Seat Of Arbitration Retains Jurisdiction Over Execution Proceedings Irrespective Of Location Of Judgment Debtor's Assets: Karnataka High Court

The Karnataka High Court bench of Justice M. Nagaprasanna has held that the seat court of an arbitration always retains jurisdiction over execution proceedings irrespective of where the award-debtor is located or has its assets, even when another execution petition is pending in another jurisdiction. Brief Facts The petitioner and the respondent company had entered into an exclusive consultancy agreement. Under the agreement, the petitioner was appointed as Exclusive Consultant and Design Director. The petitioner resigned as Director. Due to delays in the handover process, her service was extended with the respondent's consent. However, she was not paid remuneration for this extended period. Consequently, she issued a legal notice and invoked arbitration as per the agreement. The Court appointed an arbitrator. The arbitrator allowed her claims. The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) before the Commercial Court. Meanwhile, the petitioner filed an execution petition before the Court at Thane (where the respondent's registered office was located), which is pending. The Commercial Court dismissed the Section 34 petition. The petitioner then filed another execution petition in Bangalore. The petitioner sought declaration of movable property of the respondent at a particular address. The respondent filed a memo along with a deed of surrender of lease dated 26.09.2024, stating that it no longer had movable assets in Bangalore. The petitioner then filed an application under Order XXI Rule 41 of the Civil Procedure Code (“CPC”) seeking a direction to the respondent to file an affidavit disclosing particulars of its assets. The Commercial Court in its order dated 04.11.2024 rejected the application, holding that since the respondent had surrendered its lease in Bangalore, the Court did not have jurisdiction. The Court directed the petitioner to pursue attachment before the Thane Court. Aggrieved by this order, the petitioner approached the Court by way of a writ petition. Submissions Counsel for the Petitioner submitted that it is a settled principle of law that an arbitral award can be executed before any Court in the country where the judgment debtor has assets. Filing an execution in Thane does not prevent filing another one in Bangalore. He submitted that at the time of filing the execution, the respondent had movable assets in Bangalore. The respondent deliberately surrendered the lease of its Bangalore premises on 19.04.2024, a day before the matter was listed, to evade execution. Per contra, Senior counsel for the Respondent submitted that although execution may be filed anywhere, once the execution is filed at Thane, all subsequent actions should be pursued only there. The petitioner cannot choose multiple jurisdictions for the same execution. Presently, the respondent has no movable or immovable assets in Bangalore. Therefore, it cannot be compelled to file an affidavit of assets that do not exist. Observations On the 'Seat' of Arbitration The Court, in considering the question of jurisdiction for the seat of arbitration, had relied on the judgment in BGS SGS SOMA JV v. NHPC Limited (2020), wherein the Supreme Court observed: "Section 42 is meant to avoid conflicts in jurisdiction of courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one court exclusively.” The Court had held that Bangalore would be the seat of arbitration because the respondent Company had its business or a branch at Bangalore, where the petitioner was functioning. The Court referred to Patel Roadways Ltd. v. Prasad Trading Co., which interpreted Section 20 of the Code of Civil Procedure: "The clear intendment of the Explanation, however, is that, where the corporation has a subbordinate office in the place where the cause of action arises, it cannot be heard to say that it cannot be sued there because it does not carry on business at that place...". Since the respondent company operated in Bangalore, the Court held that the respondent could not argue that no cause of action arose there. Thus, the Bangalore court was deemed to have proper jurisdiction for the arbitration. Order XXI Rule 41 CPC is a step-in-aid of Execution The Court observed that the seat court retains jurisdiction to entertain applications under Order XXI Rule 41 CPC, as they are step-in-aid of execution. In this regard, the court referred to United Phosphorous Ltd. v. A.K. Kanoria (Bombay High Court) and State Bank of India v. M.K. Raveendran (Kerala High Court), where it was observed that “an application under Order XXI Rule 41 is not an application for execution of the decree but merely an aid to the decree holder to enable him to execute the decree by obtaining information which is within the special knowledge of...

Seat Of Arbitration Retains Jurisdiction Over Execution Proceedings Irrespective Of Location Of Judgment Debtor's Assets: Karnataka High Court

Tazeen Ahmed

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Seat Of Arbitration Retains Jurisdiction Over Execution Proceedings Irrespective Of Location Of Judgment Debtor's Assets: Karnataka High Court

Tazeen Ahmed

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