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High Pendency Of Arbitration & Commercial Cases : Supreme Court Asks Allahabad HC CJ To Devise Roadmap To Tackle Arrears

Sohini Chowdhury
28 April 2022 12:59 PM GMT
High Pendency Of Arbitration & Commercial Cases : Supreme Court Asks Allahabad HC CJ To Devise Roadmap To Tackle Arrears
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Being apprised of the burgeoning pendency in the execution proceedings of arbitral awards and applications to set aside award under Section 34 of the Arbitration and Conciliation Act, 1996, in the State of Uttar Pradesh, the Supreme Court, on Thursday, requested the Chief Justice of Allahabad High Court to constitute a committee of Judges to device a roadmap to tackle the...

Being apprised of the burgeoning pendency in the execution proceedings of arbitral awards and applications to set aside award under Section 34 of the Arbitration and Conciliation Act, 1996, in the State of Uttar Pradesh, the Supreme Court, on Thursday, requested the Chief Justice of Allahabad High Court to constitute a committee of Judges to device a roadmap to tackle the arrears.

"We request the Chief Justice to constitute a committee of the judges of the High Court and invite the suggestions for a roadmap on how to tackle the arrears. We request the Chief Justice…to make suggestions before the next date of hearing how the High Court proposes to deal with such a situation and huge pendency of commercial litigation in the State."

A Bench comprising Justices M.R. Shah and B.V. Nagarathna observed that the Chief Justice of the High Court ought to consult his fellow judges and come up with a roadmap.

"In Ghaziabad, execution petitions have been pending since 1993. We don't even know when the arbitration began. Nobody is coming with a roadmap. The CJ ought to have come up with a roadmap. It is shocking that execution petitions have been pending since 1993. Commercial appeals have been pending since 2011."

The Bench opined that delay in adjudication of commercial disputes have a far reaching effect -

"If commercial disputes are not disposed of at the earliest it may affect the economy of the country. It may spoil the business relation between the parties. It may also affect the ease of doing business."

On the last occasion, the Bench had directed the concerned Registrar General to file an affidavit addressing the following queries :

  1. how many execution petitions to execute the Award both under the Arbitration Act, 1940 and under the Arbitration and Conciliation Act, 1996 are pending in the subordinate courts/executing courts in the entire State;
  2. how many Section 34 applications are pending in the entire State and from which year and
  3. how many Section 37 applications are pending before the High Court and from which year.

On Thursday, reading from the affidavit, the Bench noted that -

  1. 30,154 execution petitions are pending in various District Courts/Courts, the oldest one is of the year 1981;
  2. 13,367 execution petitions are pending before the Commercial Courts, the oldest one is of the year 2002;
  3. 10,436 applications under Section 34 are pending before the District Courts, the oldest one is of the year 1987.

Upon perusal of the affidavit, Justice Shah remarked -

"What has happened in criminal matters in UP is exactly what is happening in commercial matters. What face will we show to the world?"

He was displeased that the two statutes i.e. the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015 which envisages the speedy disposal of cases are witnessing such huge pendencies. The whole purpose of the two legislations, he opined, is getting frustrated.

"What is the purpose of the constitution of commercial courts? What is the purpose of Arbitration? Arbitration is a substitute to suit. Now with arbitration also the same delay. Where will people go?"

The Bench was of the view that arbitration, which was to serve as an alternative dispute resolution mechanism had fallen into the traps of traditional litigation in terms of delay.

"It cannot be disputed that the Arbitration Act was brought into force and has been amended for speedy disposal of commercial disputes because of the pendency of cases before the ordinary civil courts for a number of years the commercial disputes remain pending."

It noted that the aim of the Commercial Courts Act and subsequent amendments to facilitate speedy disposal of commercial disputes have also not fructified.

"With similar object and purpose the Parliament came out with the Commercial Courts Act. The Parliament in its wisdom and with a view to see that commercial litigation are decided at the earliest, came out with an amendment in Arbitration Act and Commercial Courts by which it is mandated that Arbitration Proceeding and proceedings before Commercial Courts are decided preferably within one year."

Coming to the causes of the pendencies, Justice Shah identified the reduction of the pecuniary jurisdiction of the Commercial Courts from Rs. 1 crore to Rs. 3 lakh as one of the primary causes. He stated -

"Earlier the monetary limit for commercial courts was 1 crore, now it has been reduced to 3 lakhs. So the litigation in the commercial courts have increased. The legislature has to see to this and come up with an amendment. If it is 3 lakhs, then what is the difference between a normal court and a commercial court."

The Bench was apprised that pendency is also largely attributable to the repeated adjournments.

Justice Nagarathna responded saying -

"If adjournments are not given then the judge becomes unpopular and resolution is passed in the Bar Association. This is the hard reality of our District Courts."

However, the Bench was of the view that it would be more effective to take corrective measures rather than lamenting about the volume of cases pending before the Courts. In the light of the same, it noted -

"At present we do not propose to enter into the reason why such a large number of execution petitions and applications under S. 34 of the Act are kept pending. At the same time the day has come to take corrective measures and for that purpose the concerned High Court has to prepare a road map and take a call how the problem of pendency of execution proceedings to execute the awards passed under 1996 and 1940 Acts and the application under S. 34 are decided and disposed off at the earliest, so that ultimate object and purpose of commercial court is achieved."

Before passing any further directions in this regard, the Bench thought it fit to seek the response of the Chief Justice of the Allahabad High Court with respect to the pendency of execution petitions and applications filed under Section 34 at the earliest.

"Before we pass any further order, we propose to have the response from the Chief Justice of the High Court how the High Court proposes to deal with the pendency execution petitions and application under Section 34 of the Act at the earliest and within some stipulated time limit. The High Court has to prepare a road map for early disposal of the commercial dispute if the faith of the litigants in the institution as a whole is to be maintained…We direct the Registrar General of High Court (Allahabad) to place a status report before Chief Justice…"

The matter is to be next heard on 18.05.2022.

[Case Title: M/s Chopra Fabricators And Manufacturers Pvt. Ltd. v. Bharat Pumps And Compressors Ltd. And Anr. SLP (C) 4654 of 2022]

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