SC Flags Delays in Arbitral Award Execution, Seeks Law Commission Recommendations for Faster Enforcement

New Delhi, Oct 29 (KNN) The Supreme Court on Wednesday requested the Law Commission of India to study the legal and procedural framework governing the enforcement of arbitral awards and recommend measures to ensure their timely execution.

A bench of Justices Vikram Nath, Sandeep Mehta and Aparesh Kumar Singh observed that prolonged execution proceedings undermine arbitration's purpose as an effective alternative to conventional civil litigation.

The promise of arbitration remains unfulfilled if a party, having gone through the arbitral process, is compelled to embark on another protracted course of litigation to secure the benefit of the award, the Court said.

Long Delays Undermine Arbitration Process

The judgment arose from an international commercial arbitration dispute between Iraq-based Royal Construction Company Pvt. Ltd. and National Projects Construction Corporation over enforcement of an arbitral award passed in 2002. More than 24 years later, the parties were still litigating over its enforcement.

The Court said the effectiveness of India's arbitration framework should be assessed not only by the time taken to deliver an award or the grounds available to challenge it, but also by whether the successful party can recover the awarded amount within a reasonable period.

Section 36 and Execution Bottlenecks

The bench noted that Section 36 of the Arbitration and Conciliation Act, 1996 provides for enforcement of arbitral awards in the same manner as court decrees, relying on the execution machinery under the Code of Civil Procedure, 1908.

It identified several areas requiring examination, including disclosure and identification of the award-debtor's assets, coordination between different execution methods, disposal of repetitive or delaying objections and the time taken to complete proceedings.

The Court also suggested studying enforcement practices in other jurisdictions to identify more effective mechanisms while retaining legitimate procedural safeguards for judgment-debtors.

Law Commission Asked to Recommend Reforms

The Commission has been requested to examine practical barriers to timely recovery and consider whether domestic and foreign arbitral awards should have separate enforcement procedures or a common framework with appropriate safeguards.

It may recommend legislative or procedural changes to strengthen enforcement and align the execution process with the objectives of the 1996 Act and India's ambition to become an arbitration-friendly jurisdiction.

The Supreme Court directed its Registry to forward a copy of the judgment to the Chairman of the Law Commission.

Impact on MSMEs

If the proposed reforms are implemented, MSMEs could benefit from faster recovery of dues, lower legal costs, improved cash flow and reduced working capital pressure. This could particularly help smaller suppliers and contractors that depend on timely payments to sustain operations. However, the immediate impact will be limited.

(KNN Bureau)