Imax Corporation v. E-City Entertainment (I) Pvt. Ltd. & Ors – Comm. Arb. Pet. 414/2018, Bombay High Court (Decided on 13 November 2019)
27.07.2008: E-City Entertainment (I) Pvt. Ltd. filed Section 34 Petition in the Bombay High Court challenging three arbitral awards passed in an ICC Arbitration seated in London. An application for condonation of delay was also filed as the said petition was filed beyond 90 days but within the extended period of 30 days.
10.06.2013: The High Court condoned the delay and also held that it had jurisdiction to entertain Section 34 Petition.
19.11.2013: In the challenge by I-Max, the Supreme Court stayed the Section 34 proceedings.
10.03.2017: The Supreme Court finally set aside High Court order holding that the High Court had no jurisdiction to entertain the Section 34 petition challenging the foreign awards.
02.04.2018: I-Max filed Petition for enforcement and execution of the foreign awards in Bombay High Court.
E-City raised a preliminary objection to the maintainability of this petition on the ground that the petition is time-barred considering the provisions of Article 137 under the Schedule to the Limitation Act, 1963 (“Limitation Act”) which stipulates a 3 years limit for filing from the date of the award. On the other hand, I-Max contended that it is not Article 137, but Article 136 of the Limitation Act which applies and it prescribes a period of limitation of 12 years from the time when the decree or order becomes enforceable.
The present Judgement decides the above objection on limitation by E-City.
- Whether the enforcement petition is filed within the prescribed limitation or would be held as time barred?
Benefit of automatic stay is passed on in the given facts:
Considering the provisions of the Arbitration Act prior to its amendment by the 2015 Amendment Act (with effect from 23 October 2015), filing of the Section 34 petition amounted to stay of the award which law was laid down in Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited & Anr, (2009) 17 SCC 796. The legal position as had arisen was that with effect from 27 July 2008, the Section 34 petition as filed by E-City could be said to be pending. Thus, even if the petitioners were to file a petition within three years after the awards, and before the delay was condoned, i.e. upto 10 June 2013, nonetheless I-Max met with a fate of stay of the awards, and the awards were thus not available for enforcement and execution. Thus, it is only after 10 March 2017 (when the Supreme Court had set aside High Court order), the awards became available to I-Max to be enforced. The High Court opined even if Article 137 of the Limitation Act as being urged by E-City is applied and a period of three years is to be available to I-Max to file an enforcement petition, this petition which was filed on 2 April 2018 would be required to be held to be filed within the limitation of three years as prescribed under Article 137.
Foreign award is a deemed decree:
It is well settled that a foreign award is stamped as a decree and hence, as a decree it can be enforced and be executable in one and the same proceeding. In that event Article 136 of the Limitation Act would surely become applicable prescribing a limitation of twelve years from the date when award becomes enforceable and/or the award directing payment of money as specifically provided, under Article 136. This particularly, when the execution of such award is held to be permissible in the same proceedings in two parts/stages. One on its enforcement and the second part being the execution.
Reliance on Madras High Court views:
The Court also had taken note of the decision of Madras High Court in Compania Naviera ‘SODNOC’ vs. BharatRefineries Ltd. & Anr. (AIR 2007 Mad 251) in which the High Court referring to the decision of the Supreme Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2001) 6 SSC 356 rejected the contention of the respondent that as the award was passed on 2 March 2000 the petition to enforce the award should have been filed within three years and as the same being filed in the year 2005, the relief was barred by limitation. It was held that the foreign award is already stamped as a decree and the party having the foreign award can straight away apply for enforcement of the foreign award, the party would have 12 years time like that of a decree-holder to execute the foreign award. In another decision in Bharat Salt Refineries Ltd. v. Compania Naviera (O.S.A. No.52 of 2008 dated 01.08.2008) another learned Single Judge of the Madras High Court referring to the decision of the Supreme Court in Fuerst Day Lawson rejected the contention that the petition for enforcement should have been filed within three years from the date of the award.
Article 136 applies and not Article 137:
The enforcement and execution can form part of the same proceedings. In such case, certainly Article 136 under the Limitation Act becomes relevant. If the argument of non-applicability of Article 136 is accepted, it would be contrary to the principle of law as laid down by the Supreme Court in Fuerst Day Lawson apart from deeply damaging the decreetal interest of the award creditors apart from being contrary to the object of Section 47 to 49 of the Arbitration Act.
Overcoming earlier Single Judge decision by Bombay High Court:
The Bombay High Court earlier in Noy Vallesina Engineering Spa v. Jindal Drugs Limited 2006 SCC Online Bom 545 applied Article 137 for limitation to file enforcement of foreign award. The High Court in this case distinguished Noy Vallesina on facts and held that considering the facts of the present case that the Supreme Court on 10 March 2017 set aside the order passed by High Court (holding that Section 34 petition was not maintainable), even by applicability of the provisions of Article 137 of the Limitation Act, the petition (filed on 2 April 2018) is not barred by limitation. In any case, applying the principle of law as laid down in Fuerst Day Lawson and Shriram EPC Ltd. v. Rioglass Solar SA 2018(6) Bom. C.R. 529, the Court cannot overlook the prayers as made by I-Max which are in the nature of a combined petition namely for enforcement and for execution of the award. The Court held that a broader view is required to be taken to advance the object and intention of the provisions of the Arbitration Act and not a hard technical approach as urged by E-City that the petition be held as time barred, by applying Article 137 of the Limitation Act in the absence of a delay condonation application and the delay being condoned.
The limitation period for enforcement of foreign award has been a grey area in absence of specific statutory provision to deal with such case. While Bombay High Court had taken a view in 2006 that Article 137 applies, the Madras High Court was of the opinion that Article 136 applies and hence, it is 12 years and not 3 years.
The Single Judge in this case could not obviously overrule its earlier 2006 decision by coordinate Bench (Noy Vallesina) and hence made distinction on facts relying upon the decision of the Supreme Court in Fuerst Day Lawson and of course the objective of the Arbitration Act.
While the issue may be finally settled in the Supreme Court in near future, the decision of the Bombay High Court gives clarity and fosters positive sentiment in the global business community in terms of enforcement of foreign award in India.