Supreme Court Asks Law Commission of India To Suggest Measures For Timely Enforcement Of Arbitral Awards

The Supreme Court on Wednesday asked the Law Commission of India to study the legal framework governing the enforcement of arbitral awards and recommend changes to ensure that successful parties can recover awarded amounts without prolonged litigation.

The Court asked the Commission to identify practical obstacles to timely recovery, examine enforcement mechanisms in other jurisdictions and consider whether domestic and foreign arbitral awards require separate procedures or a common framework with appropriate safeguards.

"In these circumstances, we request the Law Commission of India to undertake a focused study of the statutory and procedural framework governing the enforcement and execution of arbitral awards. The study may identify the practical impediments to timely recovery, examine the experience of other jurisdictions, and consider whether domestic and foreign arbitral awards warrant distinct enforcement procedures or a common framework with appropriate safeguards.", a bench of Justices Vikram Nath, Sandeep Mehta and Aparesh Kumar Singh said.

The direction came while hearing an appeal filed by Royal Construction Company Pvt Ltd. against National Projects Construction Corporation, in a dispute where more than 24 years after an arbitral award was rendered, the parties were still litigating over its enforcement.

The dispute arose from an internationally seated arbitration that culminated in an award dated August 10, 2002, in favour of Royal Construction Company, with the awarded amounts denominated in Iraqi Dinars.

The award was challenged before Indian courts. On February 24, 2015, the Supreme Court restored the directions contained in the award, emphasising that courts should not interfere with arbitral awards unless the statutory grounds under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, were established.

Royal Construction Company then initiated execution proceedings before the Delhi High Court. On July 26, 2017, the High Court permitted the award debtor to discharge its liability in Indian currency, applying the exchange rate prevailing on September 26, 1982, the date of the underlying agreement.

The company challenged the order before a Division Bench of the High Court. On December 17, 2019, the Division Bench set aside the Single Judge's order and certified a substantial question of law for consideration by the Supreme Court. The question concerned the relevant date for converting the awarded amount from foreign currency into Indian rupees.

On October 10, 2023, the Supreme Court answered the referred question in the negative, holding that there was no occasion to determine a date for conversion into Indian rupees. It also cautioned that the terms of the agreement, the arbitral award and its earlier directions should not be disturbed.

Execution proceedings continued before the High Court. During these proceedings, National Projects Construction Corporation contended that the principal amount had already been paid in Indian rupees in 2009 pursuant to earlier High Court orders.

On February 16, 2026, the Delhi High Court granted the parties liberty to seek clarification from the Supreme Court regarding why the alleged payment had not been brought to its notice when it considered the earlier substantial question of law.

On the facts of the case, the Supreme Court held that the Division Bench had erred in understanding the scope of its October 10, 2023 judgment. The earlier appeal was confined to answering the substantial question of law certified by the High Court and did not involve examining factual matters concerning amounts deposited or subsequently withdrawn.

Before parting with the case, the Court clarified that it could not be asked under the guise of seeking clarification, to supervise continuing execution proceedings or decide every issue arising during enforcement. Such questions must be determined by the competent executing court and the appellate court exercising jurisdiction over its orders.

The Court expressed concern that the arbitration had been invoked when the Arbitration Act, 1940, was in force, yet the parties remained embroiled in enforcement litigation more than two decades after the award. It noted that the Arbitration and Conciliation Act, 1996, was enacted to facilitate expeditious dispute resolution through minimal judicial intervention.

The Court emphasised that arbitration's effectiveness depends not only on how quickly an award is delivered or how narrowly it can be challenged, but also on whether the successful party can obtain its benefits within a reasonable time. Prolonged litigation to enforce an award defeats its purpose.

"The efficacy of an arbitral regime cannot be measured merely by the expedition with which an award is rendered or the circumscribed grounds upon which it may be challenged. It must equally be assessed by the ability of the successful party to realise the fruits of the award within a reasonable time. The promise of arbitration remains unfulfilled if a party, having traversed the arbitral process, is compelled to embark upon another protracted course of litigation to secure the benefit of the award.", the Court observed. 

The Court also noted that Section 36 of the Arbitration and Conciliation Act, 1996, provides for enforcement of arbitral awards in the same manner as court decrees. It said the execution framework required closer examination, particularly regarding asset disclosure, coordination of execution methods, repetitive objections and delays in completing enforcement.

It was therefore suggested that practices in other jurisdictions could help identify more effective enforcement mechanisms while preserving legitimate safeguards for judgment debtors. The Court also asked the Law Commission to consider whether domestic and foreign arbitral awards require separate procedures or a common framework with appropriate safeguards.

Accordingly, the appeal was disposed of while a separate application seeking modification of the October 10, 2023 judgment was dismissed. The applicant was permitted to raise adjustment or set off claims before the executing court in accordance with law.

For the Appellant: Rishabh Sancheti, Sarvam Ritam Khare- 2110, AOR, Nishant Kumar, Shweta Chaurasia, Kushagra Sharma, Anuj Agarwal, Saransh Maheshwari, Advocates 

For the Respondent: Himanshu Sharma- 2801, AOR