Interim Application No. 5306 of 2025 · Bombay High Court · 2025

Order

1. By this Interim Application, the Applicant / Decree Holder has sought interim relief in aid of enforcement of the final Arbitral Award dated 30th November, 2023 passed by the Sole Arbitrator (“the Award”).

2. By the said Award, the Sole Arbitrator has awarded a principal decretal sum of INR 12,52,53,938/- and interest on the principal decretal sum at 10% p.a. from the date of the Award (i.e. 30th November, 2023) till actual payment against the Respondent No.1 and costs of INR 22,25,000/- against the Respondents.

3. The Respondent Nos.1 and 2 have filed a joint / common Petition under Section 34 of the Arbitration Act (Commercial Arbitration Petition No.149 of 2025), challenging the Award. By an Order dated 22nd April, 2025 read with Order dated 29th April, 2025, the execution of the said Award was stayed to the limited extent of paragraph 176(c) of the Award i.e. to the extent of “costs” component of the Award of INR 22,25,000/- conditional upon a 100% deposit of that sum, which deposit was thereafter made. Resultantly, the amount of INR 14,79,71,228/- under the Award remains admittedly unsatisfied and outstanding. There is no stay on recovery of the said amount.

4. This Court by an order dated 21st January, 2025 passed in the above Execution Application, directed the Respondent No.1 to file an Affidavit of Disclosure of assets / income. Respondent No.2 deposing and acting on behalf of Respondent No.1 as its karta, filed an Affidavit of Disclosure dated 21st February 2025.

5. The Applicant had filed an Affidavit in Reply dated 5th March 2025 in order to show how the Affidavit filed by Respondent No.2 (deposing on behalf of Respondent No.1) makes disclosures which are deliberately selective, insufficient, incomplete and non- compliant.

6. It is the case of the Applicant that the Affidavit of Disclosure shows that Respondent Nos.1 and 2 have clearly been siphoning / dissipating / diverting / stripping Respondent No.1 of assets / value during the pendency of the legal proceedings with an intent to defeat the Award, which the Applicant claims highlights its case for reliefs against Respondent No.1 / 2. Further, the Applicant claims that Respondent No.1’s Affidavit of Disclosure, even if taken on face value shows on admission that Respondent No.1 does not even have assets worth 5% of the decretal sum.

7. The Applicant has referred to an Order dated 5th May 2022 passed under Section 17 of the Arbitration Act against both Respondents and by which, the learned Sole Arbitrator had directed the Respondents to furnish security worth INR 4 Crores. The said Order was never challenged and in order to comply with the same, title deeds to immovable properties owned by Respondent No.2 worth about INR 4 Crores came to be voluntarily / jointly deposited by the Respondents with the learned Tribunal thereby securing the claim against Respondent No.1 as well as Respondent No.2, to the extent of about INR 4 Crores. This security was thereafter brought into this Court pursuant to directions passed vide Order 26th June, 2024 in this very Interim Application. The Applicant claims that the said property / security is custodia legis lying with this Court and liable to be proceeded against in execution of the Award.

8. The Applicant has contended that the Award for sum of INR 14,79,71,228/- remains to be enforced against the Respondents. Even if the immovable properties lying with this Court as security as well as Respondent No.1 HUFs disclosed assets are applied towards recovery of the decretal sum under the Award, there is a clear shortfall of about Rs.10 Crores, even on a rough and ready calculation based solely on admitted facts. The Applicant contends that from the Respondent No.1’s own case, the Award admittedly, cannot be satisfied by Respondent No.1’s HUF without recourse to the Karta i.e. Respondent No.2’s other personal assets. The Applicant submits that it is trite law that in a situation such as present ad- interim / interim reliefs in aid of enforcement (viz. disclosure as well as injunction against both Respondents) are liable to be granted as a matter of course in a post Award situation to secure the decretal sum so that the Applicant / Award Creditor is not left holding a mere paper decree.

9. The Respondents have resisted the Interim Application by raising a preliminary objection on lack of territorial jurisdiction of this Court because none of the assets disclosed by Respondent No.1 – HUF are situated within Mumbai. Whereas Respondent No.2 (i.e. Karta of Respondent No.1 – HUF) has raised the preliminary objection viz. that his personal assets cannot be proceeded against in execution even for unsatisfied debts of Respondent No.1 – HUF.

The first of the preliminary objections raised i.e. of Respondent No.1 – HUF on lack of jurisdiction is taken up for consideration.

11. Mr. Prathamesh Kamat, the learned Counsel appearing for the Respondent No.1 – HUF has submitted that this Court lacks the territorial jurisdiction to entertain the present Execution Application preferred by the Applicant / Judgment Creditor in view of Sections 38 and 39 of the Code of Civil Procedure (CPC), 1908. He has referred to these provisions which provide for Court by which the decree may be executed and transfer of decree respectively. He has submitted that in the present case the Award is sought to be executed by invoking Section 36 of the Arbitration Act as it is a deemed decree by legal fiction. He has submitted that on reading of the provisions of Sections 38 and 39, for an Executing Court to exercise jurisdiction, it is imperative that the Respondents against whom execution is sought to be executed, reside or have assets within the jurisdiction of the Execution Court.

12. Mr. Kamat has submitted that the Respondents admittedly reside in District Thane, and the Applicant / Judgment Creditor wishes to proceed or seek to attach the assets which are also in District Thane. He has referred to the Affidavit of Disclosure dated 21st February, 2025 which shows that Respondent No.1 does not own any immovable property within the jurisdiction of this Court. All movables and bank accounts disclosed show that they are in Bhiwandi, District Thane. Thus it is evident that the Respondent No.1 – HUF as well as assets against whom the Applicant / Judgment Creditor wish to proceed, reside and / or are situated in District – Thane which is outside the jurisdiction of this Court.

13. Mr. Kamat has submitted that it is the case of the Applicant / Judgment Creditor that the arbitration was held in Mumbai, therefore, this court would be the ‘Court’ within the meaning of Section 2(1)(e) of the Arbitration Act. Further, that this Court has jurisdiction to entertain the present Execution Application. He has submitted that these contentions of the Applicant / Judgment Creditor are utterly fallacious. He has submitted that the Arbitration Act is in itself a complete code. The word “Court” as defined under Section 2(1)(e) is not applicable to Execution Proceedings, as after the Arbitration Award, the proceedings are terminated in terms of Section 32 of the Arbitration Act and execution is severed and the umbilical cord is snapped with the passing of the Award by the Arbitral Tribunal.

14. Mr. Kamat has submitted that at this stage the status of a ‘decree’ is granted to an Arbitration Award under Section 36 of the Arbitration Act which says that “to be enforceable in accordance with the provisions of CPC in the same manner as if it were decree of the Court” means that once the Arbitration Award becomes a decree, the execution of the same shall be in terms of CPC, as it becomes a decree within CPC. Therefore Section 2(1)(e) which defines Court is irrelevant for the purpose of executing an Award or for the Executing Court to have territorial jurisdiction. This is evident from the judgment of the Delhi High Court in Daelim Industrial Co. Ltd. vs. Numaligarh Refinery Ltd1. He has in particular placed reliance upon paragraph 17 – 20, 24-28 of the said judgment. He has submitted that the issue involved in the present case and issue involved in that case are identical and this is evident from a reading of paragraphs 1, 3, 4, 6 to 9 of the said judgment.

15. Mr. Kamat has also placed reliance upon the judgment of the Supreme Court in Sundaram Finance Ltd. vs. Abdul Samad & Anr2., wherein the Supreme Court has categorically upheld the view taken by the Delhi High Court in Daelim (Supra). He has submitted 1 Delhi High Court, Coram : Justice Rajiv Sahai order dated 13th March, 2009. 2 (2018) 3 SCC 622. that paragraph 1 of the said judgment shows that an identical issue involved in the present case, was an issue which was squarely before the Supreme Court. He has in particular placed reliance upon paragraphs 17, 18, 19 and 21 of the said judgment. The Supreme Court upheld the view of the Delhi High Court in Daelim (Supra) and the views of the High Courts of Kerala, Madras, Rajasthan, Allahabad, Punjab and Haryana and Karnataka.

16. Mr. Kamat has placed reliance upon the judgment in the case of Poonawalla Housing Finance Ltd. vs. Babu and Anr3, and in particular paragraphs 1, 3, 4, 5, 6, 8, 9 and 11. In paragraph 8 of the said judgment, the Supreme Court has relied upon Sundaram Finance Ltd. (Supra) and held that it is settled principle of law that Award needs to be executed by such Court within whose jurisdiction the assets of the award debtor are located. Further, there is no requirement anymore to obtain a transfer of the decree from the Court having jurisdiction over arbitral proceedings to the Court which has jurisdiction over the award debtor or their properties.

17. Mr. Kamat has placed reliance upon the judgment of the 3 (2022) SCC OnLine Cal 4646. Calcutta High Court in MSTC Ltd. vs. Krishna Code (India) Ltd4 at paragraphs 1, 2 and 7. He has also placed reliance upon the judgment of the Delhi High Court in Continental Engineering Corporation vs. Sugesan Transport Ltd5, at paragraphs 1, 8 to 14. He has submitted that similar views were also taken by the Delhi High Court in Mohan Investment and Properties Pvt. Ltd. vs. Sai Aaina Farms Pvt. Ltd6, at paragraphs 8, 10, 11 and 38 and in Matrix Partners Indian Investment Holdings LLC & Ors. vs. Shailendra Bhadauria and Ors7, at paragraphs 13, 14, 24 to 32. He has submitted that above quoted judgments have clearly held in favour of the Respondent No.1 and that the Applicant / Judgment Creditor has not distinguished or much less dealt with said judgments during the course of the arguments.

18. Mr. Kamat has submitted that the aforesaid views of the High Courts of Delhi and Calcutta have been followed by this Court in Sara Chemicals & Consultants vs. Ogene Systems (I) Pvt. Ltd8. This Court has held that if no movable or immovable properties are 4 (2019) SCC OnLine Cal 7293. 5 (2022) SCC OnLine Del 4728. 6 (2022) SCC OnLine Del 592. 7 (2021) SCC OnLine Del 4917. 8 (2020) SCC OnLine Bom 5474. situated within the jurisdiction of the Executing Court, the matter will have to be relegated to the Court where the assets are situated. He has in particular placed reliance upon paragraphs 3 to 8 of the said judgment.

19. Mr. Kamat has submitted that this Court vide Order dated 21st January, 2025, following the principle of the judgment in Sara Chemicals (Supra) had directed disclosure of assets by Respondent No.1 to ascertain the issue of jurisdiction. He has relied upon paragraph 6 of the said Order, wherein it is held that the issue of jurisdiction to entertain the Execution Application shall be determined on the next date after considering the Disclosure Affidavit.

20. Mr. Kamat has submitted that in view of there being no assets (even post disclosure) being available or held within the territorial jurisdiction of this Court, it is clear that this Court lacks the territorial jurisdiction to entertain the present Execution Application.

21. Mr. Kamat has submitted that the judgments relied upon by the Applicant / Decree Holder are not applicable. He has submitted that the Applicant has relied upon the judgment of Global Asia Venture Company vs. Arup Parimal Deb and Ors9. This judgment though considered the judgment of the Supreme Court in Sundaram Finance (Supra), it considered the same from the perspective of Section 42 of the Arbitration Act. Further, this judgment did not consider the judgment of the Delhi High Court in Daelim (Supra) nor did it consider the fact that Daelim (Supra) in categorical terms was upheld by the Supreme Court in Sundaram Finance (Supra). He has submitted that in any event the view taken in this judgment is contrary to the view taken by this Court in Sara Chemicals (Supra) and also not in consonance with the law laid down by the Supreme Court in Sundaram Finance (Supra).

22. Mr. Kamat has submitted that the judgment of the Full Bench in Gemini Bay Transcription Pvt. Ltd. Nagpur vs. Integrated Sales Service Ltd.10, has to be considered holistically. He has referred to paragraph 14 of the said judgment. He has submitted that the said paragraph indicates that an Award has to be executed as per the provisions of the CPC to which provisions of Section 38 and 39 of the CPC would be applicable. Therefore, for the purposes of Executing 9 (2018) SCC OnLine Bom. 13061. 10 2018 (2) Mh.L.J. 329. Court to effectively proceed with execution, it is imperative that the test under Sections 38 and 39 of the CPC are satisfied. He has submitted that the judgment of the Full Bench has been misread by the Applicant to suggest that the Court under Section 2(1)(e) of the Arbitration Act can in fact be invoked to execute the Award. He has submitted that this Court held that once an Award had been passed, the same shall be governed by the provisions of CPC. He has submitted that on a harmonious reading of the Arbitration Act and CPC qua the execution proceedings, it is clear that the Execution Proceedings has to pass the litmus test of territorial jurisdiction and it nowhere means or is understood to say that the provisions of Sections 38 and 39 of the CPC would become otiose or meaningless. He has submitted that the Full Bench contemplates two options, (a) either to file Execution Application before the Court where the assets of the debtor is situated or (b) to approach a 2(1)(e) Court first, only to request the Court to transfer the decree to the Court having jurisdiction. He has submitted that this is evident from paragraph 18 of the Gemini Bay (Supra).

23. Mr. Kamat has submitted that the judgment of the Delhi High Court in Gujarat Jhm Hotels Ltd. vs. Rajasthali Resorts and Studios Ltd.,11 which has been cited by the Applicant also contemplates a similar position. This is evident on reading paragraph 46 of the said judgment which reads as “The learned Judge also held that such a party cannot be compelled to first approach the ‘2(1) (e) Court’ and thereafter be forced to approach the local Court for execution of the Award.”

24. Mr. Kamat has submitted that it is trite law that the judgment of a coordinate bench is binding and there is no conflict of law, as the Supreme Court has already settled the law in this regard that for Execution Proceedings post arbitration Award, the same has to be decided in terms of Sections 38 and 39 of the CPC.

25. Mr. Kamat has placed reliance upon the judgment of the Supreme Court in Amazon.com NV Investment Holdings LLC vs. Future Retail Ltd. & Ors12, at paragraphs 82 to 87. He has submitted that the said judgment shows that the view in Daelim (Supra) is not disturbed. This causes doubts on the correctness of the other set of judgments which take a contrary view. 11 2023 SCC OnLine Del 161. 12 (2022) 1 SCC 209.

26. Mr. Kamat has submitted that the contention of the Award Debtor that Daelim’s reasoning is based on Section 42 of the Arbitration Act is a misnomer. He has submitted that the judgments in Daelim and Sundaram Finance Ltd. inter alia proceed on the basis that under Section 32 of the Arbitration Act, once an award is passed, the relationship of Court under Section 2(1)(e) of the Arbitration Act is snapped.

27. Mr. Kamat has submitted that on a plain reading of the judgments it is clear that Section 42 of the Arbitration Act was not the basis for the conclusion in those judgments. Non applicability of Section 42 was merely an additional point.

28. Mr. Kamat has submitted that the security provided by Respondent No.2 in the form of title documents of land, is also situated outside the territorial jurisdiction of this Court. Thus, the security would not confer jurisdiction as apparently, security and execution are two different aspects and cannot be overlapped. He has submitted that in execution under Section 36 of the Arbitration Act, it has to pass the litmus test of territorial jurisdiction provided under Sections 38 and 39 of CPC.

29. Mr. Kamat has submitted that this Court is required to hold that it has no jurisdiction to entertain the present Execution Application and the same be relegated to the Court of appropriate jurisdiction where the assets are situated.

30. In so far as the other preliminary objection which has been raised by the Respondent No.2 viz. that the personal assets of Respondent No.2 (i.e. Karta of Respondent No.1 – HUF) cannot be proceeded against in execution even for unsatisfied debts of Respondent No.1 – HUF, Mr. Sanjay Jain, the learned Counsel for the Respondent No.2 has made submissions.

31. Mr. Jain has referred to operative part of the Award of the learned Sole Arbitrator. He has submitted that learned Arbitrator has not granted an Award of Rs.12,52,53,938/- against the Karta and the Co-parcener/s despite specific prayer sought for in the statement of claim. This part of the Award is only against the Respondent No.1 – HUF. This can be contrasted with the Award of sum of Rs.22,25,000/- which is by way of costs granted against the HUF and Karta, described as Respondents.

32. Mr. Jain has submitted that by the instant Execution Application, the Applicant seeks to enforce the entire Award against the Respondent No.1 – HUF as well as Respondent No.2 – Karta on the basis that for any decree passed against the HUF, the Karta of such HUF is personally liable to satisfy the Award i.e. it becomes Karta’s personal liability. He has submitted that the HUF is a corporate personality. In the eyes of law it is treated / recognized as a juristic entity / corporate personality as opposed to a partnership firm, which is treated as a compendium of person.

33. Mr. Jain has submitted that Mitakshara and Dayabhaga are two primary schools of Hindu Law. These two schools of Hindu Law govern, inter alia, a range of issues about property inheritance and succession in Hindus to a significant extent. Mitakshara school is prevalent in North, West and South. According to Mitakshara school of Hindu Law, all the property of the Hindu Joint Family is held in collective ownership by all the Coparceners in a corporate entity. He has placed reliance upon the judgment in the case of State Bank of India vs. Ghamandi Ram13, where the Supreme Court has held that a Coparcenary under the Mitakashara school of law is a creature of law 13 (1969) 2 SCC 33. and cannot arise by act of parties except on adoption. The adopted son becomes a Co-parcener with his adoptive father as regards the ancestral properties of the latter.

34. Mr. Jain has submitted that the Supreme Court in Ghamandi Ram (Supra) quoted with approval the observations in the case of Sundaram Maistri vs. Harasimbhulu Maistri14, which follows the observations of this Court in Gasavant Balsavant vs. Narayan Dhond Savant15. It was held therein that the Mitakshara doctrine of joint family property is founded upon the existence of an undivided family and possession of the property by such corporate entity.

35. Mr. Jain has also placed reliance upon the judgment in the case of Vineeta Sharma vs. Rakesh Sharma & Ors.16, which has held that the Hindu branch of dharma is influenced by theological tenets of the Vedic Aryans and what is not modified or abrogated by the legislation or constitutional provisions still prevails. The Supreme Court has quoted with approval the judgment in case of Bhagwan Dayal vs. Reoti Devi17, wherein it held that coparcenary is creature of