TaxTMI 
TaxTMI 
2017 (3) TMI 1927
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....as been filed by the decree holder (DH) Khanna Traders under Order XXI Rule 41 of the Code of Civil Procedure, 1908 (CPC) seeking a direction to the JDs to file affidavits of their income tax, assets, debts, bank lockers etc. 5. EA No. 40/2014 has been filed by the DH for arrest of the JDs No. 2 to 5. 6. These applications came up before the Court on 17th January, 2014 when inter alia the following order was passed: "...... A perusal of the award shows that the same does not address the issue as to how judgment debtor Nos. 2 to 5 have been made personally liable. The judgment debtor No. 1 is a private limited company. Liability cannot extend to the shareholders/directors of a company unless it is a case where the shareholders/directors have extended their personal guarantee or have personally made themselves liable. Prima facie, it appears to me that it is open to judgment debtor Nos. 2 to 5 raise the aforesaid aspect even in these proceedings, as, to that extent, the award may be a nullity. Learned counsel for the parties seeks further time to address the court on this particular aspect. Adjourned to 14.03.2014. ....... " 7. Th....
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....bitrator had no jurisdiction against JDs No. 2 to 5; (c) that reference also to arbitration was not sought against JDs No. 2 to 5; (d) attention was invited to the letter dated 28th July, 2006 of DH to the General Secretary, Paper Merchants Association (Regd.) invoking arbitration against JD No. 1 only and in which no reference was made to JDs No. 2 to 5; (e) attention was similarly invited to the letter dated 29th July, 2006 of the Paper Merchants Association (Regd.) to DH appointing Mr. Ram Bhaj Mittal as the Arbitrator to settle the dispute; (f) that there was no basis before the sole Arbitrator for passing the Award against JDs No. 2 to 5 also who were merely the Directors of JD No. 1 against which reference to arbitration was sought. The senior counsel for JDs No. 2 to 5 referred to: "(I) Union of India v. M/s. Jagat Ram Trehan and Sons AIR 1996 Delhi 191 where a Division Bench of this Court negatived the contention that an Arbitral Award must be objected to in accordance with the provisions of the Arbitration Act (in that case of the year 1940) and that it was not open to raise the question in execution proceedings and held that Section 47 of CPC applies to execution....
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.... principal debtor ought to have been taken in the suit; (F) Bhawarlal Bhandari v. Universal Heavy Mechanical Lifting Enterprises (1999) 1 SCC 558 where, while holding that the objection that the Arbitral Award was filed in the Court of Arbitrator four years after being passed and was barred by limitation and thus a nullity, having not been taken by way of Section 30 of the Arbitration Act, 1940, cannot be taken in execution of the award; it was again observed that Executing Court cannot go behind the decree, unless it is shown that it was passed by a Court inherently lacking jurisdiction and thus was a nullity; it was also observed that if the decree was passed beyond the period of limitation, it would be an error of law or at the highest, a wrong decision which can be corrected in appellate proceedings but not in execution; (G) Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman (1970) 1 SCC 670 laying down that an Executing Court cannot go behind the decree and must take the decree according to its tenor and cannot entertain any objection that the decree was incorrect in law or on facts; however when the decree is made by a Court which has no inherent jurisdiction ....
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....ent has the undoubted power to enact a special rule of law to deal with arbitrations and in fact, has done so; Parliament, in its wisdom, must be deemed to have had knowledge of the entire existing law on the subject and if it chose to enact a provision contrary to the general law on the subject, its wisdom cannot be doubted; accordingly, contention that a party to an arbitration proceedings is entitled to raise objections under Section 34 of the Arbitration Act, 1996 with regard to the jurisdiction of the Arbitral Tribunal, after the stage of submission of the written statement, was rejected; (N) Gas Authority of India Ltd. v. Keti Construction (I) Ltd. (2007) 5 SCC 38, which is not found to have any relevance to the present controversy; (O) Bharti Cellular Limited v. Department of Telecommunications (2012) 192 DLT 729 holding in the context of Section 34 of the Arbitration Act, 1996 that the lack of inherent jurisdiction of the Arbitrator to adjudicate the dispute has to necessarily be pleaded specifically and that if all the grounds of challenge are not taken to the impugned Award at the time of filing of the objection under Section 34 and are permitted to be r....
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....derstood in the context of the facts in which they were made. The context in MSP Infrastructure Ltd. was, whether petition under Section 34 of the Arbitration Act, 1996 on the ground of lack of jurisdiction can be preferred, even before the Arbitral Award has been announced and during the pendency of the arbitral proceedings and immediately after such an objection has been raised before the Arbitral Tribunal and in Bharti Cellular Ltd. was whether a plea of Arbitral Tribunal not having jurisdiction can be taken after the time prescribed for filing a petition under Section 34 and by way of amendment thereto. In both cases, objection of lack of jurisdiction in Arbitral Tribunal was sought to be taken in a manner in direct contravention of provisions of the Arbitration Act, 1996 i.e. by seeking to prefer a Section 34 petition during pendency of arbitral proceedings or by taking objection under Section 34 beyond the time prescribed in the Arbitration Act, 1996 therefor. 17. Here, however we are not concerned with any proceedings under the Arbitration Act. The proceedings under the Arbitration Act end on the challenge if made to the Arbitral Award being dismissed or on the challenge ....
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....he judgments cited by the senior counsel for the JDs No. 2 to 5 and Vasudev Dhanjibhai Modi supra cited by the counsel for DH. 21. I find a Co-ordinate Bench of this Court in Bijendra Kumar v. Pradeep Kumar to have also held that if an arbitral award is based on an illegal and void agreement, objection in that regard can be taken in proceedings for execution thereof, if not decided in proceedings under Section 34 of the Arbitration Act, 1996 and if the Executing Court finds merit therein, can dismiss the execution proceedings. 22. There appears to be a divergence of opinion in the High Court of Bombay in this respect. While in I.T.C. Ltd. v. Hanuman Vitamin Food Ltd. 1999 (2) LJ 345 and in Jaimal Shah v. Ila Pandya 2001 (2) Mh. LJ 297 it was held that such objections can be taken in proceedings for execution of arbitral awards, in R.K. Textiles v. Sulabh Textiles Pvt. Ltd. (2002) 4 Mh.L.J. 678 it was held that the plea that there was no arbitration agreement, cannot be entertained in execution proceeding. 23. The next question to be considered is whether the objection of the JDs No. 2 to 5 of the Arbitral Tribunal not having jurisdiction against them owing to (a) the dispu....
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....t JD No. 1 only and not against JDs No. 2 to 5. 26. DH has also filed before this Court the claim petition filed after the appointment of the sole Arbitrator by the Paper Merchants Association (Regd.) and in which besides JD No. 1, JDs No. 2 to 5 were impleaded as respondents No. 2 to 5. In the said claim petition, JD No. 1 is described as a private limited company in the business of publishing of school text books and the DH is described as a sole proprietorship of Mr. Chiman Lal Khanna carrying on business of supply of paper; a long business association has been claimed of supply and sale of paper for publishing the books; reference is also made to a complaint under Section 138 of the Negotiable Instruments Act, 1881 filed by DH against the "respondent"; there is no specific plea qua JDs No. 2 to 5 and it is not the case that JDs No. 2 to 5 gave any personal guarantee and there is no plea of piercing of the corporate veil. 27. The DH has also filed before this Court the affidavit by way of evidence filed before the sole Arbitrator and in which the JD No. 1 is described as a private limited company and JDs No. 2 to 5 as its Directors. There is no evidence in the said affidav....