Short facts

This petition was filed to seek enforcement of an award under Part II of the Arbitration Act. This judgment was rendered by an International Court of Arbitration, London, by which the petitioner was awarded a sum of 2.45 million euros and court costs.

On January 30, 2006, a consortium agreement was entered into between the petitioner and the respondent under which the responsibilities for the construction of power plants in Sudan were assumed.

NEC and the respondent executed two contracts on 9 May 2006 for the design, construction and commissioning of two thermal power plants, one located in El-Fasher, Sudan, and the other in El-Genena, Sudan. The said contracts contained an arbitration clause whereby the arbitration was to take place in London and Sudanese law was to be applicable.

On December 5, 2007, NEC and Petitioner entered into an additional deed by and pursuant to which NEC assigned, inter alia, to Petitioner all matters relating to the advance payment made by NEC to Respondent. The NEC was dissolved and the STGP was established.

On December 24, 2012, STGP and the petitioner concluded a Deed of Assignment whereby STGP assigned in favor of the petitioner the debt of 2.7 million euros, i.e. the advance made by NEC to the defendant and the right of STGP vis-à-vis the defendant resulting from the violations and/or repudiation abuse of said contracts.

Arbitration proceedings commenced before the ICC in which a partial award was rendered on 21 April 2015, which held that there was in fact an arbitration agreement between the parties conferring jurisdiction on the ICC. A final judgment was also handed down by the ICC, which was not challenged before the courts in London. However, it was challenged under Section 34 of the Arbitration Act before the Karnataka Court but the petition was withdrawn during the pendency of the present petition.

Appeals

petitioner contended that the Petitioner was the Assignee of the said Contracts and therefore stood in the place of the NEC. He pointed out that after the partial judgment, the Tribunal specifically confirmed the validity of the said mission under the applicable law, i.e. Sudanese law. The partial judgment was not challenged by the defendant, therefore it became final. It was based on the decision of the Supreme Court of McDermott International Inc. vs. Burn Standard Company Ltd. and others, 2006.

That the jurisdiction of the enforcement court is very limited and cannot enter into the substance of the judgment during the execution of the foreign judgment.

On the contrary, the respondent contended that the execution of the partial sentence and the final judgment is challenged on the ground that it is against the public policy of India. It does not matter whether it has been partially or definitively challenged or not.

It was based on the decision of the Supreme Court of Vijay Karia vs Prysmian Cavi E. Sistemi SRL, 2020 and others in which it was held that when the enforcement of a foreign judgment is opposed on the ground of breach of public order, the court would have no discretion but to refuse enforcement.

That it was held in the partial judgment that the deed of assignment was valid under Sudanese law and Indian law was not considered in deciding the matter. The enforcing court is not obliged to follow the opinion of the tribunal, but must independently assess whether the tribunal would have jurisdiction to resolve the underlying disputes.

The fact that the petitioner’s appeal of the decision of the Supreme Court of Justice in the case of McDermott International Inc. was entirely misconstrued because Section 48(2)(b) of the Arbitration Act made it clear that the Court could refuse to enforce a foreign law. Decision where the Court finds that enforcement of the foreign judgment would be contrary to the public policy of India.

That the unilateral assignment by the NEC, which resulted in the respondent being compelled to arbitrate with another party, was thus contrary to the public policy of India. Even assuming that the Deed of Assignment was valid, it did not result in an automatic award of arbitration. the clause in the said contracts.

The Court’s analysis

The court categorically rejected the defendant’s arguments on the grounds that he did not prepare a file of refusal to enforce the foreign sentence.

The court noted that the tribunal had thoroughly analyzed the arguments raised by the parties and had concluded that there was an arbitration agreement between the parties. This finding was not disputed by the respondent. Since this judgment has become final because it has not appealed, the defendant cannot be allowed to challenge the execution of the judgment on the merits alone, which is impermissible under Article 48, according to the Supreme Court’s decision in McDermott International Inc.

The court also rejected the respondent’s argument that the assignment was not valid as the respondent’s consent was not obtained prior to the assignment. The court held that “In view of Explanation 2 to Section 48 (1) of the Arbitration Act, which expressly provides that the test as to whether there is a breach of the fundamental policy of Indian law shall not involve a review of the merits of the dispute.”

The defendant cannot be allowed to seek a review of the partial judgment in the form of objections to the execution of the judgment under Article 48.

The court also observed that “Insofar as a challenge based on Section 48 (2)(iii) of the Arbitration Act, the Hon’ble Supreme Court held in the Ssangyong case that only in exceptional cases, which shocks the conscience of the Court, such a claim can be entertained . In the facts of this case, there is nothing that even remotely shocks the conscience of the Court.”

It was argued by the respondent that the arbitration clause contained in the mentioned contracts will not be automatically imported into the deed of assignment concluded by NEC with the petitioner.

The court also rejected this argument and observed that in Chloro Controls India (P) Ltd. vs Severn Trent Water Purification Inc, 2013 The Supreme Court ruled that “when a third party, i.e. a non-signatory party, claims or is sued as being directly affected by a party to the arbitration agreement and there are main and subsidiary agreements, and that third party is a signatory to a subsidiary agreement and not to the agreement parent or principal containing the arbitration clause, then, depending on the facts and circumstances of the case, it can be said that even such a third party can be referred to arbitration.”

The court held that the word “in connection with” has been interpreted by the Supreme Court to cover even subsidiary contracts entered into under or in connection with the main agreement. The relevant clause was read from the main contract which clearly contained a clause whereby the contracts could be assigned to a third party and the arbitration clause contained in the said contracts covered the main agreement.

Based on the above, the court observed that the assignment could not be said to be invalid, therefore it was against the fundamental policy of Indian law.

The court also held that the respondent was not a stranger to the mentioned contracts, in fact they were signed by the respondent. It clearly shows that the defendant has agreed to submit to arbitration any disputes and differences arising out of, but also in connection with, the said contracts. Of course, the defendant being a signatory of those contracts, no damage could be caused to him. by invoking Arbitration.

No reason was presented for the refusal to execute the decision. Accordingly, the present petition was allowed.

Title of the case: Neilan International Co Ltd vs Powerica Ltd

Case reference:COMMERCIAL ARBITRATION PETITION NO. 416 OF 2019

Judgment Date: 27/11/2024

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