The Supreme Court on Wednesday (October 28) requested the Law Commission of India to undertake a focused study of the statutory and procedural framework governing the enforcement and execution of arbitral awards and recommend measures to ensure their timely enforcement.

A bench of Justices Vikram Nath, Sandeep Mehta and Aparesh Kumar Singh said that the prolonged execution of arbitral awards undermines the very objective of arbitration as an effective alternative to conventional civil litigation.

The Court observed that even after an award is rendered and survives judicial challenge, the successful party may be forced to undergo another prolonged round of litigation to realise its benefits.

“The promise of arbitration remains unfulfilled if a party, having traversed the arbitral process, is compelled to embark upon another protracted course of litigation to secure the benefit of the award,” the Court observed.

The judgment was passed in an appeal arising from a dispute in an international commercial arbitration between Iraq-based Royal Construction Company Pvt. Ltd. and National Projects Construction Corporation concerning the enforcement of an arbitral award rendered in 2002. More than 24 years after the award, the parties were still litigating over its enforcement.

The Court noted that the efficacy of the arbitration regime cannot be assessed merely by the speed with which an award is rendered or the limited grounds available to challenge it. It must also be assessed by whether the successful party can realise the fruits of the award within a reasonable time.

It observed that Section 36 of the Arbitration and Conciliation Act, 1996 provides for the enforcement of arbitral awards in the same manner as decrees of courts, thereby relying on the ordinary execution machinery under the Code of Civil Procedure, 1908.

The Court identified several aspects warranting focused scrutiny, including the identification and disclosure of the award-debtor's assets, coordination between different modes of execution, disposal of repetitive or dilatory objections, and the time taken to conclude execution proceedings.

It also suggested that comparative legal systems could provide useful insights into more effective and coordinated enforcement mechanisms, while preserving legitimate procedural safeguards available to judgment-debtors.

Accordingly, the Court requested the Law Commission to examine practical impediments to timely recovery, study the experience of other jurisdictions, and consider whether domestic and foreign arbitral awards should be governed by distinct enforcement procedures or a common framework with appropriate safeguards.

The Commission may thereafter make legislative or procedural recommendations to strengthen the execution regime and ensure that enforcement of arbitral awards is consistent with the objectives of the 1996 Act and India's commitment to establishing itself as an arbitration-friendly jurisdiction.

“…we request the Law Commission of India to undertake a focused study of the statutory and procedural framework governing the enforcement and execution of arbitral awards. The study may identify the practical impediments to timely recovery, examine the experience of other jurisdictions, and consider whether domestic and foreign arbitral awards warrant distinct enforcement procedures or a common framework with appropriate safeguards. The Commission may, upon such examination, make such legislative or procedural recommendations as it considers necessary to strengthen the execution regime and ensure that the enforcement of arbitral awards is commensurate with the objectives of the Arbitration and Conciliation Act, 1996 and India's commitment to establishing itself as an arbitration-friendly jurisdiction.”, the Court observed.

The Registry was directed to forward a copy of the judgment to the Chairman of the Law Commission of India.

Appearance:

For Petitioner(s) : Mr. Rishabh Sancheti, Adv. Ms. Padma Priya, Adv. Mr. Sarvam Ritam Khare- 2110, AOR Mr. Anchit Bhandari, Adv. Mr. Nishant Kumar, Adv. Mr. Aquib Ali Khan, Adv. Mr. Dhaval Gaur, Adv. Ms. Devanshi Sancheti, Adv.

For Respondent(s) : Mr. Vikramjit Banerjee, ASG Mr.Aditya Kashyap, Adv. Ms. Richa Attrey, Adv. Mr. Paritosh Buddhiraja, Adv. Mr. Sahil Bhalotia, Adv. Ms. Maneesha Sunil Kumar, Adv. Mr. Himanshu Sharma- 2801, AOR