Foreign Arbitral Awards in India: Why Indian Courts Cannot Set Them Aside

In the world of international commercial arbitration, few misconceptions are as consequential and as common as the belief that a foreign arbitral award can be challenged before Indian courts in the same manner as a domestic one. This article unpacks a straightforward but frequently misunderstood legal reality: Indian courts do not possess the jurisdiction to "set aside" a foreign arbitral award. What they can do is enforce it, or refuse to enforce it, on a narrow and well-defined set of grounds.

Understanding this distinction is not merely an academic exercise. It has significant practical consequences for litigants, corporate counsel, and arbitration practitioners operating across borders. The following analysis traces the statutory architecture of the Arbitration and Conciliation Act, 1996 ("the Act") and the Supreme Court of India's landmark jurisprudence on the subject.

I. The Core Legal Distinction: Setting Aside vs. Refusing Enforcement

At the heart of international arbitration law lies a fundamental dichotomy between two distinct remedies.

Setting Aside (Annulment): The power to annul or set aside an arbitral award belongs exclusively to the courts of the "seat" of the arbitration, that is, the primary legal jurisdiction to which the arbitration is tethered. If parties agree that their arbitration shall be seated in Singapore, only the courts of Singapore have the supervisory authority to set aside the resulting award. This principle of territorial exclusivity is universally accepted under the UNCITRAL Model Law framework and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

Refusal of Enforcement: When a successful party seeks to enforce a foreign award in India, typically because the losing party holds assets within Indian jurisdiction, Indian courts step in not as supervisory courts but as enforcement courts. Their role is limited to one binary decision: enforce or refuse to enforce. They do not sit in appeal over the merits of the award.

II. The Statutory Framework: Sections 34 and 48 of the Act

A. Section 34 (Part I): Setting Aside Domestic Arbitral Awards

Section 34 of the Act provides the mechanism for challenging an arbitral award before the court of the seat. Critically, Part I of the Act, which houses Section 34, applies only to arbitrations seated in India. Following the Supreme Court's landmark ruling in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO), Part I has no application to foreign-seated arbitrations. Accordingly, Section 34 is simply not available to a party seeking to challenge a foreign arbitral award in India.

The grounds on which a domestic award may be set aside under Section 34(2) are exhaustive and include:

Incapacity of a party (as defined under Sections 11 and 12 of the Indian Contract Act, 1872); An invalid arbitration agreement (including oral agreements or agreements suffering from uncertainty or unlawfulness under Sections 23, 28, and 29 of the Indian Contract Act, 1872, read with Section 7 of the Act); Lack of proper notice to a party, violating the principles of natural justice and Section 12(2) of the Act; The award falling outside the scope of the arbitration agreement, including where the subject matter is non-arbitrable. The Supreme Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., as extended by Vimal Kishor Shah & Others v. Jayesh Dinesh Shah & Others, established the so-called "Booz Allen list" of non-arbitrable disputes encompassing matters of public policy, matrimonial status, criminal offences, guardianship, insolvency, and statutory tenancy, which constitute rights in rem and must be decided by courts or specialised tribunals; Improper composition of the tribunal in contravention of Sections 10 to 15 of the Act; and Conflict with the "public policy of India," which encompasses awards violating fundamental principles of Indian law or constitutional guarantees.

Section 34(2A) additionally permits a domestic award to be set aside on the ground of "patent illegality" appearing on the face of the award, a ground not available in the enforcement context under Section 48.

Procedurally, an application under Section 34 must be filed within three months of receiving the award, with a maximum extension of thirty days available upon sufficient cause. The court is required to dispose of such applications expeditiously, and in any event within one year of notice being served under Section 34(5) of the Act.

B. Section 48 (Part II): Conditions for Enforcement of Foreign Awards

Part II of the Act implements India's obligations under the New York Convention and governs the recognition and enforcement of foreign awards. Section 48 sets out the grounds on which a party may resist enforcement. These grounds are deliberately narrow and mirror the text of Article V of the New York Convention:

Incapacity of a party to the arbitration agreement; Invalidity of the arbitration agreement under its governing law; Lack of proper notice of the arbitral proceedings; The award dealing with matters outside the scope of submission to arbitration; Improper composition of the arbitral tribunal; and Violation of the "public policy of India."

Importantly, the public policy exception under Section 48 is interpreted far more narrowly than its counterpart under Section 34. An enforcement court is not empowered to re-examine the merits of the award, correct errors of fact or law, or substitute its judgment for that of the arbitral tribunal.

III. Landmark Jurisprudence of the Supreme Court of India

A. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO) (2012)

BALCO is the bedrock of modern Indian arbitration law. Before this decision, Indian courts had interpreted Part I of the Act as applying to all arbitrations with a connection to India, irrespective of their seat, a position that facilitated significant judicial interference with foreign-seated arbitrations.

A five-judge Constitution Bench of the Supreme Court prospectively overruled that interpretation. It held, unequivocally, that Part I of the Act applies only to arbitrations seated in India. Part II governing the enforcement of foreign awards operates as a separate, self-contained regime. The two parts do not intersect. The consequence of this ruling was categorical: Section 34 cannot be invoked to challenge a foreign award.

B. Shri Lal Mahal Ltd. v. Progetto Grano Spa (2013)

Building on BALCO, the Supreme Court in Shri Lal Mahal addressed a question that had generated considerable uncertainty: Is the scope of "public policy" under Section 48 coextensive with its scope under Section 34?

The Court answered in the negative. It held that the public policy exception in Section 48 is significantly narrower in scope than under Section 34. An enforcement court cannot refuse recognition of a foreign award simply because the arbitrator committed an error of law or fact. The Court made clear that Indian courts are not entitled to take a "second look" at the merits of a foreign award under the guise of a public policy review. Only a violation of the most basic notions of morality or justice could justify non-enforcement.

C. Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020)

The Supreme Court's decision in Vijay Karia is perhaps the most forceful judicial statement of India's pro-enforcement stance. The Court penalised attempts to resist foreign awards through dilatory and frivolous litigation, affirming that an enforcement court under Section 48 does not function as an appellate court.

In a passage that has since become widely cited in arbitration practice, the Court observed that parties often engage in speculative litigation against foreign awards in the hope that some objection, however tenuous, may find traction. The Court set an extremely high threshold for refusing enforcement, underscoring that the pro-enforcement bias of the New York Convention is not merely aspirational it is the operative standard in Indian courts.

D. Government of India v. Vedanta Limited (2020)

In Vedanta, The Supreme Court reiterated that an enforcement court under Section 48 cannot re-assess or re-evaluate the evidence considered by the arbitral tribunal. The award in question arose from a complex production-sharing contract in the energy sector, and the Court was asked to refuse enforcement on public policy grounds.

The Court declined, holding that a foreign award may only be refused enforcement where it "shocks the conscience of the court" or violates the fundamental policy of Indian law. An erroneous interpretation of a contract by the tribunal even one with which the court might disagree, is not a ground for refusing enforcement. The judgment reinforced the principle that India's enforcement courts are gatekeepers, not appellate fora.

IV. Practical Implications for Parties and Practitioners

The cumulative effect of the statutory scheme and judicial precedent is clear. A party dealing with a foreign arbitral award in India must navigate the following framework:

For the award-creditor: Enforcement is the correct pathway. An application under Section 47 and Section 49 of the Act (read with Section 48) is the mechanism to convert a foreign award into an executable decree. Courts will presume in favour of enforcement; the burden lies on the party resisting.

For the award-debtor: Section 48 provides the exhaustive and exclusive catalogue of defences. An attempt to invoke Section 34 to set aside the award will be dismissed at the threshold for want of jurisdiction. Meritless opposition to enforcement also risks attracting costs, as the courts have repeatedly signalled their impatience with dilatory tactics in this domain.

For corporate counsel: Seat selection in arbitration agreements is a strategic decision with lasting consequences. Choosing a seat outside India does not insulate an award from scrutiny altogether, but it does ensure that any challenge to the award's validity is heard in the jurisdiction of the seat, not in India. Indian courts will only be involved at the enforcement stage, and their role at that stage is deliberately constrained.

V. Conclusion

The jurisprudential journey from the pre-BALCO era to the present reflects a conscious effort by India's courts to align domestic arbitration law with international best practices. The distinction between setting aside and refusing enforcement is not a technical formality it is the cornerstone of a regime that respects party autonomy, upholds finality of awards, and honours India's treaty obligations under the New York Convention.

For practitioners and parties alike, the message is unambiguous: when a foreign award arrives at Indian shores, the question is not whether it can be undone, but only whether the narrow conditions for non-enforcement have been met. And the Supreme Court of India has made abundantly clear that those conditions will be construed with considerable strictness.