Chamber Summons No.16 of 2016,Comm Execution Application No.13 of 2016

28th April, 2017.

Petitioner Counsel: Mr ASHISH KAMAT, with Ms. T. ZARIWALA
Respondent Counsel: Mr RAMESH JAIN

Cases Cited:
L&T Finance Ltd Vs. Abhishek Talwar, 2015 SCC Online Bom 1489 [Para 9]
Abhishek Talwar Vs. L&T Finance & Ors, 2016(4) ALL MR 561=2015 (3) ABR 179 [Para 11]
Eskay Engineers Mumbai Vs. Bharat Sanchar Nigam Ltd., 2009 (5) Mh LJ 565 [Para 11]
State of West Bengal & Ors Vs. Associated Contractors, 2015(1) ALL MR 458 (S.C.)=(2015) 1 SCC 32 [Para 14]
State Trading Corporation of India Ltd Vs. Global Steel Holdings Ltd & Ors., AIR 2015 Delhi 100 [Para 16]
Mohit Bhargava Vs. Bharat Bhushan Bhargava, 2007 ALL SCR 1661=2007(4) SCC 795 [Para 17]

JUDGMENT

JUDGMENT :- This is the Respondents' Chamber Summons in an execution application. The claimant in the execution application seeks to execute an arbitral award in Mumbai; in pursuit of that execution application it has got warrants of attachment issued, and has had property attached. The Respondents say the execution application must be dismissed, the attachments raised, and the warrants of attachments dated 14th September 2016 vacated and set aside.

2. The award holder, SE Investments Ltd ("SEIL") lent money to the Respondents-Applicants, Arch Pharmalabs Ltd and others (together, "Arch Pharma"). The parties executed loan agreements and deeds of hypothecation. SEIL claimed Arch Pharma defaulted, and filed OMP No.696 of 2013 under Section 9 of the Arbitration and Conciliation Act 1996 ("the Arbitration Act") before the Delhi High Court. On 19th July 2013 the Delhi High Court granted an ex parte ad-interim restraint against Arch Pharma from alienating immovable properties. The Delhi High Court finally disposed of the Section 9 petition on 11th November 2013 with a direction to the sole arbitrator appointed by that date to treat the petition as an application under Section 17 of the Arbitration Act.

3. On 27th October 2015, the Sole Arbitrator delivered an Award in the amount of Rs.4,21,74,999/- and interest in favour of SEIL.

4. Arch Pharma that Award in a petition under Section 34 of the Arbitration Act in the Delhi High Court. Arch Pharma sought that the filing delay be condoned. It does not really matter that the Section 34 the petition was returned and filed afresh. In the meantime, on 4th May 2016, SEIL filed this Execution Application in this Court. On 14th September 2016 warrants of attachments were issued inter alia attaching Arch Pharma's salary account and residential properties. Meanwhile, the delay in filing the Section 34 petition was condoned. The matter posted for final hearing. It is yet pending. Arch Pharma brings this Chamber Summons to raise the attachments, cancel the warrants of attachment and to dismiss SEIL's execution application.

5. The short point that Mr Kamat for Arch Pharma makes in support of this Chamber Summons is that since SEIL had first moved its petition under Section 9 in the Delhi High Court, in view of the provisions of Section 42 of the Arbitration Act, all further proceedings, including in execution of an award, would lie in that Court and not in this Court. Mr Jain's submission on behalf SEIL is that the jurisdictional restriction in Section 42 applies only until the award attains finality. Section 36(1) of the Arbitration Act makes it clear that an award is executable 'as a decree' of the Court. Consequently, it can be put into execution anywhere in the country where the award debtor has property.

6. I do not think Mr Jain's formulation is correct. Section 42 of the Arbitration Act reads:

"42. Jurisdiction: Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court." (Emphasis added)

7. The words "that Court alone" must be read with not only the words "the arbitral proceedings" but also the words "and all subsequent applications arising out of that agreement and the arbitral proceedings." An application in execution is clearly an application that arises out of the arbitral proceedings. It seeks to put into execution the culmination of those arbitral proceedings.

8. The other aspect on this matter is the inherent limitation that we find in Section 39 of the Code of Civil Procedure, 1908 ("CPC"). Sections 39(1) and 39(4) of the CPC read as follows:

"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,

(b) if such person has not property within 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 writing, that the decree should be executed by such other Court.

(2) ...

(3) ...

(4) Nothing in this section shall be deemed to authorise the Court which passed a decree to execute such decree against any person or property outside the local limits of its jurisdiction. (Emphasis added)

9. Mr Kamat correctly invites attention to the decision of the learned Single Judge of this Court in L&T Finance Ltd v Abhishek Talwar. 2015 SCC Online Bom 1489. Paragraph 6 of this decision says:

"6. Indeed both the Courts, Bombay and Delhi, would have jurisdiction. The Bombay High Court would have jurisdiction because the material part of the cause of action arose in Mumbai. Tis Hazari Court, Delhi would have jurisdiction because the Respondents/award debtors reside in Delhi. If no other application was filed earlier the award holder could take out an application for execution of the award either in Bombay High Court on in Tis Hazari Court, Delhi. Since the award was passed in Mumbai the Bombay High court would be the Court which passed the decree under Section 38 of the CPC. It would, therefore, be the executing Court. It would commence execution proceedings. If after commencement of the proceedings it was seen that the award debtors do not reside in Mumbai and do not have properties in Mumbai but have properties at elsewhere which can be attached or where they could be arrested for non disclosure of their assets and for non payment of the award, this Court would transfer the decree to the Court having the properties of the award debtor or to the Court within whose jurisdiction they resided under Section 39 of the CPC." (Emphasis added)

10. The learned Single Judge specifically considered in paragraphs 8 to 10 the impact of Section 42 and held that an execution application would only lie in that Court to which the first application, of whatever nature, was made under the Arbitration Act. Then, in paragraphs 12 and 19, Mrs Dalvi J held that an execution application was a subsequent application and would lie only where the first such application was made.

11. The decision was carried in appeal, unsuccessfully. in Abhishek Talwar v L&T Finance & Ors, 2016 (4) ALL MR 561 : 2015 (3) ABR 179. dismissing the appeal, the Appeal Court held that on a plain reading of section 42, when any "application" under Part I of the Arbitration Act is made in a Court, then that Court has exclusive jurisdiction over the arbitral proceedings and all subsequent applications, including in execution. The Division Bench noted the decision of another Single Judge of this Court, DY Chandrachud J (as he then was) in Eskay Engineers Mumbai v Bharat Sanchar Nigam Ltd 2009 (5) Mh LJ 565. that considered precisely this question. There, BSNL challenged an arbitral award in a Section 34 petition. The challenge failed. So did an appeal, and a Special Leave Petition. The award became final, and, therefore, executable as a decree in view of Section 36(1) of the Arbitration Act. The award holder put the award into execution in this Court. BSNL filed a Chamber Summons, very like this one, questioning the jurisdiction of this Court in execution. Analyzing Section 34, 36 and 42 of the Act, Dr Chandrachud J said that the expression "all subsequent applications arising out of the arbitral proceedings" must be read comprehensively to include proceedings in execution.

The submission which was urged on behalf of the judgment debtor is that the application of the Arbitration and Conciliation Act, 1996 concludes with the delivery of the arbitral award and the forum for initiating proceedings for execution cannot be traced to any provision of the Act. That would not be an accurate reading of the language and the provisions of the Act. Section 36 specifically speaks of enforceability and section 42 of jurisdiction. The expression "all subsequent applications arising out of arbitral proceedings" has been used in a comprehensive sense by the Legislature and must be given full width in interpretation. The judgment debtor sought a recourse to its remedies before this Court in order to challenge the arbitral award. Once that was done, this Court alone would have jurisdiction to entertain all subsequent applications arising out of the arbitral proceedings including applications in the execution of the award as a decree of the Court to the exclusion of any other Court. (Emphasis added)

12. Finally, the Division Bench in Abhishek Talwar said:

12. On analyzing the said judgment, two things become clear. Firstly, the learned Single Judge has held that an Execution Application filed for the purposes of enforcement of an Award would be an "application" as contemplated under Section 42 of the Act. Secondly, the learned Single Judge has held that once an Award is challenged in a Court under Section 34, then by virtue of Section 42 of the Act, all subsequent applications arising out of the arbitral proceedings, would have to be filed only in that Court. In holding so, the learned Single Judge has, inter alia, held that the words "all subsequent applications arising out of the arbitral proceedings" must be read in a comprehensive manner to include recourse to execution proceedings.

15. In this judgment, we are not deciding whether an Execution Application would be an application made to a "Court" under Part I of the Act. For the sake of argument, as contended by the Appellant, we will assume that an Execution Application for enforcement of an Arbitral Award is an "application" under Part I of the Act as contemplated by the aforesaid Supreme Court judgment. Even on the basis of this assumption, in the facts of the present case, the present appeal would have to be dismissed. (Emphasis added)

13. The submissions made before Dr Chandrachud J in Eskay Engineers and before the Single Judge and the Division Bench in Abhishek Talwar are precisely those Mr Jain seeks to make today; in particular, that 'arbitral proceedings' terminate once the award becomes executable; the writ of Section 42 then ceases to run and does not continue down to execution applications. That argument has been negatived not once but three times by this Court, and I cannot accept Mr Jain's invitation to reopen this debate, now firmly closed. I am bound by those decisions.

14. In any case, that debate is clearly no longer res integra as the Division Bench in Abhishek Talwar noted, referencing the Supreme Court decision in State of West Bengal & Ors v Associated Contractors, (2015) 1 SCC 32 : [2015(1) ALL MR 458 (S.C.)]. and to which Mr Kamat, too, invites attention. Paragraphs 11, 18 and 25 of Associated Contractors say this:

"11. It will be noticed that Section 42 is in almost the same terms as its predecessor section except that the words "in any reference" are substituted with the wider expression "with respect to an arbitration agreement". It will also be noticed that the expression "has been made in a court competent to entertain it", is no longer there in Section 42. These two changes are of some significance as will be pointed out later. Section 42 starts with a non obstante clause which does away with anything which may be inconsistent with the section either in Part I of the Arbitration Act, 1996 or in any other law for the time being in force. The expression "with respect to an arbitration agreement" widens the scope of Section 42 to include all matters which directly or indirectly pertain to an arbitration agreement. Applications made to courts which are before, during or after arbitral proceedings made under Part I of the Act are all covered by Section

42. But an essential ingredient of the section is that an application under Part I must be made in a Court.

18. In contest with applications moved under Section 8 and 11 of the Act, applications moved under Section 9 are to the "court" as defined for the passing of interim orders before or during arbitral proceedings or at any time after the making of the arbitral award but before its enforcement. In case an application is made, as has been made in the present case, before a particular court, Section 42 will apply to preclude the making of all subsequent applications under Part I to any court except the court to which an application has been made under Section 9 of the Act.

25. Our conclusions therefore on Section 2(1)(e) and Section 42 of the Arbitration Act, 1996 are as follows :

(a) Section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of Original Jurisdiction in a district or a High Court having original civil jurisdiction in the State, and no other court as "court" for the purpose of Part I of the Arbitration Act, 1996.

(b) The expression "with respect to an arbitration agreement" makes it clear that Section 42 will apply to all applications made whether before or during arbitral proceedings or after an award is pronounced under Part I of the 1996 Act.

(c) However, Section 42 only applies to applications made under Part I if they are made to a court as defined. Since applications made under Section 8 are made to judicial authorities and since applications under Section 11 are made to the Chief Justice or his designate, the judicial authority and the Chief Justice or his designate not being court as defined, such applications would be outside Section 42.

(d) Section 9 applications being applications made to a court an Section 34 applications to set aside arbitral awards are applications which are within Section 42.

(e) In no circumstances can the Supreme Court be a "court" for the purposes of Section 2(1)(e), and whether the Supreme Court does or does not retain seisin after appointing an arbitrator, applications will follow the first application made before either a High Court having original jurisdiction in the State or a Principal Civil court having original jurisdiction in the district, as the case may be.

(f) Section 42 will apply to applications made after the arbitral proceedings have come to an end provided they are made under Part I.

(g) If a first application is made to a court which is neither a Principal Court of Original Jurisdiction in a district or a High court exercising original jurisdiction in a State, such application not being to a Court a defined would be outside Section 42. Also, an application made to a Court without subjetmatter jurisdiction would be outside Section 42.

The reference is answered accordingly. (Emphasis added)

15. The Supreme Court thus specifically noticed the non obstante provision in Section 42 and clearly stated that Section 42 applies to applications made after arbitral proceedings have ended so long as they are made under Part I. An application in execution is under Section 36(1) of the Arbitration Act; and this is now settled by the decisions in Abhishek Talwar and Eskay Engineers.

16. Mr Jain's reliance on the decision of a learned Single Judge of the Delhi High Court in The State Trading Corporation of India Ltd vs. Global Steel Holdings Ltd & Ors AIR 2015 Delhi 100. is of little assistance to him. The facts there were materially different. Section 42 was not in consideration.

16. 17. The question of the scope of Section 39 of the CPC is settled by the decision of the Supreme Court in Mohit Bhargava vs. Bharat Bhushan Bhargava. 2007(4) SCC 795 : [2007 ALL SCR 1661]. In paragraphs 7 to 9 of that decision the Supreme Court said that a Court that passes a decree cannot order execution against properties outside its jurisdiction (although, on a reading of paragraph 10, it might order a restraint against disposal or make an order in the form of a Mareva injunction, etc). Even this will not materially alter the position so far as Mr Jain is concerned. It only means he must file his execution application before the Delhi High Court - and no other - and then follow the discipline of Section 39 if that award is being put into execution against properties in Mumbai.

18. The Chamber Summons succeeds. It is made absolute in terms of prayers (a) and (b). There will be no order as to costs. This dismissal is not on merits and will not affect any proceedings SEIL takes in execution in the court of competent jurisdiction.

Chamber summons allowed.