Uzi Justman vs M/S Telephone Cables Ltd & Anr
2009 Latest Caselaw 3208 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 Ex.P. 102/2006

%                            Date of decision: 18th August, 2009

UZI JUSTMAN                                     ....Decree Holder
                        Through:     Mr. Rajiv Tyagi and Ms Chanchal
                                   Biswal, Advocates

                                Versus

M/S TELEPHONE CABLES LTD & ANR                  ... Judgment Debtors
                        Through: None.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.     Whether reporters of Local papers may
       be allowed to see the judgment?               Yes

2.     To be referred to the reporter or not?        Yes

3.     Whether the judgment should be reported       Yes
       in the Digest?


RAJIV SAHAI ENDLAW, J.

1. Execution is sought of an arbitral award having the force of a

decree under the provisions of the Arbitration Act, 1996. The

arbitral award is for payment of US $1,80,000/- by the judgment

debtor to the decree holder. The execution petition was originally

filed in the court of the District Judge, Chandigarh in or about the

year 2000. The judgment debtor filed objections to the execution.

The decree holder applied to the Supreme Court for transfer of the

execution petition outside Chandigarh and vide order dated 9th

December, 2002 the said transfer petition was allowed and the

execution proceedings transferred to the District Court, Delhi. While

the execution proceedings were pending before the Additional

District Judge, on 16th August, 2000 issues were framed as to

whether the award is liable to be set aside. Some witnesses were

also examined before the learned Additional District Judge.

2. The judgment debtor on or about 3rd July, 2003 filed an

application under Section 22 of the Sick Industrial Companies

(Special Provisions) Act, 1985 stating, inter alia, that the reference

of the judgment debtor dated 21st October, 2002 before the BIFR had

been registered as case No.712/2002 and praying for suspension /

stay of the proceedings in the execution. However, subsequently

realizing that the decree sought to be executed was for an amount

beyond the pecuniary jurisdiction of the Additional District Judge,

the Execution proceedings were in or about the year 2006

transferred to this court and are pending since then.

3. The counsel for the decree holder, on 9th April, 2009 informed

this court that the BIFR had granted permission to the decree holder

to execute this decree against the judgment debtor but the said

order of the BIFR had been stayed by the AAIFR. He, however,

contended that the bar of Section 22(1) will not come in the way of

the present execution. Thereafter also the proceedings were

adjourned on 6th July, 2009 on the ground that the decree holder has

moved an application before the AAIFR for vacation of the order of

stay of the permission granted by the BIFR to pursue the present

proceedings.

4. Today also the counsel for the decree holder has, at the outset,

requested that the proceedings be adjourned. He has contended

that the arguments before the AAIFR have been concluded and the

order is awaited. However, since it was his contention on 9 th April,

2009 (supra) that the provisions of Section 22(1) of the Act do not

come in the way of this execution, rather than adjourning the matter,

arguments have been heard inasmuch as proceedings cannot be kept

indefinitely before the court; if the counsel for the decree holder is

able to satisfy that the provisions of Section 22(1) do not come in the

way of the execution, the execution will proceed irrespective of the

proceedings aforesaid before the BIFR and AAIFR, else this

execution is barred by Section 22(1) of the Act.

5. The counsel for the decree holder has contended that the

decree holder, a foreign national was an employee of and worked

with the judgment debtor company; However, since difficulties were

being faced in payment of remuneration to the decree holder owing

to his foreign citizenship, and to enable requisite permissions to be

obtained in this regard, the modality of arbitration was adopted and

the claims of the decree holder against the judgment debtor were

referred to arbitration; in accordance with the understanding

aforesaid, a settlement agreement dated 30th November, 1999 was

arrived at between the parties and an arbitral award pronounced in

terms thereof. The counsel for the decree holder has submitted that

however thereafter the intentions of the judgment debtor turned

dishonest and the agreed awarded amounts were not paid to the

decree holder leading to the filing of the execution aforesaid.

6. The contention of the counsel for the decree holder qua non-

applicability of the bar of Section 22 of the SICA are two fold. Firstly

it is contended that the bar in Section 22(1) to proceedings for

execution does not apply to execution of arbitral award. Attention is

invited to Section 22(3) providing for the BIFR to order or declare

that the operation of any award to which a sick company is a party

shall remain stayed. It is contended that admittedly neither is there

any order of the BIFR nor has the judgment debtor company made

any application to the BIFR for stay of operation of the arbitral

award under execution. It is further argued that since the provision

with respect to arbitral award has been made in Section 22(3), it has

to be necessarily held that the reference in Section 22(1) to the

execution does not include the reference to the execution of an

award. Reliance in this regard is placed on the judgment of the

Division Bench of this court in M/s Lloyd Insulations (India) Ltd

Vs Cement Corporation of India Ltd ILR (2001) 1 Delhi 62 and

Morgan Securities and Credit Pvt Ltd Vs Modi Rubber Ltd AIR

2007 SC 683.

7. I do not find the contention raised by the counsel for the

decree holder to have been the subject matter of adjudication in

either of the aforesaid two decisions. It thus cannot be said that the

question raised is covered by either of the said judgments. All that

M/s Lloyd Insulations (supra) holds is that Section 22(1) does not

apply to a proceeding under Sections 14 and 17 of the Arbitration

Act 1940. The reason given therefore is that a petition under

Sections 14 and 17 of the Act is not a suit (though registered as a

suit). However, while holding so, another reason given is that the

arbitral awards are covered by Section 22(3) of the Act. The Division

Bench held that stay of the proceedings under Sections 14 and 17 of

the Arbitration Act, 1940 for making the arbitral award a rule of the

court, could be under Section 22(3) of the Act.

8. Similarly in Morgan Securities (supra) also no arbitral award

for execution was for consideration. What the Supreme Court held

in that case was that the bar of Section 22(1) of the Act did not come

in the way of a petition under Section 34 of the 1996 Act unless the

BIFR passes an order under Section 22(3) of the Act. While holding

so also the Supreme Court in para 68 of the judgment held that upon

the rejection of the objections to the award, the question of

enforceability of the award would come into being and once the

arbitral award having the force of a decree is put into execution sub-

Section (1) of Section 22 of SICA would come in its way from being

enforced.

9. It would thus be seen that the judgment of the Supreme Court

in Morgan Securities and Credit Pvt Ltd (supra) rather than

helping the decree holder is against the decree holder.

10. Even otherwise, a judgment is a precedent only on the matter

arising for consideration before the court. In neither of the aforesaid

judgments was the question of applicability of Section 22(1) to the

execution of arbitral award as a decree was before the court.

Nevertheless the observations aforesaid came to be made by the

Supreme Court and which, in my opinion, cannot also be brushed

aside as obiter.

11. Even otherwise the arbitral award under the Arbitration Act,

1996, as the award in the present case is, under Section 36 of the

Act is given the force of and made executable as a decree. Once the

same is executable as a decree, the effect of Section 22(1) of SICA

cannot be whittled down. Even otherwise considering the object of

enacting SICA and Section 22, there is no reasonable basis/ nexus

for carving out a distinction between execution of a decree and of an

arbitral award having the force of the decree. The purport is to

protect the properties of a sick company under rehabilitation from

being attached / sold in execution at the instance of the individual

creditors and which would come in the way of rehabilitation in the

larger interest. The said object would be defeated equally if

execution is permitted of an arbitral award and it does not make any

sense to prohibit execution of the decrees of the court but not of

awards of the arbitrator.

12. The Supreme Court in Jay Engineering Works Ltd Vs

Industry Facilitation Council AIR 2006 SC 3252 was concerned

with an award under the provisions of the Interest on Delayed

Payments to Small Scale and Ancillary Industrial Undertakings Act,

1993. The High Court held the said Act to be prevailing over the

SICA and held the award to be executable notwithstanding Section

22(1). The Supreme Court reversed the order of the High Court and

held that once the award is being executed as a decree before a civil

court, it will definitely attract Section 22 of SICA, even though

adjudicatory process of making an award under the aforesaid 1993

Act may n ot come within the preview of SICA but once an award is

made and sought to be executed, Section 22 of SICA will come into

play. Reference was also made to Section 32 of SICA making

provisions thereof notwithstanding inconsistencies with other laws.

13. The second contention of the counsel for the decree holder is

that the arbitral award in the present case is for recovery of dues of

the decree holder who was an employee of the judgment debtor

company. It is urged that Section 22 of SICA is not a bar for

recovery of dues of an employee of a sick company. Reference in

this regard is placed on Mideast India Ltd Vs Shri K.M. Unni

2002 IV AD Delhi 157 wherein a Single Judge of this Court in view of

and following judgments in Rajnagar Textiles Mills No. 1 Vs

Textile Labour Association (1998) 93 Company Cases 447; Shree

Chamundi Mopeds Ltd. Vs Church of South India Trust

Association (1992)75 Company Cases 440 and Deputy

Commercial Tax Officer v. Corromandal Pharmaceuticals,

(1997) 89 Company Cases 1 held that Section 22 of SICA would not

operate as a bar to the payment of dues of workmen, employees

following the adjudication of industrial disputes or determination of

dues under the provisions of Industrial Disputes Act.

14. As would be obvious, said observations were in view of the

provisions of the Industrial Disputes Act. The counsel for the decree

holder admits that the decree holder was not a workman and was/is

not covered by the provisions of the Industrial Disputes Act. He has

however contended that the principle would apply. However, I am

unable to accept the said contention. The courts have in various

context treated the workman to be different from managerial or

other employee. The law relating to a workman can thus not be made

applicable to non-workman employees. Thus, the contention of the

decree holder that Section 22(1) of SICA does not apply to the

present execution does not find favour with me and is rejected.

15. As far as the request of the decree holder for adjournment of

the present execution awaiting the permission from BIFR/AAIFIR is

concerned, I find that the execution under Section 22(1) does not

"lie". The execution as on the date of institution before this court

thus did not lie and ought not to remain on the docket of this court.

Even though the arbitral award of which execution is sought is dated

30th November, 1999, no prejudice shall be suffered by the decree

holder inasmuch as the time during which the decree holder was

prohibited from executing the same owing to the provisions of

Section 22 of SICA would be excluded in computing the limitation for

applying for execution. It is often found that parties, to serve their

own purpose, want to keep proceedings, which otherwise are not

maintainable, pending before this court. This court cannot allow its

process to be abused in this fashion and if found that the

proceedings do not lie before this court, the same cannot be

adjourned day after day merely awaiting the situation in which the

proceedings would be maintainable. Nothing substantial has

happened in these proceedings, the benefit whereof would be lost to

the decree holder in the event of applying afresh. Though issue was

framed when proceedings were pending before District Court but the

same appears to be misconceived in an much as in execution the

question whether arbitral award under the Arbitration Act, 1996 can

be set aside or not cannot be gone into. The execution petition is

thus dismissed. However, in the circumstances the parties are left to

bear their own costs.

RAJIV SAHAI ENDLAW (JUDGE) 18th August, 2009 M