Godolphine INDIA Private Limited vs. Um Projects LLP

Facts

The petitioner, Godolphine India Private Limited, is the judgment debtor aggrieved by an order dated April 22, 2022, passed by the LXXXIII Additional City Civil and Sessions Judge, Bangalore (Commercial Court), attaching its bank account to the extent of Rs. 97,58,580/-. The respondent, UM Projects LLP, is the decree holder. The respondent had filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, before the Commercial Court seeking payment of outstanding rent and maintenance charges amounting to Rs. 1,93,41,675/-. The Commercial Court allowed this application by an order dated March 4, 2022. The petitioner appealed this order, but the Division Bench of the High Court dismissed the appeal, confirming the Commercial Court's order. Subsequently, the respondent initiated execution proceedings, leading to the impugned order attaching the petitioner's bank account.

Held

The Court held that the impugned order does not contravene Order XXI Rule 22 of the CPC. The execution application was filed in 2022, and the order under Section 9 of the Arbitration and Conciliation Act, 1996, was passed on March 4, 2022. Under Order XXI Rule 22(1) of CPC, no notice is required if an application for execution is made within two years from the date of the last order. Therefore, the petitioner's contention regarding the violation of Order XXI Rule 22 is not tenable. Regarding the second issue, the Court found the petitioner's argument that the Court cannot entertain an application once an arbitral tribunal is constituted to be misconceived. Relying on the Apex Court's judgment in Arcelor Mittal Nippon Steel India Ltd. Vs. Essar Bulk Terminal Limited, the Court held that if an application for interim relief under Section 9 has been 'entertained' (taken up for consideration) by the Court and the Court has applied its mind, it can proceed to adjudicate the same even after the constitution of the Arbitral Tribunal. Since the Commercial Court had dealt with and allowed the Section 9 application before a sole arbitrator was appointed, the restriction under Section 9(3) of the Act does not apply. The Court concluded that the petitioner cannot resist execution proceedings and the respondent is entitled to execute the order passed by the Commercial Court.

Key Issues

1. Whether the impugned order attaching the bank account is in gross violation of the principles of natural justice, specifically concerning the issuance of a show-cause notice under Order XXI Rule 22 of the Code of Civil Procedure, 1908, given that the execution application was filed more than two years after the date of the decree? 2. Whether the respondent-decree holder can file an execution to recover an amount that is the subject matter of arbitration before the commencement of arbitral proceedings, or if the remedy lies solely before the Arbitration Tribunal? Petitioner's Arguments: - The impugned order violates principles of natural justice due to the failure to issue a show-cause notice as required by Order XXI Rule 22 of CPC, especially since the execution was levied more than two years after the decree. - The remedy for the parties lies before the Arbitration Tribunal, and the respondent cannot file an execution for an amount pending arbitration. - The Executing Court misinterpreted Section 9 of the Arbitration and Conciliation Act, 1996, particularly after its amendment, making the prior order inapplicable. Respondent's Arguments: - Orders passed under Section 9 of the Arbitration and Conciliation Act, 1996, are executable under Order XXI and Section 36 of CPC, as held by the Apex Court in various judgments, including State of Karnataka vs. Vishwabharathi House Building Co-Operative Society and Mysuru Manganese Company (P) Limited vs. Prakash Natural Resources Limited. - An order under Section 9 assumes the status of a decree when it adjudicates the rights of the parties. - The petitioner's conduct is unfair and does not warrant interference.