PRESTIGE INSTITUTE OF MANAGEMENT AND RESEARCH,

DEPARTMENT OF LAW

SESSION 2019-2020

Assignment on Finality of Arbitral Award and its Enforcement

Subject: Arbitration, Conciliation, Alternative Dispute Resolutions Systems

Submitted to: Submitted by-

Asst. Prof. Amay Bajaj Gunjan Khatri
B.A.LL.B IX Sem

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 TABLE OF CONTENTS

 INTRODUCTION
 ARBITRATION AWARD
 Advantages
 International Recognition of Arbitral Award
 THE FINALITY OF ARBITRAL AWARD (SECTION-35)
 ENFORCEMENT OF ARBITRAL AWARD (SECTION -36)
 Steps for enforcement
1) Domestic arbitral award
2) Foreign arbitral award
3) Enforceable awards
4) Unenforceable awards
5) Enforcement and execution
6) A binding agreement
 Difficulties experienced in enforcement
 CONCLUSION
CASE STUDY
CHERAN PROPERTIES LIMITED v. KASTURI & SONS LIMITED
 INTRODUCTION
 FACTS
 ISSUES
 CONTENTIONS
 JUDGEMENT
 ANALYSIS

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 ACKNOWLEDGEMENT
In performing my assignment, I had to take the help and guidelines of some respected people,
who deserve my greatest gratitude. The completion of this project gives me much pleasure and I
would like to show my gratitude towards Prof. Amay Bajaj for giving me good guidelines for
assignment throughout numerous consultations. I would also like to expand my heartfelt thanks
to all those who have directly and indirectly guided me in making this assignment.

Many people, specially my classmates, have made valuable comments, suggestions on this
proposal which gave me an inspiration to improve my report. I thank all the people who helped
me directly and indirectly .I express my sincere thanks to the Advocates, my institution and the
faculty co-ordinator of this programme for their extreme guidance and support

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INTRODUCTION
Arbitration is particularly a means of dispute resolution in the commercial sphere. One of the
reasons for doing so is that in international trade it is often easier to enforce a foreign arbitral
award than to enforce a judgment of the Court. The closing decades of the twentieth century saw
arbitration gain worldwide acceptance as the normal means of resolving commercial disputes.
National laws on arbitration have been modernized on all continents. The Arbitration &
Conciliation Act, 1996 is one such step by India to make the arbitration law more responsive to
contemporary requirements, taking into account the Model law and Rules adopted by the United
Nations Commission on International Trade Law (UNCITRAL). International treaties on
arbitration have been signed or adhered to with impressive success. With the gradual removal of
political and trade barriers and the rapid globalization of the world economy, new challenges
have been created for arbitration institutions in response to the growing demand of parties for
certainty and predictability, greater rapidity and flexibility as well as neutrality and efficacy in
the resolution of disputes.

Arbitration is a legal process, which takes place outside the courts, but still results in a final and
legally binding decision similar to a court judgment. Arbitration is a flexible method of dispute
resolution, which can give a quick, inexpensive, confidential, fair and final solution to a dispute.
It involves the determination of the dispute by one or more independent third parties rather than
by a court. The third parties, called arbitrators, are appointed by or on behalf of the parties in
dispute. The arbitration is conducted in accordance with the terms of the parties' arbitration
agreement, which is usually found in the provisions of a commercial contract between the
parties.

For an arbitration to take place, the disputing parties must agree to take their dispute to
arbitration. In practice, this agreement is often made before the dispute arises and is included as a
clause in their commercial contract. In signing a contract with an arbitration clause, the parties
are agreeing that their dispute will not be heard by a court but by a private individual or a panel
of several private individuals. If parties have agreed to arbitration, they will generally have to go
to arbitration rather than court as the courts will normally refuse to hear their case by staying it to
force the reluctant party to honor their agreement to arbitrate.

Parties who refer their disputes to arbitration, domestic as well as international, do so in the
expectation that the proceedings will end in an award. They also expect that the award shall be
final and binding and, if the losing party does not comply with the award voluntarily, that it will
be possible to enforce the award against such party.

ARBITRATION AWARD

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Arbitration Award is a determination on the merits by an arbitration tribunal in arbitration, and is
analogous to the judgment in the Court of Law. The award must be in writing and be signed by all
members of the tribunal or signed by the majority with reasons for any omitted signatures. The
Arbitration and Conciliation Act requires the award to set out the reasons on which it is based, unless
the parties have agreed that no reasons are to be given. The award should state the date and place of
the arbitration, and a signed copy must be delivered to each party.

In accordance with the Arbitration and Conciliation (Amendment) Act, the tribunal must render
awards within 12 months of the date that it enters the reference. This period can be extended by up to
six months if all of the parties agree. If the award is not made within 12 months or within the
mutually extended period, the tribunal’s mandate would be terminated, unless the period has been
extended by the court.
An arbitration award will result in an order, setting out the practical conclusions of the findings of the tribunal. This
part of the award may include a declaration as to the rights of the parties, if requested by the parties in their
statements before the tribunal, or contain an order for payment, for interest or for specific performance.
Advantages
Among the available dispute resolution alternatives to the courts, arbitration is by far the most commonly used
internationally. The reasons for this are clear i.e final, binding decisions. While several mechanisms can help
parties reach an amicable settlement - for example through mediation or conciliation - all of them depend,
ultimately, on the goodwill and cooperation of the parties. A final and enforceable decision can generally be
obtained only by recourse to the courts or by arbitration. Because arbitral awards are not subject to appeal, they
are much more likely to be final than the judgments of courts of first instance. Although arbitral awards may
be subject to being challenged, the grounds of challenge available against arbitral awards are limited. The
award given by the arbitrator is equivalent to a decree of a court of law and the same can be executed directly,
without making it a decree of the court.

International recognition of arbitral awards

Arbitral awards enjoy much greater international recognition than judgments of national courts.
About 120 countries have signed the 1958 United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, known as the "New York Convention". The
Convention facilitates enforcement of awards in all contracting states. There are several other
multilateral and bilateral arbitration conventions that may also help enforcement.
Neutrality
In arbitral proceedings, parties can place themselves on an equal footing in five key respects:
Place of arbitration, Language used, Procedures or rules of law applied, Nationality and Legal
representation. Arbitration may take place in any country, in any language and with arbitrators of
any nationality. With this flexibility, it is generally possible to structure a neutral procedure
offering no undue advantage to any party.

Specialized competence of arbitrators

Judicial systems do not allow the parties to a dispute to choose their own judges[3]. In contrast,
arbitration offers the parties the unique opportunity to designate persons of their choice as

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arbitrators, provided they are independent. This enables the parties to have their disputes
resolved by people who have specialized competence in the relevant field.

Speed and economy

Arbitration is faster and less expensive than litigation in the courts. Although a complex
international dispute may sometimes take a great deal of time and money to resolve, even by
arbitration, the limited scope for challenge against arbitral awards, as compared with court
judgments, offers a clear advantage. Above all, it helps to ensure that the parties will not
subsequently be entangled in a prolonged and costly series of appeals. Furthermore, arbitration
offers the parties the flexibility to set up proceedings that can be conducted as quickly and
economically as the circumstances allow.

Confidentiality
Arbitration hearings are not public, and only the parties themselves receive copies of the awards.

THE FINALITY OF THE AWARD (SECTION- 35)

Under the Arbitration and Conciliation Act, the award is final and binding on the parties (subject
to any right to challenge the award).
The first information which should be given to the unsuccessful party above is that the
arbitration award is final and binding on the parties. An arbitration award may not be appealed.
In a limited number of cases, however, an award may be set aside on procedural grounds. The
law of the seat of arbitration will usually provide the grounds and mechanisms for this procedure.

According to the Model Law, an application to set aside an arbitration award, i.e. a challenge,
may be made only on any of the following grounds:
1) the arbitration agreement was invalid; or
2) the challenging party was unable to present his case; or
3) the arbitrators have made a decision over an issue falling outside the scope of the arbitration
agreement; or
4) the constitution of the arbitral tribunal did not comply with the parties arbitration agreement.

In addition, an award may be challenged if the subject matter was not arbitrable, or if the award
would be contrary to public policy.

The possibility to set aside an award on procedural grounds may be said to reflect the public
court system’s interest in maintaining a certain level of judicial control of the arbitration

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procedure, notwithstanding its private nature. This, in turn, is motivated by the role of the public
court system in its capacity as the enforcement authority, and as such its unwillingness to
contribute in enforcing awards that inter alia are the results of clearly unjust procedures.

In balancing this judicial control of arbitration against the parties’ desire to avoid appeal
proceedings, most national legislators will provide very narrow procedural grounds for the
challenge of an award. Again - the judicial control exercised only turns on the arbitration
procedure, not the substance or merits of the award. A losing party does not «appeal» an award,
but rather seeks a review of the procedure by which it was arrived at.

The act allows a tribunal to:

 correct any computation, clerical, typographical or similar error;

 provide its interpretation of a specific point or part of an award; and

 make an additional award as to claims omitted from the original award.

ENFORCEMENT OF ARBITRAL AWARD (SECTION -36)

In January 1996, India enacted a new Arbitration Act. This Act repealed all the three previous
statutes (the 1937 Act, the 1961 Act and the 1940 Act). The new Act has two significant parts.
Part I provides for any arbitration conducted in India and enforcement of awards there under.
Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award there under (whether domestic or international) is governed by Part I,
while enforcement of any foreign award to which the New York Convention or the Geneva
Convention applies, is governed by Part II of the Act.

The Arbitration and Conciliation Act states that an award may be enforced as if it were an
Indian court decree.A domestic award does not require separate enforcement application
proceedings. On the other hand, a foreign award (ie, an award in arbitration seated outside India)
is enforced through an enforcement process in any court within the territorial limits where the
defendant resides or has its business or where its assets are located.

Steps For Enforcement Of Arbitral Award

Domestic
One of the declared objectives of the 1996 Act is that every final award: ‘is enforced in the same manner
as if it were a decree of the Court’[32]. Hence, the scheme of the Act is that it is up to the losing party to
object to the award and petition the court for setting it aside. The winning party has to make no procedural
move. If the objections to the award are not sustained (or if there are no objections within the time
allowed) the award itself becomes enforceable as if it were a decree of the court[33]. It would be noticed

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that the Indian law has thus fundamentally departed from the Model Law in this regard. The Model Law
requires an application for enforcement (Art 35) and the grounds on which enforcement of an award may
be refused are as set forth in Art 36 thereof. This has been departed from under the Indian regime as
stated above with the result, that in so far as domestic awards are concerned, if there is no application to
set aside an award under s 34 (or if the objections if made have been rejected), the award can straightaway
be executed as a decree of the court. Thus, when the period for filing objections has expired or objections
have been rejected, the award can be enforced under the Civil Procedure Code (CPC) in the same manner
as if it were a decree passed by a court of law. Section 36 declares that an arbitral award has the force of
the decree, though in fact it is not a decree. An ex parte Award passed by an Arbitral Tribunal under
Section 28 of the Act is also enforceable under Sec. 36. Even a settlement reached by the parties under
Section 30 of the Act can be enforceable under Sec. 36 of the Act as if it is a Decree of the Court.

Foreign arbitral award

India's Arbitration and Conciliation Act, 1996 provides a statutory framework for the enforcement of
foreign arbitral awards given in countries which are signatories to either the 1927 Convention on the
Execution of Foreign Arbitral Awards (Geneva Convention) or the 1958 Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (New York Convention).

One of the prerequisites for the enforcement of a foreign arbitral award in India's courts is that it should
be a foreign award under the Geneva Convention or the New York Convention.

In the case of Bhatia International vs Bulk Trading, AIR 2002 SC 1432, the Supreme Court held that
an arbitration award not made in a convention country will not be considered a foreign award and, as
such, a separate action will have to be filed on the basis of the award.

Enforceable awards
There are several requirements for a foreign arbitral award to be enforceable under the AC Act.

(i) Commercial transaction: The award must be given in a convention country to resolve commercial
disputes arising out of a legal relationship. In the case of RM Investment & Trading vs Boeing, AIR 1994
SC 1136, the Supreme Court observed that the term "commercial" should be liberally construed as having
regard to manifold activities which are an integral part of international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention provide that a foreign
arbitral agreement must be made in writing, although it need not be worded formally or be in accordance
with a particular format.

(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable commercial
agreement. In the case of Khardah Company vs Raymon & Co (India), AIR 1962 SC 1810, the
Supreme Court held that an arbitration clause cannot be enforceable when the agreement of which it
forms an integral part is declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs Hindustan Petroleum Corp, AIR
1989 SC 2198, the Supreme Court held that courts must give effect to an award that is clear,

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unambiguous and capable of resolution under Indian law.

Unenforceable awards
Under sections 48 and 57 of the AC Act, an Indian court can refuse to enforce a foreign arbitral award if it
falls within the scope of the following statutory defenses:
(i) the parties to the agreement are under some incapacity;

(ii) the agreement is void;

(iii) the award contains decisions on matters beyond the scope of the arbitration agreement;

(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with the
arbitration agreement;

(v) the award has been set aside or suspended by a competent authority of the country in which it was
made;

(vi) the subject matter of dispute cannot be settled by arbitration under Indian law, or

(vii) the enforcement of the award would be contrary to Indian public policy.

Enforcement and execution

The party seeking enforcement of a foreign award under the provisions of the Act must make an
application to the court of competent jurisdiction with the following documents:

(i) the original/duly authenticated copy of the award;

(ii) the original/duly authenticated copy of the agreement, and

(iii) such evidence as may be necessary to prove that the award is a foreign award.

In the case of Fuerst Day Lawson vs Jindal Exports[34], the Supreme Court held that a single application
will hold good to decide the question of the execution of the foreign arbitral award as well as the decree
of the award.

A binding agreement
On fulfilling the statutory conditions mentioned above, a foreign award will be deemed a decree of the
Indian court enforcing the award and thereafter will be binding for all purposes on the parties subject to
the award.

Difficulties Experienced In Enforcement

Main difficulties which a party experiences while seeking enforcement of an Arbitral Award are :
· An Arbitral Award under the 1996 Act cannot be enforced as a Decree till the period of challenge under

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Sec.34 (3) is over or the objections filed have been dismissed. It is a common practice that whenever an
Arbitral Award is made, the party adversely affected by it files a petition u/s 34 of the Act in the Court
and the Court issues notice. Then, till the time this objection petition is dismissed the said award cannot
be enforced. Given the delays in our judicial system, it almost takes years for the Objection Petition to be
disposed off and till such time the party having the arbitral award in its favour remains in limbo. Thus, the
laudable objective behind doing away of legal proceedings to make the arbitral award a Rule of Court
under the 1940 Act by introducing Sec.36 in the 1996 Act has been diluted to a great extent.

It is proposed to provide for, inter alia, that mere filing objection petition under Sec.34 will not operate as
stay of the award and the court may grant stay of the operation of the award subject to imposition of such
conditions as it may deem fit to impose and the power to impose conditions include the power to grant
interim measures not only against the parties to the award but also against the third parties in order to
protect the interest of the party in whose favour the award is passed.

· The Execution procedure laid down in Order XXI of CPC is lengthy, complex and time consuming and
almost a never ending story.

· By the time the stage of filing execution comes, the party against whom the award had come, cleverly
disposes off its assets so as to defeat the execution proceedings. Unless a party has taken interim orders
u/s 9 of the Act against disposal of assets etc. there are good chances that by the time execution
application is filed, the judgment debtor would have practically spirited away all its assets.

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CONCLUSION
The Parliament has enacted the Arbitration and Conciliation Act with a view to provide speedy remedy
by arbitration and to achieve this objective, section 5 of the Act puts a complete bar on the intervention
of the courts in matters where there exists an arbitration clause. The law of arbitration in India is very
much at its crossroads. As things stand today, arbitration is poised to effect great changes to the ways in
which dispute resolution is conducted. It brings with it the solemnity and finality of the judicial process
and couples it with the procedural flexibilities of non-conventional dispute resolution methods. There is,
however, an equally pressing need to recognize that much more can and should be done to improve the
conduct of arbitral proceedings in India but most importantly, we feel that there is a need to effect a
change in perceptions. As our nation moves towards increasing litigiousness, alternative methods of
dispute resolution might just provide the key to resolving the problems of overburdened case loads,
long pendency of cases and an all too frequent case of justice being delayed. For long, the problem
plaguing the effective implementation of ADR methods has been their perception as being subordinate
to the court process- a perception shared and fostered by lawyers and people alike. It is imperative, that
this be changed and this can only be achieved if there is active engagement from all the stakeholders in
this process. Certainly, there are some disputes inherently unsuited for alternative channels but there
are so many more which fit perfectly within the vision envisaged for a system of rendering justice that
runs concurrent to the Courts. It is necessary for the Courts themselves to mandate recourse to ADR
methods in inter alia international commercial disputes, employment disputes, matrimonial cases,
compoundable criminal offences, to name just a few.. Saw Pipe case’s expanded judicial review is
especially unsuitable in the Indian context where courts are overwhelmed with backlog. In such scenario
to permit a challenge on merits would considerably delay the enforcement proceedings. A majority of
parties opting for arbitrations do so to avoid court delays and legal niceties. An unfortunate side effect
of this decision is that it has become a ground for parties to shift the venue of arbitration outside India.
The Supreme Court’s decision (Venture Global Engineering case) flies in the face of modern commercial
practice. At the end of the day, what should take precedence is the provision of justice, in substance
more than in form. As our country grows and flowers, taking wing on issues unimagined before, it is
time also for our dispute resolution systems, the undisputed backbone of our nation, to follow suit. At
the end of the day arbitration would see the day light of reality and true success when people would
start accepting the arbitral award and its finality as that of a judgment by the Supreme Court not
because it is justice always but because it is final always, having no further appeal.

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 CASE STUDY

CHERAN PROPERTIES LIMITED v. KASTURI AND SONS LIMITED

INTRODUCTION

In Cheran Properties Limited v. Kasturi and Sons Limited1, the Supreme Court interpreted
provisions regarding execution of awards under the Arbitration and Conciliation Act, 1996
("A&C Act") vis-à-vis the power of fora other than civil courts to execute particular remedies
under arbitral awards. The Supreme Court has confirmed that an arbitral award for transmission
of shares can be executed before the NCLT rather than the civil court by seeking rectification of
register of members of a company to effectuate the transmission. The Supreme Court has further
clarified that an arbitral award can be enforced against a party who was not originally a signatory
to the arbitration in certain situations but constituted a person/entity claiming through or under a
party, for the purpose of execution of a decree.

FACTS

An agreement was entered on July 19, 2004 between Sporting Pastime India Limited ("SPIL"),
Kasturi Sons and Limited ("KSL"), KC Palanisamy ("KCP") and Hindcorp Resorts Private
Limited ("Hindcorp"). Under the agreement, SPIL was to allot 240 lakh equity shares to KSL
against the book debts due by it to KSL. KSL offered to sell 243 lakh equity shares to KCP. KCP
agreed to take over the business, shares and liabilities of SPIL as per the Shareholders
Agreement ("SHA").

Clause 14 of the SHA provided:

"KSL hereby recognizes the right of KCP and/or his nominees to sell or transfer their holding in
SPIL to any other person of their choice, provided the proposed transferees accept the terms and
conditions mentioned in this agreement for the management of SPIL and related financial
aspects covered by this agreement".

The SHA also contained a provision for dispute resolution by arbitration.

On 17 August 2004, a letter was sent from KCP, acting as the authorized signatory of Cheran
Properties Limited ("Cheran"), to KSL stating as under ("Letter"):

"Re: SHARE PURCHASE AGREEMENT DT. 19. 7. 04

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In pursuance of the above Agreement, you have agreed to sell and our Group Companies, by
themselves and/or by their nominees have agreed to purchase shares in Sporting Pastime India
Limited of a face value of Rs. 2,430 lakhs, for a sum of Rs. 243.00 lakhs.

Accordingly, we send herewith seven Share Transfer Deeds duly executed by us and we request
you to execute the same and lodge them with Sporting Pastime India Limited together with
relevant Share Certificates for registering the transfers in the following names... [including
Cheran Properties Limited]".

KCP failed to comply with its obligations under the Agreement. KSL and Hindcorp initiated
arbitration proceedings against KCP and SPIL. On December 19, 2009, the arbitral tribunal made
its award directing KCP and SPIL to return the share certificates of SPIL to KSL and Hindcorp.
Contemporaneously, KSL was directed to pay an amount of INR 3,58,11,000 together with
interest at 12% p.a. on a sum of INR 2,55,00,000.

KCP challenged this award under Section 34 of the A&C Act. The challenge was dismissed by
the High Court of Madras and subsequently by the Supreme Court. The award attained finality.

Since the award attained finality, KSL initiated proceedings against Cheran (on the basis that
Cheran is a nominee of KCP) to execute the award which directed transmission of shares. KSL
approached the NCLT to seek rectification of the register of SPIL under Section 111 of the
Companies Act, 1956 to effectuate the transmission of shares. The NCLT held that that Cheran is
a nominee of KCP and holds shares on its behalf. As such, NCLT had jurisdiction to entertain
the proceedings against Cheran for rectification of the register in order to effectuate the
transmission of shares from Cheran to KSL. This position was upheld by the NCLAT and the
Madras High Court on appeal. The present decision of the Supreme Court was rendered in an
appeal filed by Cheran ("Appellant" / "Cheran") against the decision of the High Court of
Madras.

ISSUES BEFORE THE SUPREME COURT

1. Whether an arbitral award is binding on a third party (i.e. Cheran) who is not a signatory
to the arbitration agreement?
2. Whether an arbitral award relating to transmission of shares can be enforced by the
NCLT through the remedy of rectification of register of members under Section 111 of
the Companies Act, 1956?

CONTENTION OF THE PARTIES

Appellant's Contentions

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  The appellant, Cheran, contended that it is not a signatory to the SHA, and hence, not a
party to the arbitration agreement under the SHA. Therefore, an arbitral award issued
under the terms of the SHA did not bind it.
 An arbitral award must be enforced as a decree of a civil court and therefore, it could not
have been enforced by pursuing proceedings before the NCLT.

Respondent's Contentions

 The SHA clearly provides that the nominees of KCP would have to accept the terms and
conditions to the SHA. As such, the SHA and the arbitration agreement were binding on
Cheran.
 It was necessary to approach the NCLT as it is the only forum to effectuate matters
relating to the transfer of shares.

JUDGMENT

An Arbitral Award is Binding on the Persons Claiming Under It

The Supreme Court explained that Section 35 of the A&C Act states that an arbitral award is
"binding on the parties and persons claiming under them". The expression "persons claiming
under them" is a legislative recognition of the doctrine that besides the parties, an arbitral award
binds every person whose capacity or position is derived from and is the same as a party to the
proceedings. This expression was held to widen the net to include those who claim under the
award, irrespective of whether such person was a party to the arbitration agreement or the arbitral
proceedings. Hence, the pertinent question remained as to when can a party, a non-signatory to
an arbitration agreement, be considered to claim under a party.

The Court placed heavy reliance on the case of Chloro Controls to expound on the principles and
categories of relationships which would qualify a non-signatory to be a person claiming under a
party. The first category involved relationships entailing third-party beneficiaries, guarantors,
assignment and other transfer mechanisms of contractual rights. The legal basis to connect these
relationships is implied consent and good faith. The second category involves agent and
principal, apparent authority, piercing of veil, joint venture relations, succession and estoppel;
the legal basis being force of the applicable law. The third category involves group of
companies. The legal basis to connect an arbitration agreement entered by a company within a
group of companies with its non-signatory affiliates is mutual intention i.e. if the circumstances
demonstrate that the mutual intention of the parties was to bind both the signatory as well as the
non-signatory parties.

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Relying on these principles, the Supreme Court conducted a scrutiny of the facts to determine
whether Cheran would qualify as a party under KCP, so as to bind Cheran with the SHA entered
into between KCP and KSL.

The Court considered that the parent agreement i.e. the SHA dated July 19, 2004 envisaged the
allotment of equity shares of KSL to KCP with the intent that KCP would take over the business,
assets and liabilities of SPIL. While KCP was entitled to transfer his shareholding, this was
expressly subject to the condition of the acceptance by the transferee of the terms and conditions
of the agreement. As such, Cheran being KCP's transferee had accepted the terms of the SHA.
Further, KCP's letter dated 17 August 2004 to KSL contained a specific reference to the SHA. It
was in pursuance of that agreement that KCP indicated, as authorized signatory of the appellant,
that his group of companies had agreed to purchase the shares in SPIL. Quoting its holding
in Chloro Controls, the Supreme Court held that the facts in this case display a mutual intention
of the parties to be bound by the arbitral award.

NCLT can effectuate transmission of shares

The Court dealt with the issue of execution of an arbitral award through the NCLT. The arbitral
award envisaged that KSL was entitled to the return of documents of title and the certificates
pertaining to the shares of SPIL, contemporaneously with the payment or tendering of a sum of
INR 3.58 crores together with interest. Thus, KSL was entitled to the share certificates in terms
of the arbitral award. That necessarily meant transfer of the share certificates.

The Court resorted to Section 35 of the A&C Act on finality of arbitral awards. It held that the
central facet of Section 35 is that an arbitral award shall be final and binding on the parties and
persons claiming under them. The mere fact that Cheran was not a party to the arbitral
proceedings did not conclude the question as to whether the award can be enforced against it.
Hence, the arbitral award could be executed against Cheran on the ground that it claimed under a
party i.e. KCP.

The arbitral award has the character of a decree of a civil court under Section 36 and is capable
of being enforced as if it were a decree. To effectuate the transfer of shares awarded in the
arbitration proceedings, recourse to the remedy of the rectification of the register under Section
111 was appropriate and necessary. Thus, armed with that decree, KSL was entitled to seek
rectification before the NCLT by invoking the provisions of Section 111 of the Companies Act,
1956.

Therefore, the remedy to approach the NCLT to effectuate the transfer of shares through
rectification in register was held to be competent.

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ANALYSIS

The judgment of the Supreme Court is exemplary of its approach to facilitate expedient
execution of arbitral awards by identifying and tapping powers of competent fora, other than
solely civil courts, to execute awarded remedies. In the instant case, the Court identified and
recognized the power of NCLT to execute an award that directed transmission of shares. It is
pertinent to note that this power would only be confined to specific instances under the
Companies Act that make it quintessential to approach the NCLT for execution.

Through this judgment, the Court has ruled out a potential added layer of execution of arbitral
award as a decree of the court i.e., by way of first approaching the court that has jurisdiction over
the arbitral proceedings, followed by the court within whose territory the assets are located or the
appropriate remedy (as in the instance case) can be sought.

The Court has thus adopted a dynamic view by ruling that the NCLT can enforce arbitral awards,
relating to transmission of shares. However, it remains to be seen as to how courts will address
situations where an arbitral award grants remedies that can be executed by several different
competent fora. Nevertheless, this is a welcome change, following another recent decision4 of the
Supreme Court which affirmed that execution proceedings can be initiated anywhere in the
country without having to obtain a transfer decree from the court which had jurisdiction over the
arbitral proceedings. The enforcement-friendly approach of the Supreme Court will certainly
increase the ease of execution of arbitral awards in India and foster an environment of speedy
execution.

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