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2009 DIGILAW 910 (DEL)

UZI JUSTMAN v. TELEPHONE CABLES LTD

2009-08-18

RAJIV SAHAI ENDLAW

body2009
JUDGEMNT RAJIV SAHAI ENDLAW, J. 1. Execution is sought of an arbitral award having the force of a decree under the provisions of the Arbitration Act, 1996. The arbitral award is for payment of US $1,80,000/- by the judgment debtor to the decree holder. The execution petition was originally filed in the court of the District Judge, Chandigarh in or about the year 2000. The judgment debtor filed objections to the execution. The decree holder applied to the Supreme Court for transfer of the execution petition outside Chandigarh and vide order dated 9th December, 2002 the said transfer petition was allowed and the execution proceedings transferred to the District Court, Delhi. While the execution proceedings were pending before the Additional District Judge, on 16th August, 2000 issues were framed as to whether the award is liable to be set aside. Some witnesses were also examined before the learned Additional District Judge. 2. The judgment debtor on or about 3rd July, 2003 filed an application under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 stating, inter alia, that the reference of the judgment debtor dated 21st October, 2002 before the BIFR had been registered as case No.712/2002 and praying for suspension / stay of the proceedings in the execution. However, subsequently realizing that the decree sought to be executed was for an amount beyond the pecuniary jurisdiction of the Additional District Judge, the Execution proceedings were in or about the year 2006 transferred to this court and are pending since then. 3. The counsel for the decree holder, on 9th April, 2009 informed this court that the BIFR had granted permission to the decree holder to execute this decree against the judgment debtor but the said order of the BIFR had been stayed by the AAIFR. He, however, contended that the bar of Section 22(1) will not come in the way of the present execution. Thereafter also the proceedings were adjourned on 6th July, 2009 on the ground that the decree holder has moved an application before the AAIFR for vacation of the order of stay of the permission granted by the BIFR to pursue the present proceedings. 4. Today also the counsel for the decree holder has, at the outset, requested that the proceedings be adjourned. He has contended that the arguments before the AAIFR have been concluded and the order is awaited. 4. Today also the counsel for the decree holder has, at the outset, requested that the proceedings be adjourned. He has contended that the arguments before the AAIFR have been concluded and the order is awaited. However, since it was his contention on 9th April, 2009 (supra) that the provisions of Section 22(1) of the Act do not come in the way of this execution, rather than adjourning the matter, arguments have been heard inasmuch as proceedings cannot be kept indefinitely before the court; if the counsel for the decree holder is able to satisfy that the provisions of Section 22(1) do not come in the way of the execution, the execution will proceed irrespective of the proceedings aforesaid before the BIFR and AAIFR, else this execution is barred by Section 22(1) of the Act. 5. The counsel for the decree holder has contended that the decree holder, a foreign national was an employee of and worked with the judgment debtor company; However, since difficulties were being faced in payment of remuneration to the decree holder owing to his foreign citizenship, and to enable requisite permissions to be obtained in this regard, the modality of arbitration was adopted and the claims of the decree holder against the judgment debtor were referred to arbitration; in accordance with the understanding aforesaid, a settlement agreement dated 30th November, 1999 was arrived at between the parties and an arbitral award pronounced in terms thereof. The counsel for the decree holder has submitted that however thereafter the intentions of the judgment debtor turned dishonest and the agreed awarded amounts were not paid to the decree holder leading to the filing of the execution aforesaid. 6. The contention of the counsel for the decree holder qua non-applicability of the bar of Section 22 of the SICA are two fold. Firstly it is contended that the bar in Section 22(1) to proceedings for execution does not apply to execution of arbitral award. Attention is invited to Section 22(3) providing for the BIFR to order or declare that the operation of any award to which a sick company is a party shall remain stayed. It is contended that admittedly neither is there any order of the BIFR nor has the judgment debtor company made any application to the BIFR for stay of operation of the arbitral award under execution. It is contended that admittedly neither is there any order of the BIFR nor has the judgment debtor company made any application to the BIFR for stay of operation of the arbitral award under execution. It is further argued that since the provision with respect to arbitral award has been made in Section 22(3), it has to be necessarily held that the reference in Section 22(1) to the execution does not include the reference to the execution of an award. Reliance in this regard is placed on the judgment of the Division Bench of this court in M/s Lloyd Insulations (India) Ltd Vs Cement Corporation of India Ltd ILR (2001) 1 Delhi 62 and Morgan Securities and Credit Pvt Ltd Vs Modi Rubber Ltd AIR 2007 SC 683 . 7. I do not find the contention raised by the counsel for the decree holder to have been the subject matter of adjudication in either of the aforesaid two decisions. It thus cannot be said that the question raised is covered by either of the said judgments. All that M/s Lloyd Insulations (supra) holds is that Section 22(1) does not apply to a proceeding under Sections 14 and 17 of the Arbitration Act 1940. The reason given therefore is that a petition under Sections 14 and 17 of the Act is not a suit (though registered as a suit). However, while holding so, another reason given is that the arbitral awards are covered by Section 22(3) of the Act. The Division Bench held that stay of the proceedings under Sections 14 and 17 of the Arbitration Act, 1940 for making the arbitral award a rule of the court, could be under Section 22(3) of the Act. 8. Similarly in Morgan Securities (supra) also no arbitral award for execution was for consideration. What the Supreme Court held in that case was that the bar of Section 22(1) of the Act did not come in the way of a petition under Section 34 of the 1996 Act unless the BIFR passes an order under Section 22(3) of the Act. Similarly in Morgan Securities (supra) also no arbitral award for execution was for consideration. What the Supreme Court held in that case was that the bar of Section 22(1) of the Act did not come in the way of a petition under Section 34 of the 1996 Act unless the BIFR passes an order under Section 22(3) of the Act. While holding so also the Supreme Court in para 68 of the judgment held that upon the rejection of the objections to the award, the question of enforceability of the award would come into being and once the arbitral award having the force of a decree is put into execution sub-Section (1) of Section 22 of SICA would come in its way from being enforced. 9. It would thus be seen that the judgment of the Supreme Court in Morgan Securities and Credit Pvt. Ltd (supra) rather than helping the decree holder is against the decree holder. 10. Even otherwise, a judgment is a precedent only on the matter arising for consideration before the court. In neither of the aforesaid judgments was the question of applicability of Section 22(1) to the execution of arbitral award as a decree was before the court. Nevertheless the observations aforesaid came to be made by the Supreme Court and which, in my opinion, cannot also be brushed aside as obiter. 11. Even otherwise the arbitral award under the Arbitration Act, 1996, as the award in the present case is under Section 36 of the Act is given the force of and made executable as a decree. Once the same is executable as a decree, the effect of Section 22(1) of SICA cannot be whittled down. Even otherwise considering the object of enacting SICA and Section 22, there is no reasonable basis/ nexus for carving out a distinction between execution of a decree and of an arbitral award having the force of the decree. The purport is to protect the properties of a sick company under rehabilitation from being attached / sold in execution at the instance of the individual creditors and which would come in the way of rehabilitation in the larger interest. The said object would be defeated equally if execution is permitted of an arbitral award and it does not make any sense to prohibit execution of the decrees of the court but not of awards of the arbitrator. 12. The said object would be defeated equally if execution is permitted of an arbitral award and it does not make any sense to prohibit execution of the decrees of the court but not of awards of the arbitrator. 12. The Supreme Court in Jay Engineering Works Ltd Vs Industry Facilitation Council AIR 2006 SC 3252 was concerned with an award under the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The High Court held the said Act to be prevailing over the SICA and held the award to be executable notwithstanding Section 22(1). The Supreme Court reversed the order of the High Court and held that once the award is being executed as a decree before a civil court, it will definitely attract Section 22 of SICA, even though adjudicator process of making an award under the aforesaid 1993 Act may not come within the preview of SICA but once an award is made and sought to be executed, Section 22 of SICA will come into play. Reference was also made to Section 32 of SICA making provisions thereof notwithstanding inconsistencies with other laws. 13. The second contention of the counsel for the decree holder is that the arbitral award in the present case is for recovery of dues of the decree holder who was an employee of the judgment debtor company. It is urged that Section 22 of SICA is not a bar for recovery of dues of an employee of a sick company. Reference in this regard is placed on Mideast India Ltd Vs Shri K.M. Unni 2002 IV AD Delhi 157 wherein a Single Judge of this Court in view of and following judgments in Rajnagar Textiles Mills No. 1 Vs Textile Labour Association (1998) 93 Company Cases 447; Shree Chamundi Mopeds Ltd. Vs Church of South India Trust Association (1992)75 Company Cases 440 and Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals, (1997) 89 Company Cases 1 held that Section 22 of SICA would not operate as a bar to the payment of dues of workmen, employees following the adjudication of industrial disputes or determination of dues under the provisions of Industrial Disputes Act. 14. As would be obvious, said observations were in view of the provisions of the Industrial Disputes Act. 14. As would be obvious, said observations were in view of the provisions of the Industrial Disputes Act. The counsel for the decree holder admits that the decree holder was not a workman and was/is not covered by the provisions of the Industrial Disputes Act. He has however contended that the principle would apply. However, I am unable to accept the said contention. The courts have in various context treated the workman to be different from managerial or other employee. The law relating to a workman can thus not be made applicable to non-workman employees. Thus, the contention of the decree holder that Section 22(1) of SICA does not apply to the present execution does not find favour with me and is rejected. 15. As far as the request of the decree holder for adjournment of the present execution awaiting the permission from BIFR/AAIFIR is concerned, I find that the execution under Section 22(1) does not “lie”. The execution as on the date of institution before this court thus did not lie and ought not to remain on the docket of this court. Even though the arbitral award of which execution is sought is dated 30th November, 1999, no prejudice shall be suffered by the decree holder inasmuch as the time during which the decree holder was prohibited from executing the same owing to the provisions of Section 22 of SICA would be excluded in computing the limitation for applying for execution. It is often found that parties, to serve their own purpose, want to keep proceedings, which otherwise are not maintainable, pending before this court. This court cannot allow its process to be abused in this fashion and if found that the proceedings do not lie before this court, the same cannot be adjourned day after day merely awaiting the situation in which the proceedings would be maintainable. Nothing substantial has happened in these proceedings, the benefit whereof would be lost to the decree holder in the event of applying afresh. Though issue was framed when proceedings were pending before District Court but the same appears to be misconceived in an much as in execution the question whether arbitral award under the Arbitration Act, 1996 can be set aside or not cannot be gone into. The execution petition is thus dismissed. However, in the circumstances the parties are left to bear their own costs.