PARAMJEET SINGH PATHEJA versus ICDS LTD.

Citation: [2006] SUPP. 8 S.C.R. 178 · Decided: 31-10-2006 · Supreme Court of India · Bench: AR. LAKSHMANAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
PARAMJEET SINGH PA THEJA 
v. 
ICDSLTD. 
OCTOBER 31, 2006 
B~ 
[DR. AR. LAKSHMANAN AND LOKESH~AR SINGR.I_>ANT A, JJ.] 
Arbitration and Conciliation Act, 1996; Ss. 35-36/Presidency Towns-
lnsolvency Act, 1909; S. 9 and 9(2): 
C 
Arbitration award-Nature of-Issuance of an insolvency notice in 
pursuance of an award-Correctness of-Held: Since 1909 Act is a statute 
weighed down with grave consequence of civil death for a person adjudged 
as an insolvent, it has to be construed strictly-Since an arbitration is not 
an adjudication, an award is not a decree/order for payment-Therefore, it 
D could not be enforced as a decree-Issuance of Notice under the Insolvency 
Act is fraught with serious consequences-Such a notice, therefore, could be 
issued in pursuance of decree/order for payment of money passed by a Court/ 
Judicial organ established for di~pensation of justice-Notice under 1909 
Act is not a mode of enforcing debt-I'-nforcement ~ould be done in terms of 
provisions of CPC-No insolvency notice could be issued under Section 9(2) 
E of the 1909 Act on the basis of an Arbitration Award-Hence, notice so 
issued and order passed by the Division Bench of the High Court in Notice 
of motion set aside-Code of Civil Procedure, 1908-S. 2(2) and 2(14)-
Indian Arbitration Act, 1899-Ss. 4(c:), 11 & 15. 
F 
G 
H 
Words and Phrases: 
'Decree'. 'order' and 'an award'-Distinction between. 
'Courts', 'tribunal' and 'arbitrator'-Distinction benveen. 
Words 'litigation', 'as if-Meaning of 
The questions which arose for determination in this appeal were as to 
whether an ?..rbitration award is a "decree" for the purpose of section 9 of the 
Presidency Towns Insolvency Act, 1909 and as to whether an insolvency notice 
could be issued under section 9(2) of the 1909 Act in pursuance of an 
178 
PARAMJEET SINGH PATHEJA v. ICDS LTD. 
179 
arbitration award. 
Appellants contended that the Presidency Towns Insolvency Act (PTI 
Act) is a statute fraught with the grave consequence of 'civil death' for a person 
sought to be adjudged an insolvent, therefore, it has to be construed strictly; 
A 
that it is impermissible to enlarge or restrict the language of the Act having 
regard to supposed notions of convenience, equity or justice; that the Indian B 
Arbitration Act, 1899 clearly draws the distinction between Courts and 
Arbitrators; that only for the purpose of enforcement of the award, it is treated 
as if it were a decree of the Court; that issuance of a notice under the 
Insolvency or Bankruptcy statutes is not a mode of enforcement of a decree; 
that it is settled law that where the arbitration is governed by the Arbitration C 
Act, 1899, the Second Schedule will not apply thereto; that PTI Act does not 
define 'decree' or 'order' for the simple reason that the meaning of these 
terms had been well-known since the enactment of Civil Procedure Code; that 
the words 'suit or other proceeding in which the decree or order was made' 
mean a suit in which a decree is made or a proceeding under the CPC which 
results in an order by a Civil Court which is not a decree; that the word D 
'proceeding' does not refer to arbitrations because they do not result in an 
'order' but an 'award', much less an order of a Civil Court; that the 
'proceeding' means a proceeding such as appellate or execution proceedings 
or applications under the CPC during the pendeney of the suit or appeal; that 
the words 'or other proceedings' were added not for covering arbitrations but E 
by way of abundant caution to make it clear that other proceedings in relation 
to or arising out of suits were to be included; that "Litigation" has been held 
to mean "a legal action, including all proceedings therein, initiated in a court 
of law"; that Arbitrators are not tribunals set up by the State to deal with 
special matters as they are not part of the judiciary exercising the judicial 
power of the State; that the legislative intendment was that only if a debt found F 
due by the Courts and was not paid in spite of notice, it would amount to an 
act of insolvency; that the Legislatures never contemplated that a mere award 
given by persons chosen by parties to resolve their disputes should lead to an 
act of insolvency; that it is impermissible to substitute the word 'Court' with 
'arbitrators' and the words 'decree' or 'order'; that the Insolency Notice shall G 
be in Form 1-B; that Form 1-B unambiguously points to the fact that the decree 
or order has been obtained from

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