Bombay High Court: In an interim application for relief in aid of enforcing a final arbitral award, the Court had to decide whether, as the ‘Seat Court’ under Section 2(1)(e)(i) of the Arbitration and Conciliation Act, 1996 (‘A&C Act’), it retained jurisdiction to entertain execution and grant interim relief despite the debtor’s assets lying outside its territory, and whether the Karta of a Hindu Undivided Family (‘HUF’) was personally liable for execution of the award. A Single Judge Bench of R.I. Chagla, J., held that the Court indeed possessed the jurisdiction, and that the Karta of a HUF bears personal and unlimited liability for HUF’s unsatisfied debts, thereby allowing enforcement of the award against his personal assets.
Background:
By an arbitral award dated 30-11-2023, the Sole Arbitrator awarded a principal decretal sum of Rs 12.52 crore and interest at 10% per annum from the date of the award till actual payment against the HUF and costs of approximately Rs 22 lakh against the respondents. The Respondent 1 (‘HUF’) and Respondent 2 (‘Karta’) filed a petition under Section 34 of the A&C Act challenging the award. While the costs component was stayed upon deposit, the amount of Rs 14.79 crore remained unsatisfied.
The applicant alleged that the respondents had deliberately filed incomplete and selective affidavits of disclosure, siphoning and dissipating assets to defeat the award. The applicant further argued that even on admitted facts, the disclosed assets of the HUF were insufficient to satisfy the award, necessitating recourse to the Karta’s personal assets. He also submitted that the respondents had deposited the title deeds to immovable properties owned by the Karta worth about Rs 4 crore with the Tribunal, which he claimed was custodia legis lying with the Court pursuant to an order dated 26-6-2024, and liable to be proceeded against in execution of the award. The applicant stated that even if the immovable properties lying as security as well as the HUF’s disclosed assets were applied towards recovery of the decretal sum, there would be a shortfall of about Rs 10 crore.
On the other hand, the respondents raised two preliminary objections:
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That the Court lacked territorial jurisdiction under Sections 38 and 39 of the Civil Procedure Code, 1908 (‘CPC’), since the assets were situated outside Mumbai.
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That the Karta’s personal assets could not be proceeded against in execution, as the award was passed only against the HUF.
Analysis and Decision:
Regarding the lack of territorial jurisdiction, the Court observed that it was undisputedly the Seat Court under Section 2(1)(e)(i) of the A&C Act and therefore could not be divested of jurisdiction merely because the assets were situated outside Mumbai. This was never disputed by the respondents either in pleading or in oral arguments. The Court relied on Gemini Bay Transcription (P) Ltd. v. Integrated Sales Service Ltd., (2022) 1 SCC 753, wherein it was held that an award made under Part I of the A&C Act can be executed not only by the Seat Court but also by the Court where assets are located, thereby vesting the award creditor with an additional option.
The Court noted that the HUF which carried business of undertaking and executing construction works contracts, was a trading HUF. The Court observed that the Karta’s liability for unsatisfied debts or dues of the HUF is personal and unlimited. The Court held that a HUF is not a separate legal entity like a company. It is treated as such only for limited purposes, such as taxation or when liability is extended to other family members. Since this case involved enforcing the award against the Karta personally, those exceptions did not apply.
The Court referred to Mulgund Co-operative Credit Society v. Shidlingappa Ishwarappa Manvi, 1941 SCC OnLine Bom 27, and Shiv Bhagwan Moti Ram Saraoji v. Onkarmal Ishar Dass, 1951 SCC OnLine Bom 122, where it was recognized that the Karta’s liability extends to his personal assets in satisfaction of debts incurred by the HUF.
The Court further noted that respondents’ arguments based on res judicata and estoppel were untenable, since the arbitral tribunal never adjudicated upon the enforceability of the award against the Karta’s personal assets as the issue was never raised before the Arbitrator.
Consequently, the Court, while allowing the interim application, held that both objections were without merit. The Court appointed a receiver of the immovable properties whose title deeds were deposited in the Court to secure the claim and directed the respondents to disclose all their assets by an affidavit within four weeks. The Court restrained the respondents and their servants, agents, etc., from directly or indirectly dealing with or disposing of, alienating, selling or parting with the possession of or creating any third party right in respect of any of its movable or immovable property and any other assets.
After the order was pronounced, the Karta applied for the stay of this order, which was rejected considering that award was passed way back on 30-11-2023.
[Manjeet Singh T. Anand v. Nishant Enterprises, 2026 SCC OnLine Bom 40, decided on 8-1-2026]
Advocates who appeared in this case:
For the Applicant: Rashmin Khandekar, Jamsheed Master, Anand Mohan, Aniket Worlikar.
For the Respondents: Prathamesh Kamat (Thru V.C.), with S.B. Rao i/b. Gauri Rao, Sanjay Jain, Nakul Jain, Sankalp Anantwar and Ronak Mistry i/b. SMA Law Partners.
Buy Arbitration and Conciliation Act, 1996 HERE
