RENUSAGAR POWER CO. LTD VS GENERAL ELECTRIC CO AIR 1994 SC 860

 

 

RENUSAGAR POWER CO. LTD VS GENERAL ELECTRIC CO

AIR 1994 SC 860

FACTS

• The case under consideration involved an interpretation of the definition of public policy under Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961, which is analogous to Section 48 of the Arbitration Act.
• The Supreme Court of India grappled with the question of whether the narrower concept of public policy, as seen in public international law, or the broader concept, as seen in municipal law, should apply in the context of enforcing foreign arbitral awards in India.

 

ISSUE

• The central legal issue was whether the narrower concept of public policy in public international law should apply or the wider concept in municipal law.
• Specifically, the Court had to decide whether a mere contravention of Indian law would suffice to invoke the public policy ground for refusing enforcement, or if something more than legal contravention was required. This issue required a nuanced understanding of the public policy considerations relevant to international arbitration enforcement in India.

 

RULE

• Enforcement of a foreign award can be refused if it is contrary to:
  • The fundamental policy of Indian law.
  • The interests of India
  • Justice or morality

 

HELD

• The Court concluded that the term "Public Policy" in Section 7(1)(b)(ii) of the Foreign Awards Act refers specifically to the "Public Policy of India".
• It does not encompass the public policy of any other country.
• Public policy in Article V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is similar to its usage in Article I(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937.
• This means "public policy" is used in a narrower sense, requiring more than just a violation of Indian law to refuse enforcement of a foreign award.
• The Court held that the provisions of the Foreign Exchange Regulation Act (FERA) are designed to protect India's economic interests.
• Any violation of FERA would be contrary to the public policy of India as per Section 7(1)(b)(ii) of the Foreign Awards Act.

 

NOTE

• Vijay Karia and Ors. vs. Prysmian Cavi E Sistemi Srl and Ors. (13.02.2020 - SC) : MANU/SC/0171/2020

The court held that a violation of FEMA (Foreign Exchange Management Act) rules does not automatically render a foreign award unenforceable in India, unlike FERA (Foreign Exchange Regulation Act), which operated under a stricter regime. Under FERA, violations were considered serious offenses with criminal implications, reflecting India's closed economy approach. Conversely, FEMA, enacted in the context of a liberalized economy, focuses more on managing rather than policing foreign exchange, allowing for post-facto permissions from the Reserve Bank of India for violations. Hence, a breach of FEMA, which can often be rectified, does not equate to a breach of the fundamental policy of Indian