Centrotrade Judgment: Establishing a Pro-Enforcement Regime in India

Keywords: Foreign award, Section 48(1), Fair opportunity, Pro-enforcement


The M/s Centrotrade Minerals and Metals Inc. (‘Centrotrade’) won the long-fought battle for enforcement of a foreign award under a two-tier arbitration clause. While in 2017, the Supreme Court (‘SC’ or ‘Court’) upheld the validity of the multi-tier arbitration clause, the question of enforcement of foreign award was referred to a larger bench. With this recent judgment, the question of enforcement has been answered in affirmative where the SC has interpreted the meaning of ‘was unable to present its case’ as stated in Sec. 48(1)(b) of Arbitration & Conciliation Act, 1996 (‘ACA’ or ‘the Act’). The Court concluded that it can refuse to enforce such foreign awards only if the party was unable to present its case due to reasons outside the party’s control. By this judgment, the SC has changed the landscape of the arbitration regime in India. This article aims to analyze the decision Supreme Court and revisits the grounds and the authorities behind granting of the foreign arbitral award by the SC of India.


Brief Facts of the Case


Centrotrade, a US based corporation entered into a contract for the sale of 15,500 DMT of copper concentrate to the respondent, Hindustan Copper Ltd. (‘HCL’). Thereafter, a dispute arose between the parties with respect to the quantity of the goods delivered. Clause 14 of the agreement between the parties provided for a two-tier arbitration clause. According to the clause, the first-tier arbitration had to be settled in India. If either party is not satisfied with the result, it had the right to appeal to a second arbitration to be held in London.


Centrotrade proceeded with arbitration against HCL. The Indian arbitrator pronounced a nil award. Thereafter, the second part of the clause was invoked and the award was pronounced by the ICC appointed arbitrator on 29.09.2001 which upheld the liability of HCL. After going through a series of litigation, the matter finally came to the division bench of the SC. The judges disagreed and the matter was then referred to a three-judge bench of Court. The issues that arose before the bench were divided into two parts:

  1. Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India?

  2. Whether the award rendered in the appellate arbitration being a “foreign award” is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade?

The bench upheld the validity of the two-tier arbitration clause but did not rule on the enforcement of the appellate awards, hence, this case came to this bench.


Points Considered in the Judgment


· Interpretation of ‘otherwise’ as given in Sec. 48(1)(b)

Section 48(1)(b) of the Act provides that enforcement of a foreign award can be refused if the party against whom the award is being invoked proves that it was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present its case. The point of consideration in this part is the interpretation of term ‘otherwise’.


HCL, referring to the case of Kavalappara Kottarathil Kochuni v. States of Madras and Kerala, pleaded that the word ‘otherwise’ cannot be interpreted ejusdem generis (of the same kind) with the words that precede it, thus arguing for a wider interpretation of the term. But the SC referred to the case of Monck v Hilton[ii] wherein it was held that “the words ‘or otherwise,’ in law, when used as a general phrase following an enumeration of particulars, are commonly interpreted in a restricted sense, as referring to such other matters as are kindred to the classes before mentioned”. The Court then referred to the judgment in Vijay Karia v. Prysmian Cavi e SistemiSrl&Ors (‘Vijay Karia’) and concluded that even though the term ‘otherwise’ can be given narrower as well as expansive meaning, the narrower meaning is preferred as it is in consonance with the pro-enforcement bias as advocated in the Convention on Recognition and Enforcement of Foreign Awards (‘NY Convention’).


· Meaning of ‘Fair Opportunity to Present its Case’


According to Section 48(1)(b) of the ACA, a foreign award can be challenged when the party against whom the award is invoked (‘enforcee’) is unable to present his case. The test to determine whether a party has been given adequate opportunity to present its case was formulated by the SC in Vijay Karia, by relying on the English case of Minmetals Germany GmbH v. Ferco Steel Ltd.[iii] Sec. 48(1)(b) of ACA allows the rejection of foreign awards only when the enforcee has been prevented from presenting its case, due to circumstances outside its control. On the other hand, when the enforcee does not take advantage of an opportunity given to him to present his case because of any circumstances which are within his control, he cannot bring himself within the exception provided in Section 48(1)(b).[iv]


Furthermore, in Jorf Lasfar Energy Co. v. AMCI Export Corp.,[v] the United States District Court held that if a party does not obey the procedural orders given by the arbitrator, he must suffer the consequences. If the evidence is excluded because it is not presented in accordance with a procedural order, a party cannot then successfully assert that the proceedings were unfair or violated due process.


In the present judgement, the Court relied on the principle of Natural Justice to manifest that HCL (the enforcee) got a fair opportunity to present its case. The Court, through the facts, found out that HCL had been given ample opportunity to present its case under Art. V(1)(b) of the NY Convention, since the arbitrator had provided as many as six opportunities to HCL to present its case. Additionally, on several occasions, extensions were sought for the filing of legal documents and written submissions prior to the last extension on September 12, 2001. Therefore, it would be factually incorrect to say that a fair opportunity had not been given to HCL to present its case. HCL on its own volition did not appear before the arbitrator and preferred to submit its documents beyond the schedule provided by the arbitrator.


· Authority of the Arbitrator to Enforce Ex Parte Award


The SC in the present judgement has reinforced the legal provision regarding the pro-enforcement bias by narrowing down the interpretation of the grounds for refusal of enforcement of a foreign award. The Court referred to Sohan Lal Gupta v. Asha Devi, wherein it was stated that a party has no absolute right to insist on his convenience being considered in every respect and henceforth, the discretion of the matter is with the arbitrator. Therefore, the Court will have the power to intervene only in the event of positive abuse.[vi]

Further, the King’s Bench Division in British Oil and Cake Mills Ltd. v. Horace Batin& Co. ltd.[vii] recognised that if a party, after being given proper notice, prefers not to appear, then the proceedings may continue in its absence. Moreover, in cases where the parties deliberately delay the proceedings, in order to resist the enforcement of the award, the tribunal has the power to sanction adverse inference against the defaulting party. [DongwooMann+Hummel Co. Ltd. v. Mann+Hummel GmbH] Thus, a party cannot drag the proceedings indefinitely and in such cases, the arbitrator has the power to proceed ex parte if one of the parties fails to appear.


India towards a Pro-Enforcement Regime


The NY Convention came into force to ensure limited interference by courts enforcing the foreign award. Art. V of the Convention, provides for grounds on which enforcement and recognition of a foreign award can be refused. The grounds as stipulated in the convention are to be narrowly construed to ensure a pro-enforcement bias.


With India being a signatory to the NY Convention, it becomes immensely important to establish a pro-enforcement regime. In its initial days, the Indian arbitration regime under the ACA was infamous for being skeptical towards foreign awards. The judgment in the case of White Industries v. Republic of India,[vii] brought forth two major problems of the arbitration regime. The first is interference by Courts and second being delay in arbitration. To tackle these shortcomings, the Indian legislature and judiciary have taken a pro-enforcement stance. The 246th Law Commission reviewed the ACA, and recommended a series of changes that have now been incorporated in the 2015 Amendment.


The Indian judiciary has also been striving to establish a pro-enforcement environment. The landmark judgment in Bharat Aluminium Co. v. Kaiser Almunium Technical Service (‘BALCO Case’), set the wheel in motion. In the BALCO case, it was held that foreign arbitral awards can only be subjected to the jurisdiction of Indian courts when they are to be enforced in India under the limited jurisdiction as provided in Part II of ACA, 1996. The Delhi High Court (‘HC’) in the case of Glencore Grain Rottterdam B.V v. Shivnath Rai Harnarain (India) ruled that the use of the term “may be” in Sec. 48(1) means that the conditions for refusing enforcement are to be narrowly construed, and as far as possible the Court must exercise its discretion in favour of enforcement. In Cruz City 1 Mauritius Holdings v. United Ltd., the Delhi HC interpreted that the term ‘may’ cannot be construed as ‘shall’ and further held that it cannot be compelled to refuse enforcement of an award even if conditions under Section 48 are established. Thereafter, in NTT Docomo v. Tata Sons, the Delhi HC rejected RBI’s argument with reference to the foreign award being in violation of Foreign Exchange Management Act (‘FEMA’) and proceeded with enforcing the award. Moreover, the apex Court in Renusagar Power Co. Ltd. v. General Electric Co., held that the grounds mentioned under Section 48 of the ACA do not postulate a challenge to the enforcement of foreign awards on merits. Thus the Court further narrowed down the purview of intervention by an enforcing court. In the Vijay Karia case, the SC clearly stated that as a signatory of NY Convention, it is essential to recognise pro-enforcement bias as a key feature of the arbitration regime in India. The Court further ruled that in case of foreign awards, parties have only one substantial opportunity to challenge such enforcement i.e., when filing objections under Section 48 of the Act. If such an attempt failed, the court should be very cautious in interfering with orders enforcing awards, in lieu on limited ambit of Art. 136 of the Constitution.


In NAFED v. Alimenta the SC had widened the scope of review under Section 48, thus contravening the provisions of Art. V of the NY Convention. The Centrotrade judgment, pronounced shortly thereafter, has restored the position laid down in Vijay Karia case and has thus re-established a pro-enforcement regime in the country. The Centrotrade ruling is a step towards bolstering the interpretation of Section 48(1)(b) of ACA. It highlights the often misused ground for challenging the arbitral award i.e. the public policy ground, which has been used by the losing party for delaying the enforcement proceedings in the past. In this regard, direction has been provided by the court for determining as to when a party can resist foreign arbitral award. We believe that this judgment is yet another step towards establishing the norm for minimum intervention by Courts and thus will act as a milestone in making India an enforcement friendly regime.

[i] Shivika, student at Hidayatullah National Law University, Raipur (shivikas122@gmail.com) & Alankrita Singh, student at National University of Study and Research in Law, Ranchi (singhalankrita2@gmail.com)


[ii] Monck v. Hilton, 46 LJMC 167.


[ii] Minmetals Germany GmbH v. Ferco Steel Ltd.(1999) C.L.C. 647.


[iii] Id.


[iv] JorfLasfar Energy Co. v. AMCI Export Corp, 2008 WL 1228930.


[v] Montrose Canned Food Ltd., (1965) 1 Lloyd's Rep 597.


[vi] British Oil and Cake Mills Ltd. v. Horace Batin& Co. ltd , (1922) 13 LI L Rep 443.


[vii] White Industries v. Republic of India, IIC 529 (2011).



This article was co-edited by Shebani Bhargava (Managing Editor) and Yagnesh Sharma (Associate Editor).





Preferred Citation: Shivika and Alankrita Singh, “Centrotrade Judgment: Establishing a Pro-Enforcement Regime in India”, Arbitration and Corporate Law Review, 23rd July 2020


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