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CASE NO.: Appeal (civil)  4130 of 2006

PETITIONER: Paramjeet Singh Patheja                                  

RESPONDENT: ICDS Ltd.                                                                

DATE OF JUDGMENT: 31/10/2006

BENCH: Dr. AR. Lakshmanan & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

Dr. AR. Lakshmanan, J.

This appeal was filed against the impugned interlocutory  judgment and order dated 19.3.2003 passed in Notice of  Motion No. 72/2002 in Notice No. 180 of 2001 by the High  Court of Judicature at Bombay whereby the reference made by  the learned single Judge with regard to the question of law  was answered against the appellant herein.

The appellant herein is Paramjeet Singh  Patheja(guarantor), judgment debtor and the respondent is  ICDS Ltd, a Company incorporated under the provisions of the  Companies Act, 1956.  On 30.10.1998 the said company was registered with the  Board of Industrial Financial Reconstruction (BIFR) under the  provisions of the Sick Industrial Companies (Special  provisions) Act, 1995. The appellant 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. (hereinafter referred to as the  ’company’). The appellant was sought to be sued in his  purported capacity as guarantor of the dues of the said  company.  On 09.03.2000, a letter was sent informing the  Arbitrators that the company has been registered under  section 15 of the Sick Industrial Companies (Special  provisions) Act, 1995. An Award was rendered therein on 26th June 2000 by the  Arbitrator awarding Rs.3,81,58,821.47. However, according to  the appellant, no copy of the Award was served on the  appellant. On 16.01.2002, Insolvency notice was issued under  section 9(2) of the Presidency Town Insolvency Act, 1909  (PTIA) on the basis of the Arbitration Award. Section 9(2)  provides that a debtor commits an act of insolvency if a  creditor who has obtained a "decree or order" against him for  the payment of money issues him a notice in the prescribed  form to pay the amount and the debtor fails to do so within  the time specified in the notice. 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. This contention has been upheld in the  case of Srivastava v. K.K. Modi Investments and Financial  Services, 2002 (4) Mh.L.J.281, by the Bombay High Court  (J.A. Patil,J.).

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Order of BIFR rejecting the reference of Company was  passed on 05.04.2002. On 14.06.2002, Insolvency notice was  served on the appellant.   An appeal filed by the said Company is presently under  consideration by the Appellate Authority on Industrial and  Financial Reconstruction (’AAIFR’). The appellant filed a Notice of Motion No.72 of 2002 in  the High Court challenging the Insolvency Notice dated 16th  January, 2002. When the above Notice of Motion came up for  hearing the Learned Single Judge (Dr. Chandrachud,J.)  hearing the same differed with the view expressed by the High  Court (J.A. Patil,J.) in the matter of Srivastava v. K.K. Modi  Investments and Financial Services (Supra) on 14.10.2002  and referred the question as to whether an insolvency notice  may be issued under Section 9(2) of the Insolvency Act on the  basis of an Award for reconsideration by a Division Bench.  The Division Bench answered the reference in the  affirmative on 19.03.2003 and held that an award is a "decree"  for the purpose of section 9 of the Insolvency Act and that an  insolvency notice may therefore be issued on the basis of an  award passed by an arbitrator. Against this order of the High Court this Appeal has been  filed in this Court.  The substantial questions of law of paramount  importance to be decided by this court are: 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? Counsel for both parties submitted their case at length.  Mr. V.A. Bobde, learned senior advocate appeared for the  appellant and Mr. L. Nageshwar Rao, learned senior counsel  appeared for the respondent. Mr. V.A. Bobde, learned senior advocate, appearing for  the appellants submitted that; a)      The Presidency Towns Insolvency Act, 1909 is a  statute fraught with the grave consequence of ’civil death’ for a  person sought to be adjudged an insolvent.  The Act has to be  construed strictly; it is impermissible to enlarge or restrict the  language having regard to supposed notions of convenience,  equity or justice. b) The insolvency law for Presidency-Towns was enacted  in 1909 when the Civil Procedure Code, 1908 had recently  been put on the statute book.  At that time, the Arbitration  Act, 1899 was in force.  It was clearly known to the law  makers what is a ’decree’, what is an ’order’ and what is an  ’award’.  It was equally known that there is a fundamental  difference between ’Courts’ and ’arbitrators’ \026 that Courts  constitute the judiciary and exercise the judicial power of the  State whereas arbitrators are persons chosen by parties to a  contract to resolve their disputes. c)      The Indian Arbitration Act, 1899 clearly draws the  distinction between Courts and Arbitrators.  The preamble of  the Act shows that it is an Act for dealing with ’arbitration by  agreement without the intervention of a Court of Justice’.   Section 4(a) defines ’Court’ and various sections deal with the  powers of the Court.  Section 11 provides for the making of an  ’award’.  Section 15 provides for its enforcement. It was  submitted that from a plain reading of the provision it is  evident that only for the purpose of enforcement of the award,  it is treated as if it were a decree of the Court.  

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On a plain reading of the above provision, it is apparent  that only for the purpose of enforcement of the award, it is  treated as if it were a decree of the Court.  The only result is  that for enforcement, i.e. execution, the provisions of the CPC  may be resorted to.  Section 15 does not provide that an award  shall be deemed to be a decree for all purposes under all laws,  past or future, passed by any legislature. Learned senior  counsel referred to various decisions of this court in support of  this contention.  d)     Mr. Bobde, further submitted that, it was decided  long ago in 1907 and has never been doubted since then that  issuance of a notice under the Insolvency or Bankruptcy  statutes is not a mode of enforcement of a decree in the In re  A Bankruptcy Notice  (1907) 1 KB 478.  A judgment obtained  in pursuance of an order purporting to be made under the  Arbitration Act, 1889, to enforce an award on a submission by  entering judgment in accordance therewith, is not a final  judgment in an action upon which a bankruptcy notice can be  founded within section 4, sub-section 1(g), of the Bankruptcy  Act, 1883.  Per Vaughan Williams and Fletcher Moulton L.JJ.,  "the Court has no jurisdiction under Section 12 of the  Arbitration Act, 1889 which provides for the enforcement of an  award on a submission in the same manner as if it were a  judgment, to order judgment to be entered in accordance with  the award." Per Fletcher Moulton L.J., "an application for a  bankruptcy notice is not a method of enforcing an award  within Section 12 of the Arbitration Act, 1889."  e)      Section 325 of the CPC of 1859 provides that ’the  Court shall proceed to pass judgment according to the  award\005\005and upon the judgment which shall be so given,  decree shall follow and shall be carried into execution in the  same manner as other decrees of the Court.  Section 522 of  the CPC of 1882 is in almost similar terms. Ghulam Khan vs.  Muhammad (1901) 29 Calcutta Series 167 at 173.  It will be  convenient at the outset to set out the two sections,  namely,325 of Act VIII of 1859 and 522 of Act XIV of 1882, in  extense, and in juxtaposition: "325.  If the Court shall not see cause to remit the  award or any of the matters referred to arbitration for  reconsideration in manner aforesaid, and if no application  shall have been made to set aside the award, or if the Court  shall have refused such application, the Court shall, proceed  to pass judgment according to the award or according to its  own opinion on the special case, if the award shall have been  submitted to it in the form of a special case; and upon the  judgment which shall be so given decree shall follow and  shall be carried into execution in the same manner as other  decrees of the Court.  In every case in which judgment shall  be given according to the award, the judgment shall be  final."

"522.  If the Court sees no cause to remit the award or  any of the matters referred to arbitration for reconsideration  in manner aforesaid, and if no application has been made to  set aside the award, or if the Court has refused such  application, the Court shall, after the time for making such  application has expired, proceed to give judgment according  to the award, or if the award has been submitted to it in the  form of a special case, according to its own opinion on such  case.

Upon the judgment so given a decree shall follow, and  shall be enforced in manner provided in this Code for the  execution of decrees.  No appeal shall lie from such decree

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except in so far as the decree is in excess of, or not in  accordance with the award."

f)     Since the Arbitration Act, 1899 made a departure  from the above position in the case of arbitration by agreement  without the intervention of Court, Section 89 of the CPC of  1908 provided as follows:         "89. Save as otherwise provided by the Arbitration Act,  1899, or by any other law for the time being in force, all  references to arbitration, whether by an order in a suit or  otherwise, and all proceedings shall be governed by the  provisions contained in Schedule 2."   (Dinkarrai vs.  Yeshwantrai AIR 1930 Bombay 98 at 101.)  

g)      The second Schedule provided for three types of  cases: Arbitration in Suit, from Clauses 1 to 16, Order of  reference on agreements to refer from Clauses 17 to 19 and  Arbitration without the intervention of Court, from Clauses 20  to 23.  Clause 16 of the First part and Clause 21 of the Third  part provide for the Court to ’pronounce judgment according  to the award\005..decree shall follow’. h)      It is settled law that where the arbitration is  governed by the Arbitration Act, 1899, the Second Schedule  will not apply thereto \026 Dinkarrai’s case(supra).  Hence, in  the case of arbitration on agreement without the intervention  of the Court, Section 15 of the Arbitration Act of 1899 will  apply and there is no requirement that a Court must  pronounce judgment according to the award and that decree  shall follow.  Under Section 15, the award itself is enforceable  ’as if’ it were a decree; it does not become a decree.         i)      The Act of 1909 does not define ’decree’ or ’order’ for  the simple reason that the meaning of these terms had been  well-known since the CPC of 1859 and 1882 and had been  again defined about one year ago in CPC of 1908.  Learned  counsel submitted that there are other indicators to show that  an award of arbitrators was never intended to be  comprehended in the meaning of the terms ’decree’ or ’order’.   Thus as understood from 1909, the Insolvency Act dealt only  with debtors who had suffered decrees by any Court for the  payment of money.         j)      When the Bombay Amendment came into force on  19.6.1939 by Bombay Act No. 51 of 1948, clause (i) was added  to Section 9.  That clause again speaks of a ’decree’ and  introduces the word ’order’.  After so many years of the CPC  being in force the Bombay Legislature knew the meaning of  ’decree’ and ’order’ and used those terms as understood under  the CPC.  The words ’the execution of which is not stayed’  point clearly to the fact that decree or order mean those  passed by a Court for it is only under CPC that an appellate  Court or executing Court can stay the execution of a decree or  order.  These words are inappropriate for and inapplicable to  awards under the Indian Arbitration Act of 1899 or the  Arbitration and Conciliation Act, 1996, under which the  Awards were straightaway enforceable as if they were decrees  of Court.  Moreover, so far the Arbitration Act of 1940 is  concerned, the award itself acquires force only after the Court  pronounces judgment and passes a decree under Section 17.           k)      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.  The word ’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 as  defined in Section 2(14) of the CPC.  ’Proceeding’ means a  proceeding such appellate or execution proceedings or

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applications under the CPC during the pendency of the suit or  appeal. l)      The words ’or other proceedings’ were added not for  covering arbitrations but by way of abundant  caution to make  it clear that other proceedings in relation to or arising out of  suits were to be included.  This Court has held that:          "\005.the word ’suit’ cannot be construed in the  narrow sense of meaning only the suit and not  appeal \005. and the word ’suit’ will include such  appellate proceedings ."

m)      The words ’litigant’, ’money decree’, judgment- debtor’, ’decretal amount’ and ’decree-holder’ plainly show that  Parliament intended to deal with litigants who do not pay  amounts decreed by Civil Courts.   There is no reference at all  to arbitrations and awards in the Statement of Objects and  Reasons and in sub-sections (2) to (5) of Section 9, which were  introduced in 1978 by Parliament. n)      "Litigation" has been held to mean "a legal action,  including all proceedings therein, initiated in a court of law".   Obviously therefore Parliament had in mind debts due to  ’litigants’ i.e. debts due by reason of decrees of Courts.  It is  well settled that Courts, unlike arbitrators or arbitral  tribunals, are the third great organ under the Constitution:  legislative, executive and judicial.  Courts are institutions set  up by the State in the exercise of the judicial power of the  State will be seen from the cases mentioned hereinbelow: o)      Arbitrators are persons chosen by disputants to be  their judges.  Arbitrators are not tribunals set up by the State  to deal with special matters.  They are not set up by the State  at all but by the parties to a contract.  They do not deal with  special matters; they deal with any matter referred to them  under the arbitration clause.   They are not part of the  judiciary exercising the judicial power of the State.  In this  connection, learned senior counsel referred to the following  observation of Anthony Walton in his Preface to Russell on  Arbitration, 20th Ed." "Arbitration has its center the stone that the builders of the  Courts rejected.  You can choose your own judge." p)      It is, therefore, abundantly clear that the legislative  intendment was that only if a debt found due by the Courts in  an action contested according to the rules and principles that  govern Courts, was not paid in spite of notice; it would  amount to an act of insolvency.  The Legislatures never  contemplated that a mere award given by persons chosen by  parties to resolve their disputes i.e. persons, who are outside  the ordinary hierarchy of courts of civil judicature, should lead  to an act of insolvency.         q)      It is noteworthy that Section 112 of the Bombay  Insolvency Rules, 1910, empowers the three Presidency-Town  High Courts to frame Rules.  In the exercise of this power  Rules were framed by the Bombay High Court in 1910.  After  the Bombay Amendment to the act w.e.f. 1939 by introduction  of clause (i) in Section 9, Rule 52A and Form 1-B were added  by the Bombay High Court.         r)      Rule 52 A(1) uses the words ’certified copy of the  decree or order’.  It is plain that certified copies are given only  by Courts or statutory authorities.  Arbitrators only submit  their award and are not empowered under any law to furnish  certified copies of the award. Sub-rule (2) mandates that the Insolvency Notice shall be  in Form No. 1-B with such variations as the circumstances  may require.  The variations are according to circumstances; it  is impermissible to substitute the word ’Court’ with  ’arbitrators and the words ’decree’ or ’order’.  Form 1-B

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unambiguously points to the fact that the decree or order has  been obtained from a Court in a suit or proceeding. s)      Now, that Parliament has amended the Act of 1909  in 1978 on the lines of the Bombay Amendment, it has  expressly provided by Section 9(3) that the Notice ’shall’ be in  the prescribed form i.e. prescribed by the Rules. There is no  room left for the argument that variations according to  circumstances can bring in arbitrators and awards when the  form uses the words Court, decree and order.  In reply to the submissions made by the appellants,  learned senior advocate, Mr. L. Nageshwar Rao, appearing for  the respondents submitted: ?       If an Award rendered under the Arbitration and  Conciliation Act, 1996 is not challenged within the  requisite period, the same becomes final and binding as  provided under Section 35.  Thereafter the same can be  enforced as a Decree as it is as binding and conclusive as  provided under Section 36.  There is no distinction  between an Award and a Decree.  In view thereof, there is  no impediment in taking out Insolvency Notice as  contemplated under Section 9(2) of the Presidency Towns  Insolvency Act. ?       Section 9(1)(a) to (h) of the Presidency Towns Insolvency  Act, 1909 set out the different acts of Insolvency  committed by a Debtor which acts of Insolvency would  form the ground or basis for filing an Insolvency Petition  against the Debtor under Section 12 of the PTIA for  having him adjudicated Insolvent.  The 1978 Central  Amendment introduced Section 9(2) to (5).  The  statement of objects and reasons of amending Act of  1978, inter alia, reads as follows :       "The main defect of the existing law lies in the absence  of any adequate powers to compel the production of  assets.  The primary object of the Act of 1948 was the  protection of debtors; the provision it makes for the  discovery of the property of Insolvents is treated as of  secondary importance and has long since been found  insufficient to prevent fraud.  The protection of honest  debtors should be one of the objects of every  Insolvency Law, although it is of less importance now  than it was in 1948, when imprisonment for debt was  more frequent.  But it is equally important in the  interests of commerce that creditors should not be  defrauded and that dishonest debtors should not be  able to make use of insolvency proceedings merely to  free themselves from their liabilities while preserving  their assets more or less intact."

The objects thus sought to be achieved is to widen the       scope for adopting Insolvency proceedings.  The provisions of  Section 9(2) to 9(5) which are brought in by the amending Act  of 1978 have to be viewed in the light of the statement of  objects and reasons.  Therefore, it is evident that what was  contemplated was to permit Insolvency Notice being issued  even on the basis of the Arbitral Tribunal provided the same  has become final, binding and enforceable. ?         The amendment added a new act of Insolvency and in       effect provided that a Debtor commits an act of Insolvency if  he fails to comply with the requisitions of an Insolvency  Notice served upon him by a creditor demanding from him  (the Debtor) the amounts due under the Decree or Order for  payment of money, which Decree or Order has attained  finality and the execution whereof has not been stayed.  An  Insolvency Notice by itself does not lead to the adjudication  of the Debtor as Insolvent but the non-compliance thereof

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only results in an act of Insolvency, which enable the  creditor to file an Insolvency Petition against the Debtor for  having him adjudicated Insolvent.  An Insolvency Notice is  thus only a step in aid for filing the Insolvency Petition and  the Debtor has opportunity to contest the Insolvency  Petition by taking up all available defenses. ?       Section 9(1) (e) and (h) of the PTIA use the phrase "in  execution of the Decree of any Court for the payment of  money".  Sections 9(1) (e) and (h) have been in the PTIA  since originally enacted in the year 1909 and enable a  Creditor to directly file Insolvency Petition against a debtor.   When the Legislature enacted the Bombay Amendment (in  1948) and the Central Amendment in 1979, it had before it  the express wordings of Sections 9(1) (e) and (h), however a  conscious departure was made while enacting Sections 9(i)  and 9A (introduced by the Bombay Amendment).  The same  constitute a complete code and provide for complete  machinery.  The phraseology used therein is: "Decree or Order for the payment of money being a Decree  or Order which has become final and the execution  whereof has not been stayed."

Thus by the amendments, the words "or order" have been  added, so that even an Order can sustain an Insolvency  Notice. Similarly the words "of any Court" figuring in Section  9(1) (e) and (h) are omitted.  Thereby the qualification that  Decree should be "of any Court" has been consciously removed  and/or omitted.  The expression "Decree or Order" in Sections  9(2) to (5) brought in by the 1978 Central Amendment is not  restricted to a Decree or Order of any Court.  Moreover,  Section 9(5), which provides for setting aside of Insolvency  Notice, in sub-clause (a) thereof, again uses the phraseology  "decree or order", without making it conditional that the same  should be of the Court.  Similarly the said sub-clause also  uses the words "suit or proceeding" in which the Decree or  Order was passed.  Thus any Decree or Order can sustain an  Insolvency Notice, irrespective of whether they are of Court or  any other Authority or Tribunal.     It was further submitted that, "Decree" in clauses (e)  and    (h) has a different connotation from a "Decree or Order"  in Section 9(2), and, (i)     Even if an Award is held not to be a Decree, it is still  an Order within the meaning of Section 9(2) of the  PTIA, which can sustain an Insolvency Notice. (ii)    It is clear from the statement of Objects and Reasons  behind the PTIA and the Central Amendments thereto  as also from the decisions reported in AIR 1977  Bombay 305, 1994(3) B.C.R. 223 that the provisions  relating to issuance of Insolvency Notice (Sections 9(2)  to (5) of the PTIA) are an equitable mode of execution  of a Decree or Order to enable a creditor to recover  from a Debtor the dues under a Decree or Order and  upon failure of the Debtor to make payment of the  amount demanded by the Insolvency Notice within the  prescribed period, to present an Insolvency Notice  within the prescribed period, to present an Insolvency  Petition against the Debtor for having him adjudicated  Insolvent.

Mr. L.N. Rao invited our attention to the provisions of P.T.I.  Act, Rules, C.P.C., Arbitration Act of 1899 and 1996 and also  relied on the following judgments reported in AIR 1956 SC 35  [The Member, Board of Revenue vs. Arthur Paul Benthall]  followed in T.B. Guddalli vs. Registrar or Co-op. Societies,  AIR 1994 Kar. 66 (FB), Oriental Insurance Co. Ltd. vs.

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Hansrajbhai V. Kodala, AIR 2001 SC 1832, Commissioner  of Income-tax, New Delhi vs. M/s East West Import &  Export (P) Ltd., Jaipur, AIR 1989 SC 836, M/s B.R.  Enterprises vs. State of U.P. and Ors., AIR 1999 SC 1867.   The above decisions were cited for the proposition that  the use of different words in the two provisions is for a  purpose and if the field of two provisions are to be the same  the same words would have been used and when two  provisions use different words the different words used could  only be to convey different meaning.  Arguing further Mr. L.N.  Rao submitted  that the Presidency Towns Insolvency Act does  not define the term "Decree" or "Order".  Therefore, any order,  which has become final and enforceable, irrespective of  whether passed by any Court, judicial authority, quasi-judicial  authority, Tribunal etc. could be the basis of an Insolvency  Notice under Section 9(2) of the said Act.  Since the said Act  does not define the word "Decree" or "Order", it will be  offending the legislative intent to borrow the definition of  "Decree" or "Order" from any other Act or Code. In Section 9(1)  clauses (c) and (h), the legislature has used the phraseology  "Decree of any Court" in Section 9(2), the legislature has  consciously omitted the prefix "of Court" and has added the  words "or Order".  Thus the legislative intent being to make it  necessary to have a Decree of Court for the purpose of  conferring Act of Insolvency under Clause (e) and (h) of  Sections 9(1) of the said Act, whereas Section 9(2) brought in  by the Amendment Act does not mandate that the Decree  should be of any Court. When two words of different import are used in a statute  in two consecutive provisions, it would be difficult to maintain  that they are used in the same sequence. If the intention of the legislature was to provide the same  provision, nothing would have been easier than to say so.   When two words of different import are used in a statute in  two consecutive provisions, it would be difficult to maintain  that they are used in the same sense, and the conclusion  must follow that the two different expressions have different  connotations. If the legislative intention was not to distinguish, there  would have been no necessity of expressing the position  differently.  When the situation has been differently expressed  the legislature must be taken to have intended to express a  different intention. The use of different words in the two provisions is for a  purpose.  If the field of two provisions are to be the same, the  same words would have been used.  When the two provisions  use different words, the different words used could only be to  convey different meaning.   Mr. L.N. Rao further submitted that in view of the same,  the conclusion must follow that the expression "decree or  order for payment of money" found in Section 9(1)(i) (Bombay  Amendment of 1948) and also in Section 9(2) (1978 Central  Amendment) of the said Act is not restricted to a Decree or  Order "of any Court" as found in Section 9(1)(e).  Ordinarily,  the rule of construction is that the same expression where it  appears more than once in the same statute, more so in the  same provisions, must receive the same meaning.  It lays  down that when two words of different import are used in a  statute in two consecutive provisions, it would be difficult to  maintain that they are used in the same sequence and the  conclusion must follow that the expression "decree or order for  payment of money" found in Section 9(1)(i) and also in Section  9(2) of the said Act, is not restricted to a decree or order "of  any Court" as found in Section 9(1)(e).

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In view thereof, it will be doing injury/offence to the  legislative intent if even for the purpose of taking out  Insolvency Notice under Section 9(2) of the said Act "a Decree  of Court" is made necessary. It will be a misconception to borrow the definition of  "Decree" or "Order" from the provisions of Civil Procedure  Code, while interpreting and giving effect to the provisions of  the said Act, in particular Section 9(2) to (5) which constitute a  self contained code and has been specifically brought in by  Amending Act of 1978.   We heard both the senior counsel appearing for the  appellants and respondents, in extenso.  We have carefully  perused through in detail all the material placed before us. We are of the view that The Presidency Towns Insolvency  Act, 1909 is a statute weighed down with the grave  consequence of ’civil death’ for a person sought to be adjudged  an insolvent and therefore the Act has to be construed strictly.  The Arbitration Act was in force when the PTIA came into  operation. Therefore there can be seen that the law makers  were conscious of what a ’decree’, ’order’ and an ’award’ are.   Also the fundamental difference between ’Courts’ and  ’arbitrators’ were also clear as back as in 1909. Further, The Indian Arbitration Act, 1899 clearly draws  the distinction between Courts and Arbitrators.  The preamble  of the Act shows that it is an Act for dealing with ’arbitration  by agreement without the intervention of a Court of Justice’.   Section 4(a) defines ’Court’ and various sections deal with the  powers of the Court.  Section 11 provides for the making of an  ’award’.  Section 15 provides for its enforcement. It can  therefore be observed that it is only for the purpose of  enforcement of the award, the arbitration award is treated as if  it were a decree of the Court. Section 15 reads as under: "15. Award when filed to be enforceable as a decree  (1) An  award on a submission, on being filed in the Court in  accordance with the foregoing provisions, shall (unless the  Court remits it to for reconsideration to the arbitrators or  umpire, or sets it aside) be enforceable as if it were a decree  of the Court. (2) An award may be conditional or in the alternative."

Sections 2(2) and 2(14) of the CPC define what ’decree’ and  ’order’ mean.  For seeing whether a decision or determination  is a decree or order, it must necessarily fall in the language of  the definition.  Section 2(2) of the CPC defines ’decree’ to mean  "the formal expression of an adjudication which, so far  as regards the Court expressing it, conclusively  determines the rights of the parties with regard to any  of the matters in controversy in the suit and may be  either preliminary or final.  It shall be deemed to  include the rejection of a plaint and the determination  of any question within Section 144, but shall not  include-

(a)     any adjudication from which an appeal lies as an  appeal from an order, or

(b)     any order of dismissal for default.

Explanation : A decree is preliminary when further  proceedings have to be taken before the suit can be  completely disposed of.  It is final when such adjudication  completely disposes of the suit.  It may be partly preliminary  and partly final."

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The words ’Court’, ’adjudication’ and ’suit’ conclusively  show that only a Court can pass a decree and that too only in  suit commenced by a plaint and after adjudication of a dispute  by a judgment pronounced by the Court.  It is obvious that an  arbitrator is not a Court, an arbitration is not an adjudication  and, therefore, an award is not a decree. Section 2(14) defines ’order’ to mean \026 "the formal expression of any decision of a civil  court which is not a decree;"   

The words ’decision’ and ’Civil Court’ unambiguously rule  out an award by arbitrators. The above view has been consistently taken in decisions  on Section 15 of the Indian Arbitration Act, 1899 viz.    Tribhuvandas Kalidas vs. Jiwan Chand 1911(35) Bombay  196, Manilal vs. The Bharat Spinning & Weaving (35) Bom.  L.R. 941, Ramshai v. Joylall, AIR 1928 Calcutta 840,  Ghulam Hussein vs. Shahban AIR 1938 Sindh 220.   In Ramshai v. Joylall(supra), the Calcutta High Court  held as follows: "(a) Presidency Town Insolvency Act, S.9 (e) \026 Attachment in  execution of award is not one in executive of a decree.

       Attachment in execution of an award is not  attachment in the execution of a decree within the meaning  of S.9(e) for the purpose of creating an act of insolvency: Re.  Bankruptcy Notice, (1907) 1 K.B. 478, Ref.

(b)     Arbitration Act, S.15 \026 Award,

An award is a decree for the purpose of enforcing that  award only."

In Ghulam Hussein vs. Shahban AIR 1938 Sindh 220,  the Court observed as follows:   

"Section 9(e) must be strictly construed in favour of  the debtor to whom the matter of adjudication as an  insolvent under the Insolvency law is one of vital importance.   Any inconvenience arising out of such a construction is for  the Legislature to consider and remedy if they think proper  by amendment; it is not for the Court to enlarge the meaning  of the words used by the Legislature.  An attachment in  execution of an award is not an attachment in execution of  the decree of a Court within the meaning of S.9(e) for the  purpose of creating an act of Insolvency: AIR 1928 Cal.840  approved and followed; 35 Bom. 196 relied on."

 "\005\005\005.The words: "In execution of the decree of any  Court for the payment of money" cannot be extended by  analogy.  They must be extended, if at all, by the Legislature  and we cannot hold that there has been an act of Insolvency  when the definition given by the Legislature has not been  complied with.

These are strong words and strong language, and as I  have said above the judgment of Rankin C.J. must be treated  with the greatest respect.  The case of Ramsahai vs. Joylall is  referred to by Sir D. Mulla in his Commentary on the Law of  Insolvency at P. 94.  In para 123 Sir D. Mulla states:

"An award for the payment of money filed in Court  under S.11 of I.A.A. 1890 is not a  ’decree’ within the  meaning of the present clause although it is enforceable

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under that Act as if it were a decree.  No Insolvency petition  can therefore be founded on an attachment or sale in  execution of an award."

In support of this proposition Sir D. Mulla cites the  case of Ramasahai v. Joylall (supra).  The commentator  proceeds:

It is therefore for consideration whether Cl.(e) should  not be amended by adding the words ’or in execution of an  award for the payment of money.’

Now, it cannot be disputed that Sir D. Mulla as a  commentator on the Law of Insolvency is universally  regarded as an authority, and in the course of his  Commentary on the Law of Insolvency Sir D. Mulla has not  hesitated in several places to record his respectful dissent  when he has considered that the judgment of any High Court  in India is doubtful or incorrect.  It is significant that in  referring to the case in AIR 1928 Cal. 840, the learned  commentator has not recorded any dissent, but on the  contrary states that it is for consideration whether Cl.(e)  should not be amended by adding the words ’or in execution  of an award for the payment of money.’  In this part of his  commentary Sir D. Mulla has also referred to the case in 35  Bom 196, where it was held by a Bench of the Bombay High  Court that an award filed in Court under S.11, Arbitration  Act, was nothing more than an award although it was  enforceable as if it were a decree.  In that case an application  had been made under O.21, R.29, for stay of execution of a  decree.  The application was dismissed on the following  grounds set out in the judgment of Sir Basil Scott C.J.:

Now, such an order can only be made by the Court, if  there is a suit pending on the part of a person against whom  a decree has been passed, against the holder of a decree of  the Court.  It appears to me that the petitioner is not a  holder of a decree of the Court\005\005\005for the award, to which  the applicants seek to give the force of a decree, is nothing  more than an award, although it is enforceable as if it were a  decree."       

The same view was taken on Section 36 of the 1996 Act  in Sidharth Srivastava v. K.K. Modi Investment &  Financial Service P.Ltd. 2002(4) Mah. L.J. 281.  It was held  thus: "Where the Award in favour of the petitioning creditor came  to be passed on the basis of the consent terms and not on  the basis of an adjudication, the Award which has the force  of decree does not fulfil the essential conditions of decree as  contemplated by Section 2(2) of the Civil Procedure Code.   Even though the Award dated 5.9.1997 is enforceable as if it  were a decree still it is not a decree within the meaning of  the term as defined in section 2(2) of the Civil Procedure  Code and, therefore, obtaining of such as Award does not  fulfil the requisite conditions contemplated by clause (i) of  section 9(1) of the Presidency Towns Insolvency Act.   Consequently, on that basis the respondent cannot be said  to have committed act of insolvency, either under clause (i) of  sub-section 9(1) or sub-section (2) of section 9 of the Act. AIR  1928 Cal.840, AIR 1938 Sind 220, AIR 1975 Cal 169 and  AIR 1976 SC 1503, Ref."  

       It is settled by decisions of this Court that the words ’as

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if’ in fact show the distinction between two things and such  words are used for a limited purpose.  They further show that  a legal fiction must be limited to the purpose for which it was  created.           Section 36 of the Arbitration & Conciliation Act, 1996  which is in pari materia   with Section 15 of the 1899 Act, is  set out hereinbelow: "36.  Enforcement \026 Where the time for making an application  to set aside the arbitral award under Section 34 has expired,  or such application having been made, it has been refused,  the award shall be enforced under the Code of Civil Procedure,  1908 in the same manner as if it were a decree of the Court."

In fact, Section 36 goes further than Section 15 of the  1899 Act and makes it clear beyond doubt that enforceability  is only to be under the CPC.  It rules out any argument that  enforceability as a decree can be sought under any other law  or that initiating insolvency proceeding is a manner of  enforcing a decree under the CPC. Therefore the contention of the respondents that, an  Award rendered under the Arbitration and Conciliation Act,  1996 if not challenged within the requisite period, the same  becomes final and binding as provided under Section 35 and  the same can be enforced as a Decree as it is as binding and  conclusive as provided under Section 36 and that there is no  distinction between an Award and a Decree does not hold  water.         The PTIA, 1909 does not define ’decree’ or ’order’ for the  simple reason that the meaning these terms has been well  settled since the CPC of 1859 and 1882 and had been again  defined in CPC of 1908.  The other indicators that an award of  arbitrators is not intended to be a ’decree’ or ’order’ are: i)      Section 2(a) and (b) define ’creditor’ to include a  decree-holder and a ’debt’ to include a judgment-debt  and ’debtor’ to include a judgment-debtor.  Secondly ii)     It is quite clear from Section 33 of the CPC that a  decree, being the formal expression of adjudication by  a Court, follows only upon pronouncement of  judgment by the Court.  It is equally clear that Courts  and Judges render judgments; arbitrators only make  awards.   iii)    Sections 9(e) and (h) put the matter beyond  controversy by expressly mentioning ’decree of any  Court for the payment of money’.  Thus as enacted in  1909, the Insolvency Act dealt only with debtors who  had suffered decrees by any Court for the payment of  money.         When the Bombay Amendment came into force on  19.6.1939 by Bombay Act No. 51 of 1948, clause (i) was added  to Section 9. Section 9 speaks of a ’decree’ and introduces the  word ’order’.  After so many years of the CPC being in force the  Bombay Legislature knew that meaning of ’decree’ and ’order’  and used those terms as understood under the CPC.    The fact that the Bombay Amendment and later the  Central Amendment intended to refer only to decrees and  orders as defined in the CPC is clear from the Statement of  Objects and Reasons of the Central Amendment Act No.28 of  1978 which introduced subsections (2) to (5) in Section 9.  The  SOR gazetted on 18-03-1978 reads, inter-alia, as under:         "The difficulties experienced by a litigant in  India in executing even a simple money decree have  been commented upon by the Privy Council as well  as the Law Commission and the Expert Committee on  Legal Aid.   The law Commission in its Third Report  on the Limitation Act, 1908, has recommended that

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the most effective way of instilling a healthy fear in  the minds of dishonest judgment-debtor would be to  enable the Court to adjudicate him an insolvent if he  does not pay the decretal amount after notice by the  decree-holder, by specifying a period within which it  should be paid, on the lines of the amendment made  to the Presidency-Towns Insolvency Act, 1909 in  Bombay.  This recommendation was reiterated by the  Law Commission in its Twenty Sixth Report on  Insolvency Laws. 2.      The Expert Committee on Legal Aid was also of  the view that the above recommendation of the Law  Commission should be implemented immediately  without waiting for the enactment of a comprehensive  law of insolvency. 3.      It is, therefore, proposed to amend the  Presidency \026 Towns Insolvency Act, 1909, and the  Provincial Insolvency Act, 1920 to add a new act of  insolvency, namely, that a debtor has not complied  with the insolvency notice served on him by a  creditor, who has obtained a decree or order against  him for the payment of money, within the period  specified in the notice.  If the amount shown in the  insolvency notice is not correct, it would be  invalidated if the debtor gives notice to the creditor,  disputing the amount.  The debtor can, however,  apply to the Court to have the insolvency notice set  aside on the ground, among others, that he is entitled  to have the decree re-opened under any law relating  to relief of debtedness or that the decree is not  executable under any such law."          The words ’litigant’, ’money decree’ , judgment-debtor’,  ’decretal amount’ and ’decree-holder’ plainly show that  Parliament intended to deal with litigants who do not pay  amounts decreed by Civil Courts.   There is no reference at all  to arbitrations and awards in the Statement of Objects and  Reasons and in sub-sections (2) to (5) of Section 9, which were  introduced in 1978 by Parliament. As already noticed, "Litigation" has been held to mean "a  legal action, including all proceedings therein, initiated in a  court of law".  Obviously therefore Parliament had in mind  debts due to ’litigants’ i.e. debts due by reason of decrees of  Courts.  It is well settled that Courts, unlike arbitrators or  arbitral tribunals, are the third great organ under the  Constitution: legislative, executive and judicial.  Courts are  institutions set up by the State in the exercise of the judicial  power of the State will be seen from the cases mentioned  hereinbelow:         "The expression ’Court’ in the context (of Art.136) denotes  a tribunal constituted by the State as a part of the ordinary  hierarchy of Courts which are invested with the State’s  inherent judicial powers. A sovereign State discharges  legislative, executive and judicial function and can legitimately  claim corresponding powers which are legislative, executive  and judicial.  Under our Constitution, the judicial functions  and powers of the State are primarily conferred on the  ordinary courts which have been constituted under its  relevant provisions.  The Constitution recognized a hierarchy  of Court and to their adjudication are normally entrusted all  disputes between citizens as well as between citizens and the  State.  These courts can be described as ordinary courts of  civil judicature.  They are governed by their prescribed rules of  procedure and they deal with questions of fact and law raised  before them by adopting a process which is described as  judicial process.  The powers which these Courts are judicial

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powers, the functions they discharge are judicial functions  and the decisions they reach are and pronounce are judicial  decisions. In every State there are administrative bodies \005. But the  authority to reach decisions conferred on such administrative  bodies is clearly distinct and separate from the judicial power  conferred on Courts, and the decisions pronounced by  administrative bodies are similarly distinct and separate in  character from judicial decisions pronounced by Courts. Tribunals occupy a special position of their own under  the scheme of our Constitution.  Special matters are entrusted  to them and in that sense they share with the Courts one  common characteristic; both the Courts and the tribunals are  ’constituted by the State and are invested with judicial as  distinguished from purely administrative or executive  functions’\005.  The basic and fundamental feature which is  common to both the Courts and tribunals is that they  discharge judicial functions and exercise judicial powers  which inherently vest in a sovereign State."         "By ’courts’ is meant courts of civil judicature and by  ’tribunals’ those bodies of men who are appointed to decide  controversies arising under certain special laws.  Among the  power of the State is the power to decide such controversies.   This is undoubtedly one of the attributes of the State, and is  aptly called the judicial power of the State." "All tribunals are not courts, though all courts are  tribunals.   The word ’courts’ is used to designate those  tribunals which are set up in an organized State for the  administration of justice\005\005" "It is common knowledge that a ’court’ is an agency  created by the sovereign for the purpose of administering  justice.  It is a place where justice is judicially administered.   It is a legal entity" That litigation is therefore very different from arbitration  is clear.  The former is a legal action in a Court of law where  judges are appointed by the State; the latter is the resolution  of a dispute between two contracting parties by persons  chosen by them to be arbitrators.  These persons need not  even necessarily be qualified trained judges or lawyers.  This  distinction is very old and was picturesquely expressed by   Edmund Davies, J. in these words:        "Many years age, a top-hatted gentleman used to parade  outside these law Courts carrying a placard which bore a  stirring injunction ’Arbitrate \026 don’t Litigate"          Moreover, the position that arbitrators are not Courts is  quite obvious and this Court noted the position as under in  two decisions:         "But the fact that the arbitrator under Section 10A is  not exactly in the same position as a private arbitrator does  not mean he is a tribunal under Article 136.  Even if some of  the trappings of the Court are present in his case, he lacks  the basic, essential and fundamental requisite in that behalf  because he is not invested with the State’s judicial  power\005..he is not a Tribunal because the State has not  invested him with its inherent judicial power and the power  of adjudication which he exercises is derived by him from the  agreement between parties.(Engineering Mazdoor Sabha &  Anr. Vs. Hind Cycles Ltd., AIR 1963 SC 874.) "

"There was no dispute that the arbitrator appointed under  Section 19(1)(b) [of the Defence of India Act, 1939] was not a  court.(Collector, Varanasi vs. Gauri Shankar Misra & Ors.,  AIR 1968 SC 384) "

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Thus the thrust of submissions made by both the learned  senior counsel can be summarized as under: Courts are institutions invested with the judicial power of  the State to finally adjudicate upon disputes between litigants  and to make formal and binding orders and decrees.  Civil  Courts pass decrees and orders for payment of money and the  terms ’decree and order’ are defined in the CPC.  Arbitrators  are persons chosen by parties to adjudge their disputes.  They  are not Courts and they do not pass orders or decrees for the  payment of money; they make awards. The Insolvency Act of 1909 was passed, and amended by  the Bombay Amendment of 1939 and also by Parliament in  1978 when two laws were on the statute book: the Arbitration  Act, 1899 and the Civil Procedure Code, 1908.  Parliament and  the Bombay Legislature were well aware of the difference  between awards on the one hand and decrees and orders on  the other and they chose to eschew the use of the word ’award’  for the purposes of the Insolvency Act. Section 15 of the Arbitration Act, 1899 provides for  ’enforcing’ the award as if it were a decree.  Thus a final  award, without actually being followed by a decree (as was  later provided by Section 17 of the Arbitration Act of 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 realizing the money  awarded.  However, the award remained an award and did not  become a decree either as defined in the CPC and much less  so far the purposes of an entirely different statute such as the  Insolvency Act. Section 36 of the Arbitration and Conciliation Act of 1996  brings back the same situation as it existed from 1899 to  1940.  Only under the Arbitration Act, 1940, the award was  required to be made a rule of Court i.e. required a judgment  followed by a decree of Court. 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 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 the CPC for realizing moneys. 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.  The fiction is  not intended to make it a decree for all purposes under all  statutes, whether State or Central. For the foregoing discussions we hold : i)      that no insolvency notice can be issued under  Section 9(2) of the Presidency Towns Insolvency  Act, 1909 on the basis of an Arbitration Award; ii)     that execution proceedings in respect of the  award cannot be proceeded with in view of the  statutory stay under Section 22 of the SICA Act.   As such, no insolvency notice is liable to be  issued against the appellant. iii)    Insolvency Notice cannot be issued on an  Arbitration Award. iv)     An arbitration award is neither a decree nor an  Order for payment within the meaning of Section  9(2).  The expression "decree" in the Court Fees  Act, 1870 is liable to be construed with reference

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to its definition in the CPC and held that there  are essential conditions for a "decree". (a)     that the adjudication must be given in a suit. (b)     That the suit must start with a plaint and  culminate in a decree, and (c)     That the adjudication must be formal and final  and must be given by a civil or revenue court. An award does not satisfy any of the requirements of a  decree.  It is not rendered in a suit nor is an arbitral  proceeding commenced by the institution of a plaint. (v)     A legal fiction ought not to be extended beyond its  legitimate field.  As such, an award rendered under the  provisions of the Arbitration Act, 1996 cannot be  construed to be a "decree" for the purpose of Section  9(2) of the Insolvency Act. (vi)    An insolvency notice should be in strict  compliance with the requirements in Section  9(3) and the Rules made thereunder. (vii)   It is a well established rule that a provision  must be construed in a manner which would  give effect to its purpose and to cure the  mischief in the light of which it was enacted.   The object of Section 22, in protecting  guarantors from legal proceedings pending a  reference to BIFR of the principal debtor, is to  ensure that a scheme for rehabilitation would  not be defeated by isolated proceedings adopted  against the guarantors of a sick company.  To  achieve that purpose, it is imperative that the  expression "suit" in Section 22 be given its plain  meaning, namely any proceedings adopted for  realization of a right vested in a party by law.   This would clearly include arbitration  proceedings.  (viii)  In any event, award which is incapable of  execution and cannot form the basis of an  insolvency notice. In the light of the above discussion, we further hold that  the Insolvency Notice issued under section 9(2) of the P.T.I.  Act 1909 cannot be sustained on the basis of arbitral award  which has been passed under the Arbitration & Conciliation  Act, 1996.  We answer the two questions in favour of the  appellant. In view of the above, the following two questions viz.,  (a)     Whether the award dated 26.6.2000 was ever  served upon the appellant; and (b)     Whether the Arbitration proceedings and  resulting award are null and void in view of the  Sick Industrial Companies (Special Provisions)  Act, 1995 may not have to be decided by the High Court in view of the  order passed in civil appeal by this Court.         The Civil Appeal stands allowed.  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 is set aside.  No costs.