Arbitration Referred By Civil Court Without Invoking S. 11 Of Arbitration Act Doesn't Require Registration, It's Part Of Decree: Karnataka High Court

Brief Facts:

H R Satyanarayana (“Petitioner”) initiated a suit before the Trial court seeking partition and separate possession of his share in the scheduled properties. The suit was decreed on 07.06.1986. The Respondents challenged the judgment and decree by appealing to the Karnataka High Court (“High Court”). Due to jurisdictional changes, the matter was remitted to the District Court. While pending before the Appellate Court, the dispute was referred to an arbitrator for amicable settlement. The parties reached an agreement, leading to consent, which the First Appellate Court accepted and passed a decree. An execution application was filed by the Petitioner in Trial Court to execute the decree. The execution application was dismissed. The Petitioner filed a writ petition before the High Court contesting the dismissal of the application for execution of the decree.

The Petitioner contended that as the appeal was pending before the First Appellate Court, the parties did not opt for arbitration under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Instead, the court referred the dispute to the arbitrator for settlement. Respondents acknowledged that the dispute went to arbitration, but contended that the award needed proper registration and stamping, which was not done within the limitation period. They maintained that the Trial Court correctly dismissed the execution case, and the Executing Court's order did not warrant interference. Thus, they sought dismissal of the petition.

Observations by the High Court:

The High Court observed that the Respondents did not raise objections before the First Appellate Court and accepted the decree's terms without invoking any provisions of the Arbitration Act. The Respondents relied on the decision in Lachhman Dass Vs Ram Lal and Another [(1989) 3 SCC 99] to argue that an arbitral award must be registered and drawn on the required stamp paper to be accepted. However, the High Court distinguished the present case from Lachhman Das, highlighting that none of the parties invoked arbitration provisions; rather, it was the decision of the Appellate Court to refer the dispute to arbitration for amicable settlement.

The High Court emphasized that the intention of the parties was not to settle the dispute through arbitration, but to resolve it amicably outside of court. The High Court pointed out that the arbitrator was appointed by the Appellate Court without invoking Section 11 of the Arbitration Act, and the award was presented before the Appellate Court, which accepted the reconciliation terms and passed the decree. Thus, the High Court held that the decision in Lachhman Das could not be applied to the case.

The High Court reiterated that when a Civil Court passes a decree and the decree-holder seeks execution, the Executing Court cannot exceed its jurisdiction. Even if the award by the arbitrator is considered, it merges with the decree accepted by the Appellate Court, and the Executing Court's role is limited to executing the decree in accordance with procedural law. Therefore, the High Court found that the Executing Court erred in its finding that the decree was an arbitral award, and it exceeded its jurisdiction.

Case Title: H R Satyanarayana vs H C Suresha and Others.

Citation No: 2024 LiveLaw (Kar) 81

Case Number: WRIT PETITION NO. 33944 OF 2013 (GM-CPC).

Advocate for the Petitioner: Jwala Kumar.

Advocate for the Respondent: Bhargav G and Somashekara K M.

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