Foreign Award Enforcement Can't Be Refused For Ignoring Contract Or Proof Burden Shift: Allahabad HC

The Allahabad High Court on 13 July held that courts cannot refuse to enforce a foreign arbitral award under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 (which sets out the limited grounds for refusing enforcement of a foreign award) merely because they disagree with the arbitral tribunal's appreciation of evidence or findings or the burden of proof.

A Bench of Justice Piyush Agrawal allowed the enforcement application filed by Fomento Commodities PTE. Ltd. and directed Fedders Electric & Engineering Ltd. to satisfy the foreign award with interest within one month. He held:

“Under Section 48(2)(b) of the Act, the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to fundamental policy of Indian law; or the interests of India; or justice or morality….”

Fomento Commodities PTE. Ltd., a Singapore incorporated commodity trading company, and Fedders Electric & Engineering Ltd., an Indian company dealing in iron ore, entered into two contracts on 15 May 2023 and 8 September 2023 for the sale and purchase of iron ore fines. Fomento paid an advance of USD 10 lakhs to Fedders. Fedders supplied the cargo and received payment against the invoices, but did not refund the advance.

The parties referred their dispute to arbitration under the Singapore International Arbitration Centre Rules in accordance with Clause 13 of the contracts, with Singapore as the seat of arbitration. The two references were consolidated, and sole arbitrator Elizabeth Birch passed the final award on 15 August 2025.

She allowed Fomento's claim in full with costs and interest. She also allowed two of Fedders' three counterclaims on admission and set them off against the awarded amount. Fedders neither challenged the award nor deposited any amount. Fomento then approached the High Court to enforce the award.

Fedders opposed enforcement. It argued that the contract price was provisional and that the advance had been adjusted against future shipments. It also contended that the arbitral tribunal ignored a third contract between the parties, which did not refer to the advance, and effectively rewrote the parties' bargain by treating the advance as refundable.

It further argued that the tribunal wrongly shifted the burden of proof onto it. It claimed that these errors made the award contrary to the fundamental policy of Indian law and the basic notions of justice and morality.

Fomento argued that the burden of proving any ground for refusing enforcement rested on Fedders. It also submitted that the Court could not re-examine the merits of the arbitral award at the enforcement stage.

The Court noted that Fedders had not placed any material on record to show that it had challenged the award before a competent court within the prescribed period. It also noted that Fomento filed the enforcement application after the period for challenging the award had expired.

Further, the Bench relied on the Supreme Court's decision in Shri Lal Mahal v. Progetto Grano Spa, which held that proceedings under Section 48 do not permit courts to review the merits of a foreign arbitral award. The Apex Court also held that procedural objections, including the admission or rejection of evidence, do not by themselves justify refusal of enforcement on public policy grounds. It observed:

“Under Section 48(2)(b) the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The objections raised by the appellant do not fall in any of these categories and, therefore, the foreign awards cannot be held to be contrary to public policy of India as contemplated under Section 48(2)(b).”

Applying the Supreme Court's ruling, the High Court held that Fedders' objections amounted to a challenge to the arbitral tribunal's appreciation of evidence and findings on the merits, which Section 48 does not permit at the enforcement stage. It also rejected Fedders' contention that the tribunal had wrongly shifted the burden of proof. The Bench observed:

“In the present case, the issue that has been raised by the respondent-judgment debtor is that the tribunal has shifted burden of proof upon the respondent-judgment debtor instead of applicant. On this ground also, the enforcement of foreign award cannot be refused.”

Therefore, the Bench directed Fedders Electric & Engineering Ltd. to satisfy the foreign award with interest within one month. It also restrained the company, its agents and representatives from alienating, transferring, encumbering or creating any third party interest in the properties disclosed in the enforcement petition. It further attached all the company's bank accounts until the award is satisfied. It added:

“In order to preserve the subject matter of the proceedings and to secure the enforcement of award, all the bank accounts shall be attached, till the satisfaction of the final award dated 15.8.2025.”

Accordingly, the High Court allowed the enforcement application.