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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CHAMBER SUMMONS NO.510 OF 2009
IN
CHAMBER ORDER NO.1620 OF 2008
IN
EXECUTION APPLICATION NO.158 OF 2006
IN
ARBITRATION AWARD DATED 7TH JULY, 2005
WITH
CHAMBER SUMMONS NO.597 OF 2009
IN
CHAMBER ORDER NO.1619 OF 2008
ig IN
EXECUTION APPLICATION NO.158 OF 2006
IN
ARBITRATION AWARD DATED 7TH JULY, 2005
AND
CHAMBER SUMMONS NO.771 OF 2009
IN
EXECUTION APPLICATION NO.158 OF 2006
IN
ARBITRATION AWARD DATED 7TH JULY, 2005
M/s. Eskay Engineers,
322, Vardhaman Market,
Vashi, Navi Mumbai-400 705. .... Claimant
- Versus -
Bharat Sanchar Nigam Limited,
Office of the General Manager,
Raigad Telecom Division,
Wireless Compound,
Linking Road, Santacruz (W),
Mumbai-400 054. .... Respondent
Mr. Devvrat Dhankar i/b Mr. S.S. Phadke
for the Claimant.
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Mr. Viral D. Shukla with Mr. Sumit D.
Shukla i/b M/s. Shukla & Associates
for the Respondent.
CORAM: DR. D.Y. CHANDRACHUD, J.
DATED: 30TH JUNE, 2009 AND
1ST JULY, 2009
ORAL JUDGMENT:
1. This Judgment would govern three chamber
summons; one taken out by the decree holder and
the other two by the judgment debtor. Since
all the three chamber summons arise out of an
arbitral award under the Arbitration and
Conciliation Act, 1996 and the execution
proceedings initiated consequent upon the award
having attained finality, arguments have been
heard together in all the three cases by
consent.
2. Disputes and differences between the
decree holder and the judgment debtor came to
be referred to arbitration under the provisions
of the Arbitration and Conciliation Act, 1996.
The arbitral award was made on 7th July, 2005
and in the operative part of the award, the
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sole arbitrator issued the following
directions:
1. The cases where 100% payment has
already been made are not to be
reopened.
2. The cases where recovery has
been resorted to based on surprise
checks will be not opened.
3. The cases where 60% payment or
no payment has been made, complete
payment should be made by September
2005.
4. No cost to the parties.
3. A petition was instituted by Bharat
Sanchar Nigam Limited in order to challenge the
arbitral award under Section 34. The petition
came to be dismissed by a learned single Judge
of this Court on 9th January, 2006. A Division
Bench of this Court dismissed the Appeal on
26th June, 2006. The Supreme Court dismissed
the Special Leave Petition on 1st December,
2006. The arbitral award has attained finality
and is capable of being enforced under the Code
of Civil Procedure, 1908 in the same manner as
if it were a decree of the Court. This would be
in terms of the provisions of Section 36 of the
Arbitration and Conciliation Act, 1996. On
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18th March, 2006 an Execution Application1 was
filed by the original claimant-decree holder
before this Court in which a claim was made for
the total sum of Rs.97,58,084/- comprising of a
principal amount of Rs.83.34 lakhs and the
security deposit of Rs.14.23 lakhs. A warrant
of attachment came to be issued under Order
XXI, Rule 46 in respect of a current account of
the judgment debtor with the State Bank of
India, after
ig which a
attachment came to be levied in respect of the
further warrant of
movable and immovable properties. An amount of
Rs.97,58,084/- was deposited by the judgment
debtor with the Sheriff of Mumbai which came to
be withdrawn by the decree holder.
4. On 4th July, 2006 the judgment debtor moved
Chamber Summons No.818 of 2006 principally
contending that the calculations of the decree
holder were not correct and that an amount in
excess of what was lawfully due had been
claimed. The following prayer came to be
incorporated in the chamber summons:
(b.i.) The Claimants are entitled
to recover an amount of Rs.
76,26,569.00 as per Arbitration
Award dated 07.07.2005 plus Rs.60.00
being the costs of Execution,
1 Execution Application No.158 of 2006
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aggregating to Rs.76,26,629.00. The
Claimants may be directed to refund
sum of Rs.21,31,515.00 to the
Respondents / Judgment Debtor, being
the excess amount claimed and
withdrawn by the Claimants from the
amount deposited by the
Respondents / Judgment Debtor with
Sheriff of Mumbai in the Execution
Application No.158 of 2006 as per
Arbitration Award dated 07.07.2005.
The contentionig of the judgment debtor,
therefore, was that as against an amount of Rs.
97.58 lakhs, that had been deposited with the
Sheriff, the decree holder was entitled to an
amount of Rs.76.26 lakhs, as a result of which
the judgment debtor was entitled to a refund of
Rs.21.31 lakhs. The chamber summons was
disposed of by a Judgment dated 30th September,
2008 of the Hon ble Mr. Justice S.C.
Dharmadhikari. The Learned Single Judge
negatived the contention of the judgment debtor
that the arbitral award did not include a
direction in regard to the refund of the
security deposit. The Learned Single Judge was
also of the view that under the arbitral award,
the decree holder was entitled to recover
interest from the date of the award until
payment. The Learned Single Judge held thus:
There is much substance in the
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No.2 and Claim No.3 before the
learned Arbitrator would include thepayment as directed under the
operative part of the award. In
other words, the direction was to
make payment in cases where partpayment is made or no payment is
made would include return of
security deposit in full. It also
means that the claim for interest
has been adjudicated upon and theclaimants would be entitled to
recover the said sum.
In so far as the question of interest,
however, was concerned, the contention of the
decree holder was that though there was no
specific direction in regard to the payment of
interest in the arbitral award, the amount
could be claimed and executed under Section
31(7) of the Act. The Learned Single Judge
held that it was not necessary to enter into
that issue since the decree holder was yet to
make a claim in that respect under Section
31(7). In so far as the issue of calculation
error was concerned, a concession was made on
behalf of the decree holder that certain
amounts had been claimed twice over in the
execution application in which a recalculation
would be necessary. The Learned Single Judge
observed that even if recalculation was to be
done, it would not mean that the claimant was
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required to refund any amount straightaway,
particularly since an opportunity was being
granted to the claimant to apply for the
payment of interest on the award by
instituting appropriate proceedings. The
Court observed that as and when a claim is
lodged, it would be open for the claimant to
point out the calculation errors, and at that
stage the Court would consider making
appropriate orders and directions and if need
be, for the payment by the judgment debtor of
any sum. The chamber summons was dismissed,
keeping open all the contentions of the
parties.
5. An Appeal was filed before the Division
Bench against the Judgment of the Learned
Single Judge. In paragraph 13 in the Memo of
Appeal before the Division Bench, one of the
grounds of challenge was that the arbitral
award was passed at Khamgaon (wrongly referred
to as Jalgaon) in the District of Buldana and
that consequently the award ought to have been
executed before the Civil Judge, Senior
Division in the District of Buldana and not
before this Court. When the Appeal came up
before the Division Bench, this contention, as
the order of the Division Bench shows, was not
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canvassed. The Division Bench dismissed the
Appeal holding that both in regard to the
question of interest and the recalculations of
the amounts due, the Learned Single Judge had
granted liberty to the parties to apply for
appropriate orders and all contentions had
been kept open. The Appeal was accordingly
dismissed.
6. After
the dismissal
decree holder took out a Chamber Order1 for
of the Appeal, the
amendment of the execution application. By the
proposed amendment, the amount shown as due in
the execution application was sought to be
corrected by giving credit of an amount of Rs.
4,33,979/- claimed in excess by the decree
holder and deposited by the judgment debtor.
The application for amendment was allowed by
the Master & Assistant Prothonotary (ADM) on
27th February, 2009. The Order of the Master &
Assistant Prothonotary (ADM) has been
challenged in Chamber Summons No.597 of 2009
by the respondent.
7. On 15th October, 2008 another Chamber
Order2 was initiated by the decree holder for
extension of the warrant of attachment. The
1 Chamber Order No.1619 of 2008
2 Chamber Order No.1620 of 2008
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Chamber Order came to be dismissed by the
Registrar (Finance & Budget) on 21st January,
2009. The order of dismissal has been
challenged in Chamber Summons No.510 of 2009
by the decree holder. The third chamber
summons before the Court (Chamber Summons No.
771 of 2009) has been taken out by the
judgment debtor in order to question the
jurisdiction of this Court as an executing
Court.
CHAMBER SUMMONS NO.771 OF 2009
8. For convenience of exposition, it would be
appropriate to deal with Chamber Summons No.
771 of 2009, taken out by the judgment debtor
in order to question the jurisdiction of this
Court. The submission that has been urged on
behalf of the judgment debtor is that the
award in the present case was made at Khamgaon
in the District of Buldana. Section 31(4) of
the Act requires the award to state the place
where it was made. Section 2(1)(e) defines
the Court as the principal Civil Court of
original jurisdiction in a District having
jurisdiction to decide the questions forming
the subject-matter of the arbitration if the
same had been the subject-matter of a suit.
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The submission is that under Section 36, an
award is to be enforced under the Code of
Civil Procedure, 1908 in the same manner as if
it was a decree of the Court. The expression
Court can in the present case only mean the
principal Civil Court of original jurisdiction
to decide the questions forming the subject-
matter of arbitration, which would be the
District Court at Buldana. On the other hand,
it has been submitted on behalf of the decree
holder that the judgment debtor had addressed
a challenge to the arbitral award under
Section 34 before this Court. It was urged
that it was not the contention of the judgment
debtor that this Court did not have
jurisdiction to entertain the challenge to the
arbitral award initiated by the judgment
debtor and as a matter of fact the Judgment of
this Court was carried to its logical
conclusion in appeal before the Division Bench
and eventually before the Supreme Court.
Secondly, it was submitted that the expression
Court for the purposes of Section 34 cannot
be read in a manner which would be different
from the meaning of the same expression in
Section 36 and since a challenge to the
arbitral award was preferred before this
Court, an application for enforcement of the
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award or the decree could legitimately be
entertained before this Court. Thirdly, it
was submitted that Section 42 provides that
once an application under Part-I has been made
in a Court, that Court alone would have
jurisdiction over the arbitral proceedings and
all subsequent applications arising out of
that agreement and the arbitral proceedings.
9.
Court
Section
against
34 provides
an arbitral
for recourse
award, by
to
an
a
application for setting aside the award in
accordance with the provisions of sub-section
(2) and sub-section (3). Sub-section (2) of
Section 34 specifies the grounds on which an
arbitral award may be set aside by the Court.
Section 36 provides that where the time for
making such an application to set aside the
arbitral award under Section 34 has expired or
such an application having been made, it is
refused, the award shall be enforced under the
Code of Civil Procedure, 1908 in the same
manner as if it were a decree of the Court.
Section 36 creates a legal fiction under which
an award is capable of being enforced as if it
were a decree of the Court. The enforceability
of the award comes into being either when no
application challenging the award is preferred
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under Section 34 within the time stipulated or
upon an application being refused. What is
enforceable under Section 36 is the arbitral
award. The manner of enforcement is provided
in the Code of Civil Procedure, 1908. The
legal fiction that is created is for treating
an arbitral award for all intents and purposes
as a decree of the Court. Order XXI, Rule 10
of the Code of Civil Procedure, 1908 provides
that where the holder of a decree desires to
execute it, he shall apply to the Court which
passed the decree, or if the decree has been
sent to another Court, then to such other
Court for execution.
10. In the present case, the judgment debtor
moved an application for setting aside the
arbitral award before this Court under Section
34. Neither in the pleadings nor, for that
matter, in the course of the submissions is it
the contention of the judgment debtor that
this Court did not have jurisdiction to
entertain the challenge to the arbitral award
under Section 34. Indeed, as already noted
earlier, the validity of the arbitral award
was decided all the way upto the Supreme Court
and the award attained finality by the
rejection of the challenge. Thereupon the
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arbitral award becomes enforceable as if it
were a decree of the Court under Section 36.
The expression the Court cannot for the
purposes of Section 36 be read at variance
with the meaning of the expression under
Section 34. To do so would do violence to the
use of the same expression, namely, the Court,
in sub-section (2) of Section 34 and in
Section 36 of the Act. That would also do
of the
violence to the underlying legislative object
enactment of the Arbitration and
Conciliation Act, 1996. The main object of
the Bill which was based on the uncitral
model law was to provide for a procedure which
is fair, efficient and capable of meeting the
needs of the specific arbitration and to
minimise the supervisory role of Courts in the
arbitral process. Section 42 of the Act
provides as follows:
42. Jurisdiction Notwithstanding
anything contained elsewhere in thisPart 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
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Court and in no other Court.
The effect of Section 42 is that where an
application under Part-I has been made in a
Court with respect to an arbitration
agreement, that Court alone shall have
jurisdiction over the arbitral proceedings and
all subsequent applications arising out of
that agreement and the arbitral proceedings.
The Legislature has affirmatively stated that
such a Court alone would have jurisdiction and
has placed the matter beyond doubt by
stipulating that no other Court would have
jurisdiction. The expression all subsequent
applications arising out of the arbitral
proceedings must be read in a comprehensive
manner to include recourse to execution
proceedings. The submission which was urged
on behalf of the judgment debtor is that the
application of the Arbitration and
Conciliation Act, 1996 concludes with the
delivery of the arbitral award and the forum
for initiating proceedings for execution
cannot be traced to any provision of the Act.
That would not be an accurate reading of the
language and the provisions of the Act.
Section 36 specifically speaks of
enforceability and Section 42 of jurisdiction.
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The expression all subsequent applications
arising out arbitral proceedings has been
used in a comprehensive sense by the
Legislature and must be given full width in
interpretation. The judgment debtor sought a
recourse to its remedies before this Court in
order to challenge the arbitral award. Once
that was done, this Court alone would have
jurisdiction to entertain all subsequent
applications
proceedings
ig arising
including
out of
applications
the arbitral
in the
execution of the award as a decree of the
Court to the exclusion of any other Court.
11. The view which I have taken as a matter of
first principle is consistent with a judgment
of a Learned Single Judge of the Karnataka
High Court in the matter of I.C.D.S. Ltd. v.
Mangala Builders Pvt. Ltd. And others 1 where
the Learned Single Judge held thus:
A right to enforce the award arises
only after the period for setting
aside the arbitral award under
Section 34 has expired or such an
application having been made is
rejected. That is to say, the Court
executing the decree has to satisfy
itself, before entertaining the
application for execution that, the
period for setting aside the award
1 AIR 2001 Karnataka 364::: Downloaded on – 09/06/2013 14:43:55 :::
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has expired or such an application
having been made has been refused.
If that be so, inferentially, theCourt that can exercise the power
under Section 34 of the Act can
alone entertain the steps to enforce
the arbitral award. It means theCourt as understood in Section 34
has alone the jurisdiction to
entertain the enforcement of the
arbitral award.
ig 1st July, 2009
Chamber Summons No.771 of 2009 shall
accordingly stand dismissed.
CHAMBER SUMMONS NO.597 OF 2009
AND
CHAMBER SUMMONS NO.510 OF 2009
12. By his Judgment dated 30th September, 2009,
the Hon ble Mr. Justice S.C. Dharmadhikari
permitted the decree holder to make an
application for the payment of interest on the
award under Section 31(7) by instituting
appropriate proceedings. The Court also
permitted the decree holder to point out the
error in the calculations that had occurred in
the amount as computed in the application for
execution. The Learned Single Judge observed
that the Court would consider making
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appropriate orders and directions. Liberty
was expressly reserved and all the contentions
of both the sides were kept open. The order
of the Learned Single Judge was confirmed by
the Division Bench on 31st March, 2009.
13. The decree holder took out a Chamber Order
for amending the execution application in
order to correct the error of calculations and
to claim interest under Section 31(7) of the
Arbitration and Conciliation Act, 1996. The
amended schedule reads as follows:
SCHEDULE
1. Replace the amount shown in figure
in Column G with the following:
Rs. 83,34,939.00 Principal amount.
Rs. 14,23,145.00 Security Deposit.
Rs. 60.00 Cost of Execution Application.
—————–
Rs. 97,58,144.00 Total claim made by Claimant.
Rs. 4,33,979.00 Less excess claim made by the
Claimant
—————–
Rs. 93,24,165.00 Claim under the award of the
Claimant as on 07.07.2005.
Rs. 14,48,429.00 Interest @ 18% p.a. from 07.07.2005
(date of award) till 18.05.2006
(date of deposit by respondents.)
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—————–
Rs.1,07,72,594.00
Rs. 97,58,144.00 Less amount deposited by
respondents on 18.05.2006.
Rs. 10,14,450.00 Claim of the claimant as on
18.05.2006.
Rs. 4,27,236.31 Interest @ 18% p.a. from 18.05.2006
till 14.10.2008.
—————–
Rs. 14,41,686.30 With further interest @ 18% p.a.
=================
from 15.10.2008 till payment and/or
realization.
Now in so far as the question of interest is
concerned, Clause (b) of sub-section (7) of
Section 31 of the Arbitration and Conciliation
Act, 1996 provides that the sum directed to be
paid by an arbitral award shall, unless the
award otherwise directs, carry interest at the
rate of eighteen per centum per annum from the
date of the award to the date of payment. In
the present case, admittedly, the award is
silent in regard to the payment of interest.
The contention of the judgment debtor is that
what the award does not grant must be deemed
to have been rejected by the Arbitral Tribunal
since the claim for interest had been made
before the arbitrator.
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14. In Smt. Santa Sila Devi and another v.
Dhirendra Nath Sen and others1, the Supreme
Court applied the principle set out in a
Judgment of Parke, B. in Harrison v. Creswick2
that the silence of the arbitrator upon the
subject placed before him means that the
arbitrator has negatived such plea. The award
before the Supreme Court expressly stated that
it was made of and concerning all the matters
in dispute referred to the arbitrator. Hence
the principle of construction enunciated in
the English Judgment would cover the case of
the silence of the award, as regards the claim
for accounting and was, therefore, taken to be
intended as a decision rejecting the claim to
that relief.
15. What must be noted is that the principle
which has been expounded in Harrison (supra)
is a principle of construction. A principle
of construction may be displaced when there
are clear words in a statute which would
indicate to the contrary. Clause (b) of sub-
section (7) of Section 31 contains an express
provision that unless an award has otherwise
directed, a sum directed to be paid by an
1 AIR 1963 SC 1677
2 (1853) 138 ER 1254 : 13 CB 399
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arbitral award shall carry interest at the
rate of 18% per annum from the date of the
award to the date of payment. In view of the
clear statutory stipulation, the payment of
interest from the date of the award to the
date of payment is mandated, unless there is a
direction to the contrary in the arbitral
award. The arbitral award not having made any
specific stipulation in regard to interest,
the statutory
ig prescription
sub-section (7) of Section 31 would apply.
in Clause (b) of
16. In so far as the question of calculations
is concerned, the decree holder stated before
the Learned Single Judge during the course of
the hearing of Chamber Summons No.818 of 2006
that there were certain errors in the
computation which had to be rectified. Such
an exercise was permissibly carried out in
view of the liberty granted by the Learned
Single Judge for amending the execution
application. The Advocate appearing on behalf
of the judgment debtor submitted that
according to the judgment debtor, an amount of
Rs.8,02,564/- is due and payable and not an
amount of Rs.14,41,686.30, as claimed in the
execution application, as amended. A
comparison of the statement which has been
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submitted on behalf of the judgment debtor
during the course of the hearing and the
statement which has been submitted on behalf
of the decree holder would show that the
parties are in agreement on the following
figures:
(i) An amount of Rs.97,58,144/- as per the
warrant of attachment; and
(ii) An excess amount therein of Rs.4,33,000/-.
17. In other words, the claim under the award
as on 7th July, 2005, which is the date of the
award, was Rs.93,24,165/-. The claimant was
entitled to interest at the rate of 18%
thereon from the date of the award until the
date of deposit by the respondent. The
interest liability works out to Rs.
14,48,429/-. The total amount due to the
claimant-decree holder was, therefore, Rs.
1,07,72,594/-. Deducting the amount that was
actually deposited by the judgment debtor, the
balance amount due and payable as on 18th May,
2006 was Rs.10,14,450/- on which the decree
holder would be entitled to interest at the
rate of 18% per annum until 14th October, 2008
and thereafter until payment. The error in
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computation has, therefore, been duly
corrected by the decree holder.
18. The application filed by the decree holder
for amendment of the execution application was
hence in order and was correctly allowed by
the Master & Assistant Prothonotary (ADM).
Chamber Summons No.597 of 2009 shall have to
be rejected and is accordingly rejected. The
chamber summons taken out by the decree holder
for extension of the warrant of attachment was
consequently liable to be allowed. Chamber
Summons No.510 of 2009 taken out by the decree
holder is accordingly made absolute in terms
of prayer Clauses (a), (b) and (c). Chamber
Summons No.771 of 2009 filed by the Judgment
Debtor is dismissed.
——
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