited, 2006 SCC Online Bom 545, held that Article 137 of the Act applies if, at that stage, the Court has not recorded its satisfaction that the award is enforceable.
- Another Single Judge of the Bombay High Court in a recent judgement of Imax Corporation v. E-City Entertainment (I) Pvt. Ltd. and Ors., 2020 (1) ABR 82 (considered Noy Vallesina, Compania Naviera, Furest Day Lawson, Thyssen Stahlunion and Shriram EPC Ltd. v. Rioglass Solar Sa, (2018) 18 SCC 313) has taken a contrary view that Article 136 of the Limitation Act would be applicable.
օ High Court’s analysis:
The execution of a foreign award cab be divided into three stages – (i) access; (ii) recognition; and, (iii) enforcement.
Section 47 of the Act deals with the first and second stage i.e. access and recognition. A pragmatic view would be to treat the word “enforcement” in Section 48 in the context of the Act as execution and foreign award as a decree whose execution, if at all, could only be refused on the grounds given in subsection (1) and (2) of Section 48 of the 1996 Act.
When the award passes the gateway of Section 47 is treated as being equivalent to a foreign decree whose enforcement can be refused at the request of the party against whom it is invoked only if it falls within the provisions of Section 48(1)(a) to (e) or Section 48 (2).
Section 49 presupposes 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. The word “enforcement” is used interchangeably with the word “execution” and satisfaction which is spoken of in Section 49 is relatable to the conditions stipulated for gaining access and recognition of the appropriate court in India as provided in Section 47.
The Court thus concluded that Article 136 of the Limitation Act would apply to an enforcement petition.
Issue 2 :
The Court answered the second issue in affirmative by stating that neither party contended that the Tribunal did not have jurisdiction to determine whether or not the capped cost should be increased or the amount of such an increase.
Issue 3:
The Court held that, having lost in three Courts in Malaysia, GoI has exhausted its remedies and it cannot draw the Court into deciding the merits of the dispute. Furthermore, only to reemphasize the above, a close perusal of Section 48 shows that the grounds of objections available to a party against whom the foreign award is sought to be enforced does not pertain to the merits of the dispute.
The Court further held that the relationship between the parties was contractual in nature and the Award is not in violation of public policy of India or the fundamental policy of Indian law. Therefore, the objections put forth by GoI were dismissed.
Comments:
The Judgement is “another brick in the wall” of pro-arbitration perception which India is gradually developing worldwide. The pragmatic interpretation given by the Court to curb delays by judicial fiat of conditions which are onerous, alleviates the technical embargo in enforcement and execution of foreign award in India.
The GoI has to challenge in the Apex Court against the order, in absence of relief of appeal under Section 50. It would be interesting to watch if such challenge is decided in limine or being given another round of litigation at least for finally laying down the law on limitation for execution of foreign award in India. The later is more likely, in my opinion.
