Gujarat High Court
Vadodara Mahanag Seva Sadan Formaly ... vs M S Khurana Engineering Ltd on 6 September, 2018
Bench: Akil Kureshi, B.N. Karia
C/SCA/13736/2018 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION No. 13736 of 2018
FOR APPROVAL AND SIGNATURE :
HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Mr. JUSTICE B.N. KARIA
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1 Whether Reporters of Local Papers may be allowed to see the Yes
judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the judgment ? No
4 Whether this case involves a substantial question of law as to the No
interpretation of the Constitution of India or any order made
thereunder ?
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VADODARA MAHANAG SEVA SADAN FORMALY KNOWN AS MUNICIPAL
CORPORATION
Versus
M S KHURANA ENGINEERING LTD
==============================================================
Appearance :
Mr NILESH A PANDYA, Advocate for the PETITIONER(s) No. 1
for the RESPONDENT(s) No. 1
==============================================================
CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI
and
HONOURABLE Mr. JUSTICE B.N. KARIA
6th September 2018
ORAL JUDGMENT (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)
The petitioner has challenged an order dated 8th June 2018 passed by the Commercial Court, Vadodara below application Page 1 of 15 C/SCA/13736/2018 JUDGMENT Exh. 9 in Commercial Execution Petition No. 8 of 2017.
Brief facts are as under :
PetitionerVadodara Mahanagar Seva Sadan [hereinafter to be referred to as, "the said Corporation"], had floated a tender for construction of 66 MLD Sewage Treatment Plant at Gajaravadi, Vadodara. The respondent herein was one of the tenderors. The rate of the respondent being the lowest, was awarded the contract. During the course of execution of the work, dispute surfaced between the contractor and the Corporation. The agreement had an arbitration clause. The respondentcontractor, therefore, sought arbitration for resolution of such disputes. In such proceedings, the Corporation also raised a counter claim. The total value of the contractor's claim and the counter claim of the Corporation exceeded Rs. 1 Crore. On 15th November 2010, the Arbitrator passed an award in favour of the contractor. In such award, the learned Arbitrator provided as under :
"For the reasons aforesaid, the claim of the claimant is partly allowed.
[1] The claimant is held entitled to an amount of Rs. 4,67,000/= [Rupees Four Lacs, Sixty Seven Thousand only] per month towards operation and maintenance charges for Gajrawadi Sewage Treatment Plant from 26 October 2004 to 24 October Page 2 of 15 C/SCA/13736/2018 JUDGMENT 2007. It is, however, clarified that the respondent Corporation would deduct the amount which has already been paid to the claimant towards ad hoc charges.
[2] The claimant is also entitled to refund of Security Deposit of Rs. 63,000/=.
[3] The claimant is held entitled to interest at the rate of 9 per cent per annum on the outstanding amount of operation and maintenance charges as also on Security Deposit with effect from 01 April 2008 till the date of payment of amount by the Corporation. [4] The claimant is entitled to Rs. 5,00,000/= [Rupees Five Lacs only] towards Arbitration Costs.
[5] The counter claim of the respondent Corporation is dismissed.
Award is accordingly passed."
The Corporation filed an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 ["Arbitration Act" for short] before the concerned Civil Court. Upon establishment of the Commercial Court under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 ["the Act of 2015" for short], the matter was transferred to the Commercial Court at Vadodara.
By a judgment dated 26th August 2016, the Commercial Court dismissed such an application. Subsequently, the contractor filed Execution Petition No. 8 of 2017 before the Commercial Court, Vadodara seeking recovery of a sum of Rs. 54,59,647/= Page 3 of 15 C/SCA/13736/2018 JUDGMENT with interest. In such proceedings, the petitioner appeared and resisted the claim by filing application Exh. 9 raising a contention that in terms of Order VII Rule 11 [d] of the Code of Civil Procedure, 1908 ["CPC" for short], the execution petition should be dismissed and in the alternative, the same should be returned to the contractor for presentation before appropriate court having jurisdiction to execute the decree. In short, the contention of the Corporation is that the claim of the contractor in the execution proceedings is below Rs. 1 Crore and that therefore, the Commercial Court would have no jurisdiction to execute the decree.
Learned advocate for the petitioner heavily relied on Section
2 [c] of the Act of 2015 which defines the term "Commercial dispute" and Section 2 [i] of the said Act which defines the term "Specified Value". According to his contention, in the present case, the valuation of the execution petition was below Rs. 1 Crore which would not be covered within the definition of the term "specified value" and that therefore, the Commercial Court at Vadodara has no jurisdiction to entertain the execution petition. Page 4 of 15
C/SCA/13736/2018 JUDGMENT Similar contention was raised before the Court below. The learned Judge rejected the application on the ground that the application for setting aside arbitral award was filed before the Commercial Court and was also decided by the Commercial Court at which point of time, the Corporation had raised no dispute about the jurisdiction. The learned Judge also noted that the combined value of the claim and the counter claim before the Arbitrator was over Rs. 1 Crore. The Commercial Court, therefore, was the correct court having jurisdiction to entertain the application for execution. The learned Judge was doubtful whether the provisions of Order VII Rule 11 CPC would apply to an execution petition. Be that as it may, on merits, the application was rejected.
Having heard learned advocate for the petitioner and having perused the documents and statutory provisions applicable, we find no force in the stand of the Corporation. As is well known, once an award is passed by the Arbitral Tribunal, the same can be challenged in terms of Section 34 of the Arbitration Act. Sub section [1] thereof provides for recourse to a Court against an arbitral award that may be made only by an application for setting Page 5 of 15 C/SCA/13736/2018 JUDGMENT aside such award in accordance with subsection [2] and sub section [3]. If such an application for setting aside arbitral award is not filed, or if filed and the same is not entertained, the award could be enforced in terms of Section 36 of the Arbitration Act. Section 36 provides that where the time for making an application to set aside the arbitral award under Section 34 has expired, then subject to the proviso to subsection [2], such 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 expression "in the same manner as if it were a decree of the Court" is of significance.
Section 2 [e] of the Arbitration Act defines the term "Court" as under :
"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 subjectmatter 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."
Page 6 of 15
C/SCA/13736/2018 JUDGMENT As per this provision, thus, in case of an arbitration; other than international commercial arbitration, the Court means the principal Civil Court of original jurisdiction in a district; including 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 subjectmatter of a suit, excluding any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes. Thus, for the purpose of Section 34, where there is a reference to recourse to a Court against an arbitral award and for the purpose of Section 36 for enforcement of an arbitral award, where there is a reference to the arbitral award being executed in the same manner as if it were a decree of the Court, the definition of the term "Court" as contained in Section 2 [e] of the Arbitration Act would come into play.
With this clarity, we may refer to the relevant provisions of the Act of 2015. This Act vests exclusive jurisdiction in the Commercial Courts to decide the commercial disputes of a specified value. We have noted that these terms "commercial Page 7 of 15 C/SCA/13736/2018 JUDGMENT dispute" and "specified value" have been defined under Section 2 [c] and 2 [i] respectively. The Corporation has not raised any dispute that the dispute was a commercial one. Section 2 [i] defines the term "Specified Value" in relation to a commercial dispute, as to mean value of the subject matter in respect of a suit as determined in accordance with Section 12 which shall not be less than one crore rupees or such higher value, as may be notified by the Central Government. Section 12 of the Act of 2015 refers to, "determination of specified value". Subsection [1] thereof provides inter alia that the specified value of the subjectmatter of the commercial dispute in a suit, appeal or application shall be determined, as per clause [a] where the relief sought in a suit or application is for recovery of money, the money sought to be recovered in the suit or application inclusive of interest; if any, computed upto the date of filing the suit or application, as the case may be, shall be taken into account for determining such Specified Value. Subsection [2] of Section 12 further provides that aggregate value of the claim and counter claim; if any, as set out in the statement of claim and the counterclaim; if any, in an arbitration Page 8 of 15 C/SCA/13736/2018 JUDGMENT of a commercial dispute shall be the basis of determining whether such arbitration is subject to the jurisdiction of a Commercial Division, Commercial Appellate Division or Commercial Court; as the case may be. In terms of these provisions and in particular sub section [2] of Section 12 of the Act of 2015, for deciding the specified value of the subject matter of a commercial dispute, which is the subjectmatter of arbitration, the valuation of the claim and the counter claim both together would be taken into consideration. It was because of this reason that the application of the Corporation for setting aside the arbitral award correctly came to be transferred to the Commercial Court, upon such Court having been established.
The Corporation has now raised a contention that the application for setting aside the arbitral award may be competent before the Commercial Court, however, the Execution Petition of the Contractor would not be, since the claim of the contractor in such Execution Petition is below Rs. 1 Crore. In this context, we may refer to the relevant provisions of the Code. Page 9 of 15
C/SCA/13736/2018 JUDGMENT Section 37 of the CPC pertains to definition of Court which passed a decree and provides that 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. Section 38 of the CPC pertains to "Court by which decree may be executed" and provides that a decree may be executed either by the Court which passed it, or by the Court to which it is sent for execution. In terms of Section 38 of the CPC, thus, a decree is executable by a Court which passed it.
We may recall, subsection [1] of Section 36 of the Arbitration Act provides that where the time for making application under Section 34 has expired, then subject to the proviso to subsection [2], Page 10 of 15 C/SCA/13736/2018 JUDGMENT such award shall be enforced in terms of provisions of CPC; in the same manner as if it were a decree of the Court. By this deeming fiction, thus, the Court having jurisdiction over the subject matter would be the Court competent to execute it; as per Section 38 of the CPC.
Since in the present case, jurisdiction of the subject matter which was part of the arbitration proceedings ordinarily lies with the Commercial Court and it was because of this reason that the application for setting aside the arbitral award was transferred to the Commercial Court, it was the Commercial Court which was competent to enforce the arbitral award; as if it were a decree of that Court. We, therefore, find no force in the contentions of the Corporation.
We may refer to the decision of Division Bench of this Court in case of M/s. OCI Corporation vs. Kandla Export Corporation & Ors., reported in 2017 [1] GLH 383 in which the question as to which Court would be competent to entertain execution petition to enforce award from an international commercial arbitration came up for consideration before the Court. The Court, Page 11 of 15 C/SCA/13736/2018 JUDGMENT considering the provisions of the Arbitration Act; as amended by the Arbitration Act, 2015 and the provisions of the Act of 2015 and in particular Section 15 thereof, concluded as under : "11.00. The sum and substance of the above discussion would be, (1) Where the subject matter of an arbitration is a commercial dispute of a specified value and if such arbitration is international commercial arbitration, all the applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 shall be heard, decided and disposed of by the Commercial Division where such commercial Division has been constituted in the High Court i.e. in the present case High Court of Gujarat.
(2) Where the subject matter of an arbitration is a commercial dispute but not of a specified value and if such arbitration is international commercial arbitration, considering the provisions of Arbitration and Conciliation (Amendment) Act, 2015 the same shall be heard, decided and disposed of by the concerned High Court.
(3) Where the subject matter of an arbitration is a commercial dispute of a specified value and if such arbitration is other than international arbitration, all the applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 shall be filed in and heard, decided and disposed of by the Commercial Court exercising territorial jurisdiction over such arbitration where such commercial court has been constituted.
Considering section 15 of the Commercial Courts Act, all the applications / appeals in question under the Arbitration and Conciliation Act, 1996, therefore are required to be transferred to the concerned Commercial Division of the High Court of Gujarat or Page 12 of 15 C/SCA/13736/2018 JUDGMENT before the Gujarat High Court or before the concerned commercial court and as observed hereinabove and as the case may be.
12.00. In view of the above and for the reasons stated above, all these applications stand disposed of and it is held that the concerned Executing Court before whom the respective Execution Petitions are pending shall not have any jurisdiction to execute foreign awards for which the Execution Petitions are filed. Consequently, the concerned Commercial court to return the respective Execution Petitions to the concerned original applicant to present it before appropriate Court considering the observations made in para 11 of the present judgment and order." Thus, in subpara [3] of para 11 of the judgment, it was observed that where the subject matter of an arbitration is a commercial dispute of a specified value and if such arbitration is other than international arbitration, all the applications or appeals arising out of such arbitration under the provisions of the Arbitration Act would be filed and heard, and decided by the Commercial Court exercising territorial jurisdiction over such arbitration where such Commercial Court has been constituted. We note that SLP against such judgment was dismissed by the Supreme Court on 3rd March 2017.
We may also take note of the judgment of the Supreme Court in case of Kandla Export Corporation vs. M/s. OCI Corporation, SCALE 2018 [2] 368 in which the question considered by the Court Page 13 of 15 C/SCA/13736/2018 JUDGMENT was whether an appeal not maintainable under Section 50 of the Arbitration Act is nonetheless maintainable under Section 13 [1] of the Act of 2015. This proceeding was a sequel to the earlier dispute of execution of an international arbitration award in which; as noted above, the Division Bench held that the execution petition would lie before the Commercial Division of the High Court. In such proceeding, objections were filed by the judgmentdebtor in the High Court. The High Court, dismissed the objections and allowed the execution petition. Against such order of the High Court, an appeal was filed under the Act of 2015 before the Division Bench of the High Court which was dismissed by the High Court holding that the Act of 2015 did not provide any additional right to appeal which was not otherwise available to the appellants under the provisions of the Act. Against such judgment of the High Court, the loosing party approached the Supreme Court. The Supreme Court, while dismissing the appeal held and observed as under :
"23. This, in fact, follows from the language of Section 50 itself. In all arbitration cases of enforcement of foreign awards, it is Section 50 Page 14 of 15 C/SCA/13736/2018 JUDGMENT alone that provides an appeal. Having provided for an appeal, the forum of appeal is left "to the Court authorized by law to hear appeals from such orders". Section 50 properly read would, therefore, mean that if an appeal lies under the said provision, then alone would Section 13 [1] of the Commercial Courts Act be attracted as laying down the forum which will hear and decide such an appeal."
We have taken note of these judgments mainly to remove any possibility of confusion regarding jurisdiction of the Commercial Courts to entertain execution petitions in relation to arbitral awards involving commercial disputes of specified value.
The decision of Division Bench of this Court in case of M/s. OCI Corporation vs. Kandla Export Corporation & Ors. [Supra] supports our view. The decision of the Supreme Court in case of Kandla Export Corporation [SCALE 2018 (2) 368] was rendered in relation to entirely different situation.
Petition is dismissed.
[Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 15 of 15