Madras High Court
D. Aruldoss vs The Authorised Signatory on 27 January, 2025
Author: N. Sathish Kumar
Bench: N. Sathish Kumar
C.R.P.No.4959 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 27-01-2025
CORAM
THE HONOURABLE MR JUSTICE N. SATHISH KUMAR
C.R.P.No.4959 of 2024
and
C.M.P.No. 27917 of 2024
D. Aruldoss
..... Petitioner
-Versus-
1.The Authorised Signatory
M/s. Shriram City Union Finance Ltd.
Rep by its Power of Attorney Mr.P.Sivakumar,
Deputy Manager,
No.12, Ramasamy Street,
T.Nagar, Chennai 600 017.
2.K.Dhanusu
3.R.Moorthi
..... Respondent(s)
Petition filed under Article 227 of the Constitution of India, praying to
strike off the Execution Petition in E.P.No.86 of 2022 in
C.P.No.YKR/SCUF/179/2020 on the file of the learned I Additional District
Judge, Tindivanam, Villupuram District.
For Petitioner : Mr.G.Mohammed Aseef
For Respondent(s) : Mr.J.Vikraman for R1
No Appearance for RR2 and 3
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C.R.P.No.4959 of 2024
ORDER
This civil revision petition is at the instance of one of the judgement-
debtors seeking to strike off the Execution Petition in E.P.No.86 of 2022,
which was filed by the 1st respondent and is pending on the file of the learned I
Additional District Judge, Tindivanam, to get executed the Award dated
17.03.2021 passed by the learned arbitrator in C.P.No.YKR/SCUF/179/2020.
2. The revision petitioner is the 1st respondent and the respondents 2 and
3 are the respondents 2 and 3 in the arbitral award and the 1st respondent is the
claimant in the arbitral proceedings, which arose , out of a dispute that arose
over a loan transaction. The 1st respondent, a financial institution, referred the
matter to the sole arbitrator to adjudicate the dispute arose between the
revision petitioner and the respondents 2 and 3 and themselves. The sole
arbitrator passed an award on 17.03.2021 whereby the respondents in the
arbitral proceedings were directed to pay to the claimant a sum of
Rs.21,70,626/- together with interest at the rate of 18% p.a. from 07.12.2020
till date of realisation of the amount in full and also to pay a sum of Rs.5,000/-
towards the cost of arbitration proceedings. On the basis of the award, the 1st
respondent initiated an execution proceedings on the file of the learned I
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Additional District Judge, Tindivanam, for attachment and sale of immovable
properties belonging to the revision petitioner/1st judgement-debtor. That
application was taken on file as E.P.No.86 of 2022 and the same has been
pending for execution of the decree.
3. On notice in the Execution Petition, the revision petitioner/1 st
judgement debtor entered appearance in the execution proceedings through
counsel. It is however seen from the typed set of papers that on 15.03.2023, as
the judgement-debotors did not file their counter despite conditional order, and
they were not present, the executing court set the judgement debtors ex parte
and proceeded further to order for attachment of the property and adjourned the
matter to 25.04.2023. At that stage, the 1st judgement-debtor has come forward
with the present revision petition seeking to strike off the execution petition.
4. It is seen from the typed set of papers that subsequently, the 1st
judgement-debtor has filed his counter opposing the execution petition and
inter alia contending that he had altogether paid a sum of Rs.3,00,000/-, but
the claimant had not taken that amount into credit. Despite repeated demands,
the claimant has not given the particulars of instalments paid thus far. The
property sought to be attached is not his absolute property and his two sisters
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have equal shares in the same.
5. In this revision petition, on notice, the 1st respondent/decree-holder
claimant entered appearance through counsel. The respondents 2 and 3, the
other judgement debtors have not entered appearance either in person or
through counsel, despite their name having been printed on the cause list.
Thus, this court had no other option except to proceed with further in the
revision petition and pass orders on merits.
6. Heard Mr.G.Mohammed Aseef, learned counsel for the revision
petitioner/1st judgement-debtor and Mr.J.Vikraman, learned counsel for the 1st
respondent/decree-holder.
7. Mr.G.Mohammed Aseef, learned counsel for the revision
petitioner/judgement debtor would submit that the order of attachment was
based on an ex parte award passed by the sole arbitrator appointed unilaterally
without even giving an opportunity to the revision petitioner. The revision
petitioner was also not served with any notice in the arbitral proceedings.
According to the learned counsel, the unilateral appointment of an arbitrator
would itself create an ineligibility.
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8. Mr.G.Mohammed Aseef would further submit that it is the settled law
that even if an award is not set aside under the procedure established in Section
34 of the Arbitration and Conciliation Act, 1996, the executing court can step
in and hold that an award passed by the unilaterally appointed arbitrator as non
est in law and declare such award as a nullity and direct the parties to re-agitate
the issues before a new arbitral tribunal constituted in accordance with law.
9. Per contra, J.Vikraman learned counsel appearing for the 1st
respondent/decree-holder, would submit that the executing court cannot suo
motu annul the award when a party to the agreement did not challenge the
award on the ground of ineligibility of the arbitrator under Section 12(5) of the
Arbitration and Conciliation Act, 1996. According to the learned senior
counsel, when the party to the arbitral proceedings did not choose to challenge
the appointment of the arbitrator, the same would, in the eye of law, amount to
a waiver of applicability of provision to Section 12(5) of the Arbitration Act,
1996.
10. Mr.J.Vikraman would further submit that the bar of ineligibility
partakes of a character of not being an absolute bar which would hit at the root
of the very assumption of jurisdiction at the inception, rendering the award a
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nullity and hence, according to him, though the unilateral appointment of
arbitrator creates an ineligibility, the same would not amount to inherent lack
of jurisdiction rendering the entire arbitral proceedings and the consequential
award nullity altogether.
11. In a nutshell, according to Mr.J.Vikraman, any award passed by the
arbitrator can be set aside only on an application under Section 34 of the
Arbitration and Conciliation Act, 1996. If the award passed by the arbitrator
has not been challenged by the aggrieved party, such award shall be final and
binding on the parties to the contract. Therefore, the executing court cannot
suo motu annul the arbitral award.
12. In support of his above submissions, Mr.J.Vikraman would place
reliance upon the judgements in the cases of (i) Bhawarlal Bhandari vs.
Universal Heavy Mechanical Lifting Enterprises, 1999 (1) SCC 558; (ii)
Satish Karthikeyan vs. Axis Bank Limited [C.R.P.(NPD) No.3808 of 2023
dated 13.11.2024]; and (iii) Kotak Mahindra Bank Limited vs.
Shalibhadra Cottrade Private Limited and others [Execution Case No.193
of 2019 dated 02.07.2024].
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13. The award in question was passed in the arbitration Case in
C.P.No.RJ SF/302/2017 on 13.02.2018. When the execution petition was filed,
the executing court placing reliance upon the provision in Section 12(5) of the
Arbitration and Conciliation Act, 1996 and the judgement of the Hon'ble
Supreme Court in TRF Limited v. Energo Engineering Projects Limited
[(2017) 8 SCC 377 and Perkins Eastman Architects DPC and others v.
HSCC (India) Limited [AIR 2020 SC 39], suo motu dismissed the Execution
Petition holding that the award is non est in the eye of law due to lack of
inherent jurisdiction on the ground of ineligibility of the arbitrator.
14. No doubt, the Hon'ble Supreme Court in the case of TRF Limited
and Perkins Eastman Architects' cases [cited supra] has held that unilateral
appointment of an arbitrator by one of the parties itself would come under the
purview of disqualification by ineligibility.
15. It is, however, relevant to note here that proviso to sub-section (5) of
Section 12 of the Arbitration and Conciliation Act, 1996, provides an option to
the parties to waive the applicability of provision to sub-section (5) by express
agreement in writing. Thus, an objection as to the applicability can be raised
under sub-section (5) of Section 12 of the Arbitration and Conciliation Act,
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1996. As long as there is no objection raised, it cannot be said that a mere
unilateral appointment of arbitrator would vitiate the entire aribtral proceedings
which culminated in an award. The very proviso of sub-section (5) of Section
12 of the Arbitration and Conciliation Act, 1996 would indicate that a mere
ineligibility does not make the entire arbitral proceedings void ab initio. In this
regard, it is relevant to refer to the judgement of the High Court of Calcutta in
the case of Kotak Mahindra Bank Limited v. Shalibhadra Cottrade Private
Limited (cited supra) wherein at paras 29, 30, 32 and 53 it has been held as
under:
“29. Thus, the very fact that the proviso contemplates
subsequent waiver of the objection as to ineligibility also
unerringly indicates that the ineligibility does not render the
entire proceeding void ab initio or a nullity at the inception.
If it were to be so, it would be non est and could not exist in
the eye of law. Such a fundamental defect cannot be cured
subsequently even by express waiver in writing.
30. Hence, in view of the provision of waivability
under the proviso to Section 12(5), the bar of ineligibility
partakes of a character of not being an absolute bar which
would hit at the root of the very assumption of jurisdiction
at the inception, rendering the award a nullity.
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..... ..... ..... ..... ..... .....
32. Hence, although unilateral appointment creates an
ineligibility, the same is not of such a high stature as to
tantamount to an implicit and inherent lack of jurisdiction
rendering the entire proceedings and the consequential
award a nullity altogether.
..... ..... ..... ..... ..... .....
..... ..... ..... ..... ..... .....
53. Thus, on a comprehensive consideration of the
above judgments, it is crystal-clear that the ineligibility of
the Arbitrator cannot be set up as a ground of
inexecutability of an award in a proceeding under Section
36 of the 1996 Act for the first time.”
16. In the case of Vasudev Dhanjibhai Modi v. Rajabhai Abdul
Rehman, (1970) 1 SCC 670, the Hon'ble Supreme Court has held that the
executing court cannot go behind the decree unless it is shown that it was
passed by a court inherently lacking jurisdiction and thus was a nullity. The
relevant portions of the judgement read as under:
“6. A court executing a decree cannot go behind
the decree: between the parties or their representatives it
must take the decree according to its tenor, and cannot
entertain any objection that the decree was incorrect in
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law or on facts. Until it is set aside by an appropriate
proceeding in appeal or revision, a decree even if it be
erroneous is still binding between the parties.
7. When a decree which is a nullity, for instance,
where it is passed without bringing the legal
representative on the record of a person who was dead at
the date of the decree, or against a ruling prince without a
certificate, is sought to be executed an objection in that
behalf may be raised in a proceeding for execution.
Again, when the decree is made by a court which has no
inherent jurisdiction to make objection as to its validity
may be raised in an execution proceeding if the objection
appears on the face of the record: where the objection as
to the jurisdiction of the Court to pass the decree does not
appear on the face of the record and requires examination
of the questions raised and decided at the trial or which
could have been but have not been raised, the executing
Court will have no jurisdiction to entertain an objection as
to the validity of the decree even on the ground of
absence of jurisdiction. In Jnanendra Mohan
Bhaduri v. Rabindra Nath Chakravarti [LR 60 IA 71] the
Judicial Committee held that where a decree was passed
upon an award made under the provisions of the Indian
Arbitration Act, 1899, an objection in the course of the
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execution proceeding that the decree was made without
jurisdiction, since under the Indian Arbitration Act, 1899,
there is no provision for making a decree upon an award,
was competent. That was a case in which the decree was
on the face of the record without jurisdiction.”
17. The above mentioned judgement in Vasudev Dhanjibhai v. Rajabhai
Abdul Rehman [(1970) 1 SCC 670] was followed by the Hon'ble Supreme
Court in the case of Bhawarlal Bhandari v. Universal Heavy Mechanical
Lifting Enterprises (cited supra). In Bhawarlal Bhandari's case the Hon'ble
Supreme Court has held that even if the decree was passed beyond the period
of limitation, it would be an error of law or at the highest, a wrong decision,
which can be corrected in appellate proceedings and not by the executing court
which was bound by such decree.
18. In the case of ONGC Limited v. M/s. Modern Constructions and
Company reported in (2014) 1 SCC 648, the Hon'ble Supreme Court has held
that executing court cannot go behind the decree and in the absence of any
challenge to the decree, no objection can be raised in execution.
19. In the case of Shivshankar Gurjar v. Dilip [(2014) 2 SCC 465], the
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Hon'ble Supreme Court has observed that the executing court cannot go behind
the decree; it has no jurisdiction to modify a decree; and it must execute the
decree as it is.
20. A constitution bench of the Hon'ble Supreme Court in the case of
Central Organisation for Railway Electrification v. ECI SPIC SMO
MCML (JV), a Joint Venture Company [2024 (6) CTC 495] in a majority
view has held that “unilateral appointment clauses in public-private contracts
are violative of Article 14 of the Constitution and the principle of express
waiver contained under the proviso to Section 12(5) also applies to situations
where the parties seek to waive the allegation of bias against an arbitrator
appointed unilaterally by one of the parties. After the disputes have arisen, the
parties can determine whether there is a necessity to waive the nemo judex
rule.” The Hon'ble Supreme Court has, however, held that the law laid down in
the said judgement will apply prospectively to arbitrator appointments to be
made after the date of the judgement. The doctrine of prospective overruling
was specifically made by the Hon'ble Supreme Court taking note of the fact
that change in law may have the effect of distorting established rights and
commercial bargains between parties. To avoid large-scale social and
economic disruption, the Hon'ble Supreme Court exercised its discretionary
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jurisdiction under Article 142 to give prospective effect to its decisions.
21. Further, the Hon'ble Supreme Court has applied the doctrine of
prospective overruling to bring about a smooth transition of the operation of
law without unduly affecting the rights of people who acted upon the overruled
law.
22. Even in a minority view one of the Hon'ble Judges has held that the
occasion for the court to examine the constitution of the independent and
impartial tribunal under the arbitration clause will arise when one of the parties
makes an application under Sections 11, 14 or 34. It is not permissible for the
court to give an advance declaration that all such agreements which enable one
of the parties to unilaterally constitute the arbitral tribunal would be void per
se. No two agreements are the same and it is necessary for the court to examine
the text and context of the agreement.
23. It is also further to be noted that to set aside an arbitral award, an
application under Section 34 of the Arbitration and Conciliation Act, 1996 is
must. The very wording employed in Section 34 of the Arbitration and
Conciliation Act, 1996 reads as under:-
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“Recourse to a Court against an arbitral award
may be made only by an application for setting aside
such award in accordance with sub-section (2) and sub-
section (3)”
Therefore, the words employed in Section 34 “recourse to a court against an
arbitral award may be made only by an application for setting aside the
award” make it clear that an award has to be set aside only in the manner
known to law as provided under Section 34 of the Arbitration and Conciliation
Act, 1996. As long as an aggrieved party to the award did not challenge the
award passed against him in the manner known to law, the arbitral award shall
be final and binding on the parties and the persons claiming under them
respectively. When a party to the award had not chosen to challenge the award
within the time prescribed, such award shall be enforced in accordance with the
provisions of the Code of Civil Procedure in the same manner as if it was a
decree passed by the Civil Court. Therefore, as no objection was raised and the
revision petitioner has waived the objection and also did not choose to file any
application under Section 34 of the Arbitration and Conciliation Act, 1996
seeking to set aside the award, such award is certainly executable. The issue of
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unilateral appointment of arbitrator cannot be raised during the pendency of the
execution proceedings. Thus, this court is of the view that execution petition
cannot be struck off and the petitioner is not entitled for any relief in this
revision. The revision petition must fail.
In the result, the revision petition is dismissed. No costs. Consequently,
CMP is closed.
Index : yes / no 27-01-2025
Neutral Citation : yes / no
kmk
To
1.The I Additional District Judge, Tindivanam, Villupuram District.
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N.SATHISH KUMAR.J.,
kmk
27..01..2025
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