The Foreign Awards (Recognition and Enforcement) Act, 1961, was a key piece of legislation in India that facilitated the recognition and enforcement of foreign arbitral awards before it was repealed and replaced by the Arbitration and Conciliation Act, 1996. Section 7 of this Act dealt specifically with the conditions under which a foreign award would not be enforceable in India.

The Text of Section 7

Section 7 of the Foreign Awards Act

Section 7 provided:

"A foreign award may not be enforceable under this Act—

1. if the party against whom it is sought to be enforced proves to the court dealing with the case that:
   1. the parties to the agreement were under some incapacity under the law applicable to them; or
   2. the agreement was not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the law of the country where the award was made; or
   3. the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present their case; or
   4. the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
   5. if the court dealing with the case is satisfied that:
      • the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made;
      • the enforcement of the award would be contrary to public policy.
         

Key Elements of Section 7

The section encapsulated several grounds for refusing the enforcement of foreign awards, in line with Article V of the New York Convention, 1958, which India had adopted through this Act.

Grounds Raised by the Opposing Party (Section 7(a)):

• Incapacity: If one of the parties was incapacitated under the relevant law, the award could be challenged. This ensured fairness, especially in cases involving individuals or entities with restricted legal capacity.
• Invalid Agreement: The arbitration agreement's validity was paramount, and its invalidity under the chosen law or the law of the seat of arbitration rendered the award unenforceable.
• Improper Notice or Inability to Present the Case: Procedural fairness was a cornerstone, ensuring that both parties were adequately notified and had the opportunity to present their cases.
• Exceeding Scope of Arbitration: Any decision beyond the arbitration agreement's scope could be severed, or the entire award might be rendered unenforceable.

Discretion of the Court (Section 7(b)):

• Non-binding, Set Aside, or Suspended Awards: Courts had to ensure that awards sought to be enforced were final and binding under the applicable foreign law.
• Contrary to Public Policy: This broad provision allowed courts to refuse enforcement if the award contravened fundamental principles of Indian law or morality.
   

Judicial Interpretation of Section 7

Several landmark judgments under the Foreign Awards Act provided critical interpretations of Section 7:

• Renusagar Power Co. Ltd. v. General Electric Co. (1994): The Supreme Court held that "public policy" under Section 7 must be narrowly construed. Enforcement could only be refused if the award violated the fundamental policy of Indian law, the interests of India, or justice and morality.
• National Thermal Power Corporation v. The Singer Company (1992): The Court emphasized that the validity of an arbitration agreement under Section 7(a)(ii) must be determined based on the choice of law by the parties.
• Fertilizer Corporation of India v. IDI Management Inc. (1984): The Court reinforced the importance of proper notice under Section 7(a)(iii), highlighting that procedural fairness was essential for enforcement.
   

Relevance After the Arbitration and Conciliation Act, 1996

With the advent of the Arbitration and Conciliation Act, 1996, Section 7 and the Foreign Awards Act as a whole were repealed. However, the principles enshrined in Section 7 were incorporated into Part II of the 1996 Act, particularly in Sections 44 to 52, dealing with the enforcement of foreign awards under the New York Convention and Geneva Convention.

The new Act retained the refusal grounds under Section 48, mirroring Section 7 of the 1961 Act, while broadening the scope of arbitration in India.

Conclusion
Section 7 of the Foreign Awards Act, 1961, played a pivotal role in shaping the landscape of international arbitration in India. It aligned Indian arbitration law with global standards and ensured fairness in the recognition and enforcement of foreign awards. While the Act has since been replaced, its legacy continues to influence arbitration jurisprudence in India under the Arbitration and Conciliation Act, 1996. The careful balance it struck between respecting party autonomy and upholding fundamental legal principles remains a hallmark of Indian arbitration law.