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IN

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.8943 OF 2017

(ARISING OUT OF SLP (C) No.1552/2015)

Punjab State Civil Supplies

Corporation Ltd. & Anr. ...Appellant(s)

VERSUS

M/s Atwal Rice & General

Mills Rep. by its Partners ….Respondent(s)

JUDGMENT

Abhay Manohar Sapre, J.

1) Leave granted.

2) This appeal is filed against the final judgment

and order dated 17.10.2014 passed by the High

Court of Punjab & Haryana at Chandigarh in Civil

Revision No. 3602 of 2013 whereby the High Court

dismissed the revision petition filed by the

Signature Not Verified

Digitally signed by
ASHA SUNDRIYAL
Date: 2017.07.12
16:38:07 IST
appellants herein and affirmed the order dated
Reason:

03.11.2012 passed by Additional District Judge,

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Jalandhar in Execution SR. No. 37 of 2010 by

which the execution petition relating to arbitration

award dated 01.06.2001 was dismissed.

3) In order to appreciate the short controversy

involved in this appeal, few relevant facts need

mention infra.

4) The appellant is a State owned Corporation

engaged in supply of civil commodities in the State

of Punjab. Respondent No. 1 is a partnership firm

whose partners are respondent Nos. 2 to 4. The firm

is engaged in the business of running a rice Mill in

Jalandhar.

5) On 01.01.1996, the appellant and Respondent

No.1 entered into an agreement. In terms of this

agreement, the appellant was to give their paddy to

the respondents, who were to process the paddy in

their Rice Mill and the resultant rice produced after

processing paddy were to be delivered to the Food

Corporation of India (FCI) for and on behalf of the

appellant by the respondents. Since the agreement

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was in relation to processing of paddy and then

supply of rice to public at large through FCI, the

time was made the essence of the agreement so that

the concerned departments would be able to supply

the rice in time to public at large.

6) It is the case of the appellant that the

appellant delivered 62944 bags weighing 40790

quintals of fine variety of paddy and 90303 bags

weighing 58696.95 quintals of IR 8 variety of paddy

to the respondents for processing and converting

into Rice for being supplied to the FCI. The

respondents duly acknowledged the receipt of paddy

from the appellant on 27.11.1995 and 06.12.1995.

7) The respondents, however, could only process

and deliver to the FCI 27950.75 quintals of fine

variety rice and 22955.32 quintals of IR - 8 variety

of rice till 30.06.1996. Thereafter the respondents

could deliver 710.00 quintals of fine variety of rice

and 14441.04.200 quintals of IR -8 variety of rice

in 1075 bags after 30.06.1996.

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8) Since the respondents failed to process and

deliver the full quantity of rice in terms of

agreement to the FCI much less within the time

framed, it caused money losses to the appellant in

addition to sustaining the damages due to

non-delivery of the rice. According to the appellant,

since the respondents committed breach of the

agreement because they were not able to perform

their part of the agreement, the appellant became

entitled, in terms of the agreement, to recover from

the respondents (1) 1½ times economic cost of

balance paddy, (2) the cost of balance bags and

sales tax @ 4.4% thereon, besides TDS on income

tax @ 2.34%, and (3) other recovery.

9) The agreement contained an arbitration clause

for resolving all disputes arising between the parties

in relation to the agreement. The appellant

accordingly gave notice to the respondents

requesting them for referring the disputes, which

had arisen between them to the Arbitrator. The

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respondents acceded to the appellant's request and

accordingly the disputes were referred to the sole

Arbitrator-one Mr. O. P. Garg. The arbitrator

embarked upon the reference made to him by the

parties. The parties filed their respective claims and

adduced evidence in support of their stand.

10) On 01.06.2001, the Arbitrator delivered a

reasoned award. The Arbitrator allowed the

appellant's claim in part and accordingly passed a

money award for Rs.1024847.15 with interest

payable at the rate of 21% w.e.f. 01.01.1999 till

realization in appellant's favour and against the

respondents.

11) The respondents, felt aggrieved of the award,

filed an application under Section 34 of the

Arbitration and Conciliation Act, 1996 (hereinafter

referred to as “the Act”) and questioned its legality

and correctness before the Additional District

Judge, Jalandhar. By order dated 04.06.2009, the

Additional District Judge dismissed the application

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and upheld the award. The respondents, as the

records indicate. though claimed to have filed

appeal in the High Court but did not pursue the

appeal and hence the order dated 04.06.2009 of the

Additional District Judge and, in consequence, the

award dated 01.06.2001 became final and attained

finality.

12) The respondents did not pay the awarded

amount to the appellants and, therefore, the

appellant filed Execution Petition No.37/2010 under

Section 36 of the Act before the Additional District

Judge, Jalandhar for enforcement of the award

against the respondents. The respondents on being

served filed reply to the execution application and

raised certain factual objections purporting to be

under Section 47 of the Civil Procedure Code, 1908

(hereinafter referred to as “the Code”). The

respondents also filed one application praying

therein for a direction to the appellant to produce

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the statement of accounts and the transactions

done pursuant to the agreement in question.

13) By order dated 03.11.2012, the Executing

Court upheld the objections raised by the

respondents and, in consequence, dismissed the

appellant's execution application. It was held that

the respondents having paid a sum of Rs.3,37,885/-

towards decreetal amount to the appellant, the

award/decree in question stood satisfied fully and

hence the execution application filed by the

appellant is liable to be dismissed. It was,

accordingly, dismissed.

14) The appellant, felt aggrieved, filed revision

being Civil Revision No. 3602 of 2013 before the

High Court. By impugned order, the High Court

dismissed the revision and upheld the order of the

Executing Court. It is against this order, the

appellant(claimant) has filed this appeal by way of

special leave before this Court.

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15) Heard Mr. Ashish Wad, learned counsel for the

appellant and Mr. Abhishek Vikas, learned counsel

for the respondents.

16) Having heard learned counsel for the parties

and on perusal of the record of the case, we are

constrained to allow the appeal and set aside the

impugned order.

17) Sections 35 and Section 36 of the Act as it

stood at the relevant time are relevant for this

appeal. It reads as under :

“35. Finality of arbitral awards.

Subject to this Part an arbitral award shall be
final and binding on the parties and persons
claiming under them respectively.

36. Enforcement - Where the time for making

an application to set aside the arbitral award
under Section 34 has expired, or such
application having been made, it has been
refused, the award shall be enforced under
the Code of Civil Procedure, 1908 (5 of 1908)
in the same manner as if it were a decree of
the Court.”

18) Section 35 gives finality to every arbitral award

and makes the award binding on the parties and all

persons claiming under them. So far as Section 36

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is concerned, it deals with execution of the award. It

says that once the Court dismisses the application

filed under Section 34 of the Act or if no such

application is made and time has expired for

making such application, the award shall be

enforced as if it is a decree of the Court and the

enforcement of the award shall be under the Code.

19) In other words, the arbitral award has been

given the status of a decree of the Civil Court and,

therefore, it is enforced like a decree of the Civil

Court by applying the provisions of Order 21 of the

Code and all other provisions, which deal with the

execution of the decree of the Civil Court.

20) Coming to the facts of the case, we find that

firstly, the award is under the Act; Secondly, the

award was challenged under Section 34 by the

respondents before the Additional District Judge

but the challenge failed vide order dated 03.11.2012

of the Additional District Judge, Jalandhar; Thirdly,

the order dated 03.11.2012 attained finality

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because the matter was not pursued by the

respondents in appeal to the High Court; Fourthly,

the award, in consequence, also attained the finality

by virtue of Sections 35 and 36 of the Act; Fifthly,

the award was and continues to be binding on the

appellant and the respondents; Sixthly, the award

acquired the status of a decree of the civil court by

virtue of Section 36 of the Act; Seventhly, the award

has to be enforced for recovery of the awarded

amount from the respondents like a decree of the

civil court under the Code.

21) It is a well-settled principle of law that the

executing Court has to execute the decree as it is

and it cannot go behind the decree. Likewise, the

executing Court cannot hold any kind of factual

inquiry which may have the effect of nullifying the

decree itself but it can undertake limited inquiry

regarding jurisdictional issues which goes to the

root of the decree and has the effect of rendering the

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decree nullity (see- Kiran Singh & Ors. vs. Chaman

Paswan & Ors., AIR1954 SC 340).

22) Let us now see the nature of the objections

raised by the respondents in execution proceedings

with a view to find out as to whether they or anyone

out of them were legally sustainable and which,

according to the respondents, resulted in fully

satisfying the award/decree in their favour and

rightly found acceptance by the Courts below for so

holding.

23) The respondents in their application filed

under Section 47 of the Code contended that firstly,

the award being vague, it is incapable of execution

for recovering any sum awarded therein from the

respondents; Secondly, the Arbitrator has failed to

specify the rates at which the interest were to be

charged; Thirdly, the Arbitrator did not mention the

words "per annum" to qualify the rate of interest,

i.e.,21% awarded; Fourthly, the Arbitrator awarded

simple interest whereas the appellant had claimed

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compound interest which is not permissible; Fifthly,

the Arbitrator was not competent to award pendent

lite and future interest; Sixthly, mandatory consent

of the Managing Director of the

appellant-Corporation was not obtained by the

Arbitrator for awarding interest at the rate of 21%;

Seventhly, the calculations made by the appellant in

their execution application is wrong being excessive

in nature; Eighthly, no notice of execution

application was served on the respondents because

the application was filed beyond two years from the

date of award; Ninthly, the execution application is

not maintainable because the respondents have

filed appeal before the High Court against the order

rejecting their application under Section 34 of the

Act.

24) The respondents (judgment debtors) also filed

one application seeking direction against the

appellant to produce the entire record of the case

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including the accounts relating to the transactions

done pursuant to the agreement in question.

25) It is pertinent to mention here that the

executing Court did not decide any of the objections

(nine) set out above but confined its inquiry to one

statement of accounts filed by the respondents,

which according to them, was given to them by the

appellant. The executing Court, on perusal of the

account statement, held that a sum of

Rs.3,37,885/- was paid by the respondents to the

appellant on 29.08.2011 which, as per the

statement, was credited in appellant's account and

hence such payment having been made has resulted

in fully satisfying the decree in question and,

therefore, the respondents are not liable to pay any

amount towards decree in question. It is essentially

with this factual finding, the executing Court came

to a conclusion that the award/decree stood fully

satisfied and hence no recovery of any awarded

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amount can be made and, therefore, dismissed the

appellant's execution application.

26) It is apposite to reproduce the finding of the

executing Court hereinbelow because it is this

finding which was upheld by the High Court by

impugned order giving rise to filing of this appeal by

special leave.

“8. I have thoroughly considered the

contentions of the learned counsel for both
the parties and have gone through the
documents as referred to by the learned
counsel for both the parties. It is clear that
statement of account was supplied by the
decree holder department itself to the
judgment debtor, copy of which has been
placed on file and even it is not denied by the
decree holder. This statement of account
dated 29.08.2011 shows that as on
29.08.2011, a sum of Rs.3,37,885/- was
outstanding to be paid by the judgment
debtor to the decree holder as per this
statement of account supplied by the decree
holder. Nor corresponding to the other
document, i.e., certificate issued by Punjab
National Bank, said amount of Rs.3,37,885/-
was paid by the judgment debtor and was
credited in the account of the decree holder
M/s Punjab State Civil Supplies Corporation
Limited, Jalandhar. The plea of the learned
counsel for the decree holder that the other
statement of account, which shows that a
sum of Rs.8,86,248/- is to be repaid may be
considered, is not acceptable for the reason
that the statement of account supplied by
the decree holder department itself shows
that the judgment debtor was given said

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statement of account on 29.8.2011 and this

statement of account is admitted to have
been issued by the decree holder itself. The
statement of account as relied upon by the
counsel for the decree holder does not
mention any date. More so, it is not justified
by the decree holder as to how the amount of
Rs.8,86,248/- has swollen to the amount of
Rs.3495,886.15 paise regarding which the
present execution is filed. On the other
hand, the statement of account dated
29.8.2011 shows that a sum of Rs.3,37,885/-
was found to be due against the judgment
debtor, which was paid by the judgment
debtor and deposited in the account of the
decree holder and this fact is clear from the
certificate given by the concerned bank.
Hence, considering all these documents, it is
clear that whatever money was due to be paid
by the judgment debtor to the decree holder
as per statement of account supplied by the
decree holder itself, has been paid by the
judgment debtor and as such award regarding
which the present execution has been filed
stands fully satisfied. Resultantly, objections
filed by the judgment debtor are accepted
and the execution petition stands dismissed.
Whatever property belonging to the judgment
debtor, which has been attached in the
present execution is ordered to be released
henceforth. File be consigned to the record
room.”

27) We are constrained to observe that the

executing Court and the High Court either did not

understand the controversy or if understood,

miserably failed to decide the same in accordance

with law. Indeed, both the orders clearly show the

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total non-application of mind by the two Courts

because both the Courts neither set out the facts

much less properly nor dealt the issues arising in

the case and nor applied the principle of law which

governs the controversy.

28) Both the orders are, therefore, wholly perverse,

illegal and without jurisdiction. This we say for more

than one reason as detailed by us hereinbelow.

29) In the first place, none of the objections (nine)

raised by the respondents were decided by the

executing Court or/and the High Court. Indeed,

they were not even referred to in the orders. If the

objections had been raised by the judgment debtor

under Section 47 of the Code challenging the decree

then it was necessary for the executing Court to

deal with the objections and record its finding one

way or other in accordance with law. Secondly,

assuming that these objections were to be decided

then also, in our opinion, none of them had any

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merit whatsoever and they simply deserved rejection

at the outset.

30) Thirdly, all the objections referred above ought

to have been raised by the respondents before the

Arbitrator or/and Additional District Judge under

Section 34 of the Act but certainly none of them

could be allowed to be raised in execution once the

award became final and attained finality as decree

of the Civil Court.

31) In other words, having regard to the nature of

objections, it is clear that such objections were not

capable of being tried in execution proceedings to

challenge the award. It is for the reason that they

were on facts and pertained to the merits of the

controversy, which stood decided by the Arbitrator

resulting in passing of an award. None of the

objections were in relation to the jurisdiction of the

Court affecting the root of the very passing of the

decree. If the executing Court had probed these

objections then it would have travelled behind the

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decree, which was not permissible in law. An

inquiry into facts, which ought to have been done in

a suit or in an appeal arising out of the suit or in

proceedings under Section 34 of the Act, cannot be

held in execution proceedings in relation to such

award/decree.

32) Fourthly, and apart from what is held above,

by no stretch of imagination, the award/decree

could be held fully satisfied on alleged making of the

payment of Rs.3,37,885/- by the respondents to

the appellant. This factual finding to say the least is

perverse to its extreme.

33) It is not in dispute that the awarded principal

sum even without interest was for Rs.10,24847.15.

In these circumstances, we are at loss to

understand as to how and on what basis, the

executing Court could ever come to a conclusion

that the entire money decree which was admittedly

for more than Rs.10 lacs could be held fully

satisfied against making of so-called payment of

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Rs.3,37,885/- by the respondents to the appellant

assuming that such payment was held to had been

made.

34) Order 21 Rule 1 of the Code prescribes the

modes of paying money under the decree. Sub-

clause(a) provides that the decreetal money has to

be deposited in Court or by postal money order or

through Bank. Clause(b) provides that amount, if

paid out of court, then it has to be by postal money

order or through Bank or by any mode where

payment is evidenced in writing. If the payment is

made under clause(b) then clause(c) prescribes the

procedure as to how the money has to be paid and

what details are required to be given by the

judgment debtor in support of making payment.

35) Order 21 Rule 2 of the Code deals with the

cases where the judgment debtor makes the

payment of decreetal amount either full or part out

of the Court to the decree holder. Sub-clause(1)

empowers the decree holder to apply to the

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executing Court to get the amount received from the

judgment debtor certified from the Court and it is

only when the Court certifies the amount to have

been paid, it can be adjusted against the decreetal

sum. Clause(2) empowers the judgment debtor to

apply to the executing Court and get the

certification done by the Court of the amount paid

by them to the decree holder after notice to the

decree holder. Rule 2(A) provides that no payment

made by the judgment debtor shall be adjusted

unless he ensures compliance of sub clause (a) or

(b) or (c). Rule 3 provides that if the Court does not

certify the payment made by the judgment debtor

then such payment shall not be recognized by any

Court executing the decree for the purpose of giving

adjustment to the judgment debtor against the

decretal amount.

36) Keeping in view the mandatory requirements of

Order 21 Rules 1 and 2 relating to payment of

decretal dues made by the judgment debtor and

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applying the said provisions to the undisputed facts

of this case, we have no hesitation in holding that

the sum of Rs.3,37,885/- which the respondents

claimed to have paid to the appellant towards the

decretal sum and which found acceptance to the

two Courts below could never have been regarded as

the payment made by the respondents to the

appellant in conformity with the requirements of

either Rule 1 or Rule 2 of Order 21. It is not in

dispute that such payment was never certified by

the Court as contemplated under Rule 2 of Order 21

at the instance of respondents or at the instance of

the appellant. Indeed, there was neither any

evidence to prove the factum of payment except one

copy of the statement which also remained

unproved nor any evidence was led to prove the

certification done by the Court as required under

Order 21 Rule 2 so as to recognize making of such

payment by the respondents to the appellant.

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37) We are, therefore, of the considered opinion

that firstly, the execution application filed by the

appellant (decree holder) for execution of the

award/decree dated 01.06.2001 was maintainable

and it should have been so held; Secondly, no

amount was paid by the respondents to the

appellant pursuant to the award/decree so as to

enable the executing Court to record its full

satisfaction in accordance with the provisions of

Order 21 Rules 1 and 2 and lastly, all objections

raised by the respondents under Section 47 of the

Code against the award/decree are liable to be

rejected as being wholly devoid of any merits. We,

accordingly, hold so against the respondents.

38) In view of foregoing discussion, the appeal

succeeds and is allowed with cost quantified at

Rs.25,000/- payable by the respondents to the

appellant. The impugned order and the order of the

executing Court dated 03.11.2012 are set aside.

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39) As a consequence thereof, the executing Court

is directed to issue warrant for recovery of the entire

awarded decretal amount against the respondents

after verifying and calculating the decretal amount

till date in terms of award/decree.

40) Let this be done within one month.

………...................................J.
[ABHAY MANOHAR SAPRE]

……..................................J.
[R. BANUMATHI]
New Delhi;
July 11, 2017

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