Case title: 

M/S Imagine Fashion Apparels Pvt Ltd v. Presiding Officer Commercial Court & Anr.

Date of Order: 

18th May 2021

Bench: 

Hon’ble Mr. Justice Rohit Ranjan Agarwal

Parties: 

Petitioner(s): M/S Imagine Apparels Pvt Ltd

Respondent(s): Presiding Officer Commercial Court & Anr.
 

SUBJECT:

The Hon’ble High Court of Allahabad (hereinafter referred to as ‘the High Court’ or ‘the Court’) dealt with the writ petition filed by M/S Imagine Fashion Apparels Pvt Ltd against the impugned orders of the Commercial Court of Jhansi. The Commercial Court had erred in its judgment directing the petitioner to withdraw the application and subsequently dismissing it. The High Court, recognizing the jurisdictional error, set aside both orders emphasizing the applicability of the Civil Procedure Court in enforcing arbitral awards and directing the Commercial Court to reinstate the execution in accordance with the law.

IMPORTANT PROVISIONS

The Code of Civil Procedure, 1908 (CPC):

• Order VII Rule 10
• Order VII Rule 11(d)
• Order VII Rule 11(f)
• Section 2(2)
• Section 96

The Constitution of India, 1950:

• Article 227

The Companies Act, 1956

Micro, Small and Medium Enterprises Act, 2006 (MSMED):

• Section 18

The Arbitration and Conciliation Act, 1996 (ACA):

• Section 36
• Section 32
• Section 34

OVERVIEW:

• The Petitioner, a private limited company engaged in the business of readymade garments, was in a dispute with the respondents. The parties share a supplier-buyer relationship. The matter was referred to the Facilitation Council under the MSMED under section 18.
• The Facilitation Council issued an order in favour of the petitioner, instructing the respondents to make a specific payment.
• However, when the petitioner submitted an execution application under section 36 of the ACA to the Commercial Court in Jhansi, the court erroneously gave instructions to withdraw the application and file it with the appropriate court, citing a lack of territorial jurisdiction.
• Later, the Commercial Court found that the petitioner had not withdrawn the case within the specified time and consequently dismissed the case under Order VII Rule 11(d) and (f) of CPC.
•  The petitioner has challenged the two orders of the Commercial Court in Jhansi, in this petition filed under Article 227 of the Constitution in the High Court.

ISSUES RAISED:

• Whether the Commercial Court in Jhansi had territorial jurisdiction in Misc. Case No. 78 of 2021?
• Whether the Commercial Court’s order was in adherence with the legal validity?

ARGUMENTS ADVANCED BY THE PETITIONER:

• The Commercial Court was incorrect in passing the impugned orders.
• Proceedings under section 36 of ACA can be made anywhere a decree can be executed.
• The Supreme Court’s judgment in the case of Sundaram Finance Limited v. Abdul Samad & Anr supports their argument, and the commercial court’s order goes against this judgment.
• The arbitral proceedings concluded with the final award from the Facilitation Council with no objections, thereby initiating the proceedings under section 36.
• The execution proceedings were rightfully started as respondent No. 2 resides in Jhansi.

ARGUMENTS ADVANCED BY THE RESPONDENT

• The dismissal of the application was based on the non-compliance of the earlier order, which amounted to a decree under Order VII Rule 11(d) and (f) of CPC
• The present writ petition under Article 227 is not the appropriate remedy, citing Sayyed Ayaz Ali v. Prakash G. Goyal and Ors.
• An appeal under section 96 of CPC would be appropriate.

JUDGEMENT ANALYSIS:

• The law regarding the filing of an execution application under CPC to enforce an award has already been settled by the Sundaram Finance Limited case (supra).
• The commercial court’s order goes against the Supreme Court’s judgment.
• The lower court made an error in using the power of Order VII Rule 10 of CPC and directing the petitioner to return the application to be presented before the correct court.
• Section 36 of the ACA makes it clear that the provisions of the CPC are applicable for enforcing an award, treating it as a decree.
• Filing the execution case where respondent No. 2 resides is well within the commercial court’s territorial jurisdiction.

CONCLUSION

The High Court set aside the orders passed by the commercial court as entirely erroneous. Evaluating the specifics of the case, the Court concluded that both the orders dated 12.08.2021 and 21.08.2021 are illegal, devoid of jurisdiction, and in defiance of the directives laid down by the Supreme Court. The High Court approved the writ petition and instructed the Jhansi commercial court to reinstate the execution case and proceed with it in strict accordance with the law.