IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.1650 of 2018

SUNDARAM FINANCE LIMITED ….Appellant

versus

ABDUL SAMAD & ANR.  ..…Respondents

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. The divergence of legal opinion of different High Courts on the

question  as  to  whether  an  award  under  the  Arbitration  &

Conciliation Act, 1996 (hereinafter referred to as the ‘said Act’)

is required to be first filed in the court having jurisdiction over

the  arbitration  proceedings  for  execution  and  then  to  obtain

transfer of the decree or whether the award can be straightway

filed and executed in the Court where the assets are located is

required to be settled in the present appeal.

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REPORTABLE

Facts:

2. The  appellant  claims  that  the  first  respondent  approached  the

appellant for grant of a loan for purchase of a Tata Lorry-HCV

2005 model,  which  loan was  granted  by the  appellant  on  the

terms  &  conditions  specified  in  the  Loan  Agreement  dated

18.8.2005.  Respondent No.2 is stated to have stood guarantee for

the repayment of the loan by executing a separate guarantee letter

of  the  same  date.   The  loan  had  to  be  repaid  in  installments

commencing 3.9.2005 to 3.1.2009.

3. The appellant alleges that respondent No.1 committed default in

payment from the 20th installment onwards.  The repossession,

however,  of  the  vehicle  could  not  take  place  and  in  order  to

recover the loan, arbitration proceedings were initiated in terms

of the arbitration clause contained in the Loan Agreement.  Mr. S.

Santhanakrishnan, Advocate was appointed as the sole arbitrator

on  3.5.2011  and  the  claim  statement  was  filed  before  the

arbitrator  but the respondents  remained unserved.   Notice was

served  through  publication  but  since  none  appeared  for  the

respondents,  an  ex  parte arbitration  award  was  made  on

22.10.2011 for a sum of Rs.12.69,420 with interest at 18 per cent

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per annum from 4.4.2011 till realization and costs.

4. The case of the appellant is that the award being enforceable as a

decree under Section 36 of the said Act, execution proceedings

were filed in the jurisdiction of the courts at Morena, Madhya

Pradesh under Section 47 read with Section 151 and Order 21

Rule  27  of  the  Code  of  Civil  Procedure,  1908  (hereinafter

referred to as the ‘said Code’).  The respondents sought to contest

the proceedings inter alia on the ground that the vehicle against

which the loan was obtained was stolen.  It is not necessary to go

into further details of the proceedings but suffice to say that the

trial  court  vide  order  dated  20.3.2014  return  the  execution

application on account of lack of jurisdiction to be presented to

the court of competent jurisdiction.  The effect of the judgment

was  that  the  appellant  was  required  to  file  the  execution

proceedings  first  before  the  court  of  competent  jurisdiction  in

Tamil Nadu, obtain a transfer of the decree and then only could

the proceedings be filed in the trial court at Morena.  This view

adopted by the trial court was in turn based on the judgment of

the Madhya Pradesh High Court and the opinion of the Karnataka

High Court  while  it  is  pleaded that  the view of the Rajasthan

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High Court and the Delhi High Court were to the contrary.  The

petitioner did not approach the High Court against the said order

of the trial court but straightway approached this Court by filing

the Special Leave Petition on the ground that no useful purpose

would be served by approaching the Madhya Pradesh High Court

in light of the view already expressed by that Court in conflict

with the opinions of some other High Courts.

The Conflicting Views:

A.  The  transfer  of  decree  should  first  be  obtained  before  filing  the

execution petition before the Court where the assets are located:

5. The aforesaid view has been adopted by the Madhya Pradesh and

the Himachal Pradesh High Courts:

i.  Computer  Sciences  Corporation  India  Pvt.  Ltd.  v.

Harishchandra Lodwal & Anr.1– The learned single Judge of the

Madhya  Pradesh High Court  took recourse  to  the  provisions  of

Section 42 of the said Act, dealing with the issue of jurisdiction in

respect of an arbitration agreement read with Section 2(e) of the

said Act which defines the ‘Court’.  In the context of Section 36 of

the said Act dealing with the enforcement of an award prescribing

1  AIR 2006 Madhya Pradesh 34

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that  “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,” it was observed that the same principle would

apply as for enforcing of a decree.  Since Section 37 of the Code

defines  the  Court  which  passes  the  decree  and  Section  39 lays

down the procedure for transfer of decree, it was opined that for

execution of an award a transfer of the decree was mandatory.

ii.  Jasvinder Kaur & Anr. v. Tata Motor Finance Limited2 of the

High  Court  of  Himachal  Pradesh,  Shimla  –  the  learned  single

Judge took note of the fact that the arbitration proceedings were to

be  settled  in  Mumbai  in  accordance  with  the  said  Act  and  the

award had been made in Mumbai.  Thereafter the learned single

Judge  copiously  extracted  from  the  judgment  of  this  Court  in

Swastik  Gases  Private  Limited  v.  Indian  Oil  Corporation

Limited3.   The  learned  Judge  then  proceeded  to,  once  again,

copiously extract from the then prevailing view of the Karnataka

High  Court  where  a  learned  single  Judge  in  I.C.D.S.  Ltd.  v.

Mangala Builders Pvt. Ltd. & Ors.4 had opined in favour of the

2 CMPMO No.56/2013 decided on 17.9.2013 3 JT 2013 (10) SC 35 4 AIR 2001 Karnataka 364

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aforesaid view.

B.  An award is to be enforced in accordance with the provisions of the

said Code in the same manner as if it were a decree of the Court as per

Section 36 of the said Act does not imply that the award is a decree of a

particular court and it is only a fiction.  Thus, the award can be filed for

execution before the court where the assets of the judgment debtor are

located:

i. Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.5 (Delhi

High Court) – The learned single Judge of the Delhi High Court

repelled the contention that the jurisdictional Section 42 of the said

Act requiring an application under Section 34 of the said Act to be

filed in that Court would not extend to the execution of a decree.

The execution application was not ‘arbitral proceedings’.  Section

38  of  the  said  Code  applies  to  a  decree  passed  by  the  Court

prescribing that the decree may be executed by the Court which

passed it, or by the Court to which it was sent for execution.  In

case of an award no court passes the decree.

The  learned  single  Judge went  into  the  discussion of  the

effect of the provisions of Section 635(4) of the Companies Act,

5  2009 159 DLT 579  

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1956 providing for the order of the Company Law Board to be

enforced by the Court in certain circumstances to draw an analogy

therefrom.

ii. Maharashtra Apex Corporation Limited v. V. Balaji G. & Anr.6

(Kerala High Court) – The learned single Judge expressed the view

that the Court cannot insist for a decree to receive an execution

application on its file and, thus, there was no question of transfer of

a decree.  The execution court was to accept the execution petition

with a certified copy of the award wherever it was filed.

iii.  Kotak  Mahindra  Bank  Ltd.  v.  Sivakama  Sundari  &  Ors.7

(Madras High Court) – Section 39 of the Code enables the Court

which passed the decree to transfer it to any subordinate court even

of its own motion without application by the decree holder.  The

learned  single  Judge  of  the  Madras  High  Court  examined  the

provisions of the said Act and the said Code and in the process, a

reference was made to Section 41 of the said Code imposing an

obligation  upon  the  executing  court  to  inform the  court  which

passed the decree about the completion of execution or about the

6  2011 (4) KLJ 408 7  (2011) 4 LW 745

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failure to execute the decree along with attending circumstances.

A passing reference was made to Section 46 of the said Act which

speaks of precepts.   In a nutshell  the conclusion made was that

every decree of a civil court was liable to be executed primarily by

the court which passed the decree.  On the other hand, in case of an

award, the same is liable to be enforced under Section 36 of the

said Act in the same manner as if it were a decree of the court and

thus the award passed is equated to a decree of the court, only for

purposes  of  execution.   The  execution  of  the  award  does  not

require a seal of approval by the civil court as distinct from the

provisions under the Arbitration Act, 1940.  The award cannot be

executed through the arbitral tribunal which passed the award and,

thus, there is no situation envisaged for the arbitral tribunal which

passed the decree (or award) to transfer the decree to any other

court for its execution.  There was also no provision either in the

Code or anywhere else to treat a court within whose jurisdiction

the arbitral proceedings took place as the court which passed the

decree.

It was, thus, opined that:

“19. While the award passed by an arbitral tribunal is deemed to be a decree of a civil court under section 36 of the 1996 Act, there is

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no deeming fiction anywhere to hold that the court within whose jurisdiction the arbitral award was passed, should be taken to be the court which passed the decree. Therefore, the whole procedure of  filing  an  execution  petition  before  the  court  within  whose jurisdiction the arbitral award was passed, as though it is the court which passed the decree, is pathetically misconceived.”

xxxx xxxx xxxx xxxx xxxx

“21. Therefore, it is clear that no Court to which an application for execution of an award is presented, can insist on the filing of the execution  petition  first  before  some  other  Court  and  to  have  it transmitted to it later. It appears that the High Court of Bombay has also adopted the same view, though not by a very elaborate order.”

In another perspective it was observed that in view of Section 21 of

the said Act parties could determine the place of arbitration and

thus, the Act transcends all territorial barriers.

iv.  Kotak Mahindra Bank Ltd.  v. Ram Sharan Gurjar & Anr.8

(Rajasthan  High  Court)  –  The  learned  single  Judge  of  the

Rajasthan High Court agreed with the view adopted by the Delhi

High Court.

v.  GE Money  Financial  Services  Ltd.  v.  Mohd.  Azaz  & Anr.9

(Allahabad  High  Court,  Lucknow  Bench)  –  The  learned  single

Judge  observed  that  the  arbitrator  cannot  be  treated  as  a  court

although the  award made by him will  be  executed as  a  decree.

8  (2012) 1 RLW 960 9  2013 SCC OnLine All 13365 = (2013) 100 ALR 766

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Thus,  Sections,  38  &  39  of  the  said  Code  would  have  no

application and the award can, thus,  be filed for execution as  a

decree  of  civil  court  wherever  the  judgment  debtor  resides  or

carries on business or has properties within the jurisdiction of the

said court.

vi. Indusind Bank Ltd. v. Bhullar Transport Company10(Punjab &

Haryana High Court) – The view of the Delhi High Court referred

to aforesaid was adopted.

vii.  Sri  Chandrashekhar  v.  Tata  Motor  finance  Ltd.  &  Ors.11

(Karnataka  High  Court)  –  The  learned  single  Judge  of  the

Karnataka  High  Court  opined  that  the  question  of  filing  an

execution petition before the court  which passed the decree and

then seeking a transfer of the decree to the court where the assets

are located would not arise, as an award is not a decree passed by

the court.

Our View:

6. In order to appreciate the controversy, we would first like to deal

with the provisions of the said Code and the said Act.

10 MANU/PH/2896/2012 11  (2015) 1 AIR Kant R 261

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7. Part  II  of  the  said  Code  deals  with  execution  proceedings.

Section 37 of the said Code defines the ‘Court’, which passed the

decree.   Section 38 of the said Code provides as to by which

court the decree would be executed and reads as under: “38. Court by which decree may be executed. – Adecree may be executed either by the Court which passed it, or by the Court to which it is sent for execution.”

8. Section 39 of the said Code provides for transfer of decree and

reads as under:

“39. Transfer of decree. –  (1)The Court which passed a decree may, on the application of the decree-holder, send it for execution to another Court [of competent jurisdiction],-

(a) if the person against whom the decree is passed actually and voluntarily resides or carries on business, or personally works for gain, within the local limits of the jurisdiction of such other Court, or

(b) if such person has no property within the local limits of the jurisdiction  of  the  Court  which  passed  the  decree  sufficient  to satisfy such decree and has property within the local limits of the jurisdiction of such other Court, or

(c) if the decree directs the sale or delivery of immovable property situate  outside  the  local  limits  of  the  jurisdiction  of  the  Court which passed it, or

(d) if the Court which passed the decree considers for any other reason, which it shall record in writing, that the decree should be executed by such other Court.

(2) The Court which passed the decree may of its own motion send it for execution to any subordinate Court of competent jurisdiction.

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[(3) For the purposes of this section, a Court shall be deemed to be a  Court  of  competent  jurisdiction  if,  at  the  time  of  making the application for the transfer of decree to it, such Court would have jurisdiction to try the suit in which such decree was passed.]

[(4) Nothing in this section shall be deemed to authorise the Court which passed a decree to execute such decree against any person or property outside the local limits of its jurisdiction.]”

9. One of the relevant provisions, the effect of which has not been

really discussed in any of the judgments referred to aforesaid is

Section 46 of the said Code which defines Precepts as under:

“46. Precepts. –  (1)Upon the application of the decree-holder the Court which passed the decree may, whenever it thinks fit, issue a precept to any other Court which would be competent to execute such  decree  to  attach  any  property  belonging  to  the judgment-debtor and specified in the precept.

(2) The Court to which a precept is sent shall proceed to attach the property in the manner prescribed in regard to the attachment of property in execution of a decree:

Provided  that  no  attachment  under  a  precept  shall  continue  for more than two months unless the period of attachment is extended by an order of the Court which passed the decree or unless before the  determination  of  such  attachment  the  decree  has  been transferred to the Court by which the attachment has been made and the decree-holder has applied for an order for the sale of such property. Questions to be determined by Court executing decree”

10.The relevance of the aforesaid provision is that the application of

the decree holder is made to the Court which passed the decree,

which  issues  the  precepts  to  any  other  Court  competent  to

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execute the said decree.  As noticed, the expression “the Court

which passed the decree” is as per Section 37 of the said Code.

We may note at this stage itself that in the case of an award there

is no decree passed but the award itself is executed as a decree by

fiction.  The provisions of the said Act traverse a different path

from the Arbitration Act, 1940, which required an award made to

be filed in Court and a decree to be passed thereon whereupon it

would be executable.

11.Now turning to the provisions of Order XXI of the said Code,

which  deals  with  execution  of  decrees  and orders.   In  case  a

Court desires that its own decree is to be executed by another

court, the manner for doing so is provided by Rule 6, which reads

as under: “Order XXI – Execution of Decrees and Orders xxxx xxxx xxxx xxxx xxxx 6. Procedure where court desires that its own decree shall be executed  by  another  court.-  The  court  sending  a  decree  for execution shall send—

(a) a copy of the decree;

(b) a certificate setting forth that satisfaction of the decree has not been obtained by execution within the jurisdiction of the court by which it  was passed, or, where the decree has been executed in part, the extent to which satisfaction has been obtained and what part of the decree remains unsatisfied; and

CIVIL APPEAL No.1650 of 2018 Page 13 of 21

(c) a copy of any order for the execution of the decree, or, if no such order has been made, a certificate to that effect.”

12.The manner of presentation of an application is contained in Rule

11(2) of Order XXI, which reads as under: “Order XXI – Execution of Decrees and Orders

xxxx xxxx xxxx xxxx xxxx  

11  (2)  Written  application—Save  as  otherwise  provided  by sub-rule (1), every application for the execution of a decree shall be in writing, signed and verified by the applicant or by some other person proved to the satisfaction of the court to be acquainted with the  facts  of  the  case,  and  shall  contain  in  a  tabular  form  the following particulars, namely:—

(a) the number of the suit;

(b) the names of the parties;

(c) the date of the decree;

(d) whether any appeal has been preferred from the decree;

(e) whether any, and (if any) what, payment or other adjustment of the  matter  in  controversy  has  been  made  between  the  parties subsequently to the decree;

(f) whether any, and (if any) what, previous applications have been made for the execution of the decree, the dates of such applications and their results;

(g) the amount with interest (if any) due upon the decree, or other relief granted thereby, together with particulars of any cross decree, whether passed before or after the date of the decree sought to be executed;

(h) the amount of the costs (if any) awarded;

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(i) the name of the person against whom execution of the decree is sought;  and  the  mode  in  which  the  assistance  of  the  court  is required, whether—

(i) by the delivery of any property specifically decreed;

(ii) by the attachment, or by the attachment and sale, or by the sale without attachment, of any property;

(iii) by the arrest and detention in prison of any person;

(iv) by the appointment of a receiver;

(v) otherwise, as the nature of the relief granted may require.”

13.A  perusal  of  the  aforesaid  shows  that  what  is  sought  to  be

disclosed  is  that  the  details  like  the  number  of  suits,  appeal

against the decree, etc. find a place, which really does not have a

relevance to the fiction of an award to be treated as a decree of

the Court for purposes of execution.

14.We would now like to refer to the provisions of the said Act,

more  specifically  Section  36(1),  which  deals  with  the

enforcement of the award: “36. Enforcement. – (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 to 1908), in the same manner as if it were a decree of the court.”

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15.The  aforesaid  provision  would  show  that  an  award  is  to  be

enforced in accordance with the provisions of the said code in the

same manner as if it were a decree.  It is, thus, the enforcement

mechanism, which is akin to the enforcement of a decree but the

award  itself  is  not  a  decree  of  the  civil  court  as  no  decree

whatsoever is passed by the civil court.  It is the arbitral tribunal,

which renders an award and the tribunal does not have the power

of execution of  a  decree.   For the purposes of  execution of  a

decree the award is to be enforced in the same manner as if it was

a decree under the said Code.

16.Section 2(e) of the said Act defines ‘Court’ as under:

“2. Definitions. ………

xxxx xxxx xxxx xxxx xxxx

[(e) “Court” means –  

(i)  in  the  case  of  an  arbitration  other  than  international commercial  arbitration,  the  principal  Civil  Court  of  original jurisdiction in a district, and includes the High Court in exercise of its  ordinary original  civil  jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High

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Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]”

17.The  line  of  reasoning  supporting  the  award  to  be  filed  in  a

so-called  court  of  competent  jurisdiction  and  then  to  obtain  a

transfer of the decree is primarily based on the jurisdiction clause

found in Section 42, which reads as under: “42.  Jurisdiction. –  Notwithstanding  anything  contained elsewhere in this Part or in any other law for the time being in force,  where  with  respect  to  an  arbitration  agreement  any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent  applications  arising  out  of  that  agreement  and  the arbitral proceedings shall be made in that Court and in no other Court.”

18.The  aforesaid  provision,  however,  applies  with  respect  to  an

application being filed in Court under Part I.  The jurisdiction is

over the arbitral proceedings.  The subsequent application arising

from that agreement and the arbitral proceedings are to be made

in  that  court  alone.   However,  what  has  been  lost  sight  of  is

Section 32 of the said Act, which reads as under:

“32. Termination of proceedings.—

(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

(2) The arbitral tribunal shall issue an order for the termination of

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the arbitral proceedings where—

(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,

(b) the parties agree on the termination of the proceedings, or

(c)  the  arbitral  tribunal  finds  that  the  continuation  of  the proceedings  has  for  any  other  reason  become  unnecessary  or impossible.

(3)  Subject  to  section  33 and sub-section  (4)  of  section 34,  the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings.”

19.The aforesaid provision provides for arbitral proceedings to be

terminated by the final arbitral award.  Thus, when an award is

already  made,  of  which  execution  is  sought,  the  arbitral

proceedings already stand terminated on the making of the final

award.  Thus, it is not appreciated how Section 42 of the said Act,

which  deals  with  the  jurisdiction  issue  in  respect  of  arbitral

proceedings, would have any relevance.  It does appear that the

provisions of the said Code and the said Act have been mixed up.

20.It is in the aforesaid context that the view adopted by the Delhi

High  Court  in  Daelim  Industrial  Co.  Ltd.  v.  Numaligarh

Refinery  Ltd.12 records  that  Section  42  of  the  Act  would  not

12  supra

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apply  to  an  execution  application,  which  is  not  an  arbitral

proceeding and that  Section 38 of  the Code would apply to a

decree passed by the Court,  while in the case of an award no

court has passed the decree.

21.The  Madras  High  Court  in  Kotak  Mahindra  Bank  Ltd.  v.

Sivakama Sundari  & Ors.13referred  to  Section  46  of  the  said

Code, which spoke of precepts but stopped at that.  In the context

of the Code, thus, the view adopted is that the decree of a civil

court  is  liable  to  be  executed  primarily  by  the  Court,  which

passes the decree where an execution application has to be filed

at the first instance.  An award under Section 36 of the said Act,

is equated to a decree of the Court for the purposes of execution

and only for  that  purpose.   Thus,  it  was  rightly observed that

while an award passed by the arbitral tribunal is deemed to be a

decree under Section 36 of the said Act, there was no deeming

fiction anywhere to hold that the Court within whose jurisdiction

the arbitral award was passed should be taken to be the Court,

which passed the decree.  The said Act actually transcends all

territorial barriers.

Conclusion:

13  supra

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22.We are, thus, unhesitatingly of the view that the enforcement of

an  award  through  its  execution  can  be  filed  anywhere  in  the

country  where  such  decree  can  be  executed  and  there  is  no

requirement for obtaining a transfer of the decree from the Court,

which would have jurisdiction over the arbitral proceedings.

23.The effect of the aforesaid is that the view taken by the Madhya

Pradesh High Court and the Himachal Pradesh High Court is held

to  be  not  good  in  law while  the  views  of  Delhi  High  Court,

Kerala High Court, Madras High Court, Rajasthan High Court,

Allahabad  High  Court,  Punjab  &  Haryana  High  Court  and

Karnataka High Court reflect the correct legal position, for the

reasons we have recorded aforesaid.

24.The appeal is accordingly allowed and the impugned order dated

20.3.2014 is set aside restoring the execution application filed by

the appellant before the Morena courts.  The parties are left to

bear their own costs.

..….….…………………….J.     (J. Chelameswar)

              ...……………………………J.

CIVIL APPEAL No.1650 of 2018 Page 20 of 21

       (Sanjay Kishan Kaul) New Delhi. February 15, 2018.

CIVIL APPEAL No.1650 of 2018 Page 21 of 21