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Noy Vallesina Engineering SpA v. Jindal Drugs Limited & Ors.

Civil Appeal · 2020 INSC 659Decided 26 Nov 2020
Civil Appeal No. 8607 of 2010
Justice Indira Banerjee · Justice S. Ravindra Bhat

Background

An Italian company (NV Engineering) and an Indian company (Jindal Drugs) had a dispute arising from contracts to build an ascorbic acid plant in India, with arbitration seated in London under ICC rules. After a partial and a final award were made largely in NV Engineering's favour, Jindal challenged the partial award in the Bombay High Court under Section 34 of the Arbitration Act (a provision meant for domestic/India-seated arbitrations), while a separate enforcement proceeding on the same awards was also pending. The Bombay High Court's Division Bench ruled that a Section 34 challenge to a foreign award was permissible, relying on pre-2012 Supreme Court precedent.

Decision Breakdown

The Supreme Court held that because the parties had clearly chosen London as the seat of arbitration (with English law as the curial law), the law laid down in the five-judge Constitution Bench ruling in Bharat Aluminium Co. v. Kaiser Aluminium (BALCO) applied, meaning Part I of the Arbitration Act (including Section 34) does not apply to foreign-seated arbitrations. The Bombay High Court's reliance on the older Bhatia International and Venture Global rulings was therefore incorrect, and its judgment allowing a Section 34 challenge was set aside. The Court also held, relying on Section 50 of the Act and the precedent in Fuerst Day Lawson, that Jindal's separate appeal against the order enforcing the award was not maintainable, though NV Engineering's own appeal (on the portion of the award not enforced) was maintainable and left open to be pursued. Jindal was ordered to pay costs of ₹1,50,000.

Lesson Learnt

Where parties to an international contract choose a foreign city as the "seat" of arbitration, Indian courts generally cannot be used to challenge or annul the resulting award under the domestic provisions of the Arbitration Act: any challenge must ordinarily go through the courts of that seat, and in India only the enforcement-stage objections under Part II are available.

Official source (sci.gov.in)View Judgment (PDF)

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