Union of India v. M/S Parishudh Machines Pvt. Ltd

Delhi High Court · 11 Jul 2023 · 2023:DHC:4651

Chandra Dhari Singh

O.M.P. (COMM) 372/2019

2023:DHC:4651

civil appeal_allowed Significant

AI Summary

The Delhi High Court allowed release of the entire deposited arbitral Award amount to the MSME respondent under its inherent powers after dismissal of the challenge petition, subject to security, to prevent undue hardship and ensure justice.

Full Text

I.A No. 22022/2022 in O.M.P. (COMM) 372/2019 HIGH COURT OF DELHI

Pronounced on: 11th July, 2023 I.A No. 22022/2022 in O.M.P. (COMM) 372/2019

UNION OF INDIA ..... Petitioner
Through: Dr. L. C. Singhi, Advocate

VERSUS

M/S PARISHUDH MACHINES PVT. LTD ..... Respondent
Through: Mr. Sanjeev Agarwal and Mr. Ekansh Agarwal, Advocates

CORAM:

HON'BLE MR. JUSTICE CHANDRA DHARI SINGH

JUDGMENT

CHANDRA DHARI SINGH, J I.A No. 22022/2022 (under Section 151 CPC)

1. The instant application under Section 151 of the Civil Procedure Code, 1908 (hereinafter "CPC") has been filed on behalf of applicant/respondent seeking the following reliefs:a. Direct the release of the entire deposited amount of Rs. 3,76,84,360/- with the registry of this Hon'ble Court in favour of the respondent. b. Pass any other order or direction as this Hon'ble Court may deem fit & proper in the interest of justice.

FACTUAL MATRIX

2. The learned Arbitrator has passed the Award dated 22nd April 2019 granting an amount of Rs. 3, 11, 90,000/- along with interest @ 10% per annum from the date of cancellation of the Contract continuing till realization and which was required to be paid within a period of 90 days from the date of Award i.e. 22nd April 2019, failing which interest @ 18% per annum is to be applicable after the expiry of 90 days of the Award.

3. The non-applicant/petitioner herein filed the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter “the Act, 1996”) to challenge the Award dated 22nd April 2019, which was dismissed by a Coordinate Bench of this Court vide order dated 05th December 2022, being devoid of merits.

4. A Coordinate Bench of this Court passed an order dated 11th December 2019, thereby directing the non-applicant/petitioner to deposit the entire arbitral amount along with interest in terms of the subject Award. In furtherance of the same, the non-applicant/petitioner deposited a sum of Rs. 3,11,90,000/- along with a sum of Rs. 64,94,360/- in total amounting to Rs. 3,76,84,360/- towards interest, in favor of the Registrar General of this Court.

5. During the pendency of the petition under Section 34 of the Act, 1996, the applicant/respondent filed an Application bearing IA NO. 3906/2021 seeking the release of the above stated deposited amount in favour of the applicant/respondent. The Coordinate Bench of this Court vide its order dated 12th March 2021 allowed the above stated Application and directed the Registrar General to release the sum of Rs. 3,25,00,000/in favour of the applicant/respondent herein, against security, subject to the satisfaction of the Registrar General and is pending for verification by the Registrar General.

6. Learned counsel for the applicant/respondent submitted that during the pendency of the petition to challenge the Award, the applicant/respondent filed an Application bearing IA No. 3906/2021 seeking the release of the abovestated deposited amount in favor of the applicant/respondent and the Coordinate Bench of this Court vide its order dated 12th March 2021 allowed the abovestated Application directing the Registrar General to release a sum of Rs. 3,25,00,000/- in favor of the applicant/respondent herein, against the security of the property subject to the satisfaction of the Registrar General.

7. It is submitted that the applicant/respondent has already submitted a security which is taken into consideration by this Court in its order dated 12th April 2021, but the same was directed to be verified by the be verified by the Registrar General. It is further contended that the issue of the release of the deposited amount was kept in abeyance and to date the respondent has not received the amount.

8. It is argued by the learned counsel on behalf of the applicant/respondent that in the meanwhile, the petition challenging the Award was heard and dismissed by a Coordinate Bench of this Court in O.M.P (COMM) 372/2019 vide order dated 05th December 2012. The same has not been challenged by the non-applicant/petitioner.

9. It is further submitted on behalf of the applicant/respondent that the respondent is an MSME enterprise. The respondent has been facing financial crisis and is on the verge of collapse hence, the respondent is in dire need of some monetary relief.

10. Learned counsel for the applicant/respondent submitted that in view of the arguments put-forth, this instant Application deserves to be allowed. (on behalf of non-applicant/petitioner)

11. Per contra, learned counsel on behalf of the nonapplicant/petitioner vehemently opposed the averments made by the learned counsel for the applicant/respondent and submitted that the present application has been filed with the sole objective/purpose of harassing the non-applicant/petitioner and to coerce them to deposit the amount. It is submitted that the present petition is nothing but an abuse of the process of law, instituted with the intent to derail the process of law.

12. It has been submitted by the learned counsel for the nonapplicant/petitioner that the fact remains settled, that the applicant/respondent was never serious about its obligations under the Contract and that without performing the Contract and making delivery of the machine, which was the subject matter of the Contract, the applicant herein intends to walk away with the public money. It has been submitted that the applicant/respondent is not entitled to any Award in its favor under the law.

13. Learned counsel further submitted on behalf of the nonapplicant/petitioner that even on an earlier occasion, the Award money was directed to be released in favor of the applicant/respondent upon furnishing of security, but the applicant/respondent could not satisfy this Court regarding the genuineness of the security offered for the said purpose. Further, if the Award money is released at this stage, there will be no chance of recovering the same from the applicant/respondent, in case the non-applicant/petitioner succeeds in the further proceedings, intended to be taken up by them and will cause irreparable loss to the non-applicant/petitioner.

14. In view of the abovementioned submissions, the learned counsel for the non-applicant/petitioner prays that the application is devoid of any merit and it must be dismissed.

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FINDINGS AND ANALYSIS

15. Heard learned counsel for the parties and perused the record.

16. Before delving into the analysis, this Court finds it necessary to briefly revisit position of law with respect to the scope of section 151 of CPC which reads as under: “Section 151- Saving of inherent powers of Court. Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.”

17. After perusing the arguments advanced and contentions raised, the issue which requires adjudication is - Whether the applicant is entitled to the release of the amount deposited by the non-applicant/respondent in Court after the dismissal of the petition challenging Arbitral Award in accordance with the power of this Court under Section 151 of CPC.

18. To elucidate upon the scope of Section 151 of CPC, this Court has referred to the judgment of State of U.P. v. Roshan Singh, (2008) 2 SCC 488, wherein it was held that:

“7. The principles which regulate the exercise of inherent powers by a court have been highlighted in many cases. In matters with which the Code of Civil Procedure does not deal with, the court will exercise its inherent power to do justice between the parties which is warranted under the circumstances and which the necessities of the case require. If there are specific provisions of the Code of Civil Procedure dealing with the particular topic and they expressly or by necessary implication exhaust the scope of the powers of the court or the jurisdiction that may be exercised in relation to a matter, the inherent powers of the court cannot be invoked in order to cut across the powers conferred by the Code of Civil Procedure. The inherent powers of the court are not to be used for the benefit of a litigant who has a remedy under the Code of Civil Procedure. Similar is the position vis-à-vis other statutes. 8. The object of Section 151 CPC is to supplement and not to replace the remedies provided for in the Code of Civil Procedure. Section 151 CPC will not be available when there is alternative remedy and the same is accepted to be a well-settled ratio of law. The operative field of power being thus restricted, the same cannot be risen to inherent power. The inherent powers of the court are in addition to the powers specifically conferred on it. If there are express provisions covering a particular topic, such power cannot be exercised in that regard. The section confers on the court power of making such orders as may be necessary for the ends of justice of the court. Section 151 CPC cannot be invoked when there is express provision even under which the relief can be claimed by the aggrieved party. The power can only be invoked to supplement the

provisions of the Code and not to override or evade other express provisions. The position is not different so far as the other statutes are concerned. Undisputedly, an aggrieved person is not remediless under the Act.”

19. The scope of powers conferred in the High Court under Section 151 of CPC has been further recapitulated in detail in Ram Rati v. Mange Ram, (2016) 11 SCC 296, wherein the Hon’ble Supreme Court has observed the following:

“15. After surveying the various principles stated by this

Court on Section 151 from 1961, in K.K. Velusamy [K.K.

Velusamy v. N. Palanisamy, (2011) 11 SCC 275 : (2011) 3

SCC (Civ) 665] , they have been succinctly summarised as

follows under para 12 : (SCC pp. 282-83)

“(a) Section 151 is not a substantive provision which creates or confers any power or jurisdiction on courts. It merely recognises the discretionary power inherent in every court as a necessary corollary for rendering justice in accordance with law, to do what is “right” and undo what is “wrong”, that is, to do all things necessary to secure the ends of justice and prevent abuse of its process.

(b) As the provisions of the Code are not exhaustive, Section 151 recognises and confirms that if the Code does not expressly or impliedly cover any particular procedural aspect, the inherent power can be used to deal with such situation or aspect, if the ends of justice warrant it. The breadth of such power is coextensive with the need to exercise such power on the facts and circumstances.

(c) A court has no power to do that which is prohibited by law or the Code, by purported exercise of its inherent powers. If the Code contains provisions dealing with a particular topic or aspect, and such provisions either expressly or by necessary implication exhaust the scope of the power of the court or the jurisdiction that may be exercised in relation to that matter, the inherent power cannot be invoked in order to cut across the powers conferred by the Code or in a manner inconsistent with such provisions. In other words the court cannot make use of the special provisions of Section 151 of the Code, where the remedy or procedure is provided in the Code.

(d) The inherent powers of the court being complementary to the powers specifically conferred, a court is free to exercise them for the purposes mentioned in Section 151 of the Code when the matter is not covered by any specific provision in the Code and the exercise of those powers would not in any way be in conflict with what has been expressly provided in the Code or be against the intention of the legislature. (e) While exercising the inherent power, the court will be doubly cautious, as there is no legislative guidance to deal with the procedural situation and the exercise of power depends upon the discretion and wisdom of the court, and in the facts and circumstances of the case. The absence of an express provision in the Code and the recognition and saving of the inherent power of a court, should not however be treated as a carte blanche to grant any relief. (f) The power under Section 151 will have to be used with circumspection and care, only where it is absolutely necessary, when there is no provision in the Code governing the matter, when the bona fides of the applicant cannot be doubted, when such exercise is to meet the ends of justice and to prevent abuse of process of court. (emphasis in original)”

19. In another case of Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1, Hon’ble Supreme Court has held that:

“28. As the provisions of the Code are not exhaustive, Section 151 is intended to apply where the Code does not cover any particular procedural aspect, and interests of justice require the exercise of power to cover a particular situation. Section 151 is not a provision of law conferring power to grant any kind of substantive relief. It is a procedural provision saving the inherent power of the court to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the court. It cannot be invoked with reference to a matter which is covered by a specific provision in the Code. It cannot be exercised in conflict with the general scheme and intent of the Code. It cannot be used either to create or recognise rights, or to create liabilities and obligations not contemplated by any law. 29. Considering the scope of Section 151, in Padam Sen v. State of U.P. [AIR 1961 SC 218 : (1961) 1 Cri LJ 322] , this Court observed: (AIR p. 219, paras 8-9) “8. … The inherent powers of the court are in addition to the powers specifically conferred on the court by the Code. They are complementary to those powers and therefore it must be held that the court is free to exercise them for the purposes mentioned in Section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the legislature. … 9. … The inherent powers saved by Section 151 of the Code are with respect to the procedure to be followed by the Court in deciding the cause before it. These powers are not powers over the substantive rights which any litigant possesses. Specific powers have to be conferred on the courts for passing such orders which would affect such rights of a party.” (emphasis supplied)

31. In Ram Chand and Sons Sugar Mills (P) Ltd. v. Kanhayalal Bhargava [AIR 1966 SC 1899] this Court reiterated that the inherent power of the court is in addition to and complementary to the powers expressly conferred under the Code but that power will not be exercised if its exercise is inconsistent with, or comes into conflict with any of the powers expressly or by necessary implication conferred by the other provisions of the Code. Section 151 however is not intended to create a new procedure or any new right or obligation.

32. In Nain Singh v. Koonwarjee [(1970) 1 SCC 732: AIR 1970 SC 997] this Court observed: (SCC p. 735, para 4)

“4. … Under the inherent power of courts recognised by Section 151 CPC, a court has no power to do that which is prohibited by the Code. Inherent jurisdiction of the court must be exercised subject to the rule that if the Code does contain specific provisions which would meet the necessities of the case, such provisions should be followed and inherent jurisdiction should not be invoked. In other words the court cannot make use of the special provisions of Section 151 of the Code where a party had his remedy provided elsewhere in the Code….”

20. Further, in the judgment of Matajog Dubey v. H.C. Bhari, (1955) 2 SCR 925, it was observed as follows:

“23. Where a power is conferred or a duty imposed by statute or otherwise, and there is nothing said expressly inhibiting the exercise of the power or the performance of the duty by any limitations or restrictions, it is reasonable to hold that it carries with it the power of doing all such acts or employing such means as are reasonably necessary for such execution. If in the exercise of the power or the performance of the official duty, improper or unlawful obstruction or resistance is encountered, there must be the right to use reasonable

means to remove the obstruction or overcome the resistance. This accords with commonsense and does not seem contrary to any principle of law. The true position is neatly stated thus in Broom's Legal Maxims, 10th Edn. at p. 312: “It is a rule that when the law commands a thing to be done, it authorises the performance of whatever may be necessary for executing its command.”

21. The above-mentioned judgment was also reiterated in the matter of Tecnimont (P) Ltd. v. State of Punjab, (2021) 12 SCC 477, wherein the Hon’ble Supreme Court observed the following:

“26. If the inherent power the existence of which is specifically acknowledged by provisions such as Section 151CPC and Section 482CrPC is to be read with the limitation that exercise of such power cannot be undertaken for doing that which is specifically prohibited, same limitation must be read into the scope and width of implied power of an appellate authority under a statute. In any case the principle laid down in Matajog Dobey [Matajog Dobey v. H.C. Bhari, (1955) 2 SCR 925 : AIR 1956 SC 44 : 1956 Cri LJ 140] states with clarity that so long as there is no express inhibition, the implied power can extend to doing all such acts or employing such means as are reasonably necessary for such execution……”

22. In view of the aforementioned judgments, it is a settled law under Section 151 of CPC that a High Court is not necessarily required to pass any order until it is salient and indispensable to meet the ends of justice. A Court will be under proper authority to do anything that is necessary to impart justice under the law in the lieu of exercise of its inherent powers. The scope of Section 151 of CPC is wide and encompasses several situations where the specific provisions of the CPC may not provide adequate relief to a party. It is also apposite to rely upon the well-settled ratio of law, that the objective of Section 151 of CPC is to supplement. The Section confers on the Court, the powers of making such orders as may be necessary to meet the ends of justice.

23. At this stage, it is also necessary to consider the fact that the Coordinate Bench of this Court had directed the non-applicant/petitioner to deposit the Award amount along with the interest. The nonapplicant/petitioner in pursuance to the direction of this Court, deposited the entire Award amount with the Registrar General of this Court. The judgment of Hon’ble Supreme Court in Gujarat State Disaster Management Authority v. Aska Equipments Limited, 2021 SCC OnLine SC 917 has been relied upon in this regard wherein, it was observed that Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter “MSME Act, 2006”) states that in case there is a challenge to an Award and the Award holder is a MSME, it is mandatory to provide 75% of the Awarded amount as a pre-deposit while preferring the application for setting aside the Award. The said requirement of deposit of 75% of the Awarded amount as a pre-deposit is mandatory. The Courts would have no discretion at all to deviate from the mandate under Section 19 of the MSME Act, 2006.

24. Considering the discussion made in the abovementioned paragraph, this Court is also of the opinion that as there exists statutory and judicial mandate for a pre-deposit of 75% of Awarded amount, the same is to be followed in its true letter and spirit. Courts must not deviate from the mandatory requirement as there can be no inclination or volition otherwise.

CONCLUSION

25. This Court is of the view that the applicant/respondent herein, being an aggrieved party cannot be rendered remediless. However, it becomes extremely crucial to observe that, at this stage whereby the petition challenging the Arbitral Award stands dismissed and the Award is in favor of the applicant/respondent. Therefore, any relief in relation to awarded amount can be granted in favor of the applicant/respondent and the same would be in consonance with imparting justice under the inherent power clause of CPC.

26. It is further observed by this Court that the Coordinate Bench of this Court allowed for the release of Rs. 3,25,00,000/- out of the total amount of Rs. 3,76,84,360/- deposited with the Registrar General of this Court, in favor of the applicant/respondent in IA No. 3906/2021 vide order dated 12th March 2021, subject to furnishing of security.

27. The Coordinate Bench of this Court had dismissed the petition under Section 34 of the Act, 1996, vide order dated 05th December 2022 in O.M.P (COMM) 372/2019. During the course of the arguments, it has been contended by the applicant/respondent that there is neither any application pending for setting aside the Arbitral Award nor any appeal has been filed by the non-applicant/petitioner before a Superior Court. This contention of the applicant/respondent has not been contradicted by the non-applicant/petitioner.

28. This Court is of the view that in order to safeguard the rights of both the parties in pursuing any further proceedings either by way of an appeal or an execution, the entire amount deposited by the nonapplicant/petitioner must be released against furnishing of security by the applicant/respondent.

29. This Court has placed reliance on the principles laid down in catena of judgments, wherein it was held that there is no express inhibition, the implied power can extend to doing all such acts or employing such means as are reasonably necessary for meeting the ends of justice, in genuine cases of hardship, recourse would be open under Section 151 of CPC. This Court is of the view that the petition under Section 34 of The Act, 1996 is dismissed and the money, which the applicant/respondent is entitled to is with the Registrar General of this Court, therefore, it would not be coherent to deny the release of the said amount.

30. Considering the precedents and observations of this Court, at this stage this Court finds it reasonable and particularly prudent to allow the instant application, and to grant the reliefs sought by the applicant/respondent. It is found that in case the instant application is not allowed, being an MSME, undue hardship might be caused to the applicant/respondent. Therefore, for imparting justice, it is prudent enough to pass the necessary directions.

31. In view of the discussion in the foregoing paragraphs, I find sufficient merits to allow this application and further the Registrar General of this Court is directed to release the entire amount of Rs. 3,76,84,360/- in favor of the applicant/respondent against furnishing of the security subject to proper identification and verification by the

32. Accordingly, the instant application stands allowed.

33. The order be uploaded on the website forthwith.

Union of India v. M/S Parishudh Machines Pvt. Ltd

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