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2018 DIGILAW 142 (MAD)

. v. .

2018-01-10

C.V.KARTHIKEYAN

body2018
JUDGMENT : C.V. Karthikeyan, J. 1. This application has been under Order 14 Rule 2 of the Original Side Rules, seeking to set aside the order of the Master, dated 6.12.2017 made in EPD.No.38028 of 2017 and to direct the Registry to number the execution petition in EPD.No.38028 of 2017 and transmit the decree/award, dated 25.4.2016 passed by the Sole Arbitrator to the District Court, Bellary, State of Karnataka. 2. EPD.No.38028 of 2017 had been filed by a decree holder pursuant to the final award passed under Section 31 of the Arbitration and Conciliation Act, 1966. 3. The decree holder, M/s.P & D Enterprises, represented by its Proprietor M.Poobalan and the judgement debtor, M/s.Tiffins Barytes Asbestors and Paints Limited, represented by its Managing Director, Sriram Vedham, were parties before the arbitration proceedings conducted by the Sole Arbitrator, K.Venkatraman, J., former Judge of the Madras High Court. The Arbitral Tribunal came to be constituted by orders passed by this Court in OP.No.541 of 2014, dated 19.9.2014. 4. The Arbitral Tribunal had issued notices to both parties and during the arbitral proceedings, both the parties had filed a Memo of Compromise, dated 24.4.2016. On that date, a Memorandum of Understanding, dated 16.4.2016 was also filed. According to the said Memorandum of Understanding, the following agreement was reached between the parties:- (a). As per the said Memorandum of Understanding the Respondent shall pay to the claimant a sum of Rs.20,93,52,531.00/- (Rupees twenty crores ninety three lakhs fifty two thousand and five hundred and thirty one only) along with interest @ 18% at the bank mode of calculation from the date of receipt of advance. (b). The Respondent also has to pay the claimant liquidated damages of Rs.15,00,00,000/- (Rupees fifteen crores only) in full quit and settlement of all claims under the subject agreement. (c). The parties are also agreed for passing consent award in respect of other matters which were set out in Class 3 to 6 of the Memorandum of Understanding entered into between them. (d). The parties also agreed now the litigations pending between them in various courts shall be disposed off as set out in Class 7 of the Memorandum of Understanding.” 5. In pursuant to the said Memorandum of Understanding followed by a Memo of Compromise filed before the Arbitral Tribunal, the Sole Arbitrator had passed an award on 25.4.2016, incorporating the above terms in his award. In pursuant to the said Memorandum of Understanding followed by a Memo of Compromise filed before the Arbitral Tribunal, the Sole Arbitrator had passed an award on 25.4.2016, incorporating the above terms in his award. To enforce the award, the decree holder had filed a execution petition under Order 21 Rules 43 and 64 of CPC before the Original Side of this Court and sought the following assistance of the Court:- (a). to pass an order of attachment of approximately 7.5 lakhs metric tons of iron ore lying in S.No.311, M.L.No.2293, Haraganadoni Village, Bellary Taluk, Bellary District, State of Karnataka, as per the records of DMG and IBM. Schedule of the Mines M.L.No.2293, where the stock is present is bounded on the: North By : S.Nos.74,76,77,78,79, 80 and 276 South By : V.No.33 & Sandur Taluk Boundary East By : V.No.35 & S.Nos.71, 72, 74 and 76 West By : S.No.293, 306 to 310, 276 & 80 (a). Sale of immovable item which are described in the Schedule hereunder to satisfy the decree.” 6. Simultaneously, the decree holder had also filed an application to transmit the decree/ award under Order 21 Rule 5 of CPC read with Section 40. The Registry had raised objections to number the execution petition and put up the following note before the Master:- “The above execution petition has been filed under EPD.No.38028 of 2017 by the learned counsel for the decree holder praying that “pleased to pass an order of attachment and sale of immovable properties of the judgement debtor, more fully described in the Schedule”. After scrutinising the above said EPD.No.38028 of 2017, the Registry returned the above EP with the following endorsement:- “It may be stated how this EP for attachment and sale of immovable and movable property is maintainable before this Hon'ble Court. Since, the Schedule mentioned properties are situate at out of jurisdiction of this Court. In view of the order passed by this Hon'ble Court in CRP(NPD)No.2331 of 2011, has held that there is no necessity for transmission.” The learned counsel for the decree holder re-presented the above EPD.No38028 of 2017 with the following endorsement:- “”The EP has been filed for attachment of movable and immovable properties situate outside the jurisdiction of this Hon'be Court, with a request to transit the Arbitral Award dated 25.4.2016, passed at Chennai to the file of District Court, Bellary, State of Karnataka for execution. The decree holder enquired at Bellary, Karnataka State about the filing of EP directly before the District Court, Bellary without obtaining any order for transmission of decree and was told that the District Court, Bellary, State of Karnataka is bound by the orders of Hon'ble Court. Moreover, the order passed in CRP(NPD)No.2331 of 2011 by this Hon'ble Court is General in nature, particularly, applicable within the State of Tamil Nadu. Therefore, the above EP and the connected papers may be placed before the Hon'ble Judge for maintainability with regard to transmission of Decree and thus, render justice. In the event of the registry is not satisfied with this compliance, the EPD.No.38028 of 2017 may be posted before the Court for orders to maintainability.” In this connection, it is submitted that while entertaining the above petition, the Office is still having a doubt regarding the maintainability of the execution petition. Since the order passed by this Hon'ble Court dated 26.08.2011 in CRP(NPD)No.574 of 2011, in respect of jurisdiction of this Court and transmission of the award.” 7. The Registry has posted the matter before the Master for maintainability. The Master had the opportunity of hearing the learned counsel for the Petitioner/ decree holder and on 6.12.2017, passed the following order:- “Heard the counsel for the Petitioner/ decree holder. On perusal of the case records, it is seen that the property to be attached is out of jurisdiction of this Court. In CRP(NPD)No.574 of 2011, it has been categorically differentiated between a decree and an award. Moreover, it has been held as to how a decree or award can be executed in case of issues regarding jurisdiction. From the above judgement, it is also seen that transmission of award cannot be done when the executing court has no knowledge of partial satisfaction of the Award. In such circumstances, this Court is bound by the order of the Hon'ble High Court, Madras and accordingly, the EPD.No.38028 of 2017 is rejected as not maintainable. Registry is directed to return the entire bundle to the decree holder counsel.” 8. This order of the Master is the subject matter of the present application in A.No.8429 of 2017, which in fact is an appeal against the said order. 9. This Court heard Mr.B.Kumar, the learned senior counsel for the Applicant/ decree holder. Registry is directed to return the entire bundle to the decree holder counsel.” 8. This order of the Master is the subject matter of the present application in A.No.8429 of 2017, which in fact is an appeal against the said order. 9. This Court heard Mr.B.Kumar, the learned senior counsel for the Applicant/ decree holder. The learned senior counsel drew the attention of this Court to Order 21 Rule 5 of CPC, which is as follows:- “5. Mode of transfer:- Where a decree is to be sent for execution to another Court, the Court which passed such decree shall send the decree directly to such other Court whether or not such Court is situated in the same State, but the Court to which the decree is sent for execution shall, if it has no jurisdiction to execute the decree, send it to the Court having such jurisdiction.” 10. The learned senior counsel also pointed out Section 36 of the Arbitration and Conciliation Act, 1966, which is as follows:- “36. Enforcement:- (1) Where the time for making an application to set aside the arbitral award under Section 34 has expires, then, the subject to the provisions of sub section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court. (2) Where an application to set aside the arbitral award has been filed in the Court under Section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub section (3) on a separate application made for that purpose. (3) Upon filing of an application under sub section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).” 11. The learned senior counsel has stated that since an award has to be enforced in accordance with the provisions of CPC, 1908, the provisions of Order 21 Rule 5 of CPC automatically applies and therefore, the decree, which has been filed in the Original Side, should be transmitted to the District Court, Bellary, State of Karnataka. The learned senior counsel has further stated that however, reliance has been placed by the Master on the judgement dated 28.6.2011 in CRP(NPD)No.574 of 2011 which has been reported in 2011 6 CTC 11 (Kotak Mahindra Bank Limited Vs. Sivakama Sundarai) wherein in paragraph 25, it had been held as follows:- “25. In the absence of any provision in the 1996 Act, requiring a Court to pass a decree in terms of the award (except in terms of Section 34) and in the absence of any provision in the 1996 Act making the Arbitral Tribunal a Court which passed the decree and in the absence of any provision anywhere making the court within whose jurisdiction an award was passed as the court which passed the decree, it is not open for any executing Court (i) either to demand transmission from any other Court; (ii) or to order transmission to any other Court.” 12. I have carefully considered the arguments advanced. 13. In 2011 6 CTC 11 (Kotak Mahindra Bank Limited Vs. Sivakama Sundarai), the provisions of CPC relating to execution had been examined and it was observed in paragraph 15 as follows:- “15. But, the fact that an Arbitral Tribunal is not bound by the Rules of Procedure formulated in the Code, is made clear by Section 19(1)of the Arbitration and Conciliation Act, 1996. Therefore, an Arbitral Tribunal is not a Court. Hence it follows that the Arbitration and Conciliation Act, 1996, (hereinafter referred to as the "1996 Act") elevates an award to the level of a decree, for the purpose of execution. But, it does not elevate the Arbitral Tribunal to the status of a civil Court.” 14. Thereafter, in paragraph 16, it was held as follows:- “17. Once it is seen that an award of the Arbitral Tribunal is deemed to be a decree, by virtue of Section 36of the 1996 Act, it follows as a corollary that the Arbitral Tribunal is in the position of a Court which passed the decree (though it may not be the same). Once it is seen that an award of the Arbitral Tribunal is deemed to be a decree, by virtue of Section 36of the 1996 Act, it follows as a corollary that the Arbitral Tribunal is in the position of a Court which passed the decree (though it may not be the same). But, no application for execution can be presented to an Arbitrator, by the holder of an award, under Order XXI, Rule 10, on the ground that the Arbitral Tribunal is the Court which passed the decree. Therefore, the provisions of Section 38and Order XXI, Rules 5, 6 and 10 of the Code of Civil Procedure cannot be applied to an Arbitral Tribunal. To put it differently, it is only when an award holder is entitled to file an execution petition before the Arbitral Tribunal itself under Order XXI, Rule 10, (treating it as a Court which passed the decree) that the provisions of Order XXI, Rules 5 and 6 would come to play.” 15. Finally, in paragraph 19, it was observed as follows:- “19. While the award passed by an arbitral tribunal is deemed to be a decree of a civil court under section 36of the 1996 Act, there is no deeming fiction 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. Therefore, the 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.” 16. For this proposition, reliance was placed on Daelim Industrial Co. Limited Vs. Numaligarh Refinery Limited (EA.No.105 of 2009 in Ex.No.242 of 2008, dated 13.3.2009) wherein an objection was raised to the territorial jurisdiction of the Delhi High Court to entertain an execution petition. The objection was on the basis that the arbitration proceedings were held and order pronounced at Calcutta and that the award was challenged successfully before a District Court in Assam. However, the High Court of Guwahati set aside the judgement of the District Court and partly upheld the award. The Supreme Court partly modified the judgement of the High Court. Therefore, it was contended by the award debtor that the Delhi High Court had no jurisdiction. It was also contended that the decree had to be transmitted. However, the High Court of Guwahati set aside the judgement of the District Court and partly upheld the award. The Supreme Court partly modified the judgement of the High Court. Therefore, it was contended by the award debtor that the Delhi High Court had no jurisdiction. It was also contended that the decree had to be transmitted. Repelling the said contention, the learned Judge of the Delhi High Court held that in the absence of applicability of the mandate of Section 38, CPC, the Court within whose jurisdiction the property of the judgement debtor is situate, would have jurisdiction to entertain the execution. For coming to the said conclusion, the learned Judge of the Delhi High Court also held that even Section 42of the 1996 Act would not stand in the way. The Court also drew inspiration from the fact that some of the orders of the Company Law Board were also intended to be enforced through a Court, without orders for their transmission. 17. It was also finally held in paragraph 24 as follows:- “24. There is no provision under the 1996 Act (i) either to make the Arbitral Tribunal come within the meaning of the expression "Court which passed the decree"; (ii) or to provide for the transmission of the awards from one Court to another for the purpose of execution. Complicating the issue further, it appears that the award holders also seek a certificate from this Court that the award has not been satisfied by the award debtor. It is only a Court which passed the decree that would be competent and that would be able to give a certificate of the said nature. The Court which passed the decree would always know the extent to which the decree got satisfied through the same Court. It would also know the extent to which the decree was satisfied in some other Court to which the decree was transmitted, in view of the provisions of Section 41 of the Code. But, in respect of an arbitration award, no Court can know whether an award was partly or fully satisfied, unless it had the opportunity to execute the award by itself.” 18. But, in respect of an arbitration award, no Court can know whether an award was partly or fully satisfied, unless it had the opportunity to execute the award by itself.” 18. This judgment of the Madras High Court was also followed by a subsequent judgment of the Delhi High Court in Exp.67 of 2012, dated 28.2.2012 (2012 SCC Online Del 1224), wherein a very similar application as the present application had been filed and the Delhi High Court, had declined to grant any relief and had stated that it will be open to the decree holder to approach the competent Court in Bangalore, Karnataka for execution of the award in accordance with law. 19. With much respect to the reasoning given in the above judgments, I must point out that in the judgment reported in 2011 6 CTC 11 , this Court had actually finally stated as follows:- “26. .... except in cases where only part satisfaction is recorded in execution by one Court and the remaining portion is required to be executed as against the property situate within the jurisdiction of any other Court.” Moreover, in the entire course of the judgment, the definition of the word, 'Court' had been unfortunately overlooked. Section 2(e) defines the word 'Court” as follows:- “2(e) “Court” means:- (i) in the case of an arbitration other than international commercial arbitration, 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; (ii) in the case of international commercial arbitration, 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, and in other cases a High Court having jurisdiction to hear appeals from decrees of Courts Subordinate to that High Court;” 20. In P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539 the Honourable Supreme Court has held in paragraph 8 as under:- “8. ... In P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539 the Honourable Supreme Court has held in paragraph 8 as under:- “8. ... The court to which the party shall have recourse to challenge the award would be the court as defined in clause (e) of Section 2 of the new Act and not the court to which an application under Section 8 of the new Act is made. An application before a court under Section 8 merely brings to the court's notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2(e) of the new Act.” 21. The Arbitral Tribunal may not be a Court in itself, but the Tribunal is dissolved once an award is passed. The conduct of arbitral proceedings is dealt with in Chapter 5 of the Arbitration and Conciliation Act. This deals with place of arbitration under Section 20. It also deals with rules of procedure under Section 19. It deals with commencement of the arbitral proceedings under Section 21. Chapter 6 of the Arbitration and Conciliation Act deals with making of an award and termination of proceedings. Section 31 deals with form and contents of arbitral award. 22. Under Section 31 (5), it is stated as follows:- “(5) After the arbitral award is made, a signed copy shall be delivered to each party.” 23. Section 32 deals with termination of proceedings. 24. Chapter VII deals with recourse against arbitral award. This includes Section 34, wherein a Court comes into play. Section 34 is as follows:- “34. Application for setting aside arbitral award:- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with law sub section (2) and sub section (3).” 25. Sub Sections (2) and (3) are not pointed out and from Chapter VII onwards, the arbitral award is the subject matter of challenges before a Court since the Tribunal has completed the purpose for which it was formed by passing of the award. Chapter VIII relates to finality and enforcement of arbitral awards. Sub Sections (2) and (3) are not pointed out and from Chapter VII onwards, the arbitral award is the subject matter of challenges before a Court since the Tribunal has completed the purpose for which it was formed by passing of the award. Chapter VIII relates to finality and enforcement of arbitral awards. Here again, the endorsement is only before the “court'. Naturally, the Court, which has power under Section 34 of the Act, would also be empowered to enforce the award under Section 34. On occasions, it may not be so empowered, as in this case, where the property is situated elsewhere. In such instances, it would not be justifiable for a Court to turn away a litigant and the Court must accept the duty and discharge the same as contemplated under Order 21 Rule 5 of CPC. The Court is called upon to examine the award as a whole and under Section 36, assistance of the Court is sought to enforce the award. It would be a failure of justice if the courts were to turn away the decree holder who had filed their award into the Court and seek transmission on the ground that the award, though it is to be enforced as a decree, having been passed by a Arbitral Tribunal, would not be subjected to provisions under Order 21 of CPC since arbitral Tribunal is not the Court. 26. It is to be kept in mind that the provisions of Order 21 of CPC come into play only in the case of enforcement of an award. An award is passed by a competent authority. In this case, the legally recognised competent authority is the Arbitral Tribunal. The Arbitral Tribunal may not be in strict sense termed as 'Court', but the award which it passes becomes a decree and when a decree is to be recognised, there has got to be a basis for such a decree and a decree is to be filed in a Court for its enforcement. When this aspect is examined and when a decree is examined in relation to a Court, the arbitral award as a decree cannot be related to the Arbitral Tribunal because that is terminated by passing of the award and subsequently, the 'Court' as defined under Section 2(e) of the Act comes into play. When this aspect is examined and when a decree is examined in relation to a Court, the arbitral award as a decree cannot be related to the Arbitral Tribunal because that is terminated by passing of the award and subsequently, the 'Court' as defined under Section 2(e) of the Act comes into play. Under Section 2(e) of the Act, a 'Court' is defined as the principal civil Court of original jurisdiction in a District and includes the High Court in exercise of its ordinary original civil jurisdiction. Consequently, when the parties have decided to arbitrate their disputes before the Tribunal and when an award is passed, the award might be challenged under Section 34 or enforced under Section 36. 27. In the present case, the Arbitral Tribunal itself has been formed as a legal entity only by reason of the order of this Court in OP.No.541 of 2014 dated 19.9.2014. Therefore, it is only natural that the decree holder would come back to the Court from where the Arbitral Tribunal was formed seeking to enforce the same. It would not be proper to send away such a decree holder on the ground that the Arbitral Tribunal has ceased to function and there is no 'Court' in the strict sense. It would not be proper to direct the decree holder to search for a place where he can execute the decree. It is to assist the decree holder to execute the decree that Order 21 of CPC has been enacted. 28. Under Order 21 Rule 5, a decree can be transmitted to any Court for execution. The Court which passed the decree is the Court where the decree can be challenged. In a case of arbitral award, the court where a decree can be challenged is, in this particular instance, the High Court of Madras, since it is in the High Court of Madras Original Side that OP.No.541 of 2014 was filed, as a consequence of which the Arbitral Tribunal itself was constituted. Therefore, the High Court has to take up the responsibility of entertaining the execution petition and transmit it under Order 21 Rule 5. Therefore, the High Court has to take up the responsibility of entertaining the execution petition and transmit it under Order 21 Rule 5. As a matter of fact, even in CRP(NPD)No.574 of 2011, the learned Judge had also probably felt in the same manner as has been discussed above, since he had also expressed a caveat with respect to execution as against property situated within the jurisdiction of any other Court. 29. In the present case, the judgment debtor is residing outside the jurisdiction of this Court and naturally effective enforcement of the award can be done at that place, but since the 'Court' as defined under Section 2(e) of the Arbitration and Conciliation Act, is the Original Side of the High Court of Madras High Court, execution petition can be filed before this Court. Thereafter, this Court can transmit the same to the District Court at Bellary. This judgment is not in conflict with the judgment reported in 2011 6 CTC 11 since in the earlier judgment the definition of the word 'Court' under Section 2(e) of the Arbitration and Conciliation Act had not been examined and consequently, this order can only be considered as an extension of the above order. A decree holder has the option of filing Execution Petition straight away in the Court where he seeks enforcement or in the Court where an application under Section 34 would be normally filed and then, seek transmission of the award under Order 21 Rule 5 of CPC. Therefore, I hold that the execution petition is maintainable. The Registry is directed to number the execution petition if it is otherwise in order. 30. In the result, this application is allowed as prayed for. No costs.