India: Execution Of Arbitral Award: Settling The Divergent Views In The Light Of Sundaram Finance vs. Abdul Samad & Anr

Introduction

The question to be decided by the Hon'ble Supreme Court of India in the matter titled "Sundaram Finance v. Abdul Samad & Anr."¹ was 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 transfer of the decree or whether the award can straightway be filed and executed in the Court where the assets are located. Before the decision in the present case, different High Courts had divergent views on this issue. While the Hon'ble Madhya Pradesh, Karnataka, and Himachal Pradesh High Courts have taken one view, the Hon'ble Delhi, Rajasthan, Madras, and Kerala High Courts have adopted a different view.

Facts leading to the Appeal

The Appellant and the Respondent had entered into a Loan Agreement, in which it was alleged by the Appellant that the Respondent committed a default in payment of instalments. As provided in the Loan Agreement, arbitration proceedings were initiated and an ex parte Arbitral Award was passed. The case of the Appellant is that the award being enforceable as a decree under Section 36 of the Act, execution proceedings were filed in the jurisdiction of the court at Morena, Madhya Pradesh under Section 47 read with Section 151 and Order 21 Rule 27 of the Code of Civil Procedure, 1908 (hereinafter referred to as "the Code"). However, the Learned Trial Court vide its order dated March 20, 2014, returned the execution application on account of lack of jurisdiction, directing the application to be presented to the court of competent jurisdiction. The effect of the judgment was that the Appellant was required to file the execution proceedings first before the court of competent jurisdiction in Tamil Nadu, and then obtain a transfer of the decree and then could the proceedings be filed in the trial court at Morena. This view adopted by the Learned Trial Court was based on the judgments of the Hon'ble Madhya Pradesh High Court and the Hon'ble Karnataka High Court. The Appellant did not approach the Hon'ble Madhya Pradesh High Court against the said order but approached the Hon'ble Supreme Court by filing the Special Leave Petition on the ground that no useful purpose would be served by approaching the Hon'ble Madhya Pradesh High Court in light of the view already expressed by that court in conflict with the opinions of some other high courts.

The Conflicting Views

One view is that 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 Hon'ble Madhya Pradesh and Himachal Pradesh High Courts. In the case of "Computer Sciences Corporation India Pvt. Ltd. v. Harishchandra Lodwal & Anr." ², the Learned Single Judge of the Hon'ble Madhya Pradesh High Court took recourse to the provisions of Section 42 of the Act, dealing with the issue of jurisdiction in respect of an arbitration agreement read with Section 2(e) of the Act which defines the word 'Court'. In the context of Section 36 of the Act dealing with the enforcement of an award prescribing that "the award shall be enforced under the Code of Civil Procedure, 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.

While the other view is that an award is to be enforced in accordance with the provisions of the Code in the same manner as if it were a decree of the Court as per Section 36 of the Act, it does not imply that the award is a decree of a particular court. Thus, this view holds that the award can be filed for execution before the court where the assets of the debtor are located, which is supported by various decisions of the Hon'ble Delhi High Court, Hon'ble Kerala High Court and Hon'ble Madras High Court such as "Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd." ³, "Maharashtra Apex Corporation Limited v. V. Balaji G. & Anr." ⁴, "Kotak Mahindra Bank Ltd. v. Sivakama Sundari & Ors." ⁵.

The Decision

On an analysis of the provisions of the Act and the Code, it was observed by the Hon'ble Supreme Court in Sundaram Finance v. Abdul Samad & Anr that an award is to be enforced in accordance with the provisions of the Code in the same manner as if it were a decree. It is, thus, the enforcement mechanism, which is akin to the enforcement of a decree but the award itself is not a decree of the civil court as no decree whatsoever is passed by the civil court. It is the arbitral tribunal, which renders an award and the tribunal does not have the power of execution of a decree. For the purposes of execution of a decree, the award is to be enforced in the same manner as if it was a decree under the Code. It was held 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.

Footnotes

1 Civil Appeal No. 1650 of 2018; Decided on 15 February 2018.

2 AIR 2006 Madhya Pradesh 34

3 2009 159 DLT 579

4 2011 (4) KLJ 408

5 (2011) 4 LW 745

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