corporate law – arbitration awards – execution – 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 view taken by the Madhya Pradesh High Court and the Himachal Pradesh High Court is held to be not good in law while the views of Delhi High Court, Kerala High Court, Madras High Court, Rajasthan High Court, Allahabad High Court, Punjab & Haryana High Court and Karnataka High Court reflect the correct legal position, for the reasons we have recorded aforesaid.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.1650 of 2018

SUNDARAM FINANCE LIMITED ….Appellant

versus

ABDUL SAMAD & ANR. ..…Respondents

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. The divergence of legal opinion of different High Courts on the

question as to whether an award under the Arbitration &

Conciliation Act, 1996 (hereinafter referred to as the ‘said Act’)

is required to be first filed in the court having jurisdiction over

the arbitration proceedings for execution and then to obtain

transfer of the decree or whether the award can be straightway

filed and executed in the Court where the assets are located is

required to be settled in the present appeal.

CIVIL APPEAL No.1650 of 2018 Page 1 of 21

REPORTABLE

Facts:

2. The appellant claims that the first respondent approached the

appellant for grant of a loan for purchase of a Tata Lorry-HCV

2005 model, which loan was granted by the appellant on the

terms & conditions specified in the Loan Agreement dated

18.8.2005. Respondent No.2 is stated to have stood guarantee for

the repayment of the loan by executing a separate guarantee letter

of the same date. The loan had to be repaid in installments

commencing 3.9.2005 to 3.1.2009.

3. The appellant alleges that respondent No.1 committed default in

payment from the 20th installment onwards. The repossession,

however, of the vehicle could not take place and in order to

recover the loan, arbitration proceedings were initiated in terms

of the arbitration clause contained in the Loan Agreement. Mr. S.

Santhanakrishnan, Advocate was appointed as the sole arbitrator

on 3.5.2011 and the claim statement was filed before the

arbitrator but the respondents remained unserved. Notice was

served through publication but since none appeared for the

respondents, an ex parte arbitration award was made on

22.10.2011 for a sum of Rs.12.69,420 with interest at 18 per cent

CIVIL APPEAL No.1650 of 2018 Page 2 of 21

per annum from 4.4.2011 till realization and costs.

4. The case of the appellant is that the award being enforceable as a

decree under Section 36 of the said Act, execution proceedings

were filed in the jurisdiction of the courts at Morena, Madhya

Pradesh under Section 47 read with Section 151 and Order 21

Rule 27 of the Code of Civil Procedure, 1908 (hereinafter

referred to as the ‘said Code’). The respondents sought to contest

the proceedings inter alia on the ground that the vehicle against

which the loan was obtained was stolen. It is not necessary to go

into further details of the proceedings but suffice to say that the

trial court vide order dated 20.3.2014 return the execution

application on account of lack of jurisdiction to be presented to

the court of competent jurisdiction. The effect of the judgment

was that the appellant was required to file the execution

proceedings first before the court of competent jurisdiction in

Tamil Nadu, obtain a transfer of the decree and then only could

the proceedings be filed in the trial court at Morena. This view

adopted by the trial court was in turn based on the judgment of

the Madhya Pradesh High Court and the opinion of the Karnataka

High Court while it is pleaded that the view of the Rajasthan

CIVIL APPEAL No.1650 of 2018 Page 3 of 21

High Court and the Delhi High Court were to the contrary. The

petitioner did not approach the High Court against the said order

of the trial court but straightway approached this Court by filing

the Special Leave Petition on the ground that no useful purpose

would be served by approaching the Madhya Pradesh High Court

in light of the view already expressed by that Court in conflict

with the opinions of some other High Courts.

The Conflicting Views:

A. The transfer of decree should first be obtained before filing the

execution petition before the Court where the assets are located:

5. The aforesaid view has been adopted by the Madhya Pradesh and

the Himachal Pradesh High Courts:

i. Computer Sciences Corporation India Pvt. Ltd. v.

Harishchandra Lodwal & Anr.1

– The learned single Judge of the

Madhya Pradesh High Court took recourse to the provisions of

Section 42 of the said Act, dealing with the issue of jurisdiction in

respect of an arbitration agreement read with Section 2(e) of the

said Act which defines the ‘Court’. In the context of Section 36 of

the said Act dealing with the enforcement of an award prescribing

1 AIR 2006 Madhya Pradesh 34

CIVIL APPEAL No.1650 of 2018 Page 4 of 21

that “the award shall be enforced under the Code of Civil

Procedure, 1908 (5 of 1908) in the same manner as if it were a

decree of the Court,” it was observed that the same principle would

apply as for enforcing of a decree. Since Section 37 of the Code

defines the Court which passes the decree and Section 39 lays

down the procedure for transfer of decree, it was opined that for

execution of an award a transfer of the decree was mandatory.

ii. Jasvinder Kaur & Anr. v. Tata Motor Finance Limited2

of the

High Court of Himachal Pradesh, Shimla – the learned single

Judge took note of the fact that the arbitration proceedings were to

be settled in Mumbai in accordance with the said Act and the

award had been made in Mumbai. Thereafter the learned single

Judge copiously extracted from the judgment of this Court in

Swastik Gases Private Limited v. Indian Oil Corporation

Limited3

. The learned Judge then proceeded to, once again,

copiously extract from the then prevailing view of the Karnataka

High Court where a learned single Judge in I.C.D.S. Ltd. v.

Mangala Builders Pvt. Ltd. & Ors.4

had opined in favour of the

2 CMPMO No.56/2013 decided on 17.9.2013

3 JT 2013 (10) SC 35

4 AIR 2001 Karnataka 364

CIVIL APPEAL No.1650 of 2018 Page 5 of 21

aforesaid view.

B. An award is to be enforced in accordance with the provisions of the

said Code in the same manner as if it were a decree of the Court as per

Section 36 of the said Act does not imply that the award is a decree of a

particular court and it is only a fiction. Thus, the award can be filed for

execution before the court where the assets of the judgment debtor are

located:

i. Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.5

(Delhi

High Court) – The learned single Judge of the Delhi High Court

repelled the contention that the jurisdictional Section 42 of the said

Act requiring an application under Section 34 of the said Act to be

filed in that Court would not extend to the execution of a decree.

The execution application was not ‘arbitral proceedings’. Section

38 of the said Code applies to a decree passed by the Court

prescribing that the decree may be executed by the Court which

passed it, or by the Court to which it was sent for execution. In

case of an award no court passes the decree.

The learned single Judge went into the discussion of the

effect of the provisions of Section 635(4) of the Companies Act,

5 2009 159 DLT 579

CIVIL APPEAL No.1650 of 2018 Page 6 of 21

1956 providing for the order of the Company Law Board to be

enforced by the Court in certain circumstances to draw an analogy

therefrom.

ii. Maharashtra Apex Corporation Limited v. V. Balaji G. & Anr.6

(Kerala High Court) – The learned single Judge expressed the view

that the Court cannot insist for a decree to receive an execution

application on its file and, thus, there was no question of transfer of

a decree. The execution court was to accept the execution petition

with a certified copy of the award wherever it was filed.

iii. Kotak Mahindra Bank Ltd. v. Sivakama Sundari & Ors.7

(Madras High Court) – Section 39 of the Code enables the Court

which passed the decree to transfer it to any subordinate court even

of its own motion without application by the decree holder. The

learned single Judge of the Madras High Court examined the

provisions of the said Act and the said Code and in the process, a

reference was made to Section 41 of the said Code imposing an

obligation upon the executing court to inform the court which

passed the decree about the completion of execution or about the

6 2011 (4) KLJ 408

7 (2011) 4 LW 745

CIVIL APPEAL No.1650 of 2018 Page 7 of 21

failure to execute the decree along with attending circumstances.

A passing reference was made to Section 46 of the said Act which

speaks of precepts. In a nutshell the conclusion made was that

every decree of a civil court was liable to be executed primarily by

the court which passed the decree. On the other hand, in case of an

award, the same is liable to be enforced under Section 36 of the

said Act in the same manner as if it were a decree of the court and

thus the award passed is equated to a decree of the court, only for

purposes of execution. The execution of the award does not

require a seal of approval by the civil court as distinct from the

provisions under the Arbitration Act, 1940. The award cannot be

executed through the arbitral tribunal which passed the award and,

thus, there is no situation envisaged for the arbitral tribunal which

passed the decree (or award) to transfer the decree to any other

court for its execution. There was also no provision either in the

Code or anywhere else to treat a court within whose jurisdiction

the arbitral proceedings took place as the court which passed the

decree.

It was, thus, opined that:

“19. While the award passed by an arbitral tribunal is deemed to be

a decree of a civil court under section 36 of the 1996 Act, there is

CIVIL APPEAL No.1650 of 2018 Page 8 of 21

no deeming fiction anywhere to hold that the court within whose

jurisdiction the arbitral award was passed, should be taken to be

the court which passed the decree. Therefore, the whole procedure

of filing an execution petition before the court within whose

jurisdiction the arbitral award was passed, as though it is the court

which passed the decree, is pathetically misconceived.”

xxxx xxxx xxxx xxxx xxxx

“21. Therefore, it is clear that no Court to which an application for

execution of an award is presented, can insist on the filing of the

execution petition first before some other Court and to have it

transmitted to it later. It appears that the High Court of Bombay has

also adopted the same view, though not by a very elaborate order.”

In another perspective it was observed that in view of Section 21 of

the said Act parties could determine the place of arbitration and

thus, the Act transcends all territorial barriers.

iv. Kotak Mahindra Bank Ltd. v. Ram Sharan Gurjar & Anr.8

(Rajasthan High Court) – The learned single Judge of the

Rajasthan High Court agreed with the view adopted by the Delhi

High Court.

v. GE Money Financial Services Ltd. v. Mohd. Azaz & Anr.9

(Allahabad High Court, Lucknow Bench) – The learned single

Judge observed that the arbitrator cannot be treated as a court

although the award made by him will be executed as a decree.

8 (2012) 1 RLW 960

9 2013 SCC OnLine All 13365 = (2013) 100 ALR 766

CIVIL APPEAL No.1650 of 2018 Page 9 of 21

Thus, Sections, 38 & 39 of the said Code would have no

application and the award can, thus, be filed for execution as a

decree of civil court wherever the judgment debtor resides or

carries on business or has properties within the jurisdiction of the

said court.

vi. Indusind Bank Ltd. v. Bhullar Transport Company10(Punjab &

Haryana High Court) – The view of the Delhi High Court referred

to aforesaid was adopted.

vii. Sri Chandrashekhar v. Tata Motor finance Ltd. & Ors.11

(Karnataka High Court) – The learned single Judge of the

Karnataka High Court opined that the question of filing an

execution petition before the court which passed the decree and

then seeking a transfer of the decree to the court where the assets

are located would not arise, as an award is not a decree passed by

the court.

Our View:

6. In order to appreciate the controversy, we would first like to deal

with the provisions of the said Code and the said Act.

10 MANU/PH/2896/2012

11 (2015) 1 AIR Kant R 261

CIVIL APPEAL No.1650 of 2018 Page 10 of 21

7. Part II of the said Code deals with execution proceedings.

Section 37 of the said Code defines the ‘Court’, which passed the

decree. Section 38 of the said Code provides as to by which

court the decree would be executed and reads as under:

“38. Court by which decree may be executed. – Adecree may be

executed either by the Court which passed it, or by the Court to

which it is sent for execution.”

8. Section 39 of the said Code provides for transfer of decree and

reads as under:

“39. Transfer of decree. – (1)The Court which passed a decree

may, on the application of the decree-holder, send it for execution

to another Court [of competent jurisdiction],-

(a) if the person against whom the decree is passed actually and

voluntarily resides or carries on business, or personally works for

gain, within the local limits of the jurisdiction of such other Court,

or

(b) if such person has no property within the local limits of the

jurisdiction of the Court which passed the decree sufficient to

satisfy such decree and has property within the local limits of the

jurisdiction of such other Court, or

(c) if the decree directs the sale or delivery of immovable property

situate outside the local limits of the jurisdiction of the Court

which passed it, or

(d) if the Court which passed the decree considers for any other

reason, which it shall record in writing, that the decree should be

executed by such other Court.

(2) The Court which passed the decree may of its own motion send

it for execution to any subordinate Court of competent jurisdiction.

CIVIL APPEAL No.1650 of 2018 Page 11 of 21

[(3) For the purposes of this section, a Court shall be deemed to be

a Court of competent jurisdiction if, at the time of making the

application for the transfer of decree to it, such Court would have

jurisdiction to try the suit in which such decree was passed.]

[(4) Nothing in this section shall be deemed to authorise the Court

which passed a decree to execute such decree against any person or

property outside the local limits of its jurisdiction.]”

9. One of the relevant provisions, the effect of which has not been

really discussed in any of the judgments referred to aforesaid is

Section 46 of the said Code which defines Precepts as under:

“46. Precepts. – (1)Upon the application of the decree-holder the

Court which passed the decree may, whenever it thinks fit, issue a

precept to any other Court which would be competent to execute

such decree to attach any property belonging to the

judgment-debtor and specified in the precept.

(2) The Court to which a precept is sent shall proceed to attach the

property in the manner prescribed in regard to the attachment of

property in execution of a decree:

Provided that no attachment under a precept shall continue for

more than two months unless the period of attachment is extended

by an order of the Court which passed the decree or unless before

the determination of such attachment the decree has been

transferred to the Court by which the attachment has been made

and the decree-holder has applied for an order for the sale of such

property. Questions to be determined by Court executing decree”

10.The relevance of the aforesaid provision is that the application of

the decree holder is made to the Court which passed the decree,

which issues the precepts to any other Court competent to

CIVIL APPEAL No.1650 of 2018 Page 12 of 21

execute the said decree. As noticed, the expression “the Court

which passed the decree” is as per Section 37 of the said Code.

We may note at this stage itself that in the case of an award there

is no decree passed but the award itself is executed as a decree by

fiction. The provisions of the said Act traverse a different path

from the Arbitration Act, 1940, which required an award made to

be filed in Court and a decree to be passed thereon whereupon it

would be executable.

11. Now turning to the provisions of Order XXI of the said Code,

which deals with execution of decrees and orders. In case a

Court desires that its own decree is to be executed by another

court, the manner for doing so is provided by Rule 6, which reads

as under:

“Order XXI – Execution of Decrees and Orders

xxxx xxxx xxxx xxxx xxxx

6. Procedure where court desires that its own decree shall be

executed by another court.- The court sending a decree for

execution shall send—

(a) a copy of the decree;

(b) a certificate setting forth that satisfaction of the decree has not

been obtained by execution within the jurisdiction of the court by

which it was passed, or, where the decree has been executed in

part, the extent to which satisfaction has been obtained and what

part of the decree remains unsatisfied; and

CIVIL APPEAL No.1650 of 2018 Page 13 of 21

(c) a copy of any order for the execution of the decree, or, if no

such order has been made, a certificate to that effect.”

12.The manner of presentation of an application is contained in Rule

11(2) of Order XXI, which reads as under:

“Order XXI – Execution of Decrees and Orders

xxxx xxxx xxxx xxxx xxxx

11 (2) Written application—Save as otherwise provided by

sub-rule (1), every application for the execution of a decree shall

be in writing, signed and verified by the applicant or by some other

person proved to the satisfaction of the court to be acquainted with

the facts of the case, and shall contain in a tabular form the

following particulars, namely:—

(a) the number of the suit;

(b) the names of the parties;

(c) the date of the decree;

(d) whether any appeal has been preferred from the decree;

(e) whether any, and (if any) what, payment or other adjustment of

the matter in controversy has been made between the parties

subsequently to the decree;

(f) whether any, and (if any) what, previous applications have been

made for the execution of the decree, the dates of such applications

and their results;

(g) the amount with interest (if any) due upon the decree, or other

relief granted thereby, together with particulars of any cross decree,

whether passed before or after the date of the decree sought to be

executed;

(h) the amount of the costs (if any) awarded;

CIVIL APPEAL No.1650 of 2018 Page 14 of 21

(i) the name of the person against whom execution of the decree is

sought; and the mode in which the assistance of the court is

required, whether—

(i) by the delivery of any property specifically decreed;

(ii) by the attachment, or by the attachment and sale, or by the sale

without attachment, of any property;

(iii) by the arrest and detention in prison of any person;

(iv) by the appointment of a receiver;

(v) otherwise, as the nature of the relief granted may require.”

13.A perusal of the aforesaid shows that what is sought to be

disclosed is that the details like the number of suits, appeal

against the decree, etc. find a place, which really does not have a

relevance to the fiction of an award to be treated as a decree of

the Court for purposes of execution.

14.We would now like to refer to the provisions of the said Act,

more specifically Section 36(1), which deals with the

enforcement of the award:

“36. Enforcement. – (1) Where the time for making an application

to set aside the arbitral award under section 34 has expired, then,

subject to the provisions of sub-section (2), such award shall be

enforced in accordance with the provisions of the Code of Civil

Procedure, 1908 (5 to 1908), in the same manner as if it were a

decree of the court.”

CIVIL APPEAL No.1650 of 2018 Page 15 of 21

15.The aforesaid provision would show that an award is to be

enforced in accordance with the provisions of the said code in the

same manner as if it were a decree. It is, thus, the enforcement

mechanism, which is akin to the enforcement of a decree but the

award itself is not a decree of the civil court as no decree

whatsoever is passed by the civil court. It is the arbitral tribunal,

which renders an award and the tribunal does not have the power

of execution of a decree. For the purposes of execution of a

decree the award is to be enforced in the same manner as if it was

a decree under the said Code.

16.Section 2(e) of the said Act defines ‘Court’ as under:

“2. Definitions. ………

xxxx xxxx xxxx xxxx xxxx

[(e) “Court” means –

(i) in the case of an arbitration other than international

commercial arbitration, the principal Civil Court of original

jurisdiction in a district, and includes the High Court in exercise

of its ordinary original civil jurisdiction, having jurisdiction to

decide the questions forming the subject-matter of the arbitration

if the same had been the subject-matter of a suit, but does not

include any Civil Court of a grade inferior to such principal Civil

Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High

CIVIL APPEAL No.1650 of 2018 Page 16 of 21

Court in exercise of its ordinary original civil jurisdiction, having

jurisdiction to decide the questions forming the subject-matter of

a suit, and in other cases, a High Court having jurisdiction to hear

appeals from decrees of courts subordinate to that High Court;]”

17.The line of reasoning supporting the award to be filed in a

so-called court of competent jurisdiction and then to obtain a

transfer of the decree is primarily based on the jurisdiction clause

found in Section 42, which reads as under:

“42. Jurisdiction. – Notwithstanding anything contained

elsewhere in this Part 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 of that agreement and the

arbitral proceedings shall be made in that Court and in no other

Court.”

18.The aforesaid provision, however, applies with respect to an

application being filed in Court under Part I. The jurisdiction is

over the arbitral proceedings. The subsequent application arising

from that agreement and the arbitral proceedings are to be made

in that court alone. However, what has been lost sight of is

Section 32 of the said Act, which reads as under:

“32. Termination of proceedings.—

(1) The arbitral proceedings shall be terminated by the final arbitral

award or by an order of the arbitral tribunal under sub-section (2).

(2) The arbitral tribunal shall issue an order for the termination of

CIVIL APPEAL No.1650 of 2018 Page 17 of 21

the arbitral proceedings where—

(a) the claimant withdraws his claim, unless the respondent objects

to the order and the arbitral tribunal recognises a legitimate interest

on his part in obtaining a final settlement of the dispute,

(b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the

proceedings has for any other reason become unnecessary or

impossible.

(3) Subject to section 33 and sub-section (4) of section 34, the

mandate of the arbitral tribunal shall terminate with the termination

of the arbitral proceedings.”

19.The aforesaid provision provides for arbitral proceedings to be

terminated by the final arbitral award. Thus, when an award is

already made, of which execution is sought, the arbitral

proceedings already stand terminated on the making of the final

award. Thus, it is not appreciated how Section 42 of the said Act,

which deals with the jurisdiction issue in respect of arbitral

proceedings, would have any relevance. It does appear that the

provisions of the said Code and the said Act have been mixed up.

20.It is in the aforesaid context that the view adopted by the Delhi

High Court in Daelim Industrial Co. Ltd. v. Numaligarh

Refinery Ltd.12 records that Section 42 of the Act would not

12 supra

CIVIL APPEAL No.1650 of 2018 Page 18 of 21

apply to an execution application, which is not an arbitral

proceeding and that Section 38 of the Code would apply to a

decree passed by the Court, while in the case of an award no

court has passed the decree.

21.The Madras High Court in Kotak Mahindra Bank Ltd. v.

Sivakama Sundari & Ors.13referred to Section 46 of the said

Code, which spoke of precepts but stopped at that. In the context

of the Code, thus, the view adopted is that the decree of a civil

court is liable to be executed primarily by the Court, which

passes the decree where an execution application has to be filed

at the first instance. An award under Section 36 of the said Act,

is equated to a decree of the Court for the purposes of execution

and only for that purpose. Thus, it was rightly observed that

while an award passed by the arbitral tribunal is deemed to be a

decree under Section 36 of the said Act, there was no deeming

fiction anywhere to hold that the Court within whose jurisdiction

the arbitral award was passed should be taken to be the Court,

which passed the decree. The said Act actually transcends all

territorial barriers.

Conclusion:

13 supra

CIVIL APPEAL No.1650 of 2018 Page 19 of 21

22.We are, thus, unhesitatingly of the view 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.

23.The effect of the aforesaid is that the view taken by the Madhya

Pradesh High Court and the Himachal Pradesh High Court is held

to be not good in law while the views of Delhi High Court,

Kerala High Court, Madras High Court, Rajasthan High Court,

Allahabad High Court, Punjab & Haryana High Court and

Karnataka High Court reflect the correct legal position, for the

reasons we have recorded aforesaid.

24.The appeal is accordingly allowed and the impugned order dated

20.3.2014 is set aside restoring the execution application filed by

the appellant before the Morena courts. The parties are left to

bear their own costs.

..….….…………………….J.

(J. Chelameswar)

………………………………J.

CIVIL APPEAL No.1650 of 2018 Page 20 of 21

(Sanjay Kishan Kaul)

New Delhi.

February 15, 2018.

CIVIL APPEAL No.1650 of 2018 Page 21 of 21