DAMODARAM SANJIVAYYA NATIONAL

LAW UNIVERSITY

CASE: NUOVOPIGNONE INTERNATIONAL v

CARGO MOTORS PRIVATE LIMITED

SUBJECT: COMMERCIAL ARBITRATION

SUBMITTED TO: Dr. R. V. VISHNU KUMAR

SUBMITTED BY: NADIMPALLY KAVYA SREE

ROLL NO.: 24LLM31

 Nuovopignone International v. Cargo Motors Pvt. Ltd. & Anr. on 30 May,
2023

INTRODUCTION

The case of Nuovopignone International v. Cargo Motors Pvt. Ltd. revolves around the
enforcement of a Foreign Consent Award issued by the International Chamber of Commerce
(ICC) in an arbitration proceeding between Nuovopignone (enforcement petitioner) and Cargo
Motors Pvt. Ltd. (respondents). The dispute arose from a contractual agreement involving the
purchase of a Steam Turbine Generator (STG) package, where both parties had entered into an
Equipment Purchase Agreement (EPA) and later a Settlement Agreement in response to
various disputes. The enforcement petitioner sought the enforcement of a Foreign Consent
Award passed on 5 October 2020, but the respondents raised objections based on two main
arguments: (1) the enforceability of consent awards under the New York Convention, and (2)
economic duress in the settlement process.

This case is significant because it addresses fundamental issues of international arbitration,

particularly in the context of consent awards, economic duress, and the public policy exception
under the Indian Arbitration and Conciliation Act, 1996 (hereafter "the Arbitration Act"). The
outcome of the case provides valuable insights into the enforcement of foreign arbitral awards
under Indian law and the New York Convention.

FACTS OF THE CASE

In this case, Cargo Motors Pvt. Ltd., an Indian corporation, and Nuovopignone International,
a foreign entity, entered into a contract for the sale of a Steam Turbine Generator (STG)
package. There were disagreements between the parties about payments and fulfilling their
responsibilities under the Equipment Purchase Agreement (EPA). In order to resolve the
financial obligations and other aspects of their disagreement, the parties signed a Settlement
Agreement in 2020.

However, the enforcement petitioner attempted to use arbitration in accordance with ICC
procedures to enforce the terms of the Settlement Agreement after it was signed. On October
5, 2020, a consent award was granted as a consequence of the arbitration. The enforcement
petitioner then attempted to use Indian arbitration law and the New York Convention to enforce
this award in India.

The respondents, Cargo Motors and its subsidiary, Cargo Solar, raised two main objections:

1. Consent awards (awards arising from settlements) are not enforceable under the New York
Convention.

2. The settlement was obtained under economic duress during the COVID-19 pandemic,
rendering the award contrary to Indian public policy.

ISSUES

The following legal issues were at the heart of the case:

1. Whether a Consent Award is Enforceable Under the New York Convention

2. Whether the Settlement was Obtained Under Economic Duress

3. Public Policy Exception

ARGUMENTS

1. The New York Convention, adopted in 1958, outlines the framework for the recognition
and enforcement of foreign arbitral awards. One of the main questions in this case was
whether a consent award —an award based on a settlement between parties—could be
enforced under the New York Convention. The respondents contended that the New
York Convention only applied to disputes arising out of differences between the parties
and did not cover settlements.
2. The respondents argued that they were forced into agreeing to the terms of the
settlement due to economic duress caused by the global COVID-19 pandemic. This
argument was based on the premise that the settlement was unfair and was signed under
circumstances that restricted the respondents' ability to seek legal counsel and fully
evaluate the terms.
3. The respondents further argued that even if the award was valid, its enforcement would
violate Indian public policy. This is a significant exception in Indian arbitration law,
 where awards can be refused enforcement if they are found to be contrary to Indian
public policy.

JUDGEMENT

The Court decided in favour of Nuovopignone International and permitted the implementation
of the Foreign Consent Award based on the aforementioned analysis. The Court decided that:
Both Indian law and the New York Convention uphold the enforceability of consent awards.

The arguments raised by the respondents on the grounds of public policy and economic duress
wereunfounded.
The enforcement petitioner had the right to move forward with the award's recognition and
enforcement in India.

The respondents were mandated to pay the Outstanding Amount and any related interest in
accordance with the terms of the Settlement Agreement. Additionally, the Court clarified that
Cargo Solar and Cargo Motors Pvt. Ltd. were accountable for their failure to fulfill their end
of the bargain.

ANALYSIS

1. Arbitration and Conciliation Act, 1996 (India)

The Arbitration and Conciliation Act, 1996 (the "Act") governs arbitration proceedings in India,
including the enforcement of foreign arbitral awards. In this case, the following provisions
were specifically relevant:

Section 48 – Conditions for Enforcement of Foreign Awards

This section of the Arbitration Act governs the enforcement of foreign arbitral awards in India.
It lays down the conditions under which foreign awards can be refused enforcement. The key
conditions under Section 48 that were considered in this case include:
Section 48(1)(a): The enforcement of a foreign award can be refused if the party against whom
the award is sought to be enforced can show that the award is contrary to Indian public policy.

Section 48(2): A foreign award may also be refused enforcement if it is not in conformity with
the requirements of the New York Convention or other international conventions India is a
signatory to.

In the case of Nuovopignone International v. Cargo Motors Pvt. Ltd., the respondents raised
the argument that the award should not be enforced on the grounds of economic duress
(claiming that the settlement was coerced). They also argued that the consent award violated
Indian public policy. The Court, however, dismissed these arguments and found that the award
did not fall within the scope of Section 48 for refusal based on public policy.

Section 44 – Definition of Foreign Award

This section defines what constitutes a foreign award under the Arbitration Act. According to
the definition, any award made in a foreign country pursuant to a convention to which India is
a party, such as the New York Convention, qualifies as a foreign award.

The Court found that the ICC award in this case, being rendered in an arbitration seated in Paris
and governed by the New York Convention, met the criteria for being a foreign award.

Section 13 – Challenge to the Jurisdiction of the Arbitral Tribunal

This section allows the parties to challenge the jurisdiction of the arbitral tribunal. In this case,
the respondents did not directly challenge the jurisdiction but raised objections related to the
nature of the award (i.e., whether it was a consent award). However, the Court ruled that
consent awards fall within the broader scope of arbitral awards under the Arbitration Act.

2. The New York Convention (1958)

India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (New York Convention), and it was cited as the international instrument for the
enforcement of foreign arbitral awards. The key provisions invoked under the New York
Convention were:

Article III – Recognition and Enforcement of Arbitral Awards

Article III of the New York Convention requires that each contracting state shall recognize and
enforce arbitral awards made in other contracting states, subject to the exceptions laid down in
the Convention (such as the public policy exception). The Court relied on this provision to
assert that foreign arbitral awards are presumptively enforceable in India, and the respondents'
objections related to economic duress and public policy were insufficient to prevent
enforcement.

Article V – Grounds for Refusing Recognition and Enforcement

Article V of the New York Convention specifies the grounds on which a foreign arbitral award
may be refused recognition and enforcement. The most relevant grounds discussed in this case
were:

Article V(1)(e): If the award is contrary to the public policy of the country where enforcement
is sought.

Article V(2): A court may refuse enforcement if the award was not made in accordance with
the agreement of the parties (i.e., if the consent to arbitrate was not genuine).

The Court considered these provisions to conclude that there was no sufficient ground to deny
the recognition and enforcement of the Foreign Consent Award under the New York
Convention. 3. Indian Contract Act, 1872 The respondents argued that the settlement
agreement was entered into under economic duress. Section 15 of the Indian Contract Act,
1872 defines coercion and provides that an agreement made under coercion (i.e., threats of
unlawful force or compulsion) is voidable at the option of the party coerced.

However, the Court did not accept the respondents' claim of economic duress. The Court found
that the Settlement Agreement had been negotiated with independent legal advice and there
was no evidence to suggest that the enforcement petitioner had coerced the respondents into
signing the settlement.

4. International Chamber of Commerce (ICC) Rules

The ICC Arbitration Rules were the procedural rules governing the arbitration in this case. The
award was issued by the ICC International Court of Arbitration in Paris under the ICC’s rules
of arbitration, and it was noted in the judgment that both parties had mutually consented to the
settlement and the incorporation of the settlement terms into an arbitral award.

These rules provided the framework for the procedural aspects of the arbitration, including the
appointment of the arbitrator, the submission of evidence, the filing of statements of claim and
defense, and the drafting of the consent award. The Court emphasized that both parties had
participated in the arbitration process voluntarily and had provided their consent to the award.

5. Indian Public Policy Doctrine -Under Section 48(2) of the Indian Arbitration Act, foreign
awards can be refused recognition and enforcement if they are found to be contrary to public
policy. Public policy is a broad concept and includes considerations of fairness, justice, and the
rule of law. The respondents argued that the economic duress under which the settlement
agreement was signed made it contrary to Indian public policy. The Court rejected this
argument, stating that there was no evidence of coercion, and that the settlement agreement
had been signed with independent legal advice. Therefore, the settlement did not violate Indian
public policy.

6. Legal Advice Clause in the Settlement Agreement

One of the critical clauses in the Settlement Agreement was Clause 11.2, which specifically
stated that the parties had received independent legal advice, including legal advice on Indian
law. The Court emphasized this clause in rejecting the respondents' claim of economic duress.
The inclusion of this clause in the Settlement Agreement effectively countered the respondents'
argument that they had been coerced into entering the agreement.

REFERRED CASE LAWS

1. Renusagar Power Co. Ltd. v. General Electric Co. (1994) 2 SCC 644

• This case is a landmark judgment in Indian arbitration law and was referred to in the
context of the public policy exception to the enforcement of foreign arbitral awards
under Section 48 of the Arbitration and Conciliation Act, 1996.
• Renusagar established that an arbitral award could be refused enforcement only on the
limited grounds mentioned in Section 48 of the Act, primarily if the enforcement would
be contrary to Indian public policy.
• It was significant in defining the narrow scope of public policy and clarifying that an
award should not be refused unless it violates the fundamental principles of justice in
India.
2. Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105

• This case is important for understanding the enforceability of foreign awards in India.
The Supreme Court in Bhatia International held that Indian courts could enforce a
foreign arbitral award under the New York Convention and the Arbitration Act, 1996,
unless the award was challenged on the grounds specified under Section 48.
• The case clarified that public policy could be invoked only in specific situations, such
as when the award was obtained by fraud or was contrary to Indian law.

3. Indian Oil Corporation v. Amritsar Gas Service (1991) 1 SCC 533

• This case was referred to in the context of economic duress and coercion. The case
involved a claim of coercion and whether an agreement made under coercion or
economic duress could be enforced.
• The ruling helped clarify that an agreement entered into under coercion could be
considered void and unenforceable under Indian law. The case was cited in the
Nuovopignone case to argue the possible effect of economic duress on the validity of
the settlement agreement incorporated into the arbitral award.

CONCLUSION

Because it upholds the enforceability of consent verdicts under international arbitration law—
particularly in light of the New York Convention—the Nuovopignone International v. Cargo
Motors Pvt. Ltd. case is noteworthy. Additionally, it emphasizes how crucial independent legal
counsel and legal representation are throughout arbitration processes, especially when
settlement agreements are involved. The Court upheld the idea that settlement agreements
reached with the help of legal counsel and with explicit permission are legally binding and
enforceable by dismissing the economic duress allegation. The case also explains the public
policy exception under Indian law, which guarantees that foreign arbitral rulings are normally
enforceable absent a blatant public policy breach.

In the field of international commercial arbitration, this ruling is historic, especially for parties
attempting to have foreign consent awards upheld in India. It reaffirms India's commitment to
respecting international arbitration standards and increases the predictability and stability of
international arbitration in India.