www.singhania.in w OCTOBER 2012 INDIA LEGAL UPDATE is a journal of Singhania & Partners which offers a legal perspective on the new business climate and opportunities in India in keeping with the existing laws, current happenings and events in Corporate India. LEGAL SUITE INSIDE THIS ISSUE Enforcement of Foreign Judgments in India By Vikas Goel and Ayesha Karim Enforcement of Foreign Arbitration Awards By Tara Sarma and Ayesha Karim News Quest Synapse Judgments from Non Reciprocating Territories may be enforced by filing a law suit in the appropriate Indian court, requesting enforcement and execution of the Foreign Judgment. Enforcement of Foreign Judgments in India By Vikas Goel and Ayesha Karim In this article, we take a brief look at the enforcement of foreign judgments and decrees (Foreign Judgments) in India. The Indian Code of Civil Procedure, 1908 (the CPC) as amended, governs the execution of both foreign and domestic judgments in India. Section 2(5) of the CPC defines a "Foreign Court" as a Court situated outside India and not established or constituted by the authority of the Central Government. Section 2(6) of the CPC defines a "Foreign Judgment" as a judgment of a Foreign Court. The procedure for enforcement of Foreign Judgments in India are different for (i) countries with whom India has a treaty or agreement on mutual enforcement judgments (Reciprocating Territories) and (ii) countries with whom India does not have reciprocal enforcement agreements (Non Reciprocating Territories). Enforcement of Foreign Judgments from courts of Non Reciprocating Territories Judgments from Non Reciprocating Territories may be enforced by filing a law suit in the appropriate Indian court, requesting enforcement and execution of the Foreign Judgment.
INDIA LEGAL UPDATE # OCTOBER 2012 > >LEGAL SUITE P02 PAGE 2 According to Section 13 of the CPC a Foreign Judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigation under the same title. A Foreign Judgment shall not be treated as conclusive in the following cases:- a) where it has not been pronounced by a Court of competent jurisdiction; b) where it has not been given on the merits of the case; c) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable; d) where the proceedings in which the judgment was obtained are opposed to natural justice; e) where it has been obtained by fraud; f) where it sustains a claim founded on a breach of any law in force in India. Enforcement of Foreign Judgments from courts of Reciprocating Territories The CPC defines a "Reciprocating Territory" as any country or territory outside India which the Central Government may by notification in the official gazette (Gazette Notification), declare to be a Reciprocating Territory for the purpose of this section. Similarly, the term "Superior Court" with reference to any such Reciprocating Territory would mean only such courts as are specified in the Gazette Notification. Section 44A of the CPC allows the enforcement of a Reciprocating Territory Judgment in India as if the said judgment had been passed by a court in India. Thus enforcement of a Reciprocating Territory Judgment can be obtained by filing duly certified copy if the said judgment in the appropriate court and it will be executed in accordance with the laws on enforcement and execution of Indian judgments and orders. However, if it is shown to the satisfaction of the court that the Foreign Judgment falls within the exceptions (a) to (f) of Section 13 of the CPC (set out above), the court shall refuse to enforce such Foreign Judgment. Till date only eleven countries have been notified as Reciprocating Territories under the provisions of Section 44A of the CPC, namely Aden, Bangladesh, the Cook Island, Fiji, the Federation of Malaysia, Hong Kong New Zealand, New Guinea, the Republic of Singapore, Trinidad and Tobago, and the Trust Territories of Western Samoa, Papua, the United Kingdom and the United Arab Emirates. Conclusion Indian courts, treat foreign judgments as conclusive and enforceable, subject to the exceptions set out above. In other words Indian courts may refuse to enforce Foreign Judgments where due process and the principles of natural justice have not been followed; the Foreign Court lacks jurisdiction or the Foreign Judgment is in breach of the laws of India. Vikas Goel Partner vg@singhania.in Ayesha Karim Of Counsel ayesha@singhania.in
INDIA LEGAL UPDATE # OCTOBER 2012 > > COURT ROOM P03 PAGE 3 COURT ROOM Enforcement of Foreign Arbitration Awards By Tara Sarma and Ayesha Karim Arbitration proceedings in India are governed by the Indian Arbitration and Conciliation Act of 1996 (the Arbitration Act). Further, India being a common law jurisdiction, the law is interpreted and developed by way of court rulings. The Arbitration Act covers both international and domestic commercial arbitration and is based upon the UNICTRAL Model Law and Rules. The Arbitration Act covers both international and domestic commercial arbitration and is based upon the UNICTRAL Model Law and Rules. The Arbitration Act is divided into two parts: Part I deals with any arbitration conducted in India (whether domestic or international) and enforcement of such awards; Part II deals with enforcement of foreign awards to which either the New York Convention or the Geneva Convention apply. This article focuses on enforcement of New York Convention Awards, since the Geneva Convention is now for all practical purposes eclipsed by the New York Convention. The Arbitration Act defines Arbitration as any arbitration, whether or not administered by a permanent arbitral tribunal. Arbitration Agreement is defined as an agreement by the parties to submit its disputes arising out of a defined legal relationship, whether contractual or not, provided the arbitration agreement is in writing and signed by the parties or is contained in letters, telex or other means which provide a record of the agreement or an exchange of statements of claim and defense in which the existence of an arbitration agreement is claimed by one party and not denied by the other part(ies). Enforcement of New York Convention Awards Chapter 1 of Part II of the Arbitration Act deals with the enforcement of New York Convention Awards. Part II mirrors most of the provisions of the New York Convention on enforcement of awards. Under Chapter I Part II, a Foreign Award is defined as an arbitral award which (i) is made pursuant to agreement in writing that specifically provides that the New York Convention applies; (ii) is made on or after 11 October 1960; (iii) is on differences arising out of legal relationships, whether contractual or not, considered to be commercial under the laws of India; (iv) Is made in a territory that the Central Government has declared by notification in the Official Gazette to be territories to which the New York convention applies.
INDIA LEGAL UPDATE # OCTOBER 2012 > >COURT ROOM P04 PAGE 4 Procedure for Enforcement A petition for enforcement/execution is to be filed before the relevant principal Civil Court of original jurisdiction (the Court) in India, along with (i) the award in original or a copy duly authenticated in accordance with the law of the country of origin and India, (ii) the arbitration agreement original or a duly certified copy and (iii) any other evidence necessary to show that the award is a Foreign Award. Further, if the award is in a language other than in English, an authenticated translation must be filed along with the original award. The Court will examine the award to check its enforceability in accordance with the relevant Indian law prior to ordering enforcement. Once the Court is satisfied on enforceability, the award shall be deemed a decree of that Court and can be enforced according to the Indian laws on enforcement and execution. The Court may refuse enforcement of the Foreign Award on the following grounds, (which are identical to the grounds for refusal of enforcement of a Foreign Award set out in the New York Convention). i. legal incapacity of the parties to the agreement under the laws applicable to them; ii. invalidity of the award in accordance with the provisions of the law governing the arbitration or the laws of the place of arbitration; iii. the party against whom the award is made was not given proper notice or did not have a chance to present its case; iv. the award deals with disputes that fall outside or beyond the scope of the arbitration agreement between the parties; v. the composition of the arbitral authority or the arbitration procedure is not in accordance with the arbitration agreement or the law of the country where the arbitration was conducted; vi. the award has not become final or binding on the parties; and vii. the subject matter may not be subject to arbitration proceedings under the laws of India viii. the enforcement of the award would be against the public policy of India. (Without prejudice to the generality of this clause, an award is considered against the public policy of India if it was obtained or affected by any fraud or corruption). The last two points mentioned above as grounds for refusal to enforce require some explanation. Matters not capable of arbitration Matters not capable of arbitration are not defined in the Arbitration Act; however the Supreme Court and other Courts in India have described such disputes in various judgments which can be summed up as below, As a rule of thumb, it can be said that disputes that deal with rights in personam are normally considered as capable of being the subject matter of arbitration while disputes that deal with rights in rem are normally not capable of being referred to arbitration. Further, disputes for which special courts and tribunals have been established under any law are not capable of being referred to arbitration. Other matters considered not capable of arbitration include (but are not limited to) matters such as matrimonial disputes; custody and guardianship matters; criminal matters; etc Public Policy It is not possible to define Public Policy in absolute terms. Public policy is generally interpreted to mean an (i) award against the fundamental policy of India; (ii) the interest of India or (iii) against justice and morality, or an award obtained by fraud or misrepresentation.
INDIA LEGAL UPDATE # OCTOBER 2012 > >COURT ROOM P05 PAGE 5 Appeal against refusal to enforce. Parties have a right of one appeal to the appropriate appellate count against an order refusing enforcement. However, the right to appeal to the Supreme Court of India remains unaffected by provisions of the Arbitration Act. Further, any rights that a party may have concerning enforcement of an award which a party would have had save for the enactment of Chapter II of the Arbitration Act remain unaffected. Limitation Period The Arbitration Act does not refer to any limitation period to file for enforcement but the various High Courts of India have held that the Indian Limitation Act, 1963, would apply and thus the limitation period would be three years from the date when the right of enforcement commences. Pitfalls in enforcing Foreign Awards in India Part I of the Arbitration Act allows greater scope for the courts to set aside an arbitral award as compared to Chapter 1, Part II. Part I also allows the Court to order interim protective measures such as securing the amount of the award as well as granting interim injunctions and stay orders. Previously it was held that Part 1 of the Act also applies to foreign awards unless the application of Part 1 was specifically excluded in the arbitration agreement. However on 6 September 2012 a constitution bench of The Supreme Court has held that Part 1 of the Arbitration Act would not apply to foreign awards (In the matter of Bharat Aluminium Co vs Kaiser Aluminium Technical Service Inc). This judgement removes an area of uncertainty in the law and makes enforceability of foreign awards easier. Tara Sarma Associate Partner tsarma@singhania.in Ayesha Karim Of Counsel ayesha@singhania.in
INDIA LEGAL UPDATE # OCTOBER 2012 > >COURT ROOM P06 NEWSQUEST By Tripti Sood PAGE 6 MCA MAKES SERVICE TAX APPLICABLE ON COMMISSION PAYABLE TO THE NON- WHOLE TIME DIRECTORS OF A COMPANY u/s 309(4) The Finance Act of 2012 has introduced Service Tax which is applicable to anyone who provides a Service not covered under the negative/exempted list and if the value of annual revenue is more than Rs. 10 Lakh. It has been decided that any increase in remunerations of Non whole time Directors on Account of commission payable to them by the Company shall not require approval of the Central Government. THE COMPETITION COMMISSION OF INDIA (CCI) - FILING OF THE NOTICE PRIOR TO ENTERING INTO A COMBINATION IS MANDATORY The CCI has clarified that Companies should mandatorily file a notice under Section 6 sub section (2) of the Competition Act for entering into a combination. The notice for acquisition of shares ought to be given prior to the commencement of acquisition of Shares and the Acquisition should be initiated only after receiving approval from the Commission. SUPREME COURT: CAN A WRIT PETITION BE FILED TO CHALLENGE THE AUTHORITY FOR ADVANCE RULINGS? The Supreme Court of India has pronounced that Advance rulings (Income Tax) are not advisory but binding on the applicant in respect of the transaction and on the Commissioner and the Income Tax Authorities subordinate to him. The Supreme Court has further held that section 245 S (1) of the Income Tax Act 1961, does not bar the jurisdiction of Supreme Court under Article 136 of the Constitution or the Jurisdiction of the High Court under Articles226 and 227 of the Constitution to contest the advance ruling of the Authority. Indian Cabinet approves FDI upto 51% in multi-brand retail The Union Cabinet has recently approved a proposal to allow 51% FDI in multi brand retail trading with certain caveats and also subject to final approval from the respective states to allow implementation within these states. This is a big step in the direction of strengthening the organized retail in the country. Tripti Sood Associate tripti.sood@singhania.in
INDIA LEGAL UPDATE # OCTOBER 2012 > >SYNAPSE P7 SYNAPSE PAGE 7 S&P appointed as Legal Advisor to Metro Link Express for Gandhinagar and Ahmedabad (MEGA) Company Ltd (a Govt. of India Undertaking) for advise and drafting of FIDIC based EPC contracts and tender documents for implementation of the first phase of 111 km. Metro Rail project in Ahmedabad. S&P appointed as Lenders Legal Counsel to Union Bank of India for the external commercial borrowing and foreign currency loan of US$ 15 million sanctioned to Indo Baijin Chemicals Private Limited to set up the 50,000 TPA Carbon Di-Sulphide Manufacturing Plant from natural gas at Dahej, SEZ, Gujarat. The Project was being funded by two financiers i.e. Union Bank of India, Hong Kong Branch and EXIM Bank. S&P appointed as Lenders Legal Counsel to Power Finance Corporation (a Govt. of India Undertaking) for financial assistance of Rs. 700 crores to KVK Energy Ventures Pvt. Ltd. for setting up 100 MW Parabolic Trough Collector based Concentrated Solar Thermal Power Plant with Molten Salt Thermal Energy Storage System in Askandra Village, Nachna-II Tehsil, Jaisalmer District, Rajasthan. India Legal Update is published solely for the interests of clients and associations of Singhania & Partners. This document is for general guidance only and does not constitute definitive advice. For specific information on recent developments or particular factual situations, the opinion of legal counsel should be sought. Copyright 2012 Singhania & Partners LLP. Delhi Dipak Rao Mumbai Sonil Singhania Bangalore Shilpa Shah Hyderabad Tara Sarma S&P House, H186, Sector 63, Noida NCR Delhi 201301 (t) +91.120.4631000 (f) +91.120.4631001 (e) info@singhania.in B92, 9th Floor, Himalaya House 23, K.G.Marg, New Delhi 110001 (t) +91.11.41531000 (f) +91.11.41531001 (e) info@singhania.in 123A, 12th Floor, Mittal Court, Nariman Point, Mumbai 400021 (t) +91.22.22885550 (f) +91.22.22885560 (e) mum@singhania.in 401, Prestige Meridian II, M.G.Road, Bangalore 560052 (t) +91.80.41131900 (f) +91.80.41131901 (e) blr@singhania.in #614, Babukhan Estate, Basheer Bagh, Hyderabad 500001 (t) +91.40.65810662 (f) +91.40.23226219 (e) hyd@singhania.in