Commercial Court Can’t Reject Execution Application Filed Where Judgment Debtor Resides On Grounds Of Lack Of Territorial Jurisdiction: Allahabad HC

“This Court finds that the law in regard to moving the execution application has already been settled by Apex Court in the case of Sundaram Finance Limited (supra) and provisions of Section 36 of the Act of 1996 is clear to the extent that provisions of Code of Civil Procedure, 1908 are applicable for enforcement of the award and the award shall be treated as decree. Once the said provisions are there, filing of execution case by the petitioner at the place where respondent No.2 resides is within the territorial jurisdiction as provided under the Act and the order passed by Commercial Court refusing to entertain execution application is totally erroneous,” the bench, comprising of Justice Rohit Ranjan Agarwal observed.

Background of the case

M/S Imagine Fashion Apparels Pvt. Ltd. (Petitioner) is a Micro, Small and Medium Enterprise (MSME), engaged in the business of readymade garments at Jhansi. The Petitioner supplied goods to Respondent No. 2 (Judgment Debtor) who resides at Jhansi. Subsequently, certain disputes arose between the Parties.

The Petitioner filed an arbitration Claim Petition before the Facilitation Council (Kanpur), under Section 18 of the MSMED Act, 2006, claiming the principal amount along with interest.

On September 29, 2020, the Facilitation Council (Kanpur) passed an Award, directing Respondent No. 2 to pay the principal amount along with interest to the Petitioner. In the absence of any objection or application under Section 34 of the Arbitration and Conciliation Act, 1996 being preferred by the Parties, the Award attained finality.

Thereafter, the Petitioner filed an execution application under Section 36 of the Arbitration Act before the Commercial Court, Jhansi, the place where Defendant resides.

However, the Commercial Court was of the view that the Court at Jhansi did not have territorial jurisdiction to decide the matter, since the claim petition was filed at Jhansi even though the Award was passed by the MSME Facilitation Council at Kanpur.

Hence, on August 12, 2021, the Commercial Court passed an order under Order VII Rule 10 of the Civil Procedure Code, directing the Petitioner to take back the execution application and file it before the Court in Kanpur within seven days.

Since the Petitioner failed to withdraw and file the execution petition before another court within the time, the Commercial Court passed a subsequent order dated August 21, 2021, dismissing the execution case under Order VII Rule 11 (d) and (f) CPC.

The Petitioner challenged the orders dated August 12, 2021, and August 21, 2021, before the High Court under Article 227 of the Constitution of India.

High Court's Verdict

At the outset, the Court referred to the Supreme Court’s ruling in the case of Sundaram Finance Limited vs. Abdul Samad & Anr., (2018) 3 SCC 622, wherein the top court held that Section 36 of the Arbitration Act provides for execution of an arbitral award in the manner as if it was a decree under the CPC.

In light of this, the HC said that the proceedings for the enforcement of an arbitral award through its execution can be filed anywhere in the country, where such a decree under CPC can be executed and that there is no requirement for obtaining a transfer of the decree from the Court, which would have jurisdiction over the arbitral proceedings.

The HC noted that the order passed by the Commercial Court, Jhansi, returning the execution application to be filed before the Court at Kanpur, where the Facilitation Council was situated and the Award was made, was totally against the Supreme Court’s mandate.

On the issue of whether execution proceedings can be filed where the judgment debtor resides, the Bench held that:

“Filing of execution by the petitioner before the Commercial Court where the defendant resides is well within the meaning of Section 36 and the dictum of the Apex Court in case of Sundaram Finance Limited (supra)…..…..This Court finds that the law in regard to moving the execution application has already been settled by Apex Court in case of Sundaram Finance Limited (supra) and provisions of Section 36 of the Act of 1996 is clear to the extent that provisions of Code of Civil Procedure, 1908 are applicable for enforcement of the award and the award shall be treated as decree. Once the said provisions are there, filing of execution case by the petitioner at the place where respondent No.2 resides is within the territorial jurisdiction as provided under the Act and the order passed by Commercial Court refusing to entertain execution application is totally erroneous.”

With this, the Bench set aside the orders dated August 12, 2021 and August 21, 2021, for being passed devoid of jurisdiction and it directed the Commercial Court at Jhansi to restore the execution case and proceed in accordance with law.

Appearances

Counsel for Petitioner: Puneet Arun

Counsel for Respondent: Tarun Agrawal, Rishabh Agarwal

Case Title: M/S Imagine Fashion Apparels Pvt. Ltd. v Presiding Officer Commercial Court and Anr. [ARTICLE 227 No. - 6736 of 2021]

Case Citation: 2023 LiveLaw (AB) 169

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