Shri Anand Kumar vs Singhal Cement and Allied Industries Ltd. and Others

Rajiv Sahai Endlaw, J.—Execution is sought of an arbitral award dated 5th June, 1998 having the force of the decree. The arbitration proceedings commenced after the coming into force of the Arbitration and Conciliation Act, 1996 and are governed by the said Act. An award in the sum of Rs. 19,99,586.31p was passed in favour of the decree holder and against all the judgment debtors. The decree holder was also allowed costs of Rs. 12,500/- and it was further awarded that upon the failure of the judgment debtors to pay the said amounts within 10 days of receipt of the copy of the award, they shall also be liable to pay interest at 2% per month on the awarded amount till the date of payment. It was also directed that upon the failure of the judgment debtors to pay the awarded amount, the decree holder shall be entitled to apply for execution by sale of the second floor of property No. II-M/64-AB, Lajpat Nagar-II, New Delhi, the title deeds whereof had been pledged by the judgment debtors with the decree holder.

A petition being OMP. No. 164/1998 had been preferred by the judgment debtors with respect to the said award. However, the said OMP was dismissed in default of appearance of the judgment debtors on 12th August, 2005. However, it transpires that on the same day the Counsel for the judgment debtors appeared subsequently and gave reasons for earlier non-appearance and further informed the court that the matter had been settled with the decree holder and as such the judgment debtors were not pressing the OMP and the same be dismissed as having become infructuous. This court recorded the said statement of the Counsel for the judgment debtors and restored the OMP to its original number and dismissed the same as infructuous. The decree holder/his Counsel was not present at that time.

The judgment debtors have filed reply/objections to the execution. It is, inter alia, the case of the judgment debtors that the decree stands satisfied. In this regard it is stated:

i. that the arbitral award is with respect to a transaction of loan of Rs. 14,50,000/- by the decree holder to the judgment debtors; that the judgment debtors had in repayment of the said loan with interest, handed over a cheque of Rs. 17,69,821/- to the decree holder; the said cheque was dishonored ;since the loan agreement between the parties contained an arbitration clause, arbitration was invoked. The judgment debtors were proceeded against ex parte by the arbitrator and the arbitrator allowed the claim of the decree holder for recovery of the loan amount along with interest; the cheque for Rs. 17,69,821/- is mentioned in the award also;

ii. that the decree holder had also filed a complaint u/s 138 of the Negotiable Instruments Act with respect to the dishonour of the cheque aforesaid of Rs. 17,69,821/-;

iii. that compromise talks were taking place between the parties and on 10th December, 2003 in the OMP also the Counsel for the judgment debtors and the decree holder had informed the court that an internal settlement had been arrived at and in terms whereof the judgment debtors had agreed to pay to the decree holder certain amounts in satisfaction of the award. OMP was adjourned on that date for the parties to move a formal application recording the terms of settlement;

iv. that in the complaint u/s 138 of the Negotiable Instruments Act on 19th July, 2003 a compromise was recorded whereunder the judgment debtors offered to pay a sum of Rs. 10 lacs to the decree holder in the manner provided therein and which compromise was accepted by the decree holder;

v. that upon all payments being made by the judgment debtors in terms of the said compromise, on 25th January, 2005 in the proceedings u/s 138 of the Negotiable Instrument Act the decree holder made a statement of receipt of full and final payment and of delivery of the documents of title of the property aforesaid to the judgment debtors.

The judgment debtors therefore contend that on the aforesaid satisfaction, the execution has been filed malafide. The judgment debtors have also applied u/s 340 of the CrPC for proceeding against the decree holder for taking a false stand before this court of the award remaining unexecuted.

The decree holder controverts the aforesaid position. On facts it is contended that the compromise aforesaid in the proceedings u/s 138 of the Negotiable Instrument Act is not with respect to the award sought to be executed. It is contended that besides the loan transaction, there was another transaction of transfer of shares also between the parties and whereunder cheques of the total sum of Rs. 9 lacs were also given by the judgment debtors to the decree holder; the said cheques were also dishonored ;two complaints were filed by the decree holder u/s 138 of the Negotiable Instrument Act, one with respect to the cheques for Rs. 7 lacs and Rs. 1 lac given with respect to the share transaction and the other with respect to the cheque for Rs. 17,69,821/- aforesaid given against the loan transaction and another cheque of Rs. 1 lac given towards the share transaction. It is contended that in the compromise recorded in the Section 138 proceedings, only the amount due towards share transaction was settled and no settlement was arrived at with respect to the loan transaction, with respect whereto the arbitral award had been made.

On inquiry as to why the decree holder had delivered the title documents of the property aforesaid which were the security for payment of the award amount, it is contended by the Counsel for the decree holder that the judgment debtors had orally assured that they will sell the said property and pay the award amount to the decree holder.

However, the main stay of the argument of the Counsel for the decree holder was Order 21 Rule 2(3). Rule 2 is as under:

Payment out of Court to decree-holder. � (1) Where any money payable under a decree of any kind is paid out of Court, [or a decree of any kind is otherwise adjusted] in whole or in part to the satisfaction of the decree-holder, the decree-holder shall certify such payment or adjustment to the Court whose duty it is to execute the decree, and the Court shall record the same accordingly.

(2) The judgment-debtor [or any person who has become surety for the judgment debtor] also may inform the court of such payment or adjustment, and apply to the Court to issue a notice to the decree-holder to show cause, on a day to be fixed by the court, why such payment or adjustment should not be recorded as certified; and if, after service of such notice, the decree holder fails to show cause why the payment or adjustment should not be recorded as certified, the Court shall record the same accordingly.

[(2A) No payment or adjustment shall be recorded at the instance of the judgment debtor unless�

(a) the payment is made in the manner provided in Rule 1; or

(b) the payment or adjustment is proved by documentary evidence; or

(c) the payment or adjustment is admitted by, or on behalf of, the decree holder in his reply to the notice given under Sub-rule (2) of Rule 1, or before the Court.

(3) A payment or adjustment, which has not been certified or recorded as aforesaid, shall not be recognized by any Court executing the decree.

The Counsel for the decree holder contended that this court could not take cognizance of any plea of satisfaction of the decree by the judgment debtors and no such plea could be put to trial also as provided in Section 47 of the CPC owing to the bar in Sub-rule (3) aforesaid.

Reliance was placed on Sultana Begum Vs. Prem Chand Jain, ; Padma Ben Banushali and Another Vs. Yogendra Rathore and Others, and Lakshmi Narayanan Vs. S.S. Pandian, All the said judgments on interpretation of Order 21 Rule 2(3) have held that the plea of the judgment debtors of payments/satisfaction of decree in a manner otherwise than provided in Rule 2 cannot be entertained. In fact, in Sultana Begum (supra) it has been held that the judgment debtors may even set up a false case of compromise and it is in order to prevent such judgment debtors that Sub-rule (3) has been enacted so that if such compromise has not been recorded the judgment debtors be not encouraged to initiate another round of litigation u/s 47 of the CPC. Though the Counsel for the decree holder has alongwith his list of judgments filed several other judgments also but neither have the same been read nor are the same found relevant for the matter in issue.

At the time of hearing, in view of the provision of Sub-rule (3) (supra) and the judgments aforesaid it was felt by this court and also made known to the counsels that though ordinarily the dispute as raised by the judgment debtors ought to have been put to trial u/s 47 of the CPC, but in view of the Order 21 Rule 2(3) , the same could not be put to trial and execution could not be held up for this reason; However, since the Section 138 proceedings aforesaid, prima facie, did suggest that some compromise/settlement had been arrived at between the parties, the application u/s 340 of the CrPC needs to be allowed. It was felt that if the decree holder has taken a false stand before this court of the compromise effected being not in relation to the award, he could not go scot free owing to technicality aforesaid and should at least be punished. Though the Counsel for the decree holder had contended that the application u/s 340 of CrPC was barred by time but he could not substantiate the same. The maximum punishment for the offence of making a false statement before the court is of 7 years and wherefore u/s 468 of the CrPC no limitation is prescribed.

However, subsequently I found that Sub-rule (3) of Rule 2 of Order 21 stands omitted in Delhi. There is notation to the said effect not only in the AIR manual but in the commentaries on CPC of Mulla and Sarkar as well as in the CPC published by Universal Law Publishing Company Pvt. Ltd. The same was informed to the Counsel for both the parties and opportunity given to them to respond to the same. Nothing has been brought to my attention to show that Sub-rule (3) is applicable to Delhi. With Sub-rule (3) being not applicable to Delhi, the main stay of the contention of the Counsel for the decree holder disappears.

Both counsels then referred to Morgan Securities Credit Pvt. Ltd. Vs. Blue Coast Hotels and Resorts Ltd.,

I may notice that Sub-rule 2A was added to Order 21 Rule 2. The said Sub-rule 2A precedes Sub-rule 3 supra. As per Sub-rule 2A, payment under the decree can be recorded at the instance of the judgment debtors also, provided, inter alia the same is proved by documentary evidence. No time has been provided for the judgment debtor to apply for recording of such payment. This Court in Morgan Securities Credit Pvt. Ltd. (supra) held that the same can be in any form. The objection of judgment debtor can thus be treated as application for recording of such payment. The same is supported by some documentary evidence, i.e. the compromise in Section 138 proceedings. However further evidence is required. Sub-rule (3) though not applicable to Delhi, after the insertion of Sub-rule 2A would include payment recorded under Sub-rule 2A also.

In view of the disputed questions of fact, the matter has to be posted for evidence. In fact in Sultana Begum aforesaid contention had been raised that in view of Section 47 of the CPC, whenever a plea is raised of the decree having stood satisfied, the same ought to be put to trial. However, the Supreme Court held that Section 47 had to be read harmoniously with Order 21 Rule 2 and since the Order 21 Rule 2 was a specialized provision, the same was held to prevail over Section 47. That being the law and in the face of Sub-rule (3) being not applicable to Delhi, the objections raised cannot be adjudicated without trial.

Accordingly, the following issues are framed:

Whether the sum of Rs. 10 lacs paid by the judgment debtors to the decree holder in terms of the compromise in the proceedings u/s 138 of the Negotiable Instruments Act was also in satisfaction of the arbitral award sought to be executed in the present proceedings? OPJD

Whether the decree holder had released the title deeds of second floor of property No. II-M/64-AB, Lajpat Nagar-II, New Delhi to the judgment debtors for the reason of the award having the force of decree having stood satisfied? OPJD.

Relief.

In view of the aforesaid, the order on the application u/s 340 of the CrPC is deferred till the adjudication of the issues aforesaid. If the decree holder, after the recording of evidence, is found to have committed any offence within the meaning of Section 195 of the CrPC, appropriate orders shall be made.

The parties to file their list of witnesses within 15 days. Evidence to be recorded before the Joint Registrar. The judgment debtors to file affidavits by way of evidence of their witnesses within six weeks here from .

List before the Joint Registrar on 8th October, 2009 for fixing dates for cross-examination of the witnesses of the judgment debtor.