2006 Supreme(SC) 1016

SUPREME COURT OF INDIA
Dr. A.R. Lakshmanan & Lokeshwar Singh Panta
Paramjeet Singh Patheja - PETITIONER
VERSUS
ICDS Ltd.-RESPONDENT
Appeal (civil) 4130 of 2006
Decided on : 31/10/2006

An arbitration award is not a 'decree' for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909. The court emphasized that an insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder. The court concluded that the Insolvency Notice issued under section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of an arbitral award which has been passed under the Arbitration & Conciliation Act, 1996.

Headnote:

Arbitration Award - Insolvency Notice - Sick Industrial Companies (Special provisions) Act, 1995, Presidency Towns Insolvency Act, 1909 - Section 9(2) - The court held that an arbitration award is not a 'decree' for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909. It further held that execution proceedings in respect of the award cannot be proceeded with in view of the statutory stay under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1995. The court also emphasized that an insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder. The court concluded that the Insolvency Notice issued under section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of an arbitral award which has been passed under the Arbitration & Conciliation Act, 1996. The Civil Appeal was allowed and the order dated 19.3.2003 passed by the Division Bench of the High Court of Bombay in Notice of Motion No.72/2002, Notice No. N/180/2001 was set aside.

Fact of the Case:

The appellant, Paramjeet Singh Patheja, was a party to arbitration proceedings initiated by the respondents to recover amounts alleged to be due and payable from one Patheja Forgings and Auto Parts Manufactures Ltd. The appellant was sought to be sued in his purported capacity as guarantor of the dues of the said company. An Insolvency notice was issued under section 9(2) of the Presidency Town Insolvency Act, 1909 on the basis of the Arbitration Award. The appellant filed a Notice of Motion in the High Court challenging the said notice, inter alia, on the ground that an Award is neither a decree nor an order for the purpose of the provisions of the Insolvency Act and that no notice can be issued under Section 9(2) on the basis of an award.

Finding of the Court:

The court found that an arbitration award is not a 'decree' for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909. It further held that execution proceedings in respect of the award cannot be proceeded with in view of the statutory stay under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1995. The court also emphasized that an insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder. The court concluded that the Insolvency Notice issued under section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of an arbitral award which has been passed under the Arbitration & Conciliation Act, 1996. The Civil Appeal was allowed and the order dated 19.3.2003 passed by the Division Bench of the High Court of Bombay in Notice of Motion No.72/2002, Notice No. N/180/2001 was set aside.

Issues: The substantial questions of law of paramount importance to be decided by this court were: i) Whether an arbitration award is a 'decree' for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909? ii) Whether an insolvency notice can be issued under section 9(2) of the Presidency Towns Insolvency Act, 1909 on the basis of an arbitration award?

Ratio Decidendi: The court held that an arbitration award is not a 'decree' for the purpose of section 9 of the Presidency Towns Insolvency Act, 1909. It further held that execution proceedings in respect of the award cannot be proceeded with in view of the statutory stay under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1995. The court also emphasized that an insolvency notice should be in strict compliance with the requirements in Section 9(3) and the Rules made thereunder. The court concluded that the Insolvency Notice issued under section 9(2) of the P.T.I. Act 1909 cannot be sustained on the basis of an arbitral award which has been passed under the Arbitration & Conciliation Act, 1996.

Final Decision: The Civil Appeal was allowed and the order dated 19.3.2003 passed by the Division Bench of the High Court of Bombay in Notice of Motion No.72/2002, Notice No. N/180/2001 was set aside.