Venue Restriction Provision Contained In Section 42 of A&C Act, Not Applicable To Proceedings Seeking Enforcement Of Award: Delhi High Court

The Delhi High Court has reiterated that Section 42 of the Arbitration and Conciliation Act, 1996 (A&C Act) would have no application to proceedings seeking enforcement of arbitral award. The bench of Justice Yashwant Varma noted that execution application is neither an "arbitral proceeding" within the meaning of Section 42 of the A&C Act, nor is it a subsequent application arising out of the arbitration agreement and thus, the venue restriction provision contained in Section 42 would have no application to enforcement proceedings. The Court added that an Office Memorandum, which required the Public Sector Unit (PSU) to release the award amount subject to the claimant/ award holder furnishing a bank guarantee, in case where the arbitral award was challenged by the PSU, was merely an advisory. The Court concluded that the said Office Memorandum cannot bind the powers of the Court under Section 36 of the A&C Act. The petitioner/ award holder Ramacivil India Constructions filed a petition before the Delhi High Court seeking enforcement of the arbitral award passed by the Sole Arbitrator. The Judgment Debtor/ Union of India, submitted before the High Court that it had challenged the arbitral award by filing an application under Section 34 of the A&C Act before the Commercial Court in Dehradun, which was dismissed on ground of lack of jurisdiction. The Union of India submitted that against the order of the Commercial Court, an appeal under Section 37 of A&C Act was pending before the Uttarakhand High Court. Thus, it argued that in view of Section 42 of the A&C Act, the enforcement petition was not maintainable before the Delhi High Court. Section 42 of the A&C Act provides that where with respect to an arbitration agreement, any application under Part I of the A&C Act has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings. Thus, all subsequent applications arising out of that agreement and the arbitral proceedings, shall be made in that Court and in no other Court. The Judgment Debtor/ Union of India placed reliance on the Office Memorandum, dated 5th September, 2016, which provided that in cases where a Public Sector Unit (PSU)/ Department has challenged the Arbitral Award, it may make a deposit of only 75% of the Award amount in a designated Escrow Account, which may be released only after the claimant/ award holder furnishes a bank guarantee. The High Court ruled that the appeal filed by the Union of India under Section 37 of the A&C Act before the Uttarakhand High Court, would not fall within the ambit of Section 42. Referring to the decision of the Division Bench of the Delhi High Court in Vijay Gupta versus Renu Malhotra (2008), the Court reiterated that the venue restriction provision contained in Section 42 of the A&C Act would have no application to enforcement proceedings. The Court noted that the Delhi High Court in Vijay Gupta versus Renu Malhotra (2008) had held that execution application is neither "arbitral proceedings" within the meaning of Section 42 of the A&C Act, nor is it a subsequent application arising out of the arbitration agreement. Further, the bench reckoned that the said Office Memorandum dated 5th September, 2016, as relied upon by the Union of India, was an advisory issued to various Public Sector Undertakings and that it cannot bind the powers of the Court under Section 36 of the A&C Act for enforcement of the arbitral award. Holding that the enforcement petition was maintainable before the Delhi High Court, the Court directed the judgement debtor to deposit the entire amount in terms of the Arbitral Award, with the registry. Case Title: Ramacivil India Constructions Pvt Ltd versus Union of India Citation: 2022 LiveLaw (Del) 1171Counsel for the Decree Holder: Mr. Avinash K. Trivedi and Mr. Anurag Kaushik, Advs Counsel for the Judgment Debtor: Ms. Monika Arora, CGSC for UOI with Mr. Yash Tyagi, Adv Click Here To Read/Download Order

Venue Restriction Provision Contained In Section 42 of A&C Act, Not Applicable To Proceedings Seeking Enforcement Of Award: Delhi High Court

Parina Katyal

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