Heard Shri Ravi Shankar Prasad, learned counsel for the petitioner, Shri Gulrez Khan, learned Advocate for respondent no.1, Shri Shahnawaz Akhtar, learned Advocate for respondent no.2 and Shri Jitendra Singh, learned Advocate for respondent no.3 The present petition is directed against the order dated 23.5.2018 passed by the District Judge Moradabad in Arbitration Case No.74 of 2018 (Sajid Pervai v. Khalid Pervaiz & Ors.) with the prayer to dismiss the arbitration Execution Case No.74 of 2018 for want of jurisdiction. The Execution Case No.74 of 2018 arose out of an arbitral award dated 22.4.2018. The objections of the petitioner, to assail the order of the executing court, are two folds:-
Firstly, it is contended that the execution case was premature, inasmuch as, the arbitral award did not attain finality nor it was executable as on the date of moving of such application, in view of Sections 35 and 36(1) of the Arbitration and Conciliation Act, 1996 (in short 'the Act, 1996'). Section 35 of the Act 1996 as contained in Chapter VIII of Part I attaches finality to the award and makes it binding on the parties, subject to the provisions of that part. Section 36(1) in Part I further provides that the arbitral award is enforceable in accordance with the provisions of Code of Civil Procedure, 1908, as a decree of the Court, after the time period of making application under Section 34 of the Act, 1996 to set aside the arbitral award is expired. Sub Section (2), however, clarifies that mere filing of application under Section 34 would not render award unenforceable, unless the Court grants an order of stay of the arbitral award in accordance with the provisions of sub-section (3) on a separate application made for that purpose and otherwise it can be executed. Section 34 provides the time period for making of an application for setting aside arbitral award under sub-section (1) of that section, which is three months. Proviso to sub-section (3), however, states that any application beyond the period of three months may be entertained within a further period of 30 days by the Court, if it is satisfied that the applicant was prevented by sufficient cause from making the application within such period. However, no further extension can be granted beyond the period of 30 days.
With the aid of these provisions, it is contended that on the date of institution of the execution case i.e. 22.5.2018, the award was not enforeable under law as the initial period of three months provided under the Act for challenging it under Section 34, had not expired. The deeming provision under sub-section (1) of Section 36 leaves no room for doubt that the award becomes the decree of the Court to make it enforceable in accordance with the provisions of C.P.C., only on expiry of initial period of three months for making application under Section 34 of the Act, 1996. The order dated 23.5.2018 passed by the District Judge, Moradabad, thus, is wholly without jurisdiction.
Second ground of challenge is to the territorial jurisdiction of the District Judge, Moradabad with the submission that no part of cause of action lies within the territorial limits of District Moradabad. The territorial jurisdiction shall, in any case, lies only with the District Courts at Badaun and Amroha where all functioning of the partnership firm is carried out. The registered office of the partnership firm exists in Amroha and the place of business is Badaun. It is also submitted that in view of the mandate of Section 42 of the Act, 1996 only Court which would have territorial jurisdiction to entertain the execution is the District Judge, Badaun, inasmuch as, at an earlier point of time, in Arbitration Case No.37 of 2012 under Section 34 of the Act, 1996 the execution applicant namely the respondent no.1 had submitted himself to the jurisdiction of the District Judge Badaun. It is submitted that Section 42 of the Act, 1996 mandates that in the event of an application being filed under Part I before a Court at an earlier point of time, with respect to an arbitration agreement, 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 only and cannot be filed in another Court. It is, thus, submitted that from this angle also the territorial jurisdiction of District Judge, Moradabad was completely barred.
Reliance is placed upon the judgment of Apex Court in State of West Bengal & Ors. v. Associated Contractors reported in (2015) 1 S.C.C. 32 to submit that Section 42 will apply to applications made even after the arbitration proceedings have come to an end provided they are made under Part I of the Act, 1996. If the first application has been made to a particular court, subsequent proceedings cannot be taken before another court. The execution application is filed under Section 36(1) of the Act, 1996, which provision lies in Part I of the Act, and, therefore, the application of Section 42 cannot be ruled out.
Learned counsel for the respondent no.1, on the other hand, placing reliance upon the judgment of Apex Court in Pushpa Sahakari Avas Samiti Ltd. v. Gangotri Sahakari Avas Ltd & Ors. reported in (2012) 4 SCC 751 submits that the question of execution application being premature does not go to the root of jurisdiction of the Court. The Court entertaining such an application and passing order therein cannot be said to be acting without jurisdiction. An application for execution cannot be thrown on the ground of being premature. It is further submitted that Section 42 of the Act, 1996 has no application inasmuch as, the execution application is concerned. The execution application can be filed in any Court having jurisdiction over the properties, subject matter of arbitration. To press this point, reliance has been placed upon the judgment of the Apex Court in Sundaram Finance Limited v. Abdul Samad & Ors. reported in (2018) 3 SCC 622.
Testing these submissions of learned counsel for the parties, on the legal position as to the applicability of Section 42 of the Act, 1996 in execution proceedings, there cannot be two opinion that the said provision has no application to the execution stage, inasmuch as, it is not an arbitral proceeding. (Reference Delhi High Court in Daelilm Industrial Company Limited v. Numaligarh Refinery Ltd. reported in 2009 (159) DLT 579 as also the judgment of Apex Court in Sundaram Finance Limited (supra)). The submission of the learned counsel for the petitioner that since at an earlier point of time appeal under Section 34 of the Act 1996 was filed in relation to the same arbitral agreement, the subsequent proceedings in the nature of execution application can only be filed in the same Court, based on the provisions of Section 42 of the Act, 1996 is a misconception and is liable to be rejected as such. The simple reason is that with the making of the final award, after delivery of a signed copy of the award to each party, the arbitral proceedings terminates under Section 32 of the Act. The question as to whether or not, the award became enforceable as a decree of the court section 36 of the Act, has no relevance as to the finality of award under Section 35 is concerned or termination of proceeding under Section 32 of the Act. The cooling off period of three months under Section is provided to grant time to the party to challenge it on the grounds, available to him.
So far as the first objection with regard to entertainability of the execution application on the date of filing i.e. 22.5.2018, itself is concerned, the provisions as contained in Section 36(1) of the Act, 1996, clearly reveals that the arbitral award is enforceable after expiry of three months time for making application to set aside the arbitral award under Section 34 of the Act, 1996. For appreciating the controversy involved in the present petition, it is necessary to mention here that the scheme of Arbitration Act, 1996 is clear departure from the scheme of Arbritation Act, 1940. In old Act, award was required to be made Rule of Court whereafter it was to be filed for execution. Under the new Act, award is not to be made Rule of Court rather finality is attached to an arbitral award once it is made in writing and signed by members of the artitral tribunal and copy of the signed award has been given to the parties. The arbitral proceedings terminates under Section 32 of the Act, 1996 with the making of the final arbitral award or subsequent order passed by the arbitrator terminating the arbitration proceedings. Any error in the award can be correct within a period of 30 days on the application moved under Section 33 of the Act 1996. Section 34 provides Forum to challenge the award in the Court, provided under Section 2(e) of the Act, 1996. Sub-section (3) of Section 34 provides the time period of three months to make application under Section 34 for setting aside the arbitral award. This cooling off period of three months is extendable by further period of 30 days .
Section 36 of the Act, 1996 imports a legal fiction whereby the award becomes capable of enforcement as a decree of civil court i.e. it becomes executable by adopting mechanism of enforceability of a decree under the C.P.C. The deeming provision of Section 36 of the Act, 1996 for making it a decree of the Court after expiry of period of three months is with an object to give time to the parties to approach the Court under Section 34 and to seek any interim order.
In view of the plain and simple language of Section 36(1), there remains no doubt that the arbitral award becomes executable or enforeable only after expiry of period of three months from the date of making of the final award. Prior thereof, it cannot be executed as a decree of the Court i.e. mechanism to enforce it as a decree of the Court under C.P.C. could not have been invoked. The execution application, before expiry of the said period provided in the Statute, therefore, could not have been "entertained". The argument of learned counsel for the petitioner to assail the entertainability of the execution application on the date of order dated 23.5.2018, thus, finds merit.
Now, the question arises as to whether the execution application being premature the order dated 23.5.2018 passed therein by the District Judge, Moradabad can be sustained. Learned counsel for the respondent, though, admits that the execution application was premature, but taking aid of the judgment of Apex Court in Pushpa Sahakari Avas Samiti Ltd. (supra), it is contended that with the passage of time, the arbitral award has attained the status of decree, and is mature for execution and hence the execution application cannot now be rejected on the ground of being premature. It is contended that in the similar facts and circumstances as in the instant case, the Apex Court in Pushpa Sahakari Avas Samiti Ltd. (supra) has held that the application for execution of a compromise decree cannot be rejected on the ground of being premature, on an objection filed under Section 47 C.P.C. once it is registered and the matter has proceeded for long. It is contended that the word "entertain" cannot be confused with the word "institute". The Apex Court having considered the import word "entertain" has held it to mean entertaining the grounds for consideration for the purpose of adjudication on merits and does not refer to any stage prior thereof.
Having gone through the judgment in Pushpa Sahakari Avas Samiti Ltd. (supra), it is evident that the said case is distinguishable in the facts and circumstances of the instant case, inasmuch as, the execution application there though found premature, but by the time the matter was taken up before the executing court and order impugned came to be passed, the decree had become mature for execution. It was, thus, held that the submission that the executing court could not have "entertained" the execution application solely because it was filed prior to the expiry of the period stipulated in the compromise decree i.e. being premature, was unacceptable for the fact that by the time the executing Court adverted to the execution application, the said period was over. The decree, thus, was enforceable on the date of the order or when the execution application was "entertained" or considered for adjudication on merits. It, therefore, cannot be said to have lost its potential of executability having been filed on a premature date.
In the instant case, there is no dispute about the fact that on the date when the order impugned dated 23.5.2018 came to be passed in execution application namely Arbitration Case No.74 of 2018, i.e. the period of three months for filing of an application to set aside arbitral award under Section 34 of the Act, 1996, had not expired. The arbitral award, therefore, was not having potential of executability as a decree of the civil court. The District Judge, Moradabad, as such, had no jurisdiction to entertain the execution application or to pass order dated 23.5.2018.
Lastly, the jurisdiction of the District Court, Moradabad to entertain the execution application is also being challenged on the plea of lack of territorial jurisdiction. It is categorically stated in paragraph '34' of the present petition that the cause of action for settlement of accounts has arisen within the territorial jurisdiction of District Badaun and Amroha as all functioning of the firm is carried out at the Districts Badaun and Amroha. The registered office of the partnership firm exists in Amroha while Badaun is its place of business. No part of cause of action, therefore, has arisen within the territorial jurisdiction of District Moradabad. The said assertion, though, initially was placed by taking aid of Section 42 of the Act, 1996 but the said argument as held hereinabove, has been turned down. Thus, the Court has only to see whether the arbitral award can be executed within the territorial limits of the District Judge, Moradabad.
The categorical assertions made by the petitioner in paragraph '34' of the petition as noted hereinabove, have not been denied in the counter affidavit. Only this much is submitted therein that the respondent no.3 namely Afshan Parveen (one of the four parties to the arbitral award) resides in District Moradabad. The answer to the specific objection that the District Judge, Moradabad is not empowered to execute the award within the limits of its territorial jurisdiction, is evasive.
The legal position as clarified by the Co-ordinate Bench of this Court in GE Money Financial Services Ltd., New Delhi v. Mohd. Azaz & Anr. reported in 2013 (100) ALR 766 is that the provisions of Sections 38 and 39 C.P.C. have no application in execution of an arbitral award. It has been held therein that the place of making award or agreement of the parties regarding the place of arbitration has no relation to the jurisdiction of the executing court. The award can be executed by the Court in whose jurisdiction the judgment debtor resides, carries on business or his property is situated. That means by a Court which has jurisdiction to pass orders in relation to the party or subject matter of the arbitral award so as to see that it is executed within the limits of the territorial jurisdiction of the Court concerned.
The Apex Court in Sundaram Finance Limited (supra) having noticed the judgment of Coordinate bench of this Court has also laid down the same principle by saying that the application for enforcement of the award can be filed anywhere in the country where such a decree can be executed (emphasis added).
There is no requirement of filing execution and then obtaining transfer of execution from the Court, which would have jurisdiction over the arbitral proceedings.
The crux is that while entertaining execution application, the Court concerned will examine as to whether it has territorial jurisdiction over the party or subject matter i.e. the properties, to execute the award.
Taking note of the objection taken by the petitioner, having gone through the award, this Court finds that the properties mentioned in the report of the Chartered Accountant dated 3.3.2018 are to be divided into four parts i.e. amongst the parties to the award and further, the amount deposited in the five accounts mentioned in the body of the arbitral award has to be divided equally amongst four parties by the executing court. It is not the case of the respondent that any of the above subject matter of the award lies within the territorial jurisdiction of District Judge, Moradabad. Apart from the place of residence of one of the four partners (i.e. party to the award), namely respondent no.3, in District Moradabad, no other reason has been given to file execution application in District Court, Moradabad. It can, therefore, be safely concluded that the arbitral award cannot be executed by the District Judge Moradabad within the limits of its territorial jurisdiction.
The order dated 23.5.2018 passed by the District Judge, Moradabad in Arbitration Case No.74 of 2018 (Sajid Pervai v. Khalid Pervaiz & Ors.), thus, cannot be sustained for the reason that the execution application could not have been entertained by the District Judge, Moradabad both being premature and beyond the territorial limits of its jurisdiction.
However, noticing the fact that there is no order to stay the execution of the arbitral award and the execution appliction had become mature as on date and further that the counsel for the respondents agrees during the course of argument that the execution application may be transferred to the competent court , the present petition is being disposed of with directions as follows:-
(1) . The respondent no.1 herein is being permitted to seek return of the execution application for being presented before the court of competent jurisdiction either at District Amroha or Badaun, by moving an application within two weeks along with the certified copy of this order.
(2) . The order to return the execution application shall be passed by the District Judge, Moradabad within a period of two weeks from the date of presentation of the aforesaid application.
(3) . The respondent no.1 would be at liberty to present the execution application afresh within the further period of two weeks from the date of such order before the Court of competent jurisdiction as noted hereinabove.
(4) . On fresh presentation of the execution application, the Court concerned shall pass appropriate orders to protect the interest of the parties in relation to the properties, subject matter of the award, in accordance with law.
(5) . In order to meet the ends of justice, taking note of the last paragraph of the arbitral award and the fact that its operation has not been stayed till date, it is provided that the parties to the award shall maintain status quo with regard to the properties, and the bank accounts, i.e. all subject matter of the award; and the petitioner herein i.e. the opposite party no.2 to the award shall be restrained from withdrawing any amount from any of the five bank accounts in his individual name as mentioned in the award, till the date of moving of the said execution application, before the Court of competent jurisdiction, within the time given above.
(6) . It is made clear that this Court has not entered into the merits of the rival claims of the parties.
(7) . The interim direction issued hereinabove shall not be extended mechanically without entering into the merits of the claim of the parties.
(8) It is further made clear that in case of any default on the part of the respondent no.1 to present the execution application as aforesaid before the appropriate court mentioned above, the interim protection granted herein shall stand automatically vacated.
Disposed of.
(Sunita Agarwal, J.) Order Date:-25.1.2019 Jyotsana