A domestic award is basically a result from an arbitration held in India, in accordance with provision of Part-1 of the Arbitration and Conciliation Act, 1996 (“Act”). Given the scheme of the Act, Part I would apply only to cases where the place of arbitration is in India. Section 2(2), mandates that part-I shall apply where the place of arbitration is in India. Section 2(7) provides that an arbitral award made under part-I of this Act shall be considered as a domestic award. This implies that if the place of arbitration is in India then as per Section 2(2) of the Act, the arbitral proceeding will be governed by the provision of part-I of the arbitration Act. It may be noted that apart of an award made under territory of India, domestic award also includes International arbitration award, where one party is other than India on any citizen, government or institution other than India but award made in territory of India.
On the other hand, Section 44 of the Act defines “foreign award” as an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India. The Section further provides that the above mentioned provisions should be in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
On the other hand, pursuant to The Code of Civil Procedure, 1908 (“CPC”), a decree means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. On the other hand, a foreign judgment is defined under section 2 (6) of the CPC as a judgment of a foreign court. A foreign court means a court situated outside India and not established or continued by the authority of the Central Government.
A foreign decree is further defined in Explanation II to section 44A of the CPC as, “Decree” with reference to a superior court means any decree or judgment of such court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, but shall in no case include an arbitral award, even if such an award is enforceable as a decree or judgment.
B. ENFORCING ARBITRAL AWARD
In order to enforce an award, it is mandatory for an arbitral award to become final and valid. When an award becomes final it prevents the successful party from subsequently raising a claim on which he has succeeded. It further prevents the losing party from raising the issue on which it has lost because he believes that on the second occasion he may have a more sympathetic tribunal, more convincing witnesses, or a better advocate. Thus, section 35 of the Act provides that an arbitral award shall be final and binding on the parties and persons, claiming under them respectively.
It may be noted that after the commencement of arbitral proceedings if parties enter into an agreement or settlement, not in the form and manner provided under section 35 of the 1996 Act, it does not amount to an award and does not foreclose doors for the award forever. An award can be challenged under section 34 of the Act otherwise it is final and becomes decree of court under section 35 and no objection of jurisdiction on ground of no arbitration agreement can be raised in execution.
1. Domestic Arbitral Award:
Notably, the order passed by an Arbitral Tribunal in arbitrations seated in India will be deemed to be an order of the court and will be enforceable under the provisions of CPC, as if it were an order of the court, which provides clarity on its enforceability.
Once the arbitral award is final and valid, the award holder shall file an application for execution of the award against the award debtor before the commercial court or commercial division of the High Court, subject to jurisdiction. In the mean-time, in the event, the arbitral award is being challenged, the court reserves the power to provide injunctive relief and grant a stay on the execution of the arbitral award. It is pertinent to note that pursuant to the amendment to the Act in 2015, the party challenging an arbitral award would have to move a separate application in order to seek a stay on the execution of the particular arbitral award. It may be noted that if a court finds the award to be enforceable in nature, at the stage of execution, there can be no challenge as to the validity of the arbitral award.
2. Foreign Arbitral Award:
Section 46 of the Act provides the criterion as to when such foreign award would be binding on the parties. According to the said Section, any foreign award which would be enforceable shall be treated as binding for all the purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or any other purpose in any legal proceedings in India.
India is the signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“NYC”) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“GC”). If a party receives a binding award from a country which is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory which has been notified as a convention country by India, the award would then be enforceable in India. The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of that court. However, at this stage parties would have to be mindful of the various challenges that may arise such as objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.
In order to enforce a foreign arbitral award, section 47 of the Act mandates that the following documents to be produced before the appropriate court:
- Original award or a duly authenticated copy in the manner required by the country where it is made.
- Original agreement or duly certified copy.
- Evidence necessary to prove the award is a foreign award, wherever applicable.
Conditions to enforce domestic and foreign arbitral award:
- The parties to the agreement were under incapacity.
- The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
- There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings or the party against whom the award was rendered was otherwise unable to present his case.
- Award is ultra vires the agreement or submission to arbitration.
- Award contains decisions on matters beyond the scope of submission to arbitration.
- Composition of the arbitral authority or the arbitral procedure is ultra vires agreement.
- Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place.
- The award (specifically a foreign award) has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which that award was made.
- Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
- Enforcement of the award would be contrary to the public policy of India.
Stamping and registration of domestic and foreign arbitral award
For domestic arbitral award, the provisions of Indian Stamp Act 1899 provide stamping of arbitral awards with specific stamp duties and Section 35 states that an award which is unstamped or is insufficiently stamped is inadmissible for any purpose, which may be validated on payment of the deficiency and penalty. The quantum of stamp duty to be paid would vary from state to state depending on where the award is made. Further, an award has to be compulsorily registered if it affects immovable property, failing which, it shall be rendered invalid.
For foreign arbitral award, in the case of M/S. Shri Ram EPC Limited v Rioglass Solar, the Hon’ble Supreme Court held that a foreign award is not liable to be stamped. The Delhi High Court in Naval Gent Maritime Ltd v Shivnath Rai Harnarain (I) Ltd., had observed that a foreign award would not require registration and can be enforced as a decree, and the issue of stamp duty cannot stand in the way of deciding whether the award is enforceable or not. A similar approach had been adopted by the Bombay High Court in the case of Vitol S.A v. Bhatia International Limited and the High Court of Madhya Pradesh in Narayan Trading Co. v. Abcom Trading Pvt. Ltd..
Appropriate forum and limitation:
|Sl. No.||Arbitral Award||Forum|
|1||Domestic Award – International Commercial Arbitration||The Commercial Division of a High Court where assets of the opposite party lie shall have jurisdiction for applications relating to enforcement of such awards if the subject matter is money. In case of any other subject matter, Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have jurisdiction, i.e., where the opposite party resides or carries on business or personally works for gain.|
|2||Domestic Award – Domestic Commercial Arbitration||The Commercial Court exercising such jurisdiction which would ordinarily lie before any principal Civil Court of original jurisdiction in a district, as well as the Commercial Division of a High Court in exercise of its ordinary original civil jurisdiction.|
|3||Foreign Award||Where the subject matter is money, the Commercial Division of any High Court in India where assets of the opposite party lie shall have jurisdiction. In case of any other subject matter, Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have jurisdiction.|
It is well settled that the provisions of The Limitation Act, 1962 shall be applicable for enforcing the arbitral awards and arbitrations. The limitation period for the arbitral awards would be the same as for the decrees for enforcing, which is 12 years from the date when the decree or order becomes enforceable or where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or delivery in respect of which execution is sought, takes place.
C. ENFORCING DECREE
The executing court cannot re-examine the decree or the merits of the case apart from satisfying itself on a superficial basis about the decree. Accordingly, the court has to first make enquiry as to the enforceability of award and secondly hold that it is enforceable and thereafter enforce it. On a decree being passed, execution proceedings can be initiated for enforcement of the decree. Section 36 to 74 and Order XXI of the CPC set out the provisions in respect of execution. The person in whose favour a decree has been passed or an order capable of execution has been made is known as a “decree-holder” while the person against whom a decree has been passed or an order capable of execution has been made is known as a “judgment-debtor”. The decree of a court against which no appeal has been made or where a decree is reversed, modified on appeal, the only decree capable of the execution is the appellate decree, but exceptionally where the appellate judgment simply dismisses the appeal is executable.
1. Enforcing domestic decree:
A decree holder, his legal representatives or transferee of decree-holder who has given notice to transferor and judgement debtor, as the case may be shall file an application before the appropriate forum against the judgement debtor or his legal representatives, as the case may be.
Following is the process for enforcing a domestic decree in India:
- A written application is to be filed in the court that originally passed the decree or the court to which it has been transferred for execution. It shall contain all the essential information such as suit number, name of parties, date of the decree, any appeal preferred or pending, amount due, name of the person against whom execution is sought, and most importantly the mode in which the assistance of the court is required.
- On raising of defects, if any, the decree-holder must remove all defects and get the same certified by the registry within one week from raising of the defect by the registry.
- After the executing court has satisfied itself that all defects if any have been cured in the application and has provisionally evaluated, without prejudice to the right of the parties, the correct amount for the execution of the decree concerning the value of the immovable property, it finally gives a number to the application for further movement. On obtaining of a final number to the application, process or a show-cause notice is issued by the registry to the judgment debtor, only if, the execution petition is filed after 2 years of the passing of the decree, or is against a legal representative or assignee or receiver.
- Where the person to whom notice is issued under rule 22 does not appear or does not show cause to the satisfaction of the court as to why the decree should not be executed, the court shall order the decree to be executed, by the issuance of warrant of sale and/or warrant of attachment. Where such person offers an objection to the execution of the decree, the court shall consider such objection and make such order as it thinks fit.
Appropriate forum and limitation:
The proceedings to execute a decree must be initiated, in the first instance, before the court which passed it. Where appropriate, such court may transfer the decree to another court for execution for various reasons including the locus of the judgment debtor or the locus of the property against which the decree is sought to be executed.
As per the Limitation Act 1963, the period of limitation for the execution of a decree (other than a decree granting a mandatory injunction, in which case, it is three years) is twelve years from the date of the decree. However, an application for execution of a decree granting a perpetual injunction shall not be subject to any period of limitation.
2. Enforcing foreign decree:
Section 2(6) of the CPC defines “foreign judgment” as “the judgment of a foreign Court,” which refers to a Court situated outside India and not established or continued by the authority of the Central Government.
At the time of enforcement of foreign judgments in India, two situations may arise depending on whether the foreign judgment is passed by a court in: (i). A reciprocating country; (ii). A non-reciprocating country. A party seeking enforcement of a decree of a court in a reciprocating country is required to file execution proceedings in India while in case of a decree from a non-reciprocating country, a fresh suit has to be filed before the relevant court in India. The time limit for filing a suit for enforcement for such foreign judgments is three years from such judgment being delivered.
A foreign decree needs to be valid in order to be enforced in India, and therefore the courts determine the validity on the following parameters (“Parameters”):
- if it has been pronounced by a Court of competent jurisdiction;
- if it has been given on the merits of the case;
- if it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable;
- if the proceedings in which the judgment was obtained are in accordance to natural justice;
- if it has been obtained in good faith or by fraud;
- if it sustains a claim founded on a breach of any law in force in India.
A foreign decree from reciprocating country shall be enforced by virtue of section 44A of the CPC, a decree of any superior court of a reciprocating territory shall be executed in India as a decree passed by the Indian district court. A judgment from a court of a reciprocating territory can be directly enforced in India by filing an execution application. Section 44A (1) of the CPC states that where a certified copy of a decree of any superior court of a reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court (meaning that the entire scheme of execution of decrees as laid down in Order 21 of the CPC will be applicable). While filing the execution application the original certified copy of the decree along with a certificate from the superior court stating the extent to which the decree has been satisfied or adjusted has to be annexed to the application.
A foreign decree from non-reciprocating country can be enforced only by filing a fresh suit upon the judgment along with applicable fees before a court of competent jurisdiction. The party is left with the option to sue on the basis of the foreign judgment or on the original cause of action in the domestic court or both. The resultant decree would thereafter be executed in India. Where a suit on a foreign judgment is dismissed on merits, no further application shall lie for the execution of such foreign judgment as it had merged in the decree which dismissed such suit for execution. In an event a decree is passed in favour of the party filing such a suit for enforcing the foreign judgment, it may proceed to execute it.
A certified copy of the foreign judgment would have to be filed along with the plaint which would have evidentiary value, and be certified in manner, as required under Section 86 of the Evidence Act 1872. Further, an additional certificate by a representative of the Central Government of India in the foreign country is required under Section 86 of the Evidence Act. The procedure stipulated under Section 86 of the Evidence Act does not exclude other modes of proof, e.g. deposition of an official as to what took place in his presence in the court of the foreign jurisdiction (subject to the requirements of the Evidence Act). In any event, as a preliminary requirement, such foreign judgments sought to be executed in India have to satisfy the Parameters.
Once the suit is filed, a notice is issued to the defendant summoning his appearance and directing him to file his reply within a specified date. After the plaintiff has instituted the suit and notified the defendant, the defendant is required to file its written statement, along with a set-off or counter claim, if any, in the court within 90 days of service of the summons. This is governed by Order VIII of the CPC. After the parties complete the pleadings in the suit, the court frames the issues under Order XIV of the CPC, which is followed by the production, admission and denial of evidence. Thereafter, the examination and recording of evidence (documentary and/or oral) is completed.
After the hearing of a matter is completed, the judgment is pronounced in open court. Within fifteen days of the pronouncement of a judgment, the concerned court draws up the decree. If a defendant does not appear when the suit is called for hearing, irrespective of summons being duly served on him, the court may make an order that the suit be heard ex parte.
Thereafter, the resultant decree would be enforced like a decree of that court which rendered the same in the modes as follows:
- by delivery of any property specifically decreed
- by attachment and sale or by sale without attachment of any property
- by arrest and detention in prison
- by appointing a receiver
- by any other manner as the nature of the relief granted may require
In case of decrees involving payment of money, execution by detention in prison shall be ordered only after the judgment debtor is given an opportunity of showing cause as to why he should not be imprisoned. In doing so, the court has to record in writing and be satisfied that the judgment debtor would obstruct or delay the execution of the decree. An executing court cannot go behind the decree, that is, it does not have the power to modify the terms of the decree and must take it as it stands. In case there are multiple decree-holders, the assets, after deducting the costs of realization, shall be distributed among all such persons.
Article 101 of the Limitation Act 1963 provides for the period of limitation for suits upon a foreign judgment as ‘three years from the date of the judgment’. As per the Limitation Act 1963, the period of limitation for the execution of a decree, so passed, (other than a decree granting a mandatory injunction, in which case, it is three years) is ‘twelve years from the date of the decree’.
Authors: Prashant Jain, Co-Founder & Partner; Abhishek Gupta, Associate
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