In case titled ‘Sundaram Finance v Abdul Samad & Anr. (Civil Appeal No 1650 of 2018)‘ decided on 15.02.2018, the Hon’ble Supreme Court of India has clarified the anomaly with regard to the appropriate jurisdiction for enforcement of an arbitral award. The Hon’ble Supreme Court has held that enforcement of an Arbitral Award under the Arbitration and Conciliation Act, 1996 may be filed in any jurisdiction in the country, for execution, where such decree is capable of being executed.
The Appellant in the present case initiated arbitration proceedings against Respondents for breach of a loan agreement. An ex-parte award was passed in favour of the Appellant. When the Award was filed for execution before the District Court, Morena, Madhya Pradesh, the Respondents sought to contest the proceedings inter alia on the ground that the vehicle against which the loan was obtained was stolen, but the District Court, Morena rejected the execution proceedings on the ground that it lacked jurisdiction. The District Court, Morena took the view that the Appellant was required to file the execution proceedings first before the court of competent jurisdiction in Tamil Nadu, obtain a transfer of the decree and only then could the proceedings be filed in the District Court at Morena. This view adopted by the District Court, Morena was in turn based on the judgment of the Madhya Pradesh High Court and the opinion of the Karnataka High Court while it is pleaded that the view of the Rajasthan High Court and the Delhi High Court were to the contrary. The Appellant filled a Special Leave Petition and preferred an appeal directly to the Hon’ble Supreme Court due to the divergence in the views of the Madhya Pradesh High Court and Himachal Pradesh High Court from some of the other High Courts, while dealing with the issue of jurisdiction for enforcement of arbitral awards.
Whether an arbitral award can be filed only in the court, within whose jurisdiction the arbitration proceedings were carried out or whether the arbitral award could be directly executed in the jurisdiction where the assets of the judgement debtor are located?
Divergence in Views:
1. Enforcement of an arbitral award after obtaining a transfer decree for enforcement of the arbitral award where the assets are located.
The Madhya Pradesh High Court was of the view that as per Section 42 read with Section 2(e) of the Act, the award would be enforceable, as per the provisions of the Code of Civil Procedure, 1908 (CPC), in the same manner as if it were a decree of the Court. Since Section 35 along with Section 39 of the CPC defines ‘Court’, a transfer of the decree was mandatory for execution of the arbitral award in the jurisdiction where the assets are located. The High Court of Himachal Pradesh has adopted a similar view while dealing with this issue.
2. Enforcement of the Arbitral Award directly in the jurisdiction where assets are located.
The Delhi High Court has stated that Section 42 of the Act was not applicable during proceedings under Section 34 of the Act. The Kerala High Court has adopted a similar view and held that a Court cannot insist on a decree to receive an execution application and thus there was no question of a transfer of decree. The Madras High Court ruled that as per Section 39 and 41 of the CPC, a decree may be passed to the executing court on its own motion. The Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court have taken a similar view.
The Supreme Court clarified the confusion regarding the jurisdiction for enforcement of an arbitral award and held that the execution of an arbitral award can be filed anywhere in the country where such decree was capable of being executed and there is no requirement of obtaining a transfer of the decree from the court, which would have jurisdiction over the arbitral proceedings. The Supreme Court analyzed Section 46 of the CPC, 1908, which defines ‘precepts’ and stated that the application of the decree holder is made to the court which passed the decree and which issues the precepts to any other court of competent jurisdiction to enforce it. However, in the case of an arbitral award, there is no decree passed, but the arbitral award is itself executed as a decree, by fiction. Further Order XXI of the CPC, 1908 deals with execution of decrees and orders which states that details like number of suit, appeal against the decree, etc. have no relevance to the fiction of an arbitral award for it to be treated as a decree, for the purposes of execution
The Supreme Court observed that while an award passed by the arbitral tribunal is deemed to be a decree under Section 36 of the said Act, there was 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. The Arbitration and Conciliation Act, 1996 actually transcends all territorial barriers.
The Hon’ble Supreme Court with this decision has not only provided clarity on enforcement of Arbitral Award but also has removed another hindrance experienced by the parties while adopting Arbitration as a mean for dispute resolution. It is clear that enforcement of an Arbitral Award under the Arbitration and Conciliation Act, 1996 may be filed in any jurisdiction in the country, for execution, where such decree is capable of being executed and there is no requirement of obtaining a transfer of the decree from the court which has jurisdiction over the arbitration proceedings.
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