Lacuna In Arbitration Act Needs To Be Plugged: Kerala High Court On Non-Execution Of Decade Old Foreign Award

The Kerala High Court on Tuesday expressed its displeasure at the non-execution of an arbitration award passed by Combined Edible Nut Trade Association (CENTA), London that had been pending for over 10 years.

Justice C S Dias, while hearing a revision petition filed by the petitioner on the grounds that he had no means to pay the arbitral award, said:

“Both sides are playing the blame game for the delay in the culmination of the execution petition. The fact remains that a decade-old foreign award remains unexecuted. Obviously, this is not the aim of the legislation and the interpretations of Part II of the Act. This case should be an awakener to the stakeholders to plug the lacuna in the legislation and the loopholes in the procedure.”

The respondent in the case had initiated arbitration proceedings on the basis of a contract with the petitioner for realising an amount of 2,88,125.20 U.S Dollars. An ex-parte arbitral award was passed by CENTA, London and the Respondent filed for execution of the same in India.

The petitioner had objected to the execution of the award on the ground that it was filed by an imposter, who had no authority to represent the respondent, and the contract between the parties was vitiated by fraud. The petitioner also contended that he had not received notice of proceedings and that the award was not enforceable in India. After numerous rounds of litigation between the parties that involved the district courts, high court and the supreme court, arbitral award was held to be enforceable.

Subsequently, the respondent filed a petition before the district court to arrest and detain the petitioner in civil prison. This was objected by the petitioner on the ground that he had no means to pay the award and was critically ill. The court below held that the petitioner in fact does have the means to pay the award and against this order the petitioner approached the high court by filing a revision petition.

Senior Counsel Sri. T Krishnanunni appearing for the petitioner raised three main contentions. Firstly, that the respondent company had ceased to exist. Secondly, that petitioner did not have the means to pay the arbitral award. Thirdly, that the court below had erroneously permitted the respondent to cure the defects in the time-barred application filed under Order 21 Rule 11A of the Code of Civil Procedure, even though Section 5 of the Limitation Act is not applicable.

The counsel for the respondent T.R Aswas countered the submissions of the petitioner, pointing out that this was the 12th round of litigation in the matter before the High Court and stated that it showcases “the miseries and desperation of a foreign award-holder” as it had been more than a decade since the award was passed.

The court while dismissing the contentions of the petitioner, referred to a plethora of judgements of the Supreme Court that noted that the objective of the Arbitration and Conciliation Act, 1996 is to consolidate laws pertaining to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and to minimise the role of the courts to ensure swift disposal of matters and speedy justice.

The court also made note of the fact in Section 36 in Part I of the Act, which deals with enforcement of domestic awards, the procedure for execution of the award is laid down. However, in Section 49 in Part II of the Act which deals with foreign arbitral awards, such a procedure is not specified. Section 49 of the Act states that if the court is satisfied that the award is enforceable, then the foreign award will be deemed to be a decree of the said Court and can be executed. However, unlike in Section 36 of the Act, the procedure for execution is not laid down.

The court dismissed the revision petition of the petitioner on the ground that the petitioner did have the means to pay the arbitral amount based on materials produced before the court by the petitioner himself and that the petitioner should not be allowed to stall the proceedings unnecessarily.

Cause Title: M/S Peniel Cashew Company V M/S.Ahcom Sarl

Citation : 2023 LiveLaw (Ker) 69

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