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TaxTMI 
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TaxTMI 
2019 (11) TMI 1062
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....intainability of the Appeals. 2. Commercial Appeal No. 401 of 2019 is filed by Kakade Construction Company Ltd, Commercial Appeal (Lodg.) No. 109 of 2019 is filed by Mr. Sanjay Kakade; and Commercial Appeal (Lodg.) No. 111 of 2019 is filed by Mrs. Usha Kakade. Mr.Sanjay Kakade and Ms. Usha Kakade are the Directors of Kakade Construction Company Ltd. 3. There were certain financial transactions between Kakade Constructions and the Respondents - Vistra ITCL and IIRF Holdings (referred to as the Respondents). A default was committed by Kakade Constructions. Arbitration proceedings ensued. The parties arrived at a settlement. Under the consent terms, the Respondents agreed to accept the reduced amount of Rs. 178 crores with interest at the agreed rate as and by way of a concession. A consent award was accordingly passed on 14 July 2014 in respect of arbitration between Kakade constructions and the Respondents. The arbitration between the Respondents and the Directors of the Kakade Constructions that is, Sanjay and Usha Kakade continued. On 25 July 2014, the first instalment of Rs. 10 Crores as per the Consent Award was due and payable by Kakade Constructions. Kakade Constructions....
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....lants challenged the consent award. Sanjay Kakade filed the Appeal (L) No. 234 of 2018 and Usha Kakade filed the Appeal (L) No. 235 of 2018. Kakade Constructions filed Appeal (L) Nos. 237 of 2018. The Division Bench (Coram: N.H. Patil and G.S. Kulkarni, JJ.) admitted the appeal on the question of law regarding maintainability and rejected the interim reliefs as prayed for. 8. The second instalment of Rs. 55 crores by the appellants as per the consent terms dated 22 February 2018 was due on 21 June 2018. The Appellants failed to make the payments. On 22 June 2018, the Respondents sought to execute the order dated 22 February 2018 against the assets of Sanjay Kakade and Usha Kakade. The Respondents moved a Chamber Summons bearing (Lodg.) No. 911 of 2018. The Respondents prayed for the following reliefs :- (a) That pending the hearing and final disposal of the present Execution Application, this Hon'ble Court be pleased to appoint Court Receiver, High Court, Bombay, with all powers under Order XL of the Code of Civil Procedure, 1908, as receiver in respect of the properties mentioned in Annexure B, Annexure C and Annexure D to the Affidavit in Support of this Chamber S....
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....spi Chinoy & Mr. Gaurav Joshi, Senior Advocates for the Respondents. The learned Counsel for the parties have referred to various decisions; however, we will refer to those decisions directly relevant to the issue at hand. 11. The Appeals are filed as Commercial Court appeals. The Respondents have taken an objection that the appeals are not maintainable since the impugned order is passed in execution of the arbitral award. It is contended that the proceeding being under the Arbitration and Conciliation Act 1996, only those appeals fall in the categories enumerated under Section 37 of the Act 1996 are maintainable, and the present appeals do not fall in any of the categories. 12. The Appellants in their appeal memo aver that the appeals are filed under Section 13(1) of the Commercial Courts and Commercial Appellate Division of the High Courts Act, 2015 r/w Clause 15 of the Letters Patent Appeal. Section 13 of the Commercial Courts and Commercial Appellate Division of the High Courts Act, 2015 reads thus :- 13. Appeals from decrees of Commercial Courts and Commercial Divisions :- (1) Any person aggrieved by the judgment or order of a Commercial Court below the level of a Dis....
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....ding to the Appellants, Section 36 of the Arbitration Act stipulates that the award is to be executed as if it is a decree of the civil court and that being the position, the proceedings for execution of the arbitral award will be governed by the Code of Civil Procedure. Since the argument centres on Section 36 of the Act of 1996, it will be fruitful to reproduce the same. Section 36 of the Arbitration Act reads as under:- 36. Enforcement.-(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court. (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an a....
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....on of the award were proceedings under the Act of 1996 and not proceedings under the Code of Civil Procedure. It was further observed that if the interpretation sought to be put by the appellant therein is accepted (that it is under the Code); it will lead to an incongruous result which will defeat the intention of the legislature to provide a quick and effective remedy, and of providing appeals only against certain specified orders. It was thus held that there is no appeal provided against the adjudication under section 36 of the Act of 1996 and the proceedings under section 36 cannot be held to be proceedings of execution under the Code of Civil Procedure. 18. The Appellants have sought to get over this position by contending firstly that what was under consideration in the case of Jet Airways, was the final order passed in the execution proceedings which is not the case in the present Appeals. They contend that the impugned order appoints a receiver which is not a final order in the execution proceedings. We do not find this distinction material for the position of law regarding Section 36 of the Act of 1996. The Division Bench has categorically held that adjudication of the ....
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.... award is to be enforced under the Code as if it were the decree of the Court does not mean that the award is a decree of that court, and only a legal fiction is created. The Courts held that therefore the Award could be filed for execution directly before the Court where the assets of the judgment debtor are located. After noticing the diversions of opinion amongst the High Courts, the Supreme Court considered the provisions of Section 38, Section 39, Section 46 of the Act of 1996 and Order XXI of the Code of Civil Procedure. Then the Supreme Court analyzed the fiction created under Section 36 of the Act of 1996 and held that Section 36 is only an enforcement mechanism akin to the enforcement of a decree, but the Arbitral Award itself is not a decree of the Civil Court, and no decree is passed by the Civil Court. 21. Section 36 of the Act of 1996 creates a legal fiction which is limited only to provide an enforcement mechanism. Without such an enforcement mechanism, the arbitral award cannot be executed. This legal fiction that the award is to be treated as the decree is thus for a limited purpose and cannot be stretched to include an appeal The decision of the Supreme Court in....
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....ot being appealable under Section 37(1)(a), would not be appealable under Section 13(1) of the Commercial Courts Act. Similarly, an appeal rejecting a plea referred to in sub-Sections (2) and (3) of Section 16 of the Arbitration Act would equally not be appealable under Section 37(2)(a) and, therefore, under Section 13(1) of the Commercial Courts Act." (Emphasis Supplied) The Supreme Court thus has clarified that in respect of the orders under the Act of 1996, only those appeals mentioned in Section 37 of the Act of 1996 are maintainable before Commercial Appellate Division. The Supreme Court held that the Act of 1996 is a self-contained code on the matters pertaining to arbitration, and which is exhaustive. The Supreme Court then adverted to the foundational logic of making the Arbitration Act a self-contained code. It was held that the Act of 2015 provided no additional right of appeal otherwise than the appeals under the Act of 1996. Though this case arose before the Supreme Court in a foreign award and under Section 50, the underlying principle equally applies to the Section 37 of the Act of 1996. The dicta in Kandla Export is clear that in respect of the orders ari....
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....r Section 17. These are the only orders that have been made appealable. 25. An argument was sought to be advanced by the Appellants that since the appointment of the receiver is an order under Section 9(1)(d) of the Act of 1996, an appeal is maintainable under Section 37 of the Act of 1996. There is no merit in this submission. Section 9 permits a party before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, to apply for the appointment of a receiver. In this case, that stage has long past gone. 26. The Appellant - Mrs. Usha Kakade in Appeal (Lodg.) No. 111 of 2019 sought to argue that the Appellant not being party to the Award, it cannot be said that the order passed against her is under the Arbitration Act, and therefore, as for her case, it would be governed by Order 43 of the Code of Civil Procedure and thus, the Appeal would be maintainable under Section 13 of the Act of 1996. There is no merit in this submission. Arbitration proceedings were also pending against Usha Kakade and Sanjay Kakade before the same Arbitral Tribunal. The Arbitration Petition between the Respondents and ....