Transmission of Arbitral Awards for Enforcement: Madras HC Clarifies

Kotak Mahindra Bank Ltd. v Sivakama Sundari S Narayana S B Murthy

Case: C.R.P.(NPD) No.574 of 2011

Bench: Justice V. Ramasubramanian

Date: 26.08.2011

Facts:

Disputes arose between the Petitioner (Kotak) and the Respondent (Sundari) which were referred to an arbitrator. The sole arbitrator passed an award in January 2010. Kotak thereafter filed an execution petition before the X Assistant Judge, City Civil Court, Chennai for executing the award as Sundari resided within the limits of the said court. The X Assistant Judge returned the execution petition asking the petitioner to the grounds for filing the petition even without transmitting the award through proper channel. After hearing the petitioner, the X Assistant Judge, relying on a judgement of the Karnataka High Court, dismissed the petition on the ground that the award was not transmitted through the proper court. Kotak filed a CRP in the High Court against the order of the X Assistant Judge.

The Single Judge of the High Court found that the law regarding transmission of awards was uncertain. This uncertainty has resulted in about 2362 execution petitions filed in the first half of 2011 requesting transmission of awards to various courts, either within or outside the State of Tamil Nadu.

Relevant Provisions:

Code of Civil Procedure, 1908:

"37. Definition of Court which passed a decree— The expression "Court which passed a decree", or words to that effect, shall, in relation to the execution of decrees, unless there is anything repugnant in the subject or context, be deemed to include,—

(a) where the decree to be executed has been passed in the exercise of appellate jurisdiction, the Court of first instance, and

(b) where the Court of first instance has ceased to exist or to have jurisdiction to execute it, the Court which, if the suit wherein the decree was passed was instituted at the time of making the application for the execution of the decree, would have jurisdiction to try such suit.

Explanation.—The Court of first instance does not cease to have jurisdiction to execute a decree merely on the ground that after the institution of the suit wherein the decree was passed or after the passing of the decree, any area has been transferred from the jurisdiction of that Court to the jurisdiction of any other Court; but in every such case, such other Court shall also have jurisdiction to execute the decree, if at the time of making the application for execution of the decree it would have jurisdiction to try the said suit.

38. Court by which decree may be executed— A decree may be executed either by the court which passed it, or by the Court to which it is sent for execution.

39. Transfer of decree— (1) The Court which passed a decree may, on the application of the decree-holder, send it for execution to another Court of competent jurisdiction,—

(a) if the person against whom the decree is passed actually and voluntarily resides or carries on business, or personally works for gain, within the local limits of the jurisdiction of such other Court, or

(b) if such person has not property with in the local limits of the jurisdiction of the Court which passed the decree sufficient to satisfy such decree and has property within the local limits of the jurisdiction of such other Court, or

(c) if the decree directs the sale or delivery of immovable property situate outside the local limits of the jurisdiction of the Court which passed it, or

(d) if the Court which passed the decree considers for any other reason, which it shall record in wiring, that the decree should be executed by such other Court.

(2) The Court which passed the decree may of its own motion send it for execution to any subordinate Court of competent jurisdiction.

(3) For the purposes of this section, a Court shall be deemed to be a Court of competent jurisdiction if, at the time of making the application for the transfer of decree to it, such Court would have jurisdiction to try the suit in which such decree was passed."

Order XXI

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.

6 . Procedure where Court desires that its own decree shall be executed by another Court— The Court sending a decree for execution shall send—

(a) a copy of the decree;

(b) a certificate setting forth that satisfaction of the decree has not been obtained by execution within the jurisdiction of the Court by which it was passed, or, where the decree has been executed in part, the extent to which satisfaction has been obtained and what part of the decree remains unsatisfied; and

(c) a copy of any order for the execution of the decree, or, if no such order has been made, a certificate to that effect.
...

10 Application for execution— Where the holder of a decree desires to execute it, he shall apply to the Court which passed the decree or to the officer (if any) appointed in this behalf, or if the decree has been sent under the provisions hereinbefore contained to another Court then to such Court or to the proper officer thereof."

Arbitration and Conciliation Act, 1996:

Section 2(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;

"36. Enforcement.- Where the time for making an application to set aside the arbitral award under award shall be endorsed under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court."

Decision:

The decision of the court is summarized below:

1. A decree is to be executed, primarily, by the court which passed that decree (Decree Court).

2. Provisions for sending the decree to another court (Transmission) exists only in those instances where it is not possible for the Decree Court to execute it.

3. An award under the Arbitration and Conciliation Act, 1996 is deemed to be a decree of a civil court for the purposes of execution. However, the arbitral tribunal is not equivalent in status to that of a civil court. The arbitral tribunal does not have the power to execute a decree. Consequently, it does not have the power to transfer the decree to a competent court.

4. There is a misconception that the execution petition must be filed in the court within whose jurisdiction the award was passed. This has led to filing of numerous (at least 2362) award execution applications for transfer to other courts. There is no such provision of law.

5. In Daelim Industrial Co. Ltd. v. Numaligarh Refinery [EA 105/2009 in EP 242/ 2008 decided on 13.03.2009], an award that was passed by an arbitral tribunal in Calcutta. The award was set aside by the District Court of Assam but the High Court at Guwahati partly upheld the award. The Supreme Court, on appeal, party modified the High Court’s judgement. Question arose before the Delhi High Court as to whether it had the territorial jurisdiction to entertain the execution petition. The Delhi High Court held that in the absence of mandate under Section 38 of the Code of Civil Procedure, the court having territorial jurisdiction over the place in which the properties of the judgement debtor would have jurisdiction.

6. Consequently, there is no single court where the execution petition must be necessarily filed for executing an award.

7. The 1996 Act does not necessitate that parties must arbitrate in a particular place. Therefore, parties may choose to arbitrate in any place according to their convenience. Even the tribunal can conduct arbitration proceedings in a place different from the place chosen by the parties, if any, for convenience. Therefore, it cannot be insisted that the award be enforced in the place chosen by the parties or in a place where the arbitral tribunal conducted hearings for the sake of convenience.

8. If the misconceived practice as is currently adopted is the rule, then, by logical extension, an award passed in London could only be enforced in London and not in India.

9. A connected misconceived practice is for the decree holder to get a certificate from the High Court that the award has not been satisfied by the judgement debtor. Only the court which actually passed the decree can give such a certificate.

10. In fact, courts do not insist on such a transmission of an award passed by the Registrar of Chits under Section 69 of the Tamil Nadu Chit Funds Act, 1982.

Consequently, the court concluded:

"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 [Court executing an arbitral award] (i) either to demand transmission from any other Court; (ii) or to order transmission to any other Court."

The court directed the petitioner to present the execution petition once again in the court of the X Additional Judge.

Thanks to this news report in the Business Line for bringing to our attention the above decision.