Avitel Post Studioz Limited & Ors. vs Hsbc Pi Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited)

REPORTABLE IN THE SUPREME COURT OF INDIA 2024 INSC 242 CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3835 – 3836 OF 2024 (ARISING OUT OF SLP (CIVIL) NOS. 5741 – 5742 OF 2024) [DIARY NO. 26172 OF 2023]

AVITEL POST STUDIOZ LIMITED & ORS. Appellant(s)

VERSUS

HSBC PI HOLDINGS (MAURITIUS) LIMITED Respondent(s) (PREVIOUSLY NAMED HPEIF HOLDINGS 1 LIMITED)

O R D E R

1. Delay condoned.

2. Leave granted.

3. Heard Mr. Mukul Rohatgi and Mr. Vikram Nankani, learned senior

counsel appearing for the appellants (Award Debtors). Also heard

Mr. Neeraj Kishan Kaul and Mr. Darius Khambata, learned senior

counsel appearing for the respondent (Award Holder).

4. The challenge in these appeals is to the order dated

25.04.2023 in the Arbitration Petition No. 833 of 2015 and Notice

of Motion No. 2475 of 2016 respectively whereunder, the High Court

has facilitated the enforcement of the final Award dated 27.09.2014

issued in the SIAC Arbitration No. 088 of 2012. The appellants’

objection to enforcement of the foreign Award, in terms of Section

48 of the Arbitration and Conciliation Act, 1996 (for short “Indian Signature Not Verified Digitally signed by NITIN TALREJA

Arbitration Act”)was rejected and the High Court also directed that Date: 2024.03.22 14:05:48 IST Reason:

the order of attachment against the Award Debtors shall continue to

1 operate during the execution proceedings to be undertaken by the

respondent. Accordingly, the Award Debtors were called upon to

place on record disclosure affidavits as regards their properties.

Facts

5. This case has a chequered history and it is essential to note

the background facts for the present challenge.

5.1. The respondent-HSBC PI Holdings (Mauritius) Limited (for short

“HSBC”) is a company incorporated under the laws of Mauritius. The

appellant No. 1 Avitel Post Studioz Limited (for short “Avitel

India”) is a company incorporated under the laws of India and it is

the parent company of Avitel Group. It holds entire issued capital

of Avitel Holdings Limited, which in turn, holds entire issued

share capital of Avitel Post Studioz FZ LLC. Appellant No. 2 is the

founder of Avitel Post Studioz Limited, being its Chairman and

Director, while Appellant Nos. 3 and 4 are his sons, who are

directors of Appellant No. 1.

5.2. On 21.4.2011, a Share Subscription Agreement was entered

between HSBC & Avitel India whereby HSBC made an investment in the

equity capital of Avitel India for a consideration of US 60 million

dollars to acquire 7.8% of its paid-up capital. This agreement

contained an arbitration clause which provided that the disputes

shall be finally resolved at the Singapore International

Arbitration Centre (SIAC). Singapore was designated as the seat of

arbitration and Part I of the Indian Arbitration Act was excluded,

except Section 9 thereof. Thereafter, the parties also entered into

2 a Shareholders’ Agreement(6.5.2011) which defined the relationship

between the parties and contained an identical arbitration clause.

5.3. It is the case of HSBC(Award Holder) that the appellants at a

very advanced stage made certain representations to HSBC stating

that the investment of US$ 60 Million was required to service a

significant contract with the British Broadcasting Corporation

(BBC).

5.4. Following the investment, according to HSBC, the appellants

ceased to provide any information regarding the contract with BBC,

despite numerous follow-up attempts. At this stage, HSBC engaged

their independent investigation agency, where it was discovered

that the purported BBC Contract was non-existent and the invested

amount was siphoned off to different Companies.

5.5. On 11.05.2012, HSBC invoked the arbitration clause under the

SIAC Rules and claimed damages of US$ 60 million from the

appellants. On 14.5.2012, SIAC Appointed Mr. Thio Shen Yi, SC as an

Emergency Arbitrator. On 17.5.2012, the appellants' challenge to

the appointment of the Emergency Arbitrator was considered by SIAC

& Rejected. On 28.05.2012 and 29.5.2012, the emergency arbitrator

passed two interim Awards, in favour of HSBC inter alia, directing

the appellants to refrain from disposing of/diminishing the value

of their assets upto US$ 50 million. On 27.7.2012, the Emergency

Arbitrator made an amendment to Interim Awards granting further

relief to HSBC by rejecting to desist investigations against Avitel

Dubai and Avitel Mauritius.

3 5.6. According to HSBC, the appellants made several attempts to

delay and frustrate the proceedings. The arbitral tribunal

consisted of three members. Mr. Christopher Lau, SC, was the

Chairman, while Justice F.I. Rebello (retired) and Dr. Michael

Pryles were members of the arbitral tribunal. On 27.09.2014, the

tribunal rendered its final award and directed the appellants to

pay US$ 60 million as damages for fraudulent misrepresentations.

5.7. The respondent had initiated proceedings under Section 9 of

the Indian Arbitration Act before the Bombay High Court. A

direction was issued to the appellants to deposit US$ 60 million

for the purpose of enforcement of the Award. Aggrieved by the same,

the appellants filed a Special Leave Petition before this Court

where it was contended, inter alia, that the dispute is non-

arbitrable under Indian law as it involved allegations of fraud

which included serious criminal offenses such as forgery and

impersonation. Settling the law on the arbitrability of fraud,

this Court in the earlier round in Avitel Post Studioz v HSBC PI

Holdings1, held that the dispute was arbitrable and that HSBC had a

strong prima facie case in the enforcement proceedings, in the

context of Section 9 proceedings in which HSBC had sought

maintenance of the entire claim amount in Avitel’s bank account.

5.8. Since the appellants failed to abide by the direction given by

this Court to deposit the amount, a contempt proceeding was

initiated against them. On 11.07.2022, this Court found that Avitel

had deliberately and willfully disobeyed its order and hence, the

1 (2021) 4 SCC 713

4 appellants were directed to remain present before this Court. The

Appellant Nos.2 to 4 however went abroad defying the direction

given by this Court, as a result of which, warrants and look-out

notices were also issued, with a further direction to the Ministry

of External Affairs and Central Bureau of Investigation for

issuance of Red-Corner Notice. Ultimately, appellant Nos.2 to 4

surrendered and despite tendering an unconditional apology, this

Court refused to accept the same and for their conduct, appellant

Nos. 2 to 4 were sentenced to imprisonment.

Submissions

6. According to the appellants, the Presiding Arbitrator, Mr.

Christopher Lau of the three-member Arbitral Tribunal, had failed

to make a full and frank disclosure of material facts and

circumstances concerning conflict of interest and therefore the

Award rendered by the Tribunal presided by Mr. Lau cannot be

enforced as it is against public policy in terms of Section 48(2)

(b)of the Indian Arbitration Act.

7. The counsel for the appellants refers to the IBA Guidelines on

Conflict of Interest in International Arbitration, 2004 (“IBA

Guidelines”) along with the Red, Orange and Green lists appended

thereto covering matters concerning disclosure and conflict of

interest to argue that the High Court ought to have refused

enforcement of the Award. The specific contention is that the

Presiding Arbitrator failed to disclose his conflict of interest to

adjudicate the dispute. According to the Award Debtors the

5 independence and impartiality of the Presiding Arbitrator was

compromised, as per General Standard 3 of the IBA Guidelines.

8. On the other hand, learned counsel for the respondent (Award

Holder) would submit that the concerned party here is HSBC PI

Holdings (Mauritius) Limited, which is a subsidiary of HSBC

Holdings PLC (United Kingdom). The other subsidiary is HSBC

(Singapore) Nominees Pte Ltd. which is alleged to have a

contractual association with Wing Tai. The HSBC (Singapore) held

6.29% of Wing Tai’s equity capital on a trustee/nominee basis, as

of 15.09.2014. But the said Wing Tai has no relationship with the

Award Holder and is not part of the HSBC Group.

9. Insofar as the Presiding Arbitrator Mr. Christopher Lau is

concerned, the respondent submits that he has been an independent

non-executive Director of Wing Tai since 28.10.2013 and also the

Chairman of the Audit and the Risk Committee of Wing Tai. But Mr.

Lau is not an employee of Wing Tai and therefore it is contended

that it is wrong to say that he cannot discharge responsibility as

an independent arbitrator or was incapacitated in any manner, in

rendering the final Award dated 27.09.2014.

10. Initially, the Award Holders argued before the High Court that

bias could not be raised under the concept of “public policy of

India”. However, later on, submissions were made to demonstrate

that even if it is accepted for the sake of argument that the issue

could be raised at the stage of enforcement, no disclosure was

required on the part of the arbitrator.

6

11. Before this Court, the appellants attempted to raise an

additional challenge to the award under Section 48(1)(b) of the

Indian Arbitration Act on account of ‘inability to present their

case’.

12. Another ground mentioned in the SLP was to consider the effect

of the dictum of the five-judge bench of this Court in NN Global

Mercantile Private Ltd. v M/s Indo Unique Flame Ltd 2 (for short “NN

Global”) delivered on 25.04.2023 as per which the Share

Subscription Agreement being insufficiently stamped would be

unenforceable in India. However, during the pendency of the present

proceedings, the Supreme Court in In Re: Interplay Between

Arbitration Agreements under the Arbitration and Conciliation

Act,1996 and the Indian Stamp Act,18993 delivered on 13.12.2023 has

overruled the decision in NN Global(supra). The 7-judge bench had

noted, inter alia, that the purpose of the Stamp Act,1899 is to

protect the interests of revenue and not arm litigants with a

weapon of technicality by which they delay the adjudication of the

lis. This may be the reason why the Counsel chose not to orally

argue on this point.

13. The two grounds noted above, need not detain us as the

fundamental issue that requires determination is whether

enforcement can be refused on the ground of bias. In these

proceedings, challenging the High Court’s judgment, the appellants

reiterate their contention that the enforcement of the award is

2 (2023) 7 SCC 1 3 2023 INSC 1066

7 impermissible on the ground of arbitral bias and is contrary to the

“public policy of India” as per Section 48(2)(b) of the Indian

Arbitration Act.

Discussion

14. Against this background, the consideration to be made in these

matters is whether the High Court was correct in its decision to

reject the objection under Section 48(2)(b) of Indian Arbitration

Act against enforcement of the foreign Award on the grounds of

arbitral bias and violation of public policy. This raises a further

question as to whether the ground of bias could be raised at the

enforcement stage under Section 48(2)(b) for being violative of the

“public policy of India” and the “most basic notions of morality or

justice”?

15. India was one of the earliest signatories to the Convention on

the Recognition and Enforcement of Foreign Arbitral Awards, 1958

(for short “New York Convention”)4. The New York Convention

superseded the Geneva Convention of 1927 to facilitate the

enforcement of foreign Arbitral Awards5. Article V(2) of the New

York Convention reads as under:

“2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

4 Ratified on 13.7.1960 5 Travaux Préparatoires, Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) Commission on International Trade Law’ (United Nations)

8

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public policy of that country.”

16. The precursors to the New York Convention on the contrary

provided for an expansive scope for invoking the public policy

ground based on the violation of the “fundamental principles of the

law”. Although the notion that ‘public policy’ is ‘a very unruly

horse’ has gained traction over the years6, one would also do well

to remember the words of Lord Denning who said that, “With a good

man in the saddle, the unruly horse can be kept in control.” 7 This

would suggest that a proper understanding of this branch of law by

the horse rider would be necessary. In that context, one of the

earliest cases that dealt with the aspect of “public policy” and

the general pro-enforcement bias of the New York Convention was the

decision in Parsons & Whittemore Overseas Co. v. Societe Generale

de L'Industrie du Papier,8 where the United States Court of

Appeals, Second Circuit noted:

“8. …The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention’s basic effort to remove preexisting obstacles to enforcement… Additionally, considerations of reciprocity — considerations given express recognition in the Convention itself— counsel courts to invoke the public policy defense with caution lest

6 J. Burrough, Richardson v. Mellish, (1824) 2 Bing. 229 at 252. 7 Enderby Town Football Club Ltd. v. The Football Association Ltd., [1971] Ch

591. 8 508 F.2d 969 (1974)

9 foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States.

9. We conclude, therefore, that the Convention’s public policy defense should be construed narrowly.

Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice.”

17. The above decision has been followed in various jurisdictions

including the Supreme Court of India in Renusagar Power Co. Ltd. v.

General Electric Co9. The articulation of the “forum State’s most

basic notions of morality and justice” has been legislatively

adopted in the Indian Arbitration Act,1996. The legal framework

concerning enforcement of certain foreign awards in International

Commercial Arbitration is contained in Part II of the said Act. In

this jurisdiction, we must underscore that minimal judicial

intervention to a foreign award is the norm and interference can

only be based on the exhaustive grounds mentioned under Section

48.10 A review on the merits of the dispute is impermissible 11. This

Court in Vijay Karia v. Prysmian Cavi E. Sistemi SRL,12 had noted

that Section 50 of the Indian Arbitration Act,1996 does not provide

an appeal against a foreign award enforced by a judgment of a

learned Single Judge of a High Court and therefore the Supreme

Court should only entertain the appeal with a view to settle the

law. It was noted that the party resisting enforcement can only

have “one bite at the cherry” and when it loses in the High Court,

9 1994 Supp (1) SCC 644 10 Union of India v. Vedanta, (2020) 10 SCC 1 11 Shri Lal Mahal Ltd. v Progetto Grano SpA (2014) 2 SCC 433 12 (2020) 11 SCC 1

10 the limited scope for interference could be merited only in

exceptional cases of “blatant disregard of Section 48”. This

principle of pro-enforcement bias was further entrenched by the

Supreme Court in Union of India v Vedanta13.

18. At this point, we may also note that Courts in some countries

have recognized that when applying their own public policy to

Convention Awards, they should give it an international and not a

domestic dimension14. The Arbitration legislation in France15, for

instance, makes an explicit distinction between national and

international public policy, limiting refusal of enforcement only

to the latter ground. Scholars have noted that the New York

Convention’s structure and objectives argue strongly against the

notion that reliance should be placed on local public policies

without international limitations.16 The objective behind such a

distinction is to make it less difficult to allow enforcement on

public policy grounds. Most Courts have interpreted the public

policy exception extremely narrowly17.

19. The Indian Supreme Court in Renusagar (supra) had noted that

there is no workable definition of international public policy, and

“public policy” should thus be construed to be the “public policy

13 (2020) 10 SCC 1 14 Nigel Blackaby KC, and others, Redfern and Hunter on International Arbitration (7th Edn, OUP 2022), 594 15 Article 1514 of French Code of Civil Procedure 1981 16 Gary Born, International Commercial Arbitration(3rd ed,2021) 2838; Robert Briner, Philosophy and Objectives of the Convention’ in Enforcing Arbitration Awards under the New York Convention. Experience and Prospects (United Nations 1999).

17 George A Bermann, ‘Recognition and Enforcement of Foreign Arbitral Awards: The Interpretation and Application of the New York Convention by National Courts’ in George A. Bermann(ed) Recognition and Enforcement of Foreign Arbitral Awards (Springer 2018) 60

11 of India” by giving it a narrower meaning. Later on, in Shri Lal

Mahal Ltd. v Progetto Grano SpA18, the Supreme Court held that the

wider meaning given to ‘public policy of India’ in the domestic

sphere under Section 34(2)(b)(ii) would not apply where objection

is raised to the enforcement of the Award under Section 48(2)(b) of

the Indian Arbitration Act. This would indicate that the grounds

for resisting enforcement of a foreign award are much narrower than

the grounds available for challenging a domestic award under

Section 34 of the Indian Arbitration Act.

20. At this point, we may also benefit by noting that the

International Law Association issued recommendations19 at a

conference held in New Delhi in 2002 on international commercial

arbitration and advocated using only narrow and international

standards, while dealing with “public policy”. The recommendations

have been regarded as reflective of best international practices.

The ILA also defined international public policy as follows:

“(i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned;

(ii) rules designed to serve the essential political, social or economic interests of the State, these being known as ‘lois de police’ or ‘public policy rules’; and

(iii.) the duty of the State to respect its obligations towards other States or international organizations.”

18 (2014) 2 SCC 433 19 Committee On International Commercial Arbitration, ‘Application Of Public Policy As A Ground For Refusing Recognition Or Enforcement Of International Arbitral Awards’ In International Law Association Report Of The Seventieth Conference(New Delhi 2000)

12

21. Being a signatory to the New York Convention, we must therefore

adopt an internationalist approach20. What follows from the above is

that there is a clear distinction between the standards of public

policy applicable for domestic arbitration and international

commercial arbitration. Proceeding with the aforedeclared

proposition to have a narrow meaning to the doctrine of public

policy and applying an international outlook, let us now hark back

to whether a foreign Award can be refused enforcement on the ground

of bias.

22. Even though the New York Convention does not explicitly

mention “bias”, the possible grounds for refusing recognition of a

foreign award are contained in Article V(1)(d)(irregular

composition of arbitral tribunal), Article V(1)(b) (due process)

and the public policy defence under Article V(2)(b). Courts across

the world have applied a higher threshold of bias to prevent

enforcement of an Award than the standards set for ordinary

judicial review21. Therefore, Arbitral awards are seldom refused

recognition and enforcement, considering the existence of a

heightened standard of proof for non – recognition and enforcement

of an award, based on alleged partiality22. It invokes a higher

threshold than is applicable in cases of removal of the

20 Fali Nariman and others, ‘The India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards’ in Dushyant Dave and others(ed) Arbitration in India (Kluwer 2021) 21 Reinmar Wolff (ed), A Review of New York Convention: Article-by-Article Commentary (2nd edn Beck/Hart, 2019) 352 22 Stavroula Angoura, ‘Arbitrator’s Impartiality Under Article V(1)(d) of the New York Convention' (2019) 15 (1) AIAJ 29

13 arbitrator.23 This is for the reasons that, greater risk, efforts,

time, and expenses are involved in the non-recognition of an award

as against the removal of an arbitrator during the arbitral

proceedings.

23. What is also essential to note is that Courts across the world

do not adopt a uniform test while dealing with allegations of

bias24. The standards for determining bias vary across different

legal systems and jurisdictions25. English Courts26, for instance,

adopt the “informed or fair minded” observer test to conclude

whether there is a “real possibility of bias”. Australia 27 adopts

the “real danger of bias” test and Singapore28 prefers the standard

of “reasonable suspicion” rejecting the “real danger of bias” test.

Therefore, the outcome of a challenge on the ground of bias would

vary, depending on domestic standards.

24. Cautioning against applying domestic standards at the

enforcement stage, Gary Born29 emphasizing on the adherence to

international standards, makes the following observation:

“In light of developing sources of international standards with regard to arbitrators’ conflict of interest, it should be possible to identify and apply international minimum standards of impartiality and independence...

23 Gary Born(n 12)3937 24 William W. Park, ‘Arbitrator Bias’ (2015) TDM 12; Sumeet Kachwaha,’The Rule Against Bias and the Jurisprudence of Arbitrator’s Independence and Impartiality’(2021) 17(2) AIAJ 104 25 Vibhu Bakhru J, ‘Impartiality and Independence of the Arbitral Tribunal’ in Shashank Garg(ed),Arbitrator’s Handbook (Lexis Nexis 2022) 26 Halliburton Co. v Chhub Bermuda Insurance Ltd [2020] UKSC 48 27 Hancock v Hancock Prospecting Pty Ltd [2022] NSWSC 724 28 Re Shankar Alan s/o Anant Kulkarni [2007] 1 SLR(R) 85 at [75]–[76] 29 Gary Born (n 12) 3946

14 More generally, in considering whether to deny recognition of an award under Article V, national courts should not apply domestic standards of independence and impartiality without regard to their international context. Although national standards of independence and impartiality may be relevant to identifying international standards, just as domestic standards of procedural fairness can be relevant under Article V(1)(b), these standards should be considered with caution in international contexts.

….Only in rare cases should domestic standards of independence or impartiality be relied upon to produce a different result from that required by international standards”.

25. Embracing international standards in arbitration would foster

trust, certainty, and effectiveness in the resolution of disputes

on a global scale. The above discussion would persuade us to say

that in India, we must adopt an internationally recognized narrow

standard of public policy, when dealing with the aspect of bias. It

is only when the most basic notions of morality or justice are

violated that this ground can be attracted. This Court in Ssangyong

Engineering & Construction Co. Ltd. v. National Highways Authority

of India (NHAI)30 had noted that the ground of most basic notions of

morality or justice can only be invoked when the conscience of the

Court is shocked by infraction of fundamental notions or principles

of justice.

26. In view of the above discussion, there can be no difficulty in

holding that the most basic notions of morality and justice under

the concept of ‘public policy’ would include bias. However, Courts

must endeavor to adopt international best practices instead of 30 (2019) 15 SCC 131

15 domestic standards, while determining bias. It is only in

exceptional circumstances that enforcement should be refused on the

ground of bias.

27. Let us now turn to the present facts. The Award in this matter

was passed in Singapore, a New York Convention Country and

notified31 as a reciprocating territory by India. Chapter 1 Part II

of the Indian Arbitration Act is applicable in the present case.

The parties had expressly chosen Singapore as the seat of

Arbitration. It is the seat court which has exclusive supervisory

jurisdiction to determine claims for a remedy relating to the

existence or scope of arbitrator’s jurisdiction or the allegation

of bias32. A contrary approach would go against the scheme of the

New York Convention which has been incorporated in India. The

jurisdiction was therefore chosen based on the perceived neutrality

by the parties aligning with the principle of party autonomy.

Interestingly in the present case, no setting aside challenge based

on bias was raised before the Singapore Courts by the appellants

within the limitation period. In this context, the Bombay High

Court in a judgment in Perma Container(UK) Line Limited v Perma

Container Line(India) Ltd33 had noted that since the objection of

bias was not raised in appropriate proceedings under the English

Arbitration Act,1996, it could not be raised at the post-award

Stage. Similarly, this Court in Vijay Karia(supra) had noted that

no challenge was made to the foreign award under the English

31 Gazette Notification S.O.542(E) dated 06.7.1999 32 AV Dicey and L. Collins, Dicey, Morris & Collins on the Conflict of laws(15th edn, Sweet and Maxwell 2018) [16-36] 33 2014 SCC OnLine Bom 575

16 Arbitration Law, even though the remedy was available. Rejecting

the challenge to the award on the ground of bias, the Court in

Vijay Karia(supra) remarked that the Award Debtors were indulging

in “speculative litigation with the fond hope that by flinging mud

on a foreign arbitral award, some of the mud so flung would stick”.

Similar view has also been taken by the German Supreme Court in

Shipowner (Netherlands) v Cattle and Meat Dealer(Germany)34, where

it was held that the objection of bias must be first raised in the

Country of origin of the Award and only if the objection was

rejected or was impossible to raise, could it be raised at the time

of enforcement.

28. In the present case also, the Award Holders had challenged the

appointment of Mr. Christopher Lau SC and Dr Pryles before SIAC

only on the ground that the Tribunal had intentionally fixed

November 2013 for hearing knowing that it coincided with the Diwali

vacation and that the Indian counsel would therefore not be

available. This challenge was dismissed by the SIAC Committee of

the Court of Arbitration in its decision dated September 13, 2014.

Therefore, none of the other grounds now being pressed were raised

during the arbitration or in the time period available to the

appellants to apply, to set aside the Award in Singapore.

29. It needs emphasizing that bonafide challenges to arbitral

appointments have to be made in a timely fashion and should not be

used strategically to delay the enforcement process. In other

34Dutch Shipowner v. German Cattle and Meat Dealer, Bundesgerichtshof, Germany, 1 February 2001, XXIX Y.B.Com. Arb. 700 (2004)

17 words, the Award Debtors should have applied for setting aside of

the Award before the Singapore Courts at the earliest point of

time.

Implications of the IBA Guidelines

30. The High Court in this case applied the reasonable third-

person test contained in the IBA Guidelines to conclude that there

is no requirement of disclosure and bias. The IBA Guidelines are a

collective effort of the arbitration community to define as to what

constitutes bias. However, bias has to be determined on a case-to-

basis but Courts should attempt to apply international standards,

while dealing with challenges at the enforcement stage.

31. The implications of the IBA Guidelines and their application

will now have to be considered.

32. The IBA Guidelines have also been adopted in the V and VII

Schedule to the Indian Arbitration Act and since the Award here is

dated 27.09.2014, the IBA Guidelines of the year 2004 would be

relevant and applicable. The working group of the IBA had

determined the standards/guidelines to bring about clarity and

uniformity of application and accordingly, the Red, Orange and

Green lists were appended to the Guidelines, to ensure consistency

and to avoid unnecessary challenges and withdrawals and removals of

arbitrators. The IBA Guidelines require an arbitrator to refuse

appointment in case of any doubts as to impartiality or

independence. The Arbitrator is also expected to disclose such

facts or circumstances to the parties which might compromise the

18 arbitrator’s impartiality or independence. In the event of any

doubt on whether an arbitrator should disclose certain facts or

circumstances, the issue should be resolved in favour of

disclosure. This is because an arbitrator is not expected to serve

in a situation of conflict of interest. An arbitrator is also

under a duty to make reasonable enquiry to investigate any

potential conflict of interest.

33. The relevant entries in the non-waivable Red list, the

waivable Red list, the Orange list and the Green list would suggest

that those were intended to ensure the fairness of the process and

also make certain that the arbitrator is impartial and also

independent of the parties. Such position of the arbitrator vis-à-

vis the dispute should exist not only while accepting the

appointment but must continue throughout the entire arbitration

proceeding until it terminates.

34. In the impugned judgment, the High Court adverted to the IBA

Guidelines in some detail and noticed that Mr. Christopher Lau

(Chairman of the Arbitral Tribunal) was an independent non-

executive Director of two companies – Wing Tai and Neptune. The

learned judge then considered whether he ought to have disclosed

such relationship before taking up the assignment of arbitration.

The Court noticed that the Award Debtors raised an omnibus

objection and had invoked the non-waivable Red list as well as the

waivable Red list as also the Orange list of the IBA Guidelines to

claim that the arbitrators were under a duty of disclosure. With

such broad-based contentions, the appellants urged that Mr. Lau

19 having failed to disclose the circumstances, the likelihood of bias

was very strong and this would vitiate the foreign Award, sought to

be enforced in India.

35. Adverting to the specific entries in the IBA Guidelines,

pertaining to the alleged bias of Mr. Christopher Lau (the Chairman

of the Arbitral Tribunal), the High Court reached the following

conclusion:

35.1. The circumstance alleged by the award debtor for arbitral

bias is the business interaction between one of the group companies

of the award holder with independent private companies i.e., Wing

Tai and Neptune wherein Mr. Lau was an independent non-executive

director. However, neither Wing Tai or Neptune fall within the

definition of “affiliate” of the award holder as per the IBA

Guidelines. It was therefore concluded that no reasonable third

person would conclude that justifiable doubts arise about

impartiality or independence of Mr. Lau. Thus, there exists no

identity or conflict of interest between Mr. Lau and the award

holder, or any of its affiliates including its holding company i.e.

HSBC PLC (UK).

35.2. While the award debtors’ suggest their case implies a need

for disclosure beyond the 'Red' or 'Orange' lists, and the

inapplicability of the 'Green list, the 'reasonable third person'

test is the measure for assessing conflict of interest. The High

Court concluded that the award debtors have not established that an

impartial observer, aware of all facts, would doubt Mr. Lau's

impartiality or independence and consequently, the likelihood of

bias of the arbitrator is not discernible.

35.3. The award holder provided ample evidence countering the award

20 debtors’ claims about its affiliate’s roles as book-runners and

underwriters with Wing Tai and Neptune, by showing joint

participation of various other banks. The allegation of a

significant shareholding by a wholly-owned subsidiary of the award

holder’s affiliate in Wing Tai and Neptune was found unsupported by

evidence. The affiliate was one amongst many in the fund-raising

and held the shares in trust during the course of business.

35.4 Even upon applying the subjective approach for disclosure,

wherein the disclosure requirement is viewed from the Award

Debtors’ point of view, certain limitations apply, as per the Green

list of the IBA Guidelines. Placing reliance upon Clauses, 4.5 and

4.53 of the Green list, the learned Judge of the High Court found

no conflict of interest between the arbitrator and the award holder

or its affiliates. In case, the circumstances alleged fall under

the green list, no duty of disclosure is owed by the arbitrator.

36. The above discussion in the impugned judgment in our assessment

correctly suggests that Mr. Christopher Lau neither had a duty to

disclose nor did he fail to discharge his legal duty of disclosure

in accepting the assignment as the Presiding Arbitrator. In the

circumstances here, we cannot infer bias or likelihood of bias of

the Presiding Arbitrator. Award Debtors therefore cannot claim that

there is any violation of the public policy, which would render the

foreign award unenforceable in India.

37. Nevertheless, it would also be appropriate to address one

specific contention raised by the Award Debtors on the

communication addressed by Mr. Christopher Lau to an enquiry made

on 03.02.2016, by one Ms. Pauline. In his response, Mr. Lau refused

21 to accept the suggested assignment stating that there is conflict

of interest in his taking action against HSBC. The circumstances

under which the above communication was addressed by Mr. Lau are

explained in detail in Mr. Lau’s letter dated 26.04.2016. A

reading of the response would show the reason for the response to

Ms. Pauline. It would also additionally confirm that Mr.

Christopher Lau during the phase when he acted as the Presiding

Arbitrator between the appellants and the respondent, was not

subject to any conflict of interest. He is held to have duly

complied with the disclosure obligation and no bias or improper

conduct can be attributed to rendition of the Award dated

27.09.2014 by Mr. Lau, as the President of the Arbitral Tribunal.

38. Another point on the above aspect i.e. the timing of the

communication would also need our attention. The communication by

Ms. Pauline was made in the year 2016, much after the final Award

was rendered on 27.09.2014. When the explanation of Mr. Christopher

Lau in his communication dated 26.04.2016 is examined in the

context of the roving query made by the third party, well beyond

the Award, we have no hesitation to hold that there was no

disability on the part of Mr. Lau to conduct the arbitral

proceedings between the appellants and the respondent.

39. We, therefore, conclude that there is no bias factor operating

against Mr. Lau that would violate the most basic notions of

morality and justice or shock the conscience of the Court.

Onerous Travails

22

40. This case has unfortunately seen a protracted and arduous

battle to enforce an award for over 10 long years, with multiple

phases of litigation. The arbitration itself commenced in Singapore

on 11.05.2012, when notice of arbitration was issued by the

respondent. Then the SIAC Emergency Awards were rendered on

28.05.2012 and 29.05.2012. Proceedings were then initiated by the

award holder under S. 9 of Indian Arbitration Act at the Bombay

High Court, seeking deposit of security amount to the extent of

their claims. In the meanwhile, the award debtors’ objections on

the grounds of jurisdiction were dismissed by the arbitral tribunal

through a Final Partial Award on 17.12.2012. In the Section 9

proceedings, the appellants were directed to deposit a certain sum

for enforcement of the award. The award debtor challenged the same

before the Supreme Court, which was subsequently dismissed and

culminated in an order to maintain the specified amount in the

award debtor’s account. However, the award debtors’ failure to

maintain their account to the ordered extent, led to the contempt

proceedings before the Supreme Court, which were disposed of vide

orders dated 02.09.2022 & 09.09.2022.

41. Meanwhile, the Final Award was issued on 27.09.2014, which was

sought to be set aside by the award-debtor through an application

under 34 of the Indian Arbitration Act before the High Court. The

same was dismissed as not maintainable on 28.09.2015. An appeal

against the same was filed & dismissed subsequently. Simultaneously

the award holder sought to enforce the award through an Arbitration

Petition before the High Court. As a result, the enforcement

23 proceedings culminated in the impugned orders dated 25.04.2023 of

the High Court whereby the final award was rendered enforceable.

42. This long list of events points to a saga of the award-

holder’s protracted and arduous struggle to gather the fruits of

the Award. The Award Debtors raised multiple challenges and also

defied the Court’s order. They had to serve jail time for such

contemptuous actions. In this backdrop, the travails of Award

holders suggest a Pyrrhic victory. It is not unlike the situation

articulated by the playwright & author Oscar Wilde who commented -

“In this world, there are only two tragedies. One is not getting

what one wants, and the other is getting it.”35 As can be noticed,

in this case, despite the award being in their favour, the award-

holders found themselves embroiled in multiple litigations in

different forums by the concerted and unmerited action of the

appellants. It will bear mention here, that in every forum the

award debtors have lost and Courts’ verdicts are in the favour of

the award holders. Despite this, the benefit of the foreign award

is still to reach the respondents. This sort of challenge where

arbitral bias is raised at the enforcement stage, must be

discouraged by our Courts to send out a clear message to the

stakeholders that Indian Courts would ensure enforcement of a

foreign Award unless it is demonstrable that there is a clear

violation of morality and justice. The determination of bias should

only be done by applying international standards. Refusal of

enforcement of foreign award should only be in a rare case where,

35 Oscar Wilde, Act III, Lady Windermere’s Fan, 1893

24 non- adherence to International Standards is clearly demonstrable.

43. The High Court in this matter has rightly held that the award-

debtors have failed to substantiate their allegation of bias,

conflict of interest or the failure by the Presiding Arbitrator to

render disclosure to the parties, as an objection to the

enforcement of the award. The award debtors have failed to meet the

high threshold for refusal of enforcement of a foreign award under

Section 48 of the Indian Arbitration Act. Accordingly, the decision

given by the High Court for enforcement/execution of the foreign

award stands approved. The appeals are found devoid of merit.

44. Even as the appeals filed by the award debtors are dismissed,

the respondents, notwithstanding their victory in all the legal

battles until now, must not be allowed to feel that theirs is a

case of winning the battle but losing the war. In the

circumstances, we emphasize the need for early enforcement of the

foreign award by the competent forum, without showing any further

indulgence to the award debtors. It is ordered accordingly. The

appeals stand dismissed on these terms.

45. Pending application(s), if any, shall stand closed.

..................J. (HRISHIKESH ROY)

..................J. (PRASHANT KUMAR MISHRA)

NEW DELHI;

MARCH 04, 2024.

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