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
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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