2002 (3) TMI 877 - HC - Companies Law

Arbitral Award Final & Binding; Execution Court Limited to Jurisdiction Challenges

RK. Textiles Versus Sulabh Textiles (P.) Ltd.

RK. Textiles Versus Sulabh Textiles (P.) Ltd. - [2003] 44 SCL 228 (BOM.) Issues Involved:1. Whether the arbitral award dated 6-9-2000 is without jurisdiction, illegal, null, and void.2. Whether the execution application taken out by the applicants should be quashed and the attachment on the respondents' properties should be raised.Detailed Analysis:Issue 1: Jurisdiction and Validity of the Arbitral AwardThe respondents argued that the arbitral award dated 6-9-2000 is without jurisdiction, illegal, null, and void because there was no arbitration agreement between the parties, and the respondents were not members of the Hindustan Chamber of Commerce (HCC). The respondents contended that the composition of the arbitral tribunal and the arbitral procedure were not in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (Act 1996). They claimed they were not given proper notice of the appointment of the arbitrator and that the arbitration rules of the HCC were not enforceable as they did not comply with sections 10 and 11 of the Act. The respondents appeared before the arbitrators under protest and submitted that the arbitrators had no jurisdiction to arbitrate. Despite these objections, the arbitrators proceeded and made an award.The applicants, on the other hand, argued that the award was legally and validly made and published, and it had become an executable decree. They contended that the respondents had lost their right to challenge the award as their application for setting aside the award under section 34 was dismissed due to delay.The court noted that under section 35 of the Act, an arbitral award is final and binding on the parties, subject to the provisions of section 34. Since the respondents' application under section 34 was barred by time, the award had become final and binding. The court emphasized that an executing court cannot go behind the decree unless it is shown that the court which passed it had inherent lack of jurisdiction. The court referred to the Supreme Court's decisions in Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman and Sunder Dass v. Ram Prakash, which held that an executing court cannot investigate the validity of a decree on grounds other than lack of jurisdiction.Issue 2: Execution Application and Attachment of PropertiesThe respondents sought to quash the execution application taken out by the applicants and to raise the attachment on their properties. They argued that the arbitral award was made without jurisdiction and that the executing court had the jurisdiction to go into the legality and validity of the award on the ground of jurisdiction.The court held that the respondents' challenge to the award could only be entertained on the ground of jurisdiction. The court examined whether there was an arbitration agreement between the parties. The applicants contended that the bills issued to the respondents contained an endorsement referring to the arbitration rules of the HCC, which constituted a valid arbitration agreement. The court, however, held that the executing court is not expected to investigate the facts to determine the existence of an arbitration agreement. The court emphasized that the lack of jurisdiction must be patent and should not require an investigation of facts.The court referred to the Division Bench decision in Union of India v. Ajit Mehta & Associates Co., which laid down that the validity of a decree can be questioned before the executing court only on the ground of lack of jurisdiction. The court also referred to the decision in Vasudev Dhanjibhai Modi's case, which held that the executing court should not investigate the facts to determine the jurisdiction of the court that passed the decree.The court concluded that the respondents' plea that there was no arbitration agreement could not be entertained in the execution proceeding. The court held that the executing court cannot decide on the existence or validity of an arbitration agreement as it falls outside its jurisdiction. The court dismissed the chamber summons with costs of Rs. 2,000 to be paid by the respondents to the applicants.