Enforceability of Foreign Arbitral Awards: Analysis of Vijay Karia vs. Prysmian Cavi E Sistemi Case

The case of Vijay Karia & Ors. vs. Prysmian Cavi E Sistemi SRL & Ors. is a landmark judgment dealing with the enforceability of foreign arbitral awards in India under the New York Convention. The Supreme Court’s ruling clarified the limited grounds under which Indian courts can refuse enforcement of foreign awards and reaffirmed India’s pro-arbitration stance.

The appeal was filed against the judgment of the Bombay High Court, which had upheld the enforceability of four final arbitral awards passed under the London Court of International Arbitration (LCIA) Rules (2014). The appellants sought to resist enforcement under Section 48 of the Arbitration and Conciliation Act, 1996, alleging that the award violated Indian public policy and the fundamental principles of Indian law.

Background of the Case

The appellants, led by Vijay Karia, were shareholders in Ravin Cables Ltd., an Indian company in which the respondent, Prysmian Cavi E Sistemi SRL, held a majority stake. Disputes arose over the implementation of a Joint Venture Agreement (JVA), which contained an arbitration clause under the LCIA Rules. The arbitration was seated in London.

The dispute primarily revolved around:

• Allegations of breach of contractual obligations under the JVA.
• Disputes over the valuation of shares during the execution of a put-option clause.
• Allegations of procedural unfairness in the arbitral process.

Arguments by the Petitioners

The appellants opposed the enforcement of the awards, raising the following arguments:

• The award violated Indian public policy as it directed the sale of shares at a price lower than their fair market value, which they alleged was contrary to the Foreign Exchange Management Act (FEMA).
• The valuation of shares by the appointed valuer, Deloitte, was flawed and did not take into account the company’s 49% stake in another entity.
• The arbitral tribunal was biased, as it had ignored critical evidence and had pre-determined the outcome.
• The tribunal failed to consider key contractual provisions regarding valuation methodology.
• The enforcement of the award would cause undue hardship and economic loss to Indian shareholders.

Arguments by the Respondents

The respondents, Prysmian Cavi E Sistemi SRL, countered the objections by stating:

• The tribunal had meticulously followed the contractual provisions and adopted a fair process.
• The valuation of shares was in strict compliance with the JVA and international valuation standards.
• The appellants had participated in the arbitration proceedings and could not challenge the award on grounds of bias after losing.
• Indian courts have limited scope under Section 48 to refuse enforcement of a foreign award, and none of the valid grounds for refusal were met.
• The public policy ground was being misused as an excuse to escape contractual obligations.

Supreme Court’s Observations

The Supreme Court examined the grounds under which enforcement of a foreign arbitral award can be refused under Section 48 of the Arbitration and Conciliation Act. The key observations were:

• The enforcement of foreign awards can only be refused in exceptional circumstances.
• The alleged violation of FEMA was not a valid ground to refuse enforcement, as it did not affect the fundamental policy of Indian law.
• The tribunal’s findings on valuation and procedural fairness could not be reviewed by Indian courts under Section 48.
• The appellants’ objections were a mere attempt to re-litigate the case after losing in arbitration.
• The principle of minimal judicial interference in arbitration must be upheld.

Important Judicial Statements

The Supreme Court categorically held:

“For enforcement of foreign awards, Indian courts do not sit in appeal over the arbitral award. Section 48 provides limited grounds to resist enforcement, which do not include re-evaluating evidence or reconsidering findings of fact.”

The Court further ruled that:

“A mere contravention of FEMA provisions does not amount to a violation of the fundamental policy of Indian law. Public policy objections cannot be used to escape contractual obligations.”

Final Verdict

The Supreme Court dismissed the appeal and upheld the enforcement of the foreign arbitral awards. The appellants were also directed to pay costs of INR 50 lakhs to the respondents for filing a frivolous challenge.

This judgment reinforces India’s commitment to enforcing foreign arbitral awards in line with the New York Convention and further strengthens the country’s reputation as an arbitration-friendly jurisdiction.

Petitioner Name: Vijay Karia & Ors..
Respondent Name: Prysmian Cavi E Sistemi SRL & Ors..
Judgment By: Justice R.F. Nariman.
Place Of Incident: London (Arbitration) and India (Enforcement).
Judgment Date: 13-02-2020.

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