An Inquiry Into Facts Can't Be Held In Execution Proceedings In Relation To Award/decree:SC [Read Judgment]

The Supreme Court bench of Justices Abhay Manohar Sapre and R.Banumathi, on July 11, in an arbitration case, indicted both the executing Court and the Punjab and Haryana High Court, for “total non-application of mind” and set aside their orders.

Allowing the appeal by the Punjab State Civil Supplies Corporation Ltd against M/s Atwal Rice & General Mills Represented by its Partners,  the Supreme Court directed the Additional District Judge, Jalandhar (the executing Court) to issue warrant for recovery of the entire awarded decretal amount  against the respondents after verifying and calculating the decretal amount till date in terms of award/ decree of the Arbitrator, within one month.

In the instant case,  the agreement between the appellant and the respondent, entered into in 1996, was the subject of arbitration, following the dispute between them.  In terms of the agreement, the appellant was to give their paddy to the respondents, who were to process the paddy in their rice mill and the rice, produced after processing paddy, were to be delivered to the Food Corporation of India (FCI) for and on behalf of the appellant by the respondents.

The dispute arose because the respondents failed to process and deliver the full quantity of rice in terms of agreement to the FCI much less within the time framed.  Therefore, it resulted in money losses to the appellant in addition to sustaining the damages  due to non-delivery of the rice.  In 2001, the Arbitrator allowed the appellant’s claim in part and passed a money award with interest payable at the rate of 21 per cent with effect from January 1, 1999 till realisation in appellant’s favour.

The respondents first challenged the Award before the ADJ, Jalandhar.  The  ADJ dismissed the challenged on June 4, 2009, and upheld the award.  As the respondents did not pursue their appeal in the High Court, the 2001 award became final.

But the respondents did not pay the awarded amount to the appellants.  The appellants, therefore, filed Execution Petition before the ADJ, Jalandhar for enforcement of the award.   However, the Executing Court, by its order dated 3.11.2012, upheld the objections raised by the respondents, and dismissed the appellant’s execution application.

The High Court dismissed the revision filed by the appellant and upheld the order of the Executing Court subsequently.

In Paragraph 27 of the judgment, the Supreme Court held that the executing court and the High Court neither understood the controversy, nor decided the same in accordance with law.  Indicting them for total non-application of mind, the Court further observed that both the courts below neither set out the facts properly, nor dealt with the issues arising in the case and applied the principle of law which governs the controversy.

“Both the orders are, therefore, wholly perverse, illegal and without jurisdiction”, the SC bench concluded and held that an inquiry into facts cannot be held in execution proceedings in relation to award/decree.

"It is a well-settled principle of law that the executing Court has to execute the decree as it is and it cannot go behind the decree. Likewise, the executing Court cannot hold any kind of factual inquiry which may have the effect of nullifying the decree itself but it can undertake limited inquiry regarding jurisdictional issues which goes to the root of the decree and has the effect of rendering the decree nullity", said the Bench.

The SC bench also awarded costs quantified at Rs.25000 payable by the respondents to the appellant.