(2024) ibclaw.in 434 HC
IN THE HIGH COURT OF TELANGANA
Pipeline Infrastructure Ltd.
v.
Nagarjuna Fertilizers and Chemicals Ltd.
Civil Revision Petition Nos. 3603 and 3606 of 2023
Decided on 02-May-24
Coram: Chief Justice Alok Aradhe and Shri Justice Anil Kumar Jukanti
Add. Info:
For Appellant(s): Mr. D.Narendar Naik
For Respondent(s): Mr. Avinash Desai, learned Senior Counsel, Mr. Nikhil Khadkikar, Mr. Chandrasen Reddy, learned Senior Counsel, Mr. Sai Sanjay Suraneni,
Brief about the decision:
Judgment:
COMMON ORDER: (per the Hon’ble Shri Justice Anil Kumar Jukanti)
Mr. D.Narendar Naik, learned counsel for the petitioner.
Mr. Avinash Desai, learned Senior Counsel appears for Mr. Nikhil Khadkikar, learned counsel for the respondent.
Mr. Chandrasen Reddy, learned Senior Counsel appears for Mr. Sai Sanjay Suraneni, learned counsel for the proposed respondent in C.R.P.No.3603 of 2023.
2. These Civil Revision Petitions under Article 227 of the Constitution of India have been filed against the order dated 14.11.2023 in C.E.P.Nos.13 and 14 of 2023 passed by the Commercial Court.
3. Brief facts:
For the facility of reference, facts from C.R.P.No.3603 of 2023 are being referred to.
3.1. The parties had entered into an agreement dated 27.03.2009 which contained an arbitration clause. The dispute arose between the parties and a former Judge of Bombay High Court was appointed as sole arbitrator to adjudicate the dispute between the parties. The arbitral tribunal conducted the proceedings in Bombay and passed an award on 02.01.2023 against the respondent/judgment debtor.
3.2. The respondent filed the application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘1996 Act’) to set aside the award dated 02.01.2023, which is pending before the District Court at Bombay.
3.3. The petitioner filed an execution petition seeking execution of the award before the City Civil Court, Hyderabad. The City Civil Court, Hyderabad has passed the order dated 08.05.2023 by which the immovable property of the respondent was attached. The respondent challenged the aforesaid order in a petition, namely C.R.P.No.1820 of 2023, wherein the learned Single Judge by order dated 31.07.2023 dismissed the aforesaid civil revision petition. The respondent raised the objection in the execution proceeding on the strength of the Division Bench decision of this Court in India Media Services Private Limited vs. SBPL Infrastructure Limited1. The Commercial Court dismissed the execution petition on the ground that the Court at Hyderabad lacks jurisdiction. Aggrieved by the said order, the present civil revision petitions have been filed by the petitioner/decree holder.
4. Learned counsel for the petitioner submitted that the Commercial Court grossly erred in placing reliance on a Division Bench decision of this Court in India Media Services Private Limited (supra), which does not apply to the facts of the case. It is also contended that in the aforesaid decision, the Division Bench of this Court had distinguished the decision rendered by the Supreme Court in Sundaram Finance Limited vs. Abdul Samad2 and had noted that no application was filed under Section 9 and/or under Section 34 of the 1996 Act and the Supreme Court in Sundaram Finance Limited (supra) had held that the award passed by the arbitrator can be enforced anywhere in the country. Learned counsel for the petitioner has submitted that Section 42 of the 1996 Act is applicable at the stage prior to Section 32 of the 1996 Act and nowhere in the judgment in India Media Services Private Limited (supra), the scope and impact of Section 32 of the 1996 Act is discussed. Learned counsel for the petitioner has placed reliance on a decision of the three-Judge Bench of the Supreme Court in Cheran Properties Limited vs. Kasturi and Sons Limited3. It is therefore contended that the Court in Hyderabad has jurisdiction to enforce the award.
5. On the other hand, learned Senior Counsel for the respondent submitted that the petitioner had filed the present petitions by suppressing the material facts as the factum of filing an execution petition before the District Court at Kakinada in the State of Andhra Pradesh seeking attachment of properties of respondent has not been disclosed. It is contended that the petitioner has not approached this Court with clean hands and therefore, no relief can be granted to it. In support of the aforesaid submissions, reliance has been placed on a judgment of the Apex Court in Amar Singh vs. Union of India4 for the proposition that non-disclosure of facts and litigants who come with unclean hands are not entitled to be heard on merits of the case. It is argued that the order passed by the Commercial Court is based on a Division Bench decision of this Court in India Media Services Private Limited (supra), which does not call for any interference. Reliance has been placed on a three-Judge Bench decision of the Supreme Court in State of West Bengal vs. Associated Contractors5, wherein it has been held that Section 42 of the 1996 Act will apply to the applications made after the arbitral proceedings have come to an end provided they are made under Part I.
6. In India Media Services Private Limited (supra), the validity of the award was challenged in a proceeding under Section 34 of the 1996 Act in Calcutta. However, a petition for execution was filed before the City Civil Court, Hyderabad. The execution petition was allowed by an order dated 08.03.2021 by the Court at Hyderabad. The aforesaid order was challenged before the Division Bench of this Court. The Division Bench dealt with the issue whether the civil courts in Hyderabad lack jurisdiction to entertain the execution petition. The Division bench in paragraphs 13, 15, 21 to 23, 28 to 30 and 32 to 35 held as under:
“13. The sticky issue is on jurisdictional aspect with reference to filing of Execution Petition. For enforcement of a decree of Civil Court in a suit the CPC provides detailed mechanism and takes in itself various contingencies. It also envisages filing of E.P. in any Court other than the Court which granted the decree. The elaborate procedure is also resulting in long delays in enforcing a decree, taking longer time than the time taken to dispose of a suit.
15. In the above backdrop it is necessary to consider the scope of Section 42 of the Act. Section 42 deals with jurisdiction. It opens with a non-abstante clause. It applies notwithstanding any other provision in Part-I of the Act and any other law on the subject if the same is inconsistent with the provision in Section 42. Thus, it sweeps under its carpet all other provisions dealing with execution of an award, though equated as a ‘decree in fiction’ by a Civil Court. According to Section 42 only the Court where application under Section 9 and/or Section 34 was already filed alone has jurisdiction to deal with subsequent application including application for enforcement of award and no other Court has jurisdiction.
21. Two aspects are noticed from facts recorded in the judgment in Sundaram Finance Limited (supra). Firstly, based on the term of contract straightaway Arbitrator was appointed by the Sundaram Finance Limited and award passed by the Arbitrator has become final. It appears, there was no application filed prior to commencement of arbitral proceedings, during the arbitral proceedings or after the arbitral proceedings under Section 9. No application was filed under Section 34 challenging the award. Straightaway execution application was filed, taking recourse to Section 36 of the Act. In the said facts of the case, Hon’ble Supreme Court held that award of Arbitrator can be enforced anywhere in the country. It is pertinent to note that Section 42 has not dealt with the contingency considered by the Hon’ble Supreme Court. Secondly, the opinion expressed by Three Judge Bench of the Hon’ble Supreme Court in Associated Contractors (supra) was not considered by the Hon’ble Supreme Court.
22. The second decision relied by learned counsel for respondent is in Cheran Properties Limited (supra). Briefly noted, second respondent before the Supreme Court is a company incorporated on 2.5.1994 and is fully owned subsidiary of first respondent-Kasturi and Sons Limited (for short KSL). On 19.7.2004 an agreement was entered into between third respondent-KC Palanisamy and first respondent. Under the agreement the second respondent Sporting Pastime India Limited (for short SPIL) was to allot 240 lakh equity shares of Rs. 10/- each fully paid up at par to KSL against the book debts due by SPIL to KSL. KSL in turn offered to sell KCP 243 lakh equity shares representing 90% of the total paid up share capital for a lump-sum amount. It appears intention of the parties was that KCP would take over the business, shares and liabilities of SPIL.
23. Differences arose leading to initiation of arbitration proceedings and passing of an award by the arbitrator. Suffice to note that the Arbitrator directed respondents before him to return to the claimants documents of title and share certificates relating to 2,43,00,000 shares of SPIL which were handed over earlier to first respondent. KCP challenged the award under Section 34. Learned single Judge of the Madras High Court repelled the said challenge. The appeal filed was dismissed by Division Bench and SLP filed thereon was also dismissed by the Supreme Court. In the said manner, the award attained finality.
28. It was urged by learned counsel for respondent that the decision in Cheran Properties Limited (supra) rendered by Three Judges of Hon’ble Supreme Court being a later law shall prevail over the decision in Associated Contractors (supra). There is no quarrel with the said proposition of law. But, the same is applicable only if there is a conflict of opinion by two Benches of Hon’ble Supreme Court having same corum. On careful consideration of these two decisions, we are of the opinion that there is no conflict in the opinions expressed by the Hon’ble Supreme Court in these two decisions and for that matter in the decision in Sundaram Finance Limited. They deal with different contingencies post-award of the Arbitrator.
29. In Cheran Properties Limited (supra), Hon’ble Supreme Court held that in view of special enactment in the form of Companies Act and the provisions therein for rectification of registers of a company incorporated under the Companies Act recourse has to be taken before the NCLT and, therefore, Section 42 of the Act is not applicable. Supreme Court has not decided the issue of application of Section 42 generally. Mere reference to the judgment of the Hon’ble Supreme Court in Associated Contractors (supra) cannot per se amount to overruling the decision. Thus, the decision in Associated Contractors holds the field as on today.
30. In Associated Contractors (supra) the issue considered by the Hon’ble Supreme Court is directly on the same aspect as raised in the present revision. Three Judges Bench of Hon’ble Supreme Court considered a reference by Division Bench of Hon’ble Supreme Court dated 7.4.2010. The reference reads as under.
“In this appeal, the question that arises for decision is : which court will have the jurisdiction to entertain and decide an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter for short ‘the Act’)?”
32. On elaborate consideration of the matter, Hon’ble Supreme Court recorded its conclusions in paragraph 25. They read as under:
“25. Our conclusions therefore on Section 2(1)(e) and Section 42 of the Arbitration Act, 1996 are as follows:
(a) Section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of Original Jurisdiction in a district or a High Court having original civil jurisdiction in the State, and no other court as “court” for the purpose of Part I of the Arbitration Act, 1996.
(b) The expression “with respect to an arbitration agreement” makes it clear that Section 42 will apply to all applications made whether before or during arbitral proceedings or after an award is pronounced under Part I of the 1996 Act.
(c) However, Section 42 only applies to applications made under Part I if they are made to a court as defined. Since applications made under Section 8 are made to judicial authorities and since applications under Section 11 are made to the Chief Justice or his designate, the judicial authority and the Chief Justice or his designate not being court as defined, such applications would be outside Section 42.
(d) Section 9 applications being applications made to a court and Section 34 applications to set aside arbitral awards are applications which are within Section 42.
(e) In no circumstances can the Supreme Court be “court” for the purposes of Section 2(1)(e), and whether the Supreme Court does or does not retain seisin after appointing an arbitrator, applications will follow the first application made before either a High Court having original jurisdiction in the State or a Principal Civil Court having original jurisdiction in the district, as the case may be.
(f) Section 42 will apply to applications made after the arbitral proceedings have come to an end provided they are made under Part I.
(g) If a first application is made to a court which is neither a Principal Court of Original Jurisdiction in a district or a High Court exercising original jurisdiction in a State, such application not being to a court as defined would be outside Section 42. Also, an application made to a court without subject-matter jurisdiction would be outside Section 42.
The reference is answered accordingly.”
33. Hon’ble Supreme Court clarified that expression “with respect to an arbitration agreement” applies to all applications made before or during arbitral proceedings or after award was passed. Hon’ble Supreme Court held Section 9 applications and Section 34 are applications to set aside arbitral awards being applications made to a Court, are applications within the scope of Section 42. It is thus clear that Section 42 is applicable to post arbitral award and an application for execution of the arbitral award has to be filed in the Court where an application under Section 9 and/or Section 34 application was earlier filed. The view taken by learned single judge of the Calcutta High Court that as parties submitted to the jurisdiction of the High Court, the High Court alone has jurisdiction to deal with the subsequent applications for enforcement of award and the District Court at Jalpaigudi has no jurisdiction was upheld by the Hon’ble Supreme Court.
34. On a careful reading of decision in Sundaram Finance Limited, it is clear as crystal that the Hon’ble Supreme Court was dealing with a contingency where no application under Section 9 and/or under Section 34 were filed. At any rate the decision in Associated Contractors being by a bench of Three Judges, it shall prevail over the decision of bench of Two Judges. In Cheran Properties Limited, the Hon’ble Supreme Court was considering the scope of Section 11 of the Companies Act. It being a special enactment dealing with affairs of the incorporated companies, the NCLT alone is vested with jurisdiction to deal with issues arising out of shares of a company and civil Court is not competent to deal with such matters.
35. In view of the law laid down by the Hon’ble Supreme Court in Associated Contractors (supra) it is beyond pale of doubt that Execution Application/Petition has to be filed in the Court where Section 9/Section 34 application(s) is/are filed.”
7. In the instant cases also, the award was passed by the arbitral tribunal in Bombay, the proceeding under Section 34 of the 1996 Act is pending before the Court at Bombay, we are in agreement with the view taken by the Division Bench of this Court in India Media Services Private Limited (supra) and therefore, it is held that the execution application/petition to be made in the court where Section 9/Section 34 is/are filed. The order passed by the Commercial Court is based on a Division Bench decision of this Court in India Media Services Private Limited (supra). The order passed by the Commercial Court does not suffer from any infirmity warranting interference of this Court in exercise of supervisory jurisdiction under Article 227 of the Constitution of India.
In the result, the civil revision petitions fail and are dismissed.
Miscellaneous applications pending, if any, shall stand closed. There shall be no order as to costs.
_____________________________
ALOK ARADHE, CJ
_____________________________
ANIL KUMAR JUKANTI, J
Date:02.05.2024
References:
1. 2022 SCC OnLine TS 3422
2. (2018) 3 SCC 622
3. (2018) 16 SCC 413
4. (2011) 7 SCC 69
5. (2015) 1 SCC 32
Original judgment copy is available here.
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