~Sarvika Singh (Fourth year law student at Bennett University)
Introduction
In India, arbitration is considered a “complete code”, providing an independent structure to assist parties in resolving their commercial disputes without interference from the courts and thereby enabling them to resolve these disputes as quickly as possible. A recent decision from the Supreme Court of India, in Bharat Kantilal Dalal (Dead) Through LRs v. Chetan Surendra Dalal (Dalal), demonstrates a significant point of intersection between arbitration and civil procedure concerning enforcing awards against estates, legal representatives, and corporate successors. In the Dalal case, the Court holds that due process plays an important role and cannot be bypassed for expediency. Thus the Dalal ruling exposed substantive gaps in the regulatory framework for enforcing arbitral awards and established the parameters for arbitration’s independence from civil procedure. This article discusses the current status of arbitration as a complete code until the time of executing awards; the issues brought to light by Dalal; and the need for legislative changes to facilitate the efficient enforcement of arbitral awards, as well as protect the rights of property owners and enhance investor confidence in the Indian arbitration system.
Arbitration’s Complete Code
The Arbitration & Conciliation Act, 1996 (A&C Act) is a self-contained and complete framework for all stages during Arbitral Proceedings. This principle crystallized in SBP & Co. v. Patel Engineering Ltd, where it was held that all remedies available to parties with respect to all aspects of Arbitration must be found within the Statute; that is, since the Statute was intended to minimize court involvement in the resolution of Commercial Disputes, there would therefore be finality (without further recourse to courts) to all decisions made under the Statute by the Arbitrators.
In Fuerst Day Lawson Ltd. v. Jindal Exports Limited, the court held that once a court finds an award enforceable under Section 49, the award is deemed to be a decree of that very court, eliminating the need for a separate execution decree or a second round of proceedings under the CPC. In Kandla Export Corporation v. OCI Corporation, we further saw that section 37 constitutes an exclusive source for appealable remedies. Thus, if a certain kind of appeal has not been included in section 37, then that type of appeal will not be able to be heard in any Court.
It is clear that the purpose behind arbitration was not to allow for multiple layers of litigation similar to that of a standard civil suit. As such, the way that the judiciary has treated Letters Patent Appeals (LPAs) exemplifies how the judiciary has acted protectively towards the process of arbitration as described above. In BGS SGS Soma JV v. NHPC Ltd., it was determined by the Court that there are no LPAs from any orders that are passed pursuant to the A&C Act, unless the A&C Act specifically permits such LPAs to be done. If LPAs were allowed, then this would add another tier of appeal to arbitration and be contrary to the intended goal of arbitration as an expeditious, definitive, and self-regulating method of dispute resolution. As such, the courts have repeatedly protected arbitration from unnecessary layers of appeals and judicial scrutiny. Accordingly, arbitration is a complete process as defined above, but not entirely complete in all respects.
Where Arbitration Ends and Civil Procedure Begins
Enforceable awards under Section 36 of the Arbitration Act are treated as if they are a court decree. Consequently, Section 51 of the CPC and Order 21 apply automatically. There is a structural and policy reason why this is so. With the exception of those that consented to arbitration, only the parties involved in an arbitration proceed to an award. Thus, subsequent enforcement of that award may impact actual persons and property interests that were not parties to the original arbitration agreement (Some examples are heirs of a decedent whose name was on the award, corporate successor of the original debtor due to merger or restructuring, secured creditor or mortgagee, insolvency practitioner or a committee of creditor, etc).
Non-parties cannot be bound by an arbitration and thus the due process requirement for the execution of an enforceable award must be met under the CPC. Thus the parties to the arbitration can determine whether an award exists, and the CPC determines how and against whom to enforce that award. This fundamental shift from the A&C Act to CPC in effect defines the limits of arbitration’s autonomy, as well as protecting property rights from being deprived by arbitrary court decisions and protecting parties other than the parties to the arbitration agreement.
Dalal (2025): Due Process Cannot Be Sacrificed for Speed in Cross-Border Enforcement
The dispute in Bharat Kantilal Dalal (Dead) Through LRs v. Chetan Surendra Dalal involved an arbitral award that had already been recognised and confirmed by courts in Dubai and Singapore. The award creditor sought to execute the award in India. However, the judgment debtor had died, and his estate had passed to beneficiaries under a Will executed in 1994. These legal representatives had never participated in the arbitration or the foreign enforcement proceedings.
The creditor argued that because the award had already undergone judicial review in another country, the court was required to permit the creditor to execute the award without any domestic procedural safeguards (i.e. without serving a notice pursuant to Order 21 Rule 22 of the CPC) that apply when an execution application is made against the estate of a deceased judgment debtor. The Supreme Court rejected this argument, holding that Order 21 Rule 22 uses the term “shall” and therefore serves as a jurisdictional requirement, not a formality. Without notice to legal heirs, the court lacks jurisdiction to proceed with execution.
Significantly, the Court relied on Raghunath Das v. Sundar Das Khetri, which held that notice to legal heirs is a precondition for lawful execution. The Court reiterated that execution cannot proceed behind the back of those who were not parties to the arbitral proceedings, regardless of how many global courts have confirmed the award.
International Perspective
The process of having an award obtained India’s law, followed by enforcement in accordance with the CPC, adds additional time and distance from the date on which the award was issued until it can be enforced, as compared to many other international systems that allow for much quicker enforcement of arbitration awards.
Using UK as a comparative example, an award issued with leave to enforce may simply be enforced via an action taken in the Court, and there will not be a requirement that an additional execution proceeding be pursued. Furthermore, Section 66 of the UK Arbitration Act provides that an award will be treated in the same manner as a judgment issued by the Court for enforcement purposes, and beyond obtaining the leave to enforce there is no additional court involvement required. The legislative framework established in England makes it the preferred location for international commercial arbitration.
India as of now, retains a dual path: the A&C Act determines whether or not an award is capable of being enforced while the CPC governs how enforcement takes place. This allows for non-parties and property rights of estate creditors, security creditors and insolvency stakeholders to be protected, but a lack of a dedicated enforcement regime creates greater judicial involvement, which means additional time elapsing between the time of achieving commercial success and the time of commercial recovery.
The Way Forward
Dalal does not state that the arbitration system is broken but rather that it needs further development. The Supreme Court ruling reveals that there is no established system currently in place regarding how arbitrations operate concerning the requirements of due process to guarantee that arbitration will be carried out without barriers; therefore, this is a call for legislative reform to create a more uniform structure to allow for the enforcement of arbitral awards in India. The A&C Act must contain specific sections or provisions that govern the enforcement process with regard to the notice requirements, identification of assets, and timeline for executing arbitral awards. This would eliminate this inequity and inconsistent party reliance on the CPC for enforcement. Statutory timeframes for executing an arbitral award must be set out, and additionally, these statutory timeframes must be enforced through the establishment of specialised courts for commercial execution in the High Courts. This framework will also prevent the enforcement process from having to evolve into the next phase of the litigation journey for all parties to an arbitration. The absence of any clear rules regarding the enforcement of awards against estates, legal representatives, and corporate successors allows for delays in the enforcement process due to succession disputes. Additionally, pre-execution asset disclosure requirements would provide an increased level of transparency in the enforcement process, thus reducing the latitude provided to award debtors to hinder execution of arbitral awards. Furthermore, the reciprocal recognition of foreign enforcement orders would simplify the recovery of awards across borders and eliminate unnecessary second judicial review of enforcement orders.
The improvements in procedural efficiency through the implementation of these reforms will lead to increased levels of investor confidence in relation to the enforcement of arbitral awards in India. For foreign investors, the assurance of enforcement of an award within the timeframes specified will reduce their level of risk and increase their willingness to inject long-term capital into India as further evidence of the country's favourable status as a global investment destination.
Conclusion
A clear line has been drawn between civil litigation and arbitration as per the Supreme Court of India and until a decree is sought to enforce the arbitral decree both processes will remain entirely separate. Domestic civil procedure and all other procedures for seeking enforcement of international arbitral decrees follows the domestic civil procedure as well as the provisions of the Constitution that grant protection. By creating this distinction between arbitration and civil litigation, the Court has recognized that while international commercial interests need to be permitted to utilise international arbitration as a tool in addressing dispute resolution and legal issues that arise, the Court also maintains that domestic civil procedures needs to apply to enforce international arbitral awards. Even though international arbitral awards can be enforced and transferrable by one country to another, as the country in which the enforcement is sought applies domestic law, to be enforced. Thus the Court has answered in the affirmative, is in favour of allowing arbitration in India to be enforced as separate and independent from civil litigation. As a term of reference, we must also expedite enforcement of awards without compromising the ability of any party to seek justice before the courts. Until such time as legislative change occurs, it is clear that arbitration in India is considered a complete code until the award is executed and civil procedure will take over after the execution of the award.
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