FOREIGN AWARD AGAINST PUBLIC POLICY NOT ENFORCEABLE IN INDIA

The Supreme Court on Wednesday held the international arbitral award of 1989 by Federation of Oil, Seeds and Fats Associations Ltd (FOSFA) against India’s agency, NAFED as “unenforceable” because it was in direct conflict with the public policy of India. The award was rendered after NAFED failed to supply the entire contracted quantity of 5,000 metric tonnes of groundnut to the foreign firm, Alimenta S.A in 1979-80.

During the contracted period, on account of the Government directives, NAFED was unable to export the entire quantity of groundnuts to Alimenta S.A and had to default in respect of its contractual obligations. On account of the arbitration clause that had existed between the parties, Alimenta S.A invoked arbitration against NAFED before the Federation of Oil Seeds and Fats Associations Ltd., London (“FOSFA”). Consequently, on 15.11.1989, FOSFA passed a foreign award directing NAFED to pay a total sum of USD 4,681,000 with interest @10.5% p.a. to Alimenta S.A.

Pursuant to the Award passed by FOSFA, an appeal was filed before the Board of Appeal by NAFED challenging the Foreign Award, however, the Board of appeal upheld the award against NAFED. Owing to its success before the Board of Appeal, Alimenta applied for enforcement of the foreign award before the Delhi High Court. After a series of proceedings and appeals, the High Court eventually held that the award was enforceable and converted it into a decree of the court as required under the old arbitration regime. The order was appealed to the Supreme Court of India by NAFED, which was ultimately successful.

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