Arbitration has long been celebrated as a faster, cost-effective alternative to traditional court proceedings for resolving disputes. However, despite the promise of a quicker resolution, the process of enforcing arbitral awards, particularly in execution proceedings, can be fraught with challenges. Execution proceedings are the final stage of the arbitration process, where the successful party seeks to ensure compliance with the arbitral award. The smooth and effective enforcement of such awards is critical to upholding the integrity of arbitration and fostering confidence in alternative dispute resolution mechanisms.
This article examines the framework of execution proceedings in arbitration matters, focusing on recent judicial pronouncement by the Hon’ble Supreme Court of India, to understand the evolving approach to enforcement in arbitration.
The Framework of Execution Proceedings
Legal Provisions:
Execution of arbitral awards in India is governed primarily by the Arbitration and Conciliation Act, 1996 (the Act). The process is largely similar to the enforcement of a civil court decree. Section 36 of the Act specifically addresses the enforcement of arbitral awards, stating that an award shall be enforced in the same manner as a decree of a civil court, unless the award is challenged through an application for setting aside the award under Section 34 of the Act.
The overarching principle under the Act is that a court should not interfere with the arbitral process once an award has been passed, except in exceptional circumstances where the award violates public policy or is obtained through fraud or corruption. The aim is to uphold the finality of arbitration awards, ensuring the process is not unduly delayed.
It is important to note that while Section 36 allows for an automatic stay of execution if the award is challenged, the stay is not granted merely because an appeal has been filed. A party seeking a stay must show that there is a prima facie case and that they would suffer irreparable harm if the execution proceeds.
The Arbitration Act provides that an arbitral award will be enforced “in accordance with the provisions of the Code of Civil Procedure, 1908, (“CPC”) in the same manner as if it were a decree of the Court”.
“The difficulties of a litigant in India begin when he has obtained a decree” is a well-known saying . Even after nearly 150 years, the Privy Council’s remark, which perfectly captures the suffering of the decree holders, remains relevant. The real battle starts when the decree holder approaches the executing court; receiving a favourable decree from the court is only half the fight fought. Over the years, the Supreme Court has bemoaned the state of affairs again and time again.
Rulings of the Hon’ble Supreme Court of India and Delhi High Court
In 2016 ruling in Satyawati vs. Rajinder Singh and Others[1], the Hon’ble Supreme Court of India said that “it is really agonizing to learn that the Appellant-Decree Holder is unable to enjoy the fruits of her success even today i.e. in 2013 though the Appellant-Plaintiff had finally succeeded in January 1996″ in order to express its disappointment. Years have gone by, yet the situation on the ground has not changed.
In 2021Rahul S. Shah vs. Jinendra Kumar Gandhi[2], a bench of three judges of the Hon’ble Supreme Court of India ruled –“that Executing Courts must conclude the Execution Proceedings within six months of the date of filing; this deadline can only be extended by providing written justification for the delay. However,the apex court’s two-judge panel restated the stance in 2022”.It remains to be seen, though, how much of an impact these rulings would actually have on an overworked judiciary.
In the 2022 case of Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Ltd.[3], the Hon’ble Supreme Court of India firmly said “that without the enforcement of arbitration rulings, India cannot hope to become a center for international arbitration. This had to do with a 2017 ruling that gave Delhi Metro Rail Corporation INR 7200 crores.”
In 2021, there were a total of 14,19,298 reported execution petitions pending in the lower courts. The numbers for the originating jurisdictions’ high courts are equally concerning. There are currently 11,229 execution petitions filed at the Bombay High Court and 32,397 pending before the Delhi High Court.
Issues Faced In order to Execute the Decree.
But the real question arises why do the decree-holders have to go through so much struggle to execute what has already been granted in their favour after a hard and arduous court battle? The flaw can be attributed to both the procedure and the system. Order XXI of the CPC, which lays down the rules and procedure for the execution of decrees, is a comprehensive collection of 106 Rules (Rules 60- 63 omitted) laying down the mechanism for a stay of execution, mode of execution, attachment procedure to fulfil the decree, adjudication of claims and objections, etc. The issues with the mechanism are several and severe. The Order and extensive Rules therein provide too many avenues for the judgment-debtor to escape liability by filing unnecessary appeals, applications, objections, non-disclosure of assets, etc.
It is not just the judgment debtor who is at fault for prolonging the proceedings, the courts also attribute more importance to the adjudication of the petitions and suits than the execution of the decrees. This is really the irony and the travesty of the system.
Conclusion
According to Section 34(3) of the Arbitration Act, a party must wait three (3) months for the enforcement and implementation of an arbitral award that has been rendered in its favour. The award may be contested under Section 34 of the Act during this three-month period, which is prolonged by thirty days. The award-holder knocks on the doors of the relevant executing court to execute the award as if it were a court decree after reaching finality and if the court has not placed a stay on execution under Section 36(3) of the Arbitration Act.
An arbitral award that does not include a clause ensuring its prompt resolution is incompatible with the arbitration process. Not only must the system be completely redesigned at the legislative level, but a thorough reconsideration of the procedural aspects of it is also necessary. As the Supreme Court has often called for, we might start by expanding the number of benches to handle execution petitions in a timely way. Another option is to simplify the process, as outlined in the CPC, particularly for carrying out the arbitral rulings.
To genuinely implement reforms in India’s arbitration system, the committee must give careful consideration to the problem of arbitral rulings not being executed promptly.
________________________________________
[1](2013) 9 SCC 491
[2](2021) 6 SCC 418
[3]SLP (C) No. 21396/2022
