India: Issue Of Jurisdiction And Execution Of Arbitral Awards

Arbitration friendliness of a jurisdiction is primarily dependent on the enforcement regime of Arbitral Awards by the Courts of the jurisdiction.

This article will be dealing with the question of whether an Award under the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act), is required to be first filed in the Court having jurisdiction over the arbitration proceedings, for execution and then to obtain precept for transfer of the decree or whether the Award can directly be filed for execution in the Court where the assets of the Judgment Debtor are located. There have been conflicting opinions of various High Courts and the law in this regard is being explored herein.

Execution under the Code of Civil Procedure, 1908

An overview of the provisions for execution and requirement for transfer of a Decree from a Court to another for execution under the Code of Civil Procedure, 1908 (hereinafter referred to as 'Code'), is being dealt summarily here.

Order XXI of the Code of Civil Procedure, 1908, provides detailed provisions for making an application for execution of a Decree and the manner by which such applications will be entertained, dealt with and decided. Section 38 of the Code contemplates that a Decree may be executed either by the Court which passed it or by the Court to which it is sent for execution. Section 37 defines the expression 'Court which passed a decree' and Section 39 provides for the transfer of a Decree for execution by the Court which passed it to another Court of competent jurisdiction and the conditions for such transfer. Sections 40 to 45 provide the conditions of transfer to another State, the powers of executing Court and for execution of Decrees passed in reciprocating territories. Section 46 provides for issuance of precepts by the Court which passed a decree to another Court for execution. However, in most cases, the Court which passed the Decree or Order is the executing Court.

Execution under Arbitration Act , 1940

Per Section 17 of the Arbitration Act 1940, the person in whose favor an Award was passed, had to approach the competent Civil Court to get judgment being passed in terms of the award before he could execute the decree drawn as per the judgment. The original award had to be filed in Court under Section 14(2) of the 1940 Act and the Court was obliged to issue notice to the parties about the same. Thereafter, the Court was empowered to modify or correct the award, in terms of the provisions of Section 15. The Court also had the power to remit the Award under Section 16 of the 1940 Act. If the Court saw no reason to remit the award or to set aside the award for any of the reasons provided in the Act of 1940, the Court would pronounce a judgment under Section 17. A decree would follow pronouncement of such judgment under Section 17. Thus, only the decree passed in terms judgment pronounced under Section 17 and it was executable. This decree would be executed in terms of the provisions of the Code.

Execution under the Arbitration and Conciliation Act , 1996

Section 2(1)(e) of the Act defines 'Court' and Section 42 which provides for jurisdiction determines the Court to which all applications under Part I of the Act are made before, during or after arbitral proceedings. The Hon'ble Supreme Court34 while interpreting these provisions held that the expression 'with respect to an arbitration agreement' widens the scope of Section 42 to include all matters which directly or indirectly pertain to an arbitration agreement.

Section 36 of the Act likens an Arbitral Award to a Decree of the Civil Court and therefore provides for it to straightaway be executed to realize the decretal amount. However, there is no provision in the Act which likens the Arbitral Tribunal to a Court which passed the Decree. There is also no provision for an Arbitral Tribunal to execute its own Award. Inevitably, the Decree has to be brought for execution before an executing Court. As per the Code, a decree can be executed by the Court which passes the decree or where the Judgment Debtor is residing or carrying on business or having immovable property. However, the Act of 1996 is special law which prevails over the general provisions of the Code35.

In view of this, a doubt is raised as to whether an Award can be executed under Section 36 of the Act in any jurisdiction different to the place where the Award has been passed, without requiring such award to be transferred to the executing Court by the competent Court as per Section 42.

Varying views of various High Courts

The High Court of Karnataka, in the case of I.C.D.S. Ltd. v. Mangala Builders Pvt. Ltd.36, held that the Court which could exercise jurisdiction under Section 34 of the 1996 Act would be the only Court which could enforce an award. Reliance was placed on the wordings of Section 36 of the Act. A right to enforce the award arises only after the period for setting aside the arbitral award under Section 34 has expired or such an application having been made, is rejected. In light of the same, it was stated that the Court which can exercise power under Section 34 of the Act can alone enforce the arbitral award.

The High Court of Bombay, in the case of SK Engineers v. BSNL37, held relying on Section 42 of the Act that the expression Court for the purpose of Section 36 cannot be read at variance with the meaning of the expression under Section 34 and that the provisions of Section 36 refer to Section 34.

The High Court of Calcutta, in the case of Srei Equipment and Finance Pvt. Ltd. v. Khyoda Apik and Ors.38, held relying on this judgment of the Bombay High Court39 that when an application under Part I has been made in a Court with respect to an arbitration agreement, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings including execution proceedings.

The High Court of Madras taking a contrary view in the case titled Kotak Mahindra Bank Ltd. v. Sivakama Sundari40, held that while the award passed by an arbitral tribunal is deemed to be a decree of a civil court under Section 36 of the Act, there is no deeming fiction anywhere to hold that the court within whose jurisdiction the arbitral award was passed, should be deemed to be the court which passed the decree. Therefore, the procedure of filing an execution petition before the court within whose jurisdiction the arbitral award was passed is misconceived. In light of this, the Court further stated that it is not open for any executing Court (i) either to demand transmission from any other Court; (ii) or to order transmission to any other Court. Another bench of the Madras High Court later concurred with this judgment41.

The High Court at Hyderabad for the State of Telangana and State of Andhra Pradesh in the case titled as Shriram Transport Finance Co. Ltd. vs. S. Salauddin and Ors.42, concurring with the view of the High Court of Madras held that "...no Court, to which an application for execution is made, can insist on the filing of the execution petition first before some other Court and to have it transmitted to it later". This view had been previously taken by the High Court of Hyderabad in the case Transmission Corporation of Andhra Pradesh Limited (A.P. TRANSCO) vs. Equipment Conductors and Cables Limited43, relying on the view taken by the High Court of Delhi in the case M/s Religare Finvest Limited vs. Ranjit Singh Chouhan44.

The High Court of Delhi in the case of Religare Finvest relied on the view of the Madras High Court as also on its previous case titled as Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.45 and held that territorial jurisdiction for execution is determined by the locus of the Judgment Debtor or the property of the Judgment Debtor since the Award itself is executable as a decree, the Court of the place where the property/money against which the decree is sought to be enforced is situated would have inherent jurisdiction to entertain the execution. This view has been consistently maintained by the High Court of Delhi46.

The High Court of Punjab and Haryana has also subscribed to this view of the High Court of Delhi in various cases47 holding that even in cases where no application had been moved regarding arbitral proceedings even then Court with the requisite territorial jurisdiction would be the competent Court to execute the award. It was held that there is no requirement of transmission for its enforcement.

Judgment of the Supreme Court

This issue has now been put to rest by the Hon'ble Supreme Court in the case Sundaram Finance Limited vs. Abdul Samad and Ors.48, numbered as Civil Appeal No. 1650 of 2018 vide judgment dated 15.02.2018.

The Hon'ble Supreme Court referred to the views of various High Courts such as Madhya Pradesh49 and the Himachal Pradesh50 which subscribed to the view that transfer of decree should first be obtained before filing the execution petition before the Court where the assets are located. The Hon'ble Supreme Court also referred to the contra view taken by various High Courts such as Delhi, Kerala51, Madras, Rajasthan52, Allahabad53 and Karnataka54 which opined that an arbitral award can be filed for execution before the court where the assets of the judgment debtor are located and there is no requirement of transfer and transmission.

After exploring the relevant provisions in detail, the Hon'ble Supreme Court held that reliance on Section 42 of the Act is misconceived since it only provides for jurisdiction over arbitral proceedings. These proceedings terminate with the final Arbitral Award as provided for under Section 32. Therefore, it is the Code which applies to execution proceedings. Further, the Hon'ble Supreme Court referred Section 46 of the Code which provides for issuance of precepts by the Court which passed the decree upon application of the decree holder to any other Court competent to execute the said decree, and noted that the expression "the Court which passed the decree" is as per Section 37 of the said Code. It was pointed out that in the case of an award there is no decree passed by any Court but the award itself is executed as a decree by fiction and therefore there is no deeming fiction anywhere to hold that the Court within whose jurisdiction the arbitral award was passed should be accepted as the Court, which passed the decree.

Conclusion

In light of this judgment the law has been settled that while enforcing an award, execution proceedings 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.

Execution of foreign decrees

A full bench of the Bombay High Court has, in the judgment55 immediately succeeding the judgment of the Supreme Court on this issue, has stated regarding enforcement of foreign awards under Chapter-I in Part- II of the Act that Section 49 stipulates that when a foreign award becomes enforceable, it is deemed to be a decree of that Court. The expression "that Court" would mean the Court as defined by Section 2(1)(e)(ii). It would, thus, refer to the High Court in exercise of its ordinary original civil jurisdiction having jurisdiction to decide the questions forming the subject-matter of the arbitration if it had been the subject-matter of a suit and in other cases, a High Court having jurisdiction to hear appeals from decrees of Courts subordinate to the High Court. In any case, Order XLIX, Rule 3 of the Code does not exclude the application of the provisions of Order XXI of the Code in the matter of execution of decrees.

Footnotes

34. State of West Bengal v. Associated Contractors, MANU/SC/0793/2014 : AIR 2015 SC 260

35. Consolidated Engineering Enterprises v. Principal Sec. Irrigation Dept., MANU/SC/7460/2008 : (2008) 7 SCC 169 : (AIR 2009 SC (Supp) 396) and Union of India v. Popular Construction Co., MANU/SC/0613/2001 : (2001) 8 SCC 470 : (AIR 2001 SC 4010).

36. MANU/KA/0627/2001: AIR 2001 Karnataka 364

37. S.K. Engineers v. Bharat Sanchar Nigam Ltd., 2009 (4) Arbitration Law Reporter 369 (Bom): MANU/MH/0771/2009: (2010 (4) AIR Bom R. (NOC) 386

38. MANU/WB/1040/2016: AIR 2016 CAL 293

39. Supra 3

40. MANU/TN/3588/2011: 2011 (6) CTC 11

41. Veerapathiran vs. Rajavel Decided on 18.12.2017: MANU/TN/4199/2017

42. Decided on 07.08.2017: MANU/AP/0493/2017

43. Decided on 07.12.2016: MANU/AP/0993/2016

44. Decided on 28.02.2012: MANU/DE/2330/2012

45. (2009) 3 Arb LR 524 (Del)

46. The State Trading Corporation of India Ltd. vs. Global Steel Holdings Limited and Ors. Decided on 09.03.2015: MANU/DE/0711/2015

47. Indusind Bank Ltd. vs. M/s. Bhullar Transport Company and Another Decided on 15.11.2012: MANU/PH/2896/2012 and Mahindra & Mahindra Financial Services Limited vs. Manjeet Singh Decided on 12.11.2013: MANU/PH/4218/2013

48. MANU/SC/0122/2018

49. Computer Sciences Corporation India Pvt. Ltd. v. Harishchandra Lodwal and Anr. MANU/MP/0422/2005: AIR 2006 MP 34

50. Jasvinder Kaur and Anr. v. Tata Motor Finance Limited, Decided on 17.9.2013 in CMPMO No. 56/2013

51. Maharashtra Apex Corporation Ltd. v. V. Balaji G. and Anr., MANU/ KE/1629/2011: 2011 (4) KLJ 408

52. Kotak Mahindra Bank Ltd. v. Ram Sharan Gurjar and Anr., MANU/ RH/1205/2011: (2012) 1 RLW 960

53. GE Money Financial Services Ltd. v. Mohd. Azaz and Anr. MANU/ UP/1182/2013: (2013) 100 ALR 766

54. Sri Chandrasekhar v. Tata Motor Finance Ltd. & Ors. MANU/KA/2982/2014: (2015) 1 AIR Kant R 261

55. Gemini Bay Transcription Private Ltd. and Ors. vs. Integrated Sales Service Ltd. and Ors. Decided on 16.02.2018 : MANU/MH/0265/2018

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