Source: Karnataka High Court

Why in News?

Recently, the Karnataka High Court in the matter of M/s Bellary Nirmithi Kendra v. M/s Capital Metal Industries has held that Section 47 of the Code of Civil Procedure, 1908 (CPC) does not apply to proceedings for enforcement of arbitral award.

What was the Background of M/s Bellary Nirmithi Kendra v. M/s Capital Metal Industries Case?

• The present Civil Revision Petition is filed under Section 115 of CPC challenging the order dated 19^th March 2022 passed in Execution Case by the Principal District and Sessions Judge, Bellary wherein an application filed by the Petitioner under Section 47 of the CPC was dismissed.
• The relevant facts necessary for consideration of the present petition are that the Petitioner and the Respondent entered into an Agreement dated 26^th June 2013 for supply of Kapital Era Bus Shelters at Ballari.
• Alleging various violations in compliance of the terms of the said Agreement, the Respondent filed a petition before the Micro and Small Enterprises Facilitation Council for recovery of a sum of Rs. 34,48,445/-.
• The Council allowed the petition and directed the Petitioner to pay 30,73,037/- along with interest.
• The Petitioner challenged the award, however, the challenge petition as well as the appeal was dismissed and thereafter the petitioner approached the High Court.
• The High Court dismissed the review petition.

What were the Court’s Observations?

• Justice C.M. Poonacha observed that Section 47 of CPC, which provides for determination of question by the executing court in relation to the validity of the decree, does not apply to execution of arbitral awards.
• It was further held that an arbitral award can only be challenged on the grounds mentioned under Section 34 of the Arbitration & Conciliation Act, 1996 (A & C Act) and not otherwise. It held that the award is deemed to be a decree for the purpose of the enforcement, however, this deeming fiction is limited to its enforcement only.

What are the Relevant Legal Provisions Involved in it?

Section 47 of CPC

About:

• This Section deals with the questions to be determined by the Court executing decree. It states that-

(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)

(3) Where a question arises as to whether any person is or is not the representative of a party, such a 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.

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; and (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.

Case Law:

• In the case of Bharat Pumps and Compressors V. Chopra Fabricators (2022), the Supreme Court held that an arbitration award is not included under the definition and meaning of decree in CPC and so no questions can be raised in the execution of such an award.

Section 115 of CPC:

• Section 115 of CPC empowers the High Court to entertain a revision in any case decided by any subordinate court in certain circumstances.
• Revision means the action of revising, especially critical or careful examination or perusal with a view of correcting or improving.

Section 34 of the A & C Act:

• This Section deals with the application for setting aside arbitral awards.