Supreme Court: On being apprised of 30 years-long delay in execution of an Arbitration Award, the Division Bench comprising M.R. Shah and B.V. Nagarathna, JJ., directed the Chief Justice of Allahabad High Court to constitute a Special Arrears Committee to address the issue of the long delay in commercial cases. The Court also directed the State government to consider constituting additional commercial courts in the four districts of Gautam Budh Nagar, Meerut, Agra, and Lucknow.

In the instant case, the Arbitration Award had been passed in the year 1992 and the execution petition was filed in the year 2003, however, much to the Court’s surprise, the matter was still pending. Calling it a glaring example of frustrating the arbitration proceedings under the Arbitration Act, the Bench expressed,

“It is very unfortunate that even after a period of 30 years, the party in whose favour the Award is passed is not in a position to enjoy the fruit of the litigation/Award. Even the execution petition is also pending for more than 19 years. This is a very sorry state of affairs that even the execution proceedings to execute the Award passed under the Arbitration Act are pending for more than 20 years.”

Noticing that the statutory mandate requires the commercial dispute to be decided and disposed of at the earliest, i.e., within a year, the Court, by an earlier order, had held that if the Award, under the Arbitration Act, is not executed at the earliest, it will frustrate the purpose and object of the Arbitration Act as well as the Commercial Courts Act.

By an order dated 01-04-2022, the Court had asked the Allahabad High Court to submit a report indicating the status of pendency of commercial cases. Pursuant to the said order the High Court had filed the Status Report with respect to the pending execution petitions in the State of Uttar Pradesh, to execute the Awards, both under the Arbitration Act, 1940 and under the Arbitration and Conciliation Act, 1996 as well as the statement showing the total number of applications pending under Section 34 of the Act, 1996 in the State as well as the statement showing the total number of execution petitions to execute the Award both under Section 37 of the Arbitration Act, 1940 and under the 1996 Act pending in the Commercial Courts in the State.

The Status Report revealed the following:

  • About 30,154 execution petitions are pending with various District Courts/ Regular Courts in the State of U.P. and the oldest one is of the year 1981.
  • Similarly, in the Commercial Courts, 13,367 execution petitions/ applications are reported to be pending and the oldest one seems to be of the year 2002.
  • As on 31-03-2022, approximately 10,436 execution petitions/applications under Section 34 of the Arbitration Act are reported to be pending before the Regular Courts (non-commercial courts) with the oldest one of the year 1987.
  • About 1,209 execution petitions/applications are pending before the Commercial Courts and the oldest one seems to be of the year 1998.

The Court had asked the High Court to prepare a road-map and to take a call as to how the problem of the pendency of the execution petitions/applications to execute the Awards passed under the 1940 Act and 1996 Act and the applications under Section 34 are decided/disposed of at the earliest, so that the ultimate object and purpose of the Arbitration Act and Commercial Courts Act is achieved. Additionally, the Court requested the Chief Justice of the High Court to constitute a Special Arrears Committee of the Judges of the High Court and invite the suggestions and formulate a mechanism to tackle with the problem of arrears.

The Court remarked,

“If, the commercial disputes are not decided/ disposed of at the earliest, it may ultimately affect the economy of the country and may spoil the business relations between the parties.”  

However, no committee was constituted in spite of clear directions by the Court and the Court had to adjourn the matter to next day. Similarly, no sincere efforts were shown by the High Court in preparing the required road map, which made the Court to observe,

“It is reported that now the Special Arrears Committee has been constituted only yesterday.  Our earlier order dated 28.04.2022 was very clear and there was no ambiguity at all. Despite the above, for whatever reason, the Special Arrears Committee has not been constituted till yesterday and the same has been constituted only after yesterday’s hearing. We were not satisfied at all with the report submitted by the High Court yesterday (18.05.2022) and the road-map and the action proposed in tackling the arrears so far as the commercial matters are concerned.”

Interestingly, the Court noted that from the constitution of the Special Arrears Committee to make suggestions and formulate a mechanism to tackle with the problem of arrears, only the judges from the Allahabad Bench of the High Court were involved and none of the Judges from the Lucknow Bench was part of the Committee. Therefore, the Court directed the Chief Justice to reconstitute the Committee by including the judges from Lucknow Bench as well, since a large number of commercial matters were pending within the jurisdiction of the Lucknow Bench also.

On the suggestions to create additional commercial courts in the four districts of Gautam Budh Nagar, Meerut, Agra and Lucknow where the pendency of such cases is comparatively larger, the Court directed the State Government to consider the proposal and take a final decision within a period of four weeks.

The matter is listed on 12-07-2022 for further hearing.[Chopra Fabricators and Manufacturers Pvt. Ltd. v. Bharat Pumps and Compressors Ltd., 2022 SCC OnLine SC 711, order dated 19-05-2022]

Appearance by:

For Petitioner(s): Mr. Rakesh U. Upadhyay, Advocate Mr. Rishabh Kumar Pandey, Advocate Ms. Aarti Upadhyay Mishra, AOR Mr. Pawanshree Agrawal, AOR Mr. Aneesh Mittal, Advocate Ms. Soumya Dhankani, Advocate Mr. Shaunik Gupta, Advocate

For Respondent(s): Mr. Nikhil Goel, Advocate Mr. Yashvardhan, Advocate Mr. Apoorv Shukla, AOR Ms. Smita Kant, Advocate Prabhleen Kana, Advocate Ms. Kritika Nagpal, Advocate Mr. Nitin Mishra, AOR Ms. Madhavi Divan, ASG Ms. Garima Prashad, Sr. Advocate

Kamini Sharma, Editorial Assistant has reported this brief.

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