Important Point – If an arbitral award is based on an illegal and void agreement, objection in that regard can be taken in proceedings for execution.

1. Execution as a decree is sought of an Arbitral Award dated 21st December, 2006 of Mr. Ram Bhaj Mittal, sole Arbitrator, Paper Merchants Association (Regd.), Delhi, of recovery of Rs.3,44,28,861/- with interest @ 12% per annum from the date of the Award till the date of realisation, in favour of Khanna Traders and against “Scholar Publishing House Pvt. Ltd. and others”.

2. In the execution petition, besides Scholar Publishing House Pvt. Ltd., Mr. Ramesh Ranade, Mr. Rajesh Ranade, Mr. Satish Ranade and Mr. Inderjit Sharma have been impleaded as judgment debtors (JDs).

3. Notice of the execution petition was issued.

4. EA No.39/2014 has been filed by the decree holder (DH) Khanna Traders under Order XXI Rule 41 of the Code of Civil Procedure, 1908 (CPC) seeking a direction to the JDs to file affidavits of their income tax, assets, debts, bank lockers etc.

5. EA No.40/2014 has been filed by the DH for arrest of the JDs No.2 to 5.

6. These applications came up before the Court on 17th January, 2014 when inter alia the following order was passed:

“......

A perusal of the award shows that the same does not address the issue as to how judgment debtor nos.2 to 5 have been made personally liable. The judgment debtor no.1 is a private limited company. Liability cannot extend to the shareholders/directors of a company unless it is a case where the shareholders/directors have extended their personal guarantee or have personally made themselves liable.

Prima facie, it appears to me that it is open to judgment debtor nos.2 to 5 raise the aforesaid aspect even in these proceedings, as, to that extent, the award may be a nullity.

Learned counsel for the parties seeks further time to address the court on this particular aspect. Adjourned to 14.03.2014.

.......”

7. The hearing was adjourned from time to time and in the meanwhile execution against some of the assets / properties proceeded. However, the decree still remains unsatisfied.

8. On 2nd September, 2016, the counsel for the DH and the senior counsel for the five JDs were heard on the issue raised in the order dated 17th January, 2014 and orders thereon reserved.

9. On going through the file, no reply is found to have been filed by the JDs No.2 to 5 to these applications. The JDs No.2 to 5 however in their reply to the execution petition have pleaded (i) that the JDs No.2 to 5 are the Directors of the JD No.1; (ii) that DH had business dealings with the JD No.1; (iii) that disputes arose between DH and the JD No.1 regarding supply of paper and recovery of payment; (iv) that DH initiated arbitration proceedings before the sole Arbitrator against JD No.1 and its Directors JDs No.2 to 5; (v) that the sole Arbitrator passed ex-parte Award not only against JD No.1 but also against JDs No.2 to 5; (vi) that JD No.1 filed OMP No.148/2007 under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act, 1996) for setting aside of the ex-parte Award dated 21st December, 2006; (vii) that vide order dated 29th November, 2012, OMP No.148/2007 was dismissed; (viii) that JD No.1 preferred FAO No.184/2013 which was also dismissed vide order dated 19th July, 2013; (ix) that JD No.1 filed SLP (CC) No.2610/2014 before the Supreme Court and of which notice was issued on 21st February, 2014; (x) that JD No.1 is distinct from the members namely JDs No.2 to 5 of the JD No.1 company who are not liable for the debts of JD No.1; (xi) that ex-parte Arbitral Award dated 21st December, 2006 is prima facie illegal and null and void, as the dispute was between DH and JD No.1 and JDs No.2 to 5 could not have been made liable for the debts of JD No.1. Reliance in the said reply itself is placed on Saraswat Trading Agency Vs. Union of India AIR 2004 Cal 267 to contend that a decree which is a nullity in the eyes of law is no decree. Reference in the reply itself is also made to Section 47(1) of CPC.

10. No rejoinder is found to have been file