# Avitel Post Studioz Limited & Ors v. HSBC PI Holdings (Mauritius) Limited

- **Citation:** 2024 INSC 242
- **Court:** Supreme Court of India
- **Decided:** 2024-03-04
- **Case number:** Civil Appeal Nos. 3835 - 3836 of 2024
- **Bench:** Hrishikesh Roy, Prashant Kumar Mishra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/avitel-post-studioz-limited-ors-v-hsbc-pi-holdings-mauritius-limited-37557
- **Pages:** 23

## Headnote

The High Court facilitated the enforcement of the final Award dated
27.09.2014 issued at Singapore International Arbitration Centre
(SIAC). The appellants' objection to enforcement of the foreign
Award, in terms of s.48 of the Arbitration and Conciliation Act, 1996
was rejected and the High Court had also directed that the order of
attachment against the Award Debtors-appellants shall continue to
operate during the execution proceedings to be undertaken by the
respondent-Award Holder. Whether the High Court was correct in
its decision to reject the objection u/s. 48(2)(b) of Indian Arbitration
Act against enforcement of the foreign Award on the grounds of
arbitral bias and violation of public policy. Further, whether the
ground of bias could be raised at the enforcement stage u/s. 48(2)
(b) for being violative of the "public policy of India" and the "most
basic notions of morality or justice".
Headnotes
Arbitration and Conciliation Act, 1996 - s.48 - Chapter 1
Part II - Foreign Award - According to the appellants-Award
Debtors , the Presiding Arbitrator, CL, one of the threemember Arbitral Tribunal, had failed to make a full and frank
disclosure of material facts and circumstances concerning
conflict of interest and therefore the Award rendered by the
Tribunal presided by CL cannot be enforced as it is against
public policy in terms of s.48(2) (b)of the Indian Arbitration
Act - Propriety:
Held: The Award in the instant matter was passed in Singapore,
a New York Convention Country and notified as a reciprocating
territory by India - Chapter 1 Part II of the Indian Arbitration Act
is applicable in the present case - The parties had expressly
chosen Singapore as the seat of Arbitration - It is the seat court
972
[2024] 3 S.C.R.
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which has exclusive supervisory jurisdiction to determine claims
for a remedy relating to the existence or scope of arbitrator's
jurisdiction or the allegation of bias - A contrary approach would
go against the scheme of the New York Convention which has
been incorporated in India - The jurisdiction was therefore chosen
based on the perceived neutrality by the parties aligning with the
principle of party autonomy - In the instant case, no setting aside
challenge based on bias was raised before the Singapore Courts
by the appellants within the limitation period - None of the grounds,
which are now being pressed, were raised during the arbitration
or in the time period available to the appellants to apply, to set
aside the Award in Singapore - Bonafide challenges to arbitral
appointments have to be made in a timely fashion and should
not be used strategically to delay the enforcement process - In
other words, the Award Debtors should have applied for setting
aside of the Award before the Singapore Courts at the earliest
point of time - As far as allegations of bias against Presiding
Arbitrator CL is concerned, the High Court after adverting to the
IBA guidelines concluded that there was no identity or conflict of
interest between CL and the award holder, or any of its affiliates
including its holding company - In assessment of this Court, the
High Court correctly suggested that CL neither had a duty to
disclose nor did he fail to discharge his legal duty of disclosure
in accepting the assignment as the Presiding Arbitrator - In the
circumstances here, it cannot be inferred that there was a bias
or likelihood of bias of the Presiding Arbitrator - Award Debtors
therefore cannot claim that there is any violation of the public
policy, which would render the foreign award unenforceable in
India - The award debtors have failed to meet the high threshold
for refusal of enforcement of a foreign award u/s. 48 of the Indian
Arbitration Act - Accordingly, the decision given by the High Court
for enforcement/execution of the foreign award stands approved.
[Paras 27, 28, 29, 35.1, 36, 43]
Arbitration - Foreign Award - Bias - Standard of public policy
in India:
Held: Embracing international

## Text

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[2024] 3 S.C.R. 971 : 2024 INSC 242
Avitel Post Studioz Limited & Ors.
v.
HSBC PI Holdings (Mauritius) Limited
(Previously Named Hpeif Holdings 1 Limited)
(Civil Appeal Nos. 3835 - 3836 of 2024)
04 March 2024
[Hrishikesh Roy and Prashant Kumar Mishra, JJ.]
Issue for Consideration
The High Court facilitated the enforcement of the final Award dated
27.09.2014 issued at Singapore International Arbitration Centre
(SIAC). The appellants' objection to enforcement of the foreign
Award, in terms of s.48 of the Arbitration and Conciliation Act, 1996
was rejected and the High Court had also directed that the order of
attachment against the Award Debtors-appellants shall continue to
operate during the execution proceedings to be undertaken by the
respondent-Award Holder. Whether the High Court was correct in
its decision to reject the objection u/s. 48(2)(b) of Indian Arbitration
Act against enforcement of the foreign Award on the grounds of
arbitral bias and violation of public policy. Further, whether the
ground of bias could be raised at the enforcement stage u/s. 48(2)
(b) for being violative of the "public policy of India" and the "most
basic notions of morality or justice".
Headnotes
Arbitration and Conciliation Act, 1996 - s.48 - Chapter 1
Part II - Foreign Award - According to the appellants-Award
Debtors , the Presiding Arbitrator, CL, one of the threemember Arbitral Tribunal, had failed to make a full and frank
disclosure of material facts and circumstances concerning
conflict of interest and therefore the Award rendered by the
Tribunal presided by CL cannot be enforced as it is against
public policy in terms of s.48(2) (b)of the Indian Arbitration
Act - Propriety:
Held: The Award in the instant matter was passed in Singapore,
a New York Convention Country and notified as a reciprocating
territory by India - Chapter 1 Part II of the Indian Arbitration Act
is applicable in the present case - The parties had expressly
chosen Singapore as the seat of Arbitration - It is the seat court
972
[2024] 3 S.C.R.
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which has exclusive supervisory jurisdiction to determine claims
for a remedy relating to the existence or scope of arbitrator's
jurisdiction or the allegation of bias - A contrary approach would
go against the scheme of the New York Convention which has
been incorporated in India - The jurisdiction was therefore chosen
based on the perceived neutrality by the parties aligning with the
principle of party autonomy - In the instant case, no setting aside
challenge based on bias was raised before the Singapore Courts
by the appellants within the limitation period - None of the grounds,
which are now being pressed, were raised during the arbitration
or in the time period available to the appellants to apply, to set
aside the Award in Singapore - Bonafide challenges to arbitral
appointments have to be made in a timely fashion and should
not be used strategically to delay the enforcement process - In
other words, the Award Debtors should have applied for setting
aside of the Award before the Singapore Courts at the earliest
point of time - As far as allegations of bias against Presiding
Arbitrator CL is concerned, the High Court after adverting to the
IBA guidelines concluded that there was no identity or conflict of
interest between CL and the award holder, or any of its affiliates
including its holding company - In assessment of this Court, the
High Court correctly suggested that CL neither had a duty to
disclose nor did he fail to discharge his legal duty of disclosure
in accepting the assignment as the Presiding Arbitrator - In the
circumstances here, it cannot be inferred that there was a bias
or likelihood of bias of the Presiding Arbitrator - Award Debtors
therefore cannot claim that there is any violation of the public
policy, which would render the foreign award unenforceable in
India - The award debtors have failed to meet the high threshold
for refusal of enforcement of a foreign award u/s. 48 of the Indian
Arbitration Act - Accordingly, the decision given by the High Court
for enforcement/execution of the foreign award stands approved.
[Paras 27, 28, 29, 35.1, 36, 43]
Arbitration - Foreign Award - Bias - Standard of public policy
in India:
Held: Embracing international standards in arbitration would foster
trust, certainty, and effectiveness in the resolution of disputes on
a global scale - In India, an internationally recognized narrow
standard of public policy must be adopted, when dealing with the
aspect of bias - It is only when the most basic notions of morality
[2024] 3 S.C.R.
973
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
or justice are violated that this ground can be attracted - The
Supreme Court in Ssangyong Engineering & Construction Co. Ltd.
v. National Highways Authority of India (NHAI) had noted that the
ground of most basic notions of morality or justice can only be
invoked when the conscience of the Court is shocked by infraction
of fundamental notions or principles of justice - There can be no
difficulty in holding that the most basic notions of morality and
justice under the concept of 'public policy' would include bias -
However, Courts must endeavor to adopt international best practices
instead of domestic standards, while determining bias - It is only
in exceptional circumstances that enforcement should be refused
on the ground of bias. [Paras 25 and 26]
Arbitration - Foreign Award - Bias - Challenge at enforcement
stage:
Held: If the ground of arbitral bias is raised at the enforcement
stage, it must be discouraged by the Courts to send out a clear
message to the stakeholders that Indian Courts would ensure
enforcement of a foreign Award unless it is demonstrable that there
is a clear violation of morality and justice - The determination of
bias should only be done by applying international standards -
Refusal of enforcement of foreign award should only be in a rare
case where, non-adherence to International Standards is clearly
demonstrable. [Para 42]
Case Law Cited
In Re: Interplay Between Arbitration Agreements under
the Arbitration and Conciliation Act,1996 and the Indian
Stamp Act,1899 [2023] 15 SCR 1081 : 2023 INSC
1066 - followed.
Ssangyong Engineering & Construction Co. Ltd. v.
National Highways Authority of India (NHAI) [2019] 7
SCR 522 : (2019) 15 SCC 131 - relied on.
Avitel Post Studioz v HSBC PI Holdings [2020] 10 SCR
91 : (2021) 4 SCC 713; NN Global Mercantile Private
Ltd. v. M/s Indo Unique Flame Ltd. [2023] 9 SCR 285 :
(2023) 7 SCC 1; Renusagar Power Co. Ltd. v. General
Electric Co. [1993] Suppl. 3 SCR 22 : (1994) Supp (1)
SCC 644; Union of India v. Vedanta [2020] 12 SCR
1 : (2020) 10 SCC 1; Shri Lal Mahal Ltd. v. Progetto
974
[2024] 3 S.C.R.
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Grano SpA [2013] 13 SCR 599 : (2014) 2 SCC 433;
Vijay Karia v. Prysmian Cavi E. Sistemi SRL [2020] 4
SCR 336 : (2020) 11 SCC 1 - referred to.
Perma Container(UK) Line Limited v. Perma Container
Line(India) Ltd. 2014 SCC OnLine Bom 575 - referred
to.
J. Burrough, Richardson v. Mellish (1824) 2 Bing. 229
at 252; Enderby Town Football Club Ltd. v. The Football
Association Ltd. [1971] Ch 591; Parsons & Whittemore
Overseas Co. v. Societe Generale de L'Industrie du
Papier 508 F.2d 969 (1974); Halliburton Co. v Chhub
Bermuda Insurance Ltd. [2020] UKSC 48; Hancock
v Hancock Prospecting Pty Ltd. [2022] NSWSC 724;
Dutch Shipowner v. German Cattle and Meat Dealer,
Bundesgerichtshof, Germany 1 February 2001, XXIX
Y.B.Com. Arb. 700 (2004) - referred to.
Books and Periodicals Cited
Travaux Préparatoires, Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (New York,
1958) Commission on International Trade Law (United
Nations); Nigel Blackaby KC, and others, Redfern
and Hunter on International Arbitration (7th Edn,
OUP 2022), 594; Article 1514 of French Code of Civil
Procedure 1981; Gary Born, International Commercial
Arbitration(3rd ed,2021) 2838; Robert Briner, Philosophy
and Objectives of the Convention' in Enforcing
Arbitration Awards under the New York Convention.
Experience and Prospects (United Nations 1999);
George A Bermann, 'Recognition and Enforcement
of Foreign Arbitral Awards: The Interpretation and
Application of the New York Convention by National
Courts' in George A. Bermann(ed) Recognition and
Enforcement of Foreign Arbitral Awards (Springer 2018)
60; Committee On International Commercial Arbitration,
'Application Of Public Policy As A Ground For Refusing
Recognition Or Enforcement Of International Arbitral
Awards' In International Law Association Report Of
The Seventieth Conference(New Delhi 2000); Fali
Nariman and others, 'The India Resolutions for the
1958 Convention on the Recognition and Enforcement
of Foreign Awards' in Dushyant Dave and others(ed)
[2024] 3 S.C.R.
975
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
Arbitration in India (Kluwer 2021); Reinmar Wolff (ed),
A Review of New York Convention: Article-by-Article
Commentary (2nd edn Beck/Hart, 2019) 352; Stavroula
Angoura, 'Arbitrator's Impartiality Under Article V(1)(d)
of the New York Convention' (2019) 15 (1) AIAJ 29;
Gary Born(n 12)3937; William W. Park, 'Arbitrator Bias'
(2015) TDM 12; Sumeet Kachwaha, 'The Rule Against
Bias and the Jurisprudence of Arbitrator's Independence
and Impartiality'(2021) 17(2) AIAJ 104; Vibhu Bakhru J,
'Impartiality and Independence of the Arbitral Tribunal' in
Shashank Garg(ed),Arbitrator's Handbook (Lexis Nexis
2022); Gary Born (n 12) 3946; AV Dicey and L. Collins,
Dicey, Morris & Collins on the Conflict of laws(15th edn,
Sweet and Maxwell 2018) [16-36]; Oscar Wilde, Act III,
Lady Windermere's Fan, 1893 - referred to.
List of Acts
Arbitration and Conciliation Act, 1996.
List of Keywords
Arbitration; Foreign award; Seat of Arbitration; Exclusive
supervisory jurisdiction; Existence or scope of arbitrator's
jurisdiction; Bias; Allegation of bias; New York Convention; Arbitral
appointments; Bonafide challenges to arbitral appointments;
Conflict of interest; Legal duty of disclosure; Enforcement of foreign
award; Enforcement process; Violation of the public policy; Basic
notions of morality or justice; Principles of justice; International
best practices; Domestic Standard; Refusal of enforcement of
foreign award.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3835-3836
of 2024
From the Judgment and Order dated 25.04.2023 of the High Court
of Judicature at Bombay in AP No.833 of 2015 and NOM No.2475
of 2016
Appearances for Parties
Mukul Rohatgi, Vikram Nankani, Sr. Advs., Shridhar Y. Chitale, Sumeet
Nankani, Karan Bharihoke, Ms. Manali Singhal, Ankur Yadav, Advs.
for the Appellant.
976
[2024] 3 S.C.R.
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Neeraj Kishan Kaul, Darius Khambata, Nikhil Sakhardande, Sr. Advs.,
Rajendra Barot, Ms. Priyanka Shetty, Ms. Sherna Doongaji, Ayush
Chaddha, Dhaval Vora, Shanay Shroff, Dhruv Sharma, Raghav
Agarwal, Ms. Sonali Jain, Advs. for the Respondent.
Judgment / Order of the Supreme Court
Order
1.
Delay condoned.
2.
Leave granted.
3.
Heard Mr. Mukul Rohatgi and Mr. Vikram Nankani, learned senior
counsel appearing for the appellants (Award Debtors). Also heard
Mr. Neeraj Kishan Kaul and Mr. Darius Khambata, learned senior
counsel appearing for the respondent (Award Holder).
4.
The challenge in these appeals is to the order dated 25.04.2023 in
the Arbitration Petition No. 833 of 2015 and Notice of Motion No. 2475
of 2016 respectively whereunder, the High Court has facilitated the
enforcement of the final Award dated 27.09.2014 issued in the SIAC
Arbitration No. 088 of 2012. The appellants' objection to enforcement
of the foreign Award, in terms of Section 48 of the Arbitration and
Conciliation Act, 1996 (for short "Indian Arbitration Act")was rejected
and the High Court also directed that the order of attachment against
the Award Debtors shall continue to operate during the execution
proceedings to be undertaken by the respondent. Accordingly, the
Award Debtors were called upon to place on record disclosure
affidavits as regards their properties.
Facts
5.
This case has a chequered history and it is essential to note the
background facts for the present challenge.
5.1. The respondent-HSBC PI Holdings (Mauritius) Limited (for
short "HSBC") is a company incorporated under the laws of
Mauritius. The appellant No. 1 Avitel Post Studioz Limited (for
short "Avitel India") is a company incorporated under the laws
of India and it is the parent company of Avitel Group. It holds
entire issued capital of Avitel Holdings Limited, which in turn,
holds entire issued share capital of Avitel Post Studioz FZ LLC.
Appellant No. 2 is the founder of Avitel Post Studioz Limited,
[2024] 3 S.C.R.
977
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
being its Chairman and Director, while Appellant Nos. 3 and 4
are his sons, who are directors of Appellant No. 1.
5.2. On 21.4.2011, a Share Subscription Agreement was entered
between HSBC & Avitel India whereby HSBC made an
investment in the equity capital of Avitel India for a consideration
of US 60 million dollars to acquire 7.8% of its paid-up capital. This
agreement contained an arbitration clause which provided that the
disputes shall be finally resolved at the Singapore International
Arbitration Centre (SIAC). Singapore was designated as the
seat of arbitration and Part I of the Indian Arbitration Act was
excluded, except Section 9 thereof. Thereafter, the parties
also entered into a Shareholders' Agreement(6.5.2011) which
defined the relationship between the parties and contained an
identical arbitration clause.
5.3. It is the case of HSBC(Award Holder) that the appellants at a
very advanced stage made certain representations to HSBC
stating that the investment of US$ 60 Million was required
to service a significant contract with the British Broadcasting
Corporation (BBC).
5.4. Following the investment, according to HSBC, the appellants
ceased to provide any information regarding the contract with
BBC, despite numerous follow-up attempts. At this stage,
HSBC engaged their independent investigation agency, where
it was discovered that the purported BBC Contract was nonexistent and the invested amount was siphoned off to different
Companies.
5.5. On 11.05.2012, HSBC invoked the arbitration clause under the
SIAC Rules and claimed damages of US$ 60 million from the
appellants. On 14.5.2012, SIAC Appointed Mr. Thio Shen Yi,
SC as an Emergency Arbitrator. On 17.5.2012, the appellants'
challenge to the appointment of the Emergency Arbitrator was
considered by SIAC & Rejected. On 28.05.2012 and 29.5.2012,
the emergency arbitrator passed two interim Awards, in favour of
HSBC inter alia, directing the appellants to refrain from disposing
of/diminishing the value of their assets upto US$ 50 million. On
27.7.2012, the Emergency Arbitrator made an amendment to
Interim Awards granting further relief to HSBC by rejecting to
desist investigations against Avitel Dubai and Avitel Mauritius.
978
[2024] 3 S.C.R.
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5.6. According to HSBC, the appellants made several attempts
to delay and frustrate the proceedings. The arbitral tribunal
consisted of three members. Mr. Christopher Lau, SC, was
the Chairman, while Justice F.I. Rebello (retired) and Dr.
Michael Pryles were members of the arbitral tribunal. On
27.09.2014, the tribunal rendered its final award and directed
the appellants to pay US$ 60 million as damages for fraudulent
misrepresentations.
5.7. The respondent had initiated proceedings under Section 9 of
the Indian Arbitration Act before the Bombay High Court. A
direction was issued to the appellants to deposit US$ 60 million
for the purpose of enforcement of the Award. Aggrieved by
the same, the appellants filed a Special Leave Petition before
this Court where it was contended, inter alia, that the dispute
is non-arbitrable under Indian law as it involved allegations
of fraud which included serious criminal offenses such as
forgery and impersonation. Settling the law on the arbitrability
of fraud, this Court in the earlier round in Avitel Post Studioz
v HSBC PI Holdings1, held that the dispute was arbitrable and
that HSBC had a strong prima facie case in the enforcement
proceedings, in the context of Section 9 proceedings in which
HSBC had sought maintenance of the entire claim amount in
Avitel's bank account.
5.8. Since the appellants failed to abide by the direction given by
this Court to deposit the amount, a contempt proceeding was
initiated against them. On 11.07.2022, this Court found that Avitel
had deliberately and willfully disobeyed its order and hence, the
appellants were directed to remain present before this Court.
The Appellant Nos.2 to 4 however went abroad defying the
direction given by this Court, as a result of which, warrants and
look-out notices were also issued, with a further direction to the
Ministry of External Affairs and Central Bureau of Investigation
for issuance of Red-Corner Notice. Ultimately, appellant Nos.2 to
4 surrendered and despite tendering an unconditional apology,
this Court refused to accept the same and for their conduct,
appellant Nos. 2 to 4 were sentenced to imprisonment.
1
[2020] 10 SCR 791 : (2021) 4 SCC 713
[2024] 3 S.C.R.
979
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
Submissions
6.
According to the appellants, the Presiding Arbitrator, Mr. Christopher
Lau of the three-member Arbitral Tribunal, had failed to make a full
and frank disclosure of material facts and circumstances concerning
conflict of interest and therefore the Award rendered by the Tribunal
presided by Mr. Lau cannot be enforced as it is against public policy
in terms of Section 48(2)(b)of the Indian Arbitration Act.
7.
The counsel for the appellants refers to the IBA Guidelines on Conflict
of Interest in International Arbitration, 2004 ("IBA Guidelines") along
with the Red, Orange and Green lists appended thereto covering
matters concerning disclosure and conflict of interest to argue that
the High Court ought to have refused enforcement of the Award. The
specific contention is that the Presiding Arbitrator failed to disclose
his conflict of interest to adjudicate the dispute. According to the
Award Debtors the independence and impartiality of the Presiding
Arbitrator was compromised, as per General Standard 3 of the IBA
Guidelines.
8.
On the other hand, learned counsel for the respondent (Award
Holder) would submit that the concerned party here is HSBC PI
Holdings (Mauritius) Limited, which is a subsidiary of HSBC Holdings
PLC (United Kingdom). The other subsidiary is HSBC (Singapore)
Nominees Pte Ltd. which is alleged to have a contractual association
with Wing Tai. The HSBC (Singapore) held 6.29% of Wing Tai's equity
capital on a trustee/nominee basis, as of 15.09.2014. But the said
Wing Tai has no relationship with the Award Holder and is not part
of the HSBC Group.
9.
Insofar as the Presiding Arbitrator Mr. Christopher Lau is concerned,
the respondent submits that he has been an independent nonexecutive Director of Wing Tai since 28.10.2013 and also the
Chairman of the Audit and the Risk Committee of Wing Tai. But Mr.
Lau is not an employee of Wing Tai and therefore it is contended
that it is wrong to say that he cannot discharge responsibility as
an independent arbitrator or was incapacitated in any manner, in
rendering the final Award dated 27.09.2014.
10. Initially, the Award Holders argued before the High Court that bias
could not be raised under the concept of "public policy of India".
However, later on, submissions were made to demonstrate that
980
[2024] 3 S.C.R.
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even if it is accepted for the sake of argument that the issue could
be raised at the stage of enforcement, no disclosure was required
on the part of the arbitrator.
11. Before this Court, the appellants attempted to raise an additional
challenge to the award under Section 48(1)(b) of the Indian Arbitration
Act on account of 'inability to present their case'.
12. Another ground mentioned in the SLP was to consider the effect
of the dictum of the five-judge bench of this Court in NN Global
Mercantile Private Ltd. v M/s Indo Unique Flame Ltd2 (for short "NN
Global") delivered on 25.04.2023 as per which the Share Subscription
Agreement being insufficiently stamped would be unenforceable in
India. However, during the pendency of the present proceedings, the
Supreme Court in In Re: Interplay Between Arbitration Agreements
under the Arbitration and Conciliation Act,1996 and the Indian Stamp
Act,18993 delivered on 13.12.2023 has overruled the decision in NN
Global (supra). The 7-judge bench had noted, inter alia, that the
purpose of the Stamp Act,1899 is to protect the interests of revenue
and not arm litigants with a weapon of technicality by which they
delay the adjudication of the lis. This may be the reason why the
Counsel chose not to orally argue on this point.
13. The two grounds noted above, need not detain us as the fundamental
issue that requires determination is whether enforcement can be
refused on the ground of bias. In these proceedings, challenging
the High Court's judgment, the appellants reiterate their contention
that the enforcement of the award is impermissible on the ground
of arbitral bias and is contrary to the "public policy of India" as per
Section 48(2)(b) of the Indian Arbitration Act.
Discussion
14. Against this background, the consideration to be made in these
matters is whether the High Court was correct in its decision to
reject the objection under Section 48(2)(b) of Indian Arbitration Act
against enforcement of the foreign Award on the grounds of arbitral
bias and violation of public policy. This raises a further question as
to whether the ground of bias could be raised at the enforcement
2
[2023] 9 SCR 285 : (2023) 7 SCC 1
3
[2023] 15 SCR 1081 : (2023) INSC 1066
[2024] 3 S.C.R.
981
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
stage under Section 48(2)(b) for being violative of the "public policy
of India" and the "most basic notions of morality or justice"?
15. India was one of the earliest signatories to the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 1958 (for
short "New York Convention")4. The New York Convention superseded
the Geneva Convention of 1927 to facilitate the enforcement of
foreign Arbitral Awards5. Article V(2) of the New York Convention
reads as under:
"2. Recognition and enforcement of an arbitral award may
also be refused if the competent authority in the country
where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable
of settlement by arbitration under the law of that
country; or
(b) The recognition or enforcement of the award would
be contrary to the public policy of that country."
16. The precursors to the New York Convention on the contrary provided
for an expansive scope for invoking the public policy ground based
on the violation of the "fundamental principles of the law". Although
the notion that 'public policy' is 'a very unruly horse' has gained
traction over the years6, one would also do well to remember
the words of Lord Denning who said that, "With a good man in
the saddle, the unruly horse can be kept in control."7 This would
suggest that a proper understanding of this branch of law by the
horse rider would be necessary. In that context, one of the earliest
cases that dealt with the aspect of "public policy" and the general
pro-enforcement bias of the New York Convention was the decision
in Parsons & Whittemore Overseas Co. v. Societe Generale de
L'Industrie du Papier,8 where the United States Court of Appeals,
Second Circuit noted:
4
Ratified on 13.7.1960
5
Travaux Préparatoires, Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York, 1958) Commission on International Trade Law' (United Nations)
6
J. Burrough, Richardson v. Mellish, (1824) 2 Bing. 229 at 252
7
Enderby Town Football Club Ltd. v. The Football Association Ltd., [1971] Ch 591
8
508 F.2d 969 (1974)
982
[2024] 3 S.C.R.
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"8. ...The general pro-enforcement bias informing the
Convention and explaining its supersession of the Geneva
Convention points toward a narrow reading of the public
policy defense. An expansive construction of this defense
would vitiate the Convention's basic effort to remove
preexisting obstacles to enforcement... Additionally,
considerations of reciprocity - considerations given
express recognition in the Convention itself- counsel
courts to invoke the public policy defense with caution
lest foreign courts frequently accept it as a defense to
enforcement of arbitral awards rendered in the United
States.
9. We conclude, therefore, that the Convention's public
policy defense should be construed narrowly. Enforcement
of foreign arbitral awards may be denied on this basis only
where enforcement would violate the forum state's most
basic notions of morality and justice."
17. The above decision has been followed in various jurisdictions
including the Supreme Court of India in Renusagar Power Co. Ltd.
v. General Electric Co9. The articulation of the "forum State's most
basic notions of morality and justice" has been legislatively adopted
in the Indian Arbitration Act,1996. The legal framework concerning
enforcement of certain foreign awards in International Commercial
Arbitration is contained in Part II of the said Act. In this jurisdiction,
we must underscore that minimal judicial intervention to a foreign
award is the norm and interference can only be based on the
exhaustive grounds mentioned under Section 48.10 A review on the
merits of the dispute is impermissible11. This Court in Vijay Karia v.
Prysmian Cavi E. Sistemi SRL,12 had noted that Section 50 of the
Indian Arbitration Act,1996 does not provide an appeal against a
foreign award enforced by a judgment of a learned Single Judge of
a High Court and therefore the Supreme Court should only entertain
the appeal with a view to settle the law. It was noted that the party
9
[1993] Suppl. 3 SCR 22 : 1994 Supp (1) SCC 644
10
Union of India v. Vedanta, [2020] 12 SCR 1 : (2020) 10 SCC 1
11
Shri Lal Mahal Ltd. v Progetto Grano SpA [2013] 13 SCR 599 : (2014) 2 SCC 433
12
[2020] 4 SCR 336 : (2020) 11 SCC 1
[2024] 3 S.C.R.
983
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
resisting enforcement can only have "one bite at the cherry" and when
it loses in the High Court, the limited scope for interference could
be merited only in exceptional cases of "blatant disregard of Section
48". This principle of pro-enforcement bias was further entrenched
by the Supreme Court in Union of India v Vedanta13.
18. At this point, we may also note that Courts in some countries have
recognized that when applying their own public policy to Convention
Awards, they should give it an international and not a domestic
dimension14. The Arbitration legislation in France15, for instance,
makes an explicit distinction between national and international
public policy, limiting refusal of enforcement only to the latter ground.
Scholars have noted that the New York Convention's structure and
objectives argue strongly against the notion that reliance should be
placed on local public policies without international limitations.16 The
objective behind such a distinction is to make it less difficult to allow
enforcement on public policy grounds. Most Courts have interpreted
the public policy exception extremely narrowly17.
19. The Indian Supreme Court in Renusagar (supra) had noted that
there is no workable definition of international public policy, and
"public policy" should thus be construed to be the "public policy of
India" by giving it a narrower meaning. Later on, in Shri Lal Mahal
Ltd. v Progetto Grano SpA18, the Supreme Court held that the wider
meaning given to 'public policy of India' in the domestic sphere under
Section 34(2)(b)(ii) would not apply where objection is raised to
the enforcement of the Award under Section 48(2)(b) of the Indian
Arbitration Act. This would indicate that the grounds for resisting
enforcement of a foreign award are much narrower than the grounds
available for challenging a domestic award under Section 34 of the
Indian Arbitration Act.
13
[2020] 12 SCR 1 : (2020) 10 SCC 1
14
Nigel Blackaby KC, and others, Redfern and Hunter on International Arbitration (7th Edn, OUP 2022),
594
15
Article 1514 of French Code of Civil Procedure 1981
16
Gary Born, International Commercial Arbitration(3rd ed,2021) 2838; Robert Briner, Philosophy and
Objectives of the Convention' in Enforcing Arbitration Awards under the New York Convention.
Experience and Prospects (United Nations 1999).
17
George A Bermann, 'Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and
Application of the New York Convention by National Courts' in George A. Bermann(ed) Recognition and
Enforcement of Foreign Arbitral Awards (Springer 2018) 60
18
[2013] 13 SCR 599 : (2014) 2 SCC 433
984
[2024] 3 S.C.R.
Digital Supreme Court Reports
20. At this point, we may also benefit by noting that the International
Law Association issued recommendations19 at a conference held
in New Delhi in 2002 on international commercial arbitration and
advocated using only narrow and international standards, while
dealing with "public policy". The recommendations have been
regarded as reflective of best international practices. The ILA also
defined international public policy as follows:
"(i) fundamental principles, pertaining to justice or
morality, that the State wishes to protect even when
it is not directly concerned;
(ii)
rules designed to serve the essential political, social
or economic interests of the State, these being known
as 'lois de police' or 'public policy rules'; and
(iii.) the duty of the State to respect its obligations towards
other States or international organizations."
21. Being a signatory to the New York Convention, we must therefore
adopt an internationalist approach20. What follows from the above
is that there is a clear distinction between the standards of public
policy applicable for domestic arbitration and international commercial
arbitration. Proceeding with the aforedeclared proposition to have
a narrow meaning to the doctrine of public policy and applying an
international outlook, let us now hark back to whether a foreign Award
can be refused enforcement on the ground of bias.
22. Even though the New York Convention does not explicitly mention
"bias", the possible grounds for refusing recognition of a foreign
award are contained in Article V(1)(d)(irregular composition of
arbitral tribunal), Article V(1)(b) (due process) and the public policy
defence under Article V(2)(b). Courts across the world have applied
a higher threshold of bias to prevent enforcement of an Award than
the standards set for ordinary judicial review21. Therefore, Arbitral
19
Committee On International Commercial Arbitration, 'Application Of Public Policy As A Ground For
Refusing Recognition Or Enforcement Of International Arbitral Awards' In International Law Association
Report Of The Seventieth Conference(New Delhi 2000)
20
Fali Nariman and others, 'The India Resolutions for the 1958 Convention on the Recognition and
Enforcement of Foreign Awards' in Dushyant Dave and others(ed) Arbitration in India (Kluwer 2021)
21
Reinmar Wolff (ed), A Review of New York Convention: Article-by-Article Commentary (2nd edn Beck/
Hart, 2019) 352
[2024] 3 S.C.R.
985
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
awards are seldom refused recognition and enforcement, considering
the existence of a heightened standard of proof for non - recognition
and enforcement of an award, based on alleged partiality22. It invokes
a higher threshold than is applicable in cases of removal of the
arbitrator.23 This is for the reasons that, greater risk, efforts, time,
and expenses are involved in the non-recognition of an award as
against the removal of an arbitrator during the arbitral proceedings.
23. What is also essential to note is that Courts across the world do
not adopt a uniform test while dealing with allegations of bias24. The
standards for determining bias vary across different legal systems
and jurisdictions25. English Courts26, for instance, adopt the "informed
or fair minded" observer test to conclude whether there is a "real
possibility of bias". Australia27 adopts the "real danger of bias" test and
Singapore28 prefers the standard of "reasonable suspicion" rejecting
the "real danger of bias" test. Therefore, the outcome of a challenge
on the ground of bias would vary, depending on domestic standards.
24. Cautioning against applying domestic standards at the enforcement
stage, Gary Born29 emphasizing on the adherence to international
standards, makes the following observation:
"In light of developing sources of international standards
with regard to arbitrators' conflict of interest, it should
be possible to identify and apply international minimum
standards of impartiality and independence...
More generally, in considering whether to deny recognition
of an award under Article V, national courts should not
apply domestic standards of independence and impartiality
without regard to their international context. Although
22
Stavroula Angoura, 'Arbitrator's Impartiality Under Article V(1)(d) of the New York Convention' (2019) 15
(1) AIAJ 29
23
Gary Born(n 12)3937
24
William W. Park, 'Arbitrator Bias' (2015) TDM 12; Sumeet Kachwaha,'The Rule Against Bias and the
Jurisprudence of Arbitrator's Independence and Impartiality'(2021) 17(2) AIAJ 104
25
Vibhu Bakhru J, 'Impartiality and Independence of the Arbitral Tribunal' in Shashank Garg(ed),Arbitrator's
Handbook (Lexis Nexis 2022)
26
Halliburton Co. v Chhub Bermuda Insurance Ltd [2020] UKSC 48
27
Hancock v Hancock Prospecting Pty Ltd [2022] NSWSC 724
28
Re Shankar Alan s/o Anant Kulkarni [2007] 1 SLR(R) 85 at [75]-[76]
29
Gary Born (n 12) 3946
986
[2024] 3 S.C.R.
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national standards of independence and impartiality may
be relevant to identifying international standards, just
as domestic standards of procedural fairness can be
relevant under Article V(1)(b), these standards should be
considered with caution in international contexts. ....Only
in rare cases should domestic standards of independence
or impartiality be relied upon to produce a different result
from that required by international standards".
25. Embracing international standards in arbitration would foster trust,
certainty, and effectiveness in the resolution of disputes on a global
scale. The above discussion would persuade us to say that in India,
we must adopt an internationally recognized narrow standard of public
policy, when dealing with the aspect of bias. It is only when the most
basic notions of morality or justice are violated that this ground can
be attracted. This Court in Ssangyong Engineering & Construction
Co. Ltd. v. National Highways Authority of India (NHAI)30 had noted
that the ground of most basic notions of morality or justice can only
be invoked when the conscience of the Court is shocked by infraction
of fundamental notions or principles of justice.
26. In view of the above discussion, there can be no difficulty in holding
that the most basic notions of morality and justice under the concept
of 'public policy' would include bias. However, Courts must endeavor
to adopt international best practices instead of domestic standards,
while determining bias. It is only in exceptional circumstances that
enforcement should be refused on the ground of bias.
27. Let us now turn to the present facts. The Award in this matter was
passed in Singapore, a New York Convention Country and notified31
as a reciprocating territory by India. Chapter 1 Part II of the Indian
Arbitration Act is applicable in the present case. The parties had
expressly chosen Singapore as the seat of Arbitration. It is the seat
court which has exclusive supervisory jurisdiction to determine
claims for a remedy relating to the existence or scope of arbitrator's
jurisdiction or the allegation of bias32. A contrary approach would go
30
[2019] 7 SCR 522 : (2019) 15 SCC 131
31
Gazette Notification S.O.542(E) dated 06.7.1999
32
AV Dicey and L. Collins, Dicey, Morris & Collins on the Conflict of laws(15th edn, Sweet and Maxwell
2018) [16-36]
[2024] 3 S.C.R.
987
Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius)
Limited (Previously Named Hpeif Holdings 1 Limited)
against the scheme of the New York Convention which has been
incorporated in India. The jurisdiction was therefore chosen based
on the perceived neutrality by the parties aligning with the principle
of party autonomy. Interestingly in the present case, no setting aside
challenge based on bias was raised before the Singapore Courts
by the appellants within the limitation period. In this context, the
Bombay High Court in a judgment in Perma Container (UK) Line
Limited v Perma Container Line (India) Ltd33 had noted that since the
objection of bias was not raised in appropriate proceedings under
the English Arbitration Act,1996, it could not be raised at the postaward Stage. Similarly, this Court in Vijay Karia (supra) had noted
that no challenge was made to the foreign award under the English
Arbitration Law, even though the remedy was available. Rejecting
the challenge to the award on the ground of bias, the Court in Vijay
Karia (supra) remarked that the Award Debtors were indulging in
"speculative litigation with the fond hope that by flinging mud on a
foreign arbitral award, some of the mud so flung would stick". Similar
view has also been taken by the German Supreme Court in Shipowner
(Netherlands) v Cattle and Meat Dealer (Germany)34, where it was
held that the objection of bias must be first raised in the Country
of origin of the Award and only if the objection was rejected or was
impossible to raise, could it be raised at the time of enforcement.
28. In the present case also, the Award Holders had challenged the
appointment of Mr. Christopher Lau SC and Dr Pryles before SIAC
only on the ground that the Tribunal had intentionally fixed November
2013 for hearing knowing that it coincided with the Diwali vacation
and that the Indian counsel would therefore not be available. This
challenge was dismissed by the SIAC Committee of the Court of
Arbitration in its decision dated September 13, 2014. Therefore,
none of the other grounds now being pressed were raised during
the arbitration or in the time period available to the appellants to
apply, to set aside the Award in Singapore.
29. It needs emphasizing that bonafide challenges to arbitral appointments
have to be made in a timely fashion and should not be used
strategically to delay the enforcement process. In other words, the
33
2014 SCC OnLine Bom 575
34
Dutch Shipowner v. German Cattle and Meat Dealer, Bundesgerichtshof, Germany, 1 February 2001,
XXIX Y.B.Com. Arb. 700 (2004)
988
[2024] 3 S.C.R.
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Award Debtors should have applied for setting aside of the Award
before the Singapore Courts at the earliest point of time.
Implications of the IBA Guidelines
30. The High Court in this case applied the reasonable third-person
test contained in the IBA Guidelines to conclude that there is no
requirement of disclosure and bias. The IBA Guidelines are a collective
effort of the arbitration community to define as to what constitutes
bias.