India's legal framework for enforcing foreign arbitral awards has undergone significant
evolution, primarily governed by the Arbitration and Conciliation Act, 1996 ("Act"). This
legislation, which incorporates the principles of the New York Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, 1958, has been a cornerstone in shaping India's
approach to international arbitration. The Act has seen notable amendments in the year 2015,
2019, and most recently in 2021, each aimed at enhancing India's standing as an
arbitration-friendly jurisdiction. While the 2015 amendment acted towards limiting the scope of
‘public policy’ as a ground for refusing enforcement, the 2019 amendment refined the arbitration
landscape by establishing the Arbitration Council of India. The 2021 amendment then sought to
address concerns about fraudulent awards by allowing for unconditional stays on enforcement if
the court finds that the arbitration agreement or award was induced by fraud or corruption.
Key provisions of the Act governing foreign award enforcement include Section 44, which
defines a 'foreign award', Section 48, outlining grounds for refusing enforcement, and Section 47,
detailing the enforcement procedure. The interpretation and application of these provisions have
been significantly shaped by judicial decisions, creating a more nuanced and predictable
enforcement regime.
Indian courts have played a crucial role in shaping the enforcement regime through their
interpretations of the Act. The judicial approach has generally evolved towards a more
pro-enforcement stance, albeit with some inconsistencies. In this regard, the interpretation of
'public policy' as a ground for refusing enforcement of awards has been a contentious issue.
Public Policy Exception in India
India’s interpretation of the public policy exception under Section 48 of the Arbitration and
Conciliation Act, 1996, has been inconsistent. The Hon’ble Supreme Court's decision in
Renusagar Power Co. Ltd. v. General Electric Co. (1994) narrowly construed this ground,
limiting it to fundamental policy of Indian law, interests of India, and justice or morality.
However, subsequent rulings like ONGC v. Western Geco (2014) expanded this by requiring
tribunals to adopt a "judicial approach," indirectly broadening judicial discretion.
The pendulum once again swung in the case of Shri Lal Mahal Ltd. v. Progetto Grano Spa
(2013), wherein the Court limited the exception solely to circumstances that involve fraud or
corruption. However, the amendment made to the Arbitration Act in 2015 reinstated ambiguity
by incorporating "patent illegality" and "interest of India" as bases for refusal.
Judicial Intervention and National Court Bias
India's courts have always struggled to strike a balance between theoretical support for
arbitration and actual enforcement. Despite recognising arbitration as a streamlined dispute
resolution mechanism, judges frequently undermine its core principles through two key
practices: (1) Procedural Overreach, in which courts re-examine the substance of arbitral awards
under the guise of reviewing procedural fairness, effectively retrying cases and violating
arbitration's finality; and (2) Regulatory-arbitration Conflicts, in which parallel proceedings in
forums such as competition commissions cause jurisdictional clashes. For example, after losing
an arbitration, parties may file antitrust lawsuits to invalidate contracts, compelling courts to
balance arbitral autonomy with regulatory demands. These discrepancies result in delayed
enforcement and unpredictability, weakening faith in India's arbitration system.
in the Bharat Aluminium Co. v. Kaiser Aluminium (BALCO, 2012) ruling, which prohibited
interference in arbitrations conducted abroad. Nonetheless, in Venture Global Engineering v.
Satyam Computer Services (2008), the Supreme Court controversially permitted disputes
regarding foreign awards under Indian law, compromising the finality of arbitration
Persistent Challenges and Comparative Perspective
Despite progress, several challenges remain in the enforcement of foreign awards in India. The
Indian judicial system's notorious backlog of cases continues to cause delays, even though the
Act now prescribes a one-year timeline for disposing of enforcement applications. The case of
Cruz City 1 Mauritius Holdings v. Unitech Limited (2017) is a stark example, where
enforcement proceedings dragged on for years.
Furthermore, the enforcement landscape is complicated by inconsistencies in judicial
interpretations, especially at the lower court level, which often leads to uncertainty for parties
seeking enforcement. This unpredictability is exacerbated when dealing with state entities, where
the process becomes particularly challenging. Issues of sovereign immunity and broad
interpretations of public policy are frequently invoked as shields against enforcement, creating
additional hurdles for award creditors. Adding to these complexities are various procedural
requirements, such as stamp duty payments and, in certain instances, the necessity of obtaining
prior government approval which adds to the delay.
When compared to other major jurisdictions, India's approach to enforcing foreign awards shows
both similarities and differences. The United States, under its Federal Arbitration Act, has similar
grounds for refusal but allows more expansive discovery in enforcement proceedings. The
United Kingdom is generally more pro-enforcement, with fewer grounds for refusal under its
Arbitration Act 1996. Singapore stands out as highly pro-arbitration, with a streamlined
enforcement process under its International Arbitration Act. While India has made significant
strides, it still lags behind these jurisdictions in terms of efficiency and predictability of
enforcement.
Corruption and Due Process Concerns
The use of corruption allegations as a weapon in enforcement conflicts is growing. False
accusations are used strategically to deter enforcement, even if real cases of fraud need
investigation. Courts may be required to look at claims that were never brought up during
arbitration, for instance, if a losing party alleges arbitrator bias or bribery in the construction of
the contract. In addition to delaying proceedings, this runs the danger of confusing substantive
review—which is forbidden under the New York Convention—with breaches of due process.
Indian courts must strike a careful balance between combating corruption and allowing misuse of
the legal system.
Allegations of corruption often derail enforcement. In NAFED v. Alimenta SA (2020), the
Supreme Court nullified a 30-year-old award, citing corruption in the underlying contract. While
legitimate, such rulings risk being misused to evade liability. Conversely, in Emkay Global v.
Indiabulls Financial Services (2018), the Court emphasized minimal interference in procedural
lapses, yet lower courts frequently cite due process to delay enforcement.
India’s arbitration landscape remains caught between its aspirations to align with global
standards and entrenched judicial practices that undermine enforceability. While legislative
reforms like the 2019 and 2021 amendments reflect a commitment to modernization, their impact
is diluted by inconsistent judicial interpretations of “public policy” and procedural overreach. To
bridge this gap, India must prioritize harmonizing its domestic legal framework with
international norms, such as adopting a clear, narrow definition of public policy and establishing
specialized arbitration benches to curb judicial interference.