Grounds for Refusing Enforcement of a Foreign Award: Section 48

Section 48 reproduces Article V of the New York Convention. The grounds are exhaustive, the burden for most of them lies on the party resisting enforcement, and the court has no power to examine the merits of the award. Two features of the drafting are easily missed and decide many cases: the section says that enforcement may be refused, which leaves a residual discretion to enforce even where a ground is technically established, and it contains no counterpart to the patent illegality ground available for a purely domestic award.

The questions the court asks in order, and the bias in favour of enforcement

1. The Structure of the Section

Section 48(1) contains five grounds which the party against whom the award is invoked must prove. Section 48(2) contains two which the court may find for itself. Section 48(3) permits the court to adjourn where an application to set aside or suspend the award is pending in the country of origin, and to order security. The Explanations inserted in 2015 confine the public policy ground and exclude a review on the merits.

2. The Grounds to Be Proved

2.1 Incapacity, or an invalid arbitration agreement

Section 48(1)(a) covers incapacity of a party and invalidity of the agreement. The law by which validity is tested is the law to which the parties subjected the agreement, and failing any indication, the law of the country where the award was made. Indian law is not the test, and a party cannot resist enforcement by showing that the agreement would have been invalid under Indian law if that law was not the governing law. The ground also covers the case where no agreement existed at all, though a party who participated in the arbitration without taking the objection will ordinarily be met with waiver.

2.2 Want of notice or inability to present the case

Section 48(1)(b) applies where the party was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or was otherwise unable to present his case. This is the procedural fairness ground, and it is judged by the standards of the proceeding abroad and not by Indian procedural expectations. A party who received notice and chose not to participate cannot complain; a party who was refused a reasonable opportunity to answer the case against it can. An award which is brief, or which does not address every argument, is not for that reason an award made in breach of this clause.

2.3 Matters beyond the scope of the submission

Section 48(1)(c) applies where the award deals with a difference not contemplated by or not falling within the terms of the submission, or contains decisions on matters beyond its scope. The proviso preserves the severable part: if the decisions on matters submitted can be separated from those not submitted, that part of the award which contains decisions on matters submitted may be enforced. A party relying on this clause must identify precisely which relief lies outside the reference, and must not use it as a vehicle for arguing that the tribunal decided a referred issue wrongly.

2.4 Irregular composition or procedure

Section 48(1)(d) applies where the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place. The hierarchy is important: the agreement of the parties comes first, and the law of the seat only fills a gap. A procedural irregularity which caused no prejudice does not justify refusal, which is where the residual discretion in the opening words of the section operates.

2.5 The award is not binding, or has been set aside or suspended

Section 48(1)(e) applies where the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Three points follow.

No double exequatur. The party seeking enforcement does not have to prove that the award has become final in the country of origin. It is for the resisting party to show that it is not binding. This is the principal advance the New York Convention made over the Geneva Convention.
Only the courts of the seat may annul. The competent authority is that of the country in which the award was made, or under whose law it was made. A court elsewhere may refuse enforcement, but it cannot set the award aside.
The word may. Even where an award has been annulled at the seat, the section says that enforcement may be refused, and the discretion is not exhausted by the fact of annulment, though in practice an award set aside at the seat will rarely be enforced.

3. The Grounds the Court May Find

Section 48(2) permits the court to refuse enforcement if it finds that the subject matter of the difference is not capable of settlement by arbitration under the law of India, or that the enforcement of the award would be contrary to the public policy of India. Arbitrability here is tested by Indian law, because it is Indian enforcement that is in question; the categories are those in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 and the four-fold test in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.

Explanations to Section 48(2)(b)

Explanation 1. It is clarified that an award is in conflict with the public policy of India only if (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. The test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

📖 Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC 433

Held: The expression public policy of India in Section 48(2)(b) is to be given the narrow meaning adopted in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, and not the wider meaning given to the same words in Section 34 by Saw Pipes. At the stage of enforcement the court does not have the power to review the award on the merits, and an error of fact or of law is not a ground for refusal.

📖 Vijay Karia v. Prysmian Cavi E Sistemi SRL, (2020) 11 SCC 1

Held: The grounds in Section 48 are to be construed narrowly and the burden lies on the party resisting enforcement. A breach of a statutory provision, such as the foreign exchange legislation, does not by itself contravene the fundamental policy of Indian law; the contravention must go to the core of Indian public policy, and a breach which is capable of being remedied by permission of the regulator does not qualify. The most basic notions of morality or justice are offended only where the award shocks the conscience of the court. The court retains a residual discretion to enforce where a ground is made out but no prejudice has been caused. Appeals under Article 136 against orders enforcing foreign awards should be entertained only in the rarest of cases.

Significance: The leading modern statement of the pro-enforcement approach of Part II, and the authority for the residual discretion and the prejudice requirement.

4. What Is Not a Ground

Patent illegality. Section 34(2A) applies only to an award arising out of an arbitration other than an international commercial arbitration, and Part II contains no equivalent. A foreign award cannot be resisted on the ground that the tribunal misapplied the law or ignored the terms of the contract.
An error of fact or of law. Explanation 2 excludes a review on the merits, and the court does not re-appreciate the evidence.
Inadequate reasons. A brief or unreasoned award is not for that reason unenforceable; the requirement of reasons in Section 31(3) belongs to Part I.
A view of the contract the Indian court would not have taken. The construction of the contract was for the tribunal.
A technical irregularity causing no prejudice. The residual discretion permits enforcement notwithstanding.

⚠ Objections not taken before the tribunal

A party which participated in the arbitration without objecting to the jurisdiction, the composition or the procedure will ordinarily be held to have waived the point, and cannot raise it for the first time at the enforcement stage. The principle is one of good faith rather than of statute: the Convention grounds exist to protect a party that was denied a fair process, not to give a second opportunity to a party that took its chance before the tribunal and lost. The exceptions are non-arbitrability and public policy, which the court may find of its own motion.

5. Adjournment and Security: Section 48(3)

Where an application for the setting aside or suspension of the award has been made to a competent authority in the country of origin, the court before which enforcement is sought may, if it considers it proper, adjourn the decision on the enforcement of the award, and may also, on the application of the party claiming enforcement, order the other party to give suitable security. The provision balances two risks: enforcing an award that is about to be annulled, and allowing a debtor to buy time by launching a challenge abroad. In practice the court weighs the strength of the foreign challenge and the likelihood of the assets disappearing, and an adjournment is commonly granted only on condition of security.

6. Section 48 Compared with Section 34

Basis	Section 34	Section 48
What the court may do	Set the award aside, so that it ceases to exist	Refuse enforcement in India; the award survives and may be enforced elsewhere
Burden	On the applicant for the grounds in Section 34(2)(a)	On the party resisting for the grounds in Section 48(1)
Patent illegality	Available for a purely domestic award	Not available
Public policy	Explanation 1, narrow after 2015	The same words, narrower still on the authorities
Validity of the agreement	By the law the parties chose, or the law in force in India	By the law the parties chose, or the law of the country where the award was made
Discretion	The court sets aside once a ground is established	The court may refuse; enforcement may still follow where no prejudice is shown
Appeal	Section 37(1)(c)	Section 50(1)(b), only against a refusal to enforce

7. Related Topics and Provisions

Topic or provision	Connection
New York Convention Awards: Sections 44 to 52	The Chapter as a whole
Enforcement of a Foreign Award: Sections 47 to 49	The proceeding in which these objections are taken
Patent Illegality and Public Policy Compared	The domestic grounds, and why one of them has no counterpart here
Arbitrability of Disputes	The ground in Section 48(2)(a), tested by Indian law
Section 34, A&C Act, 1996	The domestic challenge, compared above
Article V, New York Convention, 1958	The source of the grounds in Section 48