Foreign Award can bind Non-Signatories to Arbitration Agreement
The Arbitration and Conciliation Act, 1996 was enacted to consolidate and amend the laws pertaining to domestic arbitration, international commercial and business arbitration, enforcement, and implementation mechanism of foreign arbitral awards and to define the laws relating to conciliation and matters that are connected therewith or incidental thereto. The Legislation comprehensively covers provisions for process of carrying out the arbitration proceedings, provisions for arbitral awards, tribunal’s jurisdiction, supervision of the courts in the process of arbitration and etcetera. The very purpose of this legislation was discussed in the case of Union of India v. Singh Builders Syndicate, where the Supreme Court held that the purpose and object of the Act is to achieve expedition and effective disposal of the arbitral matters.  Very recently, a division bench of the Apex Court of India which comprised of Justices RF Nariman and BR Gavai held that a foreign award can be binding upon the non-signatories’ parties to the arbitration agreement and is enforceable against them.
Facts of the Case : A Representation Agreement was signed in September 2000 between Integrated Sales Services Ltd. (a Hong Kong-based company) and DMC Management Consultants Ltd. (a company registered in India, with principal business address at Nagpur). By this arrangement, Integrated Sales agreed to assist DMC in selling its goods and services to potential clients in exchange for a commission. Any dispute between the parties was to be sent to a single arbitrator in Kansas City, Missouri, USA, under the terms of the agreement. Disputes developed between the parties, prompting Integrated Sales to send Arun Dev Upadhyaya a notice of arbitration (Chairman of DMC). The statement of claim also named DMC and one Gemini Bay Transcription Private Limited as party respondents. Arun Dev Upadhyaya owned, controlled, and ruled this Gemini Bay enterprise, which was founded in India. Arun Dev Upadhyaya was accused of using Gemini Bay to transport monies away from Integrated Sales. DMC was accused of terminating contracts with clients brought in by Integrated Sales and then causing the same clients to sign new contracts with Gemini Bay. This was done to avoid paying Integrated Sales commission. Arun Dev Upadhyaya was accused of using Gemini Bay as an alter persona and ignoring DMC's corporate forms to achieve his inappropriate goal of breaching the Representation Agreement. The arbitration agreement between Integrated Sales and DMC, Gemini Bay claimed, was not enforceable against it. In March 2010, an international arbitrator awarded USD 6,948,100 to Integrated Sales, which subsequently sought to have the foreign arbitral judgement enforced by a Single Judge of the Bombay High Court. Because Arun Dev Upadhyaya and Gemini Bay were not signatories to the arbitration agreement, the Single Judge decided that the arbitral judgement was only enforceable against DMC. On appeal, the Division Bench of the High Court overturned the Single Judge's decision. Gemini Bay and Arun Dev Upadhyaya took their grievances to the Supreme Court.
Ruling: The Supreme Court held that a foreign award can be binding on non-signatories to the arbitration agreement and can be thus enforced against them. Furthermore, the Court concluded that a foreign award's enforcement cannot be challenged just because it was issued against a non-signatory to the arbitration agreement. The objections of a non-signatory will not fit under the grounds under Section 48(1) of the Arbitration and Conciliation Act, which outline the conditions under which the implementation of a foreign decision can be prohibited, according to a division bench led by Justices RF Nariman and BR Gavai.
Analysis of the Case: The enforcement of foreign awards has been dealt with in Part-II of the Arbitration and Conciliation Act, 1996 which has two chapters, Chapter I dealing with New York Convention Awards and Chapter II dealing with Geneva Convention Awards. Section 44 of the 1996 Act defines a foreign award as an arbitral award on difference between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October 1960-
a) In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
b) In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
The Supreme Court in Centro Trade Minerals & Metals Inc. v. Hindustan Copper Ltd., held that in order to come to a conclusion that a particular award is a foreign award, the following conditions have to be satisfied :
a) The legal relationship between the parties must be commercial,
b) The award must be made in pursuance of an agreement in writing; and
c) The award must be made in convention country. 
The Supreme Court in the current case of Gemini Bay Transcription Pvt. Ltd. v. Integrated Sales Service Ltd. & Anr., broke the definition of foreign award for the purpose of understanding initially the essential ingredients of constituting a foreign award under the definition provided under section 44 of the Arbitration and Conciliation Act, 1996.
It must, first and foremost, be an arbitral ruling based on differences between people resulting from legal ties.
Second, these discrepancies may arise in the context of a contract or outside of it, such as in tort.
Third, the legal relationship in question should be classified as "commercial" under Indian law.
Fourth, the award must be made no later than November 10, 1960.
Fifth, the prize must be presented during the New York Convention.
Sixth, it must be made in one of the territories declared by the Central Government to be territories to which the New York Convention applies by notification.
Further the Court thereafter turned to Section 47 of the Arbitration and Conciliation Act, 1996 that speaks of Evidence, which stipulates the following requirements for the enforcement of a foreign award:
the original award or a copy thereof duly authenticated in the manner required by the law of the country in which it was made.
the original agreement for arbitration or a duly certified copy thereof; and
such evidence as may be necessary to prove that the award was a valid foreign award.
The Supreme Court laid emphasis that the requirements under section 47(1) are procedural in nature and before the enforcement of the same, the court must first satisfy that it is a foreign award as defined under section 44 meeting the requirements for the enforcement of a foreign award. Section 47(1)(c) does not go the extent of requiring substantive evidence to prove that a non-signatory to an arbitration agreement can be bound by a foreign award. And hence stated that Sec.47(1) (c) speaks of only evidence to be produced as may be necessary to prove that certain award is a foreign award.
The substantive portion of argument came forth with the argument of the conditions for enforcement of foreign award as provided by Section 48 of the 1996 Act. In the case of Hindustan Petroleum Corp. Ltd v. Videocon Industries Ltd., the Delhi High Court stated that a perusal of section 48 would reveal that an application to assail a foreign award is independent of the said provision relating to setting aside or suspension of the foreign award. This section provides that enforcement of a foreign award may be refused at the request of the party against whom it is invoked, only if the party furnishes proof that “the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which or the law of which the award was made.  Section 48 lays down provisions for the enforcement of foreign awards and the discretion of the Indian Courts to refuse execution. If the contesting party furnishes to the court proof that –
The parties to the agreement were under some incapacity or that the agreement was not valid under the law to which the parties have subjected it;
That party against whom award is invoked was not given proper notice of appointment of arbitrator or of the arbitral proceedings or was otherwise unable to present the case;
The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration.
The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties; and,
The award has not become binding on parties or has been set aside or suspended by competent authority of the country in which the award is made.
In the case of Shri Lal Mahal Ltd., v. Progetto Grano SPA, the Rajasthan High Court highlighted that enforcement of a foreign award can be refused only if such enforcement is found to be contrary to fundamental policy of Indian Law, the interests of India and justice or morality. The contesting parties argued in the Gemini case that a non-signatory to an arbitration agreement would be covered by section 48(1) (a) and (c) and further argued that the justifications offered are exceedingly hazy and dependent on ipse dixit rather than facts, making the Award susceptible to being set aside on these two grounds. The Supreme Court analysed that Section 48(1) (a) literally refers to parties to an agreement becoming incapacitated or the agreement being void under the law to which the parties have agreed. There is no doubt that a non-party to the agreement who claims that an award made under the agreement cannot bind it is outside the literal interpretation of Section 48(1) (a). It's also important to note that, whereas Section 44 refers to an arbitral ruling on differences between "persons," Section 48(1)(a) merely refers to the "parties" to the Section 44 agreement (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), when read with Section 44.
To this the appellant party also contested stating that the award was perverse since the evidence was not led in support of the claimant’s case before the arbitrator. The court while rejecting this argument stated that taking note of the 2015th amendment and the judgment in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, the court observed that perversity as a ground to set aside an award in an international commercial arbitration held in India no longer obtains after the 2015 amendment to the Arbitration Act, 1996. The arbitral award can be set aside if it is in disagreement with India's public policy, according to Section 34 of the Act. Explanation 1 specifies that an award is in violation of Indian public policy only if,-
the award was influenced or influenced by fraud or corruption or was made in violation of section 75 or section 81; or
it is contrary to Indian law's essential policy; or
it is contrary to the most fundamental ideas of morality or justice.
Subclause 2A was added through the 2015 amendment, and it reads as follows: "An arbitral award arising from arbitrations other than international commercial arbitrations may be set aside by the Court if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided, however, that an award shall not be set aside solely on the basis of an incorrect application of the law or reappreciation of evidence." The separate ground of challenge of "patent illegality evident on the face of the award" applies solely to awards made under Part I that do not involve international commercial arbitrations. The ‘public policy of India' ground does not include ‘perversity of an award' as a ground to set aside an award in an international commercial arbitration under Section 34, and concurrently as a ground to refuse enforcement of a foreign award under Section 48, which is a pari materia provision in Part II of the Act.” Speaking about the argument for Section 48(1) (c), the Court stated that Section 48(1)(c) states that enforcement of a foreign award can be denied only if the party seeking enforcement provides proof to the court that "the award deals with a difference not contemplated by or falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration." Given that the term "submission to arbitration" refers primarily to the arbitration agreement, the Court determined that sub-clause (c) only applies to disputes that fall outside the scope of the arbitration agreement between the parties and not to whether a person who is not a party to the agreement can be bound by it.
Conclusion: The Supreme Court has again stressed the narrow spectrum of reasons on which enforcement of a foreign award might be rejected in this decision. The court decided that these grounds could not be read broadly since it would be like trying to fit a square peg into a round hole. The foreign award must be enforced unless a party can prove that their case falls clearly within Section 48(1) or 48(2) of the Arbitration and Conciliation Act, 1996.
 U.O.I v. Singh Builders Syndicate, (2009) 4 SCC 523.  Centro Trade Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245. Hindustan Petroleum Corp. Ltd v. Videocon Industries Ltd., 2012 (5) RAJ 683 (Del).  Shri Lal Mahal Ltd., v. Progetto Grano SPA, 2013 (3) Arb LR 1.
Ms. Bandana Saikia, Legal Intern
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