Process of Execution of Arbitral Award For Recovery of Money

As stated by the Delhi High Court- “Arbitral Award is to be executed at a place where Judgement Debtor Resides, carries Business or has Assets.” This means that irrespective of place where the passing of award had taken place, it is to be executed by a Court within the Jurisdiction of which the Judgement Debtor Resides, carries on business or his property is situated. Execution of arbitration award is the most important phase of a litigation as this is the stage when an award holder will get the fruit of all its efforts of obtaining an award and further for actual realization of Award. Arbitral awards are usually enforced in form of the decree of the Court and principles of natural justice applicable to the execution proceedings. Presently, Arbitration is being given recognition as a medium of alternative dispute resolution, which is effective in resolving trade related disputes with enhanced predictability, certainty and efficacy. The recourse to the party against whom the arbitral award is pronounced has been provided by the Arbitration and Conciliation Act, 1996, for the arbitral award to be set aside by making prescription relating separate procedures for setting aside domestic and foreign/international awards.

When the Execution can be Filed?

As per section 34 of the arbitration and conciliation act 1996,  arbitration award can be challenged within three months from the receiving of arbitration award and in further 30 days ( if court is  if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months) and if a party against whom the award was passed had not chosen to file an application for setting aside the arbitration award with in the prescribed time or if the same was dismissed by the court, then, as per section 35 of the arbitration and conciliation act 1996 the said award will attain its finality and hence, will have binding effect on the parties to the dispute. Once an arbitration award attains its finality then only, the execution of arbitration award can be filed for its realization.

Where this Award can be Filed?

The First and most important step for filing of execution petition is to choose the court where the execution of arbitration is to be filed. Most of the people are unable to execute an award speedy only because they choose wrong court as they first file the execution before the court under which jurisdiction the award was passed and then apply for transfer of decree as per the procedure prescribed under code of civil procedure. For the speedy execution of arbitration award, an award holder can file an execution of award directly to any court where the judgement debtor resides or carry its business or its property is situated. In Sundaram Finance Limited v. Abdul Samad[1] Hon’ble Supreme court of India has held that the execution of arbitration award can be filed at any court. As per the directions, in the arbitration award the court may issue directives for the Judgement Debtor to deposit the money in the court and then the involved amount may be released by the Court in favour of the decree holder. If the judgement debtor fails to deposit the asked amount or do not make payment of the decree then for the speedy disposal of execution proceedings, the Court may accommodate below discussed procedure.

Procedure for Execution of Arbitration Award with Relevant Provisions of Code of Civil Procedure, 1908.

1.Application under order 21 rule 11 for the execution of arbitration award: The first and foremost step for the execution of money award is filing the Execution Petition under Order 21 of the Code of Civil Procedure, 1908 read with section 35 of Arbitration and Conciliation Act, 1996 along with an application seeking disposal of execution petition in time bound manner. As Hon’ble Supreme Court of India has laid down recently, in the case of Rahul S Shah v. Jindera kumar Gandhi[2], the mandatory directions to be followed by all Executing Courts. The Apex Court stated here that- “Executing Court must dispose of the Execution Proceedings within six months from the date of filing, which may be extended only by recording reasons in writing for such delay”.[3]

2. Order 21 rule 22 of CPC: For ensuring the speedy execution of the Arbitration Award, Award Holder has to file the execution under Order 21 rule 22 of the Code of Civil Procedure, 1908, which can be applied only when an Execution Petition shall be filed within the period of two years from the date of award. As per order 21 rule 22 of the Code of Civil Procedure, in case the Executing Court is satisfied that the issue of such notice would cause unreasonable delay or would defeat the ends of justice, the Court can prevent issuing such notice. In case the Court is not satisfied that the issue of such notice would cause unreasonable delay or would defeat the ends of justice then, the court will issue notice to the judgement debtor under order 21 rule 22 to show cause as to why the award should not be executed against him. In this context, the Bombay High Court in a case titled- Shree Harivansh Securities Pvt. Ltd. v. Nikko Stock Broker Pvt. Ltd and other[4], held that Civil Procedure Code, 1908, Order 21, Rule 22; Arbitration and Conciliation Act, 1996 Section 36 may direct Execution Proceeding Notice – If judgment-debtor participated in proceeding – Unreasonable to direct issuance of notice merely to satisfy technicality.

3. Order 21 rule 23 of the CPC: For the speedy recovery of the execution, procedure under order 21 rule 23 plays a vital role as it states the procedure for appearance of the judgement debtor. Order 21 rule 23 code of civil procedure 1908 and further to offer any objection in relation to execution of the arbitral award. It is pertinent to note here that the judgement debtor is not having right to file or offer any objections in the proceeding of execution of an arbitration award. It is more pertinent to specify that Hon’ble Supreme Court of India in the case Punjab State Civil Supplied Corporation Ltd. & Anr. V. M/s Atwal Rice & General Mills Rep. its partner[5] held that- “all the objections referred above ought to have been raised buy the respondents before the arbitrator or / and additional district judge under section 34 of the act but certainly none of them could be allowed to be raised in execution once the award become final and attained finality as decree of the civil court”.

In other words, having regards to the nature of objections, it is clear that such objections were not capable of being tried in the execution proceedings to challenge the award. It is for the reason that they were on facts and pertained to the merits of the controversy, which stood decided by the arbitrator resulting in passing of the award. None of the objections were in relation with the jurisdiction of the court affecting the roots of very passing the decree. If the executing court had probed these objections, then it would have travel behind the decree, which was not permissible in law. An enquiry into facts which ought to have been done in a suit or in an appeal arising out of a suit or in proceedings under section 34 of the act, cannot be held in execution proceeding in relation to such award/ decree.

That the above said cited judgement makes it clear that the objection under section 47 of the code of civil procedure 1908 is not maintainable in the execution proceeding of an arbitral award.

4. Order 21 rule 30 of the Code of Civil Procedure: if, an award is for recovery of money then, the same can be executed either by the attachment of the assets of the judgement debtor or by arrest and detention of the judgement debtor or by both ways.

5. Order 21 rule 41(2) Code of Civil Procedure: that after the stage of appearance of the judgement debtor, if an award holder is not having proper knowledge of the assets of the judgement debtor through which an award can be realized then, the decree holder under order 21 Rule 41 Code of Civil Procedure 1908 may file an application seeking appropriate directions of the executing court to the judgement debtors to disclose all the details of the assets belongs to him as per appendix 16A of code of civil procedure. It is also necessary to mention that the Delhi High court in the case of M/s Bhandari Engineering and Builders v. M/s Maharia Raj Joint venture and others[6] stated that- the court has all the powers regarding issuance of warrant of attachment of the assets as provided in the affidavit of judgement debtor and to further procced with procedure of auction, sale of the assets for the actual realization of arbitration award.

6. Order 21 rule 41 (3) of the Code of Civil Procedure 1908: After the Executing Court directs the judgement debtor to furnish the details of its assets, in case of disobedience of any order made under sub-rule (2), the Court making the order, or any Court to which the proceeding is transferred, may direct that the person disobeying the order be detained in the civil prison for a term not of not more than 90 days unless before the expiry of such term the Court directs his release.

 7. Order 21 rule 37 and 38 of the Code of Civil Procedure 1908: An award for recovery of money can be executed by attachment and also by arrest and detention of the judgement debtor in civil imprisonment. As per order 21 rule 37 of the Code of Civil Procedure 1908  where an application is for the execution of a decree for the payment of money by the arrest and detention in the civil prison of a judgment-debtor who is liable to be arrested in pursuance of the application, the Court 1 shall, instead of issuing a warrant for his arrest, issue a notice calling upon him to appear before the Court on a day to be specified in the notice and show cause why he should not be committed to the civil prison and as per the proviso of order 21 rule 37 such notice shall not be necessary if the Court is satisfied, by affidavit, or otherwise, that, with the object or effect of delaying the execution of the decree, the judgment-debtor is likely to abscond or leave the local limits of the jurisdiction of the Court.

The above discussed procedure makes enable the award or decree holder for realizing the award or decree by arrest of judgement debtor or through the money paid to them through settlement outside the Court or by receiving payment from the sale and auction of the assets of the judgement debtor within a time-bound manner. The process if not an issue but the timely execution and proceeding of the events of the process is the prime concern.

One of the major challenges faced by the international community relating the dispute resolution if in regard of the enforcement or execution of the Arbitral Awards. The assurance of the speedy dispute resolution, requires an imperative that the procedures for execution of the awards are made unambiguous, and time and cost efficient. This is the only way the arbitration process as an alternative dispute resolution medium can be proved a win-win situation for parties at both national and international levels.

References

[1] CIVIL APPEAL No. 1650 of 2018.

[2] CIVIL APPEAL NO. 1659-1660 of 2021.

[3] Ibid.

[4] ITA No. 2122/Kol/2017.

[5] CIVIL APPEAL No. 8943 of 2017 (Arising out of SLP (C) No. 1552/2015).

[6] Ex. P. 275/2012 & E.A. 193/2020.