Arbitration | Objections To Arbitral Award Execution Maintainable Only If Decree Is Void Or Without Jurisdiction : Supreme Court

The Supreme Court on Monday (November 3) ruled against the stalling of the enforcement of an arbitral award at the execution stage, reiterating that the objections against the execution of an award lie in a narrow compass, such as only when a decree is inherently void or passed without jurisdiction. A bench of Justices Sanjay Kumar and K.V. Viswanathan upheld the Delhi High Court's decision dismissing Appellant-MMTC's objections under Section 47 of the Code of Civil Procedure and its application under Order XXI Rule 29 seeking a stay on enforcement of a multi-million-dollar arbitral award in favour of Respondent-Anglo American Metallurgical Coal Pvt. Ltd. Relying on Electrosteel Steel Limited (Now M/s ESL Steel Limited) vs. ISPAT Carrier Private Limited, 2025 LiveLaw (SC) 491, the Court held that belated allegations of fraud and collusion cannot be invoked to reopen or obstruct the enforcement of an arbitral award that has already been upheld up to the Supreme Court. The dispute originated from a Long-Term Agreement for the supply of coking coal. For the 2008-09 period, the price was contractually pegged at USD 300 per metric tonne, aligned with prices set for other public-sector units, SAIL and RINL. MMTC failed to lift the coal, citing the global financial crisis. An arbitral tribunal in 2014 held MMTC in breach, an award that was ultimately upheld by the Supreme Court in December 2020. Appellant then raised a plea of fraud only during execution proceedings, to seek a stay on the enforcement proceedings. The Appellant argued that its officials conspired with the Respondent in 2008 to fix an inflated price for coking coal, rendering the underlying contract and subsequent arbitral award a "nullity" due to fraud. They invoked the legal maxim that "fraud unravels everything." While the Court acknowledged the principle that fraud unravels everything but found the Appellant's move to challenge the enforcement of the award as a tactical manoeuvre to delay the execution of the award. Applying the business judgment rule, the judgment authored by Justice Viswanathan found that the decisions taken by MMTC's officials in 2008 were within a "range of reasonableness”, holding that even the ground of fraud was not proven by the Appellant. “Applying the business judgment rule, the course adopted by them cannot be said to be one to which a court of law would not defer to. The appellants have not been able to even prima facie demonstrate that circumstances exist to conclude that the personnel of MMTC did not act in the best interest of the company.”, the court said. “It has also been held that at the stage of execution, an objection as to executability of the decree can be raised, limited to the ground of jurisdictional infirmity or voidness. It has been further held that errors of facts and law cannot be the subject matter of objection under Section 47. It should be pointed out that, in the present case, the objection is not based on the ground of any inherent lack of jurisdiction. What is really argued is that the Officials of MMTC committed fraud on MMTC, their employer and there was collusion and conspiracy between the Officials of MMTC and Anglo in pegging the price at US$ 300 PMT for the 5th delivery period. So, the argument on inexecutability of the decree was based on fraud committed by the Officials of MMTC on MMTC, by collusion and conspiracy resulting in a favourable Award for Anglo. It is also argued that fraud was discovered only after the Award was upheld by this Court.”, the court added. Unfounded Allegations Of Corruption On Its Officials Can Lead To Policy Paralysis In Public Sector Enterprises The Court also deplored the Appellant's unfounded accusations of corruption or collusion against its public officials, stating that it can create a “chilling effect”, deter decision-making, and lead to policy paralysis in public sector enterprises. “Before we part, a small postscript. Whether in Government, Public Sector Corporations or even in the private sector, the driving force of the entity are the persons who administer them. A certain play in the joints is inevitable for their day-to-day functioning. If they are shackled with the fear that, their decisions taken for the day-to-day administration, could years later with the benefit of hindsight, be viewed with a jaundiced eye, it will create a chilling effect on them. A tendency to play it safe will set in. Decision making will be avoided. Policy paralysis will descend. All this will in the long run prove detrimental not just to that entity but to the nation itself. We are not to be understood to be condoning decisions taken for improper purposes or extraneous considerations. All that we are at pains to drive home is that great caution and circumspection have to be exercised before such allegations are brought forward and adequate proof must exist to back them. Otherwise for fear that carefully built reputations could be casually tarnished, best of...

Arbitration | Objections To Arbitral Award Execution Maintainable Only If Decree Is Void Or Without Jurisdiction : Supreme Court

Yash Mittal

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