Source: Delhi High Court 

Why in News? 

Recently, the bench of Justice Jasmeet Singh holds that a judgment debtor cannot file objections under Section 47 CPC in execution of an arbitral award under Section 36 of the Arbitration Act, as it would undermine the limited challenge mechanism under Section 34. 

• The Delhi High Court held this in the matter of Anglo-American Metallurgical Coal Pvt Ltd. v. MMTC Ltd. (2025). 

What was the Background of Anglo-American Metallurgical Coal Pvt Ltd. v. MMTC Ltd. (2025) case? 

• On 7th March, 2007, a Long-Term Agreement (LTA) was executed between Anglo American Metallurgical Coal Pty. Ltd. (decree holder) as the Seller and MMTC Ltd. (judgment debtor) as the Purchaser for the sale and purchase of coking coal on FOB (trimmed) basis from DBCT Gladstone in Australia. 
• The LTA initially encompassed three delivery periods of one year each, ending on 30th June, 2007, with an option for MMTC to extend for two additional delivery periods. 
• MMTC exercised this option, extending the agreement to include a Fourth Delivery Period (1st July, 2007 to 30th June, 2008) and a Fifth Delivery Period (1st July, 2008 to 30th June, 2009), with an obligation to purchase 466,000 MT of coking coal during each period. 
• The Fifth Delivery Period was subsequently extended by Anglo American's letter dated 14th August, 2008, to end on September 30, 2009. 
• The agreed price for two types of coking coal (Isaac Coking Coal blend and Dawson Valley blend) for the Fifth Delivery Period was US$ 300 per MT, confirmed by MMTC in a letter dated 20th November, 2008. 
• During the Fifth Delivery Period, MMTC lifted only two shipments at the contractual price of US$ 300 per MT:  
  • 2,366 MT on 30th October, 2008 
  • 9,600 MT on 5th August, 2009 (part of an ad hoc agreement for 50,000 MT) 
• The total quantity lifted was 11,966 MT, compared to the contracted quantity of 466,000 MT, leaving 454,034 MT unlifted by MMTC. 
• The LTA contained an arbitration clause (Paragraph 20), stipulating that disputes would be settled under ICC Rules, with the venue of arbitration in New Delhi, India. 
• Anglo American claimed that MMTC breached the terms of the LTA by failing to lift the contracted coal quantity and sought damages equal to the difference between the contract price (US$ 300) and the market price (average US$ 126.62) at the date of breach (30th September, 2009). 
• MMTC disputed these claims on various grounds including non-availability of contracted goods and market conditions following the Lehman Brothers collapse. 

What were the Court’s Observations? 

• The Arbitration and Conciliation Act, 1996 (A & C Act) establishes a complete, self-contained code with comprehensive legislative framework, deliberately minimizing dependence on general law for arbitration matters. 
• Limited judicial intervention is a cornerstone principle of the 1996 Act, with Section 5 explicitly restricting court interference to only those instances specifically provided within Part I of the Act. 
• The court observed that Section 36 of the A & C Act creates a limited legal fiction, treating an arbitral award "as if it were a decree" solely for enforcement purposes, without transforming the award into an actual decree. 
• An arbitral award remains fundamentally distinct from a court decree, as it does not satisfy the essential conditions of a decree under Section 2(2) of the Code of Civil Procedure, 1908 (CPC). 
• The court determined that CPC provisions apply to arbitral awards only for specific enforcement mechanisms (such as attachment, sale, and detention procedures under Order XXI), not for raising substantive objections. 
• Permitting objections under Section 47 of CPC during enforcement would effectively create an additional round of challenges to arbitral awards, contradicting the finality intended by Sections 34 and 35 of the A & C Act. 
• The court held that challenges to an award on grounds of nullity or illegality can only be raised through Section 34 proceedings of the 1996 Act, not during the enforcement stage. 
• The court concluded that allegations of fraud or collusion require formal findings by appropriate authorities rather than mere preliminary inquiries to constitute legitimate grounds for staying award enforcement. 

What is Section 36 of the Arbitration and Conciliation Act, 1996? 

• Section 36(1) establishes that once the time period for challenging an arbitral award under Section 34 has expired, the award becomes enforceable in accordance with the CPC as if it were a court decree. 
• The phrase "in the same manner as if it were a decree of the court" creates a legal fiction limited strictly to enforcement procedures, without converting the arbitral award into an actual decree. 
• Section 36(2) clarifies that the mere filing of an application to set aside an arbitral award under Section 34 does not automatically render the award unenforceable. 
• A separate, specific application for stay of the arbitral award must be filed, and a stay can only be granted through a court order in accordance with Section 36(3). 
• Section 36(3) empowers the court to grant stay of an arbitral award's operation subject to conditions it deems appropriate, but requires that reasons for granting such stay must be recorded in writing. 
• The proviso to Section 36(3) mandates that when considering applications for stay of monetary awards, courts must consider the provisions governing stays of money decrees under the CPC. 
• The enforcement mechanism under Section 36 represents a deliberate legislative choice to treat arbitral awards as final and binding, with limited grounds for interference in the enforcement process. 
• The structure of Section 36 reinforces the principle that challenges to arbitral awards must follow the specific pathway established by the Arbitration Act, primarily through Section 34, rather than through collateral challenges during enforcement. 
• Section 36 reflects the pro-enforcement bias of the 1996 Act, ensuring that enforcement remains efficient while providing limited, controlled mechanisms for staying enforcement when justified. 
• The provisions of Section 36 must be interpreted in light of the Arbitration Act's overall scheme of minimizing judicial intervention and expediting the enforcement of arbitral awards.