Public policy ruling may result in flood of cases

Under the Arbitration and Conciliation Act, 1996, the enforcement of a foreign arbitral award may be refused on the ground that it is contrary to the public policy of India. The Supreme Court in Phulchand Exports v OOO Patriot observed that a foreign arbitral award which is in contravention of Indian law will be considered as being contrary to the public policy of India and could be set aside.

Brief facts

Phulchand Exports Limited and OOO Patriot, Moscow, Russia (Patriot) executed a contract for the sale of 1,000 tonnes of Indian polished rice to be delivered at Novorossiysk, Russia. The rice was shipped by Phulchand after a delay of 16 days and the rice left the port of loading, Kandla, after a delay of about 38 days. Subsequently, as was agreed, Phulchand received payment on presentation of the shipping documents.

The rice did not reach Novorossiysk as the engine of the ship carrying the rice failed, culminating in a declaration of general average loss by the master of the ship (under an international maritime industry loss mitigation convention); subsequent arrest of the ship; and eventual sale of the ship’s cargo to offset the costs for rescue.

Vivek Vashi is a partner in the litigation department at Bharucha & Partners where Shreya Parikh is an associate.