India: Supreme Court Holds That

Enforcement Of An Award Through

by Tejas Karia , Surjendu Sankar Das and Avlokita Rajvi

Shardul Amarchand Mangaldas & Co

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Brief Facts
In disputes between Sundaram Finance Limited
("Appellant") and Abdul Samad in relation to default
in repayment of a loan, an ex-parte arbitration award
was made on 22 October 2011 in favour of the
Appellant ("Award"). The Award being enforceable
as a decree under Section 36 of the Arbitration and
Conciliation Act ("Act"), the Appellant filed execution
proceedings before 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 ("CPC"). The Court vide order
dated 20 March 2014 ("Order") returned the
execution application on account of lack of
jurisdiction to be presented to the Court of
competent jurisdiction. While passing the Order, the
Court relied upon a decision of the Madhya Pradesh
High Court on this issue. The effect of the Order 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 Court at Morena.
The Appellant did not approach the High Court
against the Order but straightway approached the
Supreme Court by filing a Special Leave Petition on
the ground that no useful purpose would be served
by approaching the High Court since the view
already expressed by that High Court was in conflict
with the views taken by other High Courts on this
issue.
Issue
Whether an award under 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 be straightway filed and executed in the Court
where the assets are located.
Judgment
The Supreme Court considered the view taken by
the: (i) Madhya Pradesh High Court in Computer
Sciences Corporation India Pvt. Ltd. v.
Harishchandra Lodwal & Anr.2; and (ii) Himachal
Pradesh High Court in Jasvinder Kaur & Anr. v. Tata
Motor Finance Limited3. In both these cases, the
view of the High Courts was that the transfer of
decree should first be obtained before filing the
execution petition before the Court where the assets
are located.
The Supreme Court further considered the view
taken by the: (i) Delhi High Court in Daelim Industrial
Co. Ltd. v. Numaligarh Refinery Ltd.4; (ii) Kerala High
Court in Maharashtra Apex Corporation Limited v. V.
Balaji G. & Anr.5; (iii) Madras High Court in Kotak
Mahindra Bank Ltd. v. Sivakama Sundari & Ors.6;
(iv) Rajasthan High Court in Kotak Mahindra Bank
Ltd. v. Ram Sharan Gurjar & Anr.7; (v) Allahabad
High Court in GE Money Financial Services Ltd. v.
Mohd. Azaz & Anr.8; (vi) Punjab & Haryana High
Court in Indusind Bank Ltd. v. Bhullar Transport
Company9; and (vii) Karnataka High Court
in Sri Chandrashekhar v. Tata Motor Finance Ltd. &
Ors.10 The view taken by the said High Courts in all
these cases was to the effect that an award can be
filed for execution before the Court where the assets
of the judgment debtor are located.
The Supreme Court noted that Section 36 of the Act
(Enforcement) provides that an award is to be
enforced in accordance with the provisions of the
CPC 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. The award
itself is executed as a decree by fiction. 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 were a decree under the CPC.
Further, the Supreme Court observed that the 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.
The Court observed that Section 42 of the Act
(Jurisdiction) applies with respect to an application
being filed in Court under Part I of the Act.11 On the
making of an application under Part I of the Act
before a Court, such Court assumes jurisdiction over
the arbitral proceedings. Resultantly, the subsequent
applications arising from an agreement and the
arbitral proceedings are to be made in that Court
alone. However, Section 32 of the Act (Termination
of proceedings) 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. Hence,
Section 42 of the Act which deals with the
jurisdiction issue in respect of 'arbitral proceedings',
would not have any relevance.
It is in light of the above, that the Supreme Court
upholds the view adopted by the Delhi High Court
in Daelim Industrial Co. Ltd. v. Numaligarh Refinery
Ltd.12 recording that Section 42 of the Act would not
apply to an execution application. This judgment of
the High Court further recorded that Section 38
(Court by which decree may be executed) of the
CPC would apply to a decree passed by the Court,
which can be distinguished from an arbitral award
where no Court passes the decree.
The Supreme Court then proceeds to uphold the
view of the Madras High Court in Kotak Mahindra
Bank Ltd. v. Sivakama Sundari & Ors.13, wherein the
view adopted was that decree of a Civil Court is
liable to be executed primarily by the Court which
passes the decree where an execution application
has to be filed at the first instance. An award under
Section 36 of the Act is equated to a decree of the
Court for the purposes of execution and for that
purpose alone. The Supreme Court held that it was
rightly observed in the said case that an award
passed by the arbitral tribunal is deemed to be a
decree under Section 36 of the Act. However, there
was nothing to indicate that the Court within whose
jurisdiction the arbitral award was passed, should be
taken to be the Court which passed the decree.
The Supreme Court accordingly 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.
There were conflicting judgments by various High
Courts surrounding the issue of appropriate Court
for enforcement of arbitral award. In this case, the
Supreme Court upheld the views taken by the High
Courts of Delhi, Kerala, Madras, Rajasthan,
Allahabad, Punjab & Haryana and Karnataka. The
decisions rendered by the High Courts of Madhya
Pradesh and Himachal Pradesh which had taken
contrary views to the abovementioned High Courts,
have been held to be not good in law by the
Supreme Court.
This simplifies the process of execution of arbitral
awards. Since the Act transcends all territorial
barriers, a decree holder is not required to obtain
any transfer of the decree from the Court which
would have jurisdiction over arbitral proceedings.
The judgment has effectively removed ambiguity on
the issue and eased the process of enforcement of
an award and will be viewed as a welcome
development in Indian arbitration jurisprudence.
Footnotes
1 Authored by Tejas Karia, Partner & Head - Arbitration, Surjendu
Sankar Das, Counsel and Avlokita Rajvi, Associate; Sundaram
Finance Limited v. Abdul Samad & Anr., Civil Appeal No. 1650 of
2018, judgment dated 15 February 2018, Supreme Court..

2 AIR 2006 MP 34.

3 2013 SCC OnLine HP 3904.

4 (2009) 159 DLT 579.

6 (2011) 4 LW 745.

7 (2012) 1 RLW 960.

8 2013 SCC OnLine All 13365.

9 2012 SCC OnLine P&H 21674.

10 2014 SCC OnLine Kar 12146.

11 Section 42 of the Act states that "Notwithstanding anything

12 Supra.

13 Supra.

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