Enforcement of Orders Under Section 9 of Arbitration Act as Decree: Delhi High Court Judgment

 

Introduction In a significant ruling, the Delhi High Court held that an order based on a settlement under Section 9 of the Arbitration and Conciliation Act, 1996, can be enforced as a decree. Justice C. Hari Shankar’s judgment clarified the execution of such orders under Section 36 of the Code of Civil Procedure (CPC), ensuring that settlements reached through arbitration receive the same enforcement as court decrees.

Background of the Case The dispute revolved around a real estate project named "ATS Tourmaline," initiated by Almond Infrabuild Private Limited. Investors Anand Gupta and Anuradha Vinod Gupta entered into a Memorandum of Understanding (MOU) with the respondents. The MOU included a buyback clause, allowing the investors to exit the project and sell their residential units back to the respondents. However, the respondents defaulted on their obligations, leading the petitioners to seek legal recourse.

Mediation and Settlement Agreement The petitioners initiated arbitration proceedings under Section 9 of the Arbitration Act. The case was referred to mediation, resulting in a settlement agreement, which included terms for payment of the buyback price and indemnification for loan payments. However, the respondents failed to comply, leading the petitioners to file an application for enforcing the settlement.

Key Legal Arguments The respondents argued that the settlement was neither a decree nor an arbitral award, and therefore not enforceable under Section 36 of the CPC. They also contended that the Delhi High Court lacked jurisdiction as their assets were located outside Delhi.

High Court’s Observations The court rejected the respondents' argument, citing a previous case (Angle Infrastructure Pvt Ltd v Ashok Manchanda) where it was held that a settlement agreement under Section 9 of the Arbitration Act is enforceable as a decree. The court emphasized that while the settlement was not an arbitral award, it could still be executed under Section 36 of the CPC.

Jurisdictional Issues Regarding jurisdiction, the High Court referred to the Supreme Court’s ruling in Sundram Finance v Abdul Samad, clarifying that the enforceability of an arbitral award is based on the location of the assets. However, the court held that the order in question was not an arbitral award but an order, thus affirming its jurisdiction to hear the case and issue precepts for executing the settlement in other jurisdictions.

Conclusion The court ruled that the settlement agreement was enforceable as a decree under Section 36 of the CPC. The respondents were ordered to make payments as per the settlement, including the buyback price, outstanding loan amounts, and accrued interest, thereby upholding the enforceability of mediated settlements under arbitration law.

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