Live law Civil: What is procedure for execution of arbitration award?

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Sunday, 24 April 2016

What is procedure for execution of arbitration award?

In view of what has been stated above, when an application under
section 36 is filed before any principalcivil court of original jurisdiction, it is duty
bound to find out:-
(i) whether it has territorial jurisdiction to decide questions forming
the subject matter of the arbitration if the same had been the
subject matter of a suit, and if so
(ii) whether period for filing application for setting aside the arbitral
award under section 34 of the Act has expired, and if so
(iii) whether such an application has at all been filed, and if so
(iv) whether such application on being filed has already been refused;
then and then only, the court can proceed to enforce the award as if it were a
decree of that court. But if it is found that it does not have jurisdiction to decide
questions forming the subject matter of the arbitration if the same had been the
subject matter of a suit, in that event, it cannot go for enforcing the award
taking recourse to the provisions of Order XXI of the Code of Civil Procedure
because by describing an arbitral award as ‘decree of the court’, the legislature
had amply mandated that it would only be the principal civil court of original
jurisdiction, having jurisdiction to decide questions forming the subject matter of
the arbitration if the same had been the subject matter of a suit. Otherwise, the
words ‘the court’ occurring at the end of section 36 after the word ‘a decree of’
shall become redundant which is contrary to the principles of interpretation of
statutes.
30. However, if the court to which an application under section 36 has been
filed, finds that it does not have jurisdiction to decide questions forming the
subject matter of the arbitration if the same had been the subject matter of a
suit, then it can entertain application only if the principal civil court of original
jurisdiction having jurisdiction to decide the questions forming the subject matter
of arbitration transfers the same to it. This is because, as discussed above, the
arbitral award at all events is the decree of the court having jurisdiction to decide
questions forming the subject matter of the arbitration if the same had been the
subject matter of the suit and not otherwise. If an arbitral award is the decree of
the principal civil court having jurisdiction to decide questions forming the subject
matter of the arbitration if the same had been the subject matter of the suit by
legal fiction created by section 36 of the 1996 Act all other attributes of a civil
court decree shall be available to it and so it shall also be capable of being
transferred under section 39 as w21ell as Rules 5, 6, 7 and 8 of Order XXI of the
of the Code of Civil Procedure.
31. The above questions are fundamental and also inherent in section 36 of
the Act. Unless an executing court is satisfied on these points, it does not derive
jurisdiction to proceed further for enforcing an arbitral award. As these questions
go to the root of the matter and are intimately related to the inherent jurisdiction
of a court, a court cannot entertain an execution application under section 36 of
the Act read with the provisions of Order XXI of the CPC merely at the asking of
an award holder. As observed above, these aspects have not been gone into by
the learned Executing Courts involved in any of these revision petitions.
Consequently, it is to be held that the impugned orders are vitiated by
jurisdictional error and so, they are liable to be set aside. The impugned orders
are accordingly set aside.
IN THE GAUHATI HIGH COURT
(The High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
Case No: CRP 196/2015
Alema Khatun,

-Versus-
Tata Motors Finance Limited,

Date of delivery ofJudgment and Order : 08.02.2016
Citation;AIR 2016 Gauhati 64

Five civil revision petitions involving identical question of law have been
heard together on the prayer of the learned counsel of the parties and
accordingly they are being disposed of by this common judgment. However,
essential respective facts of each of the five revision petitions are stated
separately at the threshold.
2. CRP No. 196/2015 (Alema Khatun and others vs. Tata Motors Finance Ltd.):-
The petitioners purchased a truck under hire purchase agreement with
the opposite party. The agreement contained a schedule for payment of EMI and
an arbitration clause for resolution of any dispute. The petitioners could not
make payment as per the paymentschedule of the agreement and thus a
dispute arose between the financier and the debtor. Opposite party Tata Motors
Ltd. appointed one Mr. Nitin Chavan as sole arbitrator who initiated an arbitration
proceeding at Mumbai for realisation of the dues. The arbitration proceeding was
held ex-parte against the present petitioners and an award for payment of Rs.
10,75,049.82 along with interest at the rate of 12% per annum w.e.f. 17.06.2013
till realisation along with a cost of Rs. 5,000/- was passed by the sole arbitrator.
Thereafter, the Tata Motors Ltd. filed Money Execution Case No. 12/2014 under
Order XXI Rule 11 of the CPC in the court of learned District Judge, Dhubri.
3. On being summoned, the present petitioners as debtors submitted a
written objection, inter alia, on the ground that the execution case has been
instituted without complying with the mandatory provisions of Order XXI Rule 5
and 6 of the CPC. One of the other objections was that since the decree holder
prayed for execution of the judgment debtor by getting him arrested and
retained, compliance of the provisions of Rule 11 and 14 of Order XXI was
necessary. Besides, it was also pleaded that the arbitration award itself was
obtained by fraud without taking into consideration that the truck became
traceless with the driver for which the judgment debtor had lodged an FIR with
Sagolia OP immediately after disappearance of the truck with intimation to the
decree holder, the Tata Motor Finance Ltd. The judgment debtor had furnished
all relevant documents to the Tata Motors on 08.04.2013 and thus the decree
holder was very much aware as to under what circumstances the judgment
debtor could not make payment of the EMI. The decree holder was also assured
by the judgment debtor at that time that the loan would be repaid in full once
insurance claim against disappearance of the truck is settled. As per the
arbitration clause, there was no appointment of arbitrator from the side of the
judgment debtor and the judgment debtor had never signed the arbitration
agreement. With these objections, the judgment debtor prayed for dismissal of
the execution case.
4. The learned Executing court after hearing the parties passed impugned
order dated 30.04.2015 holding that an award passed by an arbitrator is deemed
to be a decree under section 36 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as ‘the Act’) but it is not a decree passed by any ‘court’ in
the light of the definition of ‘court’ under section 2(e) of the Act. The learned
court also held that there being no provision in the Act for transmission of award
as in the case of transfer of a decree of a court, there is no necessity for
transmission of award to the executing court at Dhubri. Accordingly, the learned
Executing Court rejected the written objection by impugned order dated
30.04.2015. It is this order which has been brought under challenge in the
present revision petition.
5. CRP No. 263/2015 (Ramiro Infrastructure and Builder PV Chairman and
Managing Director vs. Tata Motors Finance Ltd.):-
Petitioner, Ramiro Infrastructures and Builder PV availed loan of Rs.
13,00,000/- from opposite party Tata Motors Finance Ltd. for purchase of vehicle
by executing a hire purchase agreement on 31.01.2013. But all documents
relating to the transaction was retained by the opposite party. The financier
thereafter invoked arbitration clause on allegation of default in payment of EMI
and appointed one Mr. Nitin Chavan, a Chartered Accountant of Mumbai, as sole
arbitrator for adjudicating the dispute. No notice was received by the present
petitioner of the aforesaid proceedings yet the sole arbitrator passed ex-parte
award on 24.07.2014 for a sum of Rs. 11,52,025.76 together with interest at the
rate of 18% per annum from 27.12.2013 till payment. According to the
petitioner, no copy of the award has yet been served on the debtor but the
financier opposite party filed Money Execution No. 467/2014 in the court of
learned Additional District Judge No. 3, Kamrup at Guwahati. Filing application in
this Execution court, petitioner herein contended that it came to know about the
arbitration award only after receipt of notice in the Execution case and
accordingly prayed for time to file objection. Adjournment was granted fixing
02.04.2015 as next date and on which date the learned counsel for the petitioner
was absent and so another adjournment was prayed for. The learned Executing
court by order dated 02.04.2015 rejected the adjournment prayer and
straightway issued attachment warrant against properties of the petitioner fixing
30.06.2015 for report. This order has been brought under challenge in the
present revision petition, inter alia, on the ground that the award is ex-facie
illegal, violative of the principle of natural justice and non-est in law. There is no
question of any enforcement of such award. In course of argument, the learned
counsel for the petitioner also adopted the argument made in CRP No. 196/2015
that without there being transfer of the award under section 38 read with Order
XXI Rule 5 and 6 of the CPC, the Execution proceeding is liable to be dropped.
Perhaps, this is the reason for listing the present revision petition for admission
hearing along with CRP No. 196/2015. Thus, the principal argument as to
maintainability of the Execution proceeding is also same as that of CRP No.
196/2015.
6. CRP No. 264/2015 (Ramiro Infrastructure and Builder PV Chairman and
Managing Director vs. Tata Motors Finance Ltd.):-
Petitioner, Ramiro Infrastructure and Builder PV availed loan of Rs.
13,00,000/- from opposite party Tata Motors Finance Ltd. for purchase of vehicle
by executing a hire purchase agreement on 13.03.2013. But all documents
relating to the transaction was retained by the opposite party. The financier
thereafter invoked arbitration clause on allegation of default in payment of EMI
and appointed one Mr. Nitin Chavan, a Chartered Accountant of Mumbai, as sole
arbitrator for adjudicating the dispute. No notice was received by the present
petitioner of the aforesaid proceeding yet the sole arbitrator passed ex-parte
award on 24.07.2014 for a sum of Rs. 13,05,449.42 together with interest at the
rate of 18% per annum from 27.12.2013 till payment. According to the
petitioner, no copy of the award has yet been served on the debtor but the
financier opposite party filed Money Execution No. 470/2014 in the court of
learned Additional District Judge No. 3, Kamrup at Guwahati. In this case also,
petitioners filed application contending that it came to know about the arbitration
award only after receipt of notice in the Execution case and accordingly prayed
for time to file objection. Adjournment was granted fixing 02.04.2015 as next
date on which date the petitioner No. 2 was absent and so another adjournment
was prayed for. The learned trial court rejected the application on the ground
that the application was not accompanied by Vakalatnama and that opportunities
were already given to the petitioners for filing written objection. The learned
court issued writ of attachment against the judgment and refused to grant
further time fixing the case on 30.06.2015 for report on attachment. Before the
fixed date, the present petitioners moved an application on 11.06.2015 praying
for recalling the writ of attachment and for accepting written objection which was
submitted along with the application. However, the learned Executing court
rejected the application on the same date and thus the order dated 02.04.2015
as well as 11.06.2015 has been called in question in the present revision petition.
As this case has also been tagged with the earlier two revision petitions and the
questions arising in those petitions are also equally applicable to the present
case, the learned counsel for the petitioner adopted the same argument on
maintainability of the execution case.
7. CRP No. 265/2015 (Ramiro Infrastructure and Builder PV Chairman and
Managing Director vs. Tata Motors Finance Ltd.):-
Petitioner, Ramiro Infrastructures and Builder PV availed loan of Rs.
13,00,000/- from opposite party Tata Motors Finance Ltd. for purchase of vehicle
by executing a hire purchase agreement on 18.02.2013. But all documents
relating to the transaction was retained by the opposite party. The financier
thereafter invoked arbitration clause on allegation of default in payment of EMI
and appointed one Mr. Nitin Chavan, a Chartered Accountant of Mumbai, as sole
arbitrator for adjudicating the dispute. No notice was received by the present
petitioner of the aforesaid proceeding yet the sole arbitrator passed ex-parte
award on 24.07.2014 for a sum of Rs. 11,72,296.84 together with interest at the
rate of 18% per annum from 27.12.2013 till payment. According to the
petitioner, no copy of the award has yet been served on the debtor but the
financier opposite party filed Money Execution No. 468/2014 in the court of
learned Additional District Judge No. 3, Kamrup at Guwahati. Having received
notice like the previous case, the same petitioners filed application contending
that it came to know about the arbitration award only in the third week of
February, 2015 after receipt of notice in the Execution case and accordingly
prayed for time to file objection. Adjournment was granted fixing 02.04.2015 as
next date on which date the learned counsel for the petitioner was absent and so
another adjournment was prayed for. On that date the petitioners moved yet
another application seeking time for filing written objection. The learned trial
court rejected the application on the ground that the application was not
accompanied by Vakalatnama and that opportunities were already given to the
petitioners for filing written objection. The learned court issued writ of
attachment against the judgment and refused to grant further time. The
Execution case was fixed on 30.06.2015 for report. This order dated 02.04.2015
has been called in question in the present revision petition. As this case has also
been tagged with the earlier two revision petitions and the questions arising in
those petitions are also equally applicable to the present case, the learned
counsel for the petitioner adopted the same argument on maintainability of the
execution case.
8. CRP No. 266/2015 (Ramiro Infrastructure and Builder PV Chairman and
Managing Director vs. Tata Motors Finance Ltd.):-
Petitioner, Ramiro Infrastructures and Builder PV availed loan of Rs.
13,00,000/- from opposite party Tata Motors Finance Ltd. for purchase of vehicle
by executing a hire purchase agreement on 18.02.2013. But all documents
relating to the transaction was retained by the opposite party. The financier
thereafter invoked arbitration clause on allegation of default in payment of EMI
and appointed one Mr. Nitin Chavan, a Chartered Accountant of Mumbai, as sole
arbitrator for adjudicating the dispute. No notice was received by the present
petitioner of the aforesaid proceeding yet the sole arbitrator passed ex-parte
award on 24.07.2014 for a sum of Rs. 11,72,296.84 together with interest at the
rate of 18% per annum from 27.12.2013 till payment. According to the
petitioner, no copy of the award has yet been served on the debtor but the
financier opposite party filed Money Execution No. 469/2014 in the court of
learned Additional District Judge No. 3, Kamrup at Guwahati. The learned
Executing court issued notice fixing 24.02.2015 for report. On that date the
petitioner No. 2 was out of station and so application for adjournment was
moved. The learned court allowed the prayer and fixed 02.04.2015 for filing
objection. Even on that date the petitioner No. 2 was not available and on that
ground another application praying for adjournment was filed on behalf of the
petitioners. The learned trial court rejected the application on the ground that
the application was not accompanied by Vakalatnama and issued warrant of
attachment fixing 30.06.2015 for compliance report. Before the fixed date, the
petitioners filed an application on 11.06.2015 filing objection to the Execution
petition and praying for recall of the attachment order. The learned court
rejected the application on the same date. This is how, both the orders dated
02.04.2015 and 11.06.2015 have been called in question in the present revision
petition. As this case has also been tagged with the earlier two revision petitions
and the questions arising in those petitions are also equally applicable to the
present case, the learned counsel for the petitioner adopted the same argument
on maintainability of the execution case.
9. I have heard Mr. K Bhattacharjee and Mr. KK Dey on behalf the
petitioners in the aforesaid revision petitions. Mr. K Bhattacharjee made the
leading submission and Mr. KK Dey adopted the argument of Mr. K
Bhattacharjee. Mr. S Barooah, learned counsel for the Tata Motor Finance
Company Ltd., the opposite party replied to the submissions made on behalf of
the petitioners. Both the sides relied on judicial precedents in their respective
favour.
10. Mr. K Bhattacharjee submits that ‘‘court’’ under Section 2(e) of the 1996
Act means the principal civil court of original jurisdiction in a district and it
includes the High Court in exercise of its ordinary original jurisdiction. Section 36
of the Act deals with enforcement of award passed by an arbitrator under the
Act. It provides that such an award shall be enforced under the Code of Civil
Procedure in the same manner as if it were a decree of the court. It presupposes
that an award is a deemed decree and it is capable of being executed like any
other decree passed by a civil court. So, relevant provisions of the Code of Civil
Procedure in this matter would be applicable even in case enforcement of an
arbitration award. Drawing attention of the court to Section 38 of the Code of
Civil Procedure, Mr. Bhattacharjee submits that a decree of civil court is capable
of being executed not only by the court which passed it but also by a court to
which the decree is sent for execution. Section 40 of the Code of Civil Procedure
provides that when a decree is sent for execution in another state it shall be sent
to such court and executed in such manner as may be prescribed by rules in
force in that state. Order XXI Rule 5 of CPC provides that where a decree is to be
sent for execution by another court, the court which passed such decree shall
send the same directly to the court if it has no jurisdiction to execute the decree.
Rule 6 of the same Order lays down the procedure for such execution on
transfer. According to Mr. Bhattacharjee when the decree holder of the
arbitration award in question was of the view that the property to be attached by
way of execution is situated in another state in that event, the decree holder was
duty bound to get the decree transferred to the court in other state. The
executing court in another state has no jurisdiction to entertain an execution
case without the decree being transferred in accordance with the procedure
prescribed under the Code of Civil Procedure. The same not having been done in
any of the cases under consideration, the execution proceedings are liable to be
set aside and quashed.
11. Per contra, Mr. S Barooah, learned counsel for the Tata Motor Finance
Company Ltd., submitted that the legal propositions argued by Mr. Bhattacharjee
are not entirely correct. While it is correct that an arbitration award is a deemed
decree by legal fiction under section 36 of the Act but at the same time it is also
correct that such decree is not a ‘decree of court’ and so Executing court under
Section 36 of the Act not being a court is not bound by Section 39 or Order XXI
Rule 5 and 6 of the Code of Civil Procedure. The Act is a code in itself and the
same not having provided that all provisions of the CPC applicable to a decree of
a civil court are applicable to an award, the learned Executing courts in the
present cases have very much acted within jurisdiction in passing the impugned
orders and so the revision petitions are liable to be dismissed.
12. From perusal of the respective pleadings of the parties and the argument
put forward by them it appears that the only point for consideration in all these
revision petitions is as follows:-
Whether in case of enforcement of an arbitral award beyond the
territorial jurisdiction of the court within the meaning of Section 2(1)(e) of
the Arbitration and Conciliation Act, 1996, a formal transfer of the award
is necessary under Section 39 read with Order XXI Rule 5 and 6 of the
Code of Civil Procedure?
13. I have perused the pleadings of the parties available on record and all the
judgments relied on by them. It appears that there is a divergence of opinion on
the aforesaid point for determination among various High Courts of the country.
While the High Courts of Andhra Pradesh, Karnataka and Madhya Pradesh are of
the view that unless a formal transfer of award has been taken place like any
other decree of civil court, no court can entertain Execution proceeding if the
award has not been passed within its territorial jurisdiction. On the other hand,
the High Courts of Delhi and Madras are of contrary view. According to the latter
High Courts, an arbitral award is a decree by legal fiction but it is not a decree of
court and since there is no provision in the Act warranting transfer of award,
there is no question of such transfer by unnecessarily importing the provisions of
Code of Civil Procedure. Perhaps, such a question has not yet come up for
consideration before the Hon’ble Supreme court and that is why no such decision
could be found out.
14. A similar question arose before Hon’ble Karnataka High Court in the case
of ICDS Ltd. v. Mangala Builders Pvt. Ltd. and others (AIR 2001 Karnataka 364).
The Single Judge of that Hon’ble High Court held that a court which can entertain
a suit with respect to the subject matter of arbitration dispute, it alone can
exercise the power under Section 36 of the Act. This opinion was arrived at after
juxtaposing the expression ‘court’ occurring in Section 2(e) of the Act in Section
36 thereof and thereupon it was felt that the award passed by the Arbitrator shall
be enforced in the same manner as if it were a decree made by the court having
jurisdiction to decide questions forming subject matter of the arbitration if the
same had been the subject matter of the suit. Referring to Section 36 of the Act
it was further held that a right to enforce the award arises only after the period
for filing application for setting aside the arbitral award under Section 34 has
expired or such an application having been made is rejected. This is because
before proceeding with enforcement of the award the court is duty bound to
satisfy itself that the period for filing application under Section 34 has already
expired or such an application having been filed has ultimately been dismissed.
Inferentially, the court entitled to entertain an application under Section 34 of the
Act alone can entertain the steps to enforce the arbitral award. This is how the
decision was taken that court as understood in Section 34 of the Act has alone
the jurisdiction to entertain application for enforcement of the award.
15. Mr. K Bhattacharjee, learned counsel for the petitioner, has placed
reliance on the case of Bhoomatha Para Boiled Rice and Oil Mill v. Maheswari
Trading Company and others (AIR 2010 AP 137). In this case an application
under Section 115 of the Code of Civil Procedure was filed before the Hon’ble
Andhra Pradesh High Court questioning as to whether an arbitral award can be
enforced by any competent civil court having pecuniary and territorial jurisdiction
over the subject matter and not by the “Court” as defined in Section 2(1)(e) of
the Act. Considering the case in the light of various provisions like section 39 and
Order XXI of the Code of Civil Procedure as well as AP Civil Courts Act, 1972 and
the Arbitration and Conciliation Act, 1996, the Hon’ble Court was of the view that
an arbitral award can be enforced following relevant provisions in Part-II and
Order XXI of CPC by any court depending upon the amount awarded by the
Arbitrator. According to the Andhra Pradesh High Court if the value of the award
is less than Rs. 1,00,000/-, the court of Junior Civil Judge, if the value of the
award is more than Rs. 1,00,000/- and does not exceed Rs. 10,00,000/-, the
senior Civil Judge and lastly if the value of the award is more than Rs.
10,00,000/- in that event, District Judge or Additional District Judge shall be
competent to enforce the award. The revision petition was accordingly dismissed
and the contention of the learned counsel for the petitioner that application
under Section 36 of the Act can be entertained by the court as defined in Section
2(1)(e) of the Act was rejected. However, this judgment did not deal with the
question in regard to enforcement of an arbitral award beyond the territorial
jurisdiction of court.
16. In the case of Assam State Weaving & Manufacturing Co. Ltd. vs. Vinny
Engineering Enterprises (P) Ltd. & Anr (AIR 2010 Calcutta 52), the point for
determination before the Hon’ble Calcutta High Court as to whether a party has
to fork out the cost of the reference not paid by it to obtain the benefit under the
award passed or to get a copy of the award. In that case, the arbitral award was
passed and then presented before the District Judge, Kamrup in Assam for
enforcement with prayer to transfer the same to a court in Calcutta. The Hon’ble
Calcutta High Court observed that tabular statement had been taken out on
03.06.2009 before the District Judge at Kamrup and thereupon the award and
deemed decree was transferred for execution to that court meaning thereby the
Calcutta High Court. Showing this observation in the judgment, the learned
counsel, Mr. K Bhattacharjee would argue that as per the prevailing practice in
Assam, the arbitral award was presented before the District Judge at Kamrup
where the arbitration was held and thereupon prayer was made for transfer of
the award to the competent court in whose jurisdiction, the subject matter of the
arbitration is situated. The consequent argument was that an application for
enforcement of the award is to be presented to the court within the meaning of
Section 2(1)(e) of the Act irrespective of whether the subject matter of the
dispute is situated within the territorial jurisdiction of it and if not, in that event,
the same should be transferred to a court where the subject matter of the
arbitration is situated.
17. In the case of M/s Bhusan Petrofils Private Limited vs. Sanjay Kakade
reported in (2013) 0 Supreme (Mah) 950, a Single Bench of Hon’ble Bombay
High Court considered the earlier Full Bench judgment of the said Hon’ble Court
as to definition of ‘court’ and held that the word ‘court’ occurring in Section 36
must be held to be a court of District Judge for the purpose of enforcement of
the award. This view contrary to the view of Hon’ble Andhra Pradesh High Court
was taken considering the provisions of Section 2(1)(e) and Section 36 of the
Act. The Single Judge found that there was already a Division Bench judgment of
the same High Court that District Judge in a district alone is the Principal Civil
Court of original jurisdiction within the meaning of Section 2(1)(e) of the Act and
no other court subordinate to him shall have any jurisdiction to entertain
application for enforcement of award. It was held that the word ‘court’ must be
given the same meaning wherever it appears in Part-I of the Arbitration and
Conciliation Act, 1996.
18. A Single Bench of the Hon’ble Madhya Pradesh High Court was confronted
with a similar question in the case of Computer Sciences Corporation India Pvt.
Ltd. vs. Harishchandra Lodwal & anr (AIR 2006 MP 34). In that case, the award
holder filed Arbitration Execution Case No. 9/2002 before VII ADJ, Indore and
made a prayer for transferring the award to the court at Delhi for enforcement of
the award as the respondents were residing at Delhi. The learned ADJ, Indore
dismissed the application on the ground that petitioner was at liberty to file the
Execution proceedings at Delhi itself. Referring to Section 42 of the Act along
with Section 2(1)(e) thereof, a Single Bench of the Hon’ble Madhya Pradesh High
Court held that since award was passed at Indore, therefore, unless and until the
court at Indore transfers the award to the Court at Delhi it cannot be executed
and accordingly the revision petition was allowed setting aside the order passed
by the learned ADJ, Indore.
19. In the case of Leela Hotels Ltd. vs. Housing & Urban Development
Corporation Ltd. reported in (2012) 1 SCC 302, the Hon’ble Supreme Court held
in paragraph 45 that an award passed by Arbitrator tantamounts to a decree and
it has to be enforced under the Code of Civil Procedure in the same manner as it
were a decree of the court. This view was taken on reading the clear provision of
Section 36 of the Act. The question as to enforcement of award with respect to
property situated in another state beyond the territorial jurisdiction of court
within the meaning of Section 2(1)(e) of the Act did not arise in that case.
20. On the other hand, Hon’ble Delhi High Court took a different view in the
case of Daelim Industrial Co. Ltd. vs. Numaligarh Refinery Ltd. (EA No. 105/2009
in Ex. No. 242/2008 decided on 13.03.2009). The Delhi High Court did not accept
the contention that court within the meaning of Section 2(1)(e) would not apply
to Section 36 of the Act. The aforesaid judgment of the Hon’ble Madhya Pradesh
High Court in the case Computer Sciences Corporation India Pvt. Ltd. was
considered by Delhi High Court and it was held that Section 42 of the Act would
not apply to Execution applications as an Execution application is not ‘Arbitral
Proceedings’ within the meaning of Section 42 of the Act and is not a subsequent
application arising out of the agreement and the arbitral proceedings. This is
because arbitral proceedings come to an end when the time for making an
application to set aside the arbitral award expire and the execution application is
an enforcement of the award. So, the place of filing of the execution application
need not be the place of filing of the application under Section 34 of the Act. In
paragraph 18 of the judgment, opinion was expressed that expression “court”
occurring in Section 36 is not meant to be the court within the meaning of
Section 2(1)(e) of the Act. The word “court” in Section 36 is used only to
describe the manner of enforcement i.e., as a “decree of the court” and not in
the context of providing for the court which will have territorial jurisdiction to
execute/enforce the award. The legislature has in Section 49 provided for
enforcement of foreign awards by deeming the said awards to be a decree of
“that court” which would mean the decree of the court which has adjudicated on
the enforcement of the award. But in Section 36 legislature in its wisdom did not
use the expression “that” which is indicative of the reference of the court therein
being only to describe the manner of enforcement of the award as a decree of
the court. According to Delhi High Court, there is no legislative mandate to the
effect that arbitral award has to be treated as a decree of that court only which
would have the jurisdiction to entertain the suit. Ultimately it was held that an
award amounts to a decree by legal fiction created under Section 36 of the Act
but it is not a decree of the court and so court has nothing to transfer.
21. A Single Bench of Madras High Court took the similar view in the case of
Katak Mahindra Bank Ltd. vs. Sivakama Sundari SNarayana SB Murthy (CRP No.
574/2011 decided on 26.08.2011). In that case, an application for enforcement
of arbitral award was filed before X Assistant Judge, City Civil Court, Chennai.
The learned court returned the Execution petition holding that without being
transmitted through proper channel by way of transfer, the award was not
enforceable. Considering the provisions of Section 38, 39, 41 and 43 of the Code
of Civil Procedure and the provisions of 36 and 58 of the Arbitration and
Conciliation Act, 1996, the Hon’ble Madras High Court held that the arbitral
tribunal is not a court but its award has been elevated to the level of a decree for
the purpose of execution by the legal fiction created under Section 36 of the Act.
But it does not elevate the arbitral tribunal to the status of a civil court. Since an
award can be executed directly without a seal of approval by a civil court unlike
an award passed under the provisions of Arbitration Act, 1940 and since there is
no provision in the Act or in the Code to treat a court within whose jurisdiction
the arbitral proceedings took place as the court which passed the decree, it is
only when a court within whose jurisdiction the arbitral award was passed, is
taken to be the court which passed the decree within the meaning of Section 37
and Order XXI Rule 10 CPC that the award holder would be entitled to seek
transmission from that court. But there is no deeming provision anywhere to hold
that the court within whose jurisdiction the arbitral award was passed, should be
taken to be the court which passed the decree. According to Hon’ble Madras
High Court in the aforesaid case, whole procedure of filing an execution petition
before the court within whose jurisdiction the arbitral award was passed, as
though it is the court which passed the decree, is ‘pathetically misconceived’
(sic). Adopting the view of the Hon’ble Delhi High Court it was held that the court
within whose jurisdiction the property of the judgment debtor is situate, would
have jurisdiction to entertain the execution. This view was taken having noticed
that there is no provision in the 1996 Act for transmission of awards from one
court to another for the purpose of execution. The civil revision petition was,
accordingly, allowed by the aforesaid judgment setting aside the order of the X
Assistant Judge, City Civil Court, Chennai.
22. Before embarking on any analysis in regard to the meaning of the word
‘the decree of the court’ occurring in section 36 of the 1996 Act, it is necessary to
notice basic changes brought about by the 1996 Act in regard to status and
executability of award. In the old Act, the Arbitration Act, 1940, the meaning of
the word ‘court’ was wide. Section 2(c) of the 1940 Act defined court as a civil
court having jurisdiction to decide the questions forming the subject matter of
the reference if the same had been the subject matter of the suit. Section 2(c) of
the 1940 Act is quoted below:-
“2(c). “Court” means a Civil Court having jurisdiction to decide the
questions forming the subject matter of reference if the same had been
the subject matter of a suit, but does not, except for the purpose of
arbitration proceedings under Section 21, include a Small Cause Court.”
Thus it is clear from the definition clause that under the old Act any civil
court had jurisdiction to entertain application for and in regard to arbitration
proceedings provided it had territorial and pecuniary jurisdiction.
23. But after commencement of the 1996 Act, a major change has been
effected in the definition of ‘court’. Under the new Act, all civil courts of a district
do not have jurisdiction in regard to arbitration and it has been restricted to the
highest civil court of the district. Section 2(1)(e) of the 1996 Act defines ‘court’
and the same is quoted below:-
“2(1)(e). “Court” means the principal Civil Court of original
jurisdiction in a district, and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the arbitration if the same had
been the subject-matter of a suit, but does not include any civil court of a
grade inferior to such principal Civil Court, or any Court of Small Causes”.
Under the present definition, the highest civil court of a district is ‘the
court’. Although, the definition includes High Court in exercise of its ordinary
original jurisdiction but this applies to only few High Courts which have ordinary
jurisdiction like Calcutta, Bombay etc. In all other High Courts there is no
ordinary jurisdiction for civil or criminal actions and so in majority districts, the
court of District Judge alone is understood to be the court within the meaning of
Section 2(1)(e) of the 1996 Act.
24. It is also significant to notice in the 1996 Act that civil courts other than
principal civil court of original jurisdiction (ordinarily meaning thereby the court of
District Judge) have been described as judicial authorities wherever such
reference has become necessary. In section 5, it has been provided that no
‘judicial authority’ shall intervene except where so provided in this part. Similarly,
in section 8 of the 1996 Act, it is provided that a ‘judicial authority’ before which
an action is brought in a matter which is the subject of an arbitration agreement,
a party is entitled to apply while submitting the first statement on the substance
of the dispute for referring the parties to arbitration. This means that when a suit
has been brought in any civil court and subject matter of such suit involves an
arbitration agreement, in that event, a party is entitled to apply for referring the
parties to arbitration in accordance with the procedure prescribed under the
section. But in Section 8 without making mention of ‘any civil court’, the
legislature has chosen to use the words ‘judicial authority’. In section 41 (2) of
the 1996 Act, there is mention of the words ‘judicial authority’ again to provide
for provisions in case of insolvency proceedings.
25. On the other hand, whenever the word ‘court’ has been used in 1996 Act,
it has referred to ‘court’ within the meaning of section 2(1)(e) of the 1996 Act
only. For example, in Section 9, statute provides for making interim measures
before, or during arbitral proceedings or at any time after making of the arbitral
award. Section 9 refers to the word ‘court’ having power to pass necessary
orders as an interim measure including interim injunction or appointment of
receiver. Such power has been given to ‘court’ meaning thereby that such power
is vested on principal civil court of original jurisdiction in a district. An application
for an interim measure does not lie before any other court except the principal
civil court of original jurisdiction in a district. Similarly in section 11(12)(b), there
is a mention of the word ‘court’ but it has been clearly indicated that it is nothing
but court within the meaning of section 2(1)(e). In section 13(6) of the 1996 Act,
it is provided where an arbitral award is set aside on an application made under
sub-section (5), the Court may decide as to whether the Arbitrator is entitled to
any fees. Under section 34, the power to set aside arbitral award has been
vested only on principal civil court of original jurisdiction in a district and so the
word ‘court’ referred to Section 13(6) of the 1996 Act also refers to said court. In
section 14(2), there is yet another reference to the word ‘court’. It provides that
if a controversy remains concerning any of the grounds as to failure or
impossibility to act by the arbitrator, a party may apply to court to decide on the
termination of the mandate. The ‘court’ mentioned in Section 14(2) is also not
any other civil court but principal civil court of original jurisdiction in a district.
Next reference to the word ‘court’ in 1996 Act is traceable in Section 27 for
assistance in taking evidence. It enables a party with approval of the arbitral
tribunal to apply to ‘the Court’ for assistance in taking evidence. In section 27(3),
‘the Court’ has been given the jurisdiction to execute the request as to assistance
in taking evidence by ordering that the evidence be provided directly to the
arbitral tribunal. The principal civil court of original jurisdiction in a district has
been referred in section 27(4) and (5) whenever the word ‘court’ has been
mentioned. Section 34 of the 1996 Act provides for forum to challenge an arbitral
award and it is provided that recourse to a Court against an arbitral award may
be made by filing application for setting aside of such award in accordance with
the procedure prescribed in the section. No court other than principal civil court
of original jurisdiction in a district has jurisdiction to entertain an application
under section 34. So, it is clear from above that whenever the word ‘court’ has
been used in the 1996 Act, it has referred to principal civil court of original
jurisdiction in a district only.
26. The role of civil court under the 1940 Act was virtually all pervasive.
Under section 8 of the said Act, a civil court had jurisdiction to appoint an
arbitrator or an umpire at the request of a party. After the arbitrator passed an
award the same had to be filed before the court under section 14 and if there
was no reason either to modify or remit the award, the civil court had to
pronounce judgment under section 17 of the Act and thereupon a decree had to
be drawn up. Such a decree being a decree of civil court was capable of being
executed under section 38 read with the provisions of Order XXI of the Code of
Civil Procedure. Naturally, if the subject matter of execution was beyond the
jurisdiction of the court within the meaning of section 2(c) of the 1940 Act, in
that event the same had to be transferred under section 39 like any other decree
of civil court. The transferability of a decree drawn on the basis of an arbitral
award was beyond any doubt. But after the 1940 Act has been replaced by the
1996 Act, a scope for questioning requirement of such transferability has arisen.
27. Under the 1996 Act, award does not require to be filed before court as in
1940 Act. Section 35 of the 1996 Act has conferred finality on an arbitral award.
It provides that subject to this part, meaning thereby Part-I of the 1996 Act, an
arbitral award shall be final and binding on the parties and persons claiming
under them respectively. By section 36, provision has been made for
enforcement of a domestic arbitral award. Foreign awards are covered by Part-II
of the 1996 Act and the present set of revision petitions have no relation to that
part as all the awards herein are arbitral awards of domestic arbitral proceedings.
28. Section 36 of the 1996 Act has elevated an arbitral award to the status of
a civil court decree by legal fiction and so it is capable of being executed as if it
were a decree of the court. Now, what shall be the meaning of the words ‘the
decree of the court’ is the crux of the present revision petitions. To understand
the meaning of these words, it is necessary to keep in mind the observations
made hereinabove as to definition of ‘court’ in the 1940 Act as well as the 1996
Act and also the status of an arbitral award under both the statutes as discussed
above. Section 36 casts light in this regard and so it is quoted below:-
“36. Enforcement. – Where the time for making an application
to set aside the arbitral award under section 34 has expired, or such
application having been made, it has been refused, the award shall be
enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same
manner as if it were a decree of the Court.”
There is no reason as to why the word ‘court’ mentioned in section 36
should not be understood to be principal civil court of original jurisdiction, having
jurisdiction to decide the questions forming the subject matter of arbitration if
the same had been the subject matter of a suit. If it is so construed, in that
event, ‘the decree of the court’ occurring in section 36 would mean decree
passed by principal civil court of original jurisdiction in a district having
jurisdiction to decide the questions forming the subject matter of the arbitration
in terms of definition of ‘court’ under section 2(1)(e) of the 1996 Act. This is
because, the place of arbitration and the principal civil court of original
jurisdiction in a district may not be at same place. Under section 20 of the 1996
Act, parties are free to agree on the place of arbitration irrespective of whether
the subject matter of the dispute is situated at that place. Parties at two different
places may agree to hold arbitration in a third place as per their convenience/
contract although such a place may not be the place of the subject matter of the
dispute. At any event the court, in all those cases, shall be the principal civil
court of original jurisdiction in a district in whose territorial jurisdiction the
subject matter of the arbitration is situated. Consequently, it shall be the court
for the purpose of Section 34 as well as Section 36 of the 1996 Act. In this
regard, the view taken by Hon’ble Madhya Pradesh High Court appears to be of
more persuasive force than that of Hon’ble Delhi High Court.
29. In view of what has been stated above, when an application under
section 36 is filed before any principal civil court of original jurisdiction, it is duty
bound to find out:-
(i) whether it has territorial jurisdiction to decide questions forming
the subject matter of the arbitration if the same had been the
subject matter of a suit, and if so
(ii) whether period for filing application for setting aside the arbitral
award under section 34 of the Act has expired, and if so
(iii) whether such an application has at all been filed, and if so
(iv) whether such application on being filed has already been refused;
then and then only, the court can proceed to enforce the award as if it were a
decree of that court. But if it is found that it does not have jurisdiction to decide
questions forming the subject matter of the arbitration if the same had been the
subject matter of a suit, in that event, it cannot go for enforcing the award
taking recourse to the provisions of Order XXI of the Code of Civil Procedure
because by describing an arbitral award as ‘decree of the court’, the legislature
had amply mandated that it would only be the principal civil court of original
jurisdiction, having jurisdiction to decide questions forming the subject matter of
the arbitration if the same had been the subject matter of a suit. Otherwise, the
words ‘the court’ occurring at the end of section 36 after the word ‘a decree of’
shall become redundant which is contrary to the principles of interpretation of
statutes.
30. However, if the court to which an application under section 36 has been
filed, finds that it does not have jurisdiction to decide questions forming the
subject matter of the arbitration if the same had been the subject matter of a
suit, then it can entertain application only if the principal civil court of original
jurisdiction having jurisdiction to decide the questions forming the subject matter
of arbitration transfers the same to it. This is because, as discussed above, the
arbitral award at all events is the decree of the court having jurisdiction to decide
questions forming the subject matter of the arbitration if the same had been the
subject matter of the suit and not otherwise. If an arbitral award is the decree of
the principal civil court having jurisdiction to decide questions forming the subject
matter of the arbitration if the same had been the subject matter of the suit by
legal fiction created by section 36 of the 1996 Act all other attributes of a civil
court decree shall be available to it and so it shall also be capable of being
transferred under section 39 as w21ell as Rules 5, 6, 7 and 8 of Order XXI of the
of the Code of Civil Procedure.
31. The above questions are fundamental and also inherent in section 36 of
the Act. Unless an executing court is satisfied on these points, it does not derive
jurisdiction to proceed further for enforcing an arbitral award. As these questions
go to the root of the matter and are intimately related to the inherent jurisdiction
of a court, a court cannot entertain an execution application under section 36 of
the Act read with the provisions of Order XXI of the CPC merely at the asking of
an award holder. As observed above, these aspects have not been gone into by
the learned Executing Courts involved in any of these revision petitions.
Consequently, it is to be held that the impugned orders are vitiated by
jurisdictional error and so, they are liable to be set aside. The impugned orders
are accordingly set aside.
32. In view of what has been discussed above, all the revision petitions stand
allowed and the concerned learned Executing courts are directed to pass orders
afresh taking into consideration the observations made including the questions
framed hereinabove. To avoid any further confusion and avoidable multiplicity of
proceedings, it is hereby made clear that in deciding the questions referred to in
question No. (ii) and (iii) in paragraph 29 above, the learned court shall first
determine the date since when limitation within the meaning of section 34(3) of
the 1996 Act would start running and thereupon proceed to decide the next
question. However, if the court finds after hearing the parties that it does not
have jurisdiction to decide questions forming the subject matter of the arbitration
if the same had been the subject matter of the suit in that event, shall not
proceed to decide any other question or to enforce the award until and unless
the award is transferred to it by the principal civil court having jurisdiction to
decide questions forming the subject matter of the arbitration if the same had
been the subject matter of the suit.
33. The revision petitions stand disposed of accordingly.
34. No order as to costs.