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        REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.8943 OF 2017         (ARISING OUT OF SLP (C) No.1552/2015)

Punjab State Civil Supplies Corporation Ltd. & Anr.    ...Appellant(s)           

VERSUS

M/s Atwal Rice & General Mills Rep. by its Partners       ….Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1) Leave granted.

2) This appeal is filed against the final judgment

and  order  dated  17.10.2014  passed  by  the  High

Court of Punjab & Haryana at Chandigarh in Civil

Revision No. 3602 of 2013 whereby the High Court

dismissed  the  revision  petition  filed  by  the

appellants  herein  and  affirmed  the  order  dated

03.11.2012  passed  by  Additional  District  Judge,

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Jalandhar  in  Execution  SR.  No.  37  of  2010  by

which the execution petition relating to arbitration

award dated 01.06.2001 was dismissed.  

3) In  order  to  appreciate  the  short  controversy

involved  in  this  appeal,  few  relevant  facts  need

mention infra.

4) The  appellant  is  a  State  owned  Corporation

engaged in supply of civil commodities in the State

of Punjab. Respondent No. 1 is a partnership firm

whose partners are respondent Nos. 2 to 4. The firm

is engaged in the business of running a rice Mill in

Jalandhar.

5) On 01.01.1996, the appellant and Respondent

No.1  entered  into  an agreement.  In  terms of  this

agreement, the appellant was to give their paddy to

the respondents, who were to process the paddy in

their Rice Mill and the resultant 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. Since the agreement

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was  in  relation  to  processing  of  paddy  and  then

supply of  rice  to public at  large through FCI,  the

time was made the essence of the agreement so that

the concerned departments would be able to supply

the rice in time to public at large.

6) It  is  the  case  of  the  appellant  that  the

appellant  delivered  62944  bags  weighing  40790

quintals  of  fine  variety  of  paddy  and 90303 bags

weighing 58696.95 quintals of IR 8 variety of paddy

to  the  respondents  for  processing  and  converting

into  Rice  for  being  supplied  to  the  FCI.  The

respondents duly acknowledged the receipt of paddy

from the appellant on 27.11.1995 and 06.12.1995.  

7) The respondents, however, could only process

and  deliver  to  the  FCI  27950.75  quintals  of  fine

variety rice and 22955.32 quintals of IR - 8 variety

of  rice till  30.06.1996. Thereafter  the respondents

could deliver 710.00 quintals of fine variety of rice

and 14441.04.200 quintals  of IR -8 variety of rice

in 1075 bags after 30.06.1996.

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8) Since  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, it caused money losses to the appellant in

addition  to  sustaining  the  damages  due  to

non-delivery of the rice.  According to the appellant,

since  the  respondents  committed  breach  of  the

agreement because they were not  able  to perform

their part of  the agreement, the appellant became

entitled, in terms of the agreement, to recover from

the  respondents  (1)  1½  times  economic  cost  of

balance  paddy,  (2)  the  cost  of  balance  bags  and

sales tax @ 4.4% thereon, besides TDS on income

tax @ 2.34%, and (3) other recovery.  

9) The agreement contained an arbitration clause

for resolving all disputes arising between the parties

in  relation  to  the  agreement.  The  appellant

accordingly  gave  notice  to  the  respondents

requesting  them for  referring  the  disputes,  which

had  arisen  between  them  to  the  Arbitrator.  The

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respondents acceded to the appellant's request and

accordingly  the  disputes were referred to the sole

Arbitrator-one  Mr.  O.  P.  Garg.  The  arbitrator

embarked upon the reference made to him by the

parties. The parties filed their respective claims and

adduced evidence in support of their stand.  

10) On  01.06.2001,  the  Arbitrator  delivered  a

reasoned  award.  The  Arbitrator  allowed  the

appellant's claim in part and accordingly passed a

money  award  for  Rs.1024847.15  with  interest

payable  at  the  rate  of  21% w.e.f.  01.01.1999  till

realization  in  appellant's  favour  and  against  the

respondents.

11) The respondents, felt  aggrieved of the award,

filed  an  application  under  Section  34  of  the

Arbitration and Conciliation Act, 1996 (hereinafter

referred to as “the Act”) and questioned its legality

and  correctness  before  the  Additional  District

Judge, Jalandhar.  By order dated 04.06.2009, the

Additional District Judge dismissed the application

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and  upheld  the  award.  The  respondents,  as  the

records  indicate.  though  claimed  to  have  filed

appeal  in the High Court  but did not  pursue the

appeal and hence the order dated 04.06.2009 of the

Additional District Judge and, in consequence, the

award dated 01.06.2001 became final and attained

finality.

12) The  respondents  did  not  pay  the  awarded

amount  to  the  appellants  and,  therefore,  the

appellant filed Execution Petition No.37/2010 under

Section 36 of the Act before the Additional District

Judge,  Jalandhar  for  enforcement  of  the  award

against the respondents. The respondents on being

served filed reply to the execution application and

raised  certain  factual  objections  purporting  to  be

under Section 47 of the Civil Procedure Code, 1908

(hereinafter  referred  to  as  “the  Code”).  The

respondents  also  filed  one  application  praying

therein for a direction to the appellant to produce

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the  statement  of  accounts  and  the  transactions

done pursuant to the agreement in question.    

13) By  order  dated  03.11.2012,  the  Executing

Court  upheld  the  objections  raised  by  the

respondents  and,  in  consequence,  dismissed  the

appellant's  execution application.  It  was held that

the respondents having paid a sum of Rs.3,37,885/-

towards  decreetal  amount  to  the  appellant,  the

award/decree in question stood satisfied fully and

hence  the  execution  application  filed  by  the

appellant  is  liable  to  be  dismissed.  It  was,

accordingly, dismissed.

14) The  appellant,  felt  aggrieved,  filed  revision

being  Civil  Revision  No.  3602  of  2013  before  the

High  Court.  By  impugned  order,  the  High  Court

dismissed the revision and upheld the order of the

Executing  Court.  It  is  against  this  order,  the

appellant(claimant) has filed this appeal by way of

special leave before this Court.

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15) Heard Mr. Ashish Wad, learned counsel for the

appellant and Mr. Abhishek Vikas, learned counsel

for the respondents.

16) Having heard learned counsel  for  the parties

and on perusal  of  the  record of  the  case,  we are

constrained to allow the appeal and set aside the

impugned order.

17) Sections  35  and Section 36  of  the  Act  as  it

stood  at  the  relevant  time  are  relevant  for  this

appeal. It reads as under :

“35. Finality of arbitral awards. Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.

36. Enforcement - Where the time for making an application to set aside the arbitral award under  Section  34  has  expired,  or  such application  having  been  made,  it  has  been refused, the  award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.”

18) Section 35 gives finality to every arbitral award

and makes the award binding on the parties and all

persons claiming under them. So far as Section 36

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is concerned, it deals with execution of the award. It

says that once the Court dismisses the application

filed  under  Section  34  of  the  Act  or  if  no  such

application  is  made  and  time  has  expired  for

making  such  application,  the  award  shall  be

enforced as if  it  is a decree of  the Court and the

enforcement of the award shall be under the Code.  

19) In other  words,  the  arbitral  award has been

given the status of a decree of the Civil Court and,

therefore,  it  is  enforced  like  a  decree  of  the  Civil

Court by applying the provisions of Order 21 of the

Code and all other provisions, which deal with the

execution of the decree of the Civil Court.

20) Coming to the facts of the case, we find that

firstly,  the  award is  under  the  Act;  Secondly,  the

award  was  challenged  under  Section  34  by  the

respondents  before  the  Additional  District  Judge

but the challenge failed vide order dated 03.11.2012

of the Additional District Judge, Jalandhar; Thirdly,

the  order  dated  03.11.2012  attained  finality

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because  the  matter  was  not  pursued  by  the

respondents in appeal to the High Court; Fourthly,

the award, in consequence, also attained the finality

by virtue of Sections 35 and 36 of the Act; Fifthly,

the award was and continues to be binding on the

appellant and the respondents; Sixthly,  the award

acquired the status of a decree of the civil court by

virtue of Section 36 of the Act; Seventhly, the award

has  to  be  enforced  for  recovery  of  the  awarded

amount from the respondents like a decree of the

civil court under the Code.

21) 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

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decree nullity (see- Kiran Singh & Ors. vs. Chaman

Paswan & Ors., AIR1954 SC 340).

22) Let  us  now see  the  nature  of  the  objections

raised by the respondents in execution proceedings

with a view to find out as to whether they or anyone

out  of  them  were  legally  sustainable  and  which,

according  to  the  respondents,  resulted  in  fully

satisfying  the  award/decree  in  their  favour  and

rightly found acceptance by the Courts below for so

holding.

23) The  respondents  in  their  application  filed

under Section 47 of the Code contended that firstly,

the award being vague, it is incapable of execution

for  recovering  any sum awarded therein  from the

respondents; Secondly, the Arbitrator has failed to

specify the rates at which the interest were to be

charged; Thirdly, the Arbitrator did not mention the

words "per annum" to qualify the rate of  interest,

i.e.,21% awarded; Fourthly, the Arbitrator awarded

simple interest whereas the appellant had claimed

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compound interest which is not permissible; Fifthly,

the Arbitrator was not competent to award pendent

lite and future interest;  Sixthly, mandatory consent

of  the  Managing  Director  of  the

appellant-Corporation  was  not  obtained  by  the

Arbitrator for awarding interest at the rate of 21%;

Seventhly, the calculations made by the appellant in

their execution application is wrong  being excessive

in  nature;  Eighthly,  no  notice  of  execution

application was served on the respondents because

the application was filed beyond two years from the

date of award;  Ninthly, the execution application is

not  maintainable  because  the  respondents  have

filed appeal before the High Court against the order

rejecting their application under Section 34 of the

Act.

24) The respondents (judgment debtors) also filed

one  application  seeking  direction  against  the

appellant to produce the entire record of the case

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including the accounts relating to the transactions

done pursuant to the agreement in question.  

25) It  is  pertinent  to  mention  here  that  the

executing Court did not decide any of the objections

(nine) set out above but confined its inquiry to one

statement  of  accounts  filed  by  the  respondents,

which according to them, was given to them by the

appellant.  The executing Court,  on perusal  of  the

account  statement,  held  that  a  sum  of

Rs.3,37,885/- was paid by the respondents to the

appellant  on  29.08.2011  which,  as  per  the

statement, was credited in appellant's account and

hence such payment having been made has resulted

in  fully  satisfying  the  decree  in  question  and,

therefore, the respondents are not liable to pay any

amount towards decree in question. It is essentially

with this factual finding, the executing Court came

to a conclusion that  the award/decree stood fully

satisfied  and  hence  no  recovery  of  any  awarded

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amount can be made and, therefore, dismissed the

appellant's execution application.  

26) It is apposite to reproduce the finding of the

executing  Court  hereinbelow  because  it  is  this

finding  which  was  upheld  by  the  High  Court  by

impugned order giving rise to filing of this appeal by

special leave.

“8.  I  have  thoroughly  considered  the contentions of  the learned counsel for both the  parties  and  have  gone  through  the documents  as  referred  to  by  the  learned counsel for both the parties.  It is clear that statement  of  account  was  supplied  by  the decree  holder  department  itself  to  the judgment  debtor,  copy  of  which  has  been placed on file and even it is not denied by the decree  holder.   This  statement  of  account dated  29.08.2011  shows  that  as  on 29.08.2011,  a  sum  of  Rs.3,37,885/-  was outstanding  to  be  paid  by  the  judgment debtor  to  the  decree  holder  as  per  this statement of account supplied by the decree holder.   Nor  corresponding  to  the  other document,  i.e.,  certificate  issued by Punjab National Bank, said amount of Rs.3,37,885/- was  paid  by  the  judgment  debtor  and  was credited in the account of the decree holder M/s Punjab State Civil Supplies Corporation Limited, Jalandhar.  The plea of the learned counsel for the decree holder that the other statement  of  account,  which  shows  that  a sum of Rs.8,86,248/- is to be repaid may be considered, is not acceptable for the reason that  the  statement  of  account  supplied  by the  decree  holder  department  itself  shows that  the  judgment  debtor  was  given  said

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statement of account on 29.8.2011 and this statement  of  account  is  admitted  to  have been issued by the decree holder itself.  The statement of  account as relied upon by the counsel  for  the  decree  holder  does  not mention any date.  More so, it is not justified by the decree holder as to how the amount of Rs.8,86,248/- has swollen to the amount of Rs.3495,886.15  paise  regarding  which  the present  execution  is  filed.   On  the  other hand,  the  statement  of  account  dated 29.8.2011 shows that a sum of Rs.3,37,885/- was  found  to  be  due  against  the  judgment debtor,  which  was  paid  by  the  judgment debtor and deposited in the account of  the decree holder and this fact is clear from the certificate  given  by  the  concerned  bank. Hence, considering all these documents, it is clear that whatever money was due to be paid by the judgment debtor to the decree holder as per statement of account supplied by the decree  holder  itself,  has  been  paid  by  the judgment debtor and as such award regarding which the present  execution has been filed stands fully satisfied.  Resultantly, objections filed  by  the  judgment  debtor  are  accepted and the execution petition stands dismissed. Whatever property belonging to the judgment debtor,  which  has  been  attached  in  the present  execution is  ordered to be released henceforth.  File be consigned to the record room.”

27) We  are  constrained  to  observe  that  the

executing Court and the High Court either did not

understand  the  controversy  or  if  understood,

miserably failed to decide the same in accordance

with law. Indeed, both the orders clearly show the

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total  non-application  of  mind  by  the  two  Courts

because both the Courts neither set out the facts

much less properly nor dealt the issues arising in

the case and nor applied the principle of law which

governs the controversy.  

28) Both the orders are, therefore, wholly perverse,

illegal and without jurisdiction. This we say for more

than one reason as detailed by us hereinbelow.  

29) In the first place, none of the objections (nine)

raised  by  the  respondents  were  decided  by  the

executing  Court  or/and  the  High  Court.  Indeed,

they were not even referred to in the orders. If the

objections had been raised by the judgment debtor

under Section 47 of the Code challenging the decree

then  it  was  necessary  for  the  executing  Court  to

deal with the objections and record its finding one

way  or  other  in  accordance  with  law.  Secondly,

assuming that these objections were to be decided

then also,  in  our  opinion,  none  of  them had any

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merit whatsoever and they simply deserved rejection

at the outset.  

30) Thirdly, all the objections referred above ought

to have been raised by the respondents before the

Arbitrator  or/and Additional  District  Judge  under

Section 34 of  the  Act  but  certainly  none of  them

could be allowed to be raised in execution once the

award became final and attained finality as decree

of the Civil Court.

31) In other words, having regard to the nature of

objections, it is clear that such objections were not

capable of  being tried in execution proceedings to

challenge the award. It is for the reason that they

were  on  facts  and  pertained  to  the  merits  of  the

controversy, which stood decided by the Arbitrator

resulting  in  passing  of  an  award.  None  of  the

objections were in relation to the jurisdiction of the

Court affecting the root of the very passing of the

decree.  If  the  executing  Court  had  probed  these

objections then it would have travelled behind the

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decree,  which  was  not  permissible  in  law.  An

inquiry into facts, which ought to have been done in

a suit or in an appeal arising out of the suit or in

proceedings under Section 34 of the Act, cannot be

held  in  execution proceedings  in  relation to  such

award/decree.  

32) Fourthly, and apart from what is held above,

by  no  stretch  of  imagination,  the  award/decree

could be held fully satisfied on alleged making of the

payment of  Rs.3,37,885/-  by the  respondents  to

the appellant. This factual finding to say the least is

perverse to its extreme.  

33) It is not in dispute that the awarded principal

sum even without interest was for Rs.10,24847.15.

In  these  circumstances,  we  are  at  loss  to

understand  as  to  how  and  on  what  basis,  the

executing  Court  could  ever  come  to  a  conclusion

that the entire money decree which was admittedly

for  more  than  Rs.10  lacs  could  be  held  fully

satisfied  against  making  of  so-called  payment  of

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Rs.3,37,885/- by the respondents to the appellant

assuming that such payment was held to had been

made.

34) Order  21  Rule  1  of  the  Code  prescribes  the

modes  of  paying  money  under  the  decree.  Sub-

clause(a) provides that the decreetal money has to

be deposited in Court or by postal money order or

through Bank.  Clause(b)  provides  that  amount,  if

paid out of court, then it has to be by postal money

order  or  through  Bank  or  by  any  mode  where

payment is evidenced in writing. If the payment is

made under clause(b) then clause(c) prescribes the

procedure as to how the money has to be paid and

what  details  are  required  to  be  given  by  the

judgment debtor in support of making payment.  

35) Order  21 Rule  2  of  the  Code deals  with the

cases  where  the  judgment  debtor  makes  the

payment of decreetal amount either full or part out

of  the  Court  to  the  decree  holder.  Sub-clause(1)

empowers  the  decree  holder  to  apply  to  the

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executing Court to get the amount received from the

judgment debtor certified from the Court and it is

only when the Court certifies the amount to have

been paid, it can be adjusted against the decreetal

sum.  Clause(2)  empowers  the  judgment  debtor  to

apply  to  the  executing  Court  and  get  the

certification done by the Court of the amount paid

by  them to  the  decree  holder  after  notice  to  the

decree holder. Rule 2(A) provides that no payment

made  by  the  judgment  debtor  shall  be  adjusted

unless he ensures compliance of sub clause (a) or

(b) or (c). Rule 3 provides that if the Court does not

certify the payment made by the judgment debtor

then such payment shall not be recognized by any

Court executing the decree for the purpose of giving

adjustment  to  the  judgment  debtor  against  the

decretal amount.

36) Keeping in view the mandatory requirements of

Order  21  Rules  1  and  2  relating  to  payment  of

decretal  dues  made  by  the  judgment  debtor  and

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applying the said provisions to the undisputed facts

of this case, we have no hesitation in holding that

the  sum of  Rs.3,37,885/-  which  the  respondents

claimed to have paid to the appellant towards the

decretal  sum and which found acceptance  to  the

two Courts below could never have been regarded as

the  payment  made  by  the  respondents  to  the

appellant  in  conformity  with  the  requirements  of

either  Rule  1 or  Rule  2 of  Order  21.  It  is  not  in

dispute that  such payment was never certified by

the Court as contemplated under Rule 2 of Order 21

at the instance of respondents or at the instance of

the  appellant.  Indeed,  there  was  neither  any

evidence to prove the factum of payment except one

copy  of  the  statement  which  also  remained

unproved  nor  any  evidence  was  led  to  prove  the

certification done by the  Court  as required under

Order 21 Rule 2 so as to recognize making of such

payment by the respondents to the appellant.

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37) We  are,  therefore,  of  the  considered  opinion

that  firstly,  the  execution  application  filed  by  the

appellant  (decree  holder)  for  execution  of  the

award/decree  dated  01.06.2001 was  maintainable

and  it  should  have  been  so  held;  Secondly,  no

amount  was  paid  by  the  respondents  to  the

appellant  pursuant  to  the  award/decree  so  as  to

enable  the  executing  Court  to  record  its  full

satisfaction  in  accordance  with  the  provisions  of

Order 21 Rules 1 and 2 and lastly,  all  objections

raised by the respondents under Section 47 of the

Code  against  the  award/decree  are  liable  to  be

rejected as being wholly devoid of any merits. We,

accordingly, hold so against the respondents.

38) In  view  of  foregoing  discussion,  the  appeal

succeeds  and  is  allowed  with  cost  quantified  at

Rs.25,000/-  payable  by  the  respondents  to  the

appellant. The impugned order and the order of the

executing Court dated 03.11.2012 are set aside.

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39) As a consequence thereof, the executing Court

is directed 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.

40) Let this be done within one month.       

               ………...................................J. [ABHAY MANOHAR SAPRE]

              ……..................................J.   [R. BANUMATHI]

New Delhi; July 11, 2017