Judgment Alert: Sundaram Finance Ltd. Vs Abdul Samad and Air (2018 SC) 

Execution of an Arbitral Award can be directly sought wherever the assets of the Award Debtor (JD) are located and without the need for a transfer certificate.  

The Hon’ble Supreme Court has finally settled a vexed question of law over which multiple High Courts of the Country had held a divergent view.

The question before the Hon’ble Supreme Court was:

“Whether an award under Arbitration & Conciliation Act, 1996 is required to be first filed in the court having jurisdiction over the arbitration proceeding for execution and then to obtain transfer of decree or whether the award can be straightaway filed and executed in the court where the assets are located?”

The former view has been favoured by the Hon’ble High Court of Himachal Pardesh and Madhya Pradesh, on the premise that Section 36 of the Arbitration & Conciliation Act, 1996 clearly states that “the award shall be enforced in the same manner as if it was a decree of the court”, therefore, the same principles would apply as are applicable for enforcement of a decree under the Civil Procedure Code, 1908 (“CPC”) which means that an execution petition has to be first filed in the court having jurisdiction as per the Act, followed by an an application for transfer of the decree to court within whose jurisdiction the assets of the Judgment Debtor are located.

Per Contra the High Courts of Delhi, Punjab & Haryana, Kerala had held that Section 36 of the Arbitration Act is nothing but a legal fiction, and the award cannot be held to be an award of a particular court as per Section 42 read with Section 2(e) of the Act. Further, in an arbitration there is no ‘decree court’ per se, and therefore, the analogy to a civil court’s decree is not applicable in this particular context.

In the case at hand, the Supreme Court has favoured the latter view and has held that the phraseology of Section 36 clearly shows that the manner of execution of award is the same as if it was a decree but, having said that, the award still cannot be considered to be decree of the particular court. The Court relied upon the Section 32 of the Act to state that the Arbitration Proceedings stood terminated once the final award is passed. Thus, by virtue of Section 32, the jurisdiction of the court also stands terminated. Thus for execution of the award the application can be filed anywhere in the country (subject of course to assets being located in the jurisdiction of that particular court) and there is no requirement of obtaining a transfer certificate from the court which would have jurisdiction over the arbitral proceedings.

The above is a Judgment alert and a detailed analysis of the judgment would soon follow.