GEMINI BAY TRANSCRIPTION PVT. LTD. versus INTEGRATED SALES SERVICE LTD. & ANR. on 10 August 2021

[2021] 7 S.C.R. 957

GEMINI BAY TRANSCRIPTION PVT. LTD.

v.

INTEGRATED SALES SERVICE LTD. & ANR.

(Civil Appeal Nos. 8343-8344 of 2018)

AUGUST 10, 2021

[ROHINTON FALI NARIMAN AND B. R. GAVAI, JJ.]

Arbitration and Conciliation Act, 1996:

ss. 44, 47, 48 – Foreign awards – Recognition and enforcementof, against non-signatories to the arbitration agreement – On facts,Hong Kong based company-respondent no. 1-ISS and Indiancompany-DMC entered into a Representation Agreement – In termsthereof, ISS had to assist DMC to sell its goods and services to theprospective customers and in consideration was to receiveCommission – By amendment, the agreement was subject to laws ofthe State of Delaware, USA – Dispute between the parties – Initiationof arbitration by ISS, claiming that DMC allegedly terminated itscontract with the customers introduced by ISS and executed newcontracts with the appellant company-GBT, a company owned andcontrolled by the Chairman of DMC, thereby depriving ISS of itsCommission – ISS claimed damages on the basis of accounting forlost Commissions – Chairman of DMC, DMC, DMCG, GBC andappellant company filed claim as respondents – Issuance of awardby the arbitrator directing the DMC, DMCG, Chairman of DMC,GBC and the appellant company to jointly and severally pay theamount awarded to ISS – As regards, the enforcement of award, theSingle Judge of the High Court held that the award would beenforceable against DMC as it was a party to the agreement, andnot against non-signatories to the arbitration agreement – However,the Division Bench set aside the order of the Single Judge – Appealby non-signatories – Held: Foreign award could be enforced againstnon-signatories to the arbitration agreement – s. 47(1)(c) beingprocedural in nature does not go to the extent of requiringsubstantive evidence to “prove” that a non-signatory to anarbitration agreement can be bound by a foreign award – s. 47(1)(c)speaks of only evidence as may be necessary to prove that the awardis a foreign award – A non-party to the agreement, alleging that it

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Acannot be bound by an award made under such agreement, is outsidethe literal construction of s. 48(1)(a) – Non-signatory’s objectioncannot possibly fit into s. 48(1)(a) – Application of the alter egodoctrine under Delaware law would depend primarily upon theArbitrator applying the oral and documentary evidence led beforehim to arrive at this conclusion on facts – Furthermore, perversityBnot a ground to set aside an award in an international commercialarbitration held in India –Expression ‘submission to arbitration’ u/s. 48(1)(c) only deals with disputes outside the scope of thearbitration agreement between the parties-and not to whether a person who is not a party to the agreement can be bound by theCsame – As regards, the plea that the Award should be set aside sinceno proper reasons given by the Arbitrator, being breach of naturaljustice, s. 48(1)(b) does not speak of absence of reasons in anarbitral award at all – Plea that since damages were given in tort,they would be outside the scope of the arbitration agreement cannot be accepted since u/s. 44, the tort claims may be decided by anDarbitrator provided they are disputes that arise in connection withthe agreement – Furthermore, s.46 does not speak of “parties” atall, but of “persons” who may, thus, be non-signatories to thearbitration agreement – Thus, on facts, actual loss can be said tohave been occasioned to ISS, and the damages awarded cannot beEsaid to shock the conscience of this Court – Damages – Doctrine ofalter ego.s. 44 – Foreign awards – Ingredients to an award beingforeign award – Stated.

s. 47 – Pre-requisites for the enforcement of a foreign awardF– Stated.

s. 48(1)(a), (b) and (c) – Conditions for enforcement of foreignawards – Interpretation and scope of – Explained.

Dismissing the appeals, the CourtG

GHELD: 1.1 A reading of Section 44 of the Arbitration andConciliation Act, 1996 would show that there are six ingredientsto an award being a foreign award under the said Section. First, itmust be an arbitral award on differences between persons arisingout of legal relationships. Second, these differences may be incontract or outside of contract, for example, in tort. Third, theH

legal relationship so spoken of ought to be considered“commercial” under the law in India. Fourth, the award must bemade on or after the 11th day of October, 1960. Fifth, the awardmust be a New York Convention award, it must be in pursuanceof an agreement in writing to which the New York Conventionapplies and be in one of such territories. And Sixth, it must bemade in one of such territories which the Central Governmentby notification declares to be territories to which the New YorkConvention applies. [Para 29][986-G-H; 987-A-B]

Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC

1; R.M. Investment and Trading Co. (P) Ltd. v. Boeing Co. (1994) 4 SCC 541 : [1994] 1 SCR 837 – referred to.

1.2 As the marginal note indicates, Section 47 provides thatthe pre-requisites for the enforcement of a foreign award are: (1)the original award or a copy thereof duly authenticated in themanner required by the law of the country in which it is made; (2)the original agreement for arbitration or a duly certified copythereof, and; (3) such evidence as may be necessary to provethat the award is a foreign award. Section 47 is based on ArticleIV of the New York Convention which is contained in Schedule Ito the Arbitration Act, 1996. [Para 34, 35][988-C-E]

International Commercial Arbitration by Gary B.Born(Wolters Kluwer, 2nd Edn., 2014) – referred to.

1.3 All the requirements of sub-section (1) of Section 47are procedural in nature, the object being that the enforcing courtmust first be satisfied that it is indeed a foreign award, as defined,and that it is enforceable against persons who are bound by theaward. The submission that to prove that a non- signatory to anarbitral agreement can only be roped in to the said agreement onevidence being adduced before the enforcing court as to whetherthe non-signatory is a person who claims under a party or isotherwise affected by the alter ego doctrine, is disingenuous tosay the least. Section 47(1)(c) being procedural in nature doesnot go to the extent of requiring substantive evidence to “prove”that a non-signatory to an arbitration agreement can be bound by

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Aa foreign award. As a matter of fact, Section 47(1)(c) speaks ofonly evidence as may be necessaryto prove that the award is aforeign award. This Section only has reference to the sixingredients of a foreign award that have been outlined, which arecontained in the definition section, namely, Section 44.Ingredients 1 to 4 can easily be made out from the foreign awardBitself as the award would narrate facts which would show the legalrelationship between the ‘persons’ bound by the award (who neednot necessarily be parties to the arbitration agreement), and asto whether the award deals with matters that can be consideredcommercial under the law in force in India. Equally, the date ofCthe foreign award would appear on the face of the foreign awarditself. Thus, Section 47(1)(c) would apply to adduce evidence asto whether the arbitration agreement is a New York Conventionagreement. Also, the requisite Central Government notificationcan be produced under Section 47(1)(c), so that Section 44(b)gets satisfied. The submission that the burden of proof is on theDperson enforcing the award and that this burden can only bedischarged by such person leading evidence to affirmatively showthat a non-signatory to an arbitration agreement can be bound bya foreign award is outside Section 47(1)(c), cannot be accepted.[Para 37][989-F-H; 990-A-D]

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1.4 Section 48 deals with enforcement of a foreign awardbeing refused. It is important to notice that when enforcement ofa foreign award is resisted, the party who resists it must prove tothe court that its case falls within any of the sub-clauses of sub-section (1) or sub-section (2) of Section 48. Given that foreignFawards in convention countries need to be enforced as speedilyas possible, the same logic would apply to Section 48, as a resultof which the expression “proof” in Section 48 would only mean“established on the basis of the record of the arbitral tribunal”and such other matters as are relevant to the grounds contained in Section 48. The New York Convention, which our Act hasGadopted, has a pro-enforcement bias, and unless a party is ableto show that it’s case comes clearly within Sections 48(1) or 48(2),the foreign award must be enforced. Also, the grounds containedin Sections 48(1)(a) to (e) are not to be construed expansivelybut narrowly. [Para 38-40][990-E-F; 992-A-C]H

GEMINI BAY TRANSCRIPTION PVT. LTD. v. INTEGRATED SALESSERVICE LTD. & ANR.

Ssangyong Engg. & Construction Co. Ltd. v. NHAI(2019) 15 SCC 131 : [2019] 7 SCR 522 – relied on.

Emkay Global Financial Services Ltd. v. Girdhar Sondhi(2018) 9 SCC 49 : [2018] 10 SCR 937; Vijay Karia v.Prysmian Cavi E Sistemi SRL (2020) 11 SCC 1 : [2020]4 SCR 336 – referred to.

1.5 If read literally, Section 48(1)(a) speaks only of partiesto the agreement being under some incapacity, or the agreementbeing invalid under the law to which parties have subjected it.There can be no doubt that a non-party to the agreement, allegingthat it cannot be bound by an award made under such agreement,is outside the literal construction of Section 48(1)(a). Also, it mustnot be forgotten that whereas Section 44 speaks of an arbitralaward on differences between “persons”, Section 48(1)(a) refersonly to the “parties” to the agreement referred to in Section44(a). Thus, to include non-parties to the agreement byintroducing the word “person” would run contrary to the expresslanguage of Section 48(1)(a), when read with Section 44. Also, itmust not be forgotten that these grounds cannot be expansivelyinterpreted. The grounds are in themselves specific, and onlyspeak of incapacity of parties and the agreement being invalidunder the law to which the parties have subjected it. To attemptto bring non-parties within this ground is to try and fit a squarepeg in a round hole. Quite apart from the fact that Section 48(1)(a)was not put forward either before the Single Judge or the DivisionBench of the High Court. [Para 42, 43][996-G-H; 997-A-C]

1.6 Given the conclusion on Section 48(1)(a) when read withSection 44 of the Arbitration Act 1996, it cannot be followed whatis stated to be “international practice” in trying to fit a non-signatory’s objection to a foreign award being binding upon itunder Section 48(1)(a). A non-signatory’s objection cannot possiblyfit into Section 48(1)(a). Without delving deep into this problem,it may perhaps be open in an appropriate case for a non-signatoryto bring its case within Section 48(2) read with Explanation 1(iii).[Para 49][999-E-F]

Ssangyong Engg. & Construction Co. Ltd. v. NHAI(2019) 15 SCC 131 : [2019] 7 SCR 522 – relied on.

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[2021] 7 S.C.R.

ADallah Real Estate and Tourism Co. v. Ministry ofReligious Affairs of the Government of Pakistan [2010]3 WLR 1472; IMC Aviation Solutions Pty Ltd. v. AltainKhuder LLC [2011] VSCA 248; Aloe Vera of America, Inc v. Asianic Food (S) Pte Ltd & Anr. [2006] SGHC 78– referred to.B

1.7 In the facts of the instant case, what this Court is beingasked to do, in the guise of applying Section 48(1)(a), is really toundertake a review on the merits. The application of the alterego doctrine under Delaware law would depend primarily uponthe Arbitrator applying the oral and documentary evidence ledCbefore him to arrive at this conclusion on facts. This he has doneby not only adverting to the documentary evidence, but alsoadverting to the oral evidence of ISS, MD of DMC and Chairmanof DMC. Given the fact that the foreign award gives reasons onfacts in this case to apply the alter ego doctrine, it would not beDpossible to re-appreciate these facts especially when the burdenlies on the appellants to establish the grounds made out in Section48(1), none of which go to the merits of the case. [Para 57][1005-C-E]

1.8 Perversity as a ground to set aside an award in anEinternational commercial arbitration held in India no longer obtainsafter the 2015 amendment to the Arbitration Act, 1996. Section48 of the Act has also been amended in the same manner asSection 34 of the Act. The ground of “patent illegality appearingon the face of the award” is an independent ground of challengewhich applies only to awards made under Part I which do notFinvolve international commercial arbitrations. Thus, the “publicpolicy of India” ground after the 2015 amendment does not takewithin its scope, “perversity of an award” as a ground to set asidean award in an international commercial arbitration under Section34, and concomitantly as a ground to refuse enforcement of aGforeign award under Section 48, being a pari materia provisionwhich appears in Part II of the Act. [Para 58, 59][1005-E-F; 1006-C-E]

Ssangyong Engg. & Construction Co. Ltd. v. NHAI(2019) 15 SCC 131 : [2019] 7 SCR 522 – relied on.

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1.9 Section 48(1)(c) relates to an award which deals with adifference not contemplated by or not falling within the terms ofthe submission to arbitration, or it contains decisions on mattersbeyond the scope of the submissions to arbitration. Given thefact that the expression ‘submission to arbitration’ would referprimarily to the arbitration agreement, sub-clause (c) only dealswith disputes that could be said to be outside the scope of thearbitration agreement between the parties – and not to whethera person who is not a party to the agreement can be bound by thesame. In fact, the proviso to Section 48(1)(c) makes this evenclearer, in that it states that an award may be partially enforced,provided that matters which are outside the submission toarbitration can be segregated, thereby again showing that thethrust of the provision is whether the dispute between partiesare qua excepted matters for example, or are otherwise outsidethe scope of the arbitration agreement. [Para 60][1006-E-H]

Ssangyong Engg. & Construction Co. Ltd. v. NHAI(2019) 15 SCC 131 : [2019] 7 SCR 522; OlympusSuperstructures (P) Ltd. v. Meena Vijay Khetan (1999)5 SCC 651 : [1999] 3 SCR 490 – referred to.

Aloe Vera of America, Inc v. Asianic Food (S) Pte Ltd &Anr. [2006] SGHC 78 – referred to.

1.10 It was submitted that since the Award containedreasoning which was perfunctory in nature, it would not passmuster and it would be a breach of natural justice, ‘reasons’ beinga part of natural justice as understood in this country, referringto Section 48(1)(b). Section 48(1)(b) does not speak of absenceof reasons in an arbitral award at all. The only grounds on whicha foreign award cannot be enforced u/s. 48(1)(b) are natural justicegrounds relatable to notice of appointment of the arbitrator or ofthe arbitral proceedings, or that a party was otherwise unable topresent its case before the arbitral tribunal, all of which are eventsanterior to the making of the award. [Para 63][1011-E-G]

Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020) 11SCC 1 : [2020] 4 SCR 336 – referred to.

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A1.11 Section 44 recognises the fact that tort claims may bedecided by an arbitrator provided they are disputes that arise inconnection with the agreement. The submission that sincedamages were given in tort in the instant case, they would beoutside the scope of the arbitration, agreement cannot beaccepted. [Para 66, 67, 70][1013-B-E; 1018-C]B

Renusagar Power Co. Ltd. v. General Electric Co.(1984) 4 SCC 679 : [1985] 1 SCR 432; Tarapore &Co. v. Cochin Shipyard Ltd. (1984) 2 SCC 680 : [1984]3 SCR 118 – referred to.

CAstro Vencedor Compania Naviera S.A. of Panama v.Mabanaft GmbH [(1971) 2 QB 588 – referred to.

1.12 It was submitted that a comparison between Sections35 and 46 of the Arbitration Act, 1996 would show that thelegislature circumscribed the power of the enforcing court underDSection 46 to persons who are bound by a foreign award asopposed to persons which would include ‘persons claiming underthem’ and that, therefore, a foreign award would be binding onparties alone and not on others. First and foremost, Section 46does not speak of “parties” at all, but of “persons” who may,therefore, be non-signatories to the arbitration agreement. Also,ESection 35 of the Act speaks of “persons” in the context of anarbitral award being final and binding on the “parties” and“persons claiming under them”, respectively. Section 35 would,therefore, refer to only persons claiming under parties and is,therefore, more restrictive in its application than Section 46 whichFspeaks of “persons” without any restriction. Quite apart fromthis, another important conundrum arises from the Division Benchjudgment in the instant case. The Division Bench judgmentapplied Delaware law to satisfy itself that such law had indeedbeen followed to apply the alter ego doctrine correctly, as a resultof which the foreign award would have to be upheld. This approachGis completely erroneous. First and foremost, Section 48 does notcontain any ground for resisting enforcement of a foreign awardbased upon the foreign award being contrary to the substantivelaw agreed to by the parties and which it is to apply in reachingits conclusion. As a matter of fact, whether the award is correctHin law (applying Delaware law), would be relevant if at all such GEMINI BAY TRANSCRIPTION PVT. LTD. v. INTEGRATED SALESSERVICE LTD. & ANR.

award were to be set aside in the State in which it was made andthat too if such law permitted interference on the ground that thearbitral award had infracted the substantive law of the agreement.The arbitral award in this case was not challenged in the State ofMissouri. Hence, the Division Bench’s foray into this line ofreasoning is wholly incorrect. [Para 71] [1018-D-H; 1019-A-B]

Indowind Energy Ltd. v. Wescare (India) Ltd. (2010) 5SCC 306 : [2010] 5 SCR 284; Chloro Controls India(P) Ltd. v. Severn Trent Water Purification Inc. (2013)1 SCC 641 : [2012] 13 SCR 402; Cheran PropertiesLtd. v. Kasturi & Sons Ltd. (2018) 16 SCC 413 : [2018]4 SCR 1063 – referred to.

1.13 As a matter of fact, if an international commercialarbitration were to be held in India, Section 28(1)(b) recognisesthat an arbitral tribunal can decide the dispute in accordance withthe rules of law designated by the parties as applicable to thesubstance of the dispute which, in turn, has a direct nexus to thesubstantive law of the country whose laws are said to apply. Thereis no ground in the pari materia provisions of Section 34 to setaside such award on the ground that the substantive law of thatcountry has been infracted. Indeed, the only ground on whichsuch award could possibly be interfered with is if such award,valid under the law which it applied, could be held to be contraryto the public policy of India. [Para 72][1019-B-D]

International Commercial Arbitration by Gary B.Born(Wolters Kluwer, 2nd Edn., 2014) – referred to.

1.14 The final argument that the damages that have beenawarded on no basis whatsoever would again not fall within any ofthe exceptions contained in Section 48(1). In order to attractSection 48(2) read with Explanation 1(iii), it is only in exceptionalcases which involve some basic infraction of justice which shocksthe conscience of the court that such a plea can be entertained.The Arbitrator correctly held that as nothing was forthcomingfrom any of the appellants, he would have to make a best judgmentassessment for damages. In making that assessment, he took

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Ainto account the commission that was being earned by GBT fromthe two clients of DMC and arrived at a figure of 100,000 USDper month and then found, on a reasonable estimate, that theywould continue to be clients for a period of four years, as a resultof which the figure of 6,948,100 USD was reached. That such‘guesstimates’ are not a stranger to the law of damages in theBU.S. and other common law tradition nations. [Para 74-76][1021-B-C; 1021-F-H]

Ssangyong Engg. & Construction Co. Ltd. v. NHAI(2019) 15 SCC 131 : [2019] 7 SCR 522 – relied on.

CFrederick Thomas Kingsley v. The Secretary of Statefor India AIR 1923 Cal 49 – referred to.

1.15 There can be no doubt whatsoever that as a result ofthe machinations of the Chairman and MD of DMC, as found bythe arbitral tribunal, ISS was deprived of commission legitimatelyDdue to it under the representation agreement. This being so,there can be no doubt that actual loss can be said to have beenoccasioned to ISS. In any case, the damages so awarded in thefacts of this case cannot even remotely be said to shock theconscience of this Court so as to clutch at “the basic notion ofjustice” ground contained in Section 48(2) Explanation (1)(iii).E[Para 79, 80][1023-C-D]

Agritrade International (P) Ltd. v. National AgriculturalCoop. Mktg. Federation of India Ltd., (2012) SCCOnLine Del 896 – referred to.

Case Law ReferenceF

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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8343-8344 of 2018.

From the Judgment and Order dated 04.01.2017 of the High Courtof Judicature at Bombay, Nagpur Bench, Nagpur in Arbitration AppealNo. 3 of 2016.

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Civil Appeal Nos.8345-8346 of 2018.

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K.V. Vishwanathan, Harish N. Salve, Sr. Advs., Kuber Dewan,Sharath Sampath, Manikya Khanna, Apoorv Singhal, Pratyaksh Sharma,Aditya Krishna, Ms. Anuradha Dutt, Ms. B. Vijayalakshmi Menon, WilsonMathew, Ms. Suman Yadav, Ms. Trisha Raychaudhri, Advs. for theAppellant.

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Arif Bookwala, Sr. Adv., Gagan Sanghi, Devendra V. Chauhan,M. Bharath, Rameshwar Prasad Goyal, Advs. for the Respondents.

The Judgment of the Court was delivered by

R. F. NARIMAN, J

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1. These appeals raise interesting questions relatable to Part II ofthe Arbitration and Conciliation Act, 1996 [the “Arbitration Act, 1996”]which provisions deal inter alia with recognition and enforcement offoreign awards. The facts necessary to appreciate the points raised inthese appeals are as follows.

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2. On 18[th] September, 2000, a representation agreement wasentered into between Integrated Sales Services Ltd. [“ISS” / RespondentNo. 1], a company based in Hong Kong and DMC ManagementConsultants Ltd. [“DMC”], a company registered in India, whoseprincipal business address is at Nagpur. By this agreement, ISS was toassist DMC to sell its goods and services to prospective customers, and H

Ain consideration thereof was to receive commission. The relevant clausesof the agreement are clauses 2 and 3 which read as follows: - “2. Duties of Representative Representative shall assist Company with its efforts to sell itsGoods and Services to prospective customers. Secondly, whereacceptable to the Company, identify potential sources of investmentand Investors, and assist Company in negotiating the terms ofpurchase, sale and/or investment.

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3. Validity

The right of representation under this Agreement is not limited bytime. Compensation is due Representative as defined under“Payment” hereinafter. However, if Company findsRepresentative’s efforts to be unsatisfactory, it will state so inwriting with specific and, reasonable guidelines which, ifaccomplished within six months, shall constitute satisfactoryperformance, If Representative is unable to substantially- satisfythese guidelines, then Company may cancel this Agreementforthwith. However, compensation for existing or potentialcustomers identified by the Representative, shall continue accordingto the Payment clause below.”

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3. The commission payable is then referred to in clause 4. Theagreement under clause 8(d) which is “General” then states as follows:- E

(d) Interpretation, Amendment, Law, Arbitration, and Assignments(i) This Agreement is subject to the laws of the State of Missouri,U.S.A.

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(ii) In the event a dispute arises in connection with this Agreement,such dispute shall be referred to a single arbitrator in Kansas City,Missouri, U.S.A. to be appointed by agreement between theparties hereto, or failing agreement to be appointed according tothe rules of the American Arbitration, Association the same rulesunder which any dispute which any dispute shall be decided.

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(iii) In the event a dispute is committed to arbitration, the partydeemed at fault shall reimburse the full cost of the arbitration andlegal process to the aggrieved party.

(iv) The Agreement shall not be amended in any way other thanby agreement in writing, signed by both parties.

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4. It is important to note that this agreement was signed by oneShri Rattan Pathak as Managing Director of DMC, and by one ShriTerry Peteete, Director of ISS. Though this agreement was entered intoon 18[th] September, 2000, it came into force on 3[rd] October, 2000. A firstamendment to this representation agreement was made between theaforesaid parties, which was signed by one Shri Arun Dev Upadhyaya[Appellant in CA No. 8345-8346/2018] on behalf of DMC, and TerryPeteete on behalf of ISS. We are not directly concerned with the changesmade by this first amendment except to indicate that Arun DevUpadhyaya, one of the appellants before us, was a signatory on behalfof DMC. Likewise, a second amendment agreement was entered intoon 1[st] January, 2008, again with effect from 3[rd] October, 2000, in whichvarious amendments were made to the original representation agreement.We are concerned, with sub-clause (4) of this amendment, which readsas follows: -

4. In modification of clause 8(d)(1) of the Agreement, thisAgreement is subject to the laws of the State of Delaware, U.S.A.,and shall survive the expiration of any other clauses in thisAmendment.

5. Disputes arose between the parties, as a result of which anotice for arbitration dated 22[nd] June, 2009 was sent by ISS to Arun DevUpadhyaya. Ultimately, a statement of claim dated 22[nd] June, 2009, wasfiled before the learned Arbitrator naming Arun Dev Upadhyaya, DMC(India), DMC Global (company registered in Mauritius), Gemini BayConsulting Limited (company registered in the British Virgin Islands)and Gemini Bay Transcription Private Limited [“GBT” / Appellant inCA No. 8343-8344/2018] as respondents. The statement of claim allegedas follows: -

6. DMC Management Consultants, through the Chairman(Upadhyaya) and/or with his family, in turn owns or controls allthe stock of DMC Global, which has assumed the obligations ofDMC Management Consultants under the agreement referred tobelow, including the agreement for arbitration; and the Chairmancontrols and dominates the activities of DMC Global. Both DMCManagement Consultants and the Chairman have disregarded thecorporate form of DMC Global to effect the wrongs complainedof herein, in such a manner and to such an extent that DMCGlobal should be bound as a party to this arbitration.

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7. Gemini Bay Consulting Limited (“GBC”) is a company formedin the British Virgin Islands, which is owned and/or controlled anddominated by the Chairman, who has disregarded its corporateform to effect the wrongs complained of herein, and GBC hasbeen used by the Chairman among others as a continuationcorporation of DMC Management Consultants and DMC Globalto divert funds away from ISS as complained of herein, in such amanner and to such an extent that GBC should be bound as aparty to this arbitration.

8. Gemini Bay Transcription Private Limited (“GBT”) is a companyformed in India, with a registered office at the same address asthat of the Chairman, which is owned and/or controlled anddominated by the Chairman, who has disregarded its corporateform to effect the wrongs complained of herein, and GBT hasbeen used by the Chairman among others as a continuationcorporation of DMC Management Consultants and DMC Globalto divert funds away from ISS as complained of herein, in such amanner and to such an extent that GBT should be bound as apuny to this arbitration.

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13. As the relationship developed, Claimant ISS as Representativebrought to the Company two substantial “PC” customers, identifiedas MedQuist Transcriptions Ltd, of Mt. Laurel, New Jersey(“MedQuist”), and AssistMed, Inc. of Los Angeles, California(“AssistMed”) (sometimes hereinafter collectively referred to asthe “Customer”). ISS acted as representative of the companywith the Customers.

14. Under the original terms of the Representation Agreement,ISS was to receive commission of 20% of the gross revenues toCompany from these Customers for so long as they continue tobe customers.

15. Throughout the relationship between ISS and Respondents,the principal representative of ISS has been Terry Peteete, aresident of Kansas City, Missouri.

16. Throughout the same period, the principal representative ofDMC Management Consultants and DMC Global has been theChairman, Respondent Arun Dev Upadhyaya. In that regard, the

Chairman has made regular trips from India to the United States,approximately 4 trips per year, for business and personal reasons.

17. Those trips have included at least four trips to Kansas City,Missouri, to conduct business with ISS representative TerryPeteete, regarding the subject matter of this arbitration. Therefore,he has purposely availed himself of this jurisdiction, and requiringhis participation in this arbitration in Kansas City, Missouri doesnot offend traditional or constitutional notions of justice arid fairplay.

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30. From September 18, 2000, until approximately June 30, 2008,the relationship among the parties proceeded agreeably. ISSperformed its obligations, and upon information and belief, bothDMC Management Consultants and DMC Global performed theirobligations.

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38. On July 22, 2008, DMC Management Consultants gave noticeby email entitled “Contract Termination Notice,” to the two “PC”Customers, MedQuist and Assistmed, of its intention to terminatethe Customer contracts 90 days later. (Note that the CustomerContract with MedQuist had been signed by DMC Global, butwas terminated by DMC Management Consultants). DMCManagement Consultants requested the Customers “begin theramping down process 15 days from now,” and further that the“ramping down be completed within a period of 90 days.

39. This purported “ramping down” of the Customer Contractsby DMC Management Consultants and DMC Global in fact nevertook place. Upon information and belief, as part of the scheme todivert funds from DMC Management and evade payment to ISSof commissions Respondents caused new contracts to be executedby the Customers with Respondent Gemini Bay Consultants(GBC). During the same time, the Chairman caused a newcompany Respondent Gemini Bay Transcriptions (GBT) to be setup as the company that actually performed the work for both PCCustomers, and continues to do so today. The employees of bothDMC Management employees Consultants and DMC Globalbecame GBT, and work in the same facilities, using the same A

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equipment, and managed by the same management team. Thesetwo July 22, 2008, email termination notices were part of a schemeby Respondents to divert the business from the CustomerContracts away from DMC Management Consultants and DMCGlobal to GBC and GBT.

41. The primary purpose of doing so was to evade the contractualobligations of the Respondents under the RepresentationAgreement to pay ISS its commissions for revenues earned fromthese Customers.

42. At all times, DMC Management Consultants and DMC Globalacted under the direct instruction of the Chairman in furtheringthis scheme to deprive ISS of its commissions.

43. The Chairman dominated and manipulated the activities ofDMC Management Consultants and DMC Global for his personaland business advantage, for the sole improper purpose of harmingISS and breaching his personal obligations and the obligations ofhis two companies to ISS under the Representation Agreement.

44. The Chairman used the companies as alter egos of himself,and he ignored the corporate forms of both DMC ManagementConsultants and DMC Global to achieve his improper purpose ofbreaching the Representation Agreement.

6. Based on these averments, damages were claimed on the basisof “Accounting for Lost Commissions” as follows:

64. Upon information and belief, the revenues being paid toRespondents by the “PC” Customers since October 22, 2008,continue at a rate such that the commissions payable under theRepresentation Agreement for the period since October 22, 2008,is approximately $100,000 per month.

65. Upon information and belief, the amount of lost commissions,past, present and reasonably certain to occur in the future, aredetermined at a rate of $100,000 per month for the period of 48months following the termination date of October 22, 2008,aggregates $4.8 million due and to become due to ISS fromRespondents due to their breach of contract.

7. It was then averred:

74. By making its claims pursuant to the Representation Agreementand the corporate law of Delaware in this arbitration, ClaimantISS is not making, and hereby specifically reserves: (i) all claimswhich may arise in the future, under the RepresentationAgreement, for commissions which may become payable in amanner other than as described above, and (ii) all claims for anyadditional right, title, interest and other matters ISS may make atanother time or in another forum against any of these Respondentsbased in tort, fraud, abusive conduct, or any other wrongful conductunder the law of any of the United States. India. Mauritius, or anyother jurisdiction, whether for equitable relief, compensatorydamages, punitive or exemplary damages, moral damages, orotherwise.

8. To this statement of claim, objections were filed by GBT andArun Dev Upadhyaya, in which all the aforesaid averments were denied.Meanwhile, a suit was filed by GBT against ISS before the Civil Judge,Senior Division, Nagpur, with the following prayers: -

(i) Pass a decree of declaration in favour of the plaintiff and againstthe defendants, their agent, servants and all other persons claimingthrough or under them, declaring therein that the ArbitrationAgreement entered into between the Defendant No. 1 andDefendant No. 3, is not binding or enforceable against the Plaintiffand therefore the defendant Nos. 1 & 2 cannot prosecute/ proceedwith any proceeding against the plaintiff or any one claimingthrough or under the plaintiff, in any manner whatsoever, in thepeculiar facts and circumstances of the present case;

(ii) Pass a decree of permanent injunction in favour of the plaintiffand against the defendants, their agent, servants and all otherpersons claiming through or under them, restraining them fromprosecuting or proceeding or continuing with any arbitrationproceedings against the Plaintiff, based on the so-called ArbitrationAgreement entered into between the Defendant No. 1 andDefendant No. 3, the same being not binding or enforceable againstthe Plaintiff, in the peculiar facts and circumstances of the caseand in the interest of justice;

(iii) Pass a decree of Rs. 10,00,000/ (Rupees Ten Lacs only)towards compensation in favour of the plaintiff and against A

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ADefendant Nos. 1 and 2, in the peculiar facts and circumstancesof the case;

(iv) Award costs of the suit against the defendant Nos. 1 & 2;

(v) And be further pleased to pass such order/orders and grantsuch other reliefs, as this Hon’ble Court may deem fit in the givenBfacts and circumstances of the case.

9. Though a temporary injunction was prayed for, it was rejectedon 25[th] January, 2010.

10. On 23[rd] December, 2009, the learned Arbitrator raised fourCissues in a preliminary award as follows: -

1) The determination of applicable law; and

2) The jurisdiction of this tribunal over non-signatory parties; and

3) Whether facts warrant piercing the corporate veil of certaincorporations; and D4) Whether certain non-signatory parties to the original agreementshould be excluded from this arbitration.

Only ISS and DMC filed briefs. DMC’s brief addressed only theissue of applicable law and in spite of the arbitrator’s numerousEwarnings, other Respondents and non-signatory parties failed tofile relevant briefs on the matters and submitted affidavits.

11. Issues 1 and 2 were answered stating that Delaware law isthe substantive law which controls the agreement and its interpretationand that, since neither the claimant nor the respondent challenged theFvalidity of the agreement or the validity of the arbitration clause, theArbitrator has jurisdiction to decide whether a non-signatory to therepresentation agreement can be bound by the award. The other twoissues were stated to require an in-depth review and analysis of factual,testimonial and documentary evidence as a result of which the decisionon these two issues was “postponed”.G

12. The learned Arbitrator in his final award dated 28[th] March,2010, set out the issues that were to be adjudicated as follows: - I THE UNDERSIGNED ARBITRATOR, Alain Frecon, (the“tribunal”) having been designated in accordance with thearbitration agreement entered into by ISS and DMC ManagementH

Consultants Limited, dated September 18 2000, having been dulysworn, having given the parties full and complete opportunity topresent their respective case, and having heard all the proofs andallegations of the parties, including all the witnesses and reviewedall the documents, demonstrative evidence and submissionspresented in this case, do hereby Award as follows:

TO BE DECIDED

1) Does the “alter ego” doctrine warrant piercing the corporateveil?

2) Was there a breach of the Representation Agreement and bywhom?

3) Should damages be awarded, and if the answer is yes, howmuch?

13. After describing the parties and the claim made, Issue 1 whichwas styled “Alter ego doctrine and piercing of the corporate veil” wasanswered as follows: - Before piercing a corporate veil, this tribunal must carefully reviewa complex set of factual, documentary and testimonial evidence.As Professor William W. Park (Boston University Law Faculty)points out in his well-known (among international arbitrators) article“Non Signatories and International contracts: an arbitrator’sdilemma” (1, Belinda MacMahon, ed, Oxford University Press(2009), the proverbial devil in the details lurks in the complex factpatterns underlying most situations that might justify extension ofarbitration clauses and arbitrators must consider “un faisceaud’indices” (a bundle of criteria) before reaching such a decision(See page 8).

Having found that Delaware law was the applicable law (seeOrder 4), we must follow the precedents of the Delaware Courtof Chancery.

To determine whether the “alter ego” doctrine applies to his caseand whether the corporate veil should be lifted, we must consider[the] “bundle of criteria” including control, whether the corporateform was used as a facade to commit a fraud, and the timing ofthese events.

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The control of DMC by Mr. Upadhyaya, the timing of events andcoordination of efforts between him and Mr. Pathak clearlydemonstrate that the transfer of the medical business from DMCto Gemini Bay simply was not, and could not be, the result ofmere coincidence. Their combined actions and conducts facilitatedand orchestrated the use of the corporate forms of DMC andGemini Bay to achieve, through deceit, a result which eliminatedan otherwise valid and enforceable contract. Mr. Upadhyaya totallycontrolled the business operations of DMC (a family majorityowned business) and his minority shareholding did not preventhim from running the business as he deemed fit (we received forexample no evidence whatsoever that Mr. Upadhyaya’s decisionswere ever reviewed/challenged nor even questioned by the boardof directors of DMC). Whatever Mr. Upadhyaya decided, whetherin coordination with, or with the cooperation of Mr. Pathak andthe Board of DMC, that is what DMC would do, and the boardalways voted in line with Mr. Upadhyaya’s recommendations.He was as a result, the sole decision maker. The total control anddomination of DMC by Mr. Upadhyaya is therefore notquestionable, in spite of his minority shareholding.

The correlation existing between DMC and Gemini Bayis also,not the result of mere coincidence. Not only did the very existenceof Gemini Bay germinate within the confines of DMC (but forMr. Pathak’s position as “Managing Director” of DMC, he wouldhave never known about Medquist or AssistMed), but bothcompanies shared (even if ever so temporarily) the sameemployees, address, telephone numbers, e-mail addresses, SVPs,customers (primarily Medquist and AssistMed), and shared almostidentical contracts with the same customers.

Respondents’ affirmations that DMC’s corporate formalities wererespected and that some of these facts were only temporary, aresimply not convincing or credible and, in totality, we find that thecontrol of DMC by Mr. Upadhyaya, and the collusion with Mr.Pathak and the use of the corporate forms of DMC and GeminiBay were simply a “facade” used to shield or cover-up the unjustresult of eliminating ISS. The alter ego doctrine is therefore anappropriate justification for lifting the corporate veil.

14. Under the head “Breach of the representation agreement”, itwas recorded that the agreement was not challenged by either partyand is therefore valid and enforceable. It was then held: - To determine that question, we must turn to the RepresentationAgreement. That Agreement was not challenged by either partyand is therefore a valid and enforceable Agreement. It is clearand not ambiguous and therefore not subject to interpretation.

ISS’s obligations under that Agreement are also clear. ISS mustI) sell its Goods and Services (which means the “products andservices being offered for sale by the company” (i.e. DMC) and2) “Where acceptable to the Company (i.e. DMC), identifypotential sources of investment and investors, and assist thecompany in negotiating the terms, purchase, sale and/orinvestment”(See Clause #2).

The Agreement did not specify how many customers, how often.Neither did it specify how many investors, at what price, by whatdate and since it was for an indefinite term (“is not limited bytime” See Clause 3), it is not legally sustainable to justify thetermination of the ISS/DMC business relationship based on thefact that ISS did not find an investor.

DMC could terminate that Agreement if “the Company (DMC)was not satisfied with the Representative efforts provided that itdetermined “specific and reasonable guidelines” (See Clause #3). Respondents failed to prove by reliable and relevant evidencethat any such “specific and reasonable guidelines” were everestablished by the Board of DMC or Mr. Upadhyaya or Mr. Pathak.More importantly, even if DMC could prove that such guidelineshad been established, it could not escape the obligation of clause# 4 of the Agreement which specifically provides that “this clause(payment of commissions) survives cancellation of this Agreementfor any reason”.

15. Under the head “Did DMC/Gemini Bay try to avoid/eliminatethe payment of such commissions to ISS?”, the oral and documentaryevidence was referred to as follows:

In this respect, Ms. Parker best summarized the situation in hertestimony (See Parker’s/deposition at p 16 lines 7 through 16).

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Her statement at page 18 (lines II through 25) further demonstratesthe purpose and intent of DMC’S decision to abandon the medicaltranscription business, for the benefit of Gemini Bay minus thepayment of commissions to ISS. Her statement was evenacknowledged by Mr. Pathak himself when she asked him if thepurpose of DMC’s termination was “to cut out the Peteetes” (ISS)he responded.” In essence that’s what it does”. (See Parker’sdeposition at pages 19 lines 18 through 20).

Even though we agree with Respondents that DMC had noobligation to remain in the medical transcription business, it couldonly do so by respecting the terms of the RepresentationAgreement by making sure that the “compensation for existing orpotential customers identified by the Representative, shall continueaccording to the Payment Clause” (See Clauses #3 and #4 of theRepresentation Agreement).

The decision by DMC to abandon such business for the statedpurpose (ISS failure to find an investor) does conflict with theterms of the Representation Agreement which did not give DMCan option to terminate it under such rationale and certainly not byrefusing (or avoiding) the payment of commissions in violation ofClause 4 of the Representation Agreement.

Had DMC really and totally left the medical transcription business(without helping any other company to get that business) we couldhave found a justifiable rationale for it but the payment ofcommissions could not be avoided (or voided as DMC attemptedto do).

In spite of DMC’s announcement to abandon the medicaltranscription business, Mr. Upadhyaya and Mr. Pathak engagedin a pattern of well-timed efforts and actions which resulted inGemini Bay receiving that business through an orchestrated chainof events, to the detriment of ISS and avoiding, through deceit,the payment of commissions.

Since Gemini Bay “inherited” the Medquist and AssistMed’sbusiness from DMC, it did so inheriting also the terms and conditionsof the ISS/DMC Representation Agreement. To that effect, GeminiBay is subrogated to DMC and therefore DMC’s breach can beinputted to all Respondents.

We therefore find that Mr. Upadhyaya, DMC and Gemini Baycolluded together and find them jointly and severally liable forbreaching the Representation Agreement by terminating it abruptlyin violation of the indefinite term of that contract and by refusingto pay commissions as obligated under the RepresentationAgreement.

16. In deciding what damages should be paid, the learned Arbitratorfound :

Respondents DMC, Mr. Arun Dev Upadhyaya and Gemini Bay’sfailure to fully cooperate with certain discovery requests ofClaimant, rendered the task of proving damages with anyreasonable certainty, almost impossible.

DMC biased the discovery process by refusing to make its booksand records available for inspection by ISS’s agent, Mr. Gupta(See Exhibit 169 page II and following). Mr. Upadhyaya andGemini Bay further biased the discovery process by refusing toparticipate directly in the arbitration process.

Claimant’s failure to use an independent expert on damages is nota relevant argument because in the absence of documentary proof,no independent expert could have possibly reached a reliable andnon-speculative opinion, Under such circumstances, Mr. Peteete’sintimate understanding of the business was the only and bestavailable option afforded to Claimant. In the absence of suchreliable documentary evidence, Claimant cannot be penalized forattempting ‘to prove damages the best way possible’ under thecircumstances. Since Delaware law accepts the submission ofdamage testimony by lay opinion so must this tribunal.

The conduct of Respondents gives us no other alternative but toconclude that damages should be computed as Claimant proposes.In essence, Respondents brought this result upon themselves.

Claimant’s request for damages focuses on the commissions duefor finding Medquist and AssistMed and for no other reason(Claimant does not claim any damage for its efforts for trying tofind an investor). We find that claim reasonable.

We must not however assume that the Gemini Bay/Medquist/AssistMed Agreements would have, could have, lasted any specific A

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amount of time in the future and we must determine the mostreasonable period of duration. There is no guarantee that eitherthe AssistMed or Medquist contracts would last for the length oftheir original 3 year term. The Medquist agreement can beterminated any time upon a 90 days’ notice. The AssistMedcontract can be terminated without cause with a 120 days’ advancenotice (See Exhibit 5 page 3). This tribunal therefore concludesthat damages should be limited in time and cannot be assumed tolast forever in the future.

Claimant’s assumptions that both the Medquist and Assistedcontracts would last until 2012 (they are still in force as of thedate of this Award), is not entirely satisfactory as it leads us tocontemplate future damages. Since however we found a breachof the Representation Agreement, we have a legal basis to awardfuture damages and find that ending damages in 2012 is reasonableunder the circumstances. Mr. Upadhyaya’s testimony (re: C-Bay’and Mr. Raman Kumar) that the Medquist contract will beterminated in the near future is self-serving, not substantiated byany relevant or reliable information, and therefore, not credible.

17. As a result, the Award was as follows:

AWARD

1. Within thirty (30) days from the date of transmittal of this Awardto the Parties, DMC Management Consultants, Ltd, DMC Global,Inc., Arun Dev Upadhyaya, Gemini Bay Consulting Limited andGemini Bay Transcription Private Limited, hereinafter referred toas Respondents, shall jointly and severally pay to Integrated SalesServices Ltd, hereinafter referred to as Claimant, the sum of sixmillion, nine hundred and forty-eight thousand, one hundred dollars($6,948,100.00).

2. In the event that the award is not fully paid within thirty daysfrom the date of this Award, Claimant shall be entitled to alsoseek recovery of interest computed from the date of terminationof the Representation Agreement (July 22, 2008) on the total sumof the Award at the highest legal rate allowable under Delawarelaw.

3. The administrative fees and expenses of the International Centrefor Dispute Resolution (ICDR) totalling fourteen thousand dollars

($14,000.00), and the compensation and expenses of the arbitratortotalling forty-nine thousand, nine hundred and three dollars($49,903.00), shall be borne entirely, jointly and severally byRespondents. Therefore, Respondents shall jointly and severallyreimburse Claimant the sum of sixty-three thousand, nine hundredand three dollars ($63,903.00), representing that portion of saidfees and expenses (including the Arbitrator’s fees and expenses)previously incurred by Claimant.

4. Since the arbitration clause did not provide for the award ofattorneys’ fees, Claimant and Respondents shall be responsiblefor their own attorneys’ fees, costs and expenses.

5. As ordered by this tribunal, all the costs and expenses of thevideo conference call held on Friday, March 5, 2010 shall be borneexclusively by Respondents but Claimant shall be responsible forthe costs and expenses of its attorneys present during that call.

6. This award is in full settlement of all claims and counterclaimssubmitted to this Arbitration. Any claim or counterclaim notspecifically awarded is hereby denied.

18. To enforce the aforesaid Award, the Respondent first knockedat the doors of the Principal District Judge, Nagpur, but given the factthat, being a foreign award, a District Judge would have no jurisdictionto enforce the same, a learned Single Judge of the High Court ofJudicature at Bombay, Nagpur Bench, was then approached. By hisjudgment dated 18[th] April, 2016, the learned Single Judge expresslyrecorded:

4. …. The parties have agreed that the question of leading oralevidence in support of their rival contentions does not at all ariseand the pure questions of law are raised, which can be decided onthe basis of the documents which are admitted and placed onrecord.

19. After discussing as to whether the ingredients of a foreignaward were met, the learned Single Judge found :

16. It is not in dispute that the Representation Agreements in forcecontaining clause 8(d) of arbitration brought into force from3-/10/-2000 undertaking to submit to arbitration all or anydifferences concerning the subject--matter capable of settlement

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Aby arbitration, are signed by the Director Terry L. Peteete of theapplicant--Company, and by the non--applicant No.3(i) -RattanRam Pathak in his capacity as the Managing Director of the non--applicant No.1- Company. There exists a defined legal relationshipin writing in the form of the Representation Agreements. Thearbitral award passed on 28/-3/2010 by the International ArbitrationBTribunal is on the differences between the parties to the arbitrationagreement. The said award, therefore, satisfies the test of “foreignaward”, as defined under Section 44 of the said Act. The questionNo. (1) is answered accordingly.

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20. After discussing in detail certain judgments of this Court, theClearned Single Judge held that the agreement and the arbitration clausecannot be enforced against persons who are non-signatories, even thoughsuch non-signatories may participate in the arbitration, as no acquiescenceor estoppel can apply to issues relatable to jurisdiction. So holding, thelearned Single Judge applied Sections 48(1)(c) to (e) to hold that asDGBT and Arun Dev Upadhyaya were not parties to the arbitrationagreement, the award would not be enforceable against them. However,turning down a “public policy plea” by DMC, the learned Single Judgeheld that the Award would be enforceable against DMC as it was aparty to the agreement.

E21. A side skirmish took place as to whether an appeal could befiled from the learned Single Judge’s judgment, and arguments wereraised based on the application of Section 3 of the Maharashtra HighCourt (Hearing of Writ Petitions by Division Bench and Abolition ofLetters Patent) Act, 1986, to arrive at the conclusion that an appealagainst the learned Single Judge’s order would be maintainable (SeeFjudgment dated 23[rd] June, 2016 of the Bombay HC in Arb Appeal No.3/2015). Vide judgment dated 30[th] September, 2016 in Civil Appeal No.8475-76/2016, this Court, after hearing the parties, then ordered thatsuch appeal would be maintainable but only under Section 50 of theArbitration Act, 1996.G

22. The Division Bench of the High Court, after stating the factsand after observing that the foreign award in this case had not beenchallenged in the USA, then held that the award could only be challengedunder Section 48 if the Delaware law has not been followed on the alterego principle. Being satisfied that the Arbitrator had properly appliedHthe Delaware law on the facts of this case, the Court held that none of

the grounds contained in Section 48 would apply so as to resistenforcement of the foreign award in this case. The Division Bench thenheld that Section 48 required that the grounds that are pressed to resistenforcement must be “proved”. The Division Bench held that “proof” isof a higher order than mere evidence being adduced and then held thatthe appellants have miserably failed to “prove” that any of the groundscontained in Section 48 were attracted. As a result, the Division Benchallowed the appeal and set aside the judgment of the Single Judge by theimpugned judgment dated 4[th] January, 2017. A review petition wassubsequently dismissed on 24[th] February, 2017.

23. When the matter came to this Court, in DMC’s Special LeavePetition (SLP (Civil) No. 20802/2016), special leave was granted by anorder dated 11[th] January, 2017, subject to DMC depositing a sumequivalent to 2.5 million US Dollars within three months. If this was notdone, leave would automatically stand revoked. DMC defaulted indepositing the aforesaid amount, as a result of which leave stood revoked,which is reflected in our order dated 21[th] August, 2017. As a result, theforeign Award against DMC is now final and binding.

24. Shri K.V. Vishwanathan, learned Senior Advocate appearingon behalf of GBT, read Sections 44 and 47 of the Arbitration Act, 1996,and then argued that under Section 47(1)(c), the burden of proving thata foreign award may be enforced under Part II is on the person in whosefavour that award is made, and that such burden in the case of a non-signatory to an arbitration agreement can only be discharged by adducingevidence which would independently establish that such non-signatorycan be covered by the foreign award in question. This not being done inthe facts of this case, the threshold burden of proof requirement is notmet, as a result of which the enforcement petition ought to have beenthrown out on this ground alone. The learned Senior Advocate then drewour attention to Section 48 and in particular sub-section (1) sub-clause(a). According to him, a non-signatory to an arbitration agreement wouldbe directly covered by sub-clause (a) as well as sub-clause (c), and ifthe Award were to be read, it would be clear that the reasons given areextremely sketchy and based on ipse dixit and not on facts, renderingthe Award liable to be set aside on these two grounds. He also addedthat though Section 48(1)(b) refers to a natural justice ground, the givingof reasons being part of natural justice ought to be included in this ground,and as no proper reasons have been given by the learned Arbitrator, the AB

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AAward should be set aside on this ground as well. He then argued thatthe Award is in any case perverse, and that the two clients of DMC thatwere shifted to GBT was vital evidence in the case, and the non-examination of these two clients would also vitiate the Award. He citeda number of judgments to buttress these submissions.

B25. Shri Vishwanathan also argued that damages were awardedwithout actual loss having been proved before the learned Arbitratorcontrary to the judgment of the Delhi High Court in AgritradeInternational (P) Ltd. v. National Agricultural Coop. Mktg.Federation of India Ltd., 2012 SCC OnLine Del 896, as a result ofwhich the Award stood vitiated on this ground also.C

26. Shri Harish Salve, learned Senior Advocate appearing on behalfof Arun Dev Upadhyaya, argued that the commission of a tort would beoutside contractual disputes that arise under the Arbitration Agreementand that since the cause of action really arose in tort, the Award wasvitiated on this ground. He also argued relying heavily upon Dallah RealDEstate and Tourism Co v Ministry of Religious Affairs of theGovernment of Pakistan [2010] 3 WLR 1472 [“Dallah”] that a fullreview based on oral and/or documentary evidence ought to have beenundertaken which was not done on the facts of this case, the DivisionBench merely echoing the Arbitrator’s findings. He then made aEdistinction between Section 46 and Section 35 of the Arbitration Act,and argued that under Section 46, a foreign award is to be treated asbinding only on persons as between whom it was made and not on personswho may claim under the parties. He also argued that insofar as hisclient was concerned, there was no evidence to show his involvement inany manner and that the findings against his client are unreasoned andFperfunctory, and on this ground also the Award stands vitiated.

27. Shri Arif Bookwala, learned Senior Advocate appearing onbehalf of ISS, supported the Division Bench judgment and took us throughthe facts pointing out how, as was correctly held by the learned Arbitrator,the address of Shri Arun Dev Upadhyaya, DMC and GBT were all atGthe very same place in Nagpur. He took us painstakingly through theAward to show that the learned Arbitrator not only applied his mind tothe oral and documentary evidence in this case which consisted ofMs.Parker deposing on behalf of ISS, and Shri Pathak and Shri ArunUpadhyaya deposing on behalf of DMC, and then argued that elaboratereasons need not be given in an arbitral award so long as the awardH

happens to be reasoned. He then countered the submissions of ShriVishwanathan and Shri Salve by arguing that their clients had concededbefore the learned Single Judge that only questions of law arose as aresult of which no evidence need be led – which was contrary to thesubmissions made by Shri Vishwanathan and Shri Salve before us. Hethen argued that none of the grounds under Section 48 had been madeout as neither Section 48(1)(a) nor Section 48(1)(c) would even remotelydeal with non-signatories to an arbitration agreement and that, as noobjection qua enforcement of the Award being contrary to public policybeing argued by either appellant in the courts below, the appeals shouldbe dismissed. He also referred to various judgments to buttress hissubmissions.

28. Having heard the learned counsel for all the parties, it isimportant to first set out the relevant statutory provisions as under :

44. Definition.—In this Chapter, unless the context otherwiserequires, “foreign award” means an arbitral award on differencesbetween persons arising out of legal relationships, whethercontractual or not, considered as commercial under the law inforce in India, made on or after the 11th day of October, 1960—

(a) in pursuance of an agreement in writing for arbitration towhich the Convention set forth in the First Schedule applies,and (b) in one of such territories as the Central Government, beingsatisfied that reciprocal provisions have been made may, bynotification in the Official Gazette, declare to be territories towhich the said Convention applies.

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46. When foreign award binding.—Any foreign award whichwould be enforceable under this Chapter shall be treated as bindingfor all purposes on the persons as between whom it was made,and may accordingly be relied on by any of those persons by wayof defence, set off or otherwise in any legal proceedings in Indiaand any references in this Chapter to enforcing a foreign awardshall be construed as including references to relying on an award.

47. Evidence.—

(1) The party applying for the enforcement of a foreign awardshall, at the time of the application, produce before the court—

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(a) the original award or a copy thereof, duly authenticated inthe manner required by the law of the country in which it wasmade; (b) the original agreement for arbitration or a duly certifiedcopy thereof; and

(c) such evidence as may be necessary to prove that the awardis a foreign award.

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—48. Conditions for enforcement of foreign awards.

(1) Enforcement of a foreign award may be refused, at the requestof the party against whom it is invoked, only if that party furnishesto the court proof that—

(a) the parties to the agreement referred to in section 44 were,under the law applicable to them, under some incapacity, orthe said agreement is not valid under the law to which theparties have subjected it or, failing any indication thereon, underthe law of the country where the award was made; or (b) the party against whom the award is invoked was not givenproper notice of the appointment of the arbitrator or of thearbitral proceedings or was otherwise unable to present hiscase; or

(c) the award deals with a difference not contemplated by ornot falling within the terms of the submission to arbitration, orit contains decisions on matters beyond the scope of thesubmission to arbitration:

Provided that, if the decisions on matters submitted to arbitrationcan be separated from those not so submitted, that part of theaward which contains decisions on matters submitted toarbitration may be enforced; xxx xxx xxx

29. A reading of Section 44 of the Arbitration and ConciliationAct, 1996 would show that there are six ingredients to an award being aforeign award under the said Section. First, it must be an arbitral awardon differences between persons arising out of legal relationships. Second,

these differences may be in contract or outside of contract, for example,in tort. Third, the legal relationship so spoken of ought to be considered“commercial” under the law in India. Fourth, the award must be madeon or after the 11[th] day of October, 1960. Fifth, the award must be aNew York Convention award – in short it must be in pursuance of anagreement in writing to which the New York Convention applies and bein one of such territories. And Sixth, it must be made in one of suchterritories which the Central Government by notification declares to beterritories to which the New York Convention applies.

30. The expression “legal relationships” has been explained inVidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 as follows:

24. … The expression “legal relationship”, again not defined inthe Arbitration Act, means a relationship which gives rise to legalobligations and duties and, therefore, confers a right. …

31. Also, the award may deal with differences arising out of breachof contract or tort.

32. Likewise, what is considered to be “commercial” under thelaw of India is well explained in the UNCITRAL Model Law as follows:- “The term ‘commercial’ should be given a wide interpretation soas to cover matters arising from all relationships of a commercialnature, whether contractual or not. Relationships of a commercialnature include, but are not limited to, the following transactionsany trade transaction for the supply or exchange of goods orservices; distribution agreement; commercial representation oragency; factoring, leasing, construction of works; consulting,engineering, licensing investment, financing: banking; insurance;exploitation agreement or concession, joint venture and other formsof industrial or business co-operation; carriage of goods orpassengers by air, sea, rail, or road.”

33. In R.M. Investment and Trading Co. (P) Ltd. v. BoeingCo., (1994) 4 SCC 541, at page 546, this court held:

12. [in] construing the expression “commercial” in Section 2 ofthe [Foreign Awards (Recognition & Enforcement) Act, 1961] ithas to be borne in mind that the “Act is calculated and designed to subserve the cause offacilitating international trade and promotion thereof by

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Aproviding for speedy settlement of disputes arising in such tradethrough arbitration and any expression or phrase occurringtherein should receive, consistent with its literal and grammaticalsense, a liberal construction.” [See : Renusagar Power Co.Ltd. v. General Electric Co. [(1984) 4 SCC 679] (SCC at p.723-24) and Koch Navigation Inc. v. Hindustan PetroleumBCorpn. Ltd. [(1989) 4 SCC 259, 262 (para 8)]

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The expression “commercial” should, therefore, be construedbroadly having regard to the manifold activities which are integralpart of international trade today.

C34. We now come to Section 47. As the marginal note indicates,this Section provides that the pre-requisites for the enforcement of aforeign award are: (1) the original award or a copy thereof dulyauthenticated in the manner required by the law of the country in whichit is made; (2) the original agreement for arbitration or a duly certifiedcopy thereof, and; (3) such evidence as may be necessary to prove thatDthe award is a foreign award.

35. Section 47 is based on Article IV of the New York Conventionwhich is contained in Schedule I to the Arbitration Act, 1996. Article IVreads as follows:

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1. To obtain the recognition and enforcement mentioned in thepreceding article, the party applying for recognition andenforcement shall, at the time of the application, supply:

(a) The duly authenticated original award or a duly certifiedcopy thereof; F

(b) The original agreement referred to in article II or a dulycertified copy thereof.

2. If the said award or agreement is not made in an official languageof the country in which the award is relied upon, the party applyingfor recognition and enforcement of the award shall produce atranslation of these documents into such language. The translationshall be certified by an official or sworn translator or by a diplomaticor consular agent.

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36. In his treatise titled International Commercial Arbitration byGary B. Born (Wolters Kluwer, 2nd Edn., 2014) [“Gary Born”], thelearned author while discussing Article IV of the New York Conventionhas this to say:

Under the convention, it is clear that national arbitration legislationis not permitted to impose more demanding requirements of proofof the existence of a foreign or nondomestic award than thosecontained in Article IV; Article IV prescribes a maximum standardof proof of an award and Contracting States may not imposestricter or more onerous requirements of proof.

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Article IV was drafted in order to advance the Convention’sgeneral pro-enforcement policies. As one national court put it:

“Article IV must be interpreted in accordance with the spiritof the Convention… The Contracting States wished to reducethe obligation for the party seeking recognition and enforcementof a foreign arbitral award as much as possible.” [Judgment of15 April 1999, XXVI Y.B. Comm. Arb. 863, 866 (Geneva Courde justice) (2001)]

Consistent with this objective, national courts have generallyrejected efforts to complicate the proof requirements under ArticleIV, taking a practical and relatively flexible approach towards proofrequirements.

(at pages 3396-3397)

37. From this, is clear that all the requirements of sub-section (1)are procedural in nature, the object being that the enforcing court mustfirst be satisfied that it is indeed a foreign award, as defined,and that it isenforceable against persons who are bound by the award. ShriVishwanathan and Shri Salve’s arguments that to prove that a non-signatory to an arbitral agreement can only be roped in to the aforesaidagreement on evidence being adduced before the enforcing court as towhether the non-signatory is a person who claims under a party or isotherwise affected by the alter ego doctrine, is disingenuous to say theleast. Section 47(1)(c) being procedural in nature does not go to theextent of requiring substantive evidence to “prove” that a non-signatoryto an arbitration agreement can be bound by a foreign award. As a

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Amatter of fact, Section 47(1)(c) speaks of only evidence as may benecessaryto prove that the award is a foreign award. This Section onlyhas reference to the six ingredients of a foreign award that have beenoutlined hereinabove, which are contained in the definition section, namely,Section 44. Ingredients 1 to 4 can easily be made out from the foreignaward itself as the award would narrate facts which would show theBlegal relationship between the ‘persons’ bound by the award (who neednot necessarily be parties to the arbitration agreement), and as to whetherthe award deals with matters that can be considered commercial underthe law in force in India. Equally, the date of the foreign award wouldappear on the face of the foreign award itself. Thus, Section 47(1)(c)Cwould apply to adduce evidence as to whether the arbitration agreementis a New York Convention agreement. Also, the requisite CentralGovernment notification can be produced under Section 47(1)(c), sothat Section 44(b) gets satisfied. To argue that the burden of proof is onthe person enforcing the award and that this burden can only be discharged by such person leading evidence to affirmatively show that a non-signatoryDto an arbitration agreement can be bound by a foreign award is outsideSection 47(1)(c). This argument consequently stands dismissed.

38. We now come to Section 48 which deals with enforcement ofa foreign award being refused. It is important to notice that whenenforcement of a foreign award is resisted, the party who resists it mustEprove to the court that its case falls within any of the sub-clauses of sub-section (1) or sub-section (2) of Section 48. Since some arguments weremade as to the expression “proof” contained in Section 48(1), it isnecessary to deal with the same. In Emkay Global Financial ServicesLtd. v. Girdhar Sondhi, (2018) 9 SCC 49, a question arose under the Fpari materia provision contained in Section 34 of the Arbitration Act,1996 as to what the expression “proof” means therein. After referringto a number of High Court judgments, and to an amendment that hasnow been made to Section 34, in which the expression “furnishes proofthat” is now substituted by “establishes on the basis of the record of thearbitral tribunal that”, this judgment held that the expression “proof”Gcannot possibly mean the taking of oral evidence as it will otherwisedefeat the object of speedy disposal of Section 34 petitions. This was sostated as follows:

21. It will thus be seen that speedy resolution of arbitral disputeshas been the reason for enacting the 1996 Act, and continues toH

be the reason for adding amendments to the said Act to strengthenthe aforesaid object. Quite obviously, if issues are to be framedand oral evidence taken in a summary proceeding under Section34, this object will be defeated. It is also on the cards that if BillNo. 100 of 2018 is passed, then evidence at the stage of a Section34 application will be dispensed with altogether. Given the currentstate of the law, we are of the view that the two early Delhi HighCourt judgments [Sandeep Kumar v. Ashok Hans, 2004 SCCOnLine Del 106 : (2004) 3 Arb LR 306] [,] [Sial Bioenergie v. SBECSystems, 2004 SCC OnLine Del 863 : AIR 2005 Del 95] , cited byus hereinabove, correctly reflect the position in law as to furnishingproof under Section 34(2)(a). So does the Calcutta High Courtjudgment [WEB Techniques & Net Solutions (P) Ltd. v. GatiLtd., 2012 SCC OnLine Cal 4271]. We may hasten to add that ifthe procedure followed by the Punjab and Haryana High Courtjudgment [Punjab SIDC Ltd. v. Sunil K. Kansal, 2012 SCCOnLine P&H 19641] is to be adhered to, the time-limit of oneyear would only be observed in most cases in the breach. Wetherefore overrule the said decision. We are constrained to observethat Fiza Developers [Fiza Developers & Inter-Trade (P)Ltd. v. AMCI (India) (P) Ltd., (2009) 17 SCC] was a step in theright direction as its ultimate ratio is that issues need not be struckat the stage of hearing a Section 34 application, which is a summaryprocedure. However, this judgment must now be read in the lightof the amendment made in Sections 34(5) and 34(6). So read, weclarify the legal position by stating that an application for settingaside an arbitral award will not ordinarily require anything beyondthe record that was before the arbitrator. However, if there arematters not contained in such record, and are relevant to thedetermination of issues arising under Section 34(2)(a), they maybe brought to the notice of the Court by way of affidavits filed byboth parties. Cross-examination of persons swearing to theaffidavits should not be allowed unless absolutely necessary, asthe truth will emerge on a reading of the affidavits filed by bothparties. We, therefore, set aside the judgment [GirdharSondhi v. Emkay Global Financial Services Ltd., 2017 SCCOnLine Del 12758] of the Delhi High Court and reinstate that ofthe learned Additional District Judge dated 22-9-2016. The appealis accordingly allowed with no order as to costs.

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A39. Given that foreign awards in convention countries need to beenforced as speedily as possible, the same logic would apply to Section48, as a result of which the expression “proof” in Section 48 would onlymean “established on the basis of the record of the arbitral tribunal” andsuch other matters as are relevant to the grounds contained in Section48.B

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40. It is important to remember that the New York Convention,which our Act has adopted, has a pro-enforcement bias, and unless aparty is able to show that it’s case comes clearly within Sections 48(1)or 48(2), the foreign award must be enforced. Also, the grounds containedin Sections 48(1)(a) to (e) are not to be construed expansively butCnarrowly. Thus, in Ssangyong Engg. & Construction Co. Ltd. v. NHAI,(2019) 15 SCC 131 [“Ssangyong”], it was held: -

45. After referring to the New York Convention, this Courtdelineated the scope of enquiry of grounds under Sections 34/48(equivalent to the grounds under Section 7 of the Foreign AwardsAct, which was considered by the Court), and held : (Renusagarcase [Renusagar Power Co. Ltd. v. General Electric Co., 1994Supp (1) SCC 644] , SCC pp. 671-72 & 681-82, paras 34-37 &65-66)

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“34. Under the Geneva Convention of 1927, in order to obtainrecognition or enforcement of a foreign arbitral award, therequirements of clauses (a) to (e) of Article I had to be fulfilledand in Article II, it was prescribed that even if the conditionslaid down in Article I were fulfilled recognition and enforcementof the award would be refused if the court was satisfied inrespect of matters mentioned in clauses (a), (b) and (c). Theprinciples which apply to recognition and enforcement of foreignawards are in substance, similar to those adopted by the Englishcourts at common law. (See Dicey & Morris, The Conflict ofLaws, 11th Edn., Vol. I, p. 578.) It was, however, felt that theGeneva Convention suffered from certain defects whichhampered the speedy settlement of disputes through arbitration.The New York Convention seeks to remedy the said defectsby providing for a much more simple and effective method ofobtaining recognition and enforcement of foreign awards.Under the New York Convention the party against whom theaward is sought to be enforced can object to recognition and E

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enforcement of the foreign award on grounds set out in sub-clauses (a) to (e) of Clause (1) of Article V and the court can,on its own motion, refuse recognition and enforcement of aforeign award for two additional reasons set out in sub-clauses(a) and (b) of Clause (2) of Article V. None of the groundsset out in sub-clauses (a) to (e) of Clause (1) and sub-clauses (a) and (b) of Clause (2) of Article V postulates achallenge to the award on merits.

35. Albert Jan van den Berg in his treatise The New YorkArbitration Convention of 1958: Towards a UniformJudicial Interpretation, has expressed the view:

‘It is a generally accepted interpretation of theConvention that the court before which the enforcementof the foreign award is sought may not review the meritsof the award. The main reason is that the exhaustive listof grounds for refusal of enforcement enumerated inArticle V does not include a mistake in fact or law bythe arbitrator. Furthermore, under the Convention the taskof the enforcement judge is a limited one. The controlexercised by him is limited to verifying whether an objectionof a respondent on the basis of the grounds for refusal ofArticle V(1) is justified and whether the enforcement ofthe award would violate the public policy of the law of hiscountry. This limitation must be seen in the light of theprinciple of international commercial arbitration that anational court should not interfere with the substance ofthe arbitration.’ (p. 269)

36. Similarly Alan Redfern and Martin Hunter have said:

‘The New York Convention does not permit any review onthe merits of an award to which the Convention appliesand, in this respect, therefore, differs from the provisionsof some systems of national law governing the challenge ofan award, where an appeal to the courts on points of lawmay be permitted.’ (Redfern & Hunter, Law and Practiceof International Commercial Arbitration, 2nd Edn., p.461.)

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37. In our opinion, therefore, in proceedings for enforcement of aforeign award under the Foreign Awards Act, 1961, the scope ofenquiry before the court in which award is sought to be enforcedis limited to grounds mentioned in Section 7 of the Act and doesnot enable a party to the said proceedings to impeach the awardon merits.

***

65. This would imply that the defence of public policy whichis permissible under Section 7(1)(b)(ii) should be construednarrowly. In this context, it would also be of relevance to mentionthat under Article I(e) of the Geneva Convention Act of 1927, it ispermissible to raise objection to the enforcement of arbitral awardon the ground that the recognition or enforcement of the award iscontrary to the public policy or to the principles of the law of thecountry in which it is sought to be relied upon. To the same effectis the provision in Section 7(1) of the Protocol & Convention Actof 1837 which requires that the enforcement of the foreign awardmust not be contrary to the public policy or the law of India. Sincethe expression “public policy” covers the field not covered by thewords “and the law of India” which follow the said expression,contravention of law alone will not attract the bar of public policyand something more than contravention of law is required.

66. Article V(2)(b) of the New York Convention of 1958 andSection 7(1)(b)(ii) of the Foreign Awards Act do not postulaterefusal of recognition and enforcement of a foreign award on theground that it is contrary to the law of the country of enforcementand the ground of challenge is confined to the recognition andenforcement being contrary to the public policy of the country inwhich the award is set to be enforced. There is nothing to indicatethat the expression “public policy” in Article V(2)(b) of the NewYork Convention and Section 7(1)(b)(ii) of the Foreign AwardsAct is not used in the same sense in which it was used in ArticleI(c) of the Geneva Convention of 1927 and Section 7(1) of theProtocol and Convention Act of 1937. This would mean that“public policy” in Section 7(1)(b)(ii) has been used in a narrowersense and in order to attract the bar of public policy theenforcement of the award must invoke something more than the

violation of the law of India. Since the Foreign Awards Act isconcerned with recognition and enforcement of foreign awardswhich are governed by the principles of private international law,the expression “public policy” in Section 7(1)(b)(ii) of the ForeignAwards Act must necessarily be construed in the sense thedoctrine of public policy is applied in the field of private internationallaw. Applying the said criteria it must be held that the enforcementof a foreign award would be refused on the ground that it iscontrary to public policy if such enforcement would be contraryto (i) fundamental policy of Indian law; or (ii) the interests ofIndia; or (iii) justice or morality.”

(emphasis supplied in Ssangyong)

41. Likewise, in Vijay Karia v. Prysmian Cavi E Sistemi SRL,(2020) 11 SCC 1 [“Vijay Karia”], this Court held:

24. Before referring to the wide-ranging arguments on both sides,it is important to emphasise that, unlike Section 37 of the ArbitrationAct, which is contained in Part I of the said Act, and which providesan appeal against either setting aside or refusing to set aside a“domestic” arbitration award, the legislative policy so far asrecognition and enforcement of foreign awards is that an appealis provided against a judgment refusing to recognise and enforcea foreign award but not the other way around (i.e. an orderrecognising and enforcing an award). This is because the policyof the legislature is that there ought to be only one bite at thecherry in a case where objections are made to the foreign awardon the extremely narrow grounds contained in Section 48 of theAct and which have been rejected. This is in consonance with thefact that India is a signatory to the Convention on the Recognitionand Enforcement of Foreign Arbitral Awards, 1958 (hereinafterreferred to as “New York Convention”) and intends — throughthis legislation — to ensure that a person who belongs to aConvention country, and who, in most cases, has gone through achallenge procedure to the said award in the country of its origin,must then be able to get such award recognised and enforced inIndia as soon as possible. This is so that such person may enjoythe fruits of an award which has been challenged and whichchallenge has been turned down in the country of its origin, subject AB

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to grounds to resist enforcement being made out under Section 48of the Arbitration Act. ….

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44. Indeed, this approach has commended itself in other jurisdictionsas well. Thus, in Sui Southern Gas Co. Ltd. v. Habibullah CoastalPower Co. (Pte) Ltd. [Sui Southern Gas Co. Ltd. v. HabibullahCoastal Power Co. (Pte) Ltd., 2010 SGHC 62], the SingaporeHigh Court, after setting out the legislative policy of the ModelLaw that the “public policy” exception is to be narrowly viewedand that an arbitral award that shocks the conscience alone wouldbe set aside, went on to hold:

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“48. It is clear, therefore, that in order for SSGC to havesucceeded on the public policy argument, it had to cross a veryhigh threshold and demonstrate egregious circumstances suchas corruption, bribery or fraud, which would violate the mostDbasic notions of morality and justice. Nothing of the sort hadbeen pleaded or proved by SSGC, and its ambiguous contentionthat the award was “perverse” or “irrational” could not, ofitself, amount to a breach of public policy.”

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50. The US cases show that given the “pro-enforcement bias” ofthe New York Convention, which has been adopted in Section 48of the Arbitration Act, 1996 — the burden of proof on partiesseeking enforcement has now been placed on parties objecting toenforcement and not the other way around; in the guise of publicpolicy of the country involved, foreign awards cannot be set asideby second guessing the arbitrator’s interpretation of the agreementof the parties; the challenge procedure in the primary jurisdictiongives more leeway to courts to interfere with an award than thenarrow restrictive grounds contained in the New York Conventionwhen a foreign award’s enforcement is resisted.

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42. Given these parameters, let us examine arguments of theappellants insofar as Section 48(1)(a) is concerned. If read literally,Section 48(1)(a) speaks only of parties to the agreement being undersome incapacity, or the agreement being invalid under the law to whichparties have subjected it. There can be no doubt that a non-party to theHagreement, alleging that it cannot be bound by an award made under

such agreement, is outside the literal construction of Section 48(1)(a).Also, it must not be forgotten that whereas Section 44 speaks of anarbitral award on differences between “persons”, Section 48(1)(a) refersonly to the “parties” to the agreement referred to in Section 44(a). Thus,to include non-parties to the agreement by introducing the word “person”would run contrary to the express language of Section 48(1)(a), whenread with Section 44. Also, it must not be forgotten that these groundscannot be expansively interpreted as has been held above. The groundsare in themselves specific, and only speak of incapacity of parties andthe agreement being invalid under the law to which the parties havesubjected it. To attempt to bring non-parties within this ground is to tryand fit a square peg in a round hole.

43. Quite apart from the fact that Section 48(1)(a) was not putforward either before the learned Single Judge or the Division Bench,let us examine the judgment in Dallah (supra) which appears to justifythe bringing of a non-signatory to the agreement’s objection to a foreignaward under Section 48(1)(a).

44. In Dallah’s case (supra), a Saudi company applied under theUnited Kingdom’s Arbitration Act, 1996 for leave to enforce an awardagainst a ministry of the Government of Pakistan. There was no doubton the facts of that case that the Government was not a party to thearbitration agreement, which was between Dallah and the Awami HajjTrust. The Supreme Court of the United Kingdom found, on a trialconducted before it, that the agreement containing the arbitration clausefell to be decided under French law as the law of the country where theaward was made, which required that there be a common intentionbetween the parties to the agreement that the Government of Pakistanbe bound by the arbitration agreement. It was found, contrary to theTribunal’s finding, that the agreement had been deliberately structuredto reflect a common intention that only the parties to the agreementwere to be bound, a non-party being an outsider. The Tribunal’s awardhad held on the facts of that case as follows: (para 146 of Dallah)

“Certainly, many of the above-mentioned factual elements, ifisolated and taken into a fragmented way, may not be construedas sufficiently conclusive for the purpose of this section. However,Dr Mahmassani believes that when all the relevant factualelements are looked into globally as a whole, such elementsconstitute a comprehensive set of evidence that may be relied A

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Aupon to conclude that the defendant is a true party to the agreementwith the claimant and therefore a proper party to the dispute thathas arisen with the claimant under the present arbitrationproceedings. Whilst joining in this conclusion Dr Shah and LordMustill note that they do so with some hesitation, considering thatthe case lies very close to the line.”B

45. This was referred to as a “weak conclusion” in para 146, andin any case did not conform to French law as the doctrine of alter egowas completely different from common intention of parties to theagreement which was required under French law. As a result, the arbitralaward was set aside under Section 103(2)(b) of the UK Act, which isCsubstantially similar to Section 48(1)(a) of the Indian Arbitration Act,1996.

46. The leading judgment of Lord Mance JSC set out the factsand posed the question before the Court thus: -

D2 ...The tribunal in a first partial award dated 26 June 2001concluded that the Government was a true party to the agreementand as such bound by the arbitration clause, and so that the tribunalhad jurisdiction to determine Dallah’s claim against theGovernment. The central issue before the English courts is whetherthe Government can establish that, applying French law principles,Ethere was no such “common intention” on the part of theGovernment and Dallah as would make the Government a party.

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47. The learned Judge then noted, in para 11, that the argumentmade before the Tribunal was that the Trust was either the alter ego ofthe Government of Pakistan or the Government of Pakistan was theFsuccessor to the Trust. Since the ‘alter ego’ argument found favourwith the Tribunal, and since it was not pursued before the SupremeCourt, the conclusion that the award was bad would necessarily follow. Inpara 31, Lord Mance JSC made it clear that a court seized of an issueunder Section 103(2)(b) will examine, both carefully and with interest,Gthe reasoning and conclusion of an arbitral tribunal which has undertakena similar examination before arriving at its own conclusion on facts.

48. In a separate concurring judgment, Lord Collins ofMapesbury JSC set out as to why, in His Lordship’s opinion, ArticleV(1)(a) of the New York Convention (equivalent to Section 103(2)(b) ofthe UK Act and Section 48(4)(a) of the Indian Arbitration Act, 1996)Hwould be attracted as follows: -

77 Although article V(1)(a) (and section 103(2)(b)) deals expresslyonly with the case where the arbitration agreement is not valid,the consistent international practice shows that there is no doubtthat it also covers the case where a party claims that the agreementis not binding on it because that party was never a party to thearbitration agreement. Thus in Dardana Ltd v Yukos Oil Co[2002] 2 Lloyd’s Rep 326 it was accepted by the Court of Appealthat section 103(2)(b) applied in a case where the question waswhether a Swedish award was enforceable in England againstYukos on the basis that, although it was not a signatory, it had byits conduct rendered itself an additional party to the contractcontaining the arbitration agreement. In Sarhank Group v OracleCorp (2005) 404 F 3d 657 the issue, on the enforcement of anEgyptian award, was whether a non-signatory parent companywas bound by an arbitration agreement on the basis that itssubsidiary, which had signed the agreement, was a mere shell;and in China Minmetals Materials Import and Export Co Ltd vChi Mei Corpn (2003) 334 F 3d 274 enforcement of a Chineseaward was resisted on the ground that the agreement was aforgery. See also Born, International Commercial Arbitration(2009), Vol II, pp 2778–2779.

49. Given the conclusion on Section 48(1)(a) when read withSection 44 of the Arbitration Act 1996, we cannot follow what is statedto be “international practice” in trying to fit a non-signatory’s objectionto a foreign award being binding upon it under Section 48(1)(a). Wetherefore distinguish Dallah’s case on facts as well as on law – a non-signatory’s objection cannot possibly fit into Section 48(1)(a) as has beenheld by us hereinabove. Without delving deep into this problem, it mayperhaps be open in an appropriate case for a non-signatory to bring itscase within Section 48(2) read with Explanation 1(iii), as explained inSsangyong (supra) (see paras 70 and 76 in Ssangyong).

50. Shri Vishwanathan relied on a judgment of the Supreme Courtof Victoria, Australia, in the case of IMC Aviation Solutions Pty Ltd. vAltain Khuder LLC [2011] VSCA 248 to submit that, where a partyresists enforcement of a foreign award on the ground that it is not asignatory to the arbitration agreement, the enforcing court is duty boundto examine the question of jurisdiction by itself.

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52. What is important to note is that there is a significant differencein the Australian Act i.e., Section 8(1) of the Australian Act (which isCanalogous to Section 46 of the Indian Arbitration Act, 1996) which statesthat “a foreign award is binding …. on the parties to the arbitrationagreement in pursuance of which it was made”.

53. The Supreme Court of Victoria, after initially expressing somedoubt on whether ‘not being signatory to the agreement’ can be a groundDthat can be canvassed under Section 8(5)(b), held that, since Section8(1) clearly does not intend enforcement of foreign awards against non-signatories, such a plea can be brought within the ambit of Section 8(5)(b).The relevant paras are as follows:

135 In our opinion, at stage one, the award creditor must satisfyEthe Court, on a prima facie basis, of the following matters beforethe Court may make an order enforcing the award:

(a) an award has been made by a foreign arbitral tribunal grantingrelief to the award creditor against the award debtor; F(b) the award was made pursuant to an arbitration agreement;and

(c) the award creditor and the award debtor are parties to thearbitration agreement.

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156Thirdly, s 8(1) appears prominently in the scheme of s 8. Thisis not surprising, as it defines the subject matter of Part II of theAct, namely, that by virtue of the Act, a foreign arbitral award isbinding on ‘the parties to the arbitration agreement in pursuanceof which it was made’. In thus identifying that which is binding, s H

8(1) limits the Court’s jurisdiction pursuant to s 8(2) to enforcing aforeign arbitral award against a party to the arbitration agreementin pursuance of which it was made.

159 Logically, the expression ‘the arbitration agreement is notvalid’ in s 8(5)(b) may be inapt to accommodate the ground that aperson is not a party to the arbitration agreement. This is becausea person that seeks to establish that he or she is not a party to anagreement may have no legal or factual basis for impugning thevalidity of the agreement. The agreement may be valid as betweenthe parties to it, and simply not apply to any person that is not aparty to it. A person who establishes that he or she is not a partyto an arbitration agreement does not thereby establish that thearbitration agreement is not valid.

160 Sixthly, a reading of s 8(5) as a whole indicates that theprovision assumes that the question of whether the person resistingthe enforcement of the award was a party to the arbitrationagreement in pursuance of which the award was made has alreadybeen resolved against that person. This is evident from s 8(5)(a),which refers to ‘a party to the arbitration agreement’, and s 8(5)(f),which refers to ‘the parties to the arbitration agreement’. If theseprovisions are read literally, the grounds covered by them are onlyavailable to parties to the arbitration agreement. It is not clearwhy these provisions should be so confined if it is the intention ofthe Act to permit a person that alleges that he or she is not a partyto an arbitration agreement to resist enforcement of the awardunder s 8(5).

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165 It cannot be said that the ground that the award debtor wasnot a party to the arbitration agreement in pursuance of which theaward was made is more significant than, for example, the groundthat the arbitration agreement pursuant to which the award wasmade was not valid. There is no reason to think that an awarddebtor has greater justification to be aggrieved because it maintainsthat it was not a party to the arbitration agreement than an awarddebtor that maintains that the arbitration agreement was invalidbecause it was forged or obtained by fraud. If the forgery orfraud are not apparent on the face of the arbitration agreement, A

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and an ex parte order is made to enforce the award, the awarddebtor would have the onus under s 8(5)(b) to persuade the Courtthat the arbitration agreement was a forgery or was obtained byfraud. There is no justification for adopting a different approachwhere, on the face of the arbitration agreement, the award debtorwas a party to that agreement.

166 Fourthly, the ordinary and natural meaning of the expression‘the arbitration agreement is not valid’ is that the arbitrationagreement is of no legal effect under the relevant law. A personwho asserts that he or she is not a party to an arbitration agreementis, in substance, asserting that the arbitration agreement is of nolegal effect as against him or her. Accordingly, s 8(5)(b) may betaken to include the ground that the award debtor was not a partyto the arbitration agreement in pursuance of which the awardwas made.

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171 In relation to the question of whether s 8(5)(b) extends to theground that the award debtor was not a party to the arbitrationagreement, we respectfully agree with the approach that has beenadopted in the United Kingdom.

172 In Dallah, Lord Collins JSC said that, notwithstanding thatpara 1(a) of art V of the Convention – which is reflected in s8(5)(b) of the Act – deals expressly only with the case where thearbitration agreement is not valid, ‘the consistent internationalpractice shows that there is no doubt that it also covers the casewhere a party claims that the agreement is not binding on it becausethat party was never a party to the arbitration agreement.’ Insupport of this proposition, Lord Collins JSC referred to DardanaLtd v Yukos Oil Co. In that case, Mance LJ said that ‘[i]t is clear,and was effectively common ground before us, that [the UKequivalent of s 8(5)(b) of the Act] is one vehicle enabling thepresent appellants to challenge the recognition and enforcementof the Swedish award, by maintaining that they never becameparty to the [arbitration agreement]’

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272 It will be recalled from [166] and [171] to [172] above thatthe words ‘the arbitration agreement is not valid’ in s 8(5)(b) of the Act include the ground that the award debtor was not a partyto the arbitration agreement.

(emphasis supplied)

54. This case in inapplicable when construing Section 48(1)(a) ofthe Arbitration Act, 1996 for the same reason as Dallah is inapplicable.

55. As a matter of fact, the Singapore High Court in Aloe Vera ofAmerica, Inc v Asianic Food (S) Pte Ltd & Anr., [2006] SGHC 78,has arrived at a conclusion, on facts similar to ours, that the equivalentof Section 48(1)(a) in the Singapore Act would not be attracted.

56. In the facts of this case, Aloe Vera of America, Inc. [“AVA”],a company incorporated and existing under the laws of Texas, USA,was a manufacturer and distributor of aloe vera products. One Mr. Chiewwas employed by AVA to be an independent distributor of the aforesaidproducts. When AVA decided to close its Singapore office, Mr. Chiewpersuaded AVA to let him take over AVA’s Singapore operations. Heestablished Asianic Food (S) Pte Ltd. [“Asianic”] for this purpose, as aresult of which, an Exclusive Supply, Distributorship and LicenseAgreement was entered into between AVA and Asianic. Mr. Chiewsigned the agreement on behalf of Asianic. This agreement wassubsequently terminated, with AVA commencing arbitral proceedingsagainst both Asianic and Mr. Chiew. Mr. Chiew took the position that,not being a party to the agreement, he had not agreed to arbitration or tothe laws of Arizona applying to him personally. However, the learnedArbitrator, in his award, ordered both Asianic and Mr. Chiew to payAVA damages, compensation, administrative fees and expenses. In thisfact situation, when Section 31(2)(b) of Singapore’s InternationalArbitration Act [the “Singapore Act”] (equivalent of Section 48(1)(a)of the Indian Arbitration Act, 1996) was pressed in support of Mr. Chiew’sobjection to the foreign award, the Singapore High Court held: -

61. First of all, it should be remembered that under s 31(2) of theAct, it is the party who wishes the court to refuse enforcement ofthe award who has the burden of establishing that one of thegrounds for refusal exists. Sub-section (2)(b) calls on thechallenger to establish that the arbitration agreement in questionis not valid under the law to which the parties have subjected it. Inthis case, the arbitration agreement was subject to the law ofArizona and therefore Mr Chiew bore the burden of establishing A

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that it was not valid under the law of Arizona and that under thelaw of Arizona the clauses of the Agreement could not have anyapplication to him. It would not be correct in this situation for meto construe cl 13.7 or any other clause of the Agreement in thesame way as I would be able to if it were subject to Singaporelaw in order to establish whether there was a valid arbitrationagreement binding Mr Chiew.

62. The same argument was brought before the assistant registrarwho correctly held that the issue as to whether there was a validarbitration agreement had to be determined on the basis of foreignlaw. He also recognised that Mr Chiew had the burden to adduceevidence to establish his contention. The assistant registrar foundthat Mr Chiew had failed to adduce such evidence. On thecontrary, the evidence showed that Mr Chiew had signed theAgreement and was also active in running Asianic. The assistantregistrar found support from the reasoning of the US District Courtdecision in the Sarhank case [Sarhank Group v OracleCorporation reported in Yearbook Comm Arb¼n XXVIII (2003)p 1043)]. Batts J who decided it at first instance stated:

[T]he court has been asked to enforce an international arbitralaward in which arbitrability has already been established underthe laws of Egypt. …

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[T]he Convention … does not sanction second-guessing thearbitrator¼s construction of the parties¼ agreement. … It iswell-settled that absent “extraordinary circumstances”, aconfirming court is not to reconsider the arbitrators¼ findings.

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[The arbitrators¼] conclusion of partnership under the contractis one of “construction of the parties¼ agreement” and willnot be reviewed by the Court, absent extraordinarycircumstances. In the instant case, no such extraordinarycircumstances exist.

Whilst the decision of Batts J may have been reversed by theCourt of Appeals [404 F 3d 657 (2nd Cir, 2005)], I respectfully

agree with his observations which are in line with the generalapproach taken by an enforcement court to the decision of thearbitral tribunal in question. They are also consonant with theviews of the court in the Hebei case which underline that theapproach towards the decisions of foreign arbitral tribunals inConvention countries is to recognise the validity of the sameand give effect to them subject to basic notions of morality andjustice. The Court of Appeals in the Sarhank case took adifferent view, one that I hope will not be generally endorsed.

57. In the facts of the present case, what this Court is being askedto do, in the guise of applying Section 48(1)(a), is really to undertake areview on the merits. As has been pointed out by us hereinabove, theapplication of the alter ego doctrine under Delaware law would dependprimarily upon the Arbitrator applying the oral and documentary evidenceled before him to arrive at this conclusion on facts. This he has done bynot only adverting to the documentary evidence, but also adverting tothe oral evidence of Ms. Parker of ISS, Mr. Pathak, MD of DMC andArun Dev Upadhyaya, Chairman of DMC. Given the fact that the foreignaward gives reasons on facts in this case to apply the alter ego doctrine,it would not be possible for us to re-appreciate these facts especiallywhen the burden lies on the appellants to establish the grounds made outin Section 48(1), none of which go to the merits of the case.

58. Shri Vishwanathan also argued that the award is perverse inthat vital evidence was not led in support of the claimant’s case beforethe arbitrator. Perversity as a ground to set aside an award in aninternational commercial arbitration held in India no longer obtains afterthe 2015 amendment to the Arbitration Act, 1996. This Court inSsangyong (supra)held as follows:

41. What is important to note is that a decision which is perverse,as understood in paras 31 and 32 of Associate Builders v. DDA,(2015) 3 SCC 49, while no longer being a ground for challengeunder “public policy of India”,would certainly amount to a patentillegality appearing on the face of the award. Thus, a finding basedon no evidence at all or an award which ignores vital evidence inarriving at its decision would be perverse and liable to be set asideon the ground of patent illegality. Additionally, a finding based ondocuments taken behind the back of the parties by the arbitratorwould also qualify as a decision based on no evidence inasmuch

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Aas such decision is not based on evidence led by the parties, andtherefore, would also have to be characterised as perverse.

42. Given the fact that the amended Act will now apply, and thatthe “patent illegality” ground for setting aside arbitral awards ininternational commercial arbitrations will not apply, it is necessaryBto advert to the grounds contained in Sections 34(2)(a)(iii) and(iv) as applicable to the facts of the present case.

(emphasis supplied)

59. The judgment in Ssangyong (supra)noted in para 29 thatSection 48 of the Act has also been amended in the same manner asCSection 34 of the Act. The ground of “patent illegality appearing on theface of the award” is an independent ground of challenge which appliesonly to awards made under Part I which do not involve internationalcommercial arbitrations. Thus, the “public policy of India” ground afterthe 2015 amendment does not take within its scope, “perversity of anDaward” as a ground to set aside an award in an international commercialarbitration under Section 34, and concomitantly as a ground to refuseenforcement of a foreign award under Section 48, being a pari materiaprovision which appears in Part II of the Act. This argument musttherefore stand rejected.

E60. The appellants then pressed Section 48(1)(c) into operation.As can be seen, Section 48(1)(c) relates to an award which deals with adifference not contemplated by or not falling within the terms of thesubmission to arbitration, or it contains decisions on matters beyond thescope of the submissions to arbitration. Given the fact that the expression‘submission to arbitration’ would refer primarily to the arbitrationFagreement (see Olympus Superstructures (P) Ltd. v. Meena VijayKhetan, (1999) 5 SCC 651 at para 19), sub-clause (c) only deals withdisputes that could be said to be outside the scope of the arbitrationagreement between the parties – and not to whether a person who is nota party to the agreement can be bound by the same. In fact, the provisoGto Section 48(1)(c) makes this even clearer, in that it states that an awardmay be partially enforced, provided that matters which are outside thesubmission to arbitration can be segregated, thereby again showing thatthe thrust of the provision is whether the dispute between parties arequa excepted matters for example, or are otherwise outside the scopeof the arbitration agreement. In Ssangyong (supra), this Court narrowedH

the scope of the challenge contained in Section 34(2)(a)(iv), which ispari materia with Section 48(1)(c) as follows:

58. So far as this defence is concerned, standard textbooks onthe subject have held that the expression “submission to arbitration”either refers to the arbitration agreement itself, or to disputessubmitted to arbitration, and that so long as disputes raised arewithin the ken of the arbitration agreement or the disputes submittedto arbitration, they cannot be said to be disputes which are eithernot contemplated by or which fall outside the arbitration agreement.The expression “submission to arbitration” occurs in variousprovisions of the 1996 Act. Thus, under Section 28(1)(a), anArbitral Tribunal “… shall decide the dispute submitted to arbitration…”. Section 43(3) of the 1996 Act refers to “… an arbitrationagreement to submit future disputes to arbitration …”. Also, ithas been stated that where matters, though not strictly in issue,are connected with matters in issue, they would not readily beheld to be matters that could be considered to be outside or beyondthe scope of submission to arbitration. ….

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67. In State of Goa v. Praveen Enterprises, (2012) 12 SCC 581(Praveen Enterprises), this Court set out what is meant by“reference to arbitration” as follows : (SCC pp. 587-88, paras 10-11)

“10. “Reference to arbitration” describes various acts. Referenceto arbitration can be by parties themselves or by an appointingauthority named in the arbitration agreement or by a court on anapplication by a party to the arbitration agreement. We mayelaborate:

(a) If an arbitration agreement provides that all disputesbetween the parties relating to the contract (some agreementsmay refer to some exceptions) shall be referred to arbitrationand that the decision of the arbitrator shall be final and binding,the “reference” contemplated is the act of parties to thearbitration agreement, referring their disputes to an agreedarbitrator to settle the disputes.

(b) If an arbitration agreement provides that in the event ofany dispute between the parties, an authority named therein A

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shall nominate the arbitrator and refer the disputes whichrequired to be settled by arbitration, the “reference”contemplated is an act of the appointing authority referring thedisputes to the arbitrator appointed by him.

(c) Where the parties fail to concur in the appointment of thearbitrator(s) as required by the arbitration agreement, or theauthority named in the arbitration agreement failing to nominatethe arbitrator and refer the disputes raised to arbitration asrequired by the arbitration agreement, on an application by anaggrieved party, the court can appoint the arbitrator and onsuch appointment, the disputes between the parties standreferred to such arbitrator in terms of the arbitration agreement.

11. Reference to arbitration can be in respect of all disputesbetween the parties or all disputes regarding a contract orin respect of specific enumerated disputes. Where “alldisputes” are referred, the arbitrator has the jurisdiction todecide all disputes raised in the pleadings (both claims andcounterclaims) subject to any limitations placed by thearbitration agreement. Where the arbitration agreementprovides that all disputes shall be settled by arbitration butexcludes certain matters from arbitration, then, the arbitratorwill exclude the excepted matter and decide only thosedisputes which are arbitrable. But where the reference tothe arbitrator is to decide specific disputes enumerated bythe parties/court/appointing authority, the arbitrator’sjurisdiction is circumscribed by the specific reference andthe arbitrator can decide only those specific disputes.”

68. A conspectus of the above authorities would show that wherean Arbitral Tribunal has rendered an award which decides matterseither beyond the scope of the arbitration agreement or beyondthe disputes referred to the Arbitral Tribunal, as understoodin Praveen Enterprises, the arbitral award could be said to havedealt with decisions on matters beyond the scope of submission toarbitration.

69. We therefore hold, following the aforesaid authorities, that inthe guise of misinterpretation of the contract, and consequent“errors of jurisdiction”, it is not possible to state that the arbitralaward would be beyond the scope of submission to arbitration if

otherwise the aforesaid misinterpretation (which would includegoing beyond the terms of the contract), could be said to havebeen fairly comprehended as “disputes” within the arbitrationagreement, or which were referred to the decision of the arbitratorsas understood by the authorities above. If an arbitrator is allegedto have wandered outside the contract and dealt with matters notallotted to him, this would be a jurisdictional error which could becorrected on the ground of “patent illegality”, which, as we haveseen, would not apply to international commercial arbitrations thatare decided under Part II of the 1996 Act. To bring in by thebackdoor grounds relatable to Section 28(3) of the 1996 Act to bematters beyond the scope of submission to arbitration under Section34(2)(a)(iv) would not be permissible as this ground must beconstrued narrowly and so construed, must refer only to matterswhich are beyond the arbitration agreement or beyond thereference to the Arbitral Tribunal.

61. In the Aloe Vera of America case (supra), the SingaporeHigh Court adverted to Section 31(2)(d) of the Singapore Act (which isthe equivalent to Section 48(1)(c) of the Indian Arbitration Act, 1996),and then held:

64. Under s 31(2)(d), enforcement of the Award may be refusedif it “deals with a difference not contemplated by, or not fallingwithin the terms of, the submission to arbitration or contains adecision on the matter beyond the scope of the submission toarbitration”.

65. Mr Loh submitted that the Award should not be enforced inSingapore because it contains a decision on matters that are beyondthe scope of the submission to arbitration – the arbitrationagreement was between AVA and Asianic and the submission toarbitration was restricted to those parties only. Joining Mr Chiewand entering an award against him went beyond the scope of thesubmission to arbitration. Javor v Francoeur [2003] BCJ No480 was cited in support. Additionally, Mr Loh said certainacademics (though he referred me to only one article, that byProf Wedam-Lukic, “The Jurisdictional Problems of Arbitration”(1994) 1 Croatian Arbitration Yearbook 51) were also of the viewthat an award seeking to bind non-parties to an arbitrationagreement was a ground for refusal of enforcement under Art A

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V(1)(c) of the Convention (the equivalent of s 31(2)(d) of theAct).

66. On behalf of AVA, Mr Dhillon submitted that s 31(2)(d) dealtwith the grounds of excess of power or authority of the arbitrator.He cited para 20.145 of Halsbury¼s Laws of Singapore vol 2(LexisNexis, 2003 Reissue) where the author stated that thisground of challenge assumed that the tribunal had jurisdiction overthe parties and that the excess of jurisdiction should be looked atin relation to the scope of the arbitration agreement and not berestricted to the pleadings filed in the arbitration. The author addedthat when the court examined such a challenge, it should be cautiousthat in doing so it did not go into the merits in the case raisedbefore the arbitrator, including any issue of law.

67. Mr Dhillon further submitted that s 31(2)(d) did not overlapwith s 31(2)(b) which was the proper section to invoke when achallenge was being made on the basis that a person was not aparty to the arbitration agreement. He pointed out that in PeterCremer GmbH & Co v Co-operative Molasses Traders Ltd[1985] ILRM 564, the appellant had argued that there was nobinding contract between the parties and that therefore there couldnot be a binding agreement to submit disputes to arbitration. Dealingwith this argument in the Irish Supreme Court, Finlay CJ held at573 that:

I am not satisfied that this issue can properly be made thesubject matter of a defence pursuant to either s.9(2)(d) ors.9(2)(f) of the Act of 1980. S.9(2)(d) clearly, in my view, refersto a situation where there is an undoubted submission toarbitration … If, as is contended by the appellants in this case,there was no binding agreement containing an arbitration clausethen, by definition, there could be no submission to arbitrationand in the absence of a submission to arbitration there couldbe no issue as to whether an award dealt with differences notcontemplated or falling within the terms of a submission orwent beyond the scope of the submission.

In Peter Cremer, no challenge was mounted on the basis of theIrish equivalent of s 31(2)(b) but it is quite clear that the court didnot consider that a challenge, premised on the argument that a

person was not a party to an agreement, could be made under s31(2)(b).

68. In any event, Mr Dhillon submitted that in order to determinewhether the award dealt with matters that were beyond the scopeof the submission to arbitration, the law to be applied would haveto be the governing law of the arbitration agreement since thatlaw would control the way in which the arbitration agreementwas construed. Accordingly, where a Convention award is to beenforced, the foreign law of the award would be applicable. Inthis case, Mr Chiew had brought no evidence based on Arizonalaw to prove that the Award contained a decision on a matterbeyond the scope of the submission to arbitration. As for Javor vFrancoeur, this case was distinguishable on its facts as the arbitratorthere had held that the respondent was liable without finding himto be a party to the arbitration agreement.

69. Having considered Mr Dhillon’s arguments, I accept them. Iagree with the assistant registrar that this ground of challengerelates to the scope of the arbitration agreement rather than towhether a particular person was a party to that agreement. MrChiew has not established that this ground avails him in thisinstance.

62. We think this judgment states the law correctly.

63. Shri Vishwanathan then pressed the ground that since theArbitrator’s Award in the present case contained reasoning which wasperfunctory in nature, it would not pass muster and it would be a breachof natural justice, ‘reasons’ being a part of natural justice as understoodin this country. For this, he referred to Section 48(1)(b) of the ArbitrationAct, 1996. Section 48(1)(b) does not speak of absence of reasons in anarbitral award at all. The only grounds on which a foreign award cannotbe enforced under Section 48(1)(b) are natural justice grounds relatableto notice of appointment of the arbitrator or of the arbitral proceedings,or that a party was otherwise unable to present its case before the arbitraltribunal, all of which are events anterior to the making of the award.Section 48(1)(b) has in any case been narrowly construed in the case ofVijay Karia (supra) as follows:

81. Given the fact that the object of Section 48 is to enforceforeign awards subject to certain well-defined narrow exceptions,

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Athe expression “was otherwise unable to present his case”occurring in Section 48(1)(b) cannot be given an expansive meaningand would have to be read in the context and colour of the wordspreceding the said phrase. In short, this expression would be afacet of natural justice, which would be breached only if a fairhearing was not given by the arbitrator to the parties. Read alongBwith the first part of Section 48(1)(b), it is clear that this expressionwould apply at the hearing stage and not after the award hasbeen delivered, as has been held in Ssangyong. A good workingtest for determining whether a party has been unable to presenthis case is to see whether factors outside the party’s control haveCcombined to deny the party a fair hearing. Thus, where noopportunity was given to deal with an argument which goes to theroot of the case or findings based on evidence which go behindthe back of the party and which results in a denial of justice to theprejudice of the party; or additional or new evidence is taken whichforms the basis of the award on which a party has been given noDopportunity of rebuttal, would, on the facts of a given case, rendera foreign award unenforceable on the ground that a party hasbeen unable to present his case. This must, of course, be with thecaveat that such breach be clearly made out on the facts of agiven case, and that awards must always be read supportivelyEwith an inclination to uphold rather than destroy, given the minimalinterference possible with foreign awards under Section 48.

64. This judgment also expressly referred to arbitral awards whichmay be poorly reasoned as follows: -

24. …. Also, it would only be in a very exceptional case of ablatant disregard of Section 48 of the Arbitration Act that theSupreme Court would interfere with a judgment which recognisesand enforces a foreign award however inelegantly drafted thejudgment may be. …

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83. Having said this, however, if a foreign award fails to determinea material issue which goes to the root of the matter or fails todecide a claim or counterclaim in its entirety, the award may shockthe conscience of the Court and may not be enforced, as wasdone by the Delhi High Court in Campos Bros. Farms v. MatruBhumi Supply Chain (P) Ltd., 2019 SCC OnLine Del 8350 :(2019) 261 DLT 201 on the ground of violation of the public policy G

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of India, in that it would then offend a most basic notion of justicein this country. It must always be remembered that poor reasoning,by which a material issue or claim is rejected, can never fall inthis class of cases. ….

65. This argument also stands rejected.

66. Shri Salve argued that since damages were given in tort in thepresent case, they would be outside the scope of the arbitrationagreement. The arbitration agreement in this case reads as follows: -

(ii) In the event a dispute arises in connection with this Agreementsuch dispute shall be referred to a single arbitrator in Kansas City,Missouri, U.S.A. to be appointed by agreement between theparties hereto, or failing agreement to be appointed according tothe rules of the American Arbitration, Association the same rulesunder which any dispute which any dispute shall be decided.

(emphasis supplied)

67. As has been noticed by us earlier in this judgment, Section 44recognises the fact that tort claims may be decided by an arbitratorprovided they are disputes that arise in connection with theagreement. Thus in Renusagar Power Co. Ltd. v. General ElectricCo., (1984) 4 SCC 679, this court held: -

39. As regards the third claim of compensatory damages it is truethat Renusagar is being saddled with this liability as tortfeasor, astake-holder and/or a constructive trustee, but, in our view, thataspect by itself will not justify a conclusion that the same is notcovered by the arbitration clause because the question is notwhether the claim lies in tort but the question is whether eventhough it has lain in tort it “arises out of” or is “related to” thecontract, that is to say, whether it arises out of the terms of thecontract or is consequential upon any breach thereof. As explainedearlier, this claim is based on and is consequential upon and byway of corollary to the non-payment of the two detained amountsby Renusagar to G.E.C. in breach of the terms of the contract. Inother words, it is clear that before adjudicating upon this claim theadjudicating authority will have first necessarily to adjudicate uponfirst two claims preferred by G.E.C. and only if it is found thatG.E.C. is entitled to receive the first two amounts which ought tohave been paid by Renusagar under the terms of the contract but

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which Renusagar had failed to pay that this third claim could, if atall, be allowed to G.E.C. In the real sense, therefore, this claim isdirectly, closely and inextricably connected with the terms andconditions of the contract, the payments to be made thereunderand the breaches thereof and as such will have to be regarded asa claim “arising out of” or “related to” the contract. As we shallpoint out presently this Court in one of its decisions has laid downthe test for determining the question in such cases and the test iswhether recourse to the contract, by which both the parties arebound, would be necessary for the purpose of determining whetherthe claim in question was justified or otherwise and this test, asindicated above, is clearly satisfied with regard to the third claimin the instant case.

40. We may, at this stage, refer to a passage in Russell onArbitration and a few decided cases which fortify our aforesaidconclusion. In Russell on Arbitration (Twentieth Edn.) thefollowing statement of law occurs at p. 90:

“Claims in tort may be so intimately connected with a contractthat a clause of appropriate width designed primarily to makecontractual disputes arbitrable will nevertheless render suchclaims in tort arbitrable as well.”

41. In Woolf v. Collis Removal Service [(1947) 2 All ER 260 :(1948) 1 KB 11 : 177 LT 405 (CA)] the defendants had contractedto remove plaintiff’s furniture and effects from London to theirstore in Marlow and there safely to keep and take care of them,but, according to the plaintiff, the defendants had, in breach of thecontract, removed the goods to a different destination where somewere lost and others damaged. Alternatively the plaintiff claimedthat the goods were lost and damaged owing to the negligence ofthe defendants in using an unsuitable place in which to store themand guarding them inefficiently. The clause providing for arbitrationran: “If the customer makes any claims upon or counter-claim toany claim made by the contractors” the same shall be referred tothe decision of the two arbitrators. The question was whether theclaim for damages was covered by this clause. The Court ofAppeal held that even if the claim in negligence was a claim intort and not under the contract yet there was a sufficient closeconnection between that claim and the transaction to bring the

claim within the arbitration clause. This authority clearly showsthat even though a claim may not directly arise under the contractwhich contains an arbitration clause, if there was sufficient closeconnection between that claim and the transaction under thecontract it will be covered by the arbitration clause.

42. In Astro Vencedor Compania Naviera SA of Panama v.Mabanaft GmbH [(1971) 2 All ER 1301 (QBD & CA)] thearbitration clause contained in a contract of charter-party ran:“any dispute arising during the execution of this charter-party”shall be settled by two arbitrators, one to be appointed by theowners and the other by the charterers. The relevant charterersordered the vessel to a Dutch port not named in the bill of ladingwhereby satisfactory bills of lading were not available in time anddisputes arose as to unloading. By action of the relevant charterersthe vessel was arrested and released on a bank guarantee. Later,under a charter quite unconnected with the relevant charterersthe vessel happened to be again in a Dutch port and was arrestedagain as a result of disputes as to the satisfactory nature of theoriginal bank guarantee. The owners arbitrated a claim for damagesin respect of each of the two arrests of the vessel. The charterersargued that these were claims in tort and outside the arbitrator’sjurisdiction. The Court held that arbitrator had jurisdiction (1) overthe first arrest as it was closely connected with the dispute underthe contract, and was indeed a direct consequence of a claim fordamages under the contract, and (2) over the second arrest as itwas part and parcel of the original arrest.

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44. In Alliance Jute Mills Co. Ltd. v. Lalchand Dharamchand[AIR 1978 Cal 19] disputes between the parties to a commercialcontract were arbitrable under the bye-laws of the East IndiaJute & Hessian Exchange Association and the relevant bye-lawran thus: “All matters, questions, disputes, difference and/or claimsarising out of and/or concerning and/or in connection with and/orin consequence of or relating to this contract shall be referred toarbitration....” Under the commercial contract Respondent 1 hadsold, through a broker, certain quantities of fibre to the appellantMill and after effecting delivery of the goods Respondent 1 hadsubmitted bills to the appellant Mill again through the broker; the A

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appellant Mill, however, claimed reduction in price on account ofshortage in weight and submitted claims in that respect. Since theprice was not paid, Respondent 1 referred the claim to thearbitration of Bengal Chamber of Commerce and Industry. Theappellant Mill informed the Chamber of Commerce and Industrythat it had filed a suit upon the whole of the subject-matter of thereference and served a notice under Section 35 of the ArbitrationAct. In the suit so filed against Respondent 1 and the broker apartfrom the declaration sought that the broker had no claims againstthe appellant Mill in respect of the contract or in respect of thebills submitted by the broker for the price of goods sold anddelivered the appellant Mill had also claimed a decree for Rs 50,000as damages for the alleged libel published by Respondent 1 andthe broker. In an application for stay of the suit under Section 34of the Arbitration Act, 1940, one of the questions raised waswhether the arbitration clause was wide enough to include theclaim for damages for the alleged libel. The High Court held thatthe claim in damages for defamation arose “out of” and “inconnection with” the non-payment of the bills of Respondent 1and in going into the question of tort the Court would necessarilyhave to go into the terms and conditions of the contract relating topayment and that the claim in tort was directly and inextricablyconnected with the terms and conditions of the contract and assuch came within the scope of the arbitration clause which waswide enough to cover the same. In this view of the matter Courtstayed the suit under Section 34 of the Arbitration Act.

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46. As stated earlier since this third claim for compensatorydamages is directly, closely and inextricably connected with theterms and conditions of the contract, the payments to be madethereunder and the breaches thereof and since for adjudicationthereof recourse to the contract would be necessary it will haveto be held that it is a claim “arising out of” and in any event “relatedto” the contract.

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48. Having regard to the aforesaid discussion we are clearly ofthe view that all the three claims referred by G.E.C. to the Court

of Arbitration of I.C.C. do “arise out of” and are “related to” thecommercial contract in fact the first two claims arise “under thecontract”) and squarely fall within the widely worded Arbitrationclause being Article XVII contained in the commercial contract.It is also clear that the Arbitration clause embraces even thequestion of its effect (scope), that is to say, it embraces the issueof the arbitrability of the three claims Questions whether in law,namely, the law of the Forum, the arbitrators will have jurisdictionand power to decide the arbitrability of the claims or not andwhether Renusagar’s suit is liable to be stayed or not will beconsidered by us next but at this stage we are categoricallynegativing the contentions of counsel for Renusagar that on meritsthe three claims are beyond the scope or purview of the Arbitrationclause or that the Arbitration clause on its own language does notembrace the issue of arbitrability of the three claims.

68. In Tarapore & Co. v. Cochin Shipyard Ltd., (1984) 2 SCC680, this Court held:

39. Phrases such as “claim arising out of contract” or “relating tothe contract” or “concerning the contract” on proper constructionwould mean that if while entertaining or rejecting the claim or thedispute in relation to claim may be entertained or rejected afterreference to the contract, it is a claim arising out of contract.Again the language of clause 40 shows that any claim arising outof the contract in relation to estimates made in the contract wouldbe covered by the arbitration clause. If it becomes necessary tohave recourse to the contract to settle the dispute one way or theother then certainly it can be said that it is a dispute arising out ofthe contract. And in this case the arbitration clause so widelyworded as disputes arising out of the contract or in relation to thecontract or execution of the works would comprehend within itscompass a claim for compensation related to estimates and arisingout of the contract. The test is whether it is necessary to haverecourse to the contract to settle the dispute that has arisen. [(See Russel on Arbitration, Twentieth Ed., page 85)]

69. It then specifically referred to Astro Vencedor CompaniaNaviera S.A. of Panama v. Mabanaft GmbH [(1971) 2 QB 588 asfollows:

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A42. In Astro Vencedor Compania Naviera S.A. ofPanama v. Mabanaft GmbH [(1971) 2 QB 588 : (1971) 2 AllER 1301 : (1971) 3 WLR 24] a question arose whether a claim intort would be covered by the arbitration clause? It was admittedthat the claim for wrongful arrest is a claim in tort. And it wascontended that a claim in tort cannot come within the arbitrationBclause. The Court of Appeal speaking through Lord Denning heldthat the claim in tort would be covered by the arbitration clause, ifthe claim or the issue has a sufficiently close connection with theclaim under the contract.

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70. As a result, this contention has no legs on which to stand.

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71. Shri Salve argued relying upon three judgments of this Court,namely, Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC306, Chloro Controls India (P) Ltd. v. Severn Trent WaterPurification Inc., (2013) 1 SCC 641, Cheran Properties Ltd. v.Kasturi & Sons Ltd., (2018) 16 SCC 413 that a comparison betweenDSections 35 and 46 of the Arbitration Act, 1996 would show that thelegislature circumscribed the power of the enforcing court under Section46 to persons who are bound by a foreign award as opposed to personswhich would include ‘persons claiming under them’ and that, therefore,a foreign award would be binding on parties alone and not on others.EFirst and foremost, Section 46 does not speak of “parties” at all, but of“persons” who may, therefore, be non-signatories to the arbitrationagreement. Also, Section 35 of the Act speaks of “persons” in the contextof an arbitral award being final and binding on the “parties” and “personsclaiming under them”, respectively. Section 35 would, therefore, refer toonly persons claiming under parties and is, therefore, more restrictive inFits application than Section 46 which speaks of “persons” without anyrestriction. Quite apart from this, another important conundrum arisesfrom the Division Bench judgment in the present case. The DivisionBench judgment applied Delaware law to satisfy itself that such law hadindeed been followed to apply the alter ego doctrine correctly, as aGresult of which the foreign award would have to be upheld. We wish toindicate that this approach is completely erroneous. First and foremost,Section 48 does not contain any ground for resisting enforcement of aforeign award based upon the foreign award being contrary to thesubstantive law agreed to by the parties and which it is to apply in reachingits conclusion. As a matter of fact, whether the award is correct in lawH

(applying Delaware law), would be relevant if at all such award were tobe set aside in the State in which it was made and that too if such lawpermitted interference on the ground that the arbitral award had infractedthe substantive law of the agreement. As has been pointed outhereinabove, the arbitral award in this case was not challenged in theState of Missouri. Hence, the Division Bench’s foray into this line ofreasoning is wholly incorrect.

72. As a matter of fact, if an international commercial arbitrationwere to be held in India, Section 28(1)(b) recognises that an arbitraltribunal can decide the dispute in accordance with the rules of lawdesignated by the parties as applicable to the substance of the disputewhich, in turn, has a direct nexus to the substantive law of the countrywhose laws are said to apply. There is no ground in the pari materiaprovisions of Section 34 to set aside such award on the ground that thesubstantive law of that country has been infracted. Indeed, the onlyground on which such award could possibly be interfered with is if suchaward, valid under the law which it applied, could be held to be contraryto the public policy of India. Gary Born (supra) has this to say on thisaspect:

Despite the potentially expansive and unruly character of “publicpolicy,” courts in most jurisdictions have been very reluctant toinvoke the exception to deny recognition to foreign awards. Rather,they have underscored the narrow, exceptional character of thepublic policy defense in recognition proceedings, emphasizing thatthe exception is not satisfied merely because foreign law or foreigntribunal reached a different result, or even an entirely oppositereslt, from that provided by domestic law. One leading Swissjudicial decision sums up this approach as follows:

“The appellant forgets that the enforcement court does notdecide on the arbitral award as an appellate instance; the meritsof the award cannot be reviewed under the cover of publicpolicy.” [Judgment of 9 January 1995, Inter Maritime MgmtSA v. Russin & Vecchi, XXII Y.B. Comm. Arb. 789,796 (SwissFederal Tribunal)]

Other courts have also repeatedly made clear that “erroneouslegal reasoning or misapplication of law is generally not a violationof public policy within the meaning of the New York Convention.

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That result has been repeatedly and squarely affirmed by decisionsin U.S., Swiss, French, English, German, Austrian, Singaporean,Hong Kong, Indian, Korean and other courts. Thus, the fact thatan arbitral tribunal applies a law that is different from that of therecognition forum’s law, or wrongly applies the recognition forum’slaws, or reaches a result that is contrary to that which therecognition forum’s courts would reach when applying their own(or a foreign) law, is not a basis for finding a violation of publicpolicy under Article V (2) (b).

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The same principle is even more clearly applicable with regard tofactual findings by an arbitral tribunal …

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(at pages 3667-3669)

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It is frequently said that conduct involving violations of certaintypes of criminal prohibitions implicates national and internationalpublic policies, crimes of terrorism, piracy, slave-trading, drugsmuggling, torture, murder, kidnapping and robbery are all typicallyidentified as examples of public policy. As discussed above, in thecontext of arbitration agreements:

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“The English court would not recognise an agreement between…highwaymen to arbitrate their differences any more than itwould recognise the original agreement to split the proceeds.”[Soleimany v. Soleimany [1999] QB 785, 797 (English Ct. Appl)]

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Equally, neither an English court nor courts of most other stateswould recognize awards that split the proceeds of a criminalenterprise or that otherwise facilitated serious criminal activities,whether highway robbery, terrorism, drug smuggling, slave- trading,human-trafficking, or similar crimes. In practice, however, it ishighly unusual for criminals involved in such enterprises to comeanywhere close to either lawyers or arbitrators; other forms ofalternative dispute resolution are used in almost all such settings.As a consequence, there are very few national court decisionsinvolving the text-book cases of serious criminal activities.

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(at pages 3672-3693)

73. Thus, if in a given case the substantive law of a foreign countryHwere to recognise a narcotic drug as being legal based upon which an award for the supply of such drug is then ordered, such award maypossibly be resisted in India on the ground that it would be contrary tothe fundamental policy of Indian law to give effect to such agreement ina case in which the Narcotic Drugs and Psychotropic Substances Act,1985 prohibits import of such a drug. A foreign award cannot be set atnaught under Section 48 on the ground that it has infracted the substantivelaw of the agreement.

74. The final argument that the damages that have been awardedhave been awarded on no basis whatsoever would again not fall withinany of the exceptions contained in Section 48(1). In order to attractSection 48(2) read with Explanation 1(iii), this Court in Ssangyong (supra)has held that it is only in exceptional cases which involve some basicinfraction of justice which shocks the conscience of the court that sucha plea can be entertained. This Court held:

70. The expression “most basic notions of … justice” finds mentionin Explanation 1 to sub-clause (iii) of Section 34(2)(b). Here again,what is referred to is, substantively or procedurally, somefundamental principle of justice which has been breached, andwhich shocks the conscience of the Court. ….

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76. However, when it comes to the public policy of India, argumentbased upon “most basic notions of justice”, it is clear that thisground can be attracted only in very exceptional circumstanceswhen the conscience of the Court is shocked by infraction offundamental notions or principles of justice. ….

75. The Arbitrator correctly held that as nothing was forthcomingfrom any of the appellants, he would have to make a best judgmentassessment for damages. In making that assessment, he took into accountthe commission that was being earned by GBT from the two clients ofDMC and arrived at a figure of 100,000 USD per month and then found,on a reasonable estimate, that they would continue to be clients for aperiod of four years, as a result of which the figure of 6,948,100 USDwas reached.

76. That such ‘guesstimates’ are not a stranger to the law ofdamages in the U.S. and other common law tradition nations has beenestablished very early on in a judgment of Asutosh Mookerjee, J. reportedas Frederick Thomas Kingsley v. The Secretary of State for India A

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AAIR 1923 Cal 49. In this judgment, a learned Division Bench of theCalcutta High Court put it thus: -

It may be conceded that though every breach of duty arising outof a contract gives rise to an action for damages, without proof ofactual damage, Marzetti v. Williams [(1830) I B & Ad. 415 : 35BR.R. 329.], Embery v. Owen [(1851) 6 Exch. 353 : 86 R.R. 331],the amount of damages recoverable is, as general rule, governedby the extent of the actual damage sustained in the consequenceof the defendant’s act, Hiort v. L.N.W. Ry. Co.[(1879) 4 Exch.Div. 188.]. In cases admitting proof of such damage, the amountmust be established with reasonable certainty, The CommerceC[(1850) 3 W. Rob. 283.]. But this does not mean that absolutecertainty is required, nor in all cases, is there a necessity for directevidence as to the amount. Damages are not uncertain for thereason that the loss sustained is incapable of proof with thecertainty of mathematical demonstration or is to some extentDcontingent and incapable of precise measurement. As Harlan J.observed in delivering the judgment of the Supreme Court of theUnited States in Heztel v. Baltimore and O.R. Co. [(1897) 169U.S. 26 (38)], certainty to reasonable extent is necessary, and themeaning of that language is that the loss of damage must be sofar removed from speculation or doubt as to create in the mindsEof intelligent and reasonable men the belief that it is most likely tofollow from the breach of the contract and was a probable anddirect result thereof. To the same effect is the decision in Morrisv. U.S. [174 U.S. 291.] that where absolute certainty is impossible,judgment of fair men as to damages directly resulting governs.

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(at pages 50,51)

77. Significantly, this judgment referred to and relied upon U.S.Supreme Court judgments to arrive at this conclusion.

78. However, Shri Viswanathan relied upon AgritradeGInternational (P) Ltd. v. National Agricultural Coop. Mktg.Federation of India Ltd., (supra) and para 24 in particular, which states:-

24. There is also merit in the submissions made on behalf ofNAFED that there was no material produced before the ArbitralTribunal by Agritrade to show that it had, in fact, suffered anyloss as a result of NAFED not opening an L/C for the quantity of H

5000 MT of CPO. In its final Award dated 14th January 2008, theArbitral. Tribunal merely accepted the default date as 7th October2004 and proceeded to determine the “close out price” to assessthe damage. Unless there was actual proof of loss suffered byAgritrade, awarding of any differential between the contractedprice and close out price must also be held to be based on noevidence.

79. The facts in this case are far removed from the facts in theaforesaid High Court Judgment. There can be no doubt whatsoever thatas a result of the machinations of Upadhyaya and Pathak, as found bythe arbitral tribunal, ISS was deprived of commission legitimately due toit under the representation agreement. This being so, there can be nodoubt that, on facts as proved before the arbitral tribunal, actual loss canbe said to have been occasioned to ISS.

80. In any case, the damages so awarded in the facts of this casecannot even remotely be said to shock the conscience of this Court soas to clutch at “the basic notion of justice” ground contained in Section48(2) Explanation (1)(iii).

81. The result is that the appeals are dismissed for the reasonsgiven by us without any order as to costs.

Nidhi Jain

Appeals dismissed.

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