Enforcement & Execution of Arbitral Awards In India

Introduction

The growth of international commerce has necessitated the creation of efficient methods of resolution of disputes like arbitration and enforcement of the consequent awards that determine the rights and obligations of the parties. In some cases securing an award may only be a battle half won; this is especially true in the Indian context.

There are cases where the opposite parties decide not to participate in the arbitral process or abandon it mid-way. The enforcement of these awards where the party is in absentio is sometimes more complicated than one where the opposite party has participated in the proceedings. In some cases, objections have been raised even against costs awarded by the tribunal or the jurisdiction of the tribunal or court, as the case may be. Therefore, the stage of execution of an award or decree warrants a high degree of caution.

The procedure for enforcement and execution of decrees in India is governed by the Code of Civil Procedure, 1908 ('CPC') while that of arbitral awards in India is primarily governed by the Arbitration & Conciliation Act, 1996 ('Act') as well as the CPC. Domestic and foreign awards are enforced in the same manner as a decree of the Indian court. This is true even for consent awards obtained pursuant to a settlement between parties. However, there is a distinction in the process for enforcement of an award based on the seat of arbitration. While the enforcement and execution of an Indian - seated arbitral award ('domestic award') would be governed by the provisions of Part I of the Act, the enforcement of foreign - seated awards ('foreign award') would be governed by the provisions of Part II of the Act.

For ensuring successful enforcement of arbitral awards following are some of the crucial steps to be kept in mind :Effective Service on opposite party to prevent objections at later stage ;

• Taking necessary steps by way of attachment/ notice/ arrest/ appointment of receiver or in other manner ;  
• Principles of natural justice also apply to execution proceedings.

Domestic Awards

As per section 2(7) of the Act, an arbitral award made under Part I of the Act is called a 'domestic award'. An arbitral award shall be deemed to be final and binding upon the parties (and persons claiming under them) to the arbitration. 

An award holder has to wait for the opposite party to make an application for setting aside an award which must be made within three months[1] of receipt of the award by the applicant subject to a further extension of 30 days on sufficient cause being shown[2] but not thereafter. The Court normally allows a wide scope to the meaning of what constitutes 'sufficient cause' and if it is convinced of the genuineness of the delay in filing an application under section 34 of the Act, the delay is condoned.

It is also to be noted that if a request under section 33 is made then the three months period shall start from the date on which that request had been disposed of. The said request can be made by either of the parties within 30 days from the receipt of the award, unless another period of time has been agreed upon by the parties as stated in section 33 of the Act.

Section 36 of the Act deals with the enforcement of the domestic awards. The party, after the expiry of the time for setting aside the arbitral award, as mentioned above, can file an application for execution before the court of the competent jurisdiction for the enforcement of the arbitral award and there can be no further challenge as to the validity of the arbitral award. The application should state all the important facts and issues framed by the arbitral tribunal and findings of the arbitral tribunal. The claim as awarded should be mentioned and specifically the extent to which the award for enforcement is sought. The documents required for enforcing an arbitral award are (i) original award or copy of the award duly authenticated and (ii) original arbitration agreement or a duly certified copy.

Initially, for execution of an Award under the Act, it was required to be first filed in the Court having jurisdiction over the arbitration proceedings and then to obtain precept for transfer of the decree. There have been conflicting opinions of various High Courts such as Madhya Pradesh[3] and the Himachal Pradesh[4] which subscribed to the view that transfer of decree should first be obtained before filing the execution petition before the Court where the assets are located. And the contra view taken by various High Courts such as Delhi[5], Kerala[6], Madras[7], Rajasthan[8], Allahabad[9] and Karnataka[10] which opined that an arbitral award can be filed for execution before the court where the assets of the judgment debtor are located and there is no requirement of transfer and transmission.

This issue has now been put to rest by the Hon'ble Supreme Court, vide judgment dated 15.02.2018, in the case of Sundaram Finance Limited v. Abdul Samad and Ors.[11] After exploring the relevant provisions in detail, the Hon'ble Supreme Court held that the reliance on Section 42 of the Act is misconceived since it only provides for jurisdiction over arbitral proceedings. These proceedings terminate with the final Arbitral Award as provided for under Section 32 of the Act. Therefore, it is the CPC which applies to execution proceedings. Further, the Hon'ble Supreme Court referred Section 46 of the CPC which provides for issuance of precepts by the Court which passed the decree upon application of the decree holder to any other Court competent to execute the said decree, and noted that the expression 'the Court which passed the decree' is as per Section 37 of CPC. It was pointed out that in the case of an award there is no decree passed by any Court but the award itself is executed as a decree by fiction and therefore there is no deeming fiction anywhere to hold that the Court within whose jurisdiction the arbitral award was passed should be accepted as the Court, which passed the decree. In light of the above judgment the law has been settled that while enforcing an award, execution proceedings can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of decree from Court, which would have jurisdiction over arbitral proceedings.

Section 36 of the Act has been substituted by Arbitration & Conciliation (Amendment) Act, 2015 ('Amended Act')[12] wherein if the time for making an application to set aside an arbitral award has elapsed, then such an award shall be enforced in accordance with the provisions of the CPC in the same manner as it was a decree of the Court. Prior to the Amendment Act, an application for setting aside an award would tantamount to a stay on proceedings for execution of the award. However, by virtue of the Amendment Act, a party challenging an award would have to move a separate application in order to seek a stay on the execution of an award.

The arbitral awards needs to be stamped with specific stamp duties as per the Stamps Act 1899 and Section 35 provides that an award which is unstamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty (provided it was original). Issues relating to the stamping and registration of an award or documentation thereof, may be raised at the stage of enforcement under the Act. In M. Anasuya Devi & Anr. v. M. Manik Reddy & Ors.,[13] the Supreme Court had also observed that the requirement of stamping an award and registration is within the ambit of Section 47 of the CPC and not covered by Section 34 of the Act. The quantum of stamp duty to be paid would vary from state to state depending on where the award is made. Currently, as per the Maharashtra Stamp Act, the stamp duty for arbitral awards stands at five hundred rupees in Maharashtra. Under Section 17 of the Registration Act, 1908 an award has to be compulsorily registered if it affects immoveable property, failing which, it shall be rendered invalid.

Since arbitral awards are deemed as decrees for the purposes of enforcement, as observed by the Supreme Court in M/s. Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society,[14] the Limitation Act 1963 applies to arbitrations. As per the Limitation Act 1963, the period of limitation for the execution of a decree (other than a decree granting a mandatory injunction, in which case, it is three years) is twelve years from the date of the decree. However, an application for execution of a decree granting a perpetual injunction shall not be subject to any period of limitation.

Foreign Awards

India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 ('New York Convention') as well the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 ('Geneva Convention'). 'Foreign award' means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India.[15]

The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of that Court. Parties can approach India for enforcement of an Award in two scenarios which are described as under:[16]

Scenario 1 - Where the seat/ place of Arbitration and award is outside India and where the real most close connection of the agreement also lies in the same place.

Scenario 2 - Where the seat/ place of Arbitration and award is outside India but where the real and closest connection of the agreement lies in India.

Scenario 1

Despite the seat being outside India, the parties could want to come to India for enforcement owing to the fact that the assets of the Indian party might be located in India etc. For this purpose if the award is passed in a territory which is signatory to the New York Convention, and with which a reciprocal arrangement has been made by the Indian Central Government, then such an award is enforceable in accordance with Part II of the Act.[17] Any challenge to the award would lie under Section 48, Part II of the Act. Out of the 196 countries in the world only 48 countries have been notified by the Central Government as reciprocating countries, with the most recent addition being Mauritius.[18]

However, if the award is made in a territory which is either not a party to the New York Convention, or India does not have a reciprocal arrangement with that territory, or if both conditions are not fulfilled then the following would have to be considered:

1. Where the award passed in the territory concerned, is considered to be the decree of that Court, then parties can come to India directly. In case the award is not automatically a decree in the concerned territory, then the parties would need to first make the award a rule of Court in the concerned territory, and then only can they approach India for execution of the award as a Foreign Decree.
2. Once the award is considered to be a Foreign Decree then Section 44 of CPC would become applicable. Section 2(2) of the CPC defines foreign judgment as "the judgment of a foreign Court". Parties can approach Indian Courts for enforcement under Section 44.
3. Next it needs to be checked whether the award to be enforced has been passed in a reciprocating territory[19]. In case the territory is a reciprocating territory then directly an Execution Petition can be filed in India and the award can be executed as a decree of a foreign Court.
4. However, if the country in which the foreign decree/award has been passed is not a reciprocating country, then a further complication arises, wherein a fresh suit would have to be filed in India to get the foreign decree/award enforced. This is basically a fresh adjudication and time consuming process.

Scenario 2

Where the seat/place of Arbitration and award is outside India but where the real and closest connection of the agreement lies in India, then in such a case, Part I of the Act would become applicable and an application for execution can be directly filed in India. Any party intending to object to the award would also have to approach Court under Part I, Section 34 of the Act and not under Part II, Section 48 of the Act.

By virtue of section 47 of the Act, party applying for the enforcement shall produce following evidences along with the application :

• Original award or a duly authenticated copy.
• Original arbitration agreement or a duly certified copy.
• Other evidence necessary to prove the award is a foreign award.
• If the award is in foreign language, a translation into English certified as correct by a diplomatic or consular agent of the country to which the party belongs.

Section 47 of the Act provides that the above 'shall' be produced before the court, at the time of the application for enforcement of the foreign award. However, in PEC Limited v. Austbulk Shipping SDN BHD,[20] the Supreme Court of India interpreted that the word 'shall' appearing in Section 47 of the Act relating to the production of the evidence as specified in the provision at the time of application has to be read as 'may'. It further observed that such an interpretation would mean that a party applying for enforcement of the award need not necessarily produce before the court a document mentioned therein 'at the time of the application'. Nonetheless, it further clarified that such interpretation of the word 'shall' as 'may' is restricted 'only to the initial stage of the filing of the application and not thereafter'.

As the enforceability of foreign awards are concerned, a full bench[21] of the Bombay High Court in Gemini Bay Transcription Private Ltd. & Ors. v. Integrated Sales Service Ltd. & Ors.,[22] immediately succeeding the Sundaram Finance judgment[23] of the Supreme Court on this issue, has stated in para 29 of the judgement as follows :

'As regards enforcement of foreign awards under Chapter-I in Part- II of 1996, Section 49 of the Act of 1996 stipulates that when a foreign award becomes enforceable, it is deemed to be a decree of that Court. The expression "that Court" would mean the Court as defined by Section 2(1)(e)(ii). It would, thus, refer to the High Court in exercise of its ordinary original civil jurisdiction having jurisdiction to decide the questions forming the subject-matter of the arbitration if it had been the subject-matter of a suit and in other cases, a High Court having jurisdiction to hear appeals from decrees of Courts subordinate to the High Court. Order XLIX, Rule 3 of the Code as applicable to this Court does not exclude the application of the provisions of Order XXI of the Code in the matter of execution of decrees.'

'Thus, as regards enforcement of foreign awards under Chapter-I in Part-II of the Act of 1996, same can be executed by the Court as defined by Section 2 (1) (e) (ii) of the Act of 1996 with the aid of the provisions of Sections 38, 39 and Order-XXI of the Code.'

With regard to the stamping of the foreign awards, the Supreme Court in M/s. Shri Ram EPC Limited v. Rioglass Solar SA.,[24] has categorically held that a foreign award is not liable to be stamped. Previously, the Delhi High Court in Naval Gent Maritime Ltd v. Shivnath Rai Harnarain (I) Ltd.,[25] had observed that a foreign award would not require registration and can be enforced as a decree, and the issue of stamp duty cannot stand in the way of deciding whether the award is enforceable or not. A similar approach had been adopted by the Bombay High Court in the case of Vitol S.A. v. Bhatia International Limited,[26] and the High Court of Madhya Pradesh in Narayan Trading Co. v. Abcom Trading Pvt. Ltd.[27]

Various High Courts have given varying interpretations on the limitation period within which a party may enforce an award. In Noy Vallesina Engineering Spa v. Jindal Drugs Ltd.,[28] the Bombay High Court has observed that since a foreign award is not a decree per se and would not be binding on parties unless a competent court records it as enforceable, it would undergo a two-step process. Thus, the application for enforcement of a foreign award would fall within the residuary provision of the Schedule to the Limitation Act, that is, the limitation period would be three years. Thereafter, on recognizing the award as a decree, the limitation period for execution of such a decree would be twelve years therefrom. However, the Madras High Court held a contrary view by referring to foreign awards as deemed decrees, and the corresponding limitation period would be twelve years. It held that, 'the foreign award is already stamped as a decree and the party having a foreign award can straight away apply for enforcement of it and in such circumstances, the party having a foreign award has got 12 years' time like that of a decree holder.'[29] The Act provides that certain conditions have to be assessed prior to enforcement of a foreign award, and where the court is satisfied that the foreign award is enforceable, the award would be deemed to be a decree of that court.[30] The Supreme Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.,[31] held that under the Act a foreign award is already stamped as the decree. It was observed that, 'In one proceeding there may be different stages. In the first stage the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again.' [32]

Conditions for Enforcement of Awards

A party may resort to the following grounds for challenging an award. Such an award would be rendered unenforceable when :

• The parties to the agreement were under some incapacity.
• The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
• There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings.
• Award is ultra vires the agreement or submission to arbitration.
• Award contains decisions on matters beyond the scope of submission to arbitration.
• Composition of the arbitral authority or the arbitral procedure is ultra vires agreement.
• Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place (in case of foreign awards).
• The award (specifically a foreign award) has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which that award was made.
• Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
• Enforcement of the award would be contrary to the public policy of India.

Conclusion

The design of the Amended Act is based on the premise that it will provide an efficient and swift method of dispute resolution for both the domestic as well as international investors. It has given more leeway to Indian Courts as far as Interim reliefs are concerned, thus providing additional protection to foreign investors vis-s-a-vis Indian players. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

In the words of Sir LJ Earl Warren, "It is the spirit and not the form of law that keeps the justice alive."

The author can also be reached at sarafankush@yahoo.com.

• [1] Section 34(3) of the Act.
• [2] Proviso to section 34(3) of the Act.
• [3] Computer Sciences Corporation India Pvt. Ltd. v. Harishchandra Lodwal & Anr., AIR 2006 MP 34.
• [4] Jasvinder Kaur & Anr. v. Tata Motor Finance Ltd., Decided on 17.9.2013 in CMPMO No. 56/2013.
• [5] Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd., (2009) 3 Arb. L.R. 524.
• [6] Maharashtra Apex Corporation Ltd. v. V. Balaji G. & Anr., 2011 (4) KLJ 408.
• [7] Kotak Mahindra Bank Ltd. v. Sivakama Sundari & Ors., (2011) 7 Mad. L.J. 1267.
• [8] Kotak Mahindra Bank Ltd. v. Ram Sharan Gurjar & Anr., (2012) 1 RLW 960.
• [9] GE Money Financial Services Ltd. v. Mohd. Azaz & Anr., (2013) 100 ALR 766.
• [10]Sri Chandrasekhar v. Tata Motor Finance Ltd. & Ors., (2009) 3 Arb. L.R. 524 : (2015) 1 AIR Kant  R 261.
• [11] 2018 (2) Mh.L.J. 301 (SC).
• [12] Act 3 of 2016; with retrospective effect from 23.10.2015.
• [13] (2003) 8 SCC 565.
• [14] (2016) 11 SCC 313.
• [15] Section 44 of the 1996 Act.
• [16]http://www.mondaq.com/a/3740/Arbitration+Litigation+and+Conciliation/
  The+Appropriate+Courts+In+Foreign+Seated+Arbitration+An+Indian+Perspective; Last visited on 28.01.2019.
• [17]  Section 49 of the 1996 Act.
• [18] Australia; Austria; Belgium; Botswana; Bulgaria; Central African Republic; Chile; China (including Hong Kong and Macau) Cuba; Czechoslovak Socialist Republic; Denmark; Ecuador; Federal Republic of Germany; Finland; France; German Democratic Republic; Ghana; Greece; Hungary; Italy; Japan; Kuwait; Mauritius, Malagasy Republic; Malaysia; Mexico; Morocco; Nigeria; Norway; Philippines; Poland; Republic of Korea; Romania; Russia; San Marino; Singapore; Spain; Sweden; Switzerland; Syrian Arab Republic; Thailand; The Arab Republic of Egypt; The Netherlands; Trinidad and Tobago; Tunisia; United Kingdom; United Republic of Tanzania and United States of America.
• [19] 'Reciprocating Territory' means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code. Countries which have been officially recognized as "reciprocating countries" by the Central Government of India include : Aden; Bangladesh; Federation of Malaya; Fiji Colony; Hong Kong; New Zealand; Cook Islands and Western Samoa; Papua New Guinea; Republic of Singapore; Trinidad and Tobago; United Kingdom of Great Britain and Northern Ireland; and Victoria.
• [20] Civil Appeal No. 4834 of 2007 ; decided on 14.11.2018 ; Hon'ble Justices A.M. Khanvilkar & L. Nageswara Rao.
• [21] Comprising of Justices R.K. Deshpande, A.S. Chandurkar and M.G. Giratkar., Nagpur Bench.
• [22] (2018) 2 Mh. L.J. 329 (FB).
• [23] (2018) 2 Mh.L.J. 301 (SC).
• [24] (2018) SCC Online 1471 ; Civil Appeal No. 9515 of 2018 ; Decided on 13.09.2018 ; Hon'ble Justices R.F. Nariman & Indu Malhotra.
• [25]  2009 Supp. (1) Arb. L.R. 307 ; Decided on 17.09.2009.
• [26]  (2015) 1 Bom. C.R. 100 ; Decided on 15.09.2014.
• [27]  (2013) 2 MP. L.J. 252 ; Decided on 28.09.2012.
• [28]  (2006) 5 Bom.C.R. 155 : (2006) 3 Arb. L.R. 510, para 21.
• [29] Compania Naviera 'SODNOC' v. Bharat Refineries Ltd., AIR 2007 Mad. 251.
• [30] Section 49 of 1996 Act.
• [31] (2001) 6 SCC 356.
• [32] Ibid. para 31.