Bombay High Court Condones 530-Day Delay In Foreign Award Enforcement Amid Limitation Uncertainty

The Bombay High Court has condoned a 530-day delay in seeking enforcement of a foreign arbitral award, holding that the uncertainty over the limitation period applicable to enforcement of foreign awards constituted sufficient cause for the delay.

Justice Arif S. Doctor observed that the delay arose from “the lack of clarity in the law at the time regarding the applicable period of limitation for the enforcement of a foreign award” and not from ignorance or misunderstanding of the law.

The court held that, in these circumstances, depriving China Fortune Corporation Limited of its right to seek enforcement would be “wholly unconscionable”.

The dispute arose from a May 10, 2013 Voyage Charterparty Agreement between China Fortune and Gandhar Oil Refinery India Limited, which provided for arbitration in London under English law. An arbitral award dated June 16, 2015 dismissed China Fortune's claim and Gandhar Oil's counterclaim, while reserving the issue of costs.

On September 8, 2015, the tribunal directed Gandhar Oil to bear 90% of China Fortune's arbitration costs. When the parties could not agree on the amount, the tribunal issued an Award of Assessed Costs on October 31, 2016, quantifying the costs. The award was not challenged and attained finality.

The assessed-costs award was transmitted to the advocates on January 5, 2017. China Fortune demanded payment on February 3, 2021, but Gandhar Oil denied liability on April 26, 2021. China Fortune then filed its enforcement petition on June 18, 2021 under Section 47 of the Arbitration and Conciliation Act, 1996.

China Fortune's primary case was that there was no delay. Relying on the Supreme Court's decision in Government of India v. Vedanta Limited, it argued that the limitation period for enforcing a foreign award is three years from the date on which the right to apply accrues. It contended that its February 3, 2021, demand for payment was the relevant starting point.

Alternatively, China Fortune sought condonation of delay. It relied on the earlier Bombay High Court decision in Imax Corporation v. E-City Entertainment (India) Pvt. Ltd., under which the limitation period for enforcing a foreign award had been treated as 12 years.

Gandhar Oil argued that the right to seek enforcement had accrued on October 31, 2016, when the assessed-costs award became available for collection. Even if January 5, 2017, were taken as the starting point, it argued, the three-year period had expired by January 5, 2020.

The court rejected Gandhar Oil's objection to China Fortune seeking condonation in the alternative. It held that parties are entitled to raise alternative pleas, even where they may be mutually inconsistent.

The court then noted that, before Vedanta, there was a lack of clarity and divergent judicial opinion on the limitation period applicable to the enforcement of foreign awards. The Supreme Court had itself recognised this uncertainty and held that it could constitute sufficient grounds for condoning delay.

The court found that this reasoning applied to China Fortune's case. When the assessed-costs award was made, the Bombay High Court's decision in Imax had treated the limitation period as 12 years. That position continued until the Supreme Court clarified the law in Vedanta.

Even assuming that China Fortune's right to apply accrued on January 5, 2017, the court held that the period up to September 16, 2020, when Vedanta was delivered, deserved to be condoned.

For the period after Vedanta, the court held that the period from September 16, 2020 to June 18, 2021 was also liable to be excluded in light of the Supreme Court's COVID-19 limitation orders and the circumstances explained by China Fortune.

The court also rejected Gandhar Oil's contention that limitation began on October 31, 2016. It noted that Gandhar Oil's own pleaded case treated January 5, 2017, when China Fortune received the award, as the relevant date.

More importantly, Gandhar Oil was responsible for paying the costs but had failed to do so. It therefore could not take advantage of its own default by contending that limitation had begun earlier.

The court accordingly allowed China Fortune's alternative prayer and condoned the 530-day delay, permitting its petition seeking enforcement of the foreign award to proceed.

For Petitioner (China Fortune Corporation Limited): Advocates Sharad Bansal, Devesh Dange, and Amogh Dabholkar i/b Adil Patel.

For Respondent (Gandhar Oil Refinery India Limited): Advocates Shyam Kapadia and Arnab Ghosh i/b Manoj Khatri.