Delhi High Court admits the challenge of order of dismissal ofpetitions for enforcement of arbitral awards

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The enforcement of the arbitral award was rejected on the ground that the Execution Petition itself was not maintainable for violating Section 12(5) and Schedule 7 of the Arbitration and Conciliation Act, 1996, as amended in 2015. The rejection was questioned in CM(M) 93/2023, High Court, Delhi, in HDFC Bank Ltd. vs. Azad Kalam on the grounds inter-alia that it is not only a well settled principle of law that the Executing Court cannot go beyond the decree but also it has burdened the petitioner with the costs of Rs. 25,000/-, which is unfair and unwarranted. It was contended that the award remains an award and does not change its character merely because an Execution Petition is filed under the provisions of Section 36 of the Arbitration and Conciliation Act, 1996. It was further contended that the impugned order may be burdensome upon the petitioner, as many similar Execution Petitions are being dismissed with similar observations and identical costs. It was also further contended that the petitioner is a bank trying to recover its legal and lawful dues from the respondents, and the manner in which the learned Executing Court has dismissed the

Execution Petition reflects the manner in which it has perfunctorily decided the issue.
The court, after hearing the arguments, has noted that the question needs consideration and would like to examine the judgments rendered by other High Courts and the Supreme Court in relation to the provisions of Section 12(5) of the Arbitration and Conciliation Act, 1996. The court has also noted that none appeared on behalf of the respondent at the arbitration stage or the execution stage, nor were any objections filed under Section 34 of the Act. The court has issued a notice to the respondent and the matter is ordered to be listed on 30.05.2023.

The order of execution court has affected the interest of banks and non-banking finance companies (NBFCs) across India, as it has the potential to impact the enforcement of arbitral awards in a significant number of cases that have been decided after the Perkins judgement by the Supreme Court of India. This order seems to be having far reaching consequence and is therefore attracting close attention of banks and financial institutions who would be enticed to implead themselves. The outcome of this legal dispute could set a precedent and could have implications for the way in which banks and NBFCs pursue debt recovery through the arbitration process.