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Judgment
Vivek Rusia, J, Binod Kumar Dwivedi, J
Both the civil revisions filed under Section 115 of the Code of Civil Procedure, 1908 are arising out of the order dated 15.12.2023 passed by the Commercial Court, Indore, whereby the cost of Rs.25,000/- and advocate's fee of Rs.25,000/- has been awarded in favour of M/s Kamal Cotspin Pvt. Ltd.
FACTS OF THE CASE
Canara Bank is a nationalized Bank, in which Syndicate Bank was merged with all rights and liability (hereinafter referred to as 'the Bank'). The then Syndicate Bank extended financial assistance to M/s Kamal Cotspin Pvt. Ltd. The loan was repaid before the time, for which an amount of Rs.28,00,000/- was levied towards pre-payment charges and Rs.3,46,080/- was charged towards service charges. Being aggrieved by the aforesaid action of the Bank, an arbitration dispute was raised. The sole arbitrator vide award dated 19.08.2017 directed the Bank to return the amount of Rs.28,00,000/- and Rs.3,46,080/- along with interest from 06.04.2013 and 26.04.2013, up to the date of payment along with interest @ 18% per annum to M/s Kamal Cotspin Pvt. Ltd.
2.1. M/s Kamal Cotspin Pvt. Ltd. filed an execution proceeding before the District Judge on 02.01.2018, which was registered as M.J.C. A.V. No.8/2018. During the pendency of the execution proceeding, the Bank challenged the award before the District Judge, High Court & Apex Court and remained unsuccessful, meaning thereby, the award dated 19.08.2017 attained finality. It is important to mention that no cost of arbitration proceeding was awarded in favour of M/s Kamal Cotspin Pvt. Ltd. as contemplated under Section 31A of the Arbitration & Conciliation Act, 1996 (in short 'Arbitration Act') which was also not challenged before the Court. In the execution proceeding, the Bank filed an application under Section 47 r/w section 151 of the CPC which was rejected by the executing Court vide order dated 10.04.2019 on the ground that the application filed under Section 34 of the Arbitration Act had already been dismissed. Thereafter, an appeal under Section 37 of the Arbitration Act had also been dismissed.
2.3. The Bank challenged the order dated 10.04.2019 before this Court by way of Writ Petition No.5260 of 2021. The writ petition was heard and dismissed vide order dated 06.01.2019 with an exemplary cost of Rs.50,000/- to be paid to M/s Kamal Cotspin Pvt. Ltd. Before the executing Court on 28.01.2022 and 04.02.2022, the Bank deposited the amount of Rs.81,30,712/- including interest by way of Demand Drafts to M/s Kamal Cotspin Pvt. Ltd. The Bank also paid Rs.50,000/-to M/s Kamal Cotspin Pvt. Ltd. Hence, in total M/s Kamal Cotspin Pvt. Ltd. received the amount of Rs.81,30,712 + Rs.50,000 + 2,34,000/-from the Bank.
2.4. On 15.02.2022, M/s Kamal Cotspin Pvt. Ltd. submitted an application under Section 31(8) r/w Explanation – 4 of Section 31A of the Arbitration Act seeking counsel's fee and expenses incurred in pursuing the execution proceedings from the Bank. The Bank filed a reply opposing the aforesaid prayer by submitting that no cost had been awarded, neither by the learned arbitrator nor by the Hon’ble High Court or Supreme Court, over and above, the amount awarded in the arbitration proceedings.
2.5. Vide impugned order dated 15.12.2023, the learned Commercial Court held that no other amount could be awarded in favour of M/s Kamal Cotspin Pvt. Ltd. but awarded Rs.25,000/-, lumpsum, for incurred expenses for paperwork and Rs.25,000/- as advocate's fee totalling to Rs.50,000/-. Being aggrieved by the aforesaid order, the Bank has filed C.R. No.262 of 2024 and M/s Kamal Cotspin Pvt. Ltd. filed C.R. No.162 of 2024.
SUBMISSION OF COUNSEL FOR CANARA BANK
Learned counsel for the petitioner submits that there is no such scope under Section 31A of the Arbitration Act to award the cost of the execution proceedings in favour of the decree-holder. The amount so awarded by way of arbitration award has already been paid to M/s Kamal Cotspin Pvt. Ltd. that too with interest. The learned Court has recorded the finding in favour of the Bank, but wrongly awarded Rs.25,000/- as expenses incurred for paperwork and Rs.25,000/- as the advocate's fee lumpsum without any provision, hence, the impugned order is liable to be set aside. The Bank has already paid interest @ 18%, hence, M/s Kamal Cotspin Pvt. Ltd. has already been compensated.
SUBMISSION OF COUNSEL FOR KAMAL COTSPIN PVT. LTD.
Learned counsel for the award holder submitted that the award was passed on 19.08.2017 which had attained finality after the dismissal of the application under Sections 34 & 37 of the Arbitration Act. The Bank, instead of making payment, has filed W.P No.5260 of 2021 in the third round of litigation by suppressing material documents. They obtained ex parte stay on 10.03.2021 upon execution of a decree which remained in operation for 10 months, therefore, delayed the proceedings for 04 years, 05 months and 12 days before the executing Court and at least 115 adjournments took place. Hence, the cost is liable to be imposed upon the Bank for wasting the time and money of M/s Kamal Cotspin Pvt. Ltd.
APPRECIATION & CONCLUSION
Facts of the aforesaid case are not in dispute. The only issue which requires consideration by this Court is whether the decree-holder, i.e. M/s Kamal Cotspin Pvt. Ltd. is entitled for the cost incurred in the execution proceedings from the judgment debtor, especially under the provisions of the Arbitration Act.
Section 31 of the Arbitration Act provides 'form and contents of arbitral award'. Sub-section (7) provides that unless otherwise agreed by the parties, so far as an arbitral award is for the payment of money, the Arbitral Tribunal may include in the sum for which the award is made interest, at the rate as it deems reasonable, on the whole, or any part of the money and for the period between the date on which the cause of action arose and the date on which the award is made. Clause (b) of sub-section (7) provides that a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest @ 2% higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. Therefore, under sub-section 7(a), the Arbitral Tribunal may award interest for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. As per sub-section 7(b), the Arbitral Tribunal shall award interest @ 2% higher than the rate of interest from the date of award, till the date of payment. Sub-section (8) provides that the costs of an arbitration shall be fixed by the Arbitral Tribunal in accordance with section 31A. Therefore, under Section 31A, only the Arbitral Tribunal is competent to fix any cost, that too of arbitration, in accordance with Section 31A.
In the present case, the Arbitral Tribunal awarded interest from 06.04.2013 and 26.04.2013 up to the date of payment @ 18% interest per annum which is even much more than the interest @ 2%, of the prevalent on the date of award.
So far as the imposition of cost is concerned, under Section 31(8) of the Arbitration Act, the power has been conferred to the Arbitral Tribunal to impose the cost in accordance with Section 31A, i.e. before the award put to the execution. The provision of Section 31A applies to the imposition of cost in relation to the arbitration proceedings or proceedings under any provisions of this Act, pertaining to arbitration, the Court or Arbitral Tribunal has the discretion to determine the cost notwithstanding anything contained in the CPC. As per Explanation, the cost means reasonable cost relating to fees and expenses of the arbitrators, Courts and witnesses; legal fees and expenses; and any expenses incurred in connection with the Arbitral Tribunal or the Court proceedings and the arbitral award.
Section 36(1) of the Arbitration Act provides that where the time for making such application to set aside the arbitral award under Section 34 has expired, then, subject to the provisions of sub-section (2) such award shall be enforced in accordance with the provisions of CPC, in the same manner as if it were a decree of the Court.
Section 2(1)(e) defines 'Courts', according to which an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in the exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration. Therefore, under this definition, the Civil Court is competent to award the costs in any proceedings under the Arbitration Act which includes a distinct part of the proceeding.
So far as the distinct part of the proceedings is concerned, this Court while dismissing the writ petition has considered the conduct of the parties and awarded a cost of Rs.50,000/- which has been paid to M/s Kamal Cotspin Pvt. Ltd. As held above, the decree-holder has already been compensated by way of interest @ 18% till the date of payment of the decretal amount. Against the amount of Rs.31,46,080/-, the Bank had paid an amount of Rs.84,14,712/- and after making payment, the execution proceeding was terminated. No separate application is liable to be entertained under Section 31 of the Arbitration Act, after closing of the execution proceedings.
The Bank deposited the entire amount on 28.01.2022 by way of two demand drafts, including the cost of Rs.50,000/- awarded by this Court. The remaining amount of Rs.2,34,000/- was agreed to be paid on 04.02.2022 and the same was paid on 04.02.2022. On the next date, the decree holder filed an application under Section 31(8) of the Arbitration Act on 15.02.2022. By way of the execution proceeding submitted on 30.12.2017, the decree-holder claimed only Rs.28,00,000/- as principal amount, Rs.3,46,080/- as service charges totalling to Rs.31,46,080/-including interest of Rs.26,69,806 and total Rs.58,15,886/-. No such cost of execution proceedings and advocate's fee was claimed in the execution proceedings. The regime of cost, as per the provision of Section 31A ought to have been claimed in the execution proceedings, then only the executing Court was liable to determine the said cost, apart from the amount awarded in the arbitration proceedings. After payment of the entire amount claimed in the execution proceedings, the said proceedings get terminated and the Court become functus officio.
As per Order XXI Rule 1(1) of the CPC, all the money payable under a decree shall be paid by deposit before the executing Court, out of the Court to the decree-holder by postal money order through a Bank etc. As per sub-rule (2), where money is made under clause (a) of sub-rule (1), the judgment debtor shall give notice thereof to the decree-holder, either through the Court or directly to him by the registered post.
In the present case, the decree-holder was present in the Court and the demand drafts were handed over to him. Therefore, there was no need to issue notice as required under Rule 1(1) of Order XXI of the CPC. No such objection was raised at the time of receipt of the demand drafts about the judgment debtor, therefore, after payment of the entire amount, no further proceedings are liable to be drawn by the executing Court and the application filed under Section 31(8) & 31A of the Arbitration Act is not maintainable.
In view of the above, the revision filed by Canara Bank i.e. Civil Revision No.262 of 2024 stands allowed and the impugned order dated 15.12.2023 is hereby set aside.
So far as the revision filed by M/s Kamal Cotspin Pvt. Limited i.e. Civil Revision No.162 of 2024 is concerned, the same stands dismissed.
Let a copy of this order be kept in the connected revision also.