Earlier this month, the Delhi Metro Rail Corporation failed — for the third time in the last six months — to make an arbitral award payment to the Delhi Airport Metro Express Pvt Ltd (DAMEPL) of Anil Ambani-controlled Reliance Infrastructure. The Delhi High Court, in its order dated September 6, had directed DMRC to pay the entire award of Rs 4,600 crore within four weeks
The Anil Ambani group firm had in fact won the arbitration award in May 2017. Even the Supreme Court had on September 9 last year upheld the award in favour of DAMEL. The matter is still stuck over interest payments.
This is the latest example of a series of such cases where non-implementation has eroded the very sanctity of an arbitral award. And the Indian courts are finding it difficult to address the issues concerned. A Supreme Court’s directive in the case, Rahul S Shah vs Jinendra Kumar Gandhi, for disposal of execution petitions within six months have stayed within the realm of appreciation and its implementation is yet to see the light of the day.
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“While the amendments in the Arbitration Act in 2015 and 2019 have sought to address the delays in arbitral proceedings, Parliament is yet to give this issue a serious thought. The present regime under the Civil Procedure Code is ineffective and has resulted in arbitral awards worth millions being stuck in court processes. An arbitral award without an effective and speedy enforcement/execution is anathema to arbitration and such award is nothing more than piece of worthless paper,” says Ajay Bhargava, Partner, Khaitan & Co.
Bhargava is bang on. Consider the case of Daiichi Sankyo Company vs Oscar Investments, where the Japanese pharma major is pursuing the enforcement of Rs 3,500 crore arbitration award against the former promoters of Ranbaxy Laboratories Malvinder and Shivinder Singh, despite an April 2016 Singapore tribunal ruling in its favour for concealing information regarding wrongdoing at the domestic pharma firm while selling the latter to it for $4.6 billion in 2008.
The SC in February 2018 had also upheld the arbitration award and later in 2019 held Singh brothers guilty of contempt for violating its earlier orders that had restrained them from divesting their shares in Fortis Healthcare.
There’s more. The SC has been unable to implement its August 31, 2012 order for refund of more than Rs 24,029 crore raised by the Sahara group from its 33 milion bond investors. The group was asked to deposit the funds with Sebi to refund investors, while it maintains to have already refunded most of the bondholders. Failing to comply with its orders, its chief Subrata Roy and couple of directors were sent to the judicial custody in March 2014. However, Roy and two group directors are out on parole since May 2016, after spending two years in Delhi’s Tihar Jail.
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SC lawyer Pratap Venugopal, who also represents Sebi in various cases, including Sahara, says that it was “about 150 years ago the Privy Council had observed that the difficulties of a litigant in India begin once he obtains a decree. Sadly the situation remains the same.“
Recently, in the case of Chopra Fabricators and Manufacturers Pvt td vs. Bharat Pump and Compressors, the Supreme Court in April took cognisance and termed it a “sorry state of affairs” while directing the Allahabad High Court “to prepare a roadmap for early disposal of commercial disputes if the faith of the litigants in the institution as a whole is to be maintained.” It also asked the HC’s registrar to place on record how many execution petitions to execute such awards are pending in subordinate courts/executing courts in Uttar Pradesh.
Awarded to CFMPL in January 1992, the decree of Rs 1.68 crore was issued against Bharat Pumps and Compressors. An additional district judge finalised the award in April 2003. While both the contesting parties accepted the award, Bharat Pumps did not pay the decree amount, forcing the 83 year-old CFMPL’s proprietor to raise the issue of “slow pace” of court proceedings before the SC.
The Supreme Court has time and again noted that if commercial disputes are not decided/disposed of at the earliest, it may affect the economy of the country. “The Parliament has stepped in and enacted the Commercial Courts Act. All stakeholders are talking about speedy resolution of disputes by alternative dispute mechanism. However, talks have not translated to action. Despite repeated nudges by Parliament and the courts, even after confirmation of awards by the Supreme Court, there is undue delay in execution. This is frustrating the entire object of ADR mechanism,” says Mahesh Agarwal, Managing Partner, Agarwal Law Associates.
India ranks at a miserable 163 among 193 countries in terms of enforcement of contract and the delay in implementation of the arbitration awards even after endorsement by the top court of the country does very little to inspire further confidence in the arbitration regime.
“Even after attaining finality from Supreme Court, several awards remain unenforceable during the execution stage. The investors confidence in the legal system needs to be bolstered by ensuring that the executing courts take timely action to recover award sum,” says Amit Mishra, partner, P&L Law Offices.
While echoing Mishra’s view, Bhargava also feels that “the present precarious situation of delays requires extraordinary measures. Considering that most arbitral awards are essentially money decrees, it requires to be deliberated if jurisdiction and powers can be conferred to the arbitral tribunal itself to enforce its award.”
“Stricter timelines for execution of arbitral awards along with real costs on parties responsible for delays are some other ways in which delays can be tackled. A special procedure for enforcement of arbitral awards would surely be panacea. One must remember that sending the defying judgment debtors to prison is not why the award holder spends time and money in arbitrations,” Bhargava adds.