The Jharkhand High Court dismissed a petition raising objections to the execution of an arbitral award under Section 47 of CPC and held that the party cannot be permitted to object to its execution by alleging it to be nullity or without jurisdiction, unless the award suffers from an inherent lack of jurisdiction apparent on the face of the record and the jurisdiction error goes to the root of the matter and is apparent on the face of the records and the moment such plea of nullity requires deliberations on fact and law, such objection is not permissible at the stage of execution of the award.
Brief Facts:
The parties were referred to arbitration after the failure of conciliation after a dispute broke out between them. The petitioners in the meantime were admitted into insolvency and a moratorium under Sections 13 and 14 of the IBC was declared after which the arbitral proceedings were put on hold and the proceedings continued after the approval of the resolution plan and award was delivered in favour of the respondent. The petitioner did not challenge the award under Section 34 but raised objections under Section 47 of the CPC when the award was put to execution under Section 36 which was rejected by the executing order and the petitioner then filed the present petition against the impugned order.
Contentions of the Applicant:
The learned counsel appearing on behalf of the petitioner contended that the decree of nullity can be assailed in execution or co-lateral proceedings and further argued that the provisions of the Insolvency and Bankruptcy Code have an overriding effect and thus the Facilitation Council under MSME Act had lost its jurisdiction to pass any award. It was further argued that even if the award was not challenged under Section 34 of the Arbitration and Conciliation Act, the objection could have been taken at the stage of its enforcement when it is sought to be enforced under Section 36 of the act. Further, it was argued that the exercise of power under section 47 of CPC is microscopic and lies in a very narrow inspection hole and the 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 and even in the limited scope of jurisdiction, Section 47 CPC application was maintainable.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent argued that the impugned order did not call for any interference considering the scope of Article 226 and further contended that the petitioner did not mention the provision of law under which their objection was filed before the executing court. It was further argued that the provisions of Sections 15 to 23 of the MSME Act are overriding and Section 24 of the MSME Act stipulates that provisions of Sections 15 to 23 would apply irrespective of any other contrary provision in other laws. Further, it was argued that the binding effect of the IBC does not bar the legal remedy available to the party for the realization of its debt.
Observations of the Court:
The court observed that the objections under Section 34 of the Arbitration and Conciliation Act were permissible only on issues relating to patent or inherent lack of jurisdiction and challenge to an arbitral award can only be on grounds stated under Section 34 but it is nevertheless permissible to raise objections under Section 47 of the CPC at the stage of enforcement of the award if same are concerned with lack of jurisdiction of the tribunal to pass any award. It was further stated that the party cannot be permitted to object to its execution by alleging it to be a nullity or without jurisdiction unless the award suffers from an inherent lack of jurisdiction apparent on the face of the record and the jurisdiction error goes to the root of the matter and is apparent on the face of the records and the moment such plea of nullity requires deliberations on fact and law, such objection is not permissible at the stage of execution of the award.
The court further rejected the argument of the petitioner stating that the award suffered from patent or inherent lack of jurisdiction and stated that the objection to the execution of the award could have been taken at the stage of execution without challenging the award under Section 34.
On the issue of whether the tribunal lost its jurisdiction to pronounce the award given Section 31 of IBC, the court observed that irrespective of maintainability of the objection to arbitral award under Section 47 of CPC, the Facilitation Council did not lose its jurisdiction to proceed with the award as the arbitral proceedings were initiated prior to insolvency resolution date, suspended during moratorium period and resumed upon its expiry and the approved resolution plan did not determine the claim of respondent as nil.
The decision of the Court:
The court dismissed the appeal and upheld the impugned order.
Case Title: Electrosteel Steel Limited vs. Ispat Carriers Private Limited
Coram: Hon’ble Mrs. Justice Anubha Rawat Choudhary
Case No.: C. M. P. No. 376 of 2023
Advocate for the Applicant: Mr. Indrajit Sinha, Mr. Bibhash Sinha and Ms. Puja Agarwal
Advocate for the Respondent: Mr. Atanu Banerjee, Mr. Rishi Pallava, Mr. Rajnish Kolawatia and Mr. Prakash Kumar
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