INTRODUCTION
The Supreme Court of India, in M/s Royal Construction Company Pvt. Ltd. v. M/s National Projects Construction Corporation decided by a Bench of Vikram Nath, Sandeep Mehta and Aparesh Kumar Singh, JJ., held that once a substantial question of law certified by a High Court has been answered, the scope of that appellate proceeding stands exhausted. The Court cannot be asked, in the guise of seeking “clarification” to supervise continuing execution proceedings or to decide factual issues that were never before it. The Court accordingly disposed of the appeal. The Court ruled that questions of adjustment or set-off must be raised before the executing court. The Court also expressed concern at the more than twenty-four years taken to enforce the award and requested the Law Commission of India to undertake a focused study of the framework governing the enforcement and execution of arbitral awards.
BACKGROUND
The appellant is the award-holder and the respondent is the award-debtor. An internationally seated arbitration culminated in an arbitral award dated 10 August 2002 in favour of the appellant, with the awarded amounts denominated in a foreign currency. The arbitration was invoked when the Arbitration Act, 1940 held the field.
The award was challenged before the Indian courts. By judgment the Supreme Court emphasised minimal judicial intervention in arbitral awards, holding that courts must not substitute their own subjective satisfaction for that of the arbitral tribunal unless the grounds under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 are made out.
The appellant then initiated execution proceedings before the High Court of Delhi. The Single Judge directed that the award-debtor could discharge its liability in Indian currency, with conversion at the exchange rate prevailing on the date of the underlying agreement. In appeal, the Division Bench by order dated 17 December 2019 set aside that order and certified a substantial question of law of general importance under Articles 134-A and 133(1)(a) of the Constitution, namely the relevant date for conversion of the awarded sum into Indian Rupees.
The Supreme Court held that no occasion arose for determining or fixing a date for conversion, and cautioned that the terms of the agreement, the award and its 2015 judgment ought not to be disturbed. Execution continued before the High Court, where the respondent contended that the principal amount had already been paid in 2009 pursuant to the High Court’s orders. The High Court granted the parties liberty to seek clarification from the Supreme Court as to why this fact had not been brought to its notice earlier. This order was challenged in the present appeal.
KEY POINTS
- The Supreme Court held that the Division Bench erred in appreciating the scope of the controversy previously adjudicated.
- The Court cannot be called upon, in the guise of seeking clarification, to assume a supervisory role over continuing execution proceedings. It is for the executing court, and the appellate court exercising jurisdiction over its orders, to decide the questions arising in accordance with law.
- It held that once the substantial question of law stood answered, the earlier appellate proceedings stood exhausted, and it is impermissible to enlarge them by seeking answers to questions distinct from and unconnected with the lis previously decided.
- In its Epilogue, the Court requested the Law Commission of India to study the statutory and procedural framework for enforcement and execution of arbitral awards.
ANALYSIS
The Court reasoned that its 2023 judgment had answered only the question of the relevant date for conversion, and since it had held that no conversion date arose and payment was to be made in foreign currency, there was nothing further to clarify on the factual aspects of deposit and withdrawal. The Court treated the High Court’s direction as having proceeded on a misreading of what the earlier judgment had decided. The Court was categorical that a “clarification” route cannot be used to bring the Supreme Court back into a pending execution.
In the Epilogue, it was observed that the efficacy of an arbitral regime must be measured not only by the speed with which an award is rendered or the limited grounds on which it may be challenged, but also by the ability of the successful party to realise the fruits of the award within a reasonable time. The Court pointed out that while the statutory framework has addressed delays in arbitral proceedings, challenges to awards and the grant of stays on enforcement, the process of actual execution deserves equally serious consideration. The Court identified four areas meriting focused scrutiny: (i) identification and disclosure of the award-debtor’s assets; (ii) coordination of different modes of execution; (iii) disposal of repetitive or dilatory objections; and (iv) the time taken to conclude execution proceedings. It added that comparative legal systems may offer useful insights into more coordinated enforcement mechanisms, while preserving the legitimate procedural safeguards available to judgment-debtors.
In its request to the Law Commission, the Court asked it to identify practical impediments to timely recovery, examine the experience of other jurisdictions, and consider whether domestic and foreign arbitral awards warrant distinct enforcement procedures or a common framework with appropriate safeguards.
CONCLUSION
The Epilogue signals judicial attention to the post-award stage. The Court’s request to the Law Commission of India to examine asset disclosure, coordination of execution modes, dilatory objections and the possibility of distinct or common frameworks for domestic and foreign awards may lead to reform of the enforcement regime under Section 36 of the 1996 Act.
“PRIME LEGAL is a National Award-winning law firm with over two decades of experience across diverse legal sectors. We are dedicated to setting the standard for legal excellence in civil, criminal, and family law.”
WRITTEN BY: T. R. AISIRI RAO
