This article analyses the landmark judgement by the Supreme Court of India in the case titled Sundaram Finance Limited v. Abdul Samad & Anr. In this judgement, the apex court answered a poignant question in the field of arbitration as to whether an arbitral award can be straightaway filed for execution in the court where the assets of the award-debtor are located without requiring the execution to be first filed in the court having jurisdiction over the arbitration proceedings and then obtaining the transfer of the decree.
Brief facts of the case:
The Appellant had granted a loan to the Respondent for the purchase of a vehicle. The Respondent defaulted in payment of instalments, and to recover the loan, repossession of the vehicle could not take place. Thereafter, arbitral proceedings were initiated by the Appellant in terms of the arbitration clause contained in the Loan Agreement. No one appeared for the Respondent. An ex parte arbitration award was made.
The appellant's case was that the award would be enforceable as a decree under Section 36 of the Arbitration and Conciliation Act, 1996. They filed an execution in the court at Morena, Madhya Pradesh. The Respondents contested the proceedings.
The trial court returned the execution application on account of lack of jurisdiction. The Appellant was required to file the execution first before the Court in Tamil Nadu to obtain a transfer decree, and only then could the execution proceedings be filed before the Court in Morena.
The Appellant did not approach the High Court against this Order. They straightaway filed a Special Leave Petition before the Supreme Court as there were conflicting views of different High Courts.
The Conflicting Views:
- The transfer of decree should be obtained first before filing the execution petition before the Court where the assets are located.
- Section 36 of the A&C Act does not imply that the award is a decree of a particular court. An award is to be enforced in accordance with the provisions of the CPC in the same manner as if it were a decree of the Court. Thus, the award can be filed for execution before the court where the assets of the judgment debtor are located.
The Supreme Court’s observations:
The Apex Court noted that in the case of an award, there is no decree passed, but the award itself is executed as a decree by fiction. After referring to Order 21 of the CPC, the Supreme Court noted that what is sought to be disclosed for execution of decrees or orders includes details like the number of suits, appeal against the decree, etc. find a place, which really does not have a relevance to the fiction of an award to be treated as a decree of the Court for purposes of execution.
The Supreme Court observed that, “It is the enforcement mechanism, which is akin to the enforcement of a decree but the award itself is not a decree of the civil court as no decree whatsoever is passed by the civil court. It is the arbitral tribunal, which renders an award and the tribunal does not have the power of execution of a decree. For the purposes of execution of a decree the award is to be enforced in the same manner as if it was a decree under the said Code.”
The top court noted that the view that a transfer decree needs to be obtained from the court which had jurisdiction with respect to arbitral proceedings is primarily based on jurisdiction clause contained in Section 42 which provides that, “…with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”
Hence, the jurisdiction is over the arbitral proceedings. The Supreme Court observed that what this view fails to take into account is that, as per Section 32 of the A&C Act, arbitral proceedings get terminated by the final arbitral award. “Thus, when an award is already made, of which execution is sought, the arbitral proceedings already stand terminated on the making of the final award. Thus, it is not appreciated how Section 42 of the said Act, which deals with the jurisdiction issue in respect of arbitral proceedings, would have any relevance.”
Thus, the Supreme Court concluded, “the enforcement of an award through its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral proceedings.”
Case Title: Sundaram Finance Limited v. Abdul Samad & Anr., 2018 Latest Caselaw 103 SC
Case Details: Civil Appeal No.1650 of 2018
Bench: Justice J. Chelameswar and Justice Sanjay Kishan Kaul
Judgement Date: February 15, 2018
Click here to read the Judgement @LatestLaws.com
Picture Source :
