Section 47 Of The CPC Does Not Apply To Proceedings For Enforcement Of Arbitral Award: Karnataka High Court

The bench of Justice C.M. Poonacha held that an arbitral award can only be challenged on the grounds mentioned under Section 34 of the Act and not otherwise. It held that the award is deemed to be a decree for the purpose of the enforcement, however, this deeming fiction is limited to its enforcement only.

The Court held that Section 47 of CPC, which provides for determination of question by the executing court in relation to the validity of the decree, does not apply to execution of arbitral awards.

Fact

The parties entered into an Agreement dated 26.6.2013. The Respondent was registered under the MSMED Act. A dispute arose between the parties related to the non-payment by the petitioner.

Pursuant thereto, the Respondent filed a petition before the Micro and Small Enterprises Facilitation Council for recovery of a sum of 34,48,445/-. The Council admitted the petition and initiated the conciliation proceedings. Upon the failure of the conciliation, the Council initiated arbitration proceedings.

The Respondent filed its statement of claim and the Petitioner contested the jurisdiction of the Council on ground of contractual arbitration.

The Council allowed the petition and directed the Petitioner to pay 30,73,037/- along with interest. The Petitioner challenged the award under Section 34 and 37 of the A&C Act, however, the challenge petition as well as the appeal was dismissed.

Meanwhile, the Respondent filed an execution petition, and the Petitioner filed an application under Section 47 of the CPC in the Executing Court, contending that the award was a nullity and passed without jurisdiction.

The Court dismissed the application on the ground enforceability of an award cannot be challenged on contours of Section 47 of CPC. Aggrieved thereby, the petitioner preferred the review petition before the High Court.

Submission by the Parties

The petitioner made the following submissions:

• That the Council inherently lacked subject matter jurisdiction as the Respondent was not registered under the MSMED Act at the time of the contract, rendering the provisions of the Act inapplicable.
• That the award was a nullity, and therefore, the lack of subject matter jurisdiction could be raised before the Executing Court.
• That the question of inherent lack of jurisdiction could be raised in execution proceedings, even after the rejection of challenges to the award under Sections 34 and 37 of the A&C Act.
• that applying the provisions of the MSMED Act would affect substantive rights of the parties.

The respondent made the following counter-submissions:

• That section 47 of CPC applies only to execution of decrees passed in a suit and not to execution of arbitral awards.
• That the lis between the parties was not a suit, making Section 47 of the CPC wholly inapplicable to the case.
• That the Petitioner was barred from raising the plea of lack of jurisdiction under the MSMED Act before the Executing Court, as this plea was not raised in their reply to the notice of conciliation proceedings issued by the Council.

Analysis by the Court

The Court observed that the petitioner has unsuccessfully challenged the award under Section 34 and 37 of the A&C Act and the award has become final and binding on the parties.

The Court considered whether the Petitioner was entitled to file an application under Section 47 of the CPC, raising the question of inherent lack of subject matter jurisdiction regarding the award.

The Court held that an arbitral award can only be challenged on the grounds mentioned under Section 34 of the Act and not otherwise. It held that enforcement of an award cannot be subject to a challenge under Section 47 of the CPC which applies only to decrees passed in civil suits. The Court also referred to Section 5 of the A&C Act which provides for minimal court interference.

It held that the award is deemed to be a decree for the purpose of the enforcement, however, this deeming fiction is limited to its enforcement only and not to permit the objections allowed under Section 47 of CPC.

The Court concluded that keeping in mind the “provisions of Sections 5, 12, 13, 16, 34, 35 and 36 of the Act, the only grounds which can be pressed into service for challenge to an award is within the ambit and scope of Section 34 of the Act. Once the stage of section 34 is over and the questions that were raised or could have been raised at that stage cannot be allowed to be raised again and again by pressing into service section 47 of the Code of Civil Procedure at the time of execution of award under Section 36 of the Act.”

Accordingly, the Court dismissed the review petition

Case Title: M/s Bellary Nirmithi Kendra v. M/s Capital Metal Industries, CRP No. 100067 of 2022

Date: 22.03.2024

Counsel for the Petitioner: SRI PRASHANT F GOUDAR, ADVOCATE

Counsel for the Respondent: SMT V VIDYA, ADVOCATE

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