Supreme Court of India

SUNDARAM FINANCE LIMITED versus ABDUL SAMAD & ANR. on 15 February 2018

2018 INSC 146[2018] 10 S.C.R. 451

SUNDARAM FINANCE LIMITED

v.

ABDUL SAMAD & ANR.

(Civil Appeal No. 1650 of 2018)

FEBRUARY 15, 2018

[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.]

Arbitration and Conciliation Act, 1996 – ss.36, 32, 42 and2(e) – Whether an award under the Act is required to be first filed inthe court having jurisdiction over the arbitration proceedings forexecution and then to obtain transfer of the decree or whether theaward can be straightway filed and executed in the Court wherethe assets are located – Held: s.36 of the Act shows that an award isto be enforced in accordance with the provisions of the Code ofCivil Procedure in the same manner as if it were a decree – Theenforcement of an award through its execution can be filed anywherein the country where such decree can be executed and there is norequirement for obtaining a transfer of the decree from the Court,which would have jurisdiction over the arbitral proceedings – Codeof Civil Procedure, 1908 – ss.38,39,46 and Or.XXI, rr.6, 11(2).

Allowing the appeal, the Court

HELD: 1. The section 36 states that an award is to beenforced in accordance with the provisions of the Code of CivilProcedure in the same manner as if it were a decree. It is, thus,the enforcement mechanism, which is akin to the enforcement ofa decree but the award itself is not a decree of the civil court asno decree whatsoever is passed by the civil court. It is the arbitraltribunal, which renders an award and the tribunal does not havethe power of execution of a decree. For the purposes of executionof a decree the award is to be enforced in the same manner as ifit was a decree under the said Code. [Para 15] [462-D-E]

2. The enforcement of an award through its execution canbe filed anywhere in the country where such decree can beexecuted and there is no requirement for obtaining a transfer ofthe decree from the Court, which would have jurisdiction overthe arbitral proceedings. [Para 22] [464-G]

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ADaelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.2009 159 DLT 579; Maharashtra Apex CorporationLimited v. V. Balaji G. & Anr. 2011 (4) KLJ 408; KotakMahindra Bank Ltd. v. Sivakama Sundari & Ors. (2011)4 LW 745; Kotak Mahindra Bank Ltd. v. Ram SharanGurjar & Anr. (2012) 1 RLW 960; GE Money FinancialBServices Ltd. v. Mohd. Azaz & Anr. 2013 SCC OnLineAll 13365 = (2013) 100 ALR 766; Indusind Bank Ltd.v. Bhullar Transport Company MANU/PH/2896/2012;Sri Chandrashekhar v. Tata Motor finance Ltd. & Ors.(2015) 1 AIR Kant R 261 – approved.

CComputer Sciences Corporation India Pvt. Ltd. v.Harishchandra Lodwal & Anr. AIR 2006 MadhyaPradesh 34; Jasvinder Kaur & Anr. v. Tata MotorFinance Limited CMPMO No. 56/2013 decided on17.9.2013 – disapproved.

DSwastik Gases Private Limited v. Indian Oil CorporationLimited JT 2013 (10) SC 35; I.C.D.S. Ltd. v. MangalaBuilders Pvt. Ltd. & Ors. AIR 2001 Karnataka 364 –referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1650of 2018

From the Judgment and Order dated 20.03.2014 of the DistrictJudge, Morena, Madhya Pradesh in Execution Case No. 108/2011/13H

Balaji Srinivasan, Ms. Pratiksha Mishra, Mayank Khirsagar,Vaishnavi Subrahmanyam, Abhishek Bharti, Advs. for the Appellant.

Prashant Shukla, Pashupathi Nath Razdan, Osama Ahmad Abbasi,Ms. Anushree Mishra, Advs. for the Respondents.

The Judgment of the Court was delivered by SANJAY KISHAN KAUL, J. 1. The divergence of legal opinionof different High Courts on the question as to whether an award underthe Arbitration & Conciliation Act, 1996 (hereinafter referred to as the‘said Act’) is required to be first filed in the court having jurisdictionover the arbitration proceedings for execution and then to obtain transferof the decree or whether the award can be straightway filed and executedin the Court where the assets are located is required to be settled in thepresent appeal.

Facts:

Facts:

2. The appellant claims that the first respondent approached theappellant for grant of a loan for purchase of a Tata Lorry-HCV 2005model, which loan was granted by the appellant on the terms & conditionsspecified in the Loan Agreement dated 18.8.2005. Respondent No.2 isstated to have stood guarantee for the repayment of the loan by executinga separate guarantee letter of the same date. The loan had to be repaidin installments commencing 3.9.2005 to 3.1.2009.

3. The appellant alleges that respondent No.1 committed defaultin payment from the 20[th] installment onwards. The repossession, however,of the vehicle could not take place and in order to recover the loan,arbitration proceedings were initiated in terms of the arbitration clausecontained in the Loan Agreement. Mr. S. Santhanakrishnan, Advocatewas appointed as the sole arbitrator on 3.5.2011 and the claim statementwas filed before the arbitrator but the respondents remained unserved.Notice was served through publication but since none appeared for therespondents, an ex parte arbitration award was made on 22.10.2011 fora sum of Rs.12.69,420 with interest at 18 per cent per annum from4.4.2011 till realization and costs.

4. The case of the appellant is that the award being enforceableas a decree under Section 36 of the said Act, execution proceedingswere filed in the jurisdiction of the courts at Morena, Madhya Pradeshunder Section 47 read with Section 151 and Order 21 Rule 27 of the A

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ACode of Civil Procedure, 1908 (hereinafter referred to as the ‘saidCode’). The respondents sought to contest the proceedings inter aliaon the ground that the vehicle against which the loan was obtained wasstolen. It is not necessary to go into further details of the proceedingsbut suffice to say that the trial court vide order dated 20.3.2014 returnthe execution application on account of lack of jurisdiction to be presentedBto the court of competent jurisdiction. The effect of the judgment wasthat the appellant was required to file the execution proceedings firstbefore the court of competent jurisdiction in Tamil Nadu, obtain a transferof the decree and then only could the proceedings be filed in the trialcourt at Morena. This view adopted by the trial court was in turn basedCon the judgment of the Madhya Pradesh High Court and the opinion ofthe Karnataka High Court while it is pleaded that the view of the RajasthanHigh Court and the Delhi High Court were to the contrary. The petitionerdid not approach the High Court against the said order of the trial courtbut straightway approached this Court by filing the Special Leave Petition on the ground that no useful purpose would be served by approachingDthe Madhya Pradesh High Court in light of the view already expressedby that Court in conflict with the opinions of some other High Courts.

The Conflicting Views:

A. The transfer of decree should first be obtained before filingEthe execution petition before the Court where the assets arelocated:

5. The aforesaid view has been adopted by the Madhya Pradeshand the Himachal Pradesh High Courts:

i. Computer Sciences Corporation India Pvt. Ltd. v.FHarishchandra Lodwal & Anr.[1]– The learned single Judgeof the Madhya Pradesh High Court took recourse to theprovisions of Section 42 of the said Act, dealing with the issueof jurisdiction in respect of an arbitration agreement read withSection 2(e) of the said Act which defines the ‘Court’. In theGcontext of Section 36 of the said Act dealing with theenforcement of an award prescribing that “the award shall beenforced under the Code of Civil Procedure, 1908 (5 of 1908)in the same manner as if it were a decree of the Court,” it wasobserved that the same principle would apply as for enforcing 1 AIR 2006 Madhya Pradesh 34H

of a decree. Since Section 37 of the Code defines the Courtwhich passes the decree and Section 39 lays down theprocedure for transfer of decree, it was opined that forexecution of an award a transfer of the decree was mandatory.

ii. Jasvinder Kaur & Anr. v. Tata Motor Finance Limited[2]of the High Court of Himachal Pradesh, Shimla – the learnedsingle Judge took note of the fact that the arbitrationproceedings were to be settled in Mumbai in accordance withthe said Act and the award had been made in Mumbai.Thereafter the learned single Judge copiously extracted fromthe judgment of this Court in Swastik Gases Private Limited

v. Indian Oil Corporation Limited[3]. The learned Judge thenproceeded to, once again, copiously extract from the thenprevailing view of the Karnataka High Court where a learnedsingle Judge in I.C.D.S. Ltd. v. Mangala Builders Pvt. Ltd.& Ors.[4] had opined in favour of the aforesaid view.

B. An award is to be enforced in accordance with theprovisions of the said Code in the same manner as if it were adecree of the Court as per Section 36 of the said Act does notimply that the award is a decree of a particular court and it isonly a fiction. Thus, the award can be filed for executionbefore the court where the assets of the judgment debtor arelocated:

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i. Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.[5](Delhi High Court) – The learned single Judge of the DelhiHigh Court repelled the contention that the jurisdictional Section42 of the said Act requiring an application under Section 34 ofthe said Act to be filed in that Court would not extend to theexecution of a decree. The execution application was not‘arbitral proceedings’. Section 38 of the said Code applies to adecree passed by the Court prescribing that the decree maybe executed by the Court which passed it, or by the Court towhich it was sent for execution. In case of an award no courtpasses the decree.

2 CMPMO No.56/2013 decided on 17.9.2013

3 JT 2013 (10) SC 35

4 AIR 2001 Karnataka 364

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The learned single Judge went into the discussion of theeffect of the provisions of Section 635(4) of the CompaniesAct, 1956 providing for the order of the Company Law Boardto be enforced by the Court in certain circumstances to drawan analogy therefrom.

ii. Maharashtra Apex Corporation Limited v. V. Balaji G.& Anr.[6] (Kerala High Court) – The learned single Judgeexpressed the view that the Court cannot insist for a decree toreceive an execution application on its file and, thus, there wasno question of transfer of a decree. The execution court wasto accept the execution petition with a certified copy of theaward wherever it was filed.

iii. Kotak Mahindra Bank Ltd. v. Sivakama Sundari & Ors.[7](Madras High Court) – Section 39 of the Code enables theCourt which passed the decree to transfer it to any subordinatecourt even of its own motion without application by the decreeholder. The learned single Judge of the Madras High Courtexamined the provisions of the said Act and the said Code andin the process, a reference was made to Section 41 of the saidCode imposing an obligation upon the executing court to informthe court which passed the decree about the completion ofexecution or about the failure to execute the decree along withattending circumstances. A passing reference was made toSection 46 of the said Act which speaks of precepts. In anutshell the conclusion made was that every decree of a civilcourt was liable to be executed primarily by the court whichpassed the decree. On the other hand, in case of an award, thesame is liable to be enforced under Section 36 of the said Actin the same manner as if it were a decree of the court and thusthe award passed is equated to a decree of the court, only forpurposes of execution. The execution of the award does notrequire a seal of approval by the civil court as distinct from theprovisions under the Arbitration Act, 1940. The award cannotbe executed through the arbitral tribunal which passed theaward and, thus, there is no situation envisaged for the arbitraltribunal which passed the decree (or award) to transfer the 6 2011 (4) KLJ 408

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7 (2011) 4 LW 745

decree to any other court for its execution. There was also noprovision either in the Code or anywhere else to treat a courtwithin whose jurisdiction the arbitral proceedings took placeas the court which passed the decree.

It was, thus, opined that:

“19. While the award passed by an arbitral tribunal is deemedto be a decree of a civil court under section 36 of the 1996 Act,there is no deeming fiction anywhere to hold that the courtwithin whose jurisdiction the arbitral award was passed, shouldbe taken to be the court which passed the decree. Therefore,the whole procedure of filing an execution petition before thecourt within whose jurisdiction the arbitral award was passed,as though it is the court which passed the decree, is patheticallymisconceived.”

xxxx xxxxxxxx xxxx xxxx

“21. Therefore, it is clear that no Court to which an applicationfor execution of an award is presented, can insist on the filingof the execution petition first before some other Court and tohave it transmitted to it later. It appears that the High Court ofBombay has also adopted the same view, though not by a veryelaborate order.”

In another perspective it was observed that in view of Section21 of the said Act parties could determine the place ofarbitration and thus, the Act transcends all territorial barriers.

iv. Kotak Mahindra Bank Ltd. v. Ram Sharan Gurjar &Anr.[8] (Rajasthan High Court) – The learned single Judge ofthe Rajasthan High Court agreed with the view adopted by theDelhi High Court.

v. GE Money Financial Services Ltd. v. Mohd. Azaz & Anr.[9](Allahabad High Court, Lucknow Bench) – The learned singleJudge observed that the arbitrator cannot be treated as a courtalthough the award made by him will be executed as a decree.Thus, Sections, 38 & 39 of the said Code would have noapplication and the award can, thus, be filed for execution as a 8 (2012) 1 RLW 960

9 2013 SCC OnLine All 13365 = (2013) 100 ALR 766

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decree of civil court wherever the judgment debtor resides orcarries on business or has properties within the jurisdiction ofthe said court.

vi. Indusind Bank Ltd. v. Bhullar Transport Company[10](Punjab & Haryana High Court) – The view of the Delhi HighBCourt referred to aforesaid was adopted.

vii. Sri Chandrashekhar v. Tata Motor finance Ltd. & Ors.[11](Karnataka High Court) – The learned single Judge of theKarnataka High Court opined that the question of filing anexecution petition before the court which passed the decreeand then seeking a transfer of the decree to the court wherethe assets are located would not arise, as an award is not adecree passed by the court.

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Our View:

6. In order to appreciate the controversy, we would first like toDdeal with the provisions of the said Code and the said Act.

7. Part II of the said Code deals with execution proceedings.Section 37 of the said Code defines the ‘Court’, which passed the decree.Section 38 of the said Code provides as to by which court the decreewould be executed and reads as under:

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“38. Court by which decree may be executed. – Adecreemay be executed either by the Court which passed it, or by theCourt to which it is sent for execution.”

8. Section 39 of the said Code provides for transfer of decree andreads as under:F

“39. Transfer of decree. – (1)The Court which passed a decreemay, on the application of the decree-holder, send it for executionto another Court [of competent jurisdiction],- (a) if the person against whom the decree is passed actually andGvoluntarily resides or carries on business, or personally works forgain, within the local limits of the jurisdiction of such other Court,or 10 MANU/PH/2896/2012

11 (2015) 1 AIR Kant R 261H

(b) if such person has no property within the local limits of thejurisdiction of the Court which passed the decree sufficient tosatisfy such decree and has property within the local limits of thejurisdiction of such other Court, or

(c) if the decree directs the sale or delivery of immovable propertysituate outside the local limits of the jurisdiction of the Court whichpassed it, or (d) if the Court which passed the decree considers for any otherreason, which it shall record in writing, that the decree should beexecuted by such other Court.

(2) The Court which passed the decree may of its own motionsend it for execution to any subordinate Court of competentjurisdiction.

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

[(4) Nothing in this section shall be deemed to authorise the Courtwhich passed a decree to execute such decree against any personor property outside the local limits of its jurisdiction.]”

9. One of the relevant provisions, the effect of which has notbeen really discussed in any of the judgments referred to aforesaid isSection 46 of the said Code which defines Precepts as under:

“46. Precepts. – (1)Upon the application of the decree-holderthe Court which passed the decree may, whenever it thinks fit,issue a precept to any other Court which would be competent toexecute such decree to attach any property belonging to thejudgment-debtor and specified in the precept.

(2) The Court to which a precept is sent shall proceed to attachthe property in the manner prescribed in regard to the attachmentof property in execution of a decree:

Provided that no attachment under a precept shall continue formore than two months unless the period of attachment is extendedby an order of the Court which passed the decree or unless beforethe determination of such attachment the decree has been A

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[2018] 10 S.C.R.

Atransferred to the Court by which the attachment has been madeand the decree-holder has applied for an order for the sale ofsuch property. Questions to be determined by Court executingdecree”

10. The relevance of the aforesaid provision is that the applicationBof the decree holder is made to the Court which passed the decree,which issues the precepts to any other Court competent to execute thesaid decree. As noticed, the expression “the Court which passed thedecree” is as per Section 37 of the said Code. We may note at this stageitself that in the case of an award there is no decree passed but theaward itself is executed as a decree by fiction. The provisions of theCsaid Act traverse a different path from the Arbitration Act, 1940, whichrequired an award made to be filed in Court and a decree to be passedthereon whereupon it would be executable.

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11. Now turning to the provisions of Order XXI of the said Code,which deals with execution of decrees and orders. In case a Court desiresDthat its own decree is to be executed by another court, the manner fordoing so is provided by Rule 6, which reads as under:

“Order XXI – Execution of Decrees and Orders xxxx xxxx xxxx xxxx xxxxE6. Procedure where court desires that its own decree shallbe executed by another court.- The court sending a decree forexecution shall send—

(a) a copy of the decree;

(b) a certificate setting forth that satisfaction of the decree hasFnot been obtained by execution within the jurisdiction of the courtby which it was passed, or, where the decree has been executedin part, the extent to which satisfaction has been obtained andwhat part of the decree remains unsatisfied; and

(c) a copy of any order for the execution of the decree, or, if noGsuch order has been made, a certificate to that effect.”12. The manner of presentation of an application is contained inRule 11(2) of Order XXI, which reads as under:

“Order XXI – Execution of Decrees and Orders Hxxxx xxxx xxxx xxxx xxxx

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11 (2) Written application—Save as otherwise provided by sub-rule (1), every application for the execution of a decree shall be inwriting, signed and verified by the applicant or by some otherperson proved to the satisfaction of the court to be acquaintedwith the facts of the case, and shall contain in a tabular form thefollowing particulars, namely:—

(a) the number of the suit;

(b) the names of the parties;

(c) the date of the decree;

(d) whether any appeal has been preferred from the decree; (e) whether any, and (if any) what, payment or other adjustmentof the matter in controversy has been made between the partiessubsequently to the decree; (f) whether any, and (if any) what, previous applications havebeen made for the execution of the decree, the dates of suchapplications and their results; (g) the amount with interest (if any) due upon the decree, or otherrelief granted thereby, together with particulars of any crossdecree, whether passed before or after the date of the decreesought to be executed; (h) the amount of the costs (if any) awarded;

(i) the name of the person against whom execution of the decreeis sought; and the mode in which the assistance of the court isrequired, whether—

(i) by the delivery of any property specifically decreed;

(ii) by the attachment, or by the attachment and sale, or by thesale without attachment, of any property;

(iii) by the arrest and detention in prison of any person;

(iv) by the appointment of a receiver;

(v) otherwise, as the nature of the relief granted may require.”

13. A perusal of the aforesaid shows that what is sought to bedisclosed is that the details like the number of suits, appeal against the A

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Adecree, etc. find a place, which really does not have a relevance to thefiction of an award to be treated as a decree of the Court for purposesof execution.

14. We would now like to refer to the provisions of the said Act,more specifically Section 36(1), which deals with the enforcement ofBthe award:

“36. Enforcement. – (1) Where the time for making anapplication to set aside the arbitral award under section 34 hasexpired, then, subject to the provisions of sub-section (2), suchaward shall be enforced in accordance with the provisions of theCCode of Civil Procedure, 1908 (5 to 1908), in the same manner asif it were a decree of the court.”

15. The aforesaid provision would show that an award is to beenforced in accordance with the provisions of the said code in the samemanner as if it were a decree. It is, thus, the enforcement mechanism,which is akin to the enforcement of a decree but the award itself is notDa decree of the civil court as no decree whatsoever is passed by the civilcourt. It is the arbitral tribunal, which renders an award and the tribunaldoes not have the power of execution of a decree. For the purposes ofexecution of a decree the award is to be enforced in the same manneras if it was a decree under the said Code.E

16. Section 2(e) of the said Act defines ‘Court’ as under:

“2. Definitions. ………

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[(e) “Court” means –F

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(i) in the case of an arbitration other than international commercialarbitration, the principal Civil Court of original jurisdiction in adistrict, and includes the High Court in exercise of its ordinaryoriginal civil jurisdiction, having jurisdiction to decide the questionsforming the subject-matter of the arbitration if the same had beenGthe subject-matter of a suit, but does not include any Civil Courtof a grade inferior to such principal Civil Court, or any Court ofSmall Causes;

(ii) in the case of international commercial arbitration, the HighCourt in exercise of its ordinary original civil jurisdiction, havingHjurisdiction to decide the questions forming the subject-matter of

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a suit, and in other cases, a High Court having jurisdiction to hearappeals from decrees of courts subordinate to that High Court;]”

17. The line of reasoning supporting the award to be filed in a so-called court of competent jurisdiction and then to obtain a transfer of thedecree is primarily based on the jurisdiction clause found in Section 42,which reads as under:

“42. Jurisdiction. – Notwithstanding anything containedelsewhere in this Part or in any other law for the time being inforce, where with respect to an arbitration agreement anyapplication under this Part has been made in a Court, that Courtalone shall have jurisdiction over the arbitral proceedings and allsubsequent applications arising out of that agreement and thearbitral proceedings shall be made in that Court and in no otherCourt.”

18. The aforesaid provision, however, applies with respect to anapplication being filed in Court under Part I. The jurisdiction is over thearbitral proceedings. The subsequent application arising from thatagreement and the arbitral proceedings are to be made in that courtalone. However, what has been lost sight of is Section 32 of the saidAct, which reads as under:

“32. Termination of proceedings.—

(1) The arbitral proceedings shall be terminated by the final arbitralaward or by an order of the arbitral tribunal under sub-section(2).

(2) The arbitral tribunal shall issue an order for the termination ofthe arbitral proceedings where—

(a) the claimant withdraws his claim, unless the respondent objectsto the order and the arbitral tribunal recognises a legitimate intereston his part in obtaining a final settlement of the dispute, (b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the proceedingshas for any other reason become unnecessary or impossible.

(3) Subject to section 33 and sub-section (4) of section 34, themandate of the arbitral tribunal shall terminate with the terminationof the arbitral proceedings.”

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A19. The aforesaid provision provides for arbitral proceedings tobe terminated by the final arbitral award. Thus, when an award is alreadymade, of which execution is sought, the arbitral proceedings alreadystand terminated on the making of the final award. Thus, it is notappreciated how Section 42 of the said Act, which deals with thejurisdiction issue in respect of arbitral proceedings, would have anyBrelevance. It does appear that the provisions of the said Code and thesaid Act have been mixed up.

20. It is in the aforesaid context that the view adopted by theDelhi High Court in Daelim Industrial Co. Ltd. v. NumaligarhRefinery Ltd.[12] records that Section 42 of the Act would not apply to anCexecution application, which is not an arbitral proceeding and that Section38 of the Code would apply to a decree passed by the Court, while in thecase of an award no court has passed the decree.

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21. The Madras High Court in Kotak Mahindra Bank Ltd. v.Sivakama Sundari & Ors.[13] referred to Section 46 of the said Code,Dwhich spoke of precepts but stopped at that. In the context of the Code,thus, the view adopted is that the decree of a civil court is liable to beexecuted primarily by the Court, which passes the decree where anexecution application has to be filed at the first instance. An award underSection 36 of the said Act, is equated to a decree of the Court for theEpurposes of execution and only for that purpose. Thus, it was rightlyobserved that while an award passed by the arbitral tribunal is deemedto be a decree under Section 36 of the said Act, there was no deemingfiction anywhere to hold that the Court within whose jurisdiction thearbitral award was passed should be taken to be the Court, which passedthe decree. The said Act actually transcends all territorial barriers.F

Conclusion:

22. We are, thus, unhesitatingly of the view that the enforcementof an award through its execution can be filed anywhere in the countrywhere such decree can be executed and there is no requirement forGobtaining a transfer of the decree from the Court, which would havejurisdiction over the arbitral proceedings.

23. The effect of the aforesaid is that the view taken by the MadhyaPradesh High Court and the Himachal Pradesh High Court is held to be 12 supraH13 supra

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not good in law while the views of Delhi High Court, Kerala High Court,Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab& Haryana High Court and Karnataka High Court reflect the correctlegal position, for the reasons we have recorded aforesaid.

24. The appeal is accordingly allowed and the impugned orderdated 20.3.2014 is set aside restoring the execution application filed bythe appellant before the Morena courts. The parties are left to bear theirown costs.

Ankit Gyan

Appeal allowed.

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