Following conflicting judgments passed by several high courts, the Supreme Court ruled that an arbitral award can be executed anywhere in the country where the judgment debtor’s assets are located. The ruling clarifies that there is no requirement to first file in the court with jurisdiction over the arbitration proceedings and to then obtain a transfer of the decree.
In the Sundaram Finance v Abdul Samad & Anr case, Sundaram Finance had initiated arbitral proceedings against Samad for repayment of a loan. A demand notice was served by publication, and when Samad failed to appear for the arbitral proceeding, an award was passed directing him to repay the loan amount. Execution proceedings were filed in the trial court in Morena, Madhya Pradesh state, where Samad’s assets were located.
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However, the trial court returned the application citing a lack of jurisdiction, stating that the award has to be enforced in the manner of execution of a decree as provided for in section 36 of the Arbitration and Conciliation Act, 1996. It required Sundaram Finance to file execution proceedings first before the court of competent jurisdiction in Tamil Nadu, where the company was based, and to obtain a transfer of the decree. Only then could the proceedings be filed in the court at Morena.
As the trial court’s order adhered to the view adopted in Madhya Pradesh High Court’s earlier decisions, Sundaram Finance approached the Supreme Court via a special leave petition. The Supreme Court discussed in detail the view adopted by Madhya Pradesh High Court and Himachal Pradesh High Court, which favoured the requirement of transfer of decree, as well as the opposing view of the high courts of Delhi, Kerala, Madras, Rajasthan, Allahabad, Karnataka, and Punjab and Haryana.
While allowing the appeal, the Supreme Court concurred with the latter. It held that the phraseology of section 36 shows that the manner of execution of an award is the same as if it was a decree, even though the award could not be considered a decree of the particular court. Relying upon section 32 of the arbitration act, the court stated that once the final award was passed, both the arbitration proceedings and the court’s jurisdiction stood terminated.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
