Full Text
HIGH COURT OF DELHI
JUDGMENT
286/2022 MANAK SHOE COMPANY PVT. LTD. ..... Decree Holder
Through: Mr. N.K. Kantawala, Mr. Abhinav Sharma, Ms. Ikshita Sharma, Mr. Amaya M. Nair and Ms. Swati Bansal, Advs.
Through: Mr. Rajeev Sharma, Sr. Adv. with Mr. Nishat Menon, Ms. Kavita Sarin and Mr. Deepesh, Advs.
1. This petition has been filed seeking enforcement of the Arbitral Award dated November 28, 2019 (‘Award’, hereinafter) passed by the Sole Arbitrator appointed in pursuance of the order dated March 10, 2017 of the High Court of Punjab and Haryana at Chandigarh in Arbitration Case No. 247/2016 (O&M), to resolve the dispute between the parties arising out of Lease Deed dated December 22, 2009.
2. Two applications have been filed by the judgment debtor, (i) EX. APPL.(OS) 1186/2021 for recall / modification of orders dated July 20, 2021 and September 20, 2021 with a further prayer for dismissing the present petition, and (ii) EX. APPL.(OS) 286/2022 for issuance of notice to the decree holder to show cause as to why the payment made and the adjustment effected by the judgment debtor not be recorded as certified.
3. Reply to the application EX. APPL.(OS) 1186/2021 has been filed by the decree holder. It was contended by Mr. N.K. Kantawala, learned counsel for the decree holder that the present application is an abuse of process of law and not maintainable. According to him, claims allowed by the learned Sole Arbitrator are set out in paragraph 21 of the Award. Besides the same, no other claims of the judgment debtor was allowed by the Sole Arbitrator. The claims relating to the alleged security deposit do not find any mention in paragraph 21 of the Award. In other words, the learned Sole Arbitrator has neither passed any award nor granted any relief to the judgment debtor in relation to the alleged security deposit. That apart, he submits that a sum of ₹1,58,94,457/- was remitted by the judgment debtor to the account of the decree holder. However, the said amount was paid post the filing of the present petition, and was accepted without prejudice and under protest.
4. He stated that this application, premised on the ground that an amount of ₹38,67,360/- was required to be refunded by the decree holder is without any basis and any adjustment said to have been made by the judgment debtor is denied / contested.
5. Similarly, with regard to application EX. APPL.(OS) 286/2022, the submission of Mr. Kantawala is primarily the same. Though, it is stated in the execution petition that the learned Arbitrator has awarded an amount of ₹88,90,125/- with interest computed as on December 31, 2019 which comes to ₹1,90,24,868/-, it is stated in the reply to EX.APPL(OS) 286/2022 that as per the calculation of the decree holder the total amount payable as on December 31, 2019 is quantified at ₹2,14,24,868/-. He also stated that the amounts have to be quantified again on March 31, 2020 in view of the part payment made by the judgment debtor. That apart, he reiterated that there was no adjudication of the claim of the judgment debtor which is sought to be adjusted / set off, i.e., the security deposit of ₹38,67,360/-. In fact, it is his submission that the judgment debtor cannot unilaterally adjust the said amount. Therefore, the decree holder’s amount still stands unpaid in full. He denied the fact that the Award itself mentions the entitlement of the judgment debtor to the amount of ₹38,67,360/- from the decree holder and that the judgment debtor is entitled to certification that the Award stands satisfied. He seeks the dismissal of the applications.
6. According to him, a perusal of the Award dated November 28, 2019 would reveal the following: i. The decree holder is entitled to recover rent @ ₹ 24,98,585/per month for a period of three months starting from July 2013 till September 30, 2013, i.e., ₹74,95,755/-. ii. The judgment debtor was liable to pay a sum of ₹ 13,94,370/towards arrears of electricity dues payable to the decree holder. iii. The decree holder is also entitled to pre-suit pendente lite and future interest @ 18% per annum on the sum awarded, from the date they became due, till realisation. iv. Cost of ₹25,00,000/- was also awarded in favour of the decree holder against the judgment debtor.
7. He has opposed the contention raised by the judgment debtor that it is entitled to invoke the provision of Order XXI Rule 2 of the Code of Civil Procedure, 1908 (‘CPC’, for short) seeking adjustment of ₹38,67,360/-. According to him, the provision comes into operation for any payment made after the passing of any cross-decree or counterclaim. To buttress his argument, he has relied upon the Judgment of this Court in the case of Sobhagya Advertising Service & Ors. v. Saraswati Devi & Ors., 2002 Vol 1 AD (Delhi) 731, and the Judgment of the Calcutta High Court in the case of Nucent Finance Ltd. v. Hindustan Motors Ltd., AIR 2005 Cal 66.
8. That apart, he stated that the judgment debtor does not have any cross-decree or counter-claim in its favour and as such cannot invoke Order XXI Rule 19 of the CPC.
9. He had also submitted that the judgment debtor has not filed any objections under the Arbitration and Conciliation Act, 1996 against the Award and therefore the Award has attained finality. The claims of deductions / adjustment / set-off made by the judgment debtor are on the basis of an observation made by the Arbitrator in the Award. The observations of the Arbitrator are neither binding nor could be termed as a decree as defined in Section 2 (2) of the CPC, more so when no plea of set-off / adjustment / counter-claim has been raised by the judgment debtor. In this regard he has referred to the judgment of this Court in the case of M/s. Aadhar Stumb v. NDMC, 94 (2001) DLT 248.
10. As there was no adjudication on the alleged claim of the judgment debtor of set-off / adjustment of ₹38,67,360/-, the judgment debtor had no right to unilaterally adjust the said amount. The decree has to be satisfied without any deduction. As such the judgment debtor is liable to pay the balance amounts to the decree holder in terms of the Award along with the interest accrued.
11. Mr. Kantawala submitted that even assuming that the judgment debtor is entitled to claim adjustments on equitable grounds, it is a settled position of law that in case of conflict between equity and law, the latter shall prevail. Reference in this regard is made to the judgment of the Supreme Court in the case of B. Premanand & Ors. v. Mohan Kokail and Ors., (2011) 4 SCC 266.
12. He has stated that the judgment debtor is thus liable to pay a further sum of ₹58,39,486/-, i.e., the amount calculated up to July 15,
2022.
13. That apart, in terms of the Award, the judgment debtor is liable to pay pre-suit pendente lite and future interest @ 18% per annum on the sum awarded, from the date they became due, till realisation.
14. He has sought the prayers as made in the petition.
15. A reply has been filed by the judgment debtor to the Execution Petition wherein it is stated that petition has been filed notwithstanding the fact that the Award stood satisfied as on March 31, 2020.
16. Mr. Rajeev Sharma, learned Senior Counsel appearing for the decree holder has stated that the reading of the Award would reveal the following: i. The decree holder defaulted in refunding the security deposit of ₹38,67,360/- which it was bound to refund at the time of termination of the lease deed. ii. The judgment debtor tried to hand over vacant possession of the premises to the decree holder, who avoided taking possession. iii. The decree holder is entitled to rent for the period of July, 2013 to September 30, 2019 amounting to ₹74,95,775/-. iv. The judgment debtor is liable to pay ₹13,94,370/- towards arrears of electricity dues. v. The decree holder is entitled to pre-suit pendente lite and future interest @ 18% per annum from the date they became due, till realisation. vi. The judgment debtor is liable to pay ₹25,00,000/- towards cost to the decree holder.
17. A table depicting the awarded amounts as on March 31, 2020 has been provided in the reply, which I reproduce as under: Particulars Amount TDS @10% Net paid Rent for the period of July 2013 to Sept 2013 74,95,755 7,49,576 67,46,179 Arrears of Electricity dues 13,94,370 13,94,370 Litigation Cost 25,00,000 25,00,000 Interest amount (not mentioned in order) 1,01,34,743 10,13,475 91,21,268 Amount awarded (38,67,360) to the Judgement Debtor towards Security Deposit (38,67,360) Total amount awarded to the Decree Holder. 1,58,94,457
18. Mr. Sharma has stated that an amount of ₹ 1,58,94,457/- was paid by the judgment debtor to the decree holder on March 31, 2020 in full satisfaction of the decree. However, on the first date of hearing of this petition, i.e., on July 20, 2021, this fact was deliberately not disclosed to his Court. The judgment debtor was liable to pay a net amount of ₹1,13,90,125/- as on date of the Award and ₹1,58,94,457/was paid on March 31, 2020.
19. Therefore, the entire amount as awarded stands paid to the decree holder after adjusting the security deposit of ₹38,67,360/- which the Arbitrator had held to be simultaneously refundable to the judgment debtor by the decree holder. The decree holder has initiated the present proceedings seeking the amount of ₹38,67,360/- which it has already received and as such is trying to unjustly enrich itself. It is neither the case of the decree holder that the security amount of ₹38,67,360/- is not held by it, nor that the security deposit was not refundable upon termination of the lease deed.
20. Mr. Sharma has further averred that the remittance of the balance amount awarded after adjusting the security deposit of ₹38,67,360/- by the judgment debtor constitutes payment / adjustment as contemplated in Order XXI Rule 2 (2) and (2A) of the CPC. Order XXI Rule 2 deals with the payment out of Court to the decree holder. Rule 2 (2) provides that the judgment debtor may inform the Court of a payment / adjustment out of Court against a decree and seek an order recording such payments / adjustment. In the present case, the fact that the balance amount after adjusting the security deposit amount has been remitted to the decree holder is admitted by the decree holder.
21. It is also his submission that the question of payments / adjustment need to be gone into by the executing Court under Section 47 of the CPC and not in separate proceedings. In this regard, he has relied upon the judgment of a Division Bench of the Lahore High Court in Murli Dhar v. Basheshar Lal-Moti Lal, ILR (1938) 19 Lah
264.
22. He has controverted the reliance placed by Mr. Kantawala on Order XXI Rules 18 and 19 of the CPC to contend that adjustments can take place in execution proceedings only if there are cross-decrees. According to Mr. Sharma this is incorrect, inasmuch as Order XXI Rule 2 of the CPC specifically permits payment / adjustment of decretal amounts out of Court. Order XXI Rules 18 and 19 of the CPC have no application to the facts of this case as there is no cross-decree or cross-claim herein. Rather it is a case of payment / adjustment out of Court, i.e., a contingency contemplated by and provided for in Order XXI Rule 2 of the CPC.
23. Mr. Sharma has also pointed out that there is another provision in Order XXI Rule 2 of the CPC, i.e., Sub-Rule 3. However, Sub-Rule 3 of Order XXI Rule 2 does not apply to Delhi and the matter is governed by Sub-Rules 2 and 2A of Order XXI Rule 2. Sub-Rule 3 has been omitted with respect to Delhi by Section 36 of the Punjab Relief from Indebtedness Act, 1934. The effect of such deletion has been noted by the High Court of Punjab and Haryana in the case of Devinder Kumar v. S. Chandan, 1993 SCC OnLine P&H 853, in the following words: "The result, therefore, is that irrespective of the fact whether a payment or adjustment has been certified either at the instance of the decree-holder under sub-rule (1) or within 90 days of the adjustment at the instance of the judgment-debtor under sub-rule (2), such payment can be pleaded as a defence if the decree-holder takes out an execution of the decree. Thus, as a result of omission of sub-rule (3) of Rule 2 of Order XXI of the Code of Civil Procedure, in execution filed by the decree-holder, the judgment-debtor notwithstanding that he did not move the Court under sub-rule (2) for the adjustment being certified or did not make payment or got the decree adjusted in the manner provide under sub-rule (2-A), is entitled to take up the plea that execution should not be allowed because of payment or adjustment.”
24. He has sought dismissal of the Execution Petition and has prayed for an order recording the payment and adjustment as certified holding that the award November 28, 2019 stands satisfied.
25. Having heard the learned counsel for the parties and perused the record, the short question which arises for consideration is, whether the judgment debtor could have adjusted the amount of ₹38,67,360/against the Arbitral Award dated November 28, 2019.
26. Before I deal with the submissions of the learned counsel for the parties, it is important to reproduce the relevant part of the Award, as rendered by the learned Arbitrator in the following manner:-
27. On a perusal of the Award, it is clear that the learned Arbitrator has granted an amount of ₹24,98,585/- per month for the period between July 2013 till September 30, 2013 i.e. ₹74,95,755/-, ₹13,94,370/- towards arrears of electricity dues, pre suit, pendente-lite and future interest @ 18% per annum with cost quantified at ₹25,00,000/-. Suffice to state, there is no order of the learned Arbitrator directing adjustment of ₹38,67,360/-. That apart, concedingly, there was no counter-claim of the judgment debtor with regard to the refund of the security. Mr. Kantawala is right in saying, as noted in paragraph 2 above, the amount has enured to the benefit of the decree holder, in the manner depicted therein.
28. Mr. Sharma has justified the adjustment of security deposit of ₹38,67,360/- by referring to Order XXI Rule 2 (2) and 2A of the CPC to contend that the judgment debtor is at liberty to inform the Court of payment / adjustment out of Court against a decree and seek an order recording such payments / adjustments as certified. In fact, it is his case that the said amount has been admitted by the decree holder. In support of his submission, he has relied upon the judgment of a Division Bench of the Lahore High Court in Murli Dhar (supra).
29. The submissions of Mr. Sharma are not convincing. Even the reliance placed by Mr. Sharma on the provision of Order XXI Rule 2(2) and 2A CPC, which I reproduce as under, clearly demonstrate that the adjustment can only be of an amount payable under a decree of any kind and paid out of Court to the decree holder and it is in such eventuality that such a payment / adjustment can be recorded as certified. In fact, Rule 2A provides, such payment / adjustment can be recorded only if the payment is made in the manner provided in Rule 1, or if the payment/adjustment is proved by way of documentary evidence or if the payment / 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. Order XXI Rule 2 CPC
30. The plea of Mr. Sharma that there is an admission on the part of the decree holder is a misplaced argument. There is nothing on record to how the decree holder has admitted the payment / adjustment of ₹38,67,360/-. In fact, there cannot be any admission when there was no claim. What has been stated by Mr. Kantawala is that even if the judgment debtor is entitled to claim adjustment on equitable grounds, this Court shall not permit any such payment / adjustment.
31. Even otherwise, there cannot be an adjustment also in the year 2020, of an alleged amount due and payable on September 27, 2014, i.e., six years after the judgment debtor had vacated the premises. The adjustment which is in the nature of a claim, apart from being not maintainable, is barred by limitation.
32. The judgment debtor was required to get the payment / adjustment recorded with the Court concerned within the time stipulated under Article 125 of the Limitation Act, 1963. In the present case, the judgment debtor has filed the application much beyond the period of 30 days. In this regard, the dates may be of some relevance. It is the case of the judgment debtor himself that the Award stood satisfied on March 31, 2020, which means that the complete amount as awarded was paid, after adjusting an amount of ₹38,67,360/-, to the decree holder. This I say so, as Sub-Rule 2 of Order XXI Rule 2 CPC, obligates the judgment debtor to 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 date to be fixed by the Court, why such payment or adjustment should not be recorded as certified. In other words, though, the execution petition was filed by the decree holder in the month of March 2021 and was listed for the first time on July 20, 2021 when notice was issued, returnable on September 20, 2021, nothing precluded the judgment debtor from filing an application as has been filed by the judgment debtor now being EX.APPL.(OS) 286/2022 for adjustment. Moreover, the judgment debtor cannot justify the delay in filing such an application on any ground, that too, when it had filed an application being EX.APPL.(OS) 1186/2021 on October 26, 2021 with the prayers already noted above.
33. Mr. Sharma in support of his application has relied upon the judgment in the case of Murli Dhar (supra) to contend that the question of payment / adjustment is a question that has to be gone into by the Executing Court under Section 47 CPC and not in separate proceedings. In view of my aforesaid conclusion, the reliance placed by Mr. Sharma on the above judgment is inconsequential, inasmuch as the judgment has no applicability to the facts of this case.
34. Accordingly, the judgment debtor shall deposit with the period of four weeks from today, so that the said amount can be released to the decree holder on the next date of hearing. The decree holder shall also file on record the total amount along with interest due and payable under the Award, if any, as of today, within the same period of time.
35. Accordingly, the applications filed by the judgment debtor are dismissed.
36. List before Roster Bench on January 17, 2023.
V. KAMESWAR RAO, J
JANUARY 05, 2023