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Lakhamraju Sujatha v. Yuvaraj Finance Pvt. Ltd.
Summary of Opinion by V.V.S. Rao, J.
Factual and Procedural Background
The revision petition under Section 115 of the Code of Civil Procedure, 1908 was filed by the judgment-debtor (petitioner) against the order dated 30.7.2009 in EA No. 157 of 2008 in EP No. 26 of 2007 in AA No. 66 of 1999.
The dispute arises from a hire-purchase finance transaction: the respondent financed the petitioner to purchase a bus for Rs. 6,15,000, repayable in 24 monthly instalments. The petitioner paid part of the amount and then defaulted. After an accident and inability by the petitioner to repair and use the bus, the respondent repaired and sold the bus in auction realizing Rs. 4,75,000. For the balance, the respondent invoked the arbitration clause and obtained appointment of an arbitrator from the District Judge's court.
The arbitrator passed an award on 20.2.2002 for Rs. 3,62,105 with interest at 18% p.a. The petitioner challenged the award by filing an application under Section 34 of the Arbitration Act (AA No. 2 of 2006) which remained pending before the Court of District Judge, Rajahmundry.
The respondent initiated execution proceedings: EP No. 43 of 2002 (for attachment and sale of the petitioner's residential house in Kakinada) was closed due to no bidders on 10.10.2006. In 2007 the respondent filed EP No. 26 of 2007 again to enforce the award. The petitioner filed EA No. 157 of 2008 under Section 47 CPC seeking to drop the execution proceedings on grounds including limitation, territorial jurisdiction (property outside the Rajahmundry Court's jurisdiction), pendency of Section 34 proceedings, and that only the "Principal District Court" (and not an Additional District Judge) could enforce the award. The I Additional District Judge rejected these contentions and dismissed EA No. 157 of 2008. The petitioner sought revision.
Legal Issues Presented
- Whether an Additional District Judge is barred from adjudicating an execution petition filed for enforcing an arbitral award (i.e., whether the Additional District Judge is a court competent to enforce an award under the Arbitration and Conciliation Act, 1996).
- Whether an arbitral award is to be treated as a "decree" for the purpose of enforcement under the Code of Civil Procedure (i.e., the legal basis for enforcing an award under CPC via Section 36 of the Arbitration Act).
- Whether territorial jurisdiction (attachment of property situated in Kakinada) prevents the I Additional District Judge, Rajahmundry, from entertaining the execution petition.
Arguments of the Parties
Petitioner's Arguments
- The execution petition (E.P.) is barred by limitation.
- The schedule property (subject to attachment) is situated outside the jurisdiction of the Rajahmundry Court (territorial jurisdiction objection).
- The execution petition is not maintainable because the petitioner has a pending application under Section 34 of the Arbitration Act (challenge to the award).
- The "Principal Civil Court" for enforcement of the award is the Principal District Court; an Additional District Judge does not have jurisdiction to entertain the execution petition.
- Petitioner relied on several authorities (Ankati Satyamaiah, Paramjeet Singh Patheja, Vijay Gupta) in support of the challenge (specific propositions from all cited cases are not detailed in the opinion for each citation).
Respondent's Arguments
- Reliance on Sections 36 to 39 CPC and on precedent (Globsyn Technologies Limited v. Eskaaycee Infosys) to submit that an Additional District Judge is not inferior to the District Judge and is competent to entertain an execution petition for enforcing an arbitral award.
- The case was originally filed before the Court of District Judge but for administrative convenience was made over to the I Additional District Judge, Rajahmundry; there is no infirmity in the lower court entertaining the E.P.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ankati Satyamaiah v. Sallangula Lalaiah, 2003 (2) ALD 818 : 2003 (3) ALT 193 | Cited by the petitioner; the opinion does not specify the precise extract of law relied upon from this decision. | Not specifically adopted; cited as one of the authorities the petitioner relied upon. The court did not base its ruling on this decision. |
| Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322 : AIR 2007 SC 168 | Referenced by the petitioner; the opinion specifically notes the Supreme Court's holding (as relied upon by counsel) that an arbitrator is not a "Court" within the meaning of Section 9(2) of the Presidency Towns Insolvency Act, 1909 (as discussed in the opinion). | The court considered the point but held that for enforcement purposes an arbitral award is to be treated as a "decree" under Section 36 of the Arbitration Act read with CPC; hence the petitioner's reliance was not decisive and the submission was rejected in the context of enforcement. |
| Vijay Gupta v. Renu Malhotra, AIR 2008 SC 83 | Cited by the petitioner; the opinion does not set out the exact principle from this authority. | The opinion records the citation as relied upon by the petitioner, but it does not indicate that the decision altered the court's conclusion on jurisdiction to enforce the award. |
| Globsyn Technologies Limited v. Eskaaycee Infosys, Visakhapatnam, 2004 (3) ALD 163 : 2004 (2) ALT 174 | Held that an Additional District Judge is not a court of a grade inferior to the Principal District Judge; relied upon to support that an Additional District Judge can exercise jurisdiction under the Arbitration Act for enforcement. | The court relied on this decision (and its reasoning) in concluding that Additional District Judges are competent to entertain execution petitions enforcing arbitral awards; Globsyn is treated as supporting precedent. |
| I.T.I. Ltd., Allahabad v. District Judge, Allahabad, AIR 1998 All. 313 | Authority relied upon (by opposite side in Globsyn) for the proposition that “Court” in Section 2(e) of the Arbitration Act means only the Principal Civil Court of original jurisdiction and excludes civil courts of a grade inferior. | The court (following Globsyn) rejected the reasoning and ratio of I.T.I. Ltd. as not persuasive in the present context; it did not adopt that restrictive interpretation. |
| M.P.S.E. Board v. ANSALDO Energia S.P.A., AIR 2008 MP 328 | Interpreted the Arbitration Act with the M.P. Civil Courts Act to hold that Additional District Judges meet the requirements of Section 2(1)(e) of the Arbitration Act and can therefore decide objections under Section 34. | The court cited and followed the reasoning in this decision as consistent with and supportive of the conclusion that Additional District Judges are competent to enforce awards. |
| Strojexport Company Limited v. Indian Oil Corporation Limited, AIR 1997 Raj 120 | Cited in the M.P. decision for the proposition that invoking the original jurisdiction of the High Court precludes thereafter approaching the Principal Civil Court; used in context of defining "Court". | The appellate court in the present opinion noted respectful agreement with the view as part of the chain of reasoning supporting equivalence of Additional District Judges to Principal Civil Courts for enforcement purposes. |
| B.V. Sharma's case (referenced) | Referenced in the opinion as one of the decisions aligned with the view that Additional District Judges are not inferior to District Judges (no specific citation text provided in the opinion). | Mentioned as supportive precedent in the jurisprudential line that the court approved; the opinion does not elaborate the ratio or specific holdings of this case. |
Court's Reasoning and Analysis
The court's reasoning proceeds in a stepwise legal analysis grounded in statutory interpretation and precedent:
- Nature of an arbitral award: The court first observes that an arbitral award is not a "decree" within the definition of Section 2(2) CPC. However, Section 36 of the Arbitration Act expressly provides that an award shall be enforced under the CPC in the same manner as if it were a decree of the court. Reading Section 36 of the Arbitration Act together with the provisions of CPC (Sections 36 to 74 and Order XXI rules), the court concludes that an award for enforcement purposes must be treated as a decree and executed under the CPC.
- Scope of the question: The court clarifies that the question whether enforcement must be in an appropriate court with relevant pecuniary jurisdiction was not before it. The narrow question was whether an Additional District Judge is barred from enforcing an arbitral award.
- Meaning of "Court" in the Arbitration Act and the role of state statutes: Section 2(e) of the Arbitration Act defines "Court" as the Principal Civil Court of original jurisdiction in a district (not inferior to such Principal Civil Court). The court held that while Sections 9 and 34 of the Arbitration Act employ that definition, Section 36 simply refers to a "decree of a Court" being enforced under the CPC. Consequently, interpretation of Section 2(e) must take into account the law governing establishment and conferment of jurisdiction on subordinate civil courts in the State—here, the Andhra Pradesh Civil Courts Act, 1972.
- Statutory framework under the Andhra Pradesh Civil Courts Act, 1972: The court relied on Sections 10 and 11 of that Act, which empower the government (after consultation with the High Court) to establish District Courts and appoint Additional District Judges. Section 11(2) explicitly states that an Additional District Judge shall perform functions assigned by the District Judge and "in the performance of those functions, he shall exercise the same powers as the District Judge."
- Harmonious reading: By reading Section 2(e) of the Arbitration Act conjointly with Sections 10 and 11 of the Civil Courts Act, the court concluded that Additional District Judges, although not the "Principal Civil Court" in strict terminology, are not barred from entertaining applications or petitions for enforcing arbitral awards. The statutory conferral of equal powers on Additional District Judges under the Civil Courts Act is critical to this conclusion.
- Precedent support and rejection of contrary view: The court relied on the reasoning in Globsyn Technologies Ltd. (where the Additional District Judge was held not to be of a grade inferior to the Principal District Judge), and on the subsequent Madhya Pradesh decision (M.P.S.E. Board v. Ansaldo) that reached a similar result. It rejected the restrictive interpretation advanced in I.T.I. Ltd., Allahabad, which treated "Court" as meaning only the Principal Civil Court and excluding courts of the same grade. The court found the reasoning in the restrictive view unpersuasive.
- Submission based on Paramjeet Singh Patheja: The court addressed the petitioner's reliance on the Supreme Court's observation that an arbitrator is not a "court" within the Presidency Towns Insolvency Act; it reiterated that although an arbitral award is not a "decree" in the strict statutory sense, Section 36 of the Arbitration Act makes it a decree for enforcement under the CPC. Consequently, the petitioner's reliance on that aspect did not avail them in the context of enforcement jurisdiction.
- Territorial jurisdiction objection: The court accepted the view of the lower court that an Additional District Judge exercises jurisdiction over the entire district; therefore, attachment of property situated in Kakinada did not bar the I Additional District Judge, Rajahmundry, from exercising jurisdiction in the execution proceedings.
Holding and Implications
Holding:
DISMISSED. The civil revision petition was dismissed for lack of merit. The court made no order as to costs.
Immediate implications:
- The order of the I Additional District Judge dismissing EA No. 157 of 2008 (and thereby allowing the execution proceedings to proceed) stands; the revision challenging that order is dismissed.
- The court formally approves the legal position that an arbitral award, for purposes of enforcement, is to be treated as a decree under the Arbitration Act read with the CPC, and that an Additional District Judge—under the statutory scheme of the Andhra Pradesh Civil Courts Act—has the powers equivalent to the District Judge to entertain execution petitions enforcing such awards.
Note: The opinion endorses prior decisions (notably Globsyn Technologies Ltd. and the Madhya Pradesh decision in M.P.S.E. Board v. ANSALDO Energia) which treat Additional District Judges as capable of exercising the relevant jurisdiction; it rejects a narrower construction that would limit enforcement exclusively to the Principal District Court.
V.V.S. Rao, J.:— This civil revision petition under Section 115 of Code of Civil Procedure, 1908 (CPC) is filed by the Judgment Debtor (J.Dr) against the order dated 30.7.2009 in EA No. 157 of 2008 in EP No. 26 of 2007 in AA No. 66 of 1999.
2. A short but interesting question of law that falls for consideration in this revision petition is as to the jurisdiction of Additional District Judge to adjudicate the execution petition filed for enforcing the award passed by the Arbitrator under the provisions of Arbitration and Conciliation Act, 1996.
3. The brief fact of the matter and background throwing up such question is as follows. The respondent is a company engaged in the business of financing motor vehicles. Petitioner availed a sum of Rs. 6,15,000/- for purchase of a bus bearing Regn. No. KA 04-6737. The amount was sanctioned. It is payable in 24 instalments @ Rs. 36,000/- per month. Petitioner statedly paid a sum of Rs. 76,895/- but committed default thereafter. On 5.3.1997, the bus met with an accident at Toopran Village and was brought to Vijayawada for necessary repairs. As the petitioner expressed inability to get the bus repaired and put it on road, respondent got the bus repaired and sold the same in an auction. An amount of Rs. 4,75,000/- was realized. For the balance amount, respondent invoked arbitration clause in the hire purchase agreement, in vain. Therefore, they approached the Court of District Judge for appointment of Arbitrator. An Arbitrator was appointed. An award was passed on 20.2.2002 for an amount of Rs. 3,62,105/- with interest at 18% per annum payable by petitioner to respondent. Aggrieved by the same, petitioner filed an application under Section 34 of Arbitration Act being AA No. 2 of 2006 on the file of the Court of District Judge, Rajahmundry. The same is pending.
4. The respondent filed EP No. 43 of 2002 and brought the immovable property of petitioner - a residential house at Kakinada; for sale. As there were no bidders in the auction conducted by the Court, E.P. was closed. It was closed on 10.10.2006. Again in 2007 respondent filed EP No. 26 of 2007 for enforcing the arbitral award dated 20.2.2002 by attachment and sale of immovable property of petitioner. Petitioner moved an application under Section 47 of CPC being EA No. 157 of 2008 to drop the execution proceedings on the ground that E.P. is barred by limitation, that E.P. schedule property is situated outside the jurisdiction of Rajahmundry Court and that E.P. is not maintainable in view of pendency of application under Section 34 of Arbitration Act. Petitioner also urged that “Principal Civil Court” for the purpose of enforcing the award is the “Principal District Court” and therefore Additional District Judge has no jurisdiction to entertain the E.P. By impugned order, learned I Additional District Judge rejected the contentions and dismissed EA No. 157 of 2008.
5. In this revision petition, placing reliance on the decision of this Court in Ankati Satyamaiah v. Sallangula Lalaiah, 2003 (2) ALD 818 : 2003 (3) ALT 193, Paramjeet Singh Patheja v. Icds Ltd., (2006) 13 SCC 322 : AIR 2007 SC 168 and Vijay Gupta v. Renu Malhotra, AIR 2008 SC 83, learned Counsel for petitioner reiterates the grounds urged before the lower Court. Per contra, learned Counsel for respondent relies on Sections 36 to 39 of CPC and the decision of this Court in Globsyn Technologies Limited, Calcutta v. Eskaaycee Infosys, Viskashapatnam, 2004 (3) ALD 163 : 2004 (2) ALT 174 and submits that Additional District Judge not being inferior to District Judge is equally competent to entertain a petition for enforcing arbitral award. He points out that though the case was filed by respondent before the Court of District Judge, the same was for the sake of administrative convenience made over to the Court of I Additional District Judge, Rajahmundry, and therefore, there is no infirmity in the lower Court entertaining the E.P.
6. Section 2(2) of CPC defines, “decree” means formal expression of adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit. Section 36 of CPC further clarifies that the provisions relating to execution of decrees shall be deemed to apply to the execution of orders as well. Therefore, arbitral award passed under Section 31 of Arbitration Act is certainly not a “decree”. However, when the same has to be enforced, the law contemplates that for the purpose of enforcement even the award shall be deemed to be “decree” of the Court. This is made clear by Section 36 of Arbitration Act, which lays down that, “an award shall be enforced under CPC in the same manner as if it were a decree of the Court”. Thus we do not have any doubt in our minds to hold that though arbitral award as defined under Section 2(c) of Arbitration Act is not a “decree” within the meaning of Section 2(2) of CPC read with Section 36 of CPC, but for the enforcement, the award shall be treated as a decree of the Court. Such award therefore has to be executed (enforced) under CPC. The question then is what is the procedure for enforcement/execution of the decree of a Court. The provisions in Part-II (Sections 36 to 74) and Rules contained in Order XXI CPC are applicable for execution of decrees. The question whether the award passed by the Arbitrator requires to be enforced in an appropriate Court with relevant pecuniary jurisdiction does not fall for consideration in this revision petition. The question however is whether the Additional District Judge is barred from enforcing an arbitral award. It is no doubt true that Section 2(e) of Arbitration Act defines, “Court” means the Principal Civil Court of original jurisdiction in a district not inferior to such Principal Civil Court. Though Sections 9 and 34 of Arbitration Act employ the word “Court” as defined in Section 2(e) of Arbitration Act, the word “Court” in the sense defined in Section 2(e) of Arbitration Act is conspicuous by absence in Section 36 of Arbitration Act, which only speaks of a “decree of a Court” being enforced under CPC. Hence while interpreting Section 2(e) of Arbitration Act with reference to Section 36 of Arbitration Act, the law governing establishment and conferment of jurisdiction on such Courts, cannot be ignored.
7. The Andhra Pradesh Civil Courts Act, 1972 (Civil Courts Act) is an Act relating to Civil Courts subordinate to the High Court in the State of Andhra Pradesh. Sections 3 and 10 of Civil Courts Act empower’ the Government to establish subordinate Courts in the district of Hyderabad and in other districts respectively. A reading of Sections 10 and 11 of Civil Courts Act would show that Government shall appoint a District Judge for each district and if in the opinion of the High Court it is so required, the Government may also appoint one or more Additional District Judges to the District Court and such Additional District Judges shall perform all or any functions of District Judge under Civil Courts Act. Section 11(2) of Civil Courts Act makes it clear that all Additional District Judges shall exercise same powers as the District Judge. For ready reference Sections 10 and 11 of Civil Courts Act are extracted hereunder:
Section 10. Establishment of District Courts:—
(1) The Government may, after consultation with the High Court, by notification, establish such number of District Courts as they may deem necessary and appoint a District Judge for each District Court.
(2) The Government may, from time to time, likewise abolish any District Court established under this section.
Section 11. Appointment of Additional District Judges:—(1) Where in the opinion of the High Court, the state of business pending in a District Court, so requires, the Government may, after consultation with the High Court, appoint one or more Additional District Judges to the District Court for such period as they may deem necessary.
(2) An Additional District Judge so appointed shall perform all or any of the functions of the District Judge under this Act or any other law for the time being in force which the District Judge may assign to him, and in the performance of those functions, he shall exercise the same powers as the District Judge.
8. By reading Section 2(e) of Arbitration Act and Sections 10 and 11 of Civil Courts Act harmoniously, we are convinced that Additional District Judge though not strictly be considered as a Principal Civil Court, barred from entertaining applications/petitions for enforcing arbitral awards.
9. In Globsyn Technologies Ltd's case (supra), Justice Sudershan Reddy (as His Lordship then was) considered a similar issue and came to the conclusion that Additional District Judge is not a Court of grade inferior to the Court of Principal District Judge. The relevant observations are as follows:
Learned Additional Advocate General relied upon the decision reported in I.T.I. Ltd., Allahabad v. District Judge, Allahabad, AIR 1998 All. 313 : 1998 (2) Arb. LR 670 (AIL), rendered by a Single Judge of the Allahabad High Court in support of the submission that the Parliament intended to make only one Court - the Principal Civil Court of original jurisdiction and any application with respect to the Arbitration Agreement will have to be filed in the Principal Civil Court of original jurisdiction in the district. Unless the context otherwise requires the term “Court” as defined in Section 2(e) of the Act 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 short question that falls for consideration is as to whether the Court of the learned VI-Additional District Judge is a Civil Court of a grade inferior to the Principal Civil Court. The Court of the Principal District Judge and the Court of VI-Additional District Judge are of equal grade. The Court of the learned VI-Additional District Judge is not a Court of a grade inferior to the Court of the Principal District Judge. The expression “Court of a grade inferior” is required to be understood in its proper context.
The dictionary meaning of inferior is “lower in any respect, subordinate, a person who is lower in rank or station”. According to Black's Law Dictionary, inferior means “One who, in relation to another, has less power and is below him; one who is bound to obey another. The term may denote any Court subordinate to the chief appellate Tribunal in the particular judicial system (e.g. Trial Court); but it is also commonly used as the designation of a Court of special, limited, or statutory jurisdiction”,
I find it difficult to accept the submission of the learned Additional Advocate General that the Court of the learned VI-Additional District Judge at Visakhapatnam is a Court of a grade inferior to the Principal District Judge's Court. I am unable to persuade myself to accept the reasoning given and the ratio of the decision in I.T.I. Ltd., Allahabad's case (supra). The contention is accordingly rejected.
10. In the context of Arbitration Act and M.P. Civil Courts Act, 1958, a Division Bench of Madhya Pradesh High Court in M.P.S.E. Board v. ANSALDO Energia, S.P.A., AIR 2008 MP 328, relying on Globsyn Technologies Ltd's case (supra), took the similar view. The relevant observations as follows:
In view of the aforesaid pronouncements of law, as far as Madhya Pradesh is concerned, the Additional District Judge is equated with the Principal Civil Court of original jurisdiction. Section 2(1)(e) does not include any civil Court of grade inferior to such Principal Civil Court or any Court of Small Causes. As is evincible from the enunciation of law, which we have referred to above, the Additional District Judge is not inferior to the District Judge. Section 42 refers to the term “Court”. The Court has to take the meaning from the definition. In this context, it is worth noting that the dictionary clause refers to two categories of Courts, namely, the High Court, which has the original civil jurisdiction, and also the Principal Civil Court. If any party to the agreement invokes the original jurisdiction of the High Court, he cannot thereafter go to the Principal Civil Court. He also cannot approach any other Court having the jurisdiction after approaching once to the said Court. This view has been rendered in Strojexport Company Limited v. Indian Oil Corporation Limited, AIR 1997 Raj 120. We are in respectful agreement with the same.
In view of the aforesaid analysis on the bedrock of 1958 Act, the irresistible conclusion is that the Additional District Judge meets the requirements as engrafted under Section 2(1)(e) of the 1996 Act. We also respectfully agree with the view expressed in the decisions rendered in Globsyn Technologies Ltd's (supra) and B.V. Sharma's case (supra). Ergo, the objection raised under Section 34 of 1996 Act can be dwelled upon and dealt with by the learned Additional District Judge. That being the position in law, the impugned order passed by the learned Additional District Judge is neither vulnerable nor susceptible. We give the stamp of approval to the same.
11. Therefore, in view of the legal position as above, we are not able to countenance the submission of learned Counsel for petitioner. Insofar as submission that Arbitrator is not a Court within the meaning of Section 9(2) Presidency Town Insolvency Act, 1909, as held by Supreme Court in Paramjeet Singh Patheja's case (supra), we have already held supra that though an arbitral award is not a “decree” within the meaning of Section 2(2) of CPC, but for the purpose of execution/enforcement it shall be deemed to be “decree” as per the provisions of CPC. Therefore the submission is rejected. Insofar as the question of territorial jurisdiction of I Additional District Judge, Rajahmundry, is concerned, we see no merits in the contention. As rightly held by lower Court, Additional District Judge exercises jurisdiction over the entire district, and therefore, even if the property attached is situated in Kakinada, the same is not a bar to exercise the jurisdiction of Additional District Judge, Rajahmundry.
12. In the result for the above reasons, we see no merit in civil revision petition and the same is accordingly dismissed. We make no order as to costs.
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