Kotak Mahindra Prime Ltd. v. Morbits Technologies Pvt. Ltd. & Others (WA 926 of 2016) and Kotak Mahindra Prime Ltd. v. Ashraf V.A. & Others (WA 928 of 2016)

C.R. # IN THE HIGH COURT OF KERALA AT ERNAKULAM # PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY, THE 17[TH] DAY OF JANUARY 2023 / 27TH POUSHA, 1944 ## WA NO. 926 OF 2016 AGAINST THE JUDGMENT IN WPC 4325/2016 OF HIGH COURT OF KERALA DATED 16.3.2016 ## APPELLANT/1ST RESPONDENT: M/S.KOTAK MAHINDRA PRIME LTD. HAVING ITS REGISTERED OFFICE AT 27 BKC, C-27 BLOCK, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI-400051 AND HAVING ITS BRANCH OFFICE AT 4TH FLOOR, THADIKKARAN CENTRE, PALARIVATTOM, KOCHI-682 025. BY ADVS.SRI.NAGARAJ NARAYANAN SRI.BENOJ C AUGUSTIN SRI.PRATHAP PILLAI SRI.SAIJO HASSAN SRI.SEBIN THOMAS ## RESPONDENTS/PETITIONER & RESPONDENTS 2 AND 3: - 1 MORBITS TECHNOLOGIES PVT. LTD. 41/2533C, 1ST FLOOR, METRO PALACE, ERNAKULAM NORTH, REP. BY JOSE KURIAN, 63/2405, PANAMKUZHAKAL HOUSE, SRM ROAD, COCHIN, ERNAKULAM, KERALA, INDIA-682 018. - 2 SUB INSPECTOR OF POLICE PALARIVATTOM POLICE STATION, KOCHI-682 025. - 3 ARBITRATOR M.T.BALAN RETD. DISTRICT JUDGE T-4, EMPIRE BUILDING, OPPOSITE CENTRAL POLICE STATION, ERNAKULAM, KOCHI-682 018. BY ADV SRI.N.K.MOHANLAL SRI.TEKCHAND.V, SR.G.P. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 17.01.2023 ALONG WITH WA 928/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A.Nos.926 & 928 OF 2016 :: 2 :: # IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY, THE 17[TH] DAY OF JANUARY 2023 / 27TH POUSHA, 1944 ## WA NO. 928 OF 2016 AGAINST THE JUDGMENT IN WPC 8667/2016 OF HIGH COURT OF KERALA DATED 16.3.2016 ## APPELLANT/4TH RESPONDENT: M/S. KOTAK MAHINDRA PRIME LTD. HAVING ITS REGISTERED OFFICE AT 27 BKC,C-27 BLOCK, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI-400051 AND HAVING ITS BRANCH OFFICE AT 4TH FLOOR, THADIKKARAN CENTRE, PALARIVATTOM, KOCHI-682 025. BY ADVS.SRI.NAGARAJ NARAYANAN SRI.BENOJ C AUGUSTIN SRI.PRATHAP PILLAI SRI.SAIJO HASSAN SRI.SEBIN THOMAS SRI.VISHNU BHUVANENDRAN ## - RESPONDENTS/PETITIONER & RESPONDENTS 1 TO 3: - 1 ASHRAF V.A., AGED 45 YEARS S/O. ALIYAR, VARIATH PARAMBIL HOUSE, KUNNATHERY, THAIKATTUKARA P.O., ERNAKULAM-683 106. - 2 STATE OF KERALA, REPRESENTED BY SUB INSPECTOR OF POLICE,ALUVA POLICE STATION, ALUVA-683 101. - 3 STATE POLICE CHIEF, THIRUVANANTHAPURAM-695 001. - 4 M.T.BALAN, ARBITRATOR, T-4, EMPIRE BUILDING, NEAR HIGH COURT, KOCHI-692 018. SRI.TEKCHAND.V, SR.G.P. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 17.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A.Nos.926 & 928 OF 2016 :: 3 :: JUDGMENT C.R. [W.A.Nos.926 & 928 OF 2016] Dated this the 17[th] day of January 2023 ## Shaji P Chaly, J. The writ petitions are filed by M/S Kotak Mahindra Prime Limited, a non-banking financial institution, the first respondent in W.P.(C)Nos.4325/16 and 8667/2016 respectively, challenging the common judgment of the learned Single Judge dated 16[th] March 2016; whereby the learned Single Judge allowed the writ petitions filed by the first respondent in the appeals and quashed the interim order passed by the Arbitrator under Section 17 of the Arbitration and Conciliation Act, 1996, hereinafter called ‘Act 1996’, to the extent permitting appellant/claimant to take possession of the secured asset vehicle from whomsoever the vehicle is found by appointing an Advocate Commissioner. The learned Single Judge found that an Arbitrator is not vested with powers under Section 17 (2) of Act 1996 to enforce the order passed by it, and further that for enforcing the order given by the Arbitrator, the W.A.Nos.926 & 928 OF 2016 :: 4 :: intervention of the court in contemplation of the provisions of the Code of Civil Procedure has to be sought for. It is thus challenging the legality and the correctness of the judgment of the learned Single Judge, the appeals are preferred. Since the subject matter is one and the same, by the agreement of the parties, the appeals are disposed of by this common judgment. 2. Basic facts for the disposal of the writ petitions are as follows: The party respondents in the appeals have availed loans from the appellant by executing hypothecation agreements for the purchase of vehicles which were to be repaid in equated monthly installments. Repayment was defaulted, consequent to which, on the basis of the agreement executed by and between the appellant and the party respondents, Arbitrator was appointed. Along with the claim petition appellant filed an application seeking an interim measure of repossession of the vehicles by appointing an advocate commissioner. The application for interim order was allowed and the advocate commissioner W.A.Nos.926 & 928 OF 2016 :: 5 :: was directed to repossess the vehicle with police assistance. The learned Single Judge after assimilating the entire factual and legal situation in contemplation of the provisions of the Act 1996 has arrived at the conclusion that the order so passed by the Arbitrator cannot be sustained under law. 3. We have heard learned counsel for the appellant Sri.Nagaraj Narayanan, learned Senior Government Pleader Sri.Tek Chand for the State officials and perused the pleadings and material on record. 4. The sole question to be considered is whether any interference is required to the judgment of the learned Single Judge. 5. Learned counsel for the appellant Sri.Nagaraj Narayanan relied heavily upon sub Section (2) of Section 17 of the Act 1996 and submitted that the Arbitrator is vested with all powers to pass an order for the preservation and interim custody of the vehicles and to enforce the same by appointing an Advocate Commissioner. W.A.Nos.926 & 928 OF 2016 :: 6 :: ## 6. Section 17 deals with interim measures ordered by Arbitral Tribunal and sub section (1) specifies that a party during the arbitral proceedings, apply to the Arbitrary — Tribunal (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:— (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it. W.A.Nos.926 & 928 OF 2016 :: 7 :: (2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.” 7. It is contended by learned counsel that the provision makes it clear that by virtue of sub section (2) of Section 17, the Arbitrator is clothed with the power for acting as a Civil Court and executing its order. It is further submitted that the finding rendered by the learned Single Judge relying upon Section 36 of Act 1996 dealing with enforcement of an arbitral award cannot be resorted to for the basic reason that by Section 35 of Act 1996, an arbitral award shall be final and binding on the parties and persons claiming under them respectively. Consequent to the same, the proceeding terminates as is mandated under Section 32 of Act 1996, and therefore, the Arbitrator becomes functus officio and is precluded from executing the final award. According to the learned counsel, the analogy drawn by the learned Single Judge by and between an interim measure W.A.Nos.926 & 928 OF 2016 :: 8 :: ordered by the Arbitral Tribunal and a final award passed by the Arbitral Tribunal cannot be legally encompassed. Learned counsel further invited our attention to Section 5 of Act 1996 and contended that notwithstanding anything contained in any other law for the time being in force in matters governed by part I of Act 1996, no judicial authority shall intervene, except where so provided in that part. The said submissions are made relying upon the objects and reasons for introducing the Act 1996 and according to the learned counsel, the Act 1996 was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign and arbitral awards. Therefore, according to the counsel, if intervention of the court is to be resorted to enforce an interim measure, it would defeat the purpose for which the Act 1996 was introduced. 8. On the other hand, learned Senior Government Pleader fully supported the findings rendered by the learned Single Judge. W.A.Nos.926 & 928 OF 2016 :: 9 :: 9. Moreover, the question of enforcement of an order under Section 17 was considered by the Apex Court in Amazon.Com NV Investment Holdings LLC v. Future Retail Ltd. reported in (2022) 1 SCC 209 and held as follows: “71. It was to remedy this situation that Section 17(2) was introduced. There is no doubt that the Arbitral Tribunal cannot itself enforce its orders, which can only be done by a court with reference to the Code of Civil Procedure. But the court, when it acts under Section 17(2), acts in the same manner as it acts to enforce a court order made under Section 9(1). If this is so, then what is clear is that the Arbitral Tribunal's order gets enforced under Section 17(2) read with the Code of Civil Procedure. 72. There is no doubt that Section 17(2) creates a legal fiction. This fiction is created only for the purpose of enforceability of interim orders made by the Arbitral Tribunal. To extend it to appeals being filed under the Code of Civil Procedure would be a big leap not envisaged by the legislature at all in enacting the said fiction. As a matter of fact, this Court in Paramjeet Singh Patheja v. ICDS Ltd. [Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322] , dealt with Section 36 of the Arbitration Act as it stood immediately before the 2015 Amendment Act [Section 36 as it then stood is the mirror image of Section 36(1) post amendment]. In answering the question raised before it — as to whether an arbitration award can be said to be a decree for the purpose of Section 9 of the Presidency Towns Insolvency Act, 1909, this Court held : (SCC pp. 345-46, paras 39-42) “39. Section 15 of the Arbitration Act, 1899 provides for “enforcing” the award as if it were W.A.Nos.926 & 928 OF 2016 :: 10 :: a decree. Thus, a final award, without actually being followed by a decree (as was later provided by Section 17 of the Arbitration Act, 1940), could be enforced i.e. executed in the same manner as a decree. For this limited purpose of enforcement, the provisions of CPC were made available for realising the money awarded. However, the award remained an award and did not become a decree either as defined in CPC and much less so far the purposes of an entirely different statute such as the Insolvency Act are concerned. 40. Section 36 of the Arbitration and Conciliation Act, 1996 brings back the same situation as it existed from 1899 to 1940. Only under the Arbitration Act, 1940, was the award required to be made a rule of court i.e. required a judgment followed by a decree of court. 41. Issuance of a notice under the Insolvency Act is fraught with serious consequences : it is intended to bring about a drastic change in the status of the person against whom a notice is issued viz. to declare him an insolvent with all the attendant disabilities. Therefore, firstly, such a notice was intended to be issued only after a regularly constituted court, a component of the judicial organ established for the dispensation of justice, has passed a decree or order for the payment of money. Secondly, a notice under the Insolvency Act is not a mode of enforcing a debt; enforcement is done by taking steps for execution available under CPC for realising monies. 42. The words [ Ed. : The words between two asterisks has been emphasised in original.] “as if” [ Ed. : The words between two asterisks has been emphasised in original.] demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree. The fiction is not intended to make it a decree W.A.Nos.926 & 928 OF 2016 :: 11 :: for all purposes under all statutes, whether State or Central.” (emphasis supplied) 75. There can be no doubt that the legal fiction created under Section 17(2) for enforcement of interim orders is created only for the limited purpose of enforcement as a decree of the court. To extend this fiction to encompass appeals from such orders is to go beyond the clear intention of the legislature. Mr Salve's argument in stressing the words “under the Code of Civil Procedure” in Section 17(2), thus holds no water as a limited fiction for the purpose of enforcement cannot be elevated to the level of a genie which has been released from a statutory provision and which would encompass matters never in the contemplation of the legislature.” 10. That apart, the Apex Court in Union of India v. Vedanta Limited reported in (2020) 10 SCC 1, held that the words “as if” demonstrate that award and decree or order are two different things. The legal fiction created is for the limited purpose of enforcement as a decree; and the fiction is not intended to make it a decree for all purposes under all statutes, whether State or Central. 11. We have evaluated the rival submissions made across the bar. In our considered opinion, Section 17(2) of the Act 1996 only enables an Arbitrator to pass an interim order. Merely because sub section (2) states that the order W.A.Nos.926 & 928 OF 2016 :: 12 :: passed by the Arbitrator shall be deemed an order of the court for all purposes that would not enable the Arbitrator to invoke the powers conferred under the Code of Civil Procedure and enforce the same. It is also clear from sub section (2) of Section 17 that, it only creates a fiction by giving the interim measure passed by the Arbitrator a solemnity to have trappings of an order passed by the Civil Court in order to enforce the same as if it is an order passed by a civil court. However, there is no power vested with the Arbitrator to act as a Civil Court and enforce the order. This is quite clear from sub section (2) of Section 17 which specifies that the order so passed by the Arbitrator shall be enforceable under the Code of Civil Procedure 1908. Learned Single Judge found that the order passed by the Arbitrator can be enforced only by the Civil Court invoking the powers conferred under Section 94 of the Code of Civil Procedure. So also merely because sub section (2) of Section 17 says that the order shall be deemed an order of the court for all purposes, that does not confer power on the Arbitrator to enforce the said order by W.A.Nos.926 & 928 OF 2016 :: 13 :: resorting to the provisions of the Code of Civil Procedure. Considering the facts, law and circumstances involved in the issue, we have no doubt that the learned Single Judge was right in allowing the writ petition and interfering with the enforcement of the order passed by the Arbitrator. The appellant has not made out any case of jurisdictional error or other legal infirmities justifying our interference in an intra court appeal filed under Section 5 of the High Court Act, 1958. Learned counsel also informs us that the arbitrator has already passed the final awards. Therefore, it is for the appellant to enforce the same in terms of the provisions of the Act 1996. sd/S.MANIKUMAR CHIEF JUSTICE sd/SHAJI P. CHALY JUDGE jes