The Apex Court has recently held that; a foreign award can be binding on non-signatories to an arbitration agreement and so can be enforced against them. The Court cited the provisions enshrined in Section 46 of the Arbitration and Conciliation Act,1996 in this respect. Section 46 deals with the situations in which a foreign award is enforceable. The term refers to “persons as between whom it was made,” not parties to the agreement, according to the Court. Non-signatories to the agreement may be considered “persons.” In the case of Gemini Bay Transcription Pvt. Ltd. vs. Integrated Sales Service Ltd., the Court stated, “First and foremost, Section 46 does not talk of “parties” at all, but of “persons” who may, therefore, be non-signatories to the arbitration agreement.”
Enforcement of foreign award cannot be resisted on the sole ground that it was made against a non-signatory
Furthermore, the Court ruled that; a foreign award’s enforcement cannot be challenged only because it was issued against a non-signatory to the arbitration agreement. The objections of a non-signatory will not fall under the grounds under Section 48(1) of the Arbitration and Conciliation Act. Which describes the conditions under which the execution of a foreign decision can be rejected, according to a division bench led by Justices RF Nariman and BR Gavai. The reasons are narrow in scope, referring exclusively to the parties’ incompetence and the agreement’s invalidity under the legislation to which the parties have agreed. Trying to fit a square peg into a round hole by bringing non-parties into this ground is like trying to fit a square peg into a round hole, according to Justice Nariman’s decision.
Six ingredients to an award being a foreign award
The Court referred to section 44 of the Arbitration and Conciliation Act, 1996 in order to list out the six ingredients that are important for an award to be a foreign award:
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- It must be an arbitral award by an arbitrator on disagreements between people resulting from legal relationships.
- These discrepancies might occur in a contract or outside of it, such as in tort.
- Under Indian law, the legal connection in question should be classified as “commercial.”
- The award must be presented on or after October 11th, 1960.
- The award must be a New York Convention award. It must be made in accordance with a written agreement to which the New York Convention applies. And it must take place in one of these areas.
- It must be made in one of the areas declared by the Central Government to be territories to which the New York Convention applies by notice.
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