the Telangana High Court ruled that in proceedings to enforce an arbitral award the full range of CPCs are not drawn, and a tribunal while dealing with a claim under section 36 of the Arbitration Act 1996 and Conciliation (A&C Act) for the enforcement of an award is not bound by the provisions of Section 47 of the Code of Civil Procedure, 1908 (CPC) and is not required to rule on the validity of the award before seeking enforcement.
The Bench, made up of Judge P. Naveen Rao and Dr. Judge G. Radha Rani, held that the phrase “in accordance with the CPC” used in section 36 of the A&C Act cannot be read out of context or inconsistent with the rest of the sections of the A&C Act. The Court added that the application of Article 47 CCP would render Article 34 of the A&C Act redundant and would be inconsistent with the scheme of the A&C Act.
The applicant partnership company M/s. MSR Enterprises was awarded a contract by Southern Power Distribution Company Limited. The applicant and the 1st responding M/s. Pooja Enterprises has entered into a sub-contract for the execution of the works. A dispute arose between the parties concerning the payment of invoices issued by the 1st respondent. Subsequently, a settlement was reached between the parties before the arbitrators, whereby the claimant agreed to pay a certain amount and the first defendant agreed to limit its claim to that amount as full and final settlement. Accordingly, an arbitration award was rendered in accordance with the settlement reached between the parties. However, despite said settlement, the amount was not settled between the parties and therefore on 1st The Respondent filed a motion for enforcement before the Additional District Judge (ADJ) for enforcement of the award.
1st the Respondent/Scholarship Holder has filed an application under Order 21, Rule 46A, read with Section 151 of the Code of Civil Procedure, 1908 (CPC) before the ADJ, to order the garnishees – respondent no. 2-5, i.e. Southern Power Distribution Company of Telangana Limited, to withhold the amount of compensation by not paying it to the claimant/judgment debtor.
The District Court granted Respondent’s motion no. 1 and ordered the garnishee-respondents no. 2 to 5 to withhold the scholarship amount and credit the amount to the account of scholarship holder/respondent no. 1. The petitioner/debtor filed a petition for review in the Telangana High Court against the order of the District Court.
The petitioner M/s. MSR Enterprises argued in the High Court that the District Court had no power to issue a garnishment order. The claimant argued that the arbitration award was falsified and fabricated and therefore not binding on the claimant. The claimant added that he had filed a request under section 34 of the A&C Act to set aside the arbitral award for fraud. The petitioner asserted that the enforcement court, in a request for enforcement of an award, is bound by the provisions of the CPC and that, as required by article 47 of the CPC, the enforcement court should have decide on the validity of the award before requesting its execution. .
The claimant argued that it was not fair and proper to order the recovery of the arbitral award without deciding the validity of the award. The petitioner added that the jurisdictional aspect can still be addressed even at the stage of the application for enforcement of the award.
The respondent no. 1 / winner M/s. Pooja Enterprises argued that the enforcement court has limited jurisdiction under section 36 of the A&C Act and is only required to enforce the award already made. 1st Defendant argued that in proceedings under the A&C Act, Article 47 of the CPC is not invoked and that the enforcement court cannot travel beyond the award nor decide the validity or the legality of a sentence.
Section 36(1) of the A&C Act provides that where the time for bringing an application to set aside the arbitral award under section 34 has expired, the arbitral award shall be enforced in accordance with the provisions of the Code of Procedure Civil Law, 1908, in the same manner as if it were a decree of the court. Section 36(2) provides that where a request to set aside the arbitral award has been filed under section 34, the filing of such a request does not in itself render the award unenforceable, unless the Court does not grant an order suspending the operation of said arbitral award.
Article 47 CPC deals with matters to be decided by the court when executing a decree. It provides that all questions arising between the parties to the suit in which the decree was made, relating to the execution, discharge or satisfaction of the decree, will be determined by the court executing the decree and not by a separate action. .
The High Court held that Section 36 of the A&C Act does not contemplate allowing a party to arbitration proceedings to raise arguments on the maintainability of the arbitral award once the award has become final or when ‘No restraining order is made in an application to set aside the award under Article 34.
The Court added that in proceedings for the enforcement of a decree in a civil action, the full range of CPCs is not attracted and the enforcement court is responsible only for enforcing the arbitral award.
The Court has ruled that an arbitral award may only be challenged on the grounds prescribed under Section 34 of the A&C Act and subject to the parameters set out in Section 34, an award made by the arbitrator is final. and binds the parties.
The Court held that the phrase “in accordance with the CCP” used in Section 36 cannot be read out of context or inconsistent with the rest of the sections of the A&C Act. The Court added that acceptance of the assertion regarding the application of Article 47 of the CCP would render Article 34 of the A&C Act redundant and that it would be inconsistent with or independent of the scheme of the A&C Act.
The Court ruled that an arbitral award is final even before enforcement proceedings are initiated, which signifies the intention of the legislature to ensure that the A&C Act is a stand-alone law.
“Under the CPC, the finality of an order is reached after the decision under article 47 (when it is raised), but as is apparent from article 34 in arbitration proceedings, the finality of the award is in evidence before enforcement proceedings are even initiated. This signals the legislature’s intent to ensure that alternative dispute resolution is truly effective through stand-alone legislation.”
The High Court noted that the Supreme Court in the case of Pam Developments Private Limited v State of West Bengal (2019) had held that the reference to CPC in section 36 of the A&C Act was only intended to guide the court as to the conditions that may be imposed by the court, and that these must be in accordance with the provisions of the A&C Act . The Supreme Court has ruled that the A&C Act is a stand-alone statute and that the provisions of the CPC will apply only to the extent that they are not inconsistent with the spirit and provisions of the A&C Act.
The Court further observed that in accordance with the Andhra Pradesh Arbitration Rules, 2000, made by the High Court under the A&C Act, 1996, the full range of CPC is not extended to arbitration proceedings. arbitration, but only a few provisions of the CPC are made applicable. The Court noted that under Rule 12(2), full discretion is given to the Court to appropriately vary the requirements of the CPC provisions, or to disregard the CPC provisions and proceed otherwise. The Court added that the only requirement for proceeding otherwise is that the Court must give reasons. In addition, the Court ruled that where procedural formalities have not been complied with by the lower court, the party must satisfy the Court of Appeal of the prejudice caused to it.
Therefore, the Court held that the A&C Act is a stand-alone code, which comprehensively addresses all aspects of arbitration and does not contemplate application of the full range of CPC. The Court held that CPC can only guide the Court in dealing with claims under the A&C Act and that complete discretion is given to the Court to adopt its own procedure. The High Court added that the Court cannot rule on the merits of the claims and should only deal with the enforcement of the award, treating the award as final.
Therefore, the Court held that the District Court did not err in the discretion it exercised in issuing a garnishment order.
The Court therefore dismissed the motion for civil review.
Case title: M/s. MSR companies versus M/s. Pooja Enterprises
Dated: 28.04.2022 (Telangana High Court)
Counsel for the Applicant: Manjari Ganu, representing Sunil B. Ganu, Counsel for the Applicant
Counsel for Respondent: A. Sudarshan Reddy, Lead Counsel appearing for A. Prabhakar Rao, Counsel for Respondent 1; R. Vinod Reddy, permanent counsel for TR TRANSCO for respondents 2 to 5.
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