The Supreme Court on Wednesday requested the Law Commission of India to examine the framework governing the enforcement of arbitral awards and suggest reforms to ensure timely execution of such awards [Royal Construction Company v. National Projects Construction Corporation].

A Bench of Justices Vikram Nath, Sandeep Mehta, and Aparesh Kumar Singh observed that the promise of arbitration remains unfulfilled if successful parties are forced into protracted litigation merely to secure the fruits of an award.

"The efficacy of an arbitral regime cannot be measured merely by the expedition with which an award is rendered or the circumscribed grounds upon which it may be challenged. It must equally be assessed by the ability of the successful party to realise the fruits of the award within a reasonable time. The promise of arbitration remains unfulfilled if a party, having traversed the arbitral process, is compelled to embark upon another protracted course of litigation to secure the benefit of the award," the Bench observed.

The Court thus asked the Law Commission to identify practical impediments to timely recovery and consider whether domestic and foreign awards require distinct enforcement procedures or a common framework with appropriate safeguards.

"The Commission may, upon such examination, make such legislative or procedural recommendations as it considers necessary to strengthen the execution regime and ensure that the enforcement of arbitral awards is commensurate with the objectives of the Arbitration and Conciliation Act, 1996 and India’s commitment to establishing itself as an arbitration-friendly jurisdiction," the judgment stated.

The directions came while disposing of an appeal filed by M/s Royal Construction Company Private Limited against an interim order of the Delhi High Court.

The dispute traces back to an internationally seated arbitration where an award was passed in the company's favour on August 10, 2002, with amounts denominated in Iraqi Dinars.

Though the Supreme Court restored the award in 2015 and answered a question of law on currency conversion dates in October 2023, the execution proceedings continued to remain stuck before the High Court. The High Court eventually granted the parties liberty to approach the top court again to seek factual clarifications on payments made in Indian Rupees in 2009.

The Supreme Court took exception to the High Court's approach and held that the top court cannot assume a supervisory role over ongoing execution proceedings in the guise of clarifications.

Expressing concern over execution delays, the Bench observed that while statutory reforms have focused on expediting arbitral hearings and restricting court stays, actual execution under Section 36 of the Arbitration Act warrants serious review. The Court pointed out that awards are currently enforced like civil court decrees, subjecting them to ordinary delays under the Code of Civil Procedure.

"In particular, the identification and disclosure of the award-debtor’s assets, the coordination of different modes of execution, the disposal of repetitive or dilatory objections, and the time taken to conclude execution proceedings merit focused scrutiny," the Bench said.

The Court directed its registry to forward a copy of the judgment to the chairman of the Law Commission of India for appropriate action.

[Read Judgment]