S.47 Of CPC Cannot Be Used As An Alternative To S.37 Of A&C Act For Unsettling Arbitration Award: Telangana HC

The Telangana High Court has clarified that section 47 of the CPC, which permits objections to be raised in an execution petition before the Trial Court; cannot be used as an alternative to challenge an arbitration award, which is being executed before a Trial Court.

The Division Bench of Justice Moushumi Bhattacharya and Justice B.R. Madhusudhan Rao, while passing the order made it clear that the Arbitration and Conciliation Act, 1996 is a Code in itself and lays down a mechanism to challenge an award under section 37, by way of an appeal.

“The Arbitration and Conciliation Act, 1996, is a complete code in itself as it envisages and provides for a comprehensive mechanism for parties to settle their disputes before an Arbitral Tribunal.”

The Bench further clarified that merely because the Arbitration and Conciliation stipulates that an award should be enforced in accordance with CPC, it does not ipso facto mean that all provisions of CPC will be attracted to an award that is sought to be executed.

“The section itself demarcates the terrain of an award as opposed to the mode of its execution/enforcement. The reference to the CPC is restricted to the manner in which the award is to be enforced. The reference to the CPC does not spill over to the award itself for the purpose of equating the award with a decree as defined under section 2(2) of the CPC. The remaining part of section 36 sheds further light on this issue by diverging from the CPC route and establishing a specific mechanism under the 1996 Act for stay of enforcement of the award. Section 36(3) provides the only means of pausing the execution of the award by conferring the Court with discretion to decide the issue of stay and impose conditions in accordance with the CPC in case of money awards. Therefore, the distinction drawn by the Trial Court between an award and the procedure for enforcement thereof fits with the statutory framework of the 1996 Act.”

Background:

The case revolves around an Arbitration Award passed in February, 2019 directing the petitioner before the High Court to pay Rs.. 140,89,01,800/- for claim No.1 and Rs.. 39,50,00,000/- as bonus annuity along with interest @ 12% per annum. The Award holder field an execution petition for the award before the Commercial Court. The petitioner herein/respondent before the trial Court, filed a Commercial Court original Petition (COP) to set aside the award. The COP was dismissed, and the petitioner preferred an appeal against that order before the High Court under section 37 of the Act.

In the appeal, two IAs were filed, one to set aside the award and the second to stay the award. The IA filed to Stay the order was allowed on the condition of depositing 50% of the award amount and the application to set aside was dismissed. An appeal was filed before the Supreme Court challenging the dismissal of the IA, which was dismissed. The appeal before the High Court still sits pending.

With matters standing thus, in 2024, the petitioner herein filed an application under section 47 of CPC in the Execution Petition filed by the award holder for execution of the arbitration award. The application was dismissed, and challenging the same, the present Revision was preferred.

The first objection raised by the respondents before this Court was that no CRP is maintainable against any Commercial Court order owing to the specific bar in section 8 of the Commercial Courts Act, 2015.

Relying on the State of Telangana Vs. Siddartha Constructions and Shalini Shyam Shetty Vs. Rajendra Shankar Patil, the Court reiterated that although there is no bar on the power of the High Court, the same should be used sparingly and only in fit cases.

The Bench then turned its attention to answer the question, whether or not a petition under section 47 of the CPC is maintainable in an Execution petition filed to enforce an arbitration Award? It answered this question negatively.

The Bench first appreciated that the petitioner herein had exhausted all of its remedies and the only recourse available to it would to be to get the appeal, which is pending, finally disposed of. It was also noted that the 50% deposit order was not complied with.

Referring to section 36 if the A&C Act, the Bench noted “Section 36 of the 1996 Act refers to the Code of Civil Procedure to the extent of enforcement of the arbitral award in accordance with the provisions of the CPC. The first proviso to section 36(3) of the 1996 Act authorises the Court to impose conditions for stay of operation of the Award, having due regard to the provisions for grant of stay of a money decree under the CPC. 24. A careful reading of Section 36 of the Act would make it clear that the CPC only has a limited role in the matter of enforcement and stay of the Award. The language of section 36(1) emphasizes that the Award shall be enforced in accordance with the provisions of the CPC in the same manner as if it were a decree of the Court.”

Thus, the bench concluded that there was no reason to interfere with the order impugned and regarded the acts of the petitioner as “desperate and blatant disregard to law”

“In essence, the objections/grounds available to a judgment-debtor under section 47 of the CPC are distinct from those available to an Award-Debtor under section 36 of the 1996 Act. A judgment passed by a Court of law and an award made by an Arbitral Tribunal arise from different sources of conflict, procedures and the parties' willingness to adjudicate their dispute in a forum of their choice (culminating in an award).”

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