Case: Punjab State Civil Supplies Corporation Ltd. And Anr Vs. M/S. Atwal Rice And General Mills

3. In order to appreciate the short controversy involved in this appeal, few relevant facts need mention infra.The appellant is a State owned Corporation engaged in supply of civil commodities in the State of Punjab. Respondent No. 1 is a partnership firm whose partners are respondent Nos. 2 to 4. The firm is engaged in the business of running a rice Mill in Jalandhar.On 01.01.1996, the appellant and Respondent No.1 entered into an agreement. In terms of this agreement, the appellant was to give their paddy to the respondents, who were to process the paddy in their Rice Mill and the resultant rice produced after processing paddy were to be delivered to the Food Corporation of India (FCI) for and on behalf of the appellant by the respondents. Since the agreement was in relation to processing of paddy and then supply of rice to public at large through FCI, the time was made the essence of the agreement so that the concerned departments would be able to supply the rice in time to public at large.It is the case of the appellant that the appellant delivered 62944 bags weighing 40790 quintals of fine variety of paddy and 90303 bags weighing 58696.95 quintals of IR 8 variety of paddy to the respondents for processing and converting into Rice for being supplied to the FCI. The respondents duly acknowledged the receipt of paddy from the appellant on 27.11.1995 and 06.12.1995.The respondents, however, could only process and deliver to the FCI 27950.75 quintals of fine variety rice and 22955.32 quintals of IR8 variety of rice till 30.06.1996. Thereafter the respondents could deliver 710.00 quintals of fine variety of rice and 14441.04.200 quintals of IR8 variety of rice in 1075 bags after 30.06.1996.Since the respondents failed to process and deliver the full quantity of rice in terms of agreement to the FCI much less within the time framed, it caused money losses to the appellant in addition to sustaining the damages due toof the rice. According to the appellant, since the respondents committed breach of the agreement because they were not able to perform their part of the agreement, the appellant became entitled, in terms of the agreement, to recover from the respondents (1) 1½ times economic cost of balance paddy, (2) the cost of balance bags and sales tax @ 4.4% thereon, besides TDS on income tax @ 2.34%, and (3) other recovery.The agreement contained an arbitration clause for resolving all disputes arising between the parties in relation to the agreement. The appellant accordingly gave notice to the respondents requesting them for referring the disputes, which had arisen between them to the Arbitrator. The respondents acceded to the appellants request and accordingly the disputes were referred to the soleMr. O. P. Garg. The arbitrator embarked upon the reference made to him by the parties. The parties filed their respective claims and adduced evidence in support of their stand.On 01.06.2001, the Arbitrator delivered a reasoned award. The Arbitrator allowed the appellants claim in part and accordingly passed a money award for Rs. 1024847.15 with interest payable at the rate of 21% w.e.f. 01.01.1999 till realization in appellants favour and against the respondents.The respondents, felt aggrieved of the award, filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") and questioned its legality and correctness before the Additional District Judge, Jalandhar. By order dated 04.06.2009, the Additional District Judge dismissed the application and upheld the award. The respondents, as the records indicate. though claimed to have filed appeal in the High Court but did not pursue the appeal and hence the order dated 04.06.2009 of the Additional District Judge and, in consequence, the award dated 01.06.2001 became final and attained finality.The respondents did not pay the awarded amount to the appellants and, therefore, the appellant filed Execution Petition No.37/2010 under Section 36 of the Act before the Additional District Judge, Jalandhar for enforcement of the award against the respondents. The respondents on being served filed reply to the execution application and raised certain factual objections purporting to be under Section 47 of the Civil Procedure Code, 1908 (hereinafter referred to as "the Code"). The respondents also filed one application praying therein for a direction to the appellant to produce the statement of accounts and the transactions done pursuant to the agreement in question.By order dated 03.11.2012, the Executing Court upheld the objections raised by the respondents and, in consequence, dismissed the appellants execution application. It was held that the respondents having paid a sum of Rs. 3,37,885/towards decreetal amount to the appellant, the award/decree in question stood satisfied fully and hence the execution application filed by the appellant is liable to be dismissed. It was, accordingly, dismissed.The appellant, felt aggrieved, filed revision being Civil Revision No. 3602 of 2013 before the High Court. By impugned order, the High Court dismissed the revision and upheld the order of the Executing Court. It is against this order, the appellant(claimant) has filed this appeal by way of special leave before this

Reasoning:
16. Having heard learned counsel for the parties and on perusal of the record of the case, we are constrained to allow the appeal and set aside the impugned order.Coming to the facts of the case, we find that firstly, the award is under the Act; Secondly, the award was challenged under Section 34 by the respondents before the Additional District Judge but the challenge failed vide order dated 03.11.2012 of the Additional District Judge, Jalandhar; Thirdly, the order dated 03.11.2012 attained finality because the matter was not pursued by the respondents in appeal to the High Court; Fourthly, the award, in consequence, also attained the finality by virtue of Sections 35 and 36 of the Act; Fifthly, the award was and continues to be binding on the appellant and the respondents; Sixthly, the award acquired the status of a decree of the civil court by virtue of Section 36 of the Act; Seventhly, the award has to be enforced for recovery of the awarded amount from the respondents like a decree of the civil court under the Code.It is aprinciple of law that the executing Court has to execute the decree as it is and it cannot go behind the decree. Likewise, the executing Court cannot hold any kind of factual inquiry which may have the effect of nullifying the decree itself but it can undertake limited inquiry regarding jurisdictional issues which goes to the root of the decree and has the effect of rendering the decreeWe are constrained to observe that the executing Court and the High Court either did not understand the controversy or if understood, miserably failed to decide the same in accordance with law. Indeed, both the orders clearly show the totalof mind by the two Courts because both the Courts neither set out the facts much less properly nor dealt the issues arising in the case and nor applied the principle of law which governs the controversy.Both the orders are, therefore, wholly perverse, illegal and without jurisdiction. This we say for more than one reason as detailed by us hereinbelow.In the first place, none of the objections (nine) raised by the respondents were decided by the executing Court or/and the High Court. Indeed, they were not even referred to in the orders. If the objections had been raised by the judgment debtor under Section 47 of the Code challenging the decree then it was necessary for the executing Court to deal with the objections and record its finding one way or other in accordance with law. Secondly, assuming that these objections were to be decided then also, in our opinion, none of them had any merit whatsoever and they simply deserved rejection at the outset.Thirdly, all the objections referred above ought to have been raised by the respondents before the Arbitrator or/and Additional District Judge under Section 34 of the Act but certainly none of them could be allowed to be raised in execution once the award became final and attained finality as decree of the Civil Court.In other words, having regard to the nature of objections, it is clear that such objections were not capable of being tried in execution proceedings to challenge the award. It is for the reason that they were on facts and pertained to the merits of the controversy, which stood decided by the Arbitrator resulting in passing of an award. None of the objections were in relation to the jurisdiction of the Court affecting the root of the very passing of the decree. If the executing Court had probed these objections then it would have travelled behind the decree, which was not permissible in law. An inquiry into facts, which ought to have been done in a suit or in an appeal arising out of the suit or in proceedings under Section 34 of the Act, cannot be held in execution proceedings in relation to such award/decree.Fourthly, and apart from what is held above, by no stretch of imagination, the award/decree could be held fully satisfied on alleged making of the payment of Rs. 3,37,885/by the respondents to the appellant. This factual finding to say the least is perverse to its extreme.It is not in dispute that the awarded principal sum even without interest was for Rs. 10,24847.15. In these circumstances, we are at loss to understand as to how and on what basis, the executing Court could ever come to a conclusion that the entire money decree which was admittedly for more than Rs. 10 lacs could be held fully satisfied against making ofpayment of Rs. 3,37,885/by the respondents to the appellant assuming that such payment was held to had been made.Keeping in view the mandatory requirements of Order 21 Rules 1 and 2 relating to payment of decretal dues made by the judgment debtor and applying the said provisions to the undisputed facts of this case, we have no hesitation in holding that the sum of Rs. 3,37,885/which the respondents claimed to have paid to the appellant towards the decretal sum and which found acceptance to the two Courts below could never have been regarded as the payment made by the respondents to the appellant in conformity with the requirements of either Rule 1 or Rule 2 of Order 21. It is not in dispute that such payment was never certified by the Court as contemplated under Rule 2 of Order 21 at the instance of respondents or at the instance of the appellant. Indeed, there was neither any evidence to prove the factum of payment except one copy of the statement which also remained unproved nor any evidence was led to prove the certification done by the Court as required under Order 21 Rule 2 so as to recognize making of such payment by the respondents to the appellant.We are, therefore, of the considered opinion that firstly, the execution application filed by the appellant (decree holder) for execution of the award/decree dated 01.06.2001 was maintainable and it should have been so held; Secondly, no amount was paid by the respondents to the appellant pursuant to the award/decree so as to enable the executing Court to record its full satisfaction in accordance with the provisions of Order 21 Rules 1 and 2 and lastly, all objections raised by the respondents under Section 47 of the Code against the award/decree are liable to be rejected as being wholly devoid of any merits. We, accordingly, hold so against the respondents.