The Supreme Court has asked the Law Commission of India to examine the legal and procedural framework governing the enforcement of arbitral awards, expressing concern over prolonged litigation that can prevent successful parties from recovering the amounts awarded to them.
A three-judge Bench comprising Justice Vikram Nath, Justice Sandeep Mehta and Justice Aparesh Kumar Singh also clarified that questions concerning amounts deposited and subsequently withdrawn must be addressed by the competent executing court.
Background
The dispute arose from an arbitral award dated August 10, 2002, passed in favour of Royal Construction Company, with the awarded amounts denominated in Iraqi Dinars.
During execution proceedings, the Delhi High Court directed in 2017 that the liability could be discharged in Indian currency, using the exchange rate applicable on September 26, 1982. The matter subsequently reached the Supreme Court, which, in its October 10, 2023 judgment, held that there was no occasion to determine a conversion date and cautioned against disturbing the terms of the agreement and arbitral award.
During the continuing execution proceedings, National Projects Construction Corporation contended that the principal amount had already been paid in Indian rupees in 2009. The Delhi High Court subsequently permitted the parties to seek clarification from the Supreme Court.
The Supreme Court held that the earlier proceedings had been confined to a specific question of law and could not be expanded to decide separate factual disputes arising during execution.
The Bench observed:
"The jurisdiction exercised by this Court was confined to answering that question. This Court cannot be called upon, in the guise of seeking clarification, to assume a supervisory role over the continuing execution proceedings or to adjudicate upon every issue that may arise therein."
The Court further emphasised that the effectiveness of arbitration depends not only on obtaining an award but also on enforcing it within a reasonable period.
"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."
Highlighting the delays in the present dispute, the Court requested the Law Commission to study practical obstacles to recovering awarded amounts, including asset identification, repetitive objections and the time taken to conclude execution proceedings.
The Supreme Court disposed of the appeal and directed that a copy of the judgment be forwarded to the Chairman of the Law Commission of India.
It dismissed the miscellaneous application seeking modification of the October 10, 2023 judgment.
However, it clarified that the applicant remained free to raise objections concerning adjustment or set-off of the amounts allegedly deposited and withdrawn before the executing court, in accordance with law.
