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04 April 2022, Monday

2 years ago

Standards to test defences to enforcement of foreign award restated: Bombay High Court

17 February 2022 | Aircon Beibars FZE v. Heligo Charters (P) Ltd. | Commercial Arbitration Petition No. 1130 of 2019 | AK Menon J | Bombay High Court | 2022 SCC OnLine Bom 329

The Bombay High Court has restated the limited grounds on which the court can deny enforcement of a foreign award. In the facts, the court found none of such grounds applied and hence allowed the enforcement of an award for USD 6,563,700 along with a security deposit of USD 975,462.28. The arbitration was seated in Singapore and the award debtor had not applied to the Singapore court to set it aside.

The court’s key observations on the limited nature of enforcement-resisting grounds are as follows:

  1. The ground of patent illegality is not available as a defence to enforcement of a foreign award.
  2. The following, which could be “corrected as patent illegalities”, are not relevant in proceedings to enforce a foreign award: (i) finding based on documents taken behind the back of a party or based on no evidence; (ii) jurisdictional errors like where arbitrator wanders outside the contract and deals with matters not referred to him.
  3. Poor reasoning while ejecting a claim does not attract the public policy ground unless it offends the most basic notion of justice, that is, only in very exceptional circumstances when the conscience of the court is shocked.
  4. The courts retain discretion to allow enforcement even if a ground set out in Section 48 ACA is made out. However, discretion is not to be exercised where the award reveals a fundamental/structural defect.
  5. An award may not be enforced where it is predicated on a subject matter outside the jurisdiction of the arbitrator.

The court found that none of the defenses were attracted in the case.

Read the judgment here.

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