India’s High Court Considers Interpretation of “Fundamental Policy of Indian Law”

Khaitan & Co review the Indian Courts’ interpretation of the term “fundamental policy of Indian law” (per s.48(2)(b) of the Arbitration and Conciliation (Amendment) Act 2015), when dealing with enforcement challenges to foreign arbitration awards and whether a foreign arbitral award which is in mere violation of an Indian legal provision qualifies as a contravention of the fundamental policy of Indian law. 

The authors review the 2011 case of Penn Racquet Sports v Mayor International Ltd (2011 1 ARBLR 244), where the court stated that the recognition and enforcement of a foreign award cannot be denied merely because the award is in contravention of the law of India; the award should be contrary to the fundamental policy of Indian law for the Courts in India to deny recognition and enforcement of a foreign award, and the 2017 case of Cruz City 1 Mauritius Holdings v Unitech Limited (2017 239 DLT 649), where the court stated:

“a contravention of a provision of law is insufficient to invoke the defence of public policy when it comes to enforcement of a foreign award. Contravention of any provision of an enactment is not synonymous to contravention of fundamental policy of Indian law. The expression fundamental Policy of Indian law refers to the principles and the legislative policy on which Indian Statutes and laws are founded. The expression “fundamental policy” connotes the basic and substratal rationale, values and principles which form the bedrock of laws in our country.”

The authors also refer to Daiichi Sankyo Company Limited v Malvinder Mohan Singh (OMP (EFA) (COMM) 6/2016, decided on 31 January 2018) which followed Cruz City, where the court observed that the “fundamental Policy of Indian Law does not mean provisions of the statute but substratal principles on which Indian Law is founded”.

The authors note that decisions should help to restore investor confidence in India’s position as an enforcement-friendly jurisdiction and should also encourage parties to opt for foreign-seated arbitration to ensure that they can attain finality because – unlike awards governed by Part I of the act – the enforcement of a foreign award cannot be refused on account of a mere violation of an Indian legal provision or patent illegality, as the grounds of challenge are significantly narrower.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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