Objections U/S 47 CPC Can't Be Entertained In Enforcement Of Arbitral Awards U/S 36 Of A&C Act; Facilitation Council Lacked Jurisdiction Over Works Contract: Orissa High Court
Sanchayita Lahkar
The High Court of Orissa, Single Bench of Justice Dr. Sanjeeb K Panigrahi has held that objections under Section 47 of the Code of Civil Procedure cannot be raised in the enforcement of an arbitral award, as envisaged under Section 36 of the Arbitration and Conciliation Act, 1996. The Court further held that the Micro and Small Enterprises Facilitation Council, Cuttack, lacked jurisdiction to entertain disputes arising from a composite works contract involving both goods and services, which lie outside the scope of the MSMED Act, 2006. Consequently, the arbitral award and ensuing execution proceedings were declared infructuous.
The dispute originated from a Letter of Award dated November 29, 2017, under which IOCL engaged Adarsh Nobel Corporation Ltd. (ANCL) for the work of “Provision of Additional VR Tank at Paradip Refinery” valued at Rs. 20.86 crores. The contract was to be completed within 18 months. However, work ceased on June 11, 2018, after which IOCL repeatedly requested resumption through correspondences dated June 29, July 23, and August 11, 2018. IOCL subsequently terminated the contract on December 13, 2018, and appointed another contractor in April 2019 to complete the balance work.
In August 2022, ANCL, having obtained MSME registration on January 28, 2021, filed MSEFC Case No. 56 of 2022 under Section 18 of the MSMED Act, 2006, seeking Rs. 6.65 crores as principal and interest, alleging illegal termination of the contract. IOCL contested the maintainability of the claim and objected to the Council’s jurisdiction. Nevertheless, the MSEFC passed an award on July 10, 2023, directing IOCL to pay Rs. 2.43 crores with future compounded interest at three times the bank rate, release the bank guarantee, and unblock ANCL’s vendor account.
IOCL challenged the award before the Commercial Court, Bhubaneswar, under Section 34 of the Arbitration and Conciliation Act, 1996, but later withdrew it and filed W.P.(C) No. 30966 of 2024 before the High Court, which set aside the MSEFC award. IOCL then filed the present petition, W.P.(C) No. 20210 of 2025, contesting the execution orders passed by the Civil Judge, Commercial Court, Bhubaneswar, under Section 47 of the Code of Civil Procedure, 1908.
The Court recorded that the primary issue was whether the execution court’s orders warranted interference, given that the underlying award had been declared void for lack of jurisdiction. It noted: “The Facilitation Council clearly did not have jurisdiction in the subject matter in dispute, and therefore the present case is a case of inherent lack of jurisdiction.”
The judgment clarified: “Section 18 presupposes disputes arising out of the supply of goods or rendering of services—not those emanating from composite and indivisible agreements encompassing engineering, procurement, and construction.”
The Court elaborated that the term “works contract” encompasses both goods and services and falls outside the ambit of the MSMED Act. Referring to precedents including Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu (2014) 7 SCC 1 and Larsen & Toubro Ltd. v. State of Karnataka (2014) 1 SCC 708, the Court stated that “works contracts are sui generis and cannot be conflated with ordinary contracts for sale or service.” It relied on judicial consensus from P.L. Adke v. Wardha Municipal Corporation (2021 SCC OnLine Bom 5531) and National Textile Corporation Ltd. v. Elixir Engineering Pvt. Ltd. (2023 SCC OnLine Bom 653) to conclude that Facilitation Councils have no jurisdiction over works contracts.
The Court further recorded: “The initiation of statutory arbitration under the provisions of the MSMED Act on the part of the Opposite Party in the context of contracts in question before the Facilitation Council, was a stillborn exercise.” It stated that such lack of jurisdiction rendered the award void ab initio.
Addressing the maintainability of objections under Section 47 of the CPC, the Court cited Indian Oil Corporation Ltd. v. Commercial Court (2023 SCC OnLine All 809) and held that arbitral awards are not decrees within the meaning of Section 2(2) CPC and therefore objections under Section 47 are not maintainable. The Court stated: “An arbitral award is to be treated as a decree only for the purpose of enforcement. It is not open to invoke Section 47 CPC before the executing court.”
The judgment stated: “Since this Court has specifically found that the provisions of the MSMED Act could not have been invoked in the facts and circumstances of the case, the impugned award is rendered without jurisdiction and hence, liable to be set aside on that ground alone.”
Accordingly, the writ petition was allowed, and the Court held: “Consequently, as the award dated 10.07.2023 passed by the Facilitation Council, Cuttack in MSEFC Case No. 56 of 2022 is hereby set aside, the Execution Case No. 585 of 2023 is rendered infructuous.”“The discussion on whether objections under Section 47 CPC ought to have been entertained by the learned executing court becomes an academic exercise.”
“This Court has already held that access to High Courts under Article 226 is an inalienable right, and the rule of availability of alternative remedy is not an omnibus rule of exclusion. The parties, however, shall be at liberty to seek such remedies as may be available to them in accordance with law.”
Advocates Representing the Parties
For the Petitioner: Mr. Sunil J. Mathews, Advocate
For the Respondent: Mr. S.S. Padhy, Advocate
Case Title: Indian Oil Corporation Ltd. v. Adarsh Nobel Corporation Ltd.
Case Number: W.P.(C) No. 20210 of 2025
Bench: Justice Dr. Sanjeeb K. Panigrahi
