From Award to Execution: The Arduous Journey of Executing Foreign Arbitral Awards in India

Winning an international arbitration may feel like the end of a long and contentious legal battle. However, when it comes to enforcing foreign arbitral awards, for many. this may just be an illusion. Contrary to popular perceptions, it may just be the beginning of a new and protracted litigation. While arbitration is gaining increasing importance as a methodology to resolve cross-border disputes, the challenges of executing foreign award(s), can diminish much of its appeal.

In fact, the award holder’s real ordeal begins when he approaches Indian courts to get the award executed.

There are certain prerequisites which have to be fulfilled in case a foreign award has to be enforced in India. In terms of Section 44 under Part II of the Arbitration Act, 1996 (“Arbitration Act”), in addition to the seat of arbitration being located in a Contracting State under the New York Convention, Section 44(b) also requires that the Indian Central government specifically designate the seat as a reciprocating territory.

In this article, we shall throw light on the process of executing a foreign arbitral award, the powers of an executing court, the challenges in enforcing a foreign arbitral award and finally suggestions which can make India a more pro-arbitration jurisdiction.

On the aspect of limitation, it is crucial to state that the Supreme Court, in Government of of India v. Vedanta Limited and Ors., has settled the law pertaining to the limitation period applicable to an application under Section 47 read with Section 49 of the Arbitration Act. The judgment stipulates that three years as prescribed under the residuary provision of Article 137 of the Limitation Act, 1963, will apply to such application, as opposed to 12 years as prescribed under Article 136 of the 1963 Act.

To address jurisdiction, an application shall lie under Section 2(1)(e) of the Arbitration Act, read with Section 10(1) of the Commercial Courts Act, 2015, before the Commercial Division of any High Court in India, where the opposite party’s assets are located.

Further, since India is a signatory of New York Convention and Geneva Convention, if the successful party has received a binding award from a country which has been notified as a convention country by India, the award would be enforceable in India, if not hit by the conditions set out in Section 48 of the Arbitration Act. Once an award is held to be enforceable in India, it comes as a “decree” in the realm of Section 51 read with Order 21 of the Civil Procedure Code, 1908 (CPC) read with Section 49 of the Arbitration Act.

The extent of powers vested with the executing court is encapsulated in Section 51 of the CPC, any of which can be chosen by the decree holder, subject to the Court’s discretion. It inter alia includes: (1) delivery of any property specifically decreed; (2) attachment and sale or by sale without attachment of any property; (3) by arrest or detention in prison and; (4) by appointing a receiver. The execution court also has the power to order the sale of properties (movable or immovable) attached, to satisfy the decree, in terms of Order 21 of the CPC.   

It is crucial to note here that in order to obtain an order for detention or arrest of the judgment debtor in a money decree, the decree holder must establish the debtor's capacity to pay. The conduct of the judgment debtor is a key factor for the applicability of the above provision. However, unfortunately, despite holding an award in his favour, the decree holder has to establish malafide on the part of the judgment debtor to obtain an order directing imprisonment of the judgment debtor.

The practical reality today is that execution proceedings are often prolonged for various reasons, becoming highly technical and marked by endless prolixity at every stage, creating legal pitfalls for the unsuspecting litigant, thereby reducing the decree to a mere paper decree. An example of such mischief is the Daiichi Sankhyo case, that is discussed in the next part of the article.

The primary objective of the Arbitration Act is to provide an efficient and expeditious dispute resolution. However, the ground reality in enforcing arbitral awards is far from the objective as it is cumbersome and arduous, evident from the discussions below.

In September 2022, in the case of Daiichi Sankyo Company Limited v. Oscar Investment Limited and Ors., the Supreme Court of India ordered the arrest of promoters of Oscar Investment Limited (Oscar Investments) for diluting their assets to evade the consequences of a foreign arbitration award against Oscar Investment. In this case, on April 29, 2016, a foreign arbitral award was awarded in favour of Daiichi Sankyo Company Limited (Daiichi), for an amount of around ₹4,900 crores.  In 2016, an enforcement application was filed by Daiichi before the Delhi High Court. During the enforcement proceedings, the disclosure of assets was made by the respondent orally, and only oral assurances of the respondent were recorded that there would be no fait accompli, and the award holder’s interest to the extent of total amount awarded would stay protected on several occasions. In the meanwhile, the promoters were gradually diluting their assets to evade the arbitral award. After the award was held enforceable, the Delhi High Court directed the public auction of Fortis’s trademark, which amounted to around ₹200 crores, that is, merely 4% of the award. The rest was diluted, thus frustrating the entire recovery. Pertinently, rather than merely recording the undertakings of the counsels, the High Court should have issued appropriate directions to secure the assets of the judgment debt.

In another the landmark judgment of Avitel Post Studioz Limited and Others v. HSBC PI Holdings (Mauritius) Limited, the dispute emerged from a Share Subscription Agreement dated April 21, 2011 and a Shareholders’ Agreement dated May 6, 2011, entered into between HSBC PI Holdings (Mauritius) Ltd. (“HSBC”) and Avitel Post Studioz Ltd. (“Avitel”). HSBC invested a sum of USD 60 million in Avitel based on misrepresentation by Avitel that it required funds to service a significant contract with the British Broadcasting Corporation (BBC). Upon discovering the absence of any such agreement with the BBC and the siphoning of the funds by Avitel, HSBC initiated arbitration under the Singapore International Arbitration Centre (SIAC) Rules. SIAC passed its final award on September 27, 2014 and directed Avitel to pay a sum of USD 60 million as damages for fraud and misrepresentation. Subsequently, HSBC approached the Bombay High Court for the enforcement of the award and a direction was issued against Avitel, restraining them from withdrawing any amount from their bank to the extent of USD 60 million. Challenging the order of the Bombay High Court, Avitel filed an SLP before the Supreme Court, contending that the serious allegations of fraud are non-arbitrable under Indian Law. The Supreme Court, however, in the earlier round of litigation between Avitel and HSBC, held that the dispute was arbitrable and that HSBC had a strong prima facie case for the enforcement of the award. Furthermore, the apex court found the directors of Avitel guilty of contempt of court and sentenced them to imprisonment. In the enforcement proceedings, the Bombay High Court on April 25, 2023, upheld the enforceability of the award and directed the attachment of Avitel’s assets and also directed them to submit disclosure affidavits regarding their properties, which was also upheld by the Supreme Court vide its judgment dated March 4, 2024.

The preceding discussion clearly illustrates that, despite having favourable arbitral awards and judicial pronouncements, award holders often face substantial challenges in securing enforcement on account of procedural delays. This emphasizes the need for systematic reforms to enhance India’s position as a pro-arbitration jurisdiction. In contrast, jurisdictions like Singapore offer a more structured and efficient enforcement regime, where the information of individuals and corporates are digitized and strict adherence to time-bound procedures are ensured, with non-compliance attracting contempt proceedings.

The objective of the Arbitration and Conciliation Act is to provide an efficient and expeditious dispute resolution. However, in practice, the party in whose favour the award is passed, on several occasions is placed at a disadvantage, burdened by prolonged enforcement proceedings, escalating legal costs, and strategic delays by the judgment debtor, thus frustrating the objective of the Arbitration Act.

About the author: Vinita Sasidharan is a Managing Associate at asa Legal.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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