Jurisdictional Issues In Execution Of Domestic Arbitration Awards: Has The Bird Fled Its Nest?

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Arbitral Dispute Resolution - Serious competitor to State ...

The growth of international commerce has necessitated the creation of efficient methods of resolution of disputes. In some situations, securing an award or a final judgment from the courts may only be a battle half won; this is especially true in the Indian context. Taking a totally divergent view from the erstwhile Arbitration Act, 1940, The Parliament by inculcating Section 36 of Arbitration and Conciliation Act, 1996, enabled execution of an arbitral award “in the same manner as if it were a decree of the court”. Straightforward one would think, but a great deal of confusion has emanated from divergent views taken by high courts across the country.

An award holder would have to wait for a period of three months after the receipt of the award prior to applying for enforcement and execution. During the intervening period[1] the award may be challenged in accordance with Section 34 of the Act. After expiry of the aforesaid period, if a court finds the award to be enforceable, at the stage of execution, there can be no further challenge as to the validity of the arbitral award.

The Key Provisions In The 1996 Act
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.
Section 36 of the Act therefore provides for it to straightaway be executed to realize the decrial amount.
"36. Enforcement. - (1) Where the time for making an application to set aside the arbitral award Under Section 34 has expired, then, subject to the provisions of Sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 to 1908), in the same manner as if it were a decree of the court."
The other key provision which is often missed in the Arbitration and Conciliation Act, 1996, but occupies a key role, in determining the jurisdiction of relevant court at the stage of execution is Section 32, which underlines, the arbitral proceedings shall be terminated as soon as the award is passed.

Conflicting views of the High Courts
The issue under consideration was a subject matter of conflicting judgments among various high courts. The High Courts of Madhya Pradesh, Karnataka and Himachal Pradesh have taken the view that prior to filing execution petition before the court where the assets are located, transfer of decree should first be obtained from the court having jurisdiction over the arbitration. Whereas  as, the High Court of Delhi, Madras, Punjab & Haryana, Allahabad, Rajasthan, Karnataka and Kerala have taken the opposite view that the award can be filed for execution before the court, where the assets of the judgment debtor are located.
High court of Madhya Pradesh in Computer Science India Pvt. Ltd. Vs. Harish Chandra Lodwal and Anr.[2], Karnataka in ICDS Ltd. Vs Mangala Builders Pvt. Ltd[3] and Himachal Pradesh in Jaswinder Kaur and Anr. Vs Tata Motor Finance Ltd. and Anr.[4] took this view:
Ø  For execution, an award had first to be filed in the court having jurisdiction over the arbitral proceedings and
Ø  then transferred to the court having jurisdiction over the assets against which execution may be levied.
Whereas, The High courts of Kerala in Maharashtra Apex Corporation Ltd. Vs. V. Balaji G. and Anr.[5], Rajasthan in Kotak Mahindra Bank Ltd. Vs Ram Sharan Gurjar and Anr[6], Madras in Kotak Mahindra Bank Ltd. Vs Sivakama Sundari and Ors.[7], Allahabad in GE Money Financial Services Ltd. Vs.Mohd. Azaz and Anr.[8], and Delhi in Daelim Industrial Co. Ltd. Vs Numaligarh Refinery Ltd.[9]  held:
That an execution application may be made straightaway in the court which has jurisdiction over the assets.
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.

Supreme Court Settles Jurisdictional Issues In Execution Of Arbitration Awards
The Supreme Court bench consisting of J. Chelameswar and J. Sanjay Kishan Kaul in Sundaram Finance Limited v. Abdul Samad & Anr[10] resolved a long standing debate as to whether an arbitration award: (i) 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 (ii) can be straightway filed and executed in the court where the assets are located.

Facts and Background
The fact of the case arises from an arbitration award passed in a loan agreement executed between appellant, a vehicle finance company, and respondent. The arbitration award was passed in Tamil Nadu. The appellant approached the Trial Court of Madhya Pradesh, where the vehicle was registered, to execute the award on the ground that the arbitration award is enforceable as a decree under section 36 of the Arbitration and Conciliation Act 1996 (the “Act’). Hence, execution proceeding is filed in the Trail Court of Madhya Pradesh under Section 47 read with Section 151 and Order 21 Rule 27 of the Code of Civil Procedure, 1908 .
The Trial Court returned the execution application on account of lack of jurisdiction. The effect of the judgment of the Trial Court was 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 then only could the proceedings be filed in the Trial Court at Madhya Pradesh. The appellant directly approached the Supreme Court on the ground that it would be fruitless approaching the High Court of Madhya Pradesh, because the view adopted by the Trial Court was in turn based on the judgment of the Madhya Pradesh High Court.

Judgment and Analysis of the Supreme Court
The Hon’ble Supreme Court analyzed relevant provisions of Part II of the Code, which deals with execution proceedings, including sections 37(Court which passed the decree), 38(Court by which the decree could be executed), 39 (transfer of decree) and 46 (percepts). A combined reading of the above provisions say that a decree of a court can be executed either by the court, which passed it (“Decreeing Court”); or by the court to which it is sent for execution. In the case of an arbitration award, the Supreme Court observed, there is no decree passed by a court as the award is passed by an arbitration tribunal, which has no power of execution of decree. Section 36 of the Act creates a fiction that for the purposes of execution; the award is to be enforced in the same manner, as if it was a decree under the Code.
The Hon’be Court, thereafter, analyzed Section 42 of the Act and observed that line of reasoning supporting the award to be filed in a so-called court of competent jurisdiction and then to obtain a transfer of the decree is primarily based on the jurisdiction clause found in section 42 of the Act. Whereas, the Court observed, what has been lost sight is of section 32 of the Act, which categorically provides for arbitral proceedings to be terminated by the final arbitral award. Thus, when an award is already made, of which execution is sought, the arbitral proceedings already stand terminated on the making of the final award. Thus, to sum up, Section 42 of the Act, which deals with the jurisdiction issue in respect of arbitral proceedings, would not have any relevance in execution proceedings of award.
The Hon’ble Supreme Court reproduced the observation of Madras High Court in Kotak Mahindra Bank Ltd. v. Sivakama Sundari & Ors[11] as talked above.
The Supreme Court accordingly concluded that the enforcement of an arbitral 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 proceeding.


Aditya Jain is an Advocate on Record at Supreme Court of India and Partner at J&G Advocates.
Neha Gyamlani is an Advocate practicing at Supreme Court of India and Rajasthan High Court, Partner at J&G Advocates

 [1] A further period of 30 days may be granted by a court upon sufficient cause being shown for condonation of delay.
[2] AIR 2006 Madhya Pradesh 34.
[3] AIR 2001 Karnataka 364.
[4] CMPMO No. 56/2013 decided on 17.9.2013.
[5] 2011 (4) KLJ 408.
[6] (2012) 1 RLW 960.
[7] (2011) 4 LW 745.
[8] (2013) 100 ALR 766.
[9] (2009) 159 DLT 579.
[10] Civil Appeal No. 1650 of 2018.
[11] (2011) 4 LW 745.

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