Introduction 

• This is a landmark judgment relating to enforceability of foreign awards.    
• This judgment was delivered by a three-judge bench comprising of Justice RM Lodha, Justice Madan B Lokur and Justice Kurian Joseph.   

Facts 

• The contract, dated 12th May 1994, was between Shiv Nath Rai Harnarain (India) Company (sellers) and Italgrani Spa, Naples, Italy (buyers) for the sale of 20,000 MT of Indian Durum wheat at $162 per MT. 
• Key contractual conditions included certification of quality by S.G.S. India, which was stipulated as the final and conclusive certifying agency. 
• The wheat had to meet specific quality standards, such as moisture content not exceeding 12% and at least 80% vitreous content. 
• The contract stipulated certification by S.G.S. India as the inspecting agency. 
• The sellers shipped the wheat in August 1994, which was certified by S.G.S. India as meeting the contract's requirements. 
• The buyers later claimed that S.G.S. Geneva found the wheat to be soft wheat, not durum wheat as specified, and accused the sellers of breach of contract. 
• The buyers filed for arbitration with GAFTA (Grain and Feed Trade Association). 
• On 4th December 1997, the GAFTA tribunal ruled in favor of the buyers, concluding that the wheat did not meet the contractual specifications. The tribunal awarded $1,023,750 for the price difference, additional damages, and interest. 
• The sellers contested the jurisdiction of GAFTA and sought to stop the arbitration by filing a petition in the Delhi High Court, arguing that there was no valid arbitration agreement. This petition was dismissed, as was their special leave petition by the Supreme Court of India. 
• The sellers appealed against the GAFTA awards before the Board of Appeal, which upheld the original decisions, maintaining that the wheat provided was soft wheat. 
• The sellers challenged appeal award no. 3782 in the High Court of Justice in London, which dismissed their appeal on 21st December 1998. The sellers did not challenge appeal award no. 3783, making both awards final. 
• The buyers sought to enforce the awards in the Delhi High Court. The sellers raised objections, claiming that the awards were against the public policy of India and contradicted the contract, particularly the certification by S.G.S. India. 
• The Delhi High Court rejected these objections, ruling that the awards were enforceable and did not violate public policy. The court emphasized that it could not reassess facts already decided by the Board of Appeal or GAFTA. 
• The sellers, represented by Shri Lal Mahal Ltd., appealed to the Supreme Court of India, arguing that the enforcement of the awards was contrary to the contract terms and public policy. 

Issue Involved 

• Whether the awards passed in the favour of the respondent (No. 3782 and no. 3783) are enforceable under Section 48 of the Arbitration and Conciliation Act, 1996 (A & C Act)? 

Observations 

• It is to be noted that Section 7 (1) (b) (ii) of Foreign Awards Act provides that a foreign award shall not be enforced if the Court dealing with the case was satisfied that the enforcement of award would be contrary to public policy. 
• Following the case of Renusagar Power Co. Limited v. General Electric Company (1994), the Court held that for the purposes of Section 48(2)(b), the expression "public policy of India" must be given narrow meaning and the enforcement of foreign award would be refused on the ground that it is contrary to public policy of India if it is contrary to public policy of India if it is covered by one of the three categories enumerated in Renusagar Power Co. Limited v. General Electric Company (1994). 
•  The application of ’public policy of India’ doctrine for the purposes of Section 48(2)(b) is more limited than the application of the same expression in respect of the domestic arbitral award. 
• The Court held that the enforcement of foreign award would be refused under Section 48 (2) (b) only if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. 
• The Court further held that the scope of inquiry under Section 48 does not permit review of foreign award on merits. 
• The Court in the present facts observed that the present award is not the one which is liable to be set aside as it does not fall under any of the grounds on which a foreign award can be aside. 
• Therefore, the Court refused to set aside the foreign award in this case. 

Conclusion 

• The judgment discusses the law regarding setting aside of the foreign award. 
• The grounds for setting aside the foreign award are when it is found contrary to: 
  • Fundamental policy of Indian Law 
  • The interests of India 
  • Justice or morality 

[Original Judgment]