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14 September 2021, Tuesday

2 years ago

Foreign award against a person not a party to the arbitration agreement is enforceable (Supreme Court of India)

10 August 2021 | Gemini Bay Transcription Pvt. Ltd. v. Integrated Sale Service Ltd. and another | Civil Appeal Nos. 8343-8344 & 8345-8346 of 2018 | RF Nariman & BR Gavai JJ 2021 SCC OnLine Del 572

Read our Update here to know more about the facts and the reasoning.

Very briefly, Arun Dev, the boss of the DMC group of companies, and another company, Gemini, which Arun had set up, resisted enforcement of a foreign award on the ground that they were non-signatories to the arbitration agreement. Earlier, the tribunal had considered that objection but applying the alter ego doctrine under the laws of Delaware (the substantive law), pierced the corporate veil, and made a joint and several award. In enforcement proceedings, a single judge of the High Court of Bombay (Nagpur bench) said that the award could be enforced only against the signatories. The division bench allowed the appeal after examining the laws of Delaware. In the Supreme Court, the conditional leave to appeal granted to the signatory party (DMC) was revoked later because the deposit condition was not met. These appeals were by the two non-signatories.

The court dismissed the appeals and its conclusions, in sum, were as follows:

  1. The burden of proof is on the party resisting enforcement to prove that the case falls within Section 48 (1) or 48 (2) ACA. Neither under Section 47 ACA nor Section 48 ACA, the party enforcing a foreign award is required to prove by substantive evidence that the foreign award can bind a non-signatory.
  2. “Proof” in Section 48 means “established on the basis of the record of the arbitral tribunal” and such other matters as are relevant to the grounds contained in Section 48 ACA.
  3. The ground under Section 48 (1) (a) ACA or Section 48(1)(b) ACA or Section 48 (1) (c) ACA cannot be deployed to argue that the award against non-signatory cannot be enforced.
  4. The UK Supreme Court’s decision in Dallah’s case cannot justify bringing the objection of a non-signatory under Section 48 (1)(a) ACA.
  5. In the guise of applying Section 48(1)(a) ACA, a merits-based review cannot be done.
  6. Perversity is not ground to challenge a foreign award.
  7. Section 46 ACA makes a foreign award binding on persons between whom it was made. “Persons” may be non-signatories to the arbitration agreement.
  8. A foreign award cannot be set aside because it violates the substantive law of the agreement.
  9. Section 44 recognises that an arbitrator may decide tort claims provided they are disputes that arise in connection with the agreement. The argument that damages have been awarded on no basis whatsoever would not fall within any of the exceptions contained in Section 48(1) ACA. Only exceptional cases involving basic infraction of justice that shock the court's conscience attracts the ground of Section 48(2) read with Explanation 1(iii).

Read the judgement here.

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Categories: Aloe Vera | Binding Non Signatory to Arbitration | Burden of Proof | Challenge to Foreign Award | Conditions for Enforcement of Foreign Awards | Dallah | Damages | Enforcement | Enforcement Against Non Signatory | Enforcement of Foreign Awards | Evidence | Foreign Award | Fundamental Policy of Indian Law | Merits Based Review | Natural Justice | Perverse Award | Proof | Proof of Damages | Public Policy | Public Policy of India | Recognition and Enforcement of Foreign Award | Renusagar | Section 44 ACA | Section 46 ACA | Section 47 ACA | Section 48 (1) (c) ACA | Section 48 ACA | Section 48(1)(b) ACA | Ssangyong | Vijay Karia | When Foreign Award binding

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