# VIJAY KARIA & ORS v. PRYSMIAN CAVI E SISTEMI SRL & ORS

- **Citation:** [2020] 4 S.C.R. 336
- **Court:** Supreme Court of India
- **Decided:** 2020-02-13
- **Case number:** Civil Appeal No. 1544 of 2020
- **Bench:** R. F. Nariman, Aniruddha Bose, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vijay-karia-ors-v-prysmian-cavi-e-sistemi-srl-ors-34131
- **Pages:** 123

## Headnote

Arbitration and Conciliation Act, 1996: s.48(1)(b) -
Enforcement of foreign awards - Violation of provisions of FEMA
- Whether amounts to breach of Public Policy of India - If a
particular act violates any provision of FEMA or the Rules framed
thereunder, permission of the Reserve Bank of India may be obtained
post-facto if such violation can be condoned - Neither the award,
nor the agreement being enforced by the award, can, therefore, be
held to be of no effect in law - This being the case, a rectifiable
breach under FEMA can never be held to be a violation of the
fundamental policy of Indian law - Further, even if the Reserve
Bank of India were to take action under FEMA, the non-enforcement
of a foreign award on the ground of violation of a FEMA Regulation
or Rule would not arise as the award does not become void on that
count - The fundamental policy of Indian law, must amount to a
breach of some legal principle or legislation which is so basic to
Indian law that it is not susceptible of being compromised -
"Fundamental Policy" refers to the core values of India's public
policy as a nation, which may find expression not only in statutes
but also time-honoured, hallowed principles which are followed by
the Courts - Judged from this point of view, resistance to the
enforcement of a foreign award cannot be made on this ground.
Arbitration and Conciliation Act, 1996: s.48(1)(b) -
Enforcement of foreign awards - Refusal at the request of party if
that party furnishes to the court that he was unable to present his
case - Expression "was otherwise unable to present his case" -
Interpretation of - Held: Expression "was otherwise unable to
present his case" occurring in s.48(1)(b) cannot be given an
expansive meaning and would have to be read in the context and
colour of the words preceding the said phrase - This expression
[2020] 4 S.C.R. 336
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would be a facet of natural justice, which would be breached only
if a fair hearing was not given by the arbitrator to the parties -
Read along with the first part of s.48(1)(b), this expression would
apply at the hearing stage and not after the award is delivered -
Such breach should be clearly made out on the facts of a given
case, and that awards must always be read supportively with an
inclination to uphold rather than destroy, given the minimal
interference possible with foreign awards under s.48 of the Act -
Mere failure to consider a material issue would not fall within the
rubric of s.48(1)(b) - However, if a foreign award fails to determine
a material issue which goes to the root of the matter or fails to
decide a claim or counter- claim in its entirety, the award shocking
the conscience of the Court may be set aside on the ground of
violation of the public policy of India, in that it would then offend a
most basic notion of justice in this country - Poor reasoning, by
which a material issue or claim is rejected, can never fall in this
class of cases - The foreign award must be read as a whole, fairly,
and without nit-picking - In the instant case, when award is read as
a whole, it has addressed the basic issues raised by the parties and
has, in substance, decided the claims and counter-claims of the
parties, its enforcement must follow.
Arbitration and Conciliation Act, 1996: s.48 - Recognition
and enforcement of foreign awards - Scope of interference under
Art.136 - The legislative policy so far as recognition and
enforcement of foreign awards is that an appeal is provided against
a judgment refusing to recognise and enforce a foreign award but
not the other way around (i.e. an order recognising and enforcing
an award) - This is because the policy of the legislature is that
there ought to be only one bite at the cherry in a case where
objections are made to the foreign award on the extremely narrow
grounds contained in s.48 of the Act and which have been rejected
- This is in consonance with the fact that India is a signatory to the
Convention on the Recogn

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SUPREME COURT REPORTS
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VIJAY KARIA & ORS.
v.
PRYSMIAN CAVI E SISTEMI SRL & ORS.
(Civil Appeal No. 1544 of 2020)
FEBRUARY 13, 2020
[R. F. NARIMAN, ANIRUDDHA BOSE AND
V. RAMASUBRAMANIAN, JJ.]
Arbitration and Conciliation Act, 1996: s.48(1)(b) -
Enforcement of foreign awards - Violation of provisions of FEMA
- Whether amounts to breach of Public Policy of India - If a
particular act violates any provision of FEMA or the Rules framed
thereunder, permission of the Reserve Bank of India may be obtained
post-facto if such violation can be condoned - Neither the award,
nor the agreement being enforced by the award, can, therefore, be
held to be of no effect in law - This being the case, a rectifiable
breach under FEMA can never be held to be a violation of the
fundamental policy of Indian law - Further, even if the Reserve
Bank of India were to take action under FEMA, the non-enforcement
of a foreign award on the ground of violation of a FEMA Regulation
or Rule would not arise as the award does not become void on that
count - The fundamental policy of Indian law, must amount to a
breach of some legal principle or legislation which is so basic to
Indian law that it is not susceptible of being compromised -
"Fundamental Policy" refers to the core values of India's public
policy as a nation, which may find expression not only in statutes
but also time-honoured, hallowed principles which are followed by
the Courts - Judged from this point of view, resistance to the
enforcement of a foreign award cannot be made on this ground.
Arbitration and Conciliation Act, 1996: s.48(1)(b) -
Enforcement of foreign awards - Refusal at the request of party if
that party furnishes to the court that he was unable to present his
case - Expression "was otherwise unable to present his case" -
Interpretation of - Held: Expression "was otherwise unable to
present his case" occurring in s.48(1)(b) cannot be given an
expansive meaning and would have to be read in the context and
colour of the words preceding the said phrase - This expression
[2020] 4 S.C.R. 336
336
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would be a facet of natural justice, which would be breached only
if a fair hearing was not given by the arbitrator to the parties -
Read along with the first part of s.48(1)(b), this expression would
apply at the hearing stage and not after the award is delivered -
Such breach should be clearly made out on the facts of a given
case, and that awards must always be read supportively with an
inclination to uphold rather than destroy, given the minimal
interference possible with foreign awards under s.48 of the Act -
Mere failure to consider a material issue would not fall within the
rubric of s.48(1)(b) - However, if a foreign award fails to determine
a material issue which goes to the root of the matter or fails to
decide a claim or counter- claim in its entirety, the award shocking
the conscience of the Court may be set aside on the ground of
violation of the public policy of India, in that it would then offend a
most basic notion of justice in this country - Poor reasoning, by
which a material issue or claim is rejected, can never fall in this
class of cases - The foreign award must be read as a whole, fairly,
and without nit-picking - In the instant case, when award is read as
a whole, it has addressed the basic issues raised by the parties and
has, in substance, decided the claims and counter-claims of the
parties, its enforcement must follow.
Arbitration and Conciliation Act, 1996: s.48 - Recognition
and enforcement of foreign awards - Scope of interference under
Art.136 - The legislative policy so far as recognition and
enforcement of foreign awards is that an appeal is provided against
a judgment refusing to recognise and enforce a foreign award but
not the other way around (i.e. an order recognising and enforcing
an award) - This is because the policy of the legislature is that
there ought to be only one bite at the cherry in a case where
objections are made to the foreign award on the extremely narrow
grounds contained in s.48 of the Act and which have been rejected
- This is in consonance with the fact that India is a signatory to the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 1958 ("New York Convention") and intends - through this
legislation - to ensure that a person who belongs to a Convention
country, and who, in most cases, has gone through a challenge
procedure to the said award in the country of its origin, must then
be able to get such award recognised and enforced in India as
soon as possible - Bearing this in mind, the Supreme Court's
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jurisdiction under Art.136 should not be used to circumvent the
legislative policy so contained - Constitution of India - Art.136 -
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 1958.
Dismissing the appeals, the Court
HELD: 1. Unlike Section 37 of the Arbitration Act, which
is contained in Part I of the said Act, and which provides an appeal
against either setting aside or refusing to set aside a 'domestic'
arbitration award, the legislative policy so far as recognition and
enforcement of foreign awards is that an appeal is provided
against a judgment refusing to recognise and enforce a foreign
award but not the other way around (i.e. an order recognising and
enforcing an award). This is because the policy of the legislature
is that there ought to be only one bite at the cherry in a case
where objections are made to the foreign award on the extremely
narrow grounds contained in Section 48 of the Act and which have
been rejected. This is in consonance with the fact that India is a
signatory to the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, 1958 ("New York Convention") and
intends - through this legislation - to ensure that a person who
belongs to a Convention country, and who, in most cases, has
gone through a challenge procedure to the said award in the
country of its origin, must then be able to get such award
recognised and enforced in India as soon as possible. This is so
that such person may enjoy the fruits of an award which has been
challenged and which challenge has been turned down in the
country of its origin, subject to grounds to resist enforcement
being made out under Section 48 of the Arbitration Act. Bearing
this in mind, the Supreme Court's jurisdiction under Article 136
should not be used to circumvent the legislative policy so
contained. This is so because this matter has been argued for
several days before this court as if it was a first appeal from a
judgment recognising and enforcing a foreign award. Given the
restricted parameters of Article 136, in cases like the present -
where no appeal is granted against a judgment which recognises
and enforces a foreign award - this Court should be very slow in
interfering with such judgments, and should entertain an appeal
only with a view to settle the law if some new or unique point is
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raised which has not been answered by the Supreme Court before,
so that the Supreme Court judgment may then be used to guide
the course of future litigation in this regard. Also, it would only
be in a very exceptional case of a blatant disregard of Section 48
of the Arbitration Act that the Supreme Court would interfere
with a judgment which recognises and enforces a foreign award
however inelegantly drafted the judgment may be. [Para 24][375F-H; 376-A-E]
2. Enforcement of Foreign Awards under Section 48
Amendments were made by the Arbitration and Conciliation
(Amendment) Act, 2015. Section 48 was amended to delete the
ground of "contrary to the interest of India". In the context of
challenge to domestic awards, Section 34 of the Arbitration Act
differentiates between international commercial arbitrations held
in India and other arbitrations held in India. So far as "the public
policy of India" ground is concerned, both Sections 34 and 48
are now identical, so that in an international commercial arbitration
conducted in India, the ground of challenge relating to "public
policy of India" would be the same as the ground of resisting
enforcement of a foreign award in India. This feature of the 2015
Amendment Act states that all grounds relating to patent illegality
appearing on the face of the award are outside the scope of
interference with international commercial arbitration awards
made in India and foreign awards whose enforcement is resisted
in India. [Paras 37, 38][390-F, H; 391-A-B]
3. General approach to enforcement and recognition of
Foreign Awards
The US cases show that given the "pro-enforcement bias"
of the New York Convention, which has been adopted in Section
48 of the Arbitration Act, 1996 - the burden of proof on parties
seeking enforcement has now been placed on parties objecting
to enforcement and not the other way around; in the guise of
public policy of the country involved, foreign awards cannot be
set aside by second guessing the arbitrator's interpretation of
the agreement of the parties; the challenge procedure in the
primary jurisdiction gives more leeway to Courts to interfere with
an award than the narrow restrictive grounds contained in the
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New York Convention when a foreign award's enforcement is
resisted. [Para 45][397-C-D]
4. Discretion of the Court to Enforce Foreign Awards
Enforcement of a foreign award may under Section 48 of
the Arbitration Act be refused only if the party resisting
enforcement furnishes to the Court proof that any of the stated
grounds has been made out to resist enforcement. The said
grounds are watertight - no ground outside Section 48 can be
looked at. Also, the expression used in Section 48 is "may". When
the grounds for resisting enforcement of a foreign award under
Section 48 are seen, they may be classified into three groups -
grounds which affect the jurisdiction of the arbitration
proceedings; grounds which affect party interest alone; and
grounds which go to the public policy of India, as explained by
Explanation 1 to Section 48(2). Where a ground to resist
enforcement is made out, by which the very jurisdiction of the
tribunal is questioned - such as the arbitration agreement itself
not being valid under the law to which the parties have subjected
it, or where the subject matter of difference is not capable of
settlement by arbitration under the law of India, it is obvious that
there can be no discretion in these matters. Enforcement of a
foreign award made without jurisdiction cannot possibly be
weighed in the scales for a discretion to be exercised to enforce
such award if the scales are tilted in its favour. On the other hand,
where the grounds taken to resist enforcement can be said to be
linked to party interest alone, for example, that a party has been
unable to present its case before the arbitrator, and which ground
is capable of waiver or abandonment, or, the ground being made
out, no prejudice has been caused to the party on such ground
being made out, a Court may well enforce a foreign award, even
if such ground is made out. When it comes to the "public policy
of India" ground, again, there would be no discretion in enforcing
an award which is induced by fraud or corruption, or which violates
the fundamental policy of Indian law, or is in conflict with the
most basic notions of morality or justice. It can thus be seen that
the expression "may" in Section 48 can, depending upon the
context, mean "shall" or as connoting that a residual discretion
remains in the Court to enforce a foreign award, despite grounds
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for its resistance having been made out. What is clear is that the
width of this discretion is limited in which case a balancing act
may be performed by the Court enforcing a foreign award. [Paras
46, 53, 54][397-E-F; 407-E-G; 408-A-C]
Shri Lal Mahal Ltd. v. Progetto Grano SPA (2014) 2
SCC 433; Phulchand Exports Ltd. v. O.O.O Patriot
(2011) 10 SCC 300 : [2011] 15 SCR 1129; LMJ
International Ltd. v. Sleepwell Industries (2019) 5 SCC
302 : [2019] 4 SCR 617; Sohan Lal Gupta v. Asha Devi
Gupta (2003) 7 SCC 492 : [2003] 3 Suppl. SCR 249;
Glencore International AG v. Dalmia Cement (Bharat)
Limited (2017) SCC OnLine Del 8932 - referred to
Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power
Co. (2010) SGHC 62; Parsons & Whittemore Overseas
Co. v. Societe Generale De L'Industrie Du Papier 508
F.2d 969 (1974); Compagnie des Bauxites de Guinee v.
Hammermills Inc. (1992) WL 122712; Certain
Underwriters at Lloyd's London v. BCS Ins. Co. 239 F.
Supp.2d 812 (2003); Karaha Bodas Co., L.L.C v.
Perusahaan Pertambagan Minyak 364 F.3d 274
(2004); Admart AG v. Stephen and Mary Birch
Foundation Inc. 457 F.3d 302 (2006); Dallah Real
Estate and Tourism Holding Co. v. The Ministry of
Religious Affairs, Government of Pakistan (2010)
UKSC 46 - referred to
5. The Natural Justice Ground under Section 48
5.1 Given the fact that the object of Section 48 is to enforce
foreign awards subject to certain well-defined narrow exceptions,
the expression "was otherwise unable to present his case"
occurring in Section 48(1)(b) cannot be given an expansive
meaning and would have to be read in the context and colour of
the words preceding the said phrase. In short, this expression
would be a facet of natural justice, which would be breached only
if a fair hearing was not given by the arbitrator to the parties.
Read along with the first part of Section 48(1)(b), it is clear that
this expression would apply at the hearing stage and not after
the award has been delivered, as has been held in Ssangyong. A
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good working test for determining whether a party has been unable
to present his case is to see whether factors outside the party's
control have combined to deny the party a fair hearing. Thus,
where no opportunity was given to deal with an argument which
goes to the root of the case or findings based on evidence which
go behind the back of the party and which results in a denial of
justice to the prejudice of the party; or additional or new evidence
is taken which forms the basis of the award on which a party has
been given no opportunity of rebuttal, would, on the facts of a
given case, render a foreign award liable to be set aside on the
ground that a party has been unable to present his case. This
must, of course, be with the caveat that such breach be clearly
made out on the facts of a given case, and that awards must always
be read supportively with an inclination to uphold rather than
destroy, given the minimal interference possible with foreign
awards under Section 48. [Para 76][433-E-H; 434-A]
Ssangyong Engineering & Construction Co. Ltd. v.
National Highways Authority of Indi (NHAI) Civil
Appeal No. 4779 of 2019 - relied on
Minmetals Germany GmbH v. Ferco Steel Ltd. (1999)
C.L.C. 647; Ajay Kanoria v. Tony Guinness (2006)
EWCA Civ 222; Jorf Lasfar Energy Co. v. AMCI Export
Corp. 2008 WL 1228930; Dongwoo Mann+Hummel
Co. Ltd. v. Mann+Hummel GmbH (2008) SGHC 275;
Gbangbola v. Smith and Sheriff 1998 3 All ER 730;
Bahman Irvani v. Ali Irvani 1999 WL 1142456; Van
Der Giessen-De-Noord Shipbuilding Division B.V. v.
Imtech Marine & Offshore B.V. (2008) EWHC 2904
(Comm); Malicorp Limited v. Government of Arab
Republic of Egypt (2015) EWHC 361 (Comm); Soh
Beng Tee & Co. v. Fairmount Development Pte Ltd.
(2007) SGCA 28; JVL Agro Industries Ltd v. Agritrade
International Pte Ltd. (2016) SGHC 126; G.D. Midea
Air Conditioning Equipment Co. v. Tornado Consumer
Goods Ltd. (2017) SGHC 193; Hebei Import & Export
Corporation v. Polytek Engineering Company Ltd.
(1992) 2 HKC 205; Ascot Commodities NV v. Olam
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International Ltd. 2001 WL 1560709; Zebra Industries
v. Wah Tong Paper Products Group Ltd. (2012) HKCU
1308; Front Row Investment Holdings v. Daimler South
East Asia (2010) SGHC 80; TMM Division Maritime
SA v. Pacific Richfield Marine Pte Ltd. (2013) SGHC
186; AKN & Anr. v. ALC & Ors. (2015) SGCA 18; BAZ
v. BBA & Ors. (2018) SGHC 275 - referred to.
5.2 It is not possible to hold that failure to consider a
material issue would fall within the rubric of Section 48(1)(b).
However, if a foreign award fails to determine a material issue
which goes to the root of the matter or fails to decide a claim or
counter-claim in its entirety, the award may shock the conscience
of the Court and may be set aside, as was done by the Delhi High
Court in Campos on the ground of violation of the public policy of
India, in that it would then offend a most basic notion of justice in
this country. It must always be remembered that poor reasoning,
by which a material issue or claim is rejected, can never fall in
this class of cases. Also, issues that the tribunal considered
essential and has addressed must be given their due weight - it
often happens that the tribunal considers a particular issue as
essential and answers it, which by implication would mean that
the other issue or issues raised have been implicitly rejected.
[Paras 77, 78][434-C-F]
Campos Brothers Farms v. Matru Bhumi Supply Chain
Pvt. Ltd. (2019) 261 DLT 201 - affirmed
6. Violation of FEMA Rules
If a particular act violates any provision of FEMA or the
Rules framed thereunder, permission of the Reserve Bank of
India may be obtained post-facto if such violation can be condoned.
Neither the award, nor the agreement being enforced by the
award, can, therefore, be held to be of no effect in law. This being
the case, a rectifiable breach under FEMA can never be held to
be a violation of the fundamental policy of Indian law. Even
assuming that Rule 21 of the Non-Debt Instrument Rules requires
that shares be sold by a resident of India to a non-resident at a
sum which shall not be less than the market value of the shares,
and a foreign award directs that such shares be sold at a sum less
than the market value, the Reserve Bank of India may choose to
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step in and direct that the aforesaid shares be sold only at the
market value and not at the discounted value, or may choose to
condone such breach. Further, even if the Reserve Bank of India
were to take action under FEMA, the non-enforcement of a
foreign award on the ground of violation of a FEMA Regulation
or Rule would not arise as the award does not become void on
that count. The fundamental policy of Indian law, as has been
held in Renusagar must amount to a breach of some legal
principle or legislation which is so basic to Indian law that it is
not susceptible of being compromised. "Fundamental Policy"
refers to the core values of India's public policy as a nation, which
may find expression not only in statutes but also time-honoured,
hallowed principles which are followed by the Courts. Judged
from this point of view, it is clear that resistance to the
enforcement of a foreign award cannot be made on this ground.
[Para 83][439-C-G]
Renusagar Power Plant Co. Ltd. v. General Electric Co.
(1994) Supp (1) SCC 644 : [1993] 3 Suppl. SCR 22 -
relied on.
Cruz City 1 Mauritius Holdings v. Unitech Limited
(2017) 239 DLT 649; Dropti Devi v. Union of India
(2012) 7 SCC 499 : [2012] 6 SCR 307 - relied on.
7. Challenge to Enforcement of the Foreign Award in this
case on facts
7.1 The Tribunal failed to deal with the Appellants' counterclaim pertaining to the incorporation of Jaguar Communication
Consultancy Services Private Limited.
According to the Appellants, this ground of objection - i.e.
the incorporation of Jaguar - was pleaded by them as a "concealed
breach", which became known to them only at a much later stage
of the arbitral proceedings. Despite the tribunal specifically ruling
in the First Partial Final Award that a non-defaulting party could
rely on a "concealed breach" and treat the same as an unrectified
event of default under clause 23.4 of the JVA, the submission
made by the Appellant in this behalf was ignored in its entirety.
The First Partial Final Award was made only on 15.02.2013. When
the Respondent No.1 made its oral submissions and filed written
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closing submissions on 19.07.2013, the Appellants did not plead
any case of breach due to Jaguar. It was only at the fag end, i.e. in
the Appellants' Responsive Closing Submissions, filed on
20.08.2013, that the tribunal was invited to rule on this breach.
Obviously, by this time, the Respondent did not have any
opportunity to controvert this case put up for the first time by
the Appellants. Since this case had been put up for the first time
at the fag end of the proceedings, before passing of the Second
Partial Final Award dated 19.12.2013, the arbitrator cannot be
faulted for not dealing with this case. In the Second Partial Final
Award, the tribunal also recorded that the Appellants' case on
clause 21.1 was limited to the acquisition of ACPL and direct
sales into India. The argument of the Appellant, made at the fag
end of the proceedings, that since the Respondent held 99.99 %
shares of Jaguar, which is in a similar cable business as Ravin, as
evidenced by the Memorandum and Articles of Association of
Jaguar, is a case that has never been pleaded. This being the
case, it is obvious that the arbitrator was within his jurisdiction
not to deal with this so-called counter-claim at all. This objection,
therefore, does not fall within any of the grounds mentioned in
Section 48 and must, therefore, be rejected. [Paras 86, 87][441E-G; 442-C-F]
7.2 The Tribunal failed to make a determination on the
Appellants' counter-claim concerning ouster of the Appellants
It would be wholly incorrect to state that the tribunal has
failed to make a determination on the Appellants' counter-claim
that the Respondent's efforts to oust Appellant No. 1 and his
family amounted to a breach of the JVA. While considering the
case of the Appellants and the cross-case of the Respondent, the
tribunal has adverted to pleadings, evidence and has given
detailed findings as to why the Appellants are in material breach
of the JVA, as a result of which the Respondent cannot be said to
be in material breach of the JVA. This being the case, it cannot
be said that this material issue has not been answered by the
Second Partial Final Award. This ground, therefore, also does
not fall within any of the stated pigeon-holes under Section 48.
[Para 89][445-A-C]
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7.3 The Tribunal failed to make a determination on the
Appellants' counter-claim concerning registration of the Ravin
Trademark
It is clear from the perusal of the First Partial Final Award
that what was argued before the arbitrator, and therefore
answered by the arbitrator, was whether the tribunal had
jurisdiction to go into the Trademark License Agreement. A
perusal of the transcript of the hearings on both 12th and 13th
December, 2012 before the arbitrator clearly showed that no
argument was ever made by the Appellants before the tribunal
that the Respondent had surreptitiously attempted to register
the Ravin Trademark in its own name, and therefore was in breach
of the competition clauses of the JVA. Thus, this argument again
appears to be an afterthought which has no foundation in the
submissions made before the arbitrator. [Paras 90, 91][445-E;
447-D-E]
7.4 The Tribunal acted contrary to the Parties' expert
witnesses and ignored critical evidence with regard to the
acquisition of ACPL
The tribunal went into the acquisition of ACPL in the Second
Partial Final Award, and held that Mr. Karia's contemporaneous
reaction to the acquisition of Draka, which led to an indirect
acquisition of 60 subsidiaries, one of which was ACPL, was that
he was very happy that Respondent No. 1 had so expanded its
business. Several congratulatory emails were referred to by the
arbitrator. Further, the arbitrator found that Mr. Karia's
statements in cross-examination showed that he had knowledge
of this acquisition way back in November 2010 but never
complained of material breach of the JVA. The arbitrator also
examined evidence as to serious actual loss or harm, finding no
such credible evidence, except occasional instances of both
companies tendering for the same business. It was held that there
was no reliable evidence that the Ravin's business had been lost
post the 'Draka acquisition' or that there had been any diversion
of business from Ravin to ACPL or vice versa. The arbitrator
then held that ACPL is a small specialist cable business and
operates principally in the area of instrumentation cables, which
is not the area in which Ravin operates. The learned arbitrator
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also adverted to the evidence of the expert witnesses in arriving
at this conclusion. It also made a reference to Mr. Karia's crossexamination, stating that Mr. Karia himself considered ACPL to
be the 50th or 60th competitor given its small business. The
finding, therefore, was that the acquisition of ACPL did not in any
manner amount to a serious material breach of the JVA. Insofar
as the failure to produce documents by Respondent No.1 with
regard to its subsidiary ACPL is concerned, ACPL is not a direct
subsidiary of Respondent No. 1, being an indirect subsidiary of
Respondent No.1's parent company consequent upon the
acquisition of Draka. It has an independent Board of Directors.
Above all, ACPL was not a party to these arbitral proceedings.
The tribunal therefore made Procedural Order No. 5 dated
27.11.2012 in which it specifically recorded that if the Appellants
wish to pursue their request for disclosure of further documents
qua ACPL, they must approach the Courts to do so, as it was not
within the arbitrator's power to direct a person who is not party
to the proceedings to produce documents. At no stage did the
Appellants act in compliance of this Procedural Order and
approach an English Court to direct ACPL to produce documents
within its possession. This being so, a party cannot complain of
breach of natural justice when it was within the control of such
party to approach a U.K Court for production of such documents.
This not having been done, it is clear that no adverse inference,
could have been drawn by the arbitrator. This ground also,
therefore, does not fall within any of the grounds under Section
48. [Paras 94, 95][448-D-H; 449-A-D]
7.5 Perverse Interpretation of the JVA.
The interpretation of an agreement by an arbitrator being
perverse is not a ground that can be made out under any of the
grounds contained in Section 48(1)(b). Without therefore getting
into whether the tribunal's interpretation is balanced, correct or
even plausible, this ground is rejected. [Para 96][449-F]
7.6 The Tribunal ignored critical evidence with regard to
the issue of agency agreements and Direct Sales
Having perused the Award in this behalf, it cannot be said
that the tribunal has in any manner ignored admissions or other
critical evidence with regard to the issue of direct sales. In any
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case, if at all, this ground goes to alleged perversity of the award,
which is outside the ken of Section 48. [Para 98][450-F-G]
7.7 The Tribunal adopted disparate thresholds in
determining material breach
All the allegations made under this ground go to perversity
of the award, which is outside the ken of Section 48. That apart,
the tribunal indicates in paragraphs 104 to 106 of the Second
Partial Final Award, that no disparate thresholds in determining
material breach was adopted. [Para 99][451-A]
7.8
The
Tribunal's
selective
consideration
of
contemporaneous evidence
This argument must be rejected out of hand, as not falling
within the parameters of Section 48. Equally, the tribunal's
consideration of evidence of key witnesses being selective and
perverse, must be rejected on the same ground. [Para 100]
[451-G-H; 455-A]
7.9 The Tribunal appointed a conflicted valuer
The arbitrator has considered this point in some detail and
dismissed it. This objection again does not fall under any of the
grounds of Section 48. [Para 101][452-B; 453-H]
7.10 Valuation ignores Ravin's stake in Power Plus
The appellant argued that the valuation made by Deloitte
ignored a stake of 49% of Ravin in a company called Power Plus,
which stake has been valued by the Appellants' valuer (one BDO)
at INR 563 crores. Considering that this aspect was not taken
into account by Deloitte, the valuation report ought not to have
been accepted by the arbitrator, also being contrary to the position
taken by both parties. This submission was dealt with by the
arbitrator in great detail in Final Award. Among other things, the
arbitrator referred to clause 17 of the JVA and stated that the
said clause together with the formula prescribed therein was
followed by Deloitte. Since this was done, Deloitte cannot possibly
be faulted and cannot further be asked to take into account the
stake of Ravin in Power Plus, as that would go outside the JVA.
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This again is a matter for the arbitrator to determine. This again
is a ground wholly outside grounds that can attract challenge to
foreign awards under Section 48. [Para 102][454-A-D]
7.11 Valuation Date
The appellant argued that the tribunal acted contrary to
the parties' submissions in arriving at a valuation date of
30.09.2014, much later on the date of the Final Award which is
11.04.2017, as the parties had agreed that this date ought to be
the date closest to the date of actual sale of share and would be
valid only until 31.12.2014. The arbitrator dealt with this objection
in the Final Award dated 11.04.2017. Having found that the delay
in the valuation report was attributable largely to the Appellants
and that therefore the agreed date of 30.09.2014 is the correct
date, there is nothing in the award which can be said to even
remotely shock conscience of this Court. This ground is also
therefore rejected. The plea to exercise power under Article 142
of the Constitution of India, so as to shift the valuation date from
30.09.2014 to the date of judgment is also rejected given the
arbitrator's finding. Quite apart from this, nothing in Section 48
of the Arbitration Act would permit an enforcing court to add to
or subtract from a foreign award that must either be enforced or
rejected by reason of any of the grounds under Section 48 being
made out to resist enforcement of such foreign award. This Court's
power under Article 142 ought not to be used to circumvent the
legislative policy contained in Section 48 of the Arbitration Act.
[Para 103][454-E; 455-F-H; 456-A]
7.12 Violation of FEMA and the Rules thereunder
The arbitrator awarded INR 63.90 per share as per the
Deloitte valuation, which was contractually binding under clause
17 of the JVA. The lower valuation of INR 16.88 per share as in
the M/s Kalyaniwalla & Mistry valuation report dated 04.03.2016
was not accepted. [Para 105][456-E]
7.13 Bias of the Tribunal
The appellant argued that the arbitrator was clearly biased
in that the outcome of the Second Partial Final Award was clear
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to Respondent No.1, inasmuch as its agent, one M/s Gilbert
Tweed Associates, sent out an advertisement for recruiting
employees for Ravin, two months before the Second Partial Final
Award, thereby showing that this agent was clear as to the
outcome of the proceedings. This was strongly refuted by the
Respondent, stating that at no time had Gilbert Tweed Associates
been retained by them. As a matter of fact, an agency called M/s
Key2People was engaged by Respondent No.1 to identify
potential candidates who could be recruited for the company in
due course. M/s Key2People, in turn, appointed M/s Gilbert
Tweed Associates. In any case, the Respondent undertook to
terminate the engagement of M/s Key2People by its email of
28.10.2013. The allegation of bias thus made was clearly a
desperate afterthought. The contention that the arbitrator was
otherwise biased was dealt with in the Final Award. [Para 106]
[456-F-H; 457-A]
8. The sole arbitrator exhaustively discussed the evidence
and arrived at detailed findings for each of the issues, claims and
counter-claims, and finally accepted the Respondent's case and
rejected the Appellants'. Given the fact that jurisdiction under
Article 136 of the Constitution is itself limited, and given the fact
that this Court's time has unnecessarily been taken by a case
which has already been dealt with by four exhaustive awards on
merits and also by the impugned judgment, these appeals are
dismissed with costs of INR 50 lakhs, to be paid by the Appellant
to Respondent No.1. [Para 107][458-B-C]
Case Law Reference
[1993] 3 Suppl. SCR 22
relied on
Para 30
(2014) 2 SCC 433
referred to
Para 35
[2011] 15 SCR 1129
referred to
Para 35
[2019] 4 SCR 617
referred to
Para 36
[2003] 3 Suppl. SCR 249
referred to
Para 57
[2012] 6 SCR 307
referred to
Para 84
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1544
of 2020
with
Civil Appeal No. 1545 of 2022.
From the Judgment and Order dated 07.01.2019 of the High Court
of Judicature at Bombay in Arbitration Petition No. 442 of 2017.
Dr. Abhishek Manu Singhvi, Nakul Dewan, Ritin Rai, Sr. Advs.,
Moazzam Khan, Ms. Bhavana Sunder, Amit Bhandari, Pradhuman Gohil,
Mrs. Taruna Singh Gohil, Ms. Ranu Purohit, Alipak Banerjee, Brijesh
Ujjainwal, Vikash Singh, Advs. for the Appellants.
Kapil Sibal, K.V. Viswanathan, Sr. Advs., Ms. Shreya Gupta,
Ms. Akanksha Banerjee, Raghav Tankha, Ms. Anusha Nagrajan, Apoorv
Singhal, King Dungerwal, Kunal Vajani, Ms. Sonam Gupta, Advs. for
the Respondents.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. Leave granted.
2. The present appeals are filed against the judgment of a Single
Judge of the Bombay High Court dated 07.01.2019, by which four final
awards made by a sole arbitrator in London under the London Court of
International Arbitration Rules (2014) (hereinafter referred to as the
"LCIA Rules") were held to be enforceable against the Appellants in
India.
3. The brief facts of this case are as follows. The Appellants, i.e.
Appellant No.1 Shri Vijay Karia, and Appellants No.2 to 39 (who are
represented by Appellant No.1) are individual, non-corporate shareholders
of Ravin Cables Limited (hereinafter referred to as "Ravin"). On
19.01.2010, the Appellants and Ravin entered into a Joint Venture
Agreement (hereinafter referred to as "JVA") with Respondent No.1,
i.e. Prysmian Cavi E Sistemi SRL - a company registered under the
laws of Italy. By this JVA, Respondent No.1 acquired a majority
shareholding (51%) of Ravin's share capital. The material clauses of
the JVA are set out hereinbelow:
"8. Purpose and Objectives
8.1 Purpose of the Company and Scope of the Agreement
Subsequent to Closing, the Company shall be a joint venture
between Prysmian and the Existing Shareholders for the purposes
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of undertaking and conducting the business of the company, or
for such other activities as may be determined by the Shareholders
from time to time, subject to the applicable law. The business of
the company shall be conducted in the best interests of the
Company, and in accordance with sound professional and
commercial principles."
"12.6. Chairman and Managing Director
12.6.1 Mr. Karia shall be the Chairman of the Board as well as
the Managing Director of the Company until:
(i) Expiry of seven (7) years from the Agreement Date; or
(ii) The date of which the Existing Shareholders cease to hold in
the aggregate at least ten percent (10%) of the share capital of
the Company:
Whichever occurs earlier.
It is hereby agreed that Mr. Karia shall not, during such term, be
entitled to be removed as a Chairman and Managing Director by
the passing of an ordinary resolution at a general meeting of the
Company..."
"12.6.4.Without prejudice to the aforesaid clause 12.6.3, the
Managing Director shall continue to remain responsible for the
day to day management of the Company in accordance with the
Interim Period Policy adopted by the Board on the Closing Date,
until the appointment of the CEO of the Company ("Interim
Period")"
"12.6.5 As soon as practicable after the efflux of the Interim
Period, a Board shall be convened to resolve upon a new policy,
applicable for a period of 6 (six) months thereafter (the
"Integration Period"), for the delegation of the powers to the
managers of the Company (the "Delegation of Powers Policy")
all powers not delegated to the managers of the Company pursuant
to such Delegation of Powers Policy, shall be delegated jointly to
the CEO and the Managing Director..."
"12.6.6 Provided however, that subject to the overall supervision
of the Board, after the efflux of the Integration Period, the
Managing Director shall be directly responsible solely for managing
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the internal audit as well as the strategy and business development
of the Company and present to the Board his findings and analysis
for final determination by the Board. Accordingly all the powers
which are not delegated to the managers of the Company pursuant
to the Delegation of Powers Policy, as may be amended by the
Board from time to time, shall be delegated to the Managing
Director to the extent such powers fall within his duties as
aforesaid.
12.6.7 After the Integration Period, the Managing Director may
appoint an internal auditor to assist the Managing Director in his
responsibility towards the internal audit of the company. This
internal auditor shall report directly to the Managing Director and
functionally report to the internal audit department of Prysmian
S.P.A."
"12.7 Chief Executive Officer
12.7.1 The CEO shall be appointed by and shall directly report to
the Board.
12.7.2 Without prejudice to the aforesaid Clause 12.7.1, the CEO
shall from the date of its appointment till the efflux of the Integration
Period, be responsible for the day to day management of the
Company jointly with the Managing Director.
12.7.3 Provided however, that subject to the overall supervision
of the Board, after the efflux of the Integration Period, the CEO
shall be responsible for the day to day management of the Company
excluding solely the internal audit and the strategy and business
development of the Company for which the Managing Director
shall be responsible. Accordingly all the powers which are not
delegated to the managers of the Company pursuant to the
Delegation of Powers Policy, as may be amended by the Board
from time to time, shall be delegated to the CEO to the extent
such powers fall within his duties as aforesaid."
"17. PROCEDURE FOR FAIR MARKET VALUATION
17.1 Notwithstanding anything contained in this Agreement, all
references in this Agreement to Fair Market Value shall be the
fair market value as determined, applying the definition of
EBITDA, Net Financial Indebtedness (NFI) and Net Working
VIJAY KARIA & ORS. v. PRYSMIAN CAVI E SISTEMI SRL & ORS.
[R. F. NARIMAN, J.