Beyond borders: Indian courts' jurisdiction in a transnational context

Practical Law UK Articles 1-503-4792 (Approx. 9 pages)

Beyond borders: Indian courts' jurisdiction in a transnational context

by Sanjeev K Kapoor, Kumar Mihir and Avinash Menon, Khaitan and Co

Indian courts' jurisdiction over proceedings pending in foreign jurisdictions

Principle of comity

Indian courts apply common law and favour the principle of comity (that is, among other things, the respect granted by the local/domestic courts to the exercise of jurisdiction by foreign courts) over an overzealous exercise of their jurisdiction's laws. Therefore, if the facts and circumstances indicate that a foreign court has jurisdiction, Indian courts are reluctant to interfere and tend to direct the aggrieved party to seek redress before the relevant foreign court. This is regardless of whether the case was previously brought before the foreign court.

There are a few exceptions to this pattern (see below, Anti-suit and anti-arbitration injunctions, Jurisdiction in personam and International commercial arbitrations).

Anti-suit and anti-arbitration injunctions

In appropriate cases Indian courts can pass orders including:

Anti-suit injunctions.
Anti-arbitration injunctions.

These injunctions involve a court of law ordering a party not to proceed in a suit pending before a foreign court or restraining it from proceeding with arbitration.

Principles of grant. In Oil and Natural Gas Commission v Western Company of North America (1987) 1 SCC 496, the Supreme Court held that Indian courts can grant anti-suit and anti-arbitration injunctions if either:

It is necessary or expedient to do so.
Justice requires it.

The Supreme Court also observed that it is unfair to refuse the grant of such an injunction, if an action before a foreign court is proven to be oppressive in the circumstances of that case. However, the Supreme Court added that the power to grant anti-suit injunctions must only be exercised if the court would be failing in its duty if it does not grant the injunction.

The Supreme Court also considered the grant of anti-suit injunctions in Modi Entertainment Network v W.S.G. Cricket Pte. Ltd. (2003) 4 SCC 341 and held that:

An Indian court can issue anti-suit injunctions to a party over whom it has personal jurisdiction (that is, over whom an Indian court can in the facts and circumstances of the case exercise jurisdiction in personam). However, under the principle of comity, this power should be exercised sparingly. This is because, although these injunctions are directed against a person, they implicitly interfere with other courts' jurisdiction.
The tests for granting an anti-suit injunction are as follows:
- to grant an injunction, the court must have personal jurisdiction over the defendant against whom the injunction is sought;
- the court should not decline an injunction if it would result in justice being defeated and injustice being perpetuated;
- the court should bear the principle of comity in mind;
- if more than one forum is available, the court should examine which is the appropriate forum (forum conveniens), having regard to the parties' convenience. The court can grant an anti-suit injunction relating to proceedings which are oppressive, vexatious or in a forum non conveniens (see below, Burden of proof);
- a court of natural jurisdiction should not normally grant an anti-suit injunction if the parties have agreed to submit to the exclusive jurisdiction of another court, including a foreign court. The exception to this rule is where there are good and sufficient reasons to grant an injunction, to prevent injustice in the circumstances.

Burden of proof. A party contending that the forum of choice is a forum non conveniens or that the proceedings are oppressive or vexatious (Mayar (H.K) Ltd. and Ors. v Owners and Parties, Vessel M.V. Fortune Express and Ors. (2006) 3 SCC 100):

Has the burden of proving that this is the case.
Must place relevant material before the court to show how it is aggrieved or prejudiced by an on-going proceeding.

Jurisdiction in personam

In British India Steam Navigation Co. Ltd. v Shanmughavilas Cashew Industries (1990) 3 SCC 481, the Supreme Court approved Cheshire and North's Private International Law (11th edition) on the issue of submission to jurisdiction in personam. In this regard, it was held that an appearance by a foreign defendant merely to protest that the Indian court does not have jurisdiction would not constitute submission to the court's jurisdiction.

In addition, if a foreign defendant does not at the relevant time object to the exercise of jurisdiction in personam but instead contests the case on its merits, it will be assumed that the foreign defendant in question has submitted to the jurisdiction of Indian courts. However, the parties even by submission cannot confer jurisdiction on the court to conduct proceedings which are beyond the court's authority.

International commercial arbitrations

The 1996 Act and related Supreme Court case law governs the jurisdiction of the Indian courts in relation to international commercial arbitrations.

A three-judge bench of the Supreme Court held that Part I of the 1996 Act, which compulsorily applies to arbitrations if the place of arbitration is India, also applies to arbitrations held outside India (Bhatia International v Bulk Trading (2002) 4 SCC 105 (Bhatia International)):

"The provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by the law or rules will not apply."

Indian courts can grant interim measures (section 9, 1996 Act) in matters that are the subject of international commercial arbitrations (Bhatia International). However, the parties cannot under section 9, 1996 Act:

Apply for a stay of the arbitral proceedings.
Challenge the existence or validity of the arbitration agreements, or jurisdiction of the arbitral tribunal.

These challenges would have to be made before the relevant arbitral tribunal (1996 Act).

Bhatia International was followed in Venture Global Engineering v Satyam Computer Services Ltd (2008) 4 SCC 190. It was held in Venture Global Engineering that a foreign award can be challenged under Section 34 of the 1996 Act before Indian courts. In Indtel Technical Services Pvt Ltd v W.S. Atkins Rail Ltd (2008) 10 SCC 308 the Supreme Court, following Bhatia International, held that Indian courts also have jurisdiction in relation to international commercial arbitrations to appoint arbitrators under section 11 of the 1996 Act.

Execution of foreign judgments in India

Section 13 of the Code of Civil Procedure 1908 (Civil Code)

Section 13 of the Civil Code sets out the conditions for enforcement in India of a foreign judgment (that is, a judgment delivered by a foreign court situated outside India and not established or continued by the authority of the central government (section 2(5), Civil Code)). The principles in section 13 of the Civil Code are principles of substantive law and not merely procedural law (Raj Rajendra Sardar Moloji Narsing Rao v Shankar Saran AIR 1962 SC 1737).

A foreign judgment is conclusive and binding as to a matter adjudicated on between the same parties, or between parties under whom they or any of them claim litigating under the same title (for example, a successor in interest is bound by a foreign judgment given in a dispute involving its predecessor in interest), if the judgment (section 13, Civil Code):

Is of a court of competent jurisdiction (that is, competence in the international sense and not merely under the law of a foreign state in which the court delivering the judgment functions (R Viswanathan v Rukn-ul-Mulk Syed Abdul Majid AIR 1963 SC 1)).
Was given on the merits of the case. In the case of International Woollen Mills v Standard Wool (UK) Ltd (2001) 5 SCC 265, the Supreme Court held that a foreign court's decree is not a decree on the merits and cannot be enforced in India if it was both:
- made without examining the points in controversy between the parties;
- given ex parte as one of the parties did not appear.
Does not on the face of the proceedings appear to be founded on:
- an incorrect view of international law;
- a refusal to recognise the law of India (were Indian laws is applicable).
Was obtained only after the proceedings therein conformed to the principle of natural justice.
Was not obtained by fraud.
Would sustain a claim founded on a breach of any Indian law.

If the foreign judgment does not satisfy the conditions in section 13 of the Civil Code (see above), the Indian courts will not execute the foreign judgment (Satya v Teja Singh AIR 1975 SC 105).

Form of execution of a foreign judgment

A judgment which satisfies the conditions in section 13 of the Civil Code can be executed in India by:

An Execution Petition. This applies if the judgment or decree was passed by a superior court in a reciprocating territory (that is, any country or territory outside India which the central government, by notification in the Official Gazette, declares to be a reciprocating territory for the purposes of section 44A of the Civil Code). Some of the countries and territories notified as reciprocating territories by the central government include Aden, Federation of Malaya, Fiji Islands, Hong Kong, Papua New Guinea, Singapore, Trinidad and Tobago, the UK, Western Samoa, New Zealand and Cook Islands and Bangladesh. Similarly, superior courts are courts specified in the notification issued by the central government.
The judgment or decree will be executed as if it had been passed by the District Court in India (section 44A, Civil Code) where the following have been filed for execution with the execution petition:
- the certified copy of the judgment or decree; and
- a certificate from the superior court that passed the decree stating the extent, if any, to which the decree is satisfied or adjusted.
Filing a suit based on the foreign judgment. If the judgment or decree has been passed by a court in a country that is not a reciprocating territory under Section 44A of the Civil Code, then a suit must be filed before the competent Indian court. The Indian court will then pass a judgment and decree in relation to the suit once it is satisfied that the foreign judgment is binding and conclusive between the parties. These suit(s) must be filed within three years from the date of the foreign judgment (Article 101, Limitation Act 1963).

Enforcement of foreign arbitral awards in India

The requirements for enforcement of New York Convention and Geneva Convention awards in India are broadly similar.

New York Convention awards (sections 44 to 52, Chapter I, Part II, 1996 Act)

Definition. A foreign award is an arbitral award relating to disputes between persons arising out of a legal relationship, whether contractual or not, considered as commercial under Indian law, made both (section 44, 1996 Act):

On or after 11 October 1960.
In one of the notified countries to which the New York Convention applies (for example, the UK, The Netherlands, the US, Sweden, Syria, the Philippines, Thailand, Austria, Germany, Switzerland, Czech Republic, Finland, Greece, Ecuador, Bulgaria, Romania, Norway, Poland, Hungary, France, Japan, Tanzania, Nigeria, Tunisia, Ghana and Morocco).

In Renusagar Power Co Ltd v General Electric Co Ltd (1984) 4 SCC 679, the Supreme Court held that when construing the term commercial, the following should be borne in mind:

The 1996 Act is designed to facilitate and promote international trade by providing for speedy settlement of disputes arising in international trade through arbitration.
Any expression or phrase in the 1996 Act should receive, consistent with its literal and grammatical sense, a liberal construction.

Grounds for refusing to enforce. The courts can refuse to enforce a foreign award if the party against whom the award is sought to be enforced provides the court with proof that (section 48, 1996 Act):

Under the law applicable to them, the parties to the arbitration agreement were under some incapacity, or the agreement was not valid under the law to which the parties had subjected themselves to or, failing any indication in this regard, under the law of the country where the award was made.
The party against whom the award was made was not given proper notice of appointment of the arbitrator or of the arbitral proceedings, or was otherwise unable to present his case.
The award deals with a dispute which either:
- the parties did not contemplate referring to arbitration or does not fall within the terms of reference to arbitration;
- contains decisions on matters beyond the scope of the submission to arbitration.
However, the part of the award containing decisions on matters submitted to arbitration, could still be enforced if it can be separated from the decisions on matters that were not submitted.
The composition of the arbitral authority or the arbitral procedure was either:
- not in accordance with the agreement between the parties; or
- if there was no agreement, not in accordance with the law of the country where the arbitration took place.
The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
The subject matter of the dispute is not capable of settlement by arbitration under Indian law or is contrary to Indian public policy (see below, Refusal to enforce Convention awards on public policy grounds).

If none of the grounds for refusing to enforce the award apply (see above, Grounds for refusing to enforce), a New York Convention award both (section 46, 1996 Act):

Is binding for all purposes on the persons between whom it is made.
Can be relied on by any of these persons in any legal proceeding in India.

If the court is satisfied that the foreign award is enforceable under Chapter I, Part II of the 1996 Act as none of the grounds for refusal are triggered, the award is deemed to be a decree of that court (section 49, 1996 Act).

Geneva Convention awards (sections 53 to 60, Chapter II, Part II, 1996 Act)

Definition. A foreign award under the Geneva Convention is an award relating to disputes considered as commercial under Indian law (section 53, 1996 Act). All of the following must apply to the award to be a foreign award under the convention:

The award must have been made after 28 July 1994.
The award must have been made under an agreement for arbitration to which the Geneva Convention applies.
The award must have been made in a territory defined in Clause (b) and (c) of section 53 of the 1996 Act.

Conditions for enforcement/grounds for refusal. To enforce an award, the court must be satisfied that all of the following apply (sub-section 1, section 57, 1996 Act):

The award was made in relation to a submission to arbitration which is valid under applicable law.
The subject matter of the award is capable of settlement by arbitration under Indian law.
The award was made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed on by the parties, and in conformity with the law governing the arbitration procedure.
The award is final in the country in which it has been made (that is, it is not open to opposition or appeal, and there are no pending proceedings contesting the validity of the award).
The enforcement of the award is not contrary to Indian public policy (see below, Refusal to enforce Convention awards on public policy grounds) or law.

Even if all the conditions in sub-section 1 of section 57 of the 1996 Act are fulfilled, the court can refuse to enforce the award if it is satisfied that (sub-section 2, section 57, 1996 Act):

The award was annulled in the country in which it was made.
The party against whom the award is sought to be enforced was not given notice of the arbitration proceedings in sufficient time to enable it to present its case.
The party against whom the award is sought to be enforced was not properly represented due to being under a legal incapacity.
The award does not deal with the disputes contemplated by, or falling within, the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.

If the court is satisfied that the foreign award is enforceable under Chapter II of Part II of the 1996 Act, the award is deemed to be a decree of that court (section 58, 1996 Act).

In relation to legal proceedings in India, a Geneva Convention award is binding for all purposes on the persons between whom it was made (section 55, 1996 Act).

Right of appeal against Convention awards

The 1996 Act provides for one appeal against a refusal to enforce an award under the New York Convention or Geneva Convention (sections 50 and 59, 1996 Act) There is no general right of second appeal (although the right to appeal to the Supreme Court is still available).

Refusal to enforce Convention awards on public policy grounds

The courts can refuse to enforce a Convention award on Indian public policy grounds. In Renusagar Power Company Limited v General Electric Company (1994) Supp 1 SCC 644 the Supreme Court held that a mere contravention of law does not suffice. For an award to be unenforceable on public policy grounds, it must be:

Contrary to fundamental Indian public policy or the interests of India, justice or morality.
Illegal (ONGC v Saw Pipes (2003) 5 SCC 705). However, illegality must go to the root of the matter (if the illegality is trivial in nature then it cannot be held that the award is against public policy).
So unfair and unreasonable that it shocks the conscience of the court.
Affected by fraud or corruption (sections 48 and 57, 1996 Act).

Challenging a Convention award (foreign award) under section 34 of the 1996 Act

Section 34 of the 1996 Act, which relates to domestic arbitrations, is also applicable to foreign awards (Venture Global Engineering v Satyam Computer Services Limited (supra)). If circumstances warrant it, the judgment debtor of an international foreign award cannot be deprived of his right under section 34 to challenge the award. Therefore, a foreign award is also open to challenge on section 34 grounds.

Awards not falling under a Convention

Previously, non-convention awards could be enforced in India under the common law (Badat and Co. v East India Trading Co (1964) 4 SCR 19) on grounds such as justice, equity and good conscience. A suit would be filed before the competent court:

Placing the foreign award as evidence.
Proving the conclusiveness of the foreign award in terms of:
- proof of submission to arbitration;
- the arbitration being conducted in accordance with the submission;
- arbitral award being valid according to the law of the country where they were made.
Obtaining judgment on the foreign award.

However, the Supreme Court more recently observed that, since Part I of the 1996 Act applies to all arbitrations (whereas Part II of the 1996 Act applies only to foreign awards passed under the New York Convention or the Geneva Convention), any award not passed under either Convention is a "domestic award" as contained in Part I of the 1996 Act (Bhatia International v Bulk Trading S.A (2002) 4 SCC 105). This observation may lead to a presumption that a "domestic award" passed in a non-convention country can be enforced under section 36 of the 1996 Act. This is currently good law, although there are doubts whether the observation is correct. Therefore, the position is confusing for parties seeking to enforce foreign awards, from non-convention countries.

Overview and future reform

Disputes pending in foreign jurisdictions

In appropriate circumstances, Indian courts have jurisdiction to interfere and intervene in disputes pending in foreign jurisdictions. Indian courts favour the principle of comity and exercise these powers sparingly. However, if the continuance of a proceeding in a foreign jurisdiction would perpetuate injustice or be oppressive, among other factors, the court can grant injunctions.

Enforcement of foreign judgments and arbitration awards

Foreign judgments and arbitration awards are executable and enforceable in India if they are duly established to be conclusive before the Indian courts under Indian law.

The framework of Indian law not only recognises foreign decrees and awards but also has adequate procedures in place to ensure that Indian courts can give effect to these decrees and awards.

However, recent judgments of the Supreme Court in the case of Bhatia International (followed by Venture Global and others) have extended the jurisdiction of Indian courts (some say beyond the provisions of the 1996 Act) in relation to international commercial arbitrations and foreign awards. Concerns have been expressed as to the expansive interpretation of the provisions of the 1996 Act. The Ministry of Law and Justice of the government of India has produced a consultation paper suggesting amendments to the 1996 Act, with a view to clarify the statute and satisfy these concerns.

Beyond borders: Indian courts' jurisdiction in a transnational context | Practical Law