Case Note & Summary
The dispute arose from a trade finance loan of Rs. 12,00,000 sanctioned by the respondent finance company to petitioner No.1, a proprietary firm, on 01-04-2017. Petitioners No.2 and 3 stood as guarantors, and petitioner No.1 executed a mortgage of house property as security. The loan carried monthly interest at 22.52% per annum and was repayable in sixty equal installments of Rs. 33,590 from 07-05-2017. The petitioner defaulted, leading the respondent to issue a legal notice on 17-07-2019 and initiate arbitration proceedings. Despite service, the petitioners did not appear, and the arbitrator passed an ex parte award holding them jointly and severally liable to pay Rs. 12,75,519 with future interest at 18% per annum from 10-08-2019. The petitioners did not challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996. The respondent then filed execution proceedings, Arbitration Darkhast No. 281/2021, before the executing court. During execution, the petitioners appeared and filed objections under Section 47 of the Code of Civil Procedure, 1908, challenging the tenability and maintainability of the execution proceedings. They argued that the award related to the mortgaged property and therefore required compulsory registration under Section 17 of the Registration Act, 1908, and that the executing court erred in rejecting their objections. The executing court by common order dated 08-02-2023 rejected both applications, holding that the arbitrator had not exceeded his jurisdiction, the award was for recovery of money only, and no registration was required. Aggrieved, the petitioners filed the present writ petition. Before the High Court, the petitioners relied on Ratan Lal Sharma v. Purshottam Harit, (1974) 1 SCC 671, Booz Alen and Hamilton Inc. v. SBI Home Finance Limited and others, (2011) 5 SCC 532, and Deccan Chronicle Holdings Ltd. v. L&T Finance Limited, 2013 SCC OnLine Bom 1005, contending that the executing court's order was contrary to settled law. The respondent argued that the award was not challenged under Section 34, that Section 47 CPC was inapplicable because an award is not a decree under Section 2(2) CPC, and that the award being for money did not require registration. The High Court framed four points for determination: whether the award can be termed a decree, whether Section 47 objections are tenable, whether registration is required, and whether writ interference is warranted. The Court examined the definition of decree under Section 2(2) CPC and the definition of court under Section 2(1)(e) of the Arbitration and Conciliation Act, 1996. It held that an arbitrator is not a civil court, and therefore an award cannot be termed a decree; award and decree are distinct legal concepts. It noted that under Section 36 of the Arbitration and Conciliation Act, 1996, after expiry of the time to file a Section 34 application, the award is enforceable as if it were a decree. The Court's reasoning indicated that the objections under Section 47 were not tenable and that a money award did not require registration under Section 17 of the Registration Act, 1908. Accordingly, the writ petition was liable to be dismissed, and the executing court's order was to be upheld.
Headnote
A) Civil Procedure - Decree and Arbitral Award Distinction - Section 2(2) of Code of Civil Procedure, 1908 - An arbitral award is not a decree because an arbitrator is not a civil court; the formal expression of an adjudication by a civil court which conclusively determines the rights of parties alone is a decree - the High Court held that award and decree are two distinct legal terms or concepts, answering point No. (i) against the petitioners (Paras 7-9). B) Arbitration and Conciliation - Enforcement of Arbitral Award - Section 36 of Arbitration and Conciliation Act, 1996 - After expiry of the period for making an application under Section 34 to set aside an arbitral award, the award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court - the High Court referred to this provision while considering the tenability of objections in execution proceedings (Paras 10-11). C) Civil Procedure - Objections to Execution of Award - Section 47 of Code of Civil Procedure, 1908 - Objections under Section 47 CPC are not tenable to challenge an arbitral award in execution because the award is not a decree within the meaning of Section 2(2) CPC - the High Court observed that the award can be enforced before the civil court under Section 36 of the Arbitration and Conciliation Act, 1996, but the distinction between award and decree remained significant (Paras 5-6, 10-11). D) Registration Act - Compulsory Registration of Award - Section 17 of Registration Act, 1908 - An award purely for recovery of money and not creating or declaring any right to immovable property is not compulsorily registrable - the executing court had held that the arbitrator passed the award in respect of money only and not the mortgaged property, and the writ court was considering that finding (Paras 3, 5-6).
Issue of Consideration
Whether an arbitral award can be termed as a decree of the civil Court; whether applications under Section 47 of the CPC are tenable before the executing Court before whom the award was placed for execution; whether the award is required to be registered under Section 17 of the Registration Act, 1908; whether any interference is required in the matter in writ jurisdiction
Final Decision
The High Court dismissed the writ petition and upheld the executing court's rejection of the Section 47 CPC objections, holding that an arbitral award is not a decree under Section 2(2) CPC because an arbitrator is not a civil court, and that an award for recovery of money is enforceable under Section 36 of the Arbitration and Conciliation Act, 1996 as if it were a decree without compulsory registration under Section 17 of the Registration Act, 1908.
Law Points
- An arbitral award is not a decree under Section 2(2) CPC
- an arbitrator is not a civil court
- an arbitral award is enforceable under Section 36 of the Arbitration and Conciliation Act
- 1996 as if it were a decree
- an award for recovery of money does not require compulsory registration under Section 17 of the Registration Act
- 1908
- objections under Section 47 CPC are not tenable to challenge an arbitral award in execution
