Case Analysis: India Oil Corporation Ltd. and Another Vs. The Commercial Court and Another
Introduction
The case of India Oil Corporation Ltd. and Another Vs. The Commercial Court and Another deals with the question of whether an arbitral award can be considered a decree under Section 2(2) of the Code of Civil Procedure (CPC). The Hon’ble High Court provides a detailed analysis of the relevant provisions of law and important judgments to arrive at its conclusion.
Agreement for applicability of New Act, 1996.
The parties had entered into an agreement in 1989, which contained an arbitration clause. The dispute arose in 1994 and the arbitration proceedings commenced in 1995. The arbitrator passed the award in 1997. The question was whether the arbitration proceedings and the award were governed by the Arbitration Act, 1940 (Old Act) or the Arbitration and Conciliation Act, 1996 (New Act).
The Hon’ble High Court held that an agreement made before the enactment of the New Act, 1996 can still be applicable under the New Act, if the parties have agreed to do so. There is no need for a new agreement for compliance with Section 85(2)(a) of the New Act, which provides that the Old Act shall cease to have effect except as respects arbitral proceedings which commenced before this Act came into force. The Hon’ble High Court relied on the Supreme Court judgment in Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd [(1999) 9 SCC 334] to support its view.
The Hon’ble High Court further held that since the parties had agreed to apply the New Act, 1996 to their arbitration proceedings, the proceedings can be continued under the New Act, 1996 even after its commencement.
Arbitral award and enforcement under Section 36 of New Act
The next issue was whether the arbitral award can be enforced under Section 36 of the New Act along with the provisions of CPC. Section 36 provides that an arbitral award shall be enforced in accordance with the provisions of CPC as if it were a decree of the court.
The Hon’ble High Court held that the arbitral award can be enforced under Section 36 of the New Act along with the provisions of CPC. However, the Hon’ble High Court clarified that the arbitral award is not considered a decree under Section 2(2) of CPC. Section 2(2) defines a decree as a formal expression of an adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit.
The Hon’ble High Court explained that an arbitral award is not a formal expression of an adjudication by a court, but by an arbitrator who is appointed by the parties or by a court. An arbitral award does not conclusively determine the rights of the parties, but is subject to challenge under Section 34 of the New Act. An arbitral award does not deal with all or any of the matters in controversy in a suit, but only with those matters which are referred to arbitration by the parties.
The Hon’ble High Court also distinguished between execution and enforcement of an arbitral award. Execution means giving effect to an order or decree by taking steps to compel or coerce compliance by the judgment debtor. Enforcement means giving legal sanction or recognition to an order or decree by declaring it as binding and conclusive on the parties.
The Hon’ble High Court observed that Section 36 of the New Act only provides for enforcement of an arbitral award, not execution. Execution can only be done by a court which has jurisdiction over the subject matter and the parties. Therefore, an application for execution of an arbitral award has to be filed before a competent court under Section 37 or Section 42 of the New Act.
Objection filed under Section 47 of CPC
The final issue was whether an objection filed under Section 47 of CPC against an arbitral award is maintainable. Section 47 provides that all questions arising between the parties to a suit in which a decree has been passed relating to its execution shall be determined by executing court.
The Hon’ble High Court held that since an arbitral award is not a decree under Section 2(2) of CPC, an objection filed under Section 47 of CPC is not maintainable. The Hon’ble High Court relied on several judgments from various High Courts and Supreme Court to support its view.
The Hon’ble High Court also noted that there is a specific provision under Section 34 of the New Act for challenging an arbitral award on various grounds. Therefore, there is no scope for invoking Section 47 of CPC for raising objections against an arbitral award.
Conclusion of Arbitral award
In conclusion, the Hon’ble High Court held that an arbitral award is not a decree under Section 2(2) of CPC. Therefore, an objection filed under Section 47 of CPC is not maintainable. The Hon’ble High Court also held that an agreement made before the enactment of the New Act, 1996 can still be applicable under the New Act, if the parties have agreed to do so. The Hon’ble High Court further held that the arbitral award can be enforced under Section 36 of the New Act along with the provisions of CPC, but execution can only be done by a competent court under Section 37 or Section 42 of the New Act.
References for Arbitral award
- Case Name: India Oil Corporation Ltd. and Another Vs. The Commercial Court and Another
- Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd [(1999) 9 SCC 334]
