Objections U/S 47 CPC Cannot Be Allowed In Proceedings For Execution Of Arbitral Awards: Allahabad HC

The Court also imposed a heavy cost of Rupees Five Lacs on the State of Uttar Pradesh for frivolous litigation motivated to delay the proceedings and abuse the process of the Court.

The Bench of Justice Shekhar B Saraf observed, “An arbitral award is not in reality a decree of the Court as defined under Section 2(2) of the CPC, 1908. Therefore, objections under Section 47 of the CPC, 1908 cannot be allowed in proceedings under Section 36 of the Act. Allowing objections under Section 47 of the CPC, 1908 to be raised in execution proceedings under Section 36 of the Act will undermine the finality and binding nature of arbitral awards...Once objections are dismissed under Section 34 of the Act, and appeal under Section 37 of the Act also stands adjudicated, an arbitral award attains finality. Any objections regarding the validity of an arbitral award are impermissible under Section 36 of the Act.”

AAG Manish Goyal appeared for the Petitioners whereas Senior Advocate Anurag Khanna appeared for the Respondents.

The State of Uttar Pradesh, by way of a writ petition, assailed the order passed by the Commercial Court rejecting the objection filed under Section 47 of the CPC. The Petitioner-State and Respondent had entered into a contract for the construction of cross drainage, siphon at Km 5.355 of the main canal under the Madhya Ganga Canal-Phase II Project in Bijnor.

The primary question involved revolves around the applicability of Section 47 of the CPC to execution proceedings under Section 36 of the Arbitration and Conciliation Act, of 1996. The Court placed its reliance on a recent judgment in Dhurandhar Prasad Singh v. Jai Prakash University (SC), Pradeep Mehra v Harijivan J. Jethwa (Thr. LRs.) & Ors. (SC), Hindustan Zinc Ltd. v. National Research Development Corporation(DHC), Sanjay Agarwal v. Rahul Agarwal(All HC) and others.

The Court held, “Execution proceedings, far from being a battleground for a rematch on the merits of the arbitral award, serve as the denouement of the legal drama – a final act in which the award holder claims their just reward. Like the closing scene of a play, execution proceedings bring the curtain down on the dispute, allowing the parties to turn the page and move forward. To raise objections under Section 47 of the CPC, 1908 in the execution proceedings would be akin to attempting to rewrite the script of a play after the final curtain call – a futile endeavour that serves only to prolong the agony of litigation and delay the inevitable conclusion.”

It was observed that the courts must be mindful of execution proceedings under Section 47 of the CPC, 1908 being used as a means to unnecessarily obstruct the execution proceedings. Meritless, and frivolous objections under Section 47 of the CPC, 1908 must be dealt with strongly, it said.

The Court also observed that the parties’ failure to raise timely objections under Section 34 and Section 37 of the Act will not entitle them to raise these grounds at a later stage by invoking the writ jurisdiction under the Constitution of India. Writ jurisdiction is extremely limited and cannot be treated as a second chance at the cherry, it further said.

The Court also said that the writ jurisdiction under Article 226 and Article 227 of the Constitution of India cannot be invoked to challenge an arbitral award as the Arbitration and Conciliation Act, 1996 is a complete code in itself and any challenge to the validity of an arbitral award has to be raised within the mechanisms provided by the Act itself. Only under exceptional circumstances, a writ court can interfere with an arbitral award or execution proceedings under Article 226 and Article 227 of the Constitution of India, it further stated.

Further, the Court discussed the law on imposition of costs and relied on the reportable judgment of the Apex Court in Vinod Seth v Devinder Bajar and Anr. (2010 SC) and Ramrameshwari Devi and Ors. v. Nirmala Devi and Ors. (2011 SC), and held, “In conclusion, the imposition of costs in cases of frivolous litigation is not merely a punitive measure but rather an essential tool for maintaining the integrity of the judicial system, deterring abuse of legal processes, and promoting access to justice. By holding litigants accountable for their actions and imposing costs when warranted, the legal system reaffirms its commitment to upholding the principles of justice, fairness, and equity for all members of the society.”

The Court, consequently, directed, "Accordingly, for the reasons discussed above, the instant writ petition is dismissed as frivolous, vexatious, motivated and being an abuse of the process of this Court. Costs of Rs.5,00,000/- are imposed to be paid by the Petitioners to the Respondent within four weeks from the date of this Judgment… Imposition of costs in cases of frivolous litigation is not intended to discourage legitimate claims but rather to deter abuse of the legal system. Courts have the discretion to differentiate between cases where parties genuinely believe in the merit of their claims and those where litigation is pursued for ulterior motives or without any reasonable basis. By imposing costs in cases where litigation is found to be frivolous or vexatious, courts strike a balance between deterring abuse and ensuring access to justice for legitimate claimants."

Accordingly, the Court dismissed the writ petition and directed the Petitioners to file an affidavit of compliance after making the payment in aforesaid terms within five weeks from the date of the order.

Recently, the Karnataka High Court had also observed that an arbitral award passed is required to be construed as a decree only for the purposes of enforcement and Section 47 of the CPC, cannot be invoked for such proceedings.

Cause Title: State of U.P. and Ors. v. Shri Raj Veer Singh (Neutral Citation: 2024:AHC:66171)

Appearances:

Petitioners: AAG Manish Goyal, ACSC Ashok Kumar Goyal

Respondent: Senior Advocate Anurag Khanna and Advocate Punit Kumar Gupta

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