Decided on 11th August 2022 | High Court of Karnataka

The Hon’ble Karnataka High Court (“the Court”) has held that a foreign award rendered between parties that do not carry-on business in India can be enforced by Indian Courts if the assets against which the award is sought to be enforced lies within the territorial jurisdiction of the Court. Significantly the Court also ruled that even during the pendency of the proceedings before itself, proceedings for executing the award can be initiated in other Courts within whose jurisdiction the assets of the award-debtor are situated, subject to full disclosure of prior recoveries made, if any – CTI Future Corporation vs. Ducgiang Chemical and Detergent Powder Joint Stock Company1.

FACTS

The Petitioner, CTI Future Corporation (“CTI”) is a corporate entity registered under the laws of South Korea. Ducgiang Chemical and Detergent Powder Joint Stock Company is (“DCDP”), the Respondent No.1, is a corporate entity registered under the laws of Vietnam. CTI and DCDP entered into a supply agreement on 30.05.2018. Subsequently a dispute arose between the parties, which, as per the terms of the said agreement, was referred to Singapore International Arbitration Centre (“SIAC”) for arbitration. SIAC passed an award (“the Award”) in favour of CTI. CTI approached the Court seeking enforcement of the Award under Section 44 of the Arbitration and Conciliation Act, 1996 (“the A&C Act”).

Issues

• Whether an international commercial arbitral award rendered outside India between the parties who have no connection to India can be enforced in India by filing proceedings under Section 46, 48, and 49 of the Arbitration and Conciliation Act, 1996?

• Whether a proceeding for the enforcement of a foreign award is maintainable before the Court, as against a person who is not a resident of, registered in, or carries on business within the jurisdiction of the Court?

• Whether proceedings can be initiated in other Courts within whose jurisdiction the property of the award-debtor is present, pending the proceedings in this Court?

• Whether the Court can exercise jurisdiction against an award-debtor under A&C Act, even if there are no properties of the award-debtor are situated within the jurisdiction of the Court?

Judgment

The Court addressed the first question in so far as maintainability of the enforcement petition is concerned² and held that “for an award to be recognised as a foreign award, it has to be as regards a commercial relationship as per the laws in India and rendered in a territory where the convention (“New York Convention”) has been made applicable”. India being a signatory to the New York Convention, the Court held that it has jurisdiction to enforce a foreign award.

Proceeding to the merits of the case, the Court reiterates that the relationship between CTI and DCDP is regarded as a commercial relationship in India, the Award is made in Singapore which is a “reciprocating territory” for the purpose of Section 44, in pursuance of an agreement in writing for arbitration to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards applies, and therefore, qualifies as a “New York Convention Award” for the purposes of Chapter I of Part II of the A&C Act. Such awards enjoy a special status under Indian Law.

In light of Section 2(e)(ii) and the Explanation to Section 47(2) of the A&C Act, as well as Article 51(c) of the Constitution of India, the Court can exercise jurisdiction to enforce the Awards against the properties of an award-debtor which are situated within the jurisdiction of the Court. The fact that the award-debtor is not a resident of, or registered in, or carries on business in India, and particularly within the territorial jurisdiction of the Court, is inconsequential.

The Court addressing the issue on jurisdiction, validates that proceedings can be initiated even in other Courts within whose jurisdiction the properties of the award-debtor are situated, provided that the award-holder solemnly swears, affirms and places on record by way of affidavit, the following facts:

• The extent and manner of satisfaction of the award.
• Concluded proceedings initiated earlier for enforcement of the award.
• Pending proceedings, initiated for the enforcement of the award.

Any disclosure of false information shall amount to perjury, contempt of court as well as gross misuse or abuse of process of law.

Noting that speed is the essence in commercial disputes, the Court further observes that it can exercise jurisdiction to recognize the Award as enforceable in India, even though none of the properties of DCDP are situated within the territorial jurisdiction of the Court.

Recognizing the Award as enforceable in India, the Court also clarifies that recognition of a foreign award by one Court in India shall be sufficient for its enforcement in any part of India, as the recognition by a Court is on treaty obligations and statutory requirements being fulfilled.

Finally, the Court granted liberty to CTI to file fresh applications for interim measures and enforcement of the Award in the event of any of the properties of DCDP are located or come within the jurisdiction of the Court.

Comment

This judgment paves way for the speedy recognition of an award i.e., the award holder can save time and directly file execution proceedings in different jurisdictions if the need arises. A recognised award additionally acts as an insulation against re-agitation of the case on merits in the event party chooses to do so in the future.

The Court in its decision has reinforced its powers to entertain enforcement proceedings of Foreign Arbitral Awards made in pursuance of the New York Convention. CTI Future Corporation was represented our firm.