The Supreme Court, in its recent judgment in Avitel Post Studios Ltd & Ors v HSBC PI Holdings (Mauritius) Ltd (2024), upheld the Bombay High Court’s order to enforce the Singapore International Arbitration Centre’s (SIAC) award for a claim of about USD60 million. It was alleged that the disclosure requirements for conflict of interest based on the set by the International Bar Association (IBA) were not fulfilled by the presiding arbitrator.
The main questions presented before the court were: whether rejecting the contentions of bias and allowing the enforcement of award were correct; and whether a plea of arbitral bias could be raised at the stage of enforcement under section 48(2)(b) of the Arbitration and Conciliation Act, 1996, in violation of 含羞草社区 public policy.
It was noted that the parties chose the jurisdiction based on its perceived neutrality, and no challenge to set aside the award based on bias was raised before the courts of Singapore. A challenge was raised before the SIAC on the appointment of the presiding arbitrator, which was heard and dismissed.
Under the IBA , an arbitrator is to refuse appointment in case of any doubts on their impartiality or independence, and disclose all relevant facts. Agreeing with the observations made in the high court’s judgment, the Supreme Court held that the presiding arbitrator did not require disclosure as they did not fall within the definition of an “affiliate”, and that the appellants were unable to lead sufficient evidence to establish such bias.
The Supreme Court stated that a plea of arbitral bias must be raised at the stage of appointment of arbitrators, or in the setting aside of an award before the awarding authority. It pointed out that the determination of bias at the stage of enforcement should be done only by applying international standards, and unless there is blatant violation of the basic notions of morality and justice, enforcement should not be refused unless there are exceptional circumstances.
The Supreme Court observed that the New York Convention and Geneva Convention both provide for defence of public policy at the stage of enforcement. However, such a defence must be construed narrowly to facilitate the enforcement of foreign awards.
While referring to (2014), it observed that wider grounds of public policy under section 34(2)(b)(ii) of the arbitration act cannot be applied to section 48(2)(b), and that a review on merits of the dispute is not permitted under section 48. Minimal judicial intervention to a foreign award is the norm, and interference can only be based on the exhaustive grounds provided under section 48.
The grounds for resisting the enforcement of a foreign award are much narrower than the grounds provided under section 34 of the act. The Supreme Court also held that all bona fide challenges to the appointment of an arbitrator must be made in a timely manner, and should not be used to prevent or delay the enforcement of the award.
The decision in (2020) ruled that section 50 of the act does not provide an appeal against a foreign award enforced by a single bench of a high court, and the Supreme Court shall only entertain an appeal with a view to settle the law.
The Supreme Court opined that, being a signatory to the New York Convention, India must adopt an internationalist approach and that there is a clear distinction between the standards of public policy applicable to domestic awards and foreign awards.
It was also observed that under the New York Convention a higher standard of proof is required for not enforcing a foreign award based on alleged bias than in the case of removal of arbitrators. Since different jurisdictions apply different tests, the outcome of a ground for challenge would vary depending on domestic standards, stating that a narrower approach must therefore be followed in the case of a foreign award.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
