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2024 DIGILAW 367 (CAL)

Mintech Global Private Limited v. Kesoram Industries Limited

2024-02-20

MOUSHUMI BHATTACHARYA

body2024
JUDGMENT : MOUSHUMI BHATTACHARYA, J. 1. The award-debtor has filed the present application for stay of the Execution proceedings till the outcome of the application made by the award-holder for setting aside of the award under section 34 of The Arbitration and Conciliation Act, 1996. Both the parties have sought for setting aside of the award. The award-debtor in AP No. 396 of 2023 (which is the award-holder’s setting aside application) has taken a point of the execution proceedings not being filed in proper form under the provisions of The Commercial Courts Act, 2015. The award-debtor accordingly seeks striking out of pleadings in the Execution Case and other consequential orders against the award-holder. 2. To streamline the argument made on behalf of the award-debtor, according to learned counsel, the tabular statement of the Execution Case mentions “Original Side” instead of “Commercial Division.” The other argument is that the affidavit in support of the Tabular Statement is not accompanied by a Statement of Truth as required under Order VI Rule 15A of The Code of Civil Procedure, 1908, (CPC) as amended by The Commercial Courts Act, 2015. Counsel submits that the award-holder should not be permitted to rely on the pleadings made in the affidavit in support of the tabular statement and that the pleadings should also be struck out under the mandate of Order VI Rule 15A(5) of the CPC. 3. Learned counsel appearing for the award-holder resists the preliminary objection taken on behalf of the award-debtor by placing several provisions of The CPC as amended by the Commercial Courts Act. Counsel seeks to urge that the alleged procedural lapses are curable and do not go the root of the matter. Counsel seeks to limit the application of Order VI Rule 15A of the CPC to “pleadings” as defined under Order VI of the CPC. Counsel further submits that the words “Original Side” is a result of a typographical error which cannot cause any prejudice to the award-debtor who should be given an opportunity to correct the same. 4. The issue which is germane for consideration is whether it is mandatory to affirm and verify the affidavit-in-support of the tabular statement in compliance with Order VI Rule 15-A of The Code of Civil Procedure (CPC), 1908 as amended by the Commercial Courts Act, 2015. 5. 4. The issue which is germane for consideration is whether it is mandatory to affirm and verify the affidavit-in-support of the tabular statement in compliance with Order VI Rule 15-A of The Code of Civil Procedure (CPC), 1908 as amended by the Commercial Courts Act, 2015. 5. The Commercial Courts Act, 2015 amended the First Schedule to the CPC by inserting Rule 15-A under Order VI which pertains to verification of pleadings in a commercial dispute. The relevant sub-rules of Order VI Rule 15-A are set out below: “15-A. (1) Notwithstanding anything contained in Rule 15, every pleading in a commercial dispute shall be verified by an affidavit in the manner and form prescribed in the Appendix to this schedule. ......... (3) Where a pleading is amended, the amendments must be verified in the form and manner referred to in sub-rule (1) unless the Court orders otherwise. (4) Where a pleading is not verified in the manner provided under sub-rule (1), the party shall not be permitted to rely on such pleading as evidence or any of the matters set out therein. (5) The Court may strike out a pleading which is not verified by a Statement of Truth, namely, the affidavit set out in the Appendix to this Schedule.” 6. Appendix I to the Schedule was inserted in 2018, with retrospective effect from 23.10.2015 and sets out the “Statement of Truth.” The Statement of Truth specifically refers to Order VI Rule 15-A and Order XI Rule 3 and provides the particulars of the affirmation and declaration of a deponent. The Statement of Truth is also required to bear the signature of the deponent with the place and date. 7. A careful reading of Order VI Rule 15-A would show that every pleading in a commercial dispute is to be verified by an affidavit in the form prescribed in Appendix I to the Schedule independent of Order VI Rule 15 which contains four requirements in relation to verification of pleadings. It is interesting to note that Order 6 Rule 15(4), which was the last insertion to Rule 15 in 1999 (with effect from 01.7.2002), simply required the person verifying the pleading to also furnish an affidavit in support of his pleadings. It is interesting to note that Order 6 Rule 15(4), which was the last insertion to Rule 15 in 1999 (with effect from 01.7.2002), simply required the person verifying the pleading to also furnish an affidavit in support of his pleadings. Therefore Rule 15-A, brought into existence by the Commercial Courts Act, 2015 and Appendix I inserted in 2018, introduced a further requirement to verify the pleadings in a commercial dispute in the form of a Statement of Truth. 8. Section 16(1) of the Commercial Courts Act gives primacy to the Schedule as the repository of the amendments made by the Commercial Courts Act to the provisions of The Code of Civil Procedure in any suit in respect of a commercial dispute of a Specified Value. 9. The competing arguments made on behalf of the parties with regard to the applicability of the Order VI Rule 15-A to the execution proceedings is essentially this: (i) The Court should strike out the pleadings in the affidavit-in-support or dismiss the execution proceedings for want of a Statement of Truth (the award-debtor). (ii) The Statement of Truth is not necessary for execution proceedings arising out of an arbitral award (the award-holder). 10. The truth of the matter in the Court's view is however as follows: (a) The word “pleading” as defined in Order VI Rule 1 of the CPC is “Pleading shall mean plaint or written statement.” It is hence arguable whether the word “Pleading”, as used in Order VI Rule 15-A, can be stretched to an execution proceeding arising out of an arbitral award as specifically governed under section 36 of The Arbitration and Conciliation Act, 1996. (b) The idea that “Pleading” should not be given an expansive definition so as to include anything else beyond a plaint and a written statement (Order VI Rule 1), would be clarified by the Statement of Truth in Appendix I. The Appendix has been specified as the guiding document in Order VI Rule 15-A(1) as well as in sub-Rule 5 (of Rule 15-A). The expression Statement of Truth finds its place in Order VI Rule 15-A(5). The Statement of Truth, however, positions the deponent as a party in a “suit” who is competent to swear the affidavit in the form of a Statement of Truth under Appendix I of the Schedule to the 2015 Act. The expression Statement of Truth finds its place in Order VI Rule 15-A(5). The Statement of Truth, however, positions the deponent as a party in a “suit” who is competent to swear the affidavit in the form of a Statement of Truth under Appendix I of the Schedule to the 2015 Act. Clause 4 repeats the word “suit” and Clause 5 is in the form of an undertaking given by the deponent that the documents in his/her possession, control and so on and so forth have been disclosed and copies thereof annexed with the “plaint.” The entire purpose of the Statement of Truth is revealed in clause 8 wherein the deponent offers himself/herself for appropriate action taken against the deponent for any false statement or concealment made in the Statement of Truth. (c) Therefore, the specific reference to the words “suit” and “plaint” makes it evident that Order VI Rule 15-A of the CPC; read with Appendix I to the Schedule of the Commercial Courts Act, 2015, does not aim to depart from the definition of “Pleading” as given in Order VI Rule 1 of the CPC. Order VI Rule 1 has not, in any event, been amended by the Commercial Court’s Act, 2015. Rule 15-A of Order VI is a later insertion to Order VI by the Commercial Courts Act, 2015 and does not, from even a cursory reading of the provision, expand “Pleading” to proceedings which do not either have a plaint or a written statement. (d) Section 36 of The Arbitration and Conciliation Act, 1996 deals with enforcement of an arbitral award. Section 36(1) mandates that an award shall be enforced in accordance with the provisions of the CPC in the same manner as if it were a decree of the Court where the time for applying for setting aside of the award has expired and the award has not been stayed under section 36(2) of the Act. This would mean that an award-holder would then have to resort to Order XXI of the CPC which provides for execution of decrees and orders. The award-holder must hence follow the rules and procedure laid down in Order XXI of the CPC in the form of the tabular statement and an “Affidavit” in support thereof. This would mean that an award-holder would then have to resort to Order XXI of the CPC which provides for execution of decrees and orders. The award-holder must hence follow the rules and procedure laid down in Order XXI of the CPC in the form of the tabular statement and an “Affidavit” in support thereof. The provisions of section 36(2) and (3) of The Arbitration and Conciliation Act, 1996 operate to the extent of the power of the Court to stay an arbitral award and to impose conditions on the award-debtor for granting such stay. It is significant, that the Commercial Courts Act has not amended any of the provisions of Order XXI of the CPC. However, what is more fundamental is that an execution proceeding arising out of an arbitral award is not an original proceeding as in the institution of a suit under the provisions of the CPC and particularly Order IV (Rule 1) which requires that every suit shall be instituted by presenting a plaint and that every plaint shall comply with the Rules contained in Order VI and VII as far as applicable (Order IV Rule 1(2)). Order IV Rule 1(3) further provides that the plaint shall not be deemed to be duly instituted unless it complies with Order IV Rule 1 sub-rules (1) and (2). The institution of a suit by a plaint in the Original Side of this Court is further subject to clause 12 of the Letters Patent, 1865. Clause 12 declares that the High Court, in exercise of its ordinary original civil jurisdiction, this High Court shall be empowered to receive, try, and determine suits of every description, if the cause of action arises within the local limits of the ordinary original jurisdiction of the High Court. Clause 12 provides for obtaining leave from the court in cases where the cause of action has partly arisen within such local limits. (e) Hence, compared to the discipline of instituting an Original proceeding in the High Court, an execution proceeding arising from an arbitral award can be depicted as a second stage in the proceedings where the parties are statutorily required to approach a second/different forum altogether for executing the award from the first proceeding . (e) Hence, compared to the discipline of instituting an Original proceeding in the High Court, an execution proceeding arising from an arbitral award can be depicted as a second stage in the proceedings where the parties are statutorily required to approach a second/different forum altogether for executing the award from the first proceeding . If an analogy is at all to be made, the statement of claim and defence filed by the parties in the arbitration are pleadings in the original proceeding before the arbitrator. Section 23(4) read with the section 29-A(1) of the 1996 Act refers to pleadings as the “Statement of Claim” and “Defence.” The upshot of the above is that an execution proceeding arising out of an arbitral award is not an original proceeding as in a pleading in a commercial dispute where every pleading must be verified by a Statement of Truth under Order VI Rule 15-A. The execution proceeding emanating from an arbitral award would naturally not be an original proceeding which is commenced by a filing of a plaint. The absence of a plaint and the execution being a second-tier proceeding would absolve the award-holder, who seeks execution of the award, to subject itself to the rigours of Order VI Rule 15-A of the CPC as amended by the Commercial Courts Act. The contents of the Appendix I to the Schedule/Statement of Truth indicates that the object of holding parties to verified pleadings by declaring the truth of such statements in that form is to expedite the trial in commercial disputes. The Statement of Truth is elevated to an undertaking cast in stone and the Court is given a free hand to strike out a pleading which is not verified by a Statement of Truth (Order VI Rule 15-A(5)). The party in default also relinquishes the right to rely on an unverified pleading or evidence (Order VI Rule 15-A(4)). Moreover, the elevated status of a Statement of Truth (true to its name) is however confined to the disclosure, discovery and inspection of documents in suits under Order XI Rule 3 of the CPC, as amended by The Commercial Courts Act. Appendix I/Statement of Truth in fact refers to Order XI Rule 3 apart from Order VI Rule 15-A of the CPC. Appendix I/Statement of Truth in fact refers to Order XI Rule 3 apart from Order VI Rule 15-A of the CPC. (f) Therefore, the clear object of a Statement of Truth is to expedite the process of trial in commercial disputes by minimising the evidence at the stage of trial. An execution proceeding, on the other hand, does not envisage re-appreciation of evidence. In that sense, being a tier-2 proceeding, there would be no logical requirement for a Statement of Truth to be filed in an execution proceeding. The above point is independent of the more fundamental point of a Statement of Truth - or the rigours of Order VI Rule 15-A - being restricted only to a plaint and a written statement in a suit arising out of a commercial dispute. 11. The order of a Co-ordinate Bench in Phillips Carbon Black Limited vs. Anil Kumar Poddar, CS No. 67 of 2010 was on the final hearing of the plaintiff’s interlocutory application filed in the suit. The learned Single Judge hence gave importance to the non-verification of the petition by an affidavit in terms of Appendix I of the Schedule to the Commercial Courts Act. The decision of the Supreme Court in Patil Automation Pvt. Ltd. vs. Rakheja Engineers (P) Ltd. (2022) 10 SCC 1 was also rendered in a Civil Suit. 12. Harji Engineering Works Pvt. Ltd. vs. Hindustan Steelworks Construction Ltd. AIR 2022 Cal. 18 , delivered by this Court also involved a written statement without a Statement of Truth. The plaintiff’s argument in that case was that the written statement without the accompanying Statement of Truth amounted to an incurable defect. The Court agreed with the contention of the defendant in holding that the failure to file a Statement of Truth would not be fatal to a plaint or a written statement under Order VI Rule 15-A of the CPC. 13. The Court does not wish to dwell any further on technical issues including defects of pleadings being accepted as curable and non-fatal to the suit [Ref. Emirates Grains Products Co. LLC vs. L.M.J. International Limited, (2009) 4 CHN 125 and Sugandhi (Dead) by Legal Representatives vs. P. Rajkumar, (2020) 10 SCC 706 ]. 13. The Court does not wish to dwell any further on technical issues including defects of pleadings being accepted as curable and non-fatal to the suit [Ref. Emirates Grains Products Co. LLC vs. L.M.J. International Limited, (2009) 4 CHN 125 and Sugandhi (Dead) by Legal Representatives vs. P. Rajkumar, (2020) 10 SCC 706 ]. It may however be useful to reinforce the oft-held principle laid down by the Supreme Court that procedural and technical hurdles should not be allowed to come in the way of the Court for doing substantial justice. 14. The argument of the award debtor/applicant on the residue-effect of Order VI Rule 15-A (4) i.e. that a party shall not be permitted to rely on a pleading which has not been verified in the form of Appendix I, even if the Court refuses to strike out such a pleading (sub-Rule (5)), loses relevance in the limited application of Order VI Rule 15-A to pleadings as defined under Order VI Rule 1 that is plaint and written statement. 15. The applicant/award-debtor’s prayer for stay of the execution till the outcome of the applicant’s section 34 application is contrary to the very foundation of section 36 of The Arbitration and Conciliation Act, 1996. Section 36(2) makes it clear that execution will proceed notwithstanding any application for setting aside of the award. An order of stay is the only fetter to execution of an award as mandated under section 36(2) and (3) read with the 1st proviso – The award-holder in EC 335 of 2023 applying for setting aside of the award does not alter the import of section 36. The law will take its course in the form of appropriate directions if the applicant succeeds in having the award set aside. For now, the Court finds no basis for the relief sought. GA 1 of 2023 is accordingly dismissed without any order as to costs. 16. The above reasons persuade this Court to reject the preliminary objection taken on behalf of the applicant/award-debtor for striking out the pleadings in the execution case and for dismissal of the execution proceeding. The petitioner has admitted to typographical errors in the cause-title of the tabular statement hence the matter shall continue to be heard in the Commercial Division of this Court. The petitioner has admitted to typographical errors in the cause-title of the tabular statement hence the matter shall continue to be heard in the Commercial Division of this Court. The petitioner is given liberty to correct this and other such typographical errors in the body of the affidavit in support of the tabular statement or in the prayer portion, if required. 17. The Court will resume hearing the execution case filed by the award-holder in EC No. 335 of 2023 in the coming week. 18. Liberty to mention.