Enforcement Court U/S 48 Of Arbitration Act Can Refuse To Enforce Foreign Award But Cannot Set It Aside: Delhi High Court

The Delhi High Court Bench of Mr. Justice Jasmeet Singh affirmed that the power to set aside a foreign award lies only with the courts at the seat of the arbitration, which exercise primary/supervisory jurisdiction over the matter. Even if grounds under Section 48 of the Arbitration Act can be made out, the Court being the enforcement court and having only secondary jurisdiction over the foreign award cannot set aside the award but may only “refuse” its enforcement.

Brief Facts

This is a petition seeking enforcement and execution of a foreign award dated 21.04.2022 passed by the learned Sole Arbitrator in the arbitration between International Air Transport Association (“IATA”) and Spring Travels Pvt. Ltd. (“STPL”). The arbitration was held under the aegis of ICC International Court of Arbitration and the seat of arbitration was in Singapore.

The petitioner-IATA is a trade association for member airlines worldwide, comprising approximately 280 airlines, which represent 83% of total air traffic. IATA, inter alia, promotes safe and reliable air travel and manages the billing and settlement system for its member airlines (or “Carriers”) and accredited travel agents.

STPL was appointed as an accredited travel agent by IATA under a Passenger Sales Agency Agreement (“PSA Agreement”) dated 18.01.2005 entered between STPL and IATA members represented by IATA acting for and on behalf of its members. This program facilitated the accredited travel agent to sell air passenger transportation services of the member airlines.

Since STPL breached the PSA Agreement by failing to remit the monies in terms of the remittance schedule, IATA claimed a sum of Rs. 1,24,31,69,623 (equivalent to USD 19,125,686 calculated at 1 USD = INR 65) received by STPL from the sale of ticketsplus interest.

IATA submitted a request for arbitration dated 29.03.2018 to the Secretariat of the ICC International Court of Arbitration. STPL submitted an answer to the request for arbitration dated 05.06.2018, inter alia, challenging the jurisdiction of the Arbitral Tribunal (“AT”) to hear the claims in the arbitration. On 29.06.2018, the AT was constituted. 12. On 16.05.2019, the learned AT passed the partial award, wherein the objections raised by STPL with respect to the jurisdiction and maintainability of the arbitration proceedings were rejected.

STPL challenged the partial award before the Singapore International Commercial Court (“SICC”) in appeal, which was dismissed vide judgment dated 25.03.2020. 14. Subsequent to the passing of the judgment dated 25.03.2020, the arbitral proceedings were resumed, and the learned AT passed the final award dated 21.04.2022.

Pursuant to this, the present petition for enforcement has been filed.

Contentions

The respondents submitted that in terms of Section 48(1)(c) read with Section 48(2) of the Arbitration Act, there was no arbitral dispute in the absence of review by Travel Agency Commissioner (“TAC”). For this, reliance is placed upon, inter alia rules of the Handbook, which imply that review by TAC was a mandatory pre-requisite for invoking arbitration.

• Reliance is placed upon Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum (2022) and SAIL v. J.C. Budharaja, Govt. and Mining Contractor (1999) to state that the arbitrator, being a creature of the agreement, must operate within the four corners of the agreement.
• That the cost of arbitration was extremely high, which prevented STPL from effectively participating in the proceedings and denied it fair opportunity of being heard.
• That the foreign award is unenforceable because, under the PSA Agreement and the Handbook, the Carriers whose monies were involved were necessary parties to the proceedings, and IATA's claim could not be maintained in a representative capacity.
• That AT's finding regarding limitation was perverse as there was no specific finding as to whether Indian limitation law would be applicable or that of Singapore.

Per contra, the petitioner submitted that the AT had the requisite jurisdiction, which was not ousted by IATA's failure to seek TAC's review before initiating arbitration. Additionally, it is argued that STPL cannot challenge the jurisdiction at this stage as this Court in enforcement proceedings does not act as an appellate court.

• That STPL had waived the pre-arbitration requirement by failing to approach the TAC for review within the specified time limit of 30 days.
• That the issue of alleged financial hardship of STPL and violation of principles of natural justice, the same is denied as STPL willfully absented itself from the proceedings and is now attempting to benefit from its own wrong.

Court's Analysis

The court at the outset discussed the powers of the enforcement court under section 48 of Arbitration Act and referred to the Supreme Court judgment in Union of India v. Vedanta Ltd., (2020) wherein it was held that the power to set aside a foreign award lies only with the courts at the seat of the arbitration, which exercise primary/supervisory jurisdiction over the matter.

The court in the above case further held that “even if grounds under Section 48 of the 1996 Act can be made out, this Court being the enforcement court and having only secondary jurisdiction over the foreign award cannot set aside the award but may only “refuse” its enforcement.Nor does it have the power to review the correctness of the seat court's judgment.”

Based on the above, the court while applying the law to the facts of the present case held that To my mind, the view taken by the AT that none of the provisions of the PSA Agreement or the Handbook stated that IATA is to approach the TAC for claiming unpaid dues, is a plausible view.

The court moved further and observed that “the AT has not travelled beyond the terms of the contract and has interpreted the terms of the contract in a reasonable way. The claim of IATA was based on unpaid dues for the tickets sold by STPL. Hence, no ground under Section 48 can be made out to refuse enforcement of the award.”

The court further agreed with the view taken by AT that STPL had waived off its objection by conduct to arrive at the finding that it has the requisite jurisdiction and observed that AT has considered that STPL belatedly approached the TAC and hence was barred from seeking a review.

The court further observed that thereafter, IATA approached the court to realise its claims against STPL. STPL, instead of defending the claims in court, filed an application under Order VII Rule 11 CPC read with Section 8 of the 1996 Act in that suit, seeking reference of the disputes to arbitration and obtained a favorable order. IATA did not object to this and invoked arbitration.

The court further held that this conduct of STPL, the AT held, amounted to estoppel. To my mind, the view taken by the AT is the correct view, and in the worst-case scenario, a plausible view. STPL cannot approbate and reprobate as per its convenience. If STPL's objection was to be accepted, IATA would be left remediless. The conduct of STPL suggests that it is trying to defeat the arbitral process. Hence, this objection cannot be sustained under Section 48.

The court further addressed the natural justice contention and placed reliance on the Supreme Court judgment in Vijay Karia v. Prysmian Cavi E Sistemi SRL, (2020) wherein it was held that “thus, where no opportunity was given to deal with an argument which goes to the root of the case or findings based on evidence which go behind the back of the party and which results in a denial of justice to the prejudice of the party, would, on the facts of a given case, render a foreign award unenforceable on the ground that a party has been unable to present his case.”

The court moved ahead and observed that at every step, STPL was included in the correspondences while bearing the costs of the proceedings, given access to the document repository system, provided with the links and requisite log-in details to the proceedings; and despite the same, STPL refused to participate in the proceedings, refused to present its defence, and refused to submit its witness to cross-examination. Hence, STPL had full opportunity to submit its case, but it willfully chose not to. STPL has failed to prove that the enforcement of the foreign award should be rejected on the ground of its inability/denial of opportunity to present its case.

The court further observed that STPL also argued that the finding on limitation was perverse. This is not a court of appeal, or a court of primary/supervisory jurisdiction over the matter. Further, the ground of perversity is not envisaged under Section 48. Hence, this objection is rejected.

The court further observed that as regards the objection of non-compliance of Section 47(1)(b) of the 1996 Act is concerned, the same is misconceived. The Hon'ble Supreme Court in PEC Ltd. v. Austbulk Shipping Sdn. Bhd. (2019) has held that nonfiling of documents under Section 47 is not a valid ground for rejection of enforcement under Section 48.

Based on the above, the court held that the PSA Agreement has been annexed with the petition by IATA as Document-2. Relevant extracts of the Handbook have been annexed by STPL as Document-R/2. The entire arbitration agreement is available on the court file, and hence the mandate of the 1996 Act has duly been complied with. This ground does not warrant refusal of enforcement of the award. Hence, this objection is rejected.

The court concluded that for the reasons stated above, the objections raised by the respondentSTPL under Section 48 of the 1996 Act stand rejected. Accordingly, the enforcement petition was allowed.

Case Title: INTERNATIONAL AIR TRANSPORT ASSOCIATION V.SPRING TRAVELS PVT LTD THROUGH

Case Reference: O.M.P.(EFA)(COMM.) 1/2023 & EX.APPL.(OS) 537/2023

Judgment Date: 29/10/2024

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