Objection U/S 47 CPC Cannot Be Raised In Proceedings For Execution Of Arbitral Award: Allahabad High Court Reiterates

The Allahabad High Court has recently dismissed a petition under Article 227 of the Constitution of India against the rejection of objection under Section 47 of CPC at the stage of execution of arbitral award.

A bench comprising of Justice Neeraj Tiwari reiterated that arbitral award is not a decree under Section 2(2) of CPC, therefore, an objection filed under Section 47 of CPC in execution proceedings is not maintainable. Further, the Court reiterated the principle laid down by the Supreme Court in Padmajeet Singh Patheja v. ICDS LTD that “arbitral award can be executed invoking Section 36 of New Act, 1996 along with the provisions of CPC in the same manner as if it is decree of the Court.”

The Court further held that once the Petitioner has had the opportunity to raise all issues while filing appeal in Section 34 of New Act, 1996 and FAFO (in the present case), but never availed the same. He cannot be permitted to raise issues nullifying the provision of Section 36 of Act, 1996 by way of objection under Section 47 of CPC.

Factual Background

In 1989, a suit was filed for appointment of Arbitrator under Arbitration Act, 1940 in which arbitrator was appointed in 1991. Due to pending litigation proceedings, Arbitration could only commence in the year 2001. Thereafter, in 2022, the arbitrator passed an order to continue the proceeding as per provision of Arbitration and Conciliation Act, 1996. In 2005,award was passed partly in favour petitioner and respondents both.

Respondent had moved application under Section 33 of the New Act, 1996 for modification of award. Arbitrator enhanced the award. After several rounds of litigation, the award attained finality. Respondents filed Execution Application in which petitioner filed objection under Section 47 of CPC which was rejected. The rejection order is challenge before the High Court.

Counsel for petitioner contended that the arbitrator had no power to entertain any application for modification once the records had been handed over to the District Court. It was argued that the award was enhanced beyond limitation under Section 33 of Act, 1996 without obtaining consent from the parties.

Further, it was argued that as per Section 85 of Act, 1996, arbitrator had no jurisdiction to decide the claim in New Act, 1996, once the proceeding has been initiated under the Old Act, 1940 unless there is an agreement between the parties. Objection with regard to jurisdiction could be raised at the stage of execution proceedings. Reliance was placed on the decision of the Allahabad High Court in Smt. Shakuntala Devi v. Smt. Vimla to state that in case a judgment has been given without jurisdiction or contrary to existing law, principle of res judicata shall not be applicable.

Per Contra, Counsel for Respondent argued that the Petitioner never objected to order by the arbitrator for conducting the proceedings under the New Act of 1996. Further, the agreement the parties states that Indian Arbitration Act, 1940, all its re-enactments and modification thereof and rules made thereunder shall apply to any arbitration between the parties.

It was argued that since the Petitioner failed to raise objections at the stage of Section 34, it cannot be permitted to raise the same at the stage of execution proceedings as an award is a not a decree under Section 2(2) of CPC.

High Court Verdict:

The Court observed that the arbitration agreement between the parties provides that not only for Old Act, 1940, but all statutory re-enactments and modification thereof and rules framed thereunder shall be applicable. Since, the said agreement is undisputed between the parties, it cannot be said that there is no agreement between the parties for applicability of New Act, 1996.

Placing reliance on the decision of the Supreme Court in Thyssen Stahlunion GMBH etc. v. Steel Authority of India Ltd., the Court held

“As the language of both the matters are similar and Apex Court after considering in detail has held that an agreement can be made even before enactment of New Act, 1996 for its applicability and in arbitration clause there is such agreement already present, therefore, there is no need to have any new agreement for compliance of Section 85(2)(a) and proceedings can be continued in New Act, 1996. Therefore, submission of learned counsel for the petitioner that there is no agreement between the parties as required under Section 85(2)(a) cannot be accepted. Judgment of Thyssen Stahlunion (supra) is not in favour of petitioner rather in favour of respondent as the similar issue has been considered and replied.”

The Court held that the an arbitral award is not a decree in terms of Section 2(2) of CPC even though it is enforced under Section 36 of the Act, 1996 read with CPC.

With regard to the issue whether in execution proceedings under Section 36 of New Act, 1996, objection under Section 47 of CPC is maintainable or not, the Court placed reliance on the decision of the Allahabad High Court in Larsen & Tubro Limited v. Maharaji Educational Trust.

“This Court in the matter of Larsen & Tubro Limited (Supra) relying upon the judgment of Padmajeet Singh Patheja (supra) has considered this issue that once the stage of Section 34 of New Act, 1996 is over and the question that were raised or could have been raised at that stage cannot be allowed to be raised again by filing objection under Section 47 of CPC at the time of execution of award.”

While dismissing the petition, the Court directed that IOCL pay a cost of Rs. 1,00,000 to M/s Vidhyawati Construction Col.

Case Title:- India Oil Corporation Ltd. And Another vs. The Commercial Court And Another

Case citation: 2023 LiveLaw (AB) 318

Counsel for Petitioner :- Anil Sharma Sr. Advocate assisted by Pramod Kumar Rai

Counsel for Respondent :- Manish Goyal, AAG assisted by Pranab Kumar Ganguli

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