Case BriefsSupreme Court

Supreme Court: The bench of J. Chelameswar and SK Kaul, JJ held that the enforcement of an award through its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral proceedings.

Different High Courts had given different opinion on the question as to whether an award under the Arbitration & Conciliation Act, 1996 is required to be first filed in the court having jurisdiction over the arbitration proceedings for execution and then to obtain transfer of the decree or whether the award can be straightway filed and executed in the Court where the assets are located is required to be settled in the present appeal.

Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court were of the opinion:

“An award is to be enforced in accordance with the provisions of the said Code in the same manner as if it were a decree of the Court as per Section 36 of the said Act does not imply that the award is a decree of a particular court and it is only a fiction. Thus, the award can be filed for execution before the court where the assets of the judgment debtor are located.”

However, the Madhya Pradesh and Himachal Pradesh High Courts held:

“The transfer of decree should first be obtained before filing the execution petition before the Court where the assets are located.”

After discussing various provisions of the Act and the various orders of the High Courts at length, the Bench said:

“An award under Section 36 of the said Act, is equated to a decree of the Court for the purposes of execution and only for that purpose. Thus, it was rightly observed that while an award passed by the arbitral tribunal is deemed to be a decree under Section 36 of the said Act, there was no deeming fiction anywhere to hold that the Court within whose jurisdiction the arbitral award was passed should be taken to be the Court, which passed the decree. The said Act actually transcends all territorial barriers.”

It was, hence, held that the view taken by the Madhya Pradesh High Court and the Himachal Pradesh High Court is held to be not good in law while the views of Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court reflect the correct legal position. [Sundaram Finance Limited v. Abdul Samad, 2018 SCC OnLine SC 121, decided on 15.02.2018]

Case BriefsHigh Courts

High Court of Judicature at Madras: The Bench of V. M. Velumani, J. recently addressed a civil revision petition filed under Article 227 of the Constitution which challenged the decree order of the Small Causes Court, dated 28/10/2010.

The petitioner, also the claimant, had filed a case in the Motor Accident Claims Tribunal claiming compensation of Rs. 3,00,000 for the injuries sustained due to an accident. During the pendency of the case before the Lok Adalat, the petitioner and the second respondent, i.e., the insurance company came to a settlement wherein it was agreed upon that the second respondent would pay an amount of Rs. 1,55,000, in view of which the Lok Adalat passed an award directing the said amount to be paid for full withdrawal of the petitioner’s claim. The second respondent had deposited the amount. This was followed by the first respondent challenging the award and to stop issuance of the cheque and instead conducting the trial on merits. This was based on the contention of the first respondent, i.e., the owner of the vehicle that her vehicle was not the offending vehicle in the first place.

The counsel for the petitioner contended that an award of the Lok Adalat can be challenged only by initiating proceedings under Article 226 or 227 of the Constitution. He contended that the Tribunal failed to see that the matter was referred to the Lok Adalat on the application filed by the petitioner under Section 19 of the Legal Services Authorities Act and it was not correct to state that no notice was served on the first respondent. Despite the notice having been served, there had been no representation on behalf of the first respondent.

The Court held that the relief that was being seeked by the petitioner would not stand since it was already well settled in law by way of the judgment in Bharvagi Constructions v. Kothakapu Muthyam Reddy, 2017 (5) CTC 775 that an award of the Lok Adalat could only be challenged by initiating proceedings under Article 226 or 227 of the Constitution of India and that too only on limited grounds. Hence, it held that the Tribunal had committed an error and irregularity by allowing the petition filed by the first respondent. [N. Prabhuraj v. Josephine, 2017 SCC OnLine Mad 12290, order dated 6/12/2017]

Case BriefsHigh Courts

Kerala High Court: Deciding upon the validity of the awards passed by the Lok Adalat under Section 21 of the Legal Services Authorities Act, 1987 on a reference, the Court observed that the function of a Lok Adalat organised under Section 19 of the Legal Services Authority Act, 1987 is only to help the parties to the dispute arrive at a compromise or settlement, which is seen from Section 20(3) of the Act. The Adalat cannot enter a finding. It can only record the compromise or settlement between the parties.

The dispute between the parties to a partition suit was referred to the Lok Adalat which were settled and awards passed. However, the petitioner contended that the awards passed were not in terms of the settlement entered into.

Finding several shortcomings in the awards, the Bench of K. Abraham Mathew, J. observed that “When the award cannot be challenged in a suit or execution proceedings or even in appeal the Lok Adalat should make sure that its proceedings are transparent and not vitiated by procedural illegalities or irregularities. Its proceedings should inspire confidence in the public, failing which the very existence of the institution will be at peril. To ensure its credibility, the Lok Adalat shall comply with the procedure prescribed by the statues scrupulously.”

Regulation 17 of the National Legal Services Authority (Lok Adalats) Regulations, 2009 contains the procedure to be followed while drawing up an award. The Court observed that the impugned award neither contained the names and addresses of the parties to the proceedings, signature of the counsel or the settlement entered into and held that the impugned orders were not awards passed by the Lok Adalat in the eye of law since there was no means to ascertain whether the petitioner agreed to the terms recorded in it, which is the result of violation of mandatory provisions in the relevant statutes. The trial court was directed to proceed with the trial but to comply with the request of the parties if they wanted to refer the dispute to Lok Adalat again. [K.S. Sunil v. Sherly, 2016 SCC OnLine Ker 12168, decided on August 18, 2016]

Legislation Updates

On 21-04-2015, the Income Tax department was awarded the ‘Prime Minister Award for excellence in public administration’ for ‘Easy Tax Compliance through Quality Service’. The award has been conferred to the Income Tax Department for setting-up and successful implementation of end to end solution of core services which includes integrated e-governance initiatives viz. e-filing portal, Centralized Processing Cell (CPC-TDS) for processing of TDS statements, Centralized Processing Centre (CPC) for processing of Income Tax Returns and the Refund Banker. The projects have been conceptualized based on principles of USAGE – Uniform interpretation of tax laws, Simplification of forms, Easy Accessibility of services, Good tax governance and Empowerment of taxpayer with information. More USAGE prompts more Voluntary Compliance. The award is a recognition of the sustained efforts of officers of the Income Tax Department and their commitment towards achieving ‘Minimum Government and Maximum Governance’ in tax administration and to move towards a non-adversarial and tax-payer friendly regime.


-Ministry of Finance

Supreme Court

Supreme Court: In one of the prominent decisions of Supreme Court, the 3 judge bench  decided with a ratio of 2:1 that the decision given in  S.L. Arora Case, (2010) 3 SCC 690, was wrongly decided. The question before the Court was that whether the decision of Supreme Court in State of Haryana  v. S.L. Arora , wherein it was held that an award of interest on interest from the date of award is not permissible Section 31(7) of the Arbitration and Conciliation Act, 1996 , and is in consonance with earlier decisions of this Court. Abhay Manohar Sapre, J opined with the view given by S.A Bobde, J while H.L Dattu, CJ dissented with the majority.

It was decided in S.L Arora case that a  sum directed to be paid by an Arbitral Tribunal and the reference to the Award on the substantive claim does not refer to interest during the actual progress of law suit awarded on thesum directed to be paid upon Awardand that in the absence of any provision of interest upon interest in the contract, the Arbitral Tribunal does not have the power to award interest upon interest, or compound interest either for the pre-award period or for the post-award period.

In this view of the matter, S.A Bobde, J said that it is clear that the interest, the sum directed to be paid by the Arbitral Award under clause (b) of sub-section (7) of Section 31 of the Act is inclusive of interest during the actual progress of a law suit.Critical of the view taken by Supreme Court in S.L Arora case, S.A Bobde, J said that the Parliament has the undoubted power to legislate on the subject and provide that the Arbitral Tribunal may award interest on the sum directed to be paid by the Award, meaning a sum inclusive of principal sum adjudged and the interest, and this has been done by Parliament in plain language.

Dissenting from the majority, H.L Dattu, CJ concluded that the terminterest, appears to be distinct from the principal amount on which it is imposed. According to him, there was no infirmity with the S.L. Arora case, whereby it was held that if the arbitral award is silent about interest from the date of award till the date of payment, the person in whose favour the award is made will be entitled to interest at 18% per annum on the principal amount awarded, from the date of award till the date of payment.( HYDER CONSULTING (UK) LTD v. GOVERNOR, STATE OF ORISSA2014 SCC OnLine SC 940 Decided on-25/11/2014)