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2006 (10) TMI 419 - SC - Companies LawWhether an arbitration award is a decree for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909? Whether an insolvency notice can be issued under section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an arbitration award? Held that - No insolvency notice can be issued under Section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an Arbitration Award. That execution proceedings in respect of the award cannot be proceeded with in view of the statutory stay under Section 22 of the SICA Act. As such, no insolvency notice is liable to be issued against the appellant. Insolvency Notice cannot be issued on an Arbitration Award. An arbitration award is neither a decree nor an Order for payment within the meaning of Section 9(2). The expression decree in the Court Fees Act, 1870 is liable to be construed with reference to its definition in the CPC and held that there are essential conditions for a decree . Thus the Insolvency Notice issued under section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of arbitral award which has been passed under the Arbitration & Conciliation Act, 1996. We answer the two questions in favour of the appellant.
Issues Involved:
1. Whether an arbitration award is a "decree" for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909? 2. Whether an insolvency notice can be issued under section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an arbitration award? Detailed Analysis: 1. Whether an arbitration award is a "decree" for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909? The court examined the nature and definition of a "decree" under the Civil Procedure Code (CPC) and compared it with an arbitration award. The key points discussed were: - Definition of Decree and Order: Section 2(2) of the CPC defines a "decree" as the formal expression of an adjudication by a court that conclusively determines the rights of the parties. Section 2(14) defines an "order" as the formal expression of any decision of a civil court which is not a decree. The court noted that an arbitrator is not a court, and an arbitration proceeding is not an adjudication by a court, making an award distinct from a decree. - Historical Context: The court referred to the historical context of the Arbitration Act, 1899, and the Civil Procedure Code, 1908, highlighting that the lawmakers were aware of the distinctions between decrees, orders, and awards. The court emphasized that the legal fiction created by Section 15 of the Arbitration Act, 1899, and Section 36 of the Arbitration and Conciliation Act, 1996, which treats an award as if it were a decree for enforcement purposes, does not equate an award to a decree for all purposes. - Case Law: The court cited several precedents, including Tribhuvandas Kalidas vs. Jiwan Chand (1911), Ramshai v. Joylall (1928), and Sidharth Srivastava v. K.K. Modi Investment & Financial Service P.Ltd. (2002), which consistently held that an award is not a decree within the meaning of the CPC and the Insolvency Act. 2. Whether an insolvency notice can be issued under section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an arbitration award? The court analyzed the provisions of the Presidency Towns Insolvency Act, 1909, and the amendments introduced by the Bombay Amendment of 1939 and the Central Amendment of 1978. Key points included: - Strict Construction: The court emphasized that the PTIA, 1909, is a statute with grave consequences for the debtor, leading to "civil death," and thus must be construed strictly. The court noted that the Act does not define "decree" or "order," relying on the well-settled definitions in the CPC. - Legislative Intent: The court highlighted the legislative intent behind the amendments, which aimed to address difficulties in executing money decrees and to protect creditors from dishonest debtors. The amendments introduced the concept of an insolvency notice based on a decree or order that has become final and enforceable. The court noted that the legislature consciously chose not to include awards within the scope of these provisions. - Legal Fiction: The court reiterated that the legal fiction created by treating an award as if it were a decree for enforcement purposes is limited to the context of enforcement under the CPC and does not extend to other statutes, including the Insolvency Act. - Practical Implications: The court observed that allowing insolvency notices based on arbitration awards would undermine the legislative intent and the strict construction required for the PTIA, 1909. The court also noted that arbitration awards, unlike decrees, do not result from adjudications by courts and are not subject to the same procedural safeguards. Conclusion: The court held that: 1. An arbitration award is not a "decree" for the purposes of section 9 of the Presidency Towns Insolvency Act, 1909. 2. An insolvency notice cannot be issued under section 9(2) of the Presidency Towns Insolvency Act, 1909, on the basis of an arbitration award. The court allowed the appeal, setting aside the order of the Division Bench of the High Court of Bombay, and concluded that the insolvency notice issued against the appellant was not sustainable.
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