Executability of the Ex-Parte Award By Unilaterally Appointed Sole Arbitrator (Part-1): Scope of Judicial Intervention by Execution Court under Section 47 CPC

The Execution Petition of the Arbitral Award is to be filed under Section 36 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “The Act” read with Order 21 CPC (hereinafter referred to as ‘The Code’).

This essay will endeavour to ascertain and explain if an “Execution Court” can refuse to execute an Arbitral Award if it is found that the same is passed by an Arbitration Tribunal which lacked inherent Jurisdiction to adjudicate the dispute and whether its appointment was non est and void ab initio.

It would be handy to have a glance of Section 36 of ‘The Act’.

Section 36: Enforcement

(1)    When 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 of 1908), in the same manner as if it were a decree of the court.

(2)    Where an application to set aside the arbitral award has been filed in the Court under Section 34, the filing of such an application shall not by itself render that award unforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

(3)    Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 190.

Provided further that where the Court is satisfied that a prima facie case is made out that-

(a)    the arbitration agreement or contract which is the basis of the award; or

(b)    the making of the award was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under Section 34 to the award.

Explanation-For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016)

A plain reading of the Statutory Provision makes it amply clear that the right of the Award Holder to seek Enforcement of the Award is subject to provisions of ‘The Code’.

This brings us to Section 47 of the Code which governs the scope of judicial intervention by an Execution Court. For ready reference same is reproduced hereunder:

Section 47 CPC: Questions to be determined by the Court executing the decree

(1)        “All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree shall be determined by the Court executing the decree and not by a separate suit.

(2)        ……..

(3)        Where a question arises as to whether any person is or is not the representative of a party, such question shall, for the purposes of this Section be determined by the Court.

Explanation I.-For the purposes of this Section, a plaintiff whose suit has been dismissed and a defendant against whom a suit has been dismissed are parties to the suit.

Explanation II.-(a) For the purposes of this Section, a purchaser of property at a sale in execution of a decree shall be deemed to be a party to the suit in which the decree is passed; and

(b) All questions relating to the delivery of possession of such property to such purchaser or his representative shall be deemed to be questions relating to the execution, discharge or satisfaction of the decree within the meaning of this Section.”

Plain reading of the above Statute makes it evident that once a decree is passed by a Court or an Award is passed by an Arbitral Tribunal all the questions related to Execution of such Decree/Award must be taken up and determined by the Executing Court itself and that there shall be no separate suit for this purpose. In case title Harmand Rai Badridas Vs. Devidutt Bhagwati Prasad and Ors.[1] Hon’ble Supreme Court ruled that,

“In order to empower the Executing Court to consider and determine all questions relating to the execution of a decree, unless it falls beyond its ambit, the provision of Section 47 of the Code must be interpreted liberally.”

One of the most important duty casted by Section 47 of the Code on Executing Court is to ascertain:

•         Whether the Decree/Arbitral Award passed is executable?

•         Did the Court/Arbitral Tribunal which passed the Decree/Award lacked inherent jurisdiction rendering such Decree/Award to be a nullity?

Thus the duty of the Executing Court include:-

➢      To not to go beyond decree.

➢      To not to question the correctness of the Decree unless there is some ambiguity.

➢      To ascertain if the Court/Arbitral Tribunal which passed the Decree/Award had the inherent jurisdiction.

Thus the question to be dealt by the Executing Court necessarily restricts itself to the execution part of the decree as long as the same is lawful, executable and is a not non est or nullity. The Law in this regard is no longer res integra. There are several authoritative pronouncements in this regard. In case title Sunder Dass Vs. Ram Prakash[2] of Hon’ble Mr. Justice P. N. Bhagwati while speaking in for the Bench ruled,

“The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree lacked inherent jurisdiction. A court is said to be lacking in jurisdiction when it could not have seisin of the case because the subject matter was wholly foreign to its jurisdiction or that the defendant was dead at the time of institution of the suit or when the suit was decreed. Inherent lack of jurisdiction means a power or jurisdiction which does not at all exist or vest in a court. A court lacks inherent jurisdiction when the subject matter is wholly foreign to its ambit and is totally unconnected with its recognized jurisdiction.”

In case title Kiran Singh Vs. Chaman Paswan[3] Full Bench of Hon’ble Supreme Court ruled,

“It is a fundamental principle that a decree passed by a court without jurisdiction is a nullity and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the Court to pass any decree and such defect cannot be cured even by consent of parties.”

In Case title Urban Improvement Trust, Jodhpur Vs. Gokul Narain[4], Hon’ble Supreme Court held that,

“15. A decree passed by a Court without jurisdiction over the subject- matter or on any other ground which goes to the root of its exercise of jurisdiction or inherent jurisdiction, is a nullity. A decree passed by such a court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon as a foundation for a right even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the authority of the Court to pass a decree which cannot be cured by consent or waiver of the party.”

In case title Saraswat Trading Agency Vs. Union of India[5], it is held by High Court that,

“If Court finds that decree is a nullity, Court cannot proceed to execute it. A decree which is a nullity in the eye of law is no decree and, hence, even by consent of the parties such a decree cannot be executed by the Court. But for this reason it cannot be denied the remedy available to it under Section 47. If the Court finds that the decree is a nullity, the Court cannot proceed to execute it, and it is the duty of the Court to hold that the decree is not executable.”

In Daland Uchha Bidyapith Vs. State of Orissa[6], it is held that,

“Execution cannot be refused except in case of nullity Execution of the decree ought not to be refused, unless the decree itself is a nullity.”

In case title Brakewel Automative Components (India Private) Ltd. Vs. P.R. Selvam Alagppan[7], Hon’ble Supreme Court ruled at para 23 that,

“Through this view has echoed time out of number in similar pronouncements of this Court in Dhurandhar Prasad Singh Vs. Jain Prakash University and Others, AIR 2001 SC 2552, while dwelling on the scope of Section 47 of the Code, it was ruled that the powers of the court thereunder are quite different and much narrower than those in appeal/revision or review. The exercise of power under Section 47 of the Code is microscopic and lied in a very narrow inspection hole and an executing court can allow objection to the executability of the decree if it is found that the same is void ab initio and is a nullity, apart from the ground that it is not capable of execution under the law, either because the same was passed in ignorance of such provision of law or the law was promulgated making a decree unexecutable after its passing. None of the above eventualities as recognized in law for rendering a decree unexecutable, exists in the case in hand. For obvious reasons, we do not wish to burden this adjudication by multiplying the decisions favouring the same view.”

In Bijendra Kumar Vs. Pradeep Kumar and Ors.[8] Hon’ble Delhi High Court while discussing another plea between Section 47 CPC and Section 36 of Arbitration and Conciliation Act, 1996 observed,

“An Award which is a nullity being against public policy can always be challenged even at the stage of execution in as much as, if we take a most extreme example that an Award is passed that ‘A’ will steal money for ‘B’ then surely ‘B’ cannot enforce the Award/decree stating that ‘A’ should give him particular amount of money which was to be stolen by ‘B’ for being given to ‘A’.”

Thus, on the strength of the above judgments and the discussion it can be fairly concluded that generally speaking the Execution Court cannot go behind the Decree but as far as the Executability of a Decree/Award is concerned, if the Executing Court finds that the judgment is non-est or that the Decree/Award is a nullity on account of lack of inherent jurisdiction with the Arbitral Tribunal, Section 47 of the Code fully empowers the Execution Court to declare the Decree/Award as “Not Executable” but shall stop short of declaring it a “Nullity”.

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