Seat Of Arbitration Retains Jurisdiction Over Execution Proceedings Irrespective Of Location Of Judgment Debtor's Assets: Karnataka High Court

Brief Facts

The petitioner and the respondent company had entered into an exclusive consultancy agreement. Under the agreement, the petitioner was appointed as Exclusive Consultant and Design Director. The petitioner resigned as Director. Due to delays in the handover process, her service was extended with the respondent's consent. However, she was not paid remuneration for this extended period. Consequently, she issued a legal notice and invoked arbitration as per the agreement. The Court appointed an arbitrator. The arbitrator allowed her claims.

The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) before the Commercial Court. Meanwhile, the petitioner filed an execution petition before the Court at Thane (where the respondent's registered office was located), which is pending. The Commercial Court dismissed the Section 34 petition. The petitioner then filed another execution petition in Bangalore. The petitioner sought declaration of movable property of the respondent at a particular address. The respondent filed a memo along with a deed of surrender of lease dated 26.09.2024, stating that it no longer had movable assets in Bangalore. The petitioner then filed an application under Order XXI Rule 41 of the Civil Procedure Code (“CPC”) seeking a direction to the respondent to file an affidavit disclosing particulars of its assets.

The Commercial Court in its order dated 04.11.2024 rejected the application, holding that since the respondent had surrendered its lease in Bangalore, the Court did not have jurisdiction. The Court directed the petitioner to pursue attachment before the Thane Court. Aggrieved by this order, the petitioner approached the Court by way of a writ petition.

Submissions

Counsel for the Petitioner submitted that it is a settled principle of law that an arbitral award can be executed before any Court in the country where the judgment debtor has assets. Filing an execution in Thane does not prevent filing another one in Bangalore. He submitted that at the time of filing the execution, the respondent had movable assets in Bangalore. The respondent deliberately surrendered the lease of its Bangalore premises on 19.04.2024, a day before the matter was listed, to evade execution.

Per contra, Senior counsel for the Respondent submitted that although execution may be filed anywhere, once the execution is filed at Thane, all subsequent actions should be pursued only there. The petitioner cannot choose multiple jurisdictions for the same execution. Presently, the respondent has no movable or immovable assets in Bangalore. Therefore, it cannot be compelled to file an affidavit of assets that do not exist.

Observations

On the 'Seat' of Arbitration

The Court, in considering the question of jurisdiction for the seat of arbitration, had relied on the judgment in BGS SGS SOMA JV v. NHPC Limited (2020), wherein the Supreme Court observed:

"Section 42 is meant to avoid conflicts in jurisdiction of courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one court exclusively.”

The Court had held that Bangalore would be the seat of arbitration because the respondent Company had its business or a branch at Bangalore, where the petitioner was functioning. The Court referred to Patel Roadways Ltd. v. Prasad Trading Co., which interpreted Section 20 of the Code of Civil Procedure:

"The clear intendment of the Explanation, however, is that, where the corporation has a subbordinate office in the place where the cause of action arises, it cannot be heard to say that it cannot be sued there because it does not carry on business at that place...".

Since the respondent company operated in Bangalore, the Court held that the respondent could not argue that no cause of action arose there. Thus, the Bangalore court was deemed to have proper jurisdiction for the arbitration.

Order XXI Rule 41 CPC is a step-in-aid of Execution

The Court observed that the seat court retains jurisdiction to entertain applications under Order XXI Rule 41 CPC, as they are step-in-aid of execution. In this regard, the court referred to United Phosphorous Ltd. v. A.K. Kanoria (Bombay High Court) and State Bank of India v. M.K. Raveendran (Kerala High Court), where it was observed that “an application under Order XXI Rule 41 is not an application for execution of the decree but merely an aid to the decree holder to enable him to execute the decree by obtaining information which is within the special knowledge of the judgement debtor”.

The court noted that the High Courts of Delhi, Bombay, Calcutta and Kerala have all affirmed that an application under Order XXI Rule 41 of the CPC is a preliminary step in execution, not contingent upon the success of an execution. It thus held that the seat Court of Arbitration retains jurisdiction to entertain an application, even when another execution is pending in another jurisdiction.

Surrender of Lease During Proceedings Doesn't Oust Jurisdiction of the Court

The court then referred to Motorola Inc. v. Modi Wellvest Pvt. Ltd. where the Delhi High Court held that the loss or removal of assets within the jurisdiction of the seat court after initiation of execution proceedings does not strip the executing court of its jurisdiction.

The Court held that surrender of the lease, by a party during the proceedings, cannot knock off the jurisdiction of a Court, which it had at the time of institution of proceedings. The bench stated, “the attempt by the respondent to escape scrutiny by shifting its base mid proceedings cannot be countenanced”.

Seat Court continues to have jurisdiction irrespective of where the Judgment Debtor's assets are located

The Court referred to the judgment in Global Asia Venture Company v. Arup Parimal Deb (Bombay High Court), which held that the word 'Court' under Section 2(1)(e) of the Act, being the Court of seat of arbitration, continues to have jurisdiction to execute the arbitral award.

The court also clarified the ratio in Sundaram Finance v. Abdul Samad, where it was held 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”. The court reiterated that all that the Supreme Court in Sundaram Finance held was that notwithstanding the right of a party to petition the seat court for execution of the award, it would additionally have the choice to initiate execution in a court within whose jurisdiction the assets of the judgment debtor may be situate. Its ratio does not operate to strip the 2(1)(e) Court of its jurisdiction.

The court allowed the application filed by the Petitioner and directed the judgment debtor to file its affidavit of assets in answer to application under Order XXI Rule 41 before the executing Court within 15 days. It thus allowed the writ petition and quashed the order dated 04.11.2024.

Case Title: Ms. Sumita Abhishek Sundaram v. Sankalpan Infrastructure Private Limited

Case No.: WRIT PETITION No.35715 OF 2024 (GM - CPC)

Counsel for the Petitioner: Sri. Aditya Chatterjee, Adv., a/w., Ms. Sanjana Muraleedharan, Adv. and Ms. Akhila Balaji, Adv.

Counsel for the Respondent: Sri. Dhyan Chinnappa, Sr. Adv. for Sri. Nandish Shenni, Adv.

Date of Order: 30.07.2025

Citation: 2025 LiveLaw (Kar) 262