[Arya and Trilok are students at Gujarat National Law University.]
“The difficulty of the litigants starts when they have obtained the decree”. This remark was made by the Supreme Court in General Manager of the Raj Durbhunga v. Coomar Ramaput Singh while expressing deep concern over a striking instance of arbitration proceeding. In this case, an award was issued in 1992, but the execution petition to enforce the award was filed in 2003 which remains unresolved to this day. It is disheartening to observe that even after the passage of 30 years, the party in whose favor the award was granted has been unable to reap the benefits of the legal victory. The execution petition has been pending for more than 20 years, resulting in an extremely unfortunate and protracted situation Satyawati v. Rajinder Singh and Another. This prolonged delay, spanning over two decades, in the execution proceedings to enforce the arbitral award is a matter of great regret. In 2021, a three-judge bench of the Supreme Court issued directions to the executing courts, urging them to resolve execution proceedings within a period of 6 months which was again reiterated by the two-judge bench in 2022 in Rahul S Shah v. Jinendra Kumar Gandhi.
Source of Delay, a Legal Conundrum
The question of why we still witness cases like these, where arbitration matters linger for almost three decades and end up in the halls of the apex court, requires an examination of the Arbitration and Conciliation Act 1996 (1996 Act) and the current state of arbitration in India. Despite the numerous advantages of arbitration, such as party autonomy and a customized procedure for dispute resolution, many parties seem to struggle to access justice through this mechanism. By closely analyzing the existing provisions of the 1996 Act and the prevailing state of arbitration in India, we can better understand the reasons behind these prolonged and unresolved disputes.
Section 36 of the 1996 Act holds immense significance in the enforcement of arbitration awards. After the expiry of the 3-month period, which can be extended by an additional 30 days under Section 34, and in the absence of any court-ordered stay on execution as per Section 36(3) of the 1996 Act, the court treats the award as if it were a regular decree. Subsequently, it enforces the award using the procedures laid out in the Civil Procedure Code 1908 (CPC), assuming there are no substantial reasons to suggest otherwise. The adoption of arbitration as an alternative dispute resolution method was driven by considerable delays experienced in the traditional judicial system. Arbitration aimed to streamline the resolution process, ensuring efficiency and promptness. Parties were granted the flexibility to opt for arbitration either before or after a dispute emerged, allowing them to select arbitrators with expertise in the relevant field and tailor the procedure for a swift resolution. All of this was intended to avoid the unnecessary delays often encountered when dealing with conventional judiciary.
However, despite these advantages, there is a notable drawback. The 1996 Act does not provide a specific procedure for executing arbitral awards (emphasis supplied). As a consequence, the award-holder often finds themselves compelled to approach the very same courts they sought to avoid by choosing arbitration, thus negating some of the intended benefits of this alternate dispute-resolution mechanism. The delay in the execution stage of decrees can be attributed to the complexities within Order XXI of the CPC. This order outlines the rules and procedures for executing decrees, consisting of an extensive collection of 106 rules (Rules 60 to 63 omitted) governing stay of execution, mode of execution, attachment procedures to fulfil the decree, and adjudication of claims and objections. The mechanisms laid out in Order XXI offer numerous avenues for judgment debtors to evade liability by filing unnecessary appeals, applications, objections, or even the non-disclosure of their assets. These tactics lead to prolonged proceedings and hinder the timely enforcement of decrees. However, it is not solely the fault of judgment debtors for prolonging the execution process. The courts themselves often prioritize the adjudication of petitions and suits over the execution of decrees, leading to further delays.
This imbalance in priorities is an ironic and lamentable aspect of the system, perpetuating the travesty of justice for those seeking prompt resolution and enforcement of their rights. The 1996 Act sets a maximum time limit of 18 months (from the date of completion of pleadings) for concluding proceedings and issuing an award, with the possibility of extension granted by the court if valid reasons for the delay are provided. However, there is a significant paradox in the 1996 Act - while it aims to ensure speedy resolution of disputes through arbitration, there is no specified time limit for executing and enforcing the awarded decisions (emphasis supplied). This contradiction becomes evident in Section 29B of the 1996 Act, introduced in the 2015 amendment, which established a fast-track procedure for resolving disputes and passing awards within six months. The intention was to expedite the arbitration process. However, the moment an award is issued, it must go through the court for execution, without any special provision for promptly executing fast-track awards. As a result, the benefits derived from the fast-track procedure are nullified by the subsequent delays in executing these awards. The award essentially becomes a paper tiger until it is successfully enforced. The absence of a specified time frame for executing arbitral awards hinders the realization of the core objective of the 1996 Act - providing efficient and speedy resolution of disputes. The delays in executing these awards contradict the very essence of the fast-track procedure introduced to accelerate the arbitration process, leading to a gap between the intention and the practical implementation of the 1996 Act. In 2022, the Supreme Court made a significant observation, emphasizing that “India cannot hope to become an international arbitration hub unless arbitration awards are effectively enforced”. The remark came in response to a 2017 award of INR 7,200 crores in favor of the Delhi Metro Rail Corporation in the case of Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited. An arbitral award lacking provisions for speedy disposal is detrimental to the entire arbitration process. To address this issue, not only legislative reforms are necessary but also a thorough reconsideration of procedural aspects.
Data Analysis
The following data is taken from the National Judicial Data Grid, and it is often used to showcase an increase in the rate of disposal of execution suits in arbitration matters, which would suggest that the legal machinery is improving drastically over the course of less than a decade (data is between 2016 and 2023). However, it is argued that the data could be misleading, since the matters that are being disposed of may be pending for more than a few decades, whereas the cases instituted are on a per year basis, meaning that being newer suits, they pile on the existing caseload, whereas the disposed matters are likely not of the nature of being instituted recently. We can further support this counter view by highlighting the pendency in the disposal of execution petitions across Indian courts, who are tasked with the job of executing arbitral awards, in a data range spanning across the past 30 years and beyond.
Conclusion
To improve the enforcement of arbitration awards, one crucial step is to establish more benches dedicated to the time-bound disposal of execution petitions, as repeatedly urged by the Supreme Court. Furthermore, with the Indian government’s increasing inclination towards institutional arbitration over ad hoc arbitration, it is advisable to empower these specialized institutions to both render and execute awards (emphasis supplied). Creating a dedicated body for delivering and enforcing awards can streamline the process and eliminate the involvement of regular courts. Alternatively, there is scope for reevaluating and simplifying the procedures outlined in the CPC specifically for executing arbitral awards. Trimming down the existing procedure could expedite the enforcement process and align it better with the underlying principles of arbitration - efficiency and prompt resolution. In conclusion, addressing the enforcement challenges surrounding arbitration awards requires a comprehensive approach. Legislative reforms, empowering specialized institutions, and rethinking procedural aspects are all critical steps to make India a more attractive destination for international arbitration and ensure effective dispute resolution.