Enforcement of Arbitration Awards - Conflicting Views by the Indian Courts.

There were divergence of legal opinion of different High Courts on the question as to the enforcement jurisdiction of Arbitral Awards; whether an award under the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'said Act') is required to be first filed in the court having jurisdiction over the arbitration proceedings for execution and then to obtain transfer of the decree or whether the award can be straightway filed and executed in the Court where the assets are located remained.

It is an attempt to explore the conflicting views by the different Courts and subsequent pronouncement by the honorable Supreme Court of India in the Sundaram Finance Limited vs. Abdul Samad and Ors. dated15.02.2018 .

The Conflicting Views:

A. The transfer of decree should first be obtained before filing the execution petition before the Court where the assets are located:

The aforesaid view has been adopted by the Madhya Pradesh and the Himachal Pradesh High Courts:

i. Computer Sciences Corporation India Pvt. Ltd. v. Harishchandra Lodwal and Anr. MANU/MP/0422/2005 : AIR 2006 Madhya Pradesh 34 - The learned single Judge of the Madhya Pradesh High Court took recourse to the provisions of Section 42 of the said Act, dealing with the issue of jurisdiction in respect of an arbitration agreement read with Section 2(e) of the said Act which defines the 'Court'. In the context of Section 36 of the said Act dealing with the enforcement of an award prescribing that "the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court," it was observed that the same principle would apply as for enforcing of a decree. Since Section 37 of the Code defines the Court which passes the decree and Section 39 lays down the procedure for transfer of decree, it was opined that for execution of an award a transfer of the decree was mandatory.

ii. Jasvinder Kaur and Anr. v. Tata Motor Finance Limited1 of the High Court of Himachal Pradesh, Shimla - the learned single Judge took note of the fact that the arbitration proceedings were to be settled in Mumbai in accordance with the said Act and the award had been made in Mumbai. Thereafter the learned single Judge copiously extracted from the judgment of this Court in Swastik Gases Private Limited v. Indian Oil Corporation Limited MANU/SC/0654/2013 : JT 2013 (10) SC 35. The learned Judge then proceeded to, once again, copiously extract from the then prevailing view of the Karnataka High Court where a learned single Judge in I.C.D.S. Ltd. v. Mangala Builders Pvt. Ltd. and Ors. MANU/KA/0627/2001 : AIR 2001 Karnataka 364 had opined in favour of the aforesaid view.

B. An award is to be enforced in accordance with the provisions of the said Code in the same manner as if it were a decree of the Court as per Section 36 of the said Act does not imply that the award is a decree of a particular court and it is only a fiction. Thus, the award can be filed for execution before the court where the assets of the judgment debtor are located:

i. Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd. MANU/DE/1316/2009 : 2009 159 DLT 579 (Delhi High Court) - The learned single Judge of the Delhi High Court repelled the contention that the jurisdictional Section 42 of the said Act requiring an application Under Section 34 of the said Act to be filed in that Court would not extend to the execution of a decree. The execution application was not 'arbitral proceedings'. Section 38 of the said Code applies to a decree passed by the Court prescribing that the decree may be executed by the Court which passed it, or by the Court to which it was sent for execution. In case of an award no court passes the decree.

The learned single Judge went into the discussion of the effect of the provisions of Section 635(4) of the Companies Act, 1956 providing for the order of the Company Law Board to be enforced by the Court in certain circumstances to draw an analogy therefrom.

ii. Maharashtra Apex Corporation Limited v. V. Balaji G. and Anr. MANU/KE/1629/2011 : 2011 (4) KLJ 408 (Kerala High Court) - The learned single Judge expressed the view that the Court cannot insist for a decree to receive an execution application on its file and, thus, there was no question of transfer of a decree. The execution court was to accept the execution petition with a certified copy of the award wherever it was filed.

iii. Kotak Mahindra Bank Ltd. v. Sivakama Sundari and Ors. MANU/TN/3588/2011 : (2011) 4 LW 745 (Madras High Court) - Section 39 of the Code enables the Court which passed the decree to transfer it to any subordinate court even of its own motion without application by the decree holder. The learned single Judge of the Madras High Court examined the provisions of the said Act and the said Code and in the process, a reference was made to Section 41 of the said Code imposing an obligation upon the executing court to inform the court which passed the decree about the completion of execution or about the failure to execute the decree along with attending circumstances. A passing reference was made to Section 46 of the said Act which speaks of precepts. In a nutshell the conclusion made was that every decree of a civil court was liable to be executed primarily by the court which passed the decree. On the other hand, in case of an award, the same is liable to be enforced Under Section 36 of the said Act in the same manner as if it were a decree of the court and thus the award passed is equated to a decree of the court, only for purposes of execution. The execution of the award does not require a seal of approval by the civil court as distinct from the provisions under the Arbitration Act, 1940. The award cannot be executed through the arbitral tribunal which passed the award and, thus, there is no situation envisaged for the arbitral tribunal which passed the decree (or award) to transfer the decree to any other court for its execution. There was also no provision either in the Code or anywhere else to treat a court within whose jurisdiction the arbitral proceedings took place as the court which passed the decree.

It was, thus, opined that:

19. While the award passed by an arbitral tribunal is deemed to be a decree of a civil court Under Section 36 of the 1996 Act, there is no deeming fiction anywhere to hold that the court within whose jurisdiction the arbitral award was passed, should be taken to be the court which passed the decree. Therefore, the whole procedure of filing an execution petition before the court within whose jurisdiction the arbitral award was passed, as though it is the court which passed the decree, is pathetically misconceived.

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21. Therefore, it is clear that no Court to which an application for execution of an award is presented, can insist on the filing of the execution petition first before some other Court and to have it transmitted to it later. It appears that the High Court of Bombay has also adopted the same view, though not by a very elaborate order.

In another perspective it was observed that in view of Section 21 of the said Act parties could determine the place of arbitration and thus, the Act transcends all territorial barriers.

iv. Kotak Mahindra Bank Ltd. v. Ram Sharan Gurjar and Anr. MANU/RH/1205/2011 : (2012) 1 RLW 960 (Rajasthan High Court) - The learned single Judge of the Rajasthan High Court agreed with the view adopted by the Delhi High Court.

v. GE Money Financial Services Ltd. v. Mohd. Azaz and Anr. MANU/UP/1182/2013 : (2013) 100 ALR 766 (Allahabad High Court, Lucknow Bench) - The learned single Judge observed that the arbitrator cannot be treated as a court although the award made by him will be executed as a decree. Thus, Sections, 38 & 39 of the said Code would have no application and the award can, thus, be filed for execution as a decree of civil court wherever the judgment debtor resides or carries on business or has properties within the jurisdiction of the said court.

vi. Indusind Bank Ltd. v. Bhullar Transport Co. MANU/PH/2896/2012 - The view of the Delhi High Court referred to aforesaid was adopted.

vii. Sri Chandrashekhar v. Tata Motor finance Ltd. and Ors. MANU/KA/2982/2014 : (2015) 1 AIR Kant R 261 (Karnataka High Court) - The learned single Judge of the Karnataka High Court opined that the question of filing an execution petition before the court which passed the decree and then seeking a transfer of the decree to the court where the assets are located would not arise, as an award is not a decree passed by the court.

SUPREME COURT'S PRONOUNCEMENT -

Honorable Supreme Court of India allayed the anomalies pertaining to the enforcement jurisdiction, in the following pronouncement :

Sundaram Finance Limited Vs. Abdul Samad and Ors. Civil Appeal No. 1650 of 2018 Decided On: 15.02.2018 Judges/Coram: Jasti Chelameswar and Sanjay Kishan Kaul, JJ.

22. We are, thus, unhesitatingly of the view that the enforcement of an award through its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral proceedings.

23. The effect of the aforesaid is that the view taken by the Madhya Pradesh High Court and the Himachal Pradesh High Court is held to be not good in law while the views of Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court reflect the correct legal position, for the reasons we have recorded aforesaid.