Thursday, 14 April 2016

Whether arbitral Tribunal can enforce its own order by appointing Advocate Commissioner/Receiver?

 To sum up the discussions as above, it has to be declared


that the Arbitral Tribunal cannot pass an order to enforce its order by



directing the Advocate Commissioner/Receiver to repossess the


vehicle from the opposite party. It is made clear that the Advocate


Commissioner or Receiver as the case may be, can be appointed for


any other purpose, but not to enforce an order of repossession


passed by the Tribunal.    Any order of repossession can only be


enforced through a civil court.

The repossession of the vehicles by enforcing the order of


the Arbitral Tribunal without the intervention of the civil court,


therefore, has to be treated as violation of Article 21 of the


Constitution of India.   
IN THE HIGH COURT OF KERALA AT ERNAKULAM

                           PRESENT:

        THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE

  WEDNESDAY, THE 16TH DAY OF MARCH 2016.
                 WP(C).No. 38725 of 2015 (M)
               
               PRADEEP K.N.
              Vs

            THE STATION HOUSE OFFICER,
              

                  A.MUHAMED MUSTAQUE, J.
                ~~~~~~~~~~~~~~~~~~~~~~~~~
                        W.P.(C).Nos.
                      38725/2015   7932/2016
                      39542/2015   8667/2016
                       4325/2016   9660/2016
                       4333/2016      &
                       7435/2016  10044/2016
    

     The common question of law in all these writ petitions is


regarding enforcement of the interim order issued under Section 17


of the Arbitration and Conciliation Act, 1996 (Act 26 of 1996) as


amended by the Act 3 of 2016, by the Arbitral Tribunal.


     2.   The writ petitioners have availed vehicle loans from


finance companies, which have been arrayed as party respondents in


the writ petitions.  They have approached this Court raising a


grievance to the effect that the interim order passed by the Arbitral


Tribunal is enforced/being attempted to be enforced without putting


the orders for enforcement, following the procedures under the Code


of Civil Procedure, before the Principal Civil Court.


      3.    Before proceeding to consider the questions that have


arisen for consideration, it is appropriate to refer the power of this


Court to interfere with an order passed by the Arbitral Tribunal. The


Constitution of the Arbitral Tribunal is referable to a Contract. The


jurisdiction, therefore, is based on a Contract. The Arbitration and


Conciliation Act, 1996 is enacted essentially for the recognition of the


award and its enforcement.


      4.    The jurisdiction of this Court invoking power of Article 226


of the Constitution cannot be used directly to interfere with the


interim order or award as the Arbitral Tribunal cannot be considered


as a State within the meaning of Article 12 of the Constitution nor the


award can be subjected to a judicial review. Further, the Arbitral


Tribunal is not a Tribunal within the meaning of Tribunal as referred


under Article 227 of the Constitution (See judgment of this Court in


Daison v. Varghese Jose [2016 (1)KLT 612]. However, when an


order/award    issued  by    the   Arbitral Tribunal   impinges     the


fundamental rights of a citizen in the colour of exercise of the


authority stemmed from the Statute, certainly, this Court can step


into, to restore the rights of the citizen to the limited extent to


restore the right which has been taken away by enforcing of an


order/award without any authority.



      5.    Before the amendment to the Arbitration Act, 1996 which


came into effect from 23/10/2015 inserted by Act 3 of 2016, the


interim order passed by the Arbitral Tribunal could not be enforced


as an order of the civil court. Prior to the substitution of Section 17,


the Arbitral Tribunal had also power under Section 17 to order


interim measures. However, wider power was conferred on the civil


court to pass orders for interim measures before or during arbitral


proceedings or at any time after making of the arbitral award under


Section 9 of the Act 26 of 1996. However, substantial changes have


been made after amendment Act 3 of 2016 crippling the power of


the civil court to pass an interim order by inserting sub-section 3 to


Section 9. Under Section 9(3) the Court can entertain an application


for interim measures only if the Court finds that circumstances exist


which may not render remedy to grant interim orders by the Tribunal


efficacious. After the amendment by Act 3 of 2016, under Section 17,


the Arbitral Tribunal is conferred with an enormous power which


otherwise is conferred with a Civil Court to pass order for interim


measures.    In terms of Section 17(2) of the amended Act, these


interim orders are also enforcible in the same manner as if it were an


order of civil court. Section 17(2) reads as follows:


                  "17(2) Subject to any orders passed in an appeal
            under section 37, any order issued by the arbitral tribunal
            under this section shall be deemed to be an order of the
            Court for all purposes and shall be enforceable under the
            Code of Civil Procedure, 1908 (5 of 1908) in the same
            manner as if it were an order of the Court."

      6.    In M.D. Army Welfare Housing Organisation v.


Sumangal Services Pvt. Ltd. [(2004) 9 SCC 619], it was held by the


Hon'ble Supreme Court that no power was conferred on the Arbitral


Tribunal to enforce its order nor does it provide for judicial


enforcement thereon. In Sri Krishan v. Anand [(2009) 3 Arb LR 447


(Del)], the Delhi High Court held that any persons failed to honour


an interim order of the Arbitral Tribunal deemed to be "making any


other default" or "guilty of contempt to the Arbitral Tribunal during


the conduct of the proceedings" in terms of section 27(5) of Act 26 of


1996.    Faced with dilemma on account of lack of provisions to


enforce interim orders, the Law Commission suggested for making


provisions to provide teeth to the orders of the Arbitral Tribunal by


incorporating measures for enforcement. The Law Commission was


of the view that the judgment of the Delhi High Court in Sri


Krishan's case (supra) is not a complete solution. The Commission


made the following suggestions:



                  "The Commission has, therefore, recommended
           amendments to section 17 of the Act which would give
           teeth to the orders of the Arbitral Tribunal and the same
           would be statutorily enforceable in the same manner as
           the Orders of a Court. In this respect, the views of the
           Commission are consistent with (though do not go far as)
           the 2006 amendments to Article 17 of the UNCITRAL
           Model Law."


      7.   Thus, the above suggestions itself make it clear that the


Legislature never had intended the Arbitral Tribunal's order to be


enforced by the Tribunal itself. The intention behind is only to ensure


that the order is enforced in a manner provided under the Code of


Civil Procedure, enforcing an order of such court.


      8.   It is to be noted that the legislature used "enforcement"


interchangeably in the context of different provisions of the Act 26 of


1996 as amended by the Act 3 of 2016. In terms of Section 17(2),


"enforcement" means causing implementation of the order.           The



enforcement of an interim order under Section 17(2) is on account of


disobedience to the interim order. Therefore, it need not follow the


same procedure as contemplated in "execution".             It can be


implemented in a like manner as the Court exercises its power under


Section 27(5) of the Act 26 of 1996. It is also appropriate to refer


Section 94 of the Code of Civil Procedure for the Court to enforce


such orders. Section 94 of the Code of Civil Procedure provides as


follows:


               "94. Supplemental Proceedings.-In order to prevent
           the ends of justice from being, defeated the Court may, if
           it is so prescribed,-
                  (a) issue a warrant to arrest the defendant and bring
                  him before the Court to show cause why he should
                  not give security for his appearance, and if he fails
                  to comply with any order for security commit him
                  so the civil prison;

                  (b) direct the defendant to furnish security to
                  produce any property belonging to him and to


                  place the same at the disposal of the Court or order
                  the attachment of any property;

                  (c) grant a temporary injunction and in case of
                  disobedience commit the person guilty thereof to
                  the civil prison and order that his property be
                  attached and sold;

                  (d) appoint a receiver of any property and enforce
                  the performance of his duties by attaching and
                  selling his property;

                  (e) make such other interlocutory orders as may
                  appear to the Court to be just and convenient."


      9.   It is to be noted that nowhere in Section 17(2) of the Act


26 of 1996, Legislature mandated to follow the procedure of


execution to implement the interim order.


      10.  The civil court while enforcing interim order of the Arbitral


Tribunal has to treat the order as if it were issued under the Code of


Civil Procedure. Section 2(14) of the Code of Civil Procedure Code


defines order as follows:



                    "(14) "order" means the formal expression of any
              decision of a Civil Court which is not a decree."


Thus, the court while considering an application under Section 17(2)


of the Act 26 of 1996 shall resort to Section 94 of the Code of Civil


Procedure to enforce the interim order of the Arbitral Tribunal and


need not require to follow any procedure as contemplated for


execution under the Code of Civil Procedure.


      11.    However, enforcement of the final award under Section


36 of the Act 26 of 1996 is like an execution of the decree. The


execution arises in the context of non compliance of the award which


is distinct from disobedience to honour an interim order. The court


has to follow the procedure for execution of the decree.          The


enforcement in relation to foreign award under Section 48 of the Act


26 of 1996 is a prerequisite satisfaction for execution of the foreign


award. It is only after satisfying that the award is enforcible, the court


can proceed further for execution. Thus, it has to be understood that


the Legislature has given a different meaning to "enforcement" under


Section 17, 36 and 48 of the Act 26 of 1996.


      12.   There cannot be any doubt that after amendment, the


Arbitral Tribunal would possess the same power for making orders as


the Court had before the amendment for the purpose of, and in


relation to, any proceedings before it. The Arbitrator also can order


repossession of the vehicle. But the question is, when an order is not


obeyed or honoured by the parties, can the order be enforced like an


order of the civil court, by the Tribunal or by the party.


      13.   "Enforcement" is defined under the Blacks law dictionary


as follows:



                  "Enforcement.The act of putting something such as
            a law into effect; the execution of a law; the carrying out
            of a mandate or command."


Enforcement implies a force to implement. The law enforcement is a


Sovereign and State function. The nature of the Arbitral Tribunal's


composition emanates from a contract though, the powers of the


Arbitral  Tribunal   is  governed     by  the     Statutory  provisions.


Nevertheless, it confers no power on the Tribunal to enforce its own


order. Conferring the power of the Civil Court to the Tribunal for


passing an interim order does not mean that the Tribunal is conferred


with the power of enforcement. The Tribunal, by its constitution or


creation, inherently lacks power to deal with any sovereign function


or public law in the sense that their authority is founded in a contract


and power is regulated by the statute.



      14.   The nature of the power vested with the Arbitral Tribunal


is also discernible from Section 27 of the Act 26 of 1996. The Arbitral


Tribunal has to apply to the Court for assistance in taking evidence.


It is for the Court to ensure that such request is implemented by


passing appropriate orders.     In Daison's case, this Court held at


para.26 as follows:

                  "26. The test evolved by the Supreme Court may be
            applied to the case under consideration. Has the arbitral
            tribunal constituted under the Arbitration and Conciliation
            Act 1996 the trappings of a court. The Act contains no
            provision empowering the tribunal to compel witnesses
            to appear before it. If it wants to compel appearance of
            witnesses, it has to take the assistance of a court as
            provided in Section 27 of the Act."


      15.   The issue in this context has arisen from the orders


passed by the Arbitral Tribunal under Section 17 of the Act 26 of


1996. Some of the interim orders are reproduced hereunder.


      16.i. The Arbitral Tribunal in the order on I.A.No.50 of 2015 in


Arbitration Case No.112 of 2015 (produced as Ext.P4 in W.P.(C).


No.4325/2016) held at para.7 as follows:


            "7.  Therefore as measure of protection of this subject
            matter of loan and secured asset, I hereby order the
            respondents to handover the secured asset vehicle
            namely, Hyundai Verna VTVT bearing Reg.No.KL-07/BZ-
            4575, to the Advocate Commissioner appointed herein for
            placing and preserving the secured asset in the yard of
            the claimant.     For the purpose I hereby appoint
            Adv.Sri.Sangeeth.C.U., 23/1122, Palluruthy, P.O., Kochi-682
            006 an Advocate as Advocate Commissioner to take
            possession of the above referred vehicle from the
            possession of the respondents and place the vehicle in
            the yard of the claimant for preservation, maintenance
            and safe custody of the vehicle until further orders.
            Commission batta is fixed as Rs.1000/-. I also direct the
            Station House Officer, concerned Police Station to render
            necessary    protection/assistance   to    the    Advocate
            Commissioner for this purpose.


      16.ii. The Arbitral Tribunal in the order on I.A.No.535 of 2015 in


Arbitration Case No.611 of 2015 (produced as Ext.P5 in W.P.(C).


No.39542/2015) held at para.7 as follows:


             "7.   Therefore as measure of protection of this subject
             matter of loan and secured asset, I hereby order the
             claimant to take possession of the secured asset vehicle
             namely     MARUTI      SUZUKI     ERTIGA     VDI    bearing
             Reg.No.KL/37-B-6390, respondents or from whomsoever
             the vehicle is found and order the respondents to
             handover the said secured vehicle to the claimant for
             placing and preserving the secured asset in the yard of
             the claimant. Advocate Commissioner appointed herein
             may report the process to this Tribunal. For this purpose,
             I   hereby    appoint     Adv.Sri.Sangeeth.C.U.,   23/1122,
             Palluruthy, P.O., Kochi-682 006 as Advocate Commissioner
             for reporting to this Tribunal the process of taking over of
             possession of the secured vehicle by the claimant from
             the respondents or from whomsoever the vehicle is found
             and as to the placing the vehicle in the yard of the
             claimant for preservation, maintenance and safe custody
             of the vehicle till further orders.   Commission batta is
             fixed   as   Rs.2500/-.      Of   course,   the   Advocate
             Commissioner and claimant are entitled to seek the



            assistance of the Station House Officer of the concerned
            Police Station, if there is any threat to their person or life
            in the process of the claimant taking repossession of the
            vehicle."


      17.   The interim orders in all these writ petitions are in the


nature of appointment of an Advocate Commissioner/Receiver to


repossess the vehicle either directly or with the assistance of police.


      18.   As has been adverted above, the enforcement itself


signifies that there must be a force to put the order in motion, to


ensure that the party bound by the order is complied with such


order.   The Arbitral Tribunal's by very nature of its composition


cannot exercise any such power vested with the court, which


discharges sovereign function.


      19.   To sum up the discussions as above, it has to be declared


that the Arbitral Tribunal cannot pass an order to enforce its order by



directing the Advocate Commissioner/Receiver to repossess the


vehicle from the opposite party. It is made clear that the Advocate


Commissioner or Receiver as the case may be, can be appointed for


any other purpose, but not to enforce an order of repossession


passed by the Tribunal.    Any order of repossession can only be


enforced through a civil court.


      20.  The repossession of the vehicles by enforcing the order of


the Arbitral Tribunal without the intervention of the civil court,


therefore, has to be treated as violation of Article 21 of the


Constitution of India.    In the colour of statutory backing, the


Tribunal's order has been allowed to be enforced without any


statutory authority. The encroachment into a public law field in a


private law remedy is nothing but a sheer abuse of process of law.


The citizen has to be safeguarded against such arbitrariness.


Therefore, the writ petitions are maintainable to the extent nullifying


an act done by encroaching into public law power, by exceeding


power conferred under the private law.         All the writ petitions,


therefore, are disposed of in the light of the facts involved in each


case.


      21.   W.P.(C).No.39542/2015:

      In this case a vehicle has been seized pursuant to an interim


order dated 11/11/2015 and sold in public auction. It is the case of


the respondents that the vehicle has been surrendered by the writ


petitioner voluntarily. It is submitted that the respondents did not


enforce the order passed by the Tribunal. In such circumstances, this


Court is of the view the disputed question of fact cannot be entered


into by this Court under Article 226 of the Constitution. If the writ



petitioner has a case that he has not surrendered the vehicle, he is at


liberty to seek appropriate relief before the competent court or


before the civil court, challenging the interim order as illegal


repossession. With that liberty W.P.(C).No.39542/2015 is closed.


      23.   W.P.(C).No.4325/2016: In this case an interim order was


passed for repossession of the vehicle. The case of the company is


that the writ petitioner voluntarily brought the vehicle to the


Palarivattom Police Station and parked in the said premises. It is


further stated that since the petitioner did not turn up for collecting


the vehicle, the company took possession of the vehicle from the


station premises.


      23.i. The facts as such would show that this plea has been


raised, with an intention to justify repossession of the vehicle. It is



apparent that the vehicle has been repossessed by enforcing the


interim order, by the Advocate Commissioner. In such circumstances,


the possession of the vehicle has to be restored to the petitioner,


forthwith.


      24.   W.P.(C).No.4333/2016: In this matter, the vehicle has not


been repossessed so far. Therefore, this Court is of the view that if


the respondent-company is armed with any order passed by the


Arbitral Tribunal, they are free to enforce such order through the civil


court.

      25.   W.P.(C).No.9660/2016: In this case the vehicle has been


repossessed by enforcing the order of the Arbitrator. Admittedly, the


respondent-company did not approach the civil court to enforce the


order. Therefore, this Court is of the view that the possession of the


vehicle has to be restored to the petitioner forthwith.



      26.   W.P.(C).No.7932/2016: In this case, the vehicle has been


seized pursuant to the interim order passed the Arbitrator. It is the


case   of  the   respondent-company       that  when    the   Advocate


Commissioner went to the premises of the petitioner without police


assistance, the Advocate Commissioner was threatened by the writ


petitioner.   Thereafter, the Advocate Commissioner with the


assistance of Sub Inspector of Police, Kodanad Police Station went to


the house of the writ petitioner and the petitioner's father voluntarily


surrendered the vehicle without making any issue.


      26.i. This Court is of the view there is nothing to show that the


vehicle has been surrendered by the petitioner. The police acted on


the interim order of the Arbitral Tribunal to enforce the order without



any authority vested in it. Therefore, the possession of the vehicle


has to be restored to the writ petitioner forthwith.


      27.   W.P.(C).No.8667/2016: In this case, the vehicle has been


seized pursuant to the interim order of the Arbitral Tribunal. The


respondents' case is that the petitioner had voluntarily surrendered


the vehicle to the respondent-company.         It is to be noted that


nothing has been produced before this Court to show that the


petitioner had voluntarily surrendered the vehicle to the respondent-


company. Therefore, this Court is of the view that the possession of


the vehicle has to be restored to the petitioner forthwith.

      28.   W.P.(C).No.7435/2016: In this case the vehicle has been


seized pursuant to the interim order of the Arbitral Tribunal. The


respondent-company justified seizing the vehicle stating that the


Tribunal has the same power as that of the civil court, to enter into a


building for taking possession of the vehicle of the subject matter.


The possession of the vehicle has to be restored to the petitioner


forthwith.

      29.   W.P.(C).No.10044/2016: In this case though an interim


order has been passed for repossession, the vehicle is yet to be


repossessed. Therefore, this Court is of the view that the respondents


are free to enforce the interim order in accordance with Section 17(2)


of the Act 26 of 1996, as amended by the Act 3 of 2016.

      30.   W.P.(C).No.38725/2015:


      In this case the vehicle is yet to be repossessed based on the


order passed by the Arbitral Tribunal. Therefore, the respondents are


restrained from repossessing the vehicle otherwise than through the


intervention of the civil court.


      31.   However, the petitioners to whom the possession of the


vehicles have been restored pursuant to the direction of this Court,


shall not transfer or alienate the vehicles. They shall make available


the vehicles as an when demanded by the civil court. It is made clear


that if any one of the writ petitioners alienate or transfer the vehicles


after restoring possession, they would be doing it at their own risk


warranting contempt of Court action by this Court.


      32.   The respondent-finance company are free to take


measures for enforcement of Arbitral award in the light of the


discussions as above with the intervention of the civil court. The


Registry is directed to forward a copy of this judgment to the


Director General of Police.     The Director General of Police shall


thereafter, issue a Circular to all the subordinates instructing not to


provide assistance to enforce the order passed by the Arbitral


Tribunal without the direction of the civil court. No costs.




                               A.MUHAMED MUSTAQUE, JUDGE


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