AVITEL POST STUDIOZ LIMITED & ORS. versus HSBC PI HOLDINGS (MAURITIUS) LIMITED (PREVIOUSLY NAMED HPEIF HOLDINGS 1 LIMITED)

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 impermissible11. 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 [1993] Suppl. 3 SCR 22 : 1994 Supp (1) SCC 644 Union of India v. Vedanta, [2020] 12 SCR 1 : (2020) 10 SCC 1 Shri Lal Mahal Ltd. v Progetto Grano SpA [2013] 13 SCR 599 : (2014) 2 SCC 433 [2020] 4 SCR 336 : (2020) 11 SCC 1 [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited) resisting enforcement can only have “one bite at the cherry” and when it loses in the High Court, 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 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. [2020] 12 SCR 1 : (2020) 10 SCC 1 Nigel Blackaby KC, and others, Redfern and Hunter on International Arbitration (7th Edn, OUP 2022), Article 1514 of French Code of Civil Procedure 1981 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). 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 [2013] 13 SCR 599 : (2014) 2 SCC 433 984

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.”

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 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) 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) Reinmar Wolff (ed), A Review of New York Convention: Article-by-Article Commentary (2nd edn Beck/ Hart, 2019) 352 [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited) 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 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”. Australia27 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… 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 Stavroula Angoura, ‘Arbitrator’s Impartiality Under Article V(1)(d) of the New York Convention’ (2019) 15 (1) AIAJ 29 Gary Born(n 12)3937 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 Vibhu Bakhru J, ‘Impartiality and Independence of the Arbitral Tribunal’ in Shashank Garg(ed),Arbitrator’s Handbook (Lexis Nexis 2022) Halliburton Co. v Chhub Bermuda Insurance Ltd [2020] UKSC 48 Hancock v Hancock Prospecting Pty Ltd [2022] NSWSC 724 Re Shankar Alan s/o Anant Kulkarni [2007] 1 SLR(R) 85 at [75]–[76] Gary Born (n 12) 3946 986 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 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 [2019] 7 SCR 522 : (2019) 15 SCC 131 Gazette Notification S.O.542(E) dated 06.7.1999 AV Dicey and L. Collins, Dicey, Morris & Collins on the Conflict of laws(15th edn, Sweet and Maxwell 2018) [16-36] [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited) 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 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 words, the 2014 SCC OnLine Bom 575 Dutch Shipowner v. German Cattle and Meat Dealer, Bundesgerichtshof, Germany, 1 February 2001, XXIX Y.B.Com. Arb. 700 (2004) 988 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 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. [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited)

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 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 debtors’ claims about its affiliate’s roles as book-runners 990 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 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. [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited)

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

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 992 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, 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 Oscar Wilde, Act III, Lady Windermere’s Fan, 1893 [2024] 3 S.C.R.  Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited (Previously Named Hpeif Holdings 1 Limited) 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. Headnotes prepared by: Ankit Gyan Result of the case: Appeals dismissed.