In a recent decision, the Allahabad High Court has rectified a significant error in a writ petition filed under Article 227 of the Constitution of India made by a Commercial Court in Jhansi regarding the execution of an arbitral award.
M/S Imagine Fashion Apparels Pvt. Ltd., a private limited company is engaged in the readymade garments business. After a dispute arose between the petitioner and the respondent, the matter was referred to the Facilitation Council under the Micro, Small and Medium Enterprises Act, 2006 (MSME Act). The Facilitation Council rendered an award in favor of the petitioner, directing the respondent to pay a specific amount. However, when the petitioner filed an execution application before the Commercial Court, Jhansi, the court erroneously directed the petitioner to take back the application and present it before the appropriate court, citing lack of territorial jurisdiction.
The petitioner argued that the execution proceedings under Section 36 of the Arbitration and Conciliation Act, 1996, could be initiated at any place where a decree could be executed. Reliance was placed on the Supreme Court’s judgment in Sundaram Finance Limited vs. Abdul Samad & Anr. (2018) 3 SCC 622, which clarified the jurisdiction for execution applications. The petitioner contended that as the respondent resided in Jhansi, it was within the jurisdiction of the Commercial Court to entertain the execution application.
On the other hand, counsel for the respondent, Tarun Agrawal and Rishabh Agarwal, argued that the order passed by the Commercial Court on 12.08.2021 was an appellable order under Section 96 of the Code of Civil Procedure (CPC), and therefore, a writ petition under Article 227 of the Constitution was not maintainable. They cited the Supreme Court’s decision in Sayyed Ayaz Ali vs. Prakash G. Goyal and others (2021) 7 SCC 456 to support their contention.
The court held that the Commercial Court’s order of returning the execution application on the grounds of lack of territorial jurisdiction was erroneous and against the law laid down by the Supreme Court in Sundaram Finance Limited (2018). The court emphasized that Section 36 of the Arbitration and Conciliation Act, 1996, provides for the enforcement of arbitral awards in the same manner as a decree of the court. Therefore, the filing of the execution application by the petitioner at the place where the respondent resides was within the jurisdiction of the Commercial Court.
The court set aside both the orders passed by the Commercial Court on 12.08.2021 and 21.08.2021, deeming them illegal and without jurisdiction. The Commercial Court, Jhansi, was directed to restore the execution case and proceed with it in accordance with the law.