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Sundaram Finance Limited v. Abdul Samad & Anr.

Civil Appeal · 2018 INSC 146Decided 15 Feb 2018
Civil Appeal No. 1650 of 2018
Justice J. Chelameswar · Justice Sanjay Kishan Kaul

Background

Sundaram Finance had financed a lorry purchase, and when the borrower defaulted, it obtained an ex-parte arbitral award of about Rs. 12.69 lakh. It tried to execute this award directly in a court in Morena, Madhya Pradesh (where the borrower/assets were), but the trial court returned the execution application, holding that the award first had to be executed in the court with jurisdiction over the arbitration itself, with the decree then formally "transferred" to Morena. Different High Courts across India had taken conflicting views on this exact question, so the finance company approached the Supreme Court directly.

Decision Breakdown

The Supreme Court resolved the conflict among High Courts on whether an arbitral award must first be filed/executed in the court having jurisdiction over the arbitration before being transferred elsewhere, or whether it can be filed directly for execution wherever the judgment-debtor's assets are located. Analysing Sections 36, 38 and 42 of the Arbitration and Conciliation Act, 1996 alongside Sections 37-39 and 46 of the CPC, the Court held that an award is only deemed to be a decree for enforcement purposes: no court actually "passes" the decree in the case of an award, so there is no originating court from which a transfer is required. It held that Section 42 (jurisdiction over arbitral proceedings) has no bearing here because the arbitral proceedings terminate once the final award is made. The Court endorsed the view of the Delhi, Kerala, Madras, Rajasthan, Allahabad, Punjab & Haryana and Karnataka High Courts (execution can be filed directly wherever assets are located) over the contrary view of the Madhya Pradesh and Himachal Pradesh High Courts, allowed the appeal, and restored the execution application at Morena.

Lesson Learnt

A person who has won an arbitration award can go straight to the court where the loser's assets are located to enforce it: they do not need to first get a decree "transferred" from the court that had jurisdiction over the arbitration itself, since an award is only treated like a decree for execution purposes, not an actual decree of any particular court.

Official source (sci.gov.in)View Judgment (PDF)

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