A recent order of the Gujarat High Court raised eyebrows and highlighted the misuse of contempt proceedings filed under the garb of seeking execution of an arbitral award.

In arbitration proceedings arising out of a commercial contract, an award was passed by the arbitral tribunal. The judgment debtor challenged the award under Section 34 then under Section 37 of the Arbitration & Conciliation Act, 1996, and finally under Article 136 of the Constitution. At each stage, the challenge was unsuccessful.

While implementing the award, instead of resorting to the execution mechanism prescribed under Section 36 of the Arbitration Act, the decree-holder instead filed a contempt petition under Section 10 of the Contempt of Courts Act, 1971 before the Gujarat High Court.

On a preliminary objection raised by the alleged contemnor/judgment debtor regarding the maintainability of the petition under Section 10 of the Contempt of Courts Act, the High Court rejected the same holding as under:

a) Since the challenge to the award was dismissed by the High Court under Section 37 of the Arbitration Act and at the end by the Supreme Court under Article 136 of the Constitution, applying the theory of merger, the directions of the arbitral tribunal merged with the directions of the High Court as well as the Supreme Court. Therefore, it was incumbent upon the judgment debtor to abide by the said directions.

b) Accordingly, failure to abide by the directions of the arbitral tribunal tantamounts to failure to abide by the directions of the High Court, attracting the provisions of Section 10 of the Contempt of Court Act.

Thereafter, the aforesaid order of the High Court was challenged before the Supreme Court by the alleged contemnor. The Supreme Court has by way of an order dated March 28, 2025, set aside the order passed by the High Court, thereby giving a silent burial to the unsung devil.

If the order passed by the Gujarat High Court had come into effect, it would have upset many settled positions of law, detailed as under.

Inverting the Doctrine of Merger

As held by the Constitution Bench of the Supreme Court in Kunhayammed & Ors v. State of Kerala & Anr and followed in Khoday Distilleries Ltd. v. Shri Mahadeshwara Sahakara Sakkare, the doctrine of merger is only applicable where, in appellate jurisdiction, the superior court modifies or upholds the order of a lower court.

The jurisdiction under Sections 34 and 37 of the Arbitration Act is limited vis-a vis setting aside an award. It cannot be termed as an appellate jurisdiction.

The Supreme Court in State of Madras v. Madurai Mills Co. Ltd has enunciated on this issue stating,

“...In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case & the scope of the statutory provisions conferring the appellate or revisional jurisdiction.”

Contempt proceedings cannot be used as disguised execution

It is a settled law that contempt proceedings cannot substitute execution. [R.N. Dey & Ors. v. Bhagyabati Pramanik and Kanwar Singh Saini v. High Court of Delhi].

Arbitration Act is a complete code in itself and other statutes can only be resorted to when specifically provided thereunder

The Arbitration Act provides for very specific and limited situations where other laws are applicable, as specified hereunder:

• Section 27: Since the arbitral tribunal is only a creation of a commercial contract between two parties, the legislature has provided that for a seamless and unhindered proceedings, assistance of the court may also be taken.

• Section 27(5): Persons failing to attend, as per the process/summons issued by the court, are made liable to contempt. Pertinently, the provision for contempt has been provided in this section only, keeping in mind that the arbitral tribunal is not a court, and for this specific purpose, the court’s assistance is being taken. Disregard to the court’s proceedings is even otherwise a contemptuous act. 

• Sections 34 & 37: Recourse against the arbitral award and appeal against the same are allowed before the courts. However, these remedies are not available as a right; specific grounds for invocation of these provisions have been provided.

• Section 36: Provision for enforcement of an award has been provided and it has been stated that the award passed under the Act can be enforced as a decree of the court.

Courts must curtail the misuse of contempt proceedings filed under the garb of seeking execution of arbitral awards. A failure to do so will open the floodgates for prospective litigants to misuse contempt proceedings for implementation of inexecutable awards.

Vaibhav Kulkarni is an Associate Partner and Aditeya Bali is a Senior Associate at Vaish Associates, Advocates.