Objections Under Section 47 Of CPC Cannot Be Considered In An Enforcement Petition Under Section 36 Of The A&C Act: Delhi High Court

The bench of Justice Vashwant Varma held though under the Arbitration Act, 1940, the Arbitral Award was required to be made a rule of the Court and a decree but Section 36 of the Arbitration Act, 1996, confers the Arbitral Award with a status of a decree to be enforced in the same manner as if it were a decree of the Court. However, the deeming fiction is limited for the purpose of enforcement and not to make it a decree for all purposes, thus, the objections that can be raised against a decree at the enforcement stage would not apply to an arbitration award which is a deemed decree only.

The Court held that an arbitration award can only be challenged under Section 34 and that too on the limited grounds mentioned under Section 34(2). It held that the Act does not contemplate a dual challenge, thus, an award cannot be challenged on merits in the enforcement petition.

Facts

The enforcement petition arose out of a final award dated 16.06.2014. The award was challenged under Section 34 of the Act on 13.10.2013. The respondent preferred objections under Section 47 of CPC on the ground of manifest illegality and award being nullity in law.

Grounds of Objections

The respondent preferred objections on the following grounds:

• The arbitrator has committed manifest illegality in rejecting the claims of the respondent, thus, the award was a nullity.
• The Court in Khanna Traders v. Scholar Publishing House P. Ltd^[1] has held that objection under Section 47 can also be taken in a petition for the enforcement of arbitration award as an award is enforced in the same manner as a decree of the Court, thus, objections to decree at the time of enforcement is also available to enforcement of an award.

Analysis by the Court

The Court held that the judgement in Khanna Traders (supra) was passed without considering the other judgments of the Court and failed to take the correct view of the law. It held that Khanna Traders failed to consider the judgement in Morgan Securities v. Morepen Laboratories^[2] wherein the Court held that objection, once not taken under Section 34, cannot be taken in an enforcement petition. It held that Morgan Securities (affirmed by the Division Bench) was cited, however, the Court did not hold to be either inapplicable, inapposite or distinguishable, thus, the judgement in Khanna Traders was passed ignoring the binding precedent.

The Court relied upon the judgments of the Supreme Court in Paramjeet Singh Patheja v. ICDS,^[3] Amazom.Com v. Future Retail,^[4] and its judgment in Daelim Industrial v. Numaligard Refinery and Gujarat JHM Hotels v. Rajasthali Resorts,^[5] to hold that although the award is a deemed decree and is enforced in the same manner, however, the deeming fiction is limited for the purpose of enforcement and not to make it a decree for all purposes, thus, the objections that can be raised against a decree at the enforcement stage would not apply to an arbitration award which is a deemed decree only.

The Court relied upon the judgements of the Supreme Court in Furest Day Lawson v. Jindal Exports,^[6] Pam Development v. State of W.B.^[7] and its judgement in NHAI v. Oriental Structure^[8] to hold that arbitration act is a self-contained code, thus, CPC would not apply unless otherwise given under the Act.

Therefore, the Court held that that objections available under Section 47 of CPC cannot be considered by a Court at the time of enforcement of an arbitration award under Section 36 of the A&C Act and that an arbitration award can only be challenged under Section 34 and that too on the limited grounds mentioned under Section 34(2). It held that the Act does not contemplate a dual challenge, thus, an award cannot be challenged on merits in the enforcement petition.

Accordingly, the Court dismissed the objections as not maintainable and fixed the date for hearing the enforcement petition on the merits.

Case Title: Hindustan Zinc Ltd v. National Research Development Corporation

Citation: 2023 LiveLaw (Del) 89

Date: 24.01.2023

Counsel for the Petitioner: Mr. Uday N. Tiwaly and Mr. Akshat Tiwaly, Advs.

Counsel for the Respondent (Applicant): Mr. J. M. Kalia and Mr. Dhruv Kalia, Advs.

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