Enforcement Of A Foreign Award Can Only Be Refused On The Ground Of Bias In Exceptional Circumstances: Avitel Post Studioz Ltd & Ors v HSBC Pi Holdings (Mauritius) Ltd

Enforcement Of A Foreign Award Can Only Be Refused On The Ground Of Bias In Exceptional Circumstances: Avitel Post Studioz Ltd & Ors v HSBC Pi Holdings (Mauritius) Ltd¹

The Supreme Court of India has recently reiterated that there should be minimal judicial interference in the execution of foreign awards under §48(2) of the Arbitration & Conciliation Act 1996.

Facts

Disputes under a Share Subscription Agreement arose between HSBC and Avitel. HSBC invoked the arbitration clause in 2012 and a three-member tribunal was appointed under the Singapore International Arbitration Centre rules. The award was issued in favour of HSBC in 2014, and it directed Avitel to pay USD 60 million in damages.

HSBC approached the Bombay High Court in 2015 for the enforcement of the award. Avitel opposed the enforcement proceedings on the ground that the award conflicted with the public policy of India. Avitel alleged bias against the presiding member of the tribunal stating that he had failed to disclose that he was an independent non-executive director of a company named Wing Tai, which had contractual associations with a sister company of HSBC.

The High Court rejected Avitel's contentions on the basis that it had failed to substantiate the allegations of bias against the arbitrator. Avitel then approached the Supreme Court against the decision of the High Court.

Issue

Is the enforcement of the award impermissible on the ground of bias and contrary to the "public policy of India" and the "most basic notions of morality or justice" under §48(2) of the Act?

Supreme Court's Decision

The Supreme Court held that:

1. In India, minimal judicial intervention in a foreign award is the norm and interference can only occur under the exhaustive grounds provided in §48(2) of the Act.
2. Upon reviewing the standards for determining bias across various legal systems and jurisdictions, it was held that Indian Courts must adopt internationally recognized narrow standards of public policy when dealing with allegations of bias.
3. The "most basic notions of morality or justice" under the concept of "public policy of India" include bias, but it is only under exceptional circumstances that the enforcement of an award should be refused on these grounds.
4. The court in the country where the arbitral proceedings occur should have exclusive supervisory jurisdiction to determine allegation(s) of bias.

In this case, the Supreme Court noted that Avitel had not alleged bias against the arbitrator during the course of the arbitration proceedings or in the challenge to the award before the Singapore courts. The Supreme Court held that there was no violation of public policy which would render the award unenforceable in India under §48(2) of the Act.

The Supreme Court rejected the appeal, upheld the decision of the High Court and directed that the Award be enforced.

Conclusion

The enforcement of a foreign award can only be refused in exceptional circumstances under §48(2) of the Act.

Footnote

1 2024 SCC OnLine SC 345.

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