MR.MANEL VAMAN NAYAK v. HARIHAR

proceedings on a dispute that arose between the parties in A.P. 5 of 2001 against the petitioner and other respondents before the sole arbitrator, a retired District and Sessions Judge in terms of the 4 provisions of the Arbitration Act, 1940. The arbitrator rendered his award on 28-12-2004. The arbitral award dated 28-12-2004 resulted in a direction to auction the properties of the dissolved partnership firm. The award so passed by the arbitrator comes to be confirmed by the concerned Court by its judgment and decree dated 11-03-2010. The Judgment Debtor, aggrieved by the said judgment and decree dated 11-03-2010, preferred a Miscellaneous First Appeal before this Court in MFA No. 4816 of 2010. The MFA also comes to be dismissed, thereby affirming the award passed by the Arbitrator on 28-12-2004.

2.2. Subsequent to the dismissal of the MFA in MFA No. 4816 of 2010, the 1st respondent/Decree Holder files Execution Petition in Execution Petition 31 of 2017 seeking execution of the arbitral award. In the said Execution Petition, the petitioner files an application under Section 47 r/w 151 of the CPC challenging the maintainability of the Execution Petition. The concerned Court, in terms of the order impugned, rejects the said contention of the petitioner/Judgment Debtor No.1, against which the petitioner is before this Court in the subject petition. 5

3. Heard Sri D Vijaya Chandra Reddy, learned counsel for petitioner, Sri O Shivarama Bhat, learned counsel for respondent No.1, Sri M Vinod Kumar, learned counsel for respondent No.2 and Sri M Sudhakar Pai, learned counsel appearing for impleading applicant.

4. The learned counsel appearing for the petitioner would vehemently contend that the new Arbitration and Conciliation Act, 1996, is not applicable to the arbitral proceedings which commenced under the old Act i.e., the old Arbitration Act, 1940. The judgment relied on by the trial Court in ILR 2003 KAR 4343 was misplaced. The order was passed placing reliance upon the judgments of the Apex Court and other High Courts, which would not become applicable to the impugned proceedings. The learned counsel submits that the proceedings before the Executing Court was not even maintainable, as the judgment and decree that was passed was not executable. He would further contend that the arbitral award passed was barred by limitation, since the order of appointment of an Arbitrator under Section 8 of the Arbitration and Conciliation Act was passed after the expiry of 3 years from the 6 date of cause of action i.e., of dissolution of the partnership firm, in terms of Article 5 of the Limitation Act. The proceedings itself could not have been initiated. The arbitral award cannot be executed straightaway, by resorting to Section 36 of the new Act, as the subject matter of the award was passed in pursuance of the proceedings commenced under the old Act and therefore, unless the award is made as a decree of the Court under Section 17 of the old Act, it becomes an unexecutable award.

5. Per-contra, learned counsel representing respondents would submit that this Court held that the new Act, 1996 would become applicable in relation to arbitral proceedings commenced under the old Act. The arbitral award is not a decree and objections under Section 47 of the CPC would not be maintainable against the arbitral award. In terms of Section 36 of the new Act, the award passed under the new Act is required to be construed to be a decree only for the purpose of the enforcement of the same and not to open or invoke Section 47 of the CPC before the Executing Court. The learned counsel would further contend that the petitioner challenged the award twice, by filing an 7 application under Section 34 and an appeal under Section 37 of the new Act, which have come to an end, confirming the award and now cannot go back to the Executing Court invoking Section 47 of the CPC. The respondents would contend that the impleading applicant being a bona fide purchaser of the subject property in an auction conducted by the Court, has deposited the entire amount of Rs.4,18,45,000/- and is now neither here nor there. He would seek dismissal of the petition.

6. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. In furtherance whereof, the issues that fall for consideration are: (i) Can an arbitral award which is sought to be executed under Section 36 of the Arbitration and Conciliation Act, 1996 be objected to, or challenged in the execution proceedings under Section 47 of the CPC? (ii) Can an arbitral award be passed under the new Arbitration and Conciliation Act, for arbitration 8 proceedings which had commenced under the old Arbitration Act, 1940? (iii) Whether the partnership firm dissolved in correct procedure, as is laid down under the Indian Partnership Act, 1932? ISSUE NO.1: Can an arbitral award which is sought to be executed under Section 36 of the Arbitration and Conciliation Act, 1996 be objected to, or challenged in the execution proceedings under Section 47 of the CPC?

7.1. Facts in brief need to be reiterated for consideration of the issue so raised. The partnership firm was established by entering into a partnership deed, which was again reconstituted on several occasions due to retirement of partners. On 26-12-1985 the partnership firm stood dissolved, which led to the genesis of the arbitral dispute for apportionment of shares of the dissolution of the partnership firm, of which the petitioner and the respondents were partners. In 1996, an application is made before the Civil Judge, 9 Senior Division, for appointment of an arbitrator in Arbitration Case No. 4 of 1996 in terms of the partnership deed, which sought to resolve the dispute by way of appointment of an arbitrator to adjudicate the dispute between the parties. Accordingly, on 20-09-2001 the sole arbitrator H. Umesh Shetty was appointed as an arbitrator to resolve the dispute between the parties. Therefore, he was appointed as an arbitrator under the provisions of the Arbitration Act, 1940. The arbitration proceedings commence. An arbitral award is passed by the arbitrator on 28-12-2004. The award resulted in several actions against the Judgment Debtors, the details of the award are as follows: “All the assets of the dissolved firm-M/s.Sri Krishnas Novelty House in Door No. 13-4-538 along with the land and premises comprised in R.S.No.601/1A, T.S.No. 187/1A measuring 2.41 cents (97-54 sq meters) situate in market Road in Mangalore Town including the stock-in-trade in Sri Krishna Stores shall be sold preferably to such of the parties to this proceedings offering the highest price. If this method is found to be not feasible, then, the above mentioned assets shall be sold by public auction by the executing court in execution of this Award. The parties to this Award will be at Liberty to participate in the Auction and to set of their proportionate shares in the partnership. The net sale proceeds after deducting the expenses and costs of the auction shall be distributed between the petitioner and respondents 1 and 2 in the proportion of their shares of 15%, 40% and 35% respectively. The amount falling to the share of the deceased 3rd respondent shall be distributed 10 equally between all the legal representatives of deceased respondent No. 3. Respondents 1 and 2 shall render accounts of business of both firms from period from 26.12.1985, the date of dissolution till the end of the year 1998 and for the period sub-sequent to that till the date of sale of assets of the firm by respondent No. 1. The profits, if any, earned by both these firms from 26.12.1985 till the date of sale of assets also shall be distributed between the parties in the proportion of their shares. From out of Rs.30,000/- being the remuneration of Arbitrator Rs.15,000/- have been paid by petitioner and respondents 1 and 2 Rs.5,000/each. Petitioner and respondents 1 and 2 shall bear their respective costs of Arbitration. Requisite Stamp Duty on this Award shall be paid under Article 39(a)(1)(c) of Karnataka Stamp Act by the parties.”

7.2. The Arbitral Award was challenged by the Judgment Debtor No.1 before the I Additional District Judge, Mangalore who by a judgment and decree dated 11-03-2010, confirmed the award of the Arbitrator in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996. After the confirmation of the award by the concerned Court on 11-03-2010, the petitioner challenges the said judgment and decree in MFA No. 4816 of 2010 invoking Section 37 of the Arbitration and Conciliation Act, 1996, which also comes to be dismissed on 15-06-2016. Thus, three 11 proceedings go against the Judgment Debtor. The first is, suffering of an arbitral award on 28-12-2004, the next is, the order passed by the Additional District Judge rejecting the application filed under Section 34 under the Act of 1996 and the challenge to the judgment and decree dated 11-03-2010 by the present petitioner before this Court, invoking Section 37 of the Act of 1996. Therefore, the arbitral award stood confirmed by two judicial fora.

7.3. The 1st respondent/Decree Holder seeking to execute the arbitral award, files an execution petition in Execution Petition No. 31 of 2017 seeking execution, by auctioning the assets of the dissolved partnership firm. The petitioner/Judgment Debtor No.1 files his objections to the execution of the arbitral award, challenging the maintainability of the execution proceedings, on the plea that the execution proceedings were barred by limitation and suffered from jurisdictional issues. The concerned Court, rejects the application so filed challenging the maintainability of the execution proceedings, with costs. The concerned Court holds that the petition under Section 34 and an appeal under Section 37 of the Act of 1996 had become final. The Judgment Debtor No.1/petitioner herein 12 never projected any of the grounds that are now sought to be projected with regard to maintainability of the execution proceedings. The Executing Court holds that it is maintainable and rejects the application. The issue now as observed hereinabove would be, whether there could be a challenge to the arbitral award, in the executing Court, on an application filed under Section 47 of the CPC.

7.4. To consider the said issue this Court need not delve deep into the matter, as this Court has itself, on an identical circumstance, in a judgment reported in the case of KARNATAKA STATE MEDICAL SUPPLIES CORPORATION LIMITED, v. PLASTIC SURGE INDUSTRIES PVT. LTD1, has held as follows: “…. …. ….

14. What the petitioner now seeks to contend is that award was obtained by fraud. It is not the case of the petitioner that it was placed ex parte or not afforded adequate opportunity. The plea of fraud and several factors are for the first time placed before the Executing Court, that too when the coordinate Bench reserved file statement of objections. It is trite law that what should have been done as grounds under Section 34 of the Act cannot be raised in execution proceedings. Jurisprudence is replete with several High Courts taking the view that what should liberty 1 2025 SCC OnLine KAR 18501 13 have been urged under Section 34, cannot be raised in execution proceedings.

14.1. The High Court of Delhi in the case of ANGLO- AMERICAN METALLURGICAL COAL PRIVATE LIMITED v. MMTC LIMITED (2025) SCC OnLine Del.3201) has held as follows: “…. …. ….

53. The legislature by using the phrase “such award shall be enforced in accordance with the provisions of the Civil Procedure Code” only intends to “enforce” an award in the same manner and procedure as contemplated in CPC without altering the nature and character of an award. The provisions of the CPC are only applicable to the extent of “enforcement” of an award such as attachment, sale, auction, detention, etc. which are reflected in Order 21 CPC. The legislature did not intend to permit a challenge enforcement proceedings again on merits as this would be contrary to the objectives of the 1996 Act which aim to ensure interference. The finality and challenge to an award is only to be made under Section 34 of the 1996 Act. Once the award passes the scrutiny under Section 34 or the period to challenge an award under Section 34 lapses, the award becomes final and binding to the parties therein by virtue of Section 35 of the 1996 Act. award during judicial limited

54. If the objections under Section 47 CPC are allowed to be entertained during the enforcement proceedings of an award, it would effectively open a second round for challenging the award which the legislature did not intend to do as the same would undermine the provision of Section 34 i.e. challenge to award on limited grounds available as mentioned therein and render the finality granted by Section 35, meaningless. Further, if such interpretation is allowed, the same would defeat the purpose of the 1996 Act which is to streamline arbitration and reduce the prolonged litigation. In addition, allowing objections would not only delay the finality of disputes but would also nullify the basic contours of the 1996 Act. Any particular provision of a statute has to 14 be harmoniously construed so as not to render any other provisions of the statue otiose/inconsistent with the other provisions. … … … confined of CPC provisions

70. As observed above, I have already held that Section 5 of the 1996 Act aims limited judicial interference. The legal fiction created by Section 36 of the 1996 Act, allowing an award to be enforced “as if it were a decree,” is limited solely to its “enforcement” and does not equate an award with a decree in substance. Further, the arbitral proceedings are distinct from civil suits/proceedings. The enforcement mechanisms under Order 21 and does not allow a re- challenge to the award on merits, which is exclusively governed by Section 34 of the 1996 Act. In this backdrop, the award cannot be termed as a decree as the same is not passed by a court. Also, the AT is not a “court” and an satisfy Section 2(2) CPC which defines a “decree”. For the said reasons and relying on the observations of Shaukat Hussain case, it is clear that the award which is sought to be enforced as a decree and is not a “decree” passed by this Court where the suit is pending. Hence, on this ground, Order 21 Rule 29 CPC is not applicable.” conditions (Emphasis supplied) The High Court of Delhi holds that arbitral proceedings are distinct from civil proceedings. A challenge to the arbitral award can be made only under Section 34 of the Act. Once the award passes the scrutiny or the period to challenge the award under Section 34 lapses, then the award becomes final and binding. Challenging the award in execution is impermissible in law.

14.2. The High Court of Allahabad in the case of LARSEN & TOUBRO LIMITED v. MAHARAJI EDUCATIONAL TRUST)(2010) SCC OnLine All 1866) has held as follows: “…. …. ….

22. The issue that an award made in arbitral proceedings is not a decree within the meaning of the aforesaid CPC having been pronouncement by the Hon'ble Apex Court, the settled by 15 provisions of Section 47 CPC cannot be available to obstruct the execution of the award. … … … 25. Apart from above, judicial intervention has been circumscribed by Section 5 of the Act. In other words, judicial interpretation is prohibited except as provided under the Act. Section 5 of the Act reads as under : the extent of

5. Extent judicial “Section intervention. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. Section 5 of the Act falls under Part-I which includes within its ambit Section 2 to Section 43 of the Act. Thus, Sections 34 and 36 are also included in Part-I of the Act. The judicial intervention having been limited by the legislature, the Court cannot interfere at any and every stage on a ground other than those available in the Act itself. Thus, once stage of Section 34 is over and the award becomes final under Section 35, judicial intervention in the execution of the award under Section 36 cannot be held to be permissible on any ground, whatsoever, in view of the limitation imposed by Section 5 of the Act.

26. Thus, having regard to the provisions of Sections 5, 12, 13, 16, 34, 35 and 36 of the Act, the irresistible conclusion is only grounds which can be pressed into service for challenge to an award is within the ambit and scope of Section 34 of the Act. Once the stage of section 34 is over and the questions that were raised or could have been raised at that stage cannot be allowed to be raised again and again by pressing into service section 47 of the Civil Procedure Code at the time of execution of award under Section 36 of the Act.” (Emphasis supplied) The Allahabad High Court holds that an arbitral award is to be enforced like a decree, but it is not a decree as defined under the CPC.

14.3. The Allahabad High Court, again, in the case of SANJAY AGARWAL v. RAHUL AGARWAL(2024 SCC OnLine All 149) has held as follows: 16 “…. …. ….

29. The applicability of Section 47CPC have been considered by this Court in Larsen & Toubro Ltd. v. Maharaji Educational Trust [Larsen & Toubro Ltd. v. Maharaji Educational Trust, 2010 SCC OnLine All 1866] where it was held: (SCC OnLine All para 13) “The aforesaid scheme of the Act go to show that Section 34 of the Act prescribes the ground under which arbitral award can be challenged. If no application is made under Section 34 within the prescribed period of limitation or the application is refused the award becomes final under Section 35 of the Act and enforceable in terms of Section 36. Section 34 of the Act enumerates specific grounds on which an application for setting aside an award can be made. Intention of legislature is a guiding factor for interpreting the provision of a Statute and the same is to be gathered from the words used in various provisions and the scheme of the Statute. Under the 1996 Act, the grounds of challenge having been specified by the legislature by enacting Section 34 of the Act and finality having been attached under Section 35, the legislature obviously did not intend to either enlarge the scope of grounds of challenge or to provide another opportunity of challenge after the stage of Section 34 is over. Thus, the objection to the award on the grounds enumerated in Section 34 of the Act once adjudicated cannot be allowed to be raised or reagitated by permitting to raise objection during the execution proceedings under Section 36 by pressing Section 47CPC in service as the same would render the provisions of Sections 34 and 35 of the Act virtually redundant. The use of words ‘the award shall be enforced under the Civil Procedure Code, 1908 in the same manner as if it were a decree of the court’ in Section 36 of the Act would not mean that the provisions of the Code of Civil procedure with regard to execution of decree would become applicable in the execution of the award. Section 36 only creates a fiction that an award would be enforceable as if it were a decree of the court within the scope of Order 21 CPC. This enforcement of the award under Order 21 CPC would not attract the application of Section 47CPC simply by use of the expression ‘shall be enforceable as a decree’ in Section 36 nor Section 36 can be read independent of other provisions contained in the Act itself. The provisions of the Act are to be reconciled with each other. Section 36 cannot be read out of context and independent of the scheme of the Act. Reference to another statute does not attract application of such other statute to the referring statute unless expressly provided. A reference in a statute to another statute cannot be read in a manner to invite 17 to bring inconsistency in the referring statute. Any such reference, if made, has to be interpreted in the context in which the reference is made so as not to make inconsistent the provisions of the referring statute itself. If it brings inconsistency, then the same is to be avoided. If Section 47CPC is to be attracted, then the restrictions provided in Section 34 of the Act and finality to arbitral award by virtue of Section 35 of the Act would be redundant. Section 36 cannot be interpreted in the manner inconsistent with the provisions contained in the other part of the Act. That apart the finality of the decree under the Code is reached after the decision under Section 47CPC, if raised. But the legislature in its wisdom thought it fit to incorporate the scope similar to Section 47CPC in Section 34 of the Act in the award becomes executable. Same procedure cannot be expected to be incorporated in a statute twice. Legislature can never be interpreted to intend repetition. At the same time, the object of the Act is directed towards speedy and hazard free finality with a view to avoid long drawn proceeding based on technicalities. Therefore, having regard to the provisions of Sections 13, 16, 34, 35 and 36 cannot be interpreted in a manner inconsistent with any of the provisions of the Act to attract the provisions contained in the Code in its entirety. Therefore, while considering the application filed under Section 36 of the Act for the execution of an award, the court cannot overlook the scope and ambit within which the court is to execute the award taking aid of the provisions for execution contained in the CPC not inconsistent with the provisions contained in the 1996 Act. Therefore, in my view, Section 47CPC cannot be attracted despite the words ‘in the same manner as if it were a decree of the court’ used in Section 36 when the award is sought to be executed thereunder. finality before The matter can be viewed from another angle. Section 47CPC provides for questions to be determined by the court executing the decree. The said section reads as under: ‘47.Questions to be determined by the court executing decree.—(1) All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree, shall be determined by the court executing the decree and not by a separate suit. (2) Omitted by the Code of Civil Procedure (Amendment) Act, 1976, Section 20 (w.e.f. 1-2-1977) (3) Where a question arises as to whether any person is or is not the representative of a party, such question shall, for the purposes of this section, be determined by the court. Explanation I.—For the purposes of this section, a plaintiff whose suit has been dismissed and a defendant against whom a suit has been dismissed are parties to the suit. 18 Explanation II.—(a) for the purposes of this section, a purchaser of property at a sale in execution of a decree shall be deemed to be a party to the suit in which the decree is passed; (b) all questions relating to the delivery of possession of such property to such purchaser or his representative shall be deemed to be questions relating to the execution, discharge or satisfaction of the decree within the meaning of this section.’ far as regards the court expressing It is, thus, clear that in order to invoke Section 47CPC, there must be a decree. Section 2(2)CPC defines the decree. For a decision or determination to be a decree, it must necessarily fall within the four-corners of the language used in the definition. Section 2(2)CPC defines decree to mean ‘formal expression of an adjudication which, so it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within Section 144, but shall not include— (a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default’. Explanation.—A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit. It may be partly preliminary and partly final. The use of words ‘adjudication’ and ‘suit’ used by legislature clearly goes to show that it is only a court which can pass a decree in a suit commenced by plaint adjudicating the dispute between the parties by means of a judgment pronounced by the court. The Hon'ble Supreme Court in Paramjeet Singh Patheja v. ICDS Ltd. [Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322 : AIR 2007 SC 168] after considering the definition of decree as contained in CPC in para 29 has held that ‘it is obvious that an arbitrator is not a court, an arbitration is not an adjudication and, therefore, an award is not a decree’. Again in para 31, it has been held that words ‘decision’, and ‘civil court’ unambiguously rule out an award by arbitrators to be a decree. In the said case, the Hon'ble Supreme Court while considering the question as to whether an insolvency notice under Section 9 of the Presidency Town Insolvency Act, 1909 can be issued on the basis of an arbitration award, held that such notice cannot be issued for the reason the arbitration award is neither a decree nor an order for payment within the meaning of Section 9(2) of the Insolvency Act and it is not rendered in a suit. Thus, the award not being covered under the definition of a decree, 19 objection with respect to its validity can only be raised as provided under Section 34 of the Act and not by taking resort to Section 47CPC. In Paramjeet Singh Patheja