Arbitration In IndiaArbitral Award cannot be considered to be a Decree as per Section 2(2) of CPC

The Allahabad High Court, in India Oil Corporation Ltd. & Anr. v. The Commercial Court & Anr., [MATTERS UNDER ARTICLE 227 No. 7573 of 2022, decided on 06.09.2023] held that an Arbitral Award is not a decree and hence, an objection under Section 47 of the CPC cannot be raised in proceedings for execution of Arbitral Award.

FACTS

Due to arising disputes between India Oil Corporation Limited (hereinafter referred to as the “Petitioner”) and The Commercial Court (hereinafter referred to as the “Respondent”), a suit was filed vide Original Suit No. 436 of 1989 on 01.07.1989  for appointment of an Arbitrator under the Arbitration Act, 1940 (hereinafter referred to as the “Old Act”) , and Hon’ble Mr. Justice R.P. Singh (Retired) was appointed as the Arbitrator on 12.08.1991.

However, due to pending litigation, the Arbitration proceedings commenced in 2001, as per the procedure and provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”).

An Arbitral Award was passed on 27.04.2005, directing the Respondent to pay an amount of  Rs. 7,79,871/- to the Petitioner.

Thereafter, the Award dated 27.04.2005, was sent to the Additional District Judge-IX, Civil Court, Varanasi. Subsequently, the Respondent sought a modification of the award under Section 33 of the A&C Act, pursuant to which an additional Award was passed on 21.02.2006.  (hereinafter referred to as the “Impugned Award”)

The Petitioner challenged the Impugned Award by filing a writ petition vide No. 30461 of 2006, which was further withdrawn on 08.05.2012. Further the Impugned Award was challenged under Section 34 of the A&C Act under Arbitration Case No. 79 of 2012, which was dismissed vide order dated 23.03.2013.

Furthermore, even a First Appeal was preferred from Order No.1584 of 2013, which was also dismissed vide order dated 08.04.2016.  The Respondent filed a Special Leave to Appeal (C) No. 681 of 2017, which was also dismissed on 20.01.2017. Hence, the Award had attained finality.

Later, the Respondents filed Execution Application No. 21 of 2012 (renumbered as Execution Application No. 24 of 2020), which was  objected by the Petitioner under Section 47 of the Civil Procedure Code, 1908 (hereinafter referred to as “CPC”), which was rejected vide order dated 08.08.2022 (hereinafter referred to as the “Impugned Order”)

Hence, being aggrieved and dissatisfied by the Impugned Order, the Petitioner has filed the present petition.

ISSUES BEFORE THE SUPREME COURT

1. Whether the Arbitration proceedings commenced under the Old Arbitration Act, can continue under the provisions of the A&C Act?

2. Whether an Arbitral Award can be construed to be a decree under Section 2(2) of CPC?

3. Whether an Arbitral Award can be enforced under Section 36 of the A&C Act along with the provisions of CPC as if it is a decree of a Court?

4. Whether in the execution proceedings under Section 36 of the A&C Act, objection under Section 47 of the CPC is maintainable or not?

CONTENTIONS OF THE PARTIES

The Petitioner contended that once the Award was transferred to the District Court, the Arbitrator did not have the authority to consider any modification applications. Moreover, the Impugned Award had been augmented beyond the stipulated limitation outlined in Section 33 of the A&C Act, without securing consent from the involved parties.

It was argued that the provision of Section 85 of the A&C Act, does not permit the Arbitrator to decide claims under the A&C Act, once proceedings had commenced under the Old Arbitration Act, unless a mutual agreement existed between the parties. Thus, the Impugned Award is wholly without jurisdiction and authority of law.

Furthermore, as the Impugned Award itself lacks jurisdiction, the execution proceedings are also without jurisdiction. Further, res judicata is inapplicable on the judgments rendered without jurisdiction.

It was also argued that the Award dated 27.04.2006 as well as the Impugned Award both are nullity.

The Respondents contended that no objections have been raised during the Arbitral proceedings. Moreover, the Impugned Award has attained finality as the Petitioner has sought all possible remedies.

Moreover, Clause 9 of the Agreement of Contract specifically stated that the Old Arbitration Act along with its subsequent re-enactments and modifications, and the rules established therein, would apply to any Arbitration between the involved parties. Therefore, conditions of Section 85 of the A&C Act are fulfilled in its entirety.

Furthermore, the Petitioner did not take any of the grounds while challenging the Impugned Award under Sections 34 and 37 of the A&C Act. Therefore, such defenses cannot be taken at a belated stage. It was also submitted that an Arbitral Award is not a decree as defined under Section 2(2) of the CPC and hence, the objections under Section 47 of CPC are not maintainable. Moreover, the objection regarding the jurisdiction of the Arbitrator cannot be raised at a belated stage,

DECISION AND FINDINGS

The High Court observed provision of Section 85 of the A&C Act and the Agreement Contract held that the A&C Act was applicable upon the parties.

 The High Court relied on Thyssen Stahlunion GMBH etc. v. Steel Authority of India Ltd., [1999 9 SCC 334], and observed that even though the Arbitration proceedings are commenced under Old Arbitration Act, it can continue under the A&C Act.

The High Court relied on Paramjeet Singh Patheja Vs. ICDS Ltd., [AIR 2007 SC – 168] and held that Arbitral Award can be enforced under Section 36 of the A&C Act, along with the provisions of CPC, but it is not a decree as defined under Section 2(2) of the CPC. 1996, is not a CPC-defined decree.

on the High Court relied on Larsen & Tubro Limited v. Maharaji Educational Trust [2010 SCC Online AII 1866] and held that as Arbitral Award is not a decree, hence, objections under Section 47 of CPC cannot be raised. Therefore, the Impugned Award can be executed as per Section 36 of the A&C Act along with the provisions of the CPC.

The High Court dismissed the petition and imposed cost of Rs. 1,00,000/- on the Petitioner.

AMLEGALS REMARKS

The High Court held that the Arbitral proceedings commenced under the Old Arbitration Act, can continue under the provisions of the A&C Act if mutually agreed by the parties.  Further, an Arbitral Award cannot be considered to be a decree as under the provisions of CPC and therefore, cross-objections cannot be raised during the execution of an Arbitral Award. This has upheld the objective of the legislation, which is free from the complex procedure of CPC.  However, the execution of an Arbitral Award can be done in accordance of Section 36 of the A&C Act along with the provisions of CPC.

It was also held that no objections or grounds pertaining to nullity or any such defence can be raised at a belated stage, which are not already raised during challenge of the Arbitral Award under Section 34 and 37 of the A&C Act.

-Team AMLEGALS, assisted by Mr. Atulit Raj (Intern)

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