* THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL REVISION PETITION No.2820 of 2009 % 14.12.2009 Between: M/s.Bhoomatha Para Boiled Rice and Oil Mill, Represented by its Proprietor, Billa Prabhakar Reddy … Petitioner AND M/s.Maheshwari Trading Company, Represented by its Proprietor, Patha Hanmandlu And others …Respondents Counsel for the petitioner: Sri L. Harish Counsel for the Respondents: Sri K.Ananda Rao < Gist: > Head Note: ? CITATIONS: 1. 2003(2) ALD 818: 2003(3) ALT 193 2. (2005) 8 SCC 618: AIR 2006 SC 450 3. (2008) 6 SCC 741 4. AIR 1981 SC 2075 5. AIR 2008 MP 328 6. 2004(2) ALT 174 7. AIR 2007 SC 168 THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL REVISION PETITION No.2820 of 2009 14.12.2009 Between: M/s.Bhoomatha Para Boiled Rice and Oil Mill, Represented by its Proprietor, Billa Prabhakar Reddy … Petitioner AND M/s.Maheshwari Trading Company, Represented by its Proprietor, Patha Hanmandlu And others …Respondents THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL REVISION PETITION No.2820 of 2009 ORDER: (Per Hon,ble Sri Justice V.V.S.Rao) This revision petition under Section 115 of Code of Civil Procedure, 1908 (CPC), involves an important question as to whether arbitral award passed by the arbitral tribunal as per the provisions of the Arbitration and Conciliation Act, 1996 (Arbitration Act, for brevity), can be enforced only by the “Court” as defined in Section 2(1)(e) or whether such arbitral award can be enforced or executed by a competent civil Court having territorial and pecuniary jurisdiction to entertain the matter. This requires to be considered in the light of various provisions in different statutes like Section 89 and Order XXI of CPC, A.P. Civil Courts Act, 1972, and Arbitration Act. The background case is as follows. First respondent (hereafter, D.Hr) filed O.S.No.86 of 1997 on the file of the Court of Senior Civil Judge, Karimnagar, for recovery of a sum of Rs.5,06,034/- against the petitioner and others (hereafter, J.Drs). In interlocutory application being I.A.No.529 of 1997, the Court below appointed an arbitrator with the consent of the parties. An award dated 20.10.1998 was passed for an amount Rs.2,40,000/- in favour of D.Hr. The amount was not paid. Therefore, E.P.No.42 of 2005 was moved by D.Hr for recovery of award amount by attachment and sale of immovable property, under Section 36 of Arbitration Act read with Order XXI Rule 11 of CPC. The proprietor of J.Dr No.1 filed a counter opposing the execution petition contending that the award cannot be enforced by the Court of Senior Civil Judge, that it is not valid, that it is not properly stamped and that J.Drs and D.Hr did not sign the award, and therefore, it is not binding on them. Learned Senior Civil Judge rejected these pleas holding that (i) Petition to set aside the award was not filed, and therefore, it has become final under Section 35 of Arbitration Act; (ii) the award was passed in the presence of both the parties and even after lapse of three months, the award was not challenged before the competent court, and therefore, the same can be enforced under Section 36 thereof; and that (iii) as per Article 12 of Schedule 1A of Stamp Act, 1899, stamp duty of Rs.200/- is attracted, and therefore, D.Hr is required to pay the amount. Accordingly the Court below allowed the execution petition and ordered attachment of movable properties on condition of D.Hr paying the stamp duty and penalty. Learned Counsel for petitioner submits that an award can be enforced under Section 36 of Arbitration Act only by “the Court” as defined in Section 2(1)(e) of Arbitration Act. He also invites attention of this Court to Sections 8 and 9 of Arbitration Act in support of the contention. He, therefore, submits that the Court of Senior Civil Judge, Karimnagar, has no jurisdiction to entertain a petition for execution/enforcement of the award under Section 36 of Arbitration Act. Per contra, learned Counsel for contesting respondent No.1 submits that enforcement of arbitral award under Section 36 of Arbitration Act in accordance with provisions of CPC has nothing to do with Section 2(1)(e) of Arbitration Act. He would urge that any arbitral award has to be executed in accordance with the provisions of CPC. Ankati Satyamaiah v Sallangula Lalaiah[1], SBP & Company v Patel Engineering Limited[2] and Garhwal Mandal Vikas Nigam Ltd. v Krishna Travel Agency[3] have been referred to by the counsel. The question as mentioned supra needs to be considered, after noticing various related aspects of the matter. This is necessary because Section 36 of Arbitration Act makes an arbitral award enforceable under CPC in the same manner as if it were a decree of the Court. The only condition is that the awardee has to wait for a period of three months from the date of arbitral award, which is the time prescribed under Section 34(3) of Arbitration Act for filing an application to set aside the arbitral award. For ready reference Sections 35 and 36 of Arbitration Act are extracted below. 35. Finality of arbitral awards. -Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively. 36. Enforcement. - Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court. The starting point for the purpose of our consideration is Section 36 of Arbitration Act, which as noticed supra, confers the status of “decree” on the arbitral award for the purpose of enforcement as “decree” of Civil Court. Does it mean that every arbitral award has to be enforced like a decree of civil court only in the Court as defined under Section 2(e) of Arbitration Act? Does it mean depending on the pecuniary limits, an arbitral award can be enforced as “decree” under the provisions of CPC in a Court having pecuniary jurisdiction. The answer to these questions has to be found in the second part of Section 36 of Arbitration Act which is to the effect that, “award shall be enforced under the Code of Civil Procedure 1908, in the same manner as if it were a decree of the Court.” This can be divided into two distinct parts, namely, (i) “… … … award shall be enforced under CPC” and (ii) “… … … in the same manner as if it were a decree of the Court”. In the context, the ‘jurisdiction’ of Civil Court under CPC and method and manner of executing decree are very relevant. We shall consider these two aspects before proceeding further. Jurisdiction of Civil Courts Though the long title of CPC mentions that CPC is enacted to consolidate and amend laws relating to the procedure of civil judicature, the term, “Court” or “Civil Court” is not defined. Section 2(8) of CPC defines “Judge” means Presiding Officer of a Civil Court. Section 3 of CPC makes the District Court and other Civil Court of a Court inferior to that of District and Small Causes Court subordinate to High Court and/or District Court, as the case may be. Therefore, CPC uses the term “Civil Court” synonymously with the term “Judge”. Section 6 of CPC speaks of pecuniary jurisdiction and is to the effect that no Court can exercise jurisdiction over suits, the amount or value of subject matter of which exceeds the pecuniary limits of its ordinary jurisdiction, unless it is expressly or otherwise provided. Section 15 of CPC mandates that every suit shall be instituted in the Court of lower grade competent to try it. Sections 16 to 20 of CPC deal with every jurisdictional matter regarding the place of institution of suits and pecuniary limits subject to which the suit can be entertained. The effect of Civil Court entertaining a suit not within its territorial and/or pecuniary limits is dealt with by Sections 21 and 21A of CPC. As per these two provisions, ordinarily objection as to place of suing or objection as to competence shall not be allowed in any appeal or revision unless such objection is taken in the Court of first instance. Insofar as place of suing is concerned, a suit challenging validity of a decree passed in a former suit on the ground of lack of territorial jurisdiction would not lie. Sections 36 to 74 of CPC deal with execution of decrees. Section 36 of CPC makes all the provisions of CPC applicable to the execution of decrees. Be it also noted that as per Section 141 of CPC the procedure provided therein in regard to suits shall be followed in all proceedings. Order XXI of CPC contains elaborate procedure for execution of all types of decrees; both pecuniary and non-pecuniary. Section 9 of CPC, recognises remedy for enforcing all civil rights in the Courts having jurisdiction to try all suits of civil nature. Such Courts however cannot take cognizance of a suit, when the amount or value of subject matter of which exceeds the pecuniary limits or the subject matter falls outside the territorial jurisdiction of Civil Court. After the decree is passed, D.Hr shall institute an execution petition in the Civil Court which passed the decree or by the Court to which the decree is sent for execution (Section 38 of CPC). Section 37 of CPC is very relevant here and reads under. 37. Definition of Court which passed a decree. The expression "Court which passed a decree", or words to that effect, shall, in relation to the execution of decrees, unless there is anything repugnant in the subject or context, be deemed to include,- (a) where the decree to be executed has been passed in the exercise of appellate jurisdiction, the Court of first instance, and (b) where the Court of first instance has ceased to exist or to have jurisdiction to execute it, the Court which, if the suit wherein the decree was passed was instituted at the time of making the application for the execution of the decree, would have jurisdiction to try such suit. Before analysing Section 37 of CPC, it is necessary to advert to Civil Courts Act. It is an Act of the A.P. State Legislature relating to Civil Courts subordinate to High Court in the State. The Act provides for three-tier subordinate Court structure, namely, Courts of Junior Civil Judges, Senior Civil Judges and District Judges. (Sections 4 to 9 in City Civil Court in the District of Hyderabad and Sections 10 to 19 of CPC in Districts other than Hyderabad). Section 16 of Civil Courts Act, enumerates the limits of pecuniary jurisdiction and reads as under. Section 16 - Jurisdiction of District Judge, Senior Civil Judge and Junior Civil Judge in Original Suits and other proceedings (1) The pecuniary jurisdiction of a District Judge shall, subject to the provisions of the Code of Civil Procedure, 1908 and the other provisions of this Act, extend to all Original Suits and proceedings of a civil nature including Land Acquisition Original Petitions, the amount or value of the subject matter of which exceeds rupees ten lakhs. (2) The pecuniary jurisdiction of a Senior Civil Judge shall extend to all like suits and proceedings of a civil nature including Land Acquisition Original Petitions not otherwise exempted from his cognizance under any other law for the time being in force, the amount or value of the subject matter of which exceeds rupees one lakh but does not exceed rupees ten lakhs. (3) The pecuniary jurisdiction of a Junior Civil Judge shall extend to all like suits and proceedings, not otherwise exempted from his cognizance under any other law for the time being in force, the amount or value of the subject matter of which does not exceed rupees one lakh. As of now, pecuniary jurisdiction of District Judge (District Court) shall extend to all original suits and proceedings, the amount or value of the subject matter of which exceeds Rs.10,00,000/-. The pecuniary jurisdiction of Senior Civil Judge shall extend to all original suits and proceedings, the amount or value of the subject matter of which exceeds Rs.1,00,000/- but does not exceed Rs.10,00,000/-. The pecuniary jurisdiction of Junior Civil Judge shall extend to all original suits and proceeds, the amount or value of the subject matter of which does not exceed Rs.1,00,000/-. Therefore, if a Court of Junior Civil Judge entertains a suit, the subject matter of which does not exceed Rs.1,00,000/-, and decrees the same, execution petition has to be filed before the Court of Junior Civil Judge, which passed the decree or the Court of Junior Civil Judge to which the decree is transferred. Similar is the case when the decree is passed by Senior Civil Judge or District Judge, as the case may be. If the decree is passed by the District Court in a suit, the amount or value of subject matter of which exceeds Rs.10,00,000/-, the same has to be executed only before a District Court which passed the decree or before the Court to which the decree is transferred but it cannot be executed before the Court of Senior Civil Judge or Junior Civil Judge. What would be the position if a Court after passing decree ceases to exist or ceases to have jurisdiction to execute it. This is clarified by Section 37 of CPC, which defines, “the Court which passed the decree”. As per Section 37(a) of CPC, the Court of first instance which passed the decree shall be the Court even after the decree to be executed has been passed by appellate Court. For instance, if a suit for recovery of money or for any other non-pecuniary relief is dismissed by original Court but reversed by appellate Court, decreeing the suit, the original Court shall be the Court, which is competent to execute the same. Section 37(b) of CPC needs careful examination as it has some relevance to the case on hand. It deals with two situations, which might create procedural hurdle in executing the decree and offer solution. If the Court which passed the decree ceased to exist or such Court ceased to have jurisdiction to execute the decree, in either case the Court which would have jurisdiction to try such suit, is the Court to execute the decree. Section 37(b) of CPC creates a fiction. Even though the decree is passed by one Court, it deems another Court as a Court which passed the decree in the event of earlier Court ceasing to exist or losing jurisdiction to execute the decree. We may illustrate it with an example. We assume Court ‘A’ and Court ‘B’ both of which have jurisdiction to try a suit. The suit is instituted in Court ‘B’ which passed decree. Subsequently Court ‘B’ ceased to exist or its jurisdiction is withdrawn. Then for any decree passed by Court ‘B’ in the suit filed before it, Court ‘A’ would be “the Court” for all purposes including execution of such decree. In other words, though the decree is passed by Court ‘B’, it shall be deemed to be the decree passed by Court ‘A’ and therefore, Court ‘A’ shall have jurisdiction to execute such decree. With this background, we may now deal with provisions of Arbitration Act. Enforcement of arbitral awards Section 36 of Arbitration Act confers right on the successful party to enforce the award as a decree, after it has become final. A reading of Sections 34, 35 and 36 of Arbitration Act would show that an arbitral award shall be final and binding on the parties and persons claiming under them respectively after the expiry of three months from the date on which a party received the arbitral award and fails to file an application to set aside the award under Section 34(1) and/or when an application to set aside the award is refused by the competent Court. Arbitration as Alternative Dispute Resolution (ADR) device is not unknown to India. Civil Procedure Codes 1859, 1877 and 1887 provide for arbitration with or without intervention of the Court, and CPC 1908 also retained arbitration provisions in Second Schedule which essentially dealt with arbitration outside the scope of the Arbitration Act 1899. Arbitration Act 1940 repealed Second Schedule to CPC and Arbitration Act 1899 and introduced new legal regime. 1940 Act however failed in providing inexpensive expeditious and qualitative adjudication and resolution of disputes between the parties. As observed by Supreme Court in M/s.Guru Nanak Foundation v M/s.Rattan Singh and sons[4], “the proceedings under 1940 Act made lawyers laugh and legal philosophers weep and impelled jurists to search for resolution of disputes avoiding procedural claptrap.” By the time, these observations were printed in the law reports the international effort to find an all effective ADR was on. The most notable is establishment of United Nations Commission on International Trade Law (UNCITRAL) in 1966. About two decades after its existence, UNCITRAL adopted Model Law of Arbitration in 1985. General Assembly of UNO recommended to all Member States to give due consideration to Model Law on International Commercial Arbitration. The Arbitration Act (1996) is based on UNCITRAL Model Law though it differs in certain respects. It may be emphasized here that UNCITRAL Model Law aims at reducing intervention of Judicial Authority to the barest minimum lest dispute resolution by arbitration loses required momentum. The Arbitration Act containing 86 sections is divided into four parts. Part I (Chapters I to X - Sections 2 to 43) deals with arbitration (agreement between the parties, appointment of arbitrators with or without Court’s intervention, procedure before arbitration, passing of awards, enforcement of arbitral awards, appeals etc.,). Part II (Chapters I to IV – Sections 44 to 60) deals with enforcement of foreign awards. Part III (Sections 61 to 81) and Part IV (Sections 82 to 86) contain provisions for conciliation and supplementary matters respectively. In addition, it has three Schedules. As we are concerned with judicial intervention for enforcement of the Award by the Court, we will first deal with the definition of the Court as defined in Arbitration Act and refer to other provisions where the term “Court” is used by the legislation. Section 2(1)(e): "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; The above provision does not specifically use “District Judge” as is the case in CPC which defines, “District” or General Clauses Act, 1897. As per Section 2(4) of CPC, “District” means the local limits of Principal Civil Court or District Court of original jurisdiction. Section 2(17) of General Clauses Act defines “District Judge” shall mean the Judge of Principal Civil Court of original jurisdiction. Needless to mention that when the term or words are not defined in a statute, there cannot be any objection to see the meaning of such a term in the General Clauses Act or in the judgments of the Courts or dictionaries. Applying this principle, the phrase “Principal Civil Court of original jurisdiction in a District” used in Section 2(1)(e) of Arbitration Act read with Section 2(4) of CPC and Section 2(17) of General Clauses Act, means any District Judge not inferior to the Principal District Court or any Court of Small Causes. For the purpose of Section 2(1)(e) of Arbitration Act, therefore, even Additional District Court contemplated in Section 11 of Civil Courts Act is a Court for all intended purposes under the Arbitration Act. In M.P.S.E.Board v ANSALDO Energia, S.P.A.,[5] and Globsyn Technologies Ltd v Eskaaycee Infosys[6], it is held that Additional District Court is not subordinate to Principal District Court and for all intended purposes Additional District Judge shall have same powers and shall exercise the same powers as District Judge. After decision of the Constitution Bench of seven learned Judges of Supreme Court in SBP & Company (supra), it is axiomatic that designation of “District Judge” as authority under Section 11(6) of Arbitration Act empowering the appointment of arbitrator is ruled out under the Scheme of the Act. Therefore, “the Court” as defined under Section 2(1)(e) of Arbitration Act is designated only for the purpose of interlocutory intervention under Section 9 of Arbitration Act (in non-set aside applications) and as a judicial authority to which a recourse can be availed by way of set aside application against arbitral award. Sections 27 and 42 of Arbitration Act also referred to the term “Court” but as is presently shown “the Court” used within these two provisions, is not a Court as defined in Section 2(1)(e) of Arbitration Act. We may mention here that in view of explanation to Section 47 as well as explanation under Section 56 of Arbitration Act which incorporates Section 2(1)(e) in the matter of enforcement of foreign awards, it is only the Principal District Court or Additional District Court to which the case is assigned, which can enforce/execute a foreign award and as per the said explanation in the matter of enforcement of foreign awards, no other Civil Court has jurisdiction to entertain the matter. This would not however solve the problem in this case and in cases for enforcement of awards passed by arbitrators under different contexts and situations. Before this is taken up, it is necessary to refer to three other provisions in Arbitration Act, which mainly deal with pre-arbitral situations. Section 8 of Arbitration Act empowers every judicial authority before which an action is brought in a matter which is subject of arbitration agreement to refer the parties to arbitration if one of the parties applies before putting in statement of defence to arbitration. Sections 45 and 54 of Arbitration Act also speak of such power to refer matters referred to in Section 44 and Section 53 of Arbitration Act respectively. The term “judicial authority” is not defined in Arbitration Act. We may mention that Section 2(8) of CPC defines “Judge” means presiding officer of a Civil Court whereas Section 3(i) of Code of Criminal Procedure, 1973, defines “judicial proceeding” as including any proceedings in the course of which evidence is or may be legally taken on oath. Therefore, though the terms “Judge” and “judicial proceeding” are used in the Codes, Arbitration Act used the words “judicial authority” as including every public authority vested with the power and right to hear and determine questions in controversy. Any judicial authority can appoint an arbitrator whether in relation to a dispute or action or cause referred to in Section 8 or in relation to agreement referred to in Section 44 or Section 53 of Arbitration Act. In these provisions, “judicial authority” is certainly not the Court alone as defined in Section 2(1)(e). A Principal Civil Court’s original jurisdiction in a District may also come within the ambit of “judicial authority” but every judicial authority need not be a Court as defined therein. Section 9 of Arbitration Act deals with non-set aside application. Section 34 deals with set aside application and Sections 49 and 58 deal with enforcement of foreign awards. These provisions alone refer to the ‘Court’ as defined under Section 2(1)(e). This means the powers conferred under Sections 9, 34, 49 and 58 can be exercised only by the Principal Civil Court of original jurisdiction in a District and not by any other Court. In our considered opinion for the purpose of enforcement of award as a decree of Court for the purpose of Section 36 of Arbitration Act, the Court means not only the Court as defined under Section 2(1) (e) of Arbitration Act but all