Case Summary: Renusagar Power Co. Ltd. vs General Electric Co. (1993)
(1993) 10 SC CK 0044
In The Supreme Court of India
Case No: Civil Appeal Nos. 71 and 71A of 1992
Renusagar Power Co. Ltd. - APPELLANT
Vs
General Electric Co. - RESPONDENT
Date of Decision: 07-10-1993
Name of the Court
The Supreme Court of India
Citations
AIR 1994 SC 860; (1994) 2 ARBLR 405; (1994) 81 CompCas 171; (1993) 4 SCALE 44; (1994) 1 SCC 644 Supp; (1993) 3 SCR 22 Supp
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Facts of the Case
The dispute arose from a 1964 contract between Renusagar Power Co. Ltd., an Indian company, and General Electric Co., a U.S.-based corporation, for the supply and erection of a thermal power plant in Renukoot, U.P. The contract involved equipment supply, services, and payment in instalments, backed by promissory notes and a bank guarantee, and was governed by New York law with an ICC arbitration clause.
The Government of India initially granted a tax exemption on interest payments, which was later withdrawn. This led to litigation in Indian courts, with Renusagar withholding part of the interest. Disputes over delayed payments, revised schedules, and performance issues prompted General Electric to initiate ICC arbitration. Renusagar challenged the arbitrability of the claims and filed suits in Indian courts to block proceedings.
The Bombay High Court stayed Renusagar’s suit under the Foreign Awards Act, and the Supreme Court upheld the arbitrability in 'Renusagar Case I'. Parallel litigation in Mirzapur was also stayed by the Supreme Court in 'Renusagar Case II'. The ICC tribunal, after interim awards affirming jurisdiction, proceeded with hearings on the substantive issues.
Law Points Raised
1. Scope and applicability of the Foreign Awards (Recognition and Enforcement) Act, 1961.
2. Enforcement of ICC arbitration agreements in India.
3. Whether disputes arising from tax exemption withdrawal and payment defaults fall within the arbitration clause.
4. Public policy considerations in enforcing foreign arbitral awards in India.
Acts / Provisions / Articles Referred
Arbitration Act, 1940 — Section 29
Civil Procedure Code, 1908 — Sections 13, 14, 151, 34
Constitution of India, 1950 — Articles 1, 2, 227
Contract Act, 1872 — Section 23
Foreign Awards (Recognition and Enforcement) Act, 1961 — Section 3
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)
Judgements Referred
1. Renusagar Case I (1984) — Upholding arbitrability of disputes under ICC clause.
2. Renusagar Case II (1987) — Staying domestic litigation under Foreign Awards Act.
3. S.P. Gupta v. Union of India.
4. Kesavananda Bharati v. State of Kerala.
Obiter Dicta
The Court emphasised India's commitment to honouring international arbitration agreements and the narrow scope of public policy exceptions under the Foreign Awards Act, consistent with the New York Convention.
Ratio Decidendi
Foreign arbitral awards are enforceable in India unless they contravene the country's public policy, with 'public policy' interpreted narrowly to mean fundamental legal principles, interests of India, or justice/morality violations. The disputes fell within the broad ICC arbitration clause, and proceedings were valid.
Final Ruling
The Supreme Court dismissed the appeals, affirming the enforceability of the ICC arbitration agreement and the limited scope for challenging foreign awards under Indian law.
Relevant Paragraph Numbers
Paras 49, 53, 66, 85, 93, 98, 100, 111, 112, 127, 132.
Summary
Renusagar Power Co. Ltd. vs General Electric Co. is a landmark in Indian arbitration law, establishing a restrictive interpretation of 'public policy' in enforcing foreign arbitral awards. It reinforced India's pro-arbitration stance, giving effect to ICC awards and contractual commitments.
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