Objection Petition U/S 47 CPC Should Not Invariably Be Treated As Commencement Of New Trial: Supreme Court

The Supreme Court held that the Objection Petition under Section 47 of the Civil Procedure Code, 1908 (CPC) should not invariably be treated as a commencement of a new trial.

The Court held thus in a Civil Appeal preferred by a company against the Judgment of the Delhi High Court, which dismissed objections filed under Section 47 of CPC as well as an application under Order XXI Rule 29 of CPC seeking stay of the enforcement proceedings.

The two-Judge Bench comprising Justice Sanjay Kumar and Justice K.V. Viswanathan observed, “We are dealing with an objection filed under Section 47 claiming that the award as upheld by this Court is inexecutable. As held by this Court in Electrosteel (Supra) the jurisdiction lies in a narrow compass. … This Court has warned that there is a steady rise of proceedings akin to a retrial which causes failure of realization of the fruits of a decree, unless prima facie grounds are made out entertaining objections under Section 47 would be an abuse of process. … An objection petition under Section 47 should not invariably be treated as a commencement of a new trial.”

The Bench elucidated that the object of Section 47 CPC is to prevent unwarranted litigation and dispose of all objections as expeditiously as possible.

Additional Solicitor General (ASG) N. Venkataraman, Senior Advocate Sanat Kumar, AOR Astha Tyagi, Advocates Akhil Sachar, Sunanda Tulsyan, and Karishma Sharma appeared for the Appellant, while Senior Advocates Neeraj Kishan Kaul, Jayant Mehta, AOR Garima Bajaj, Advocates Sumeet Kachwaha, Samar Singh Kachwaha, Ankit Khushu, Akanksha Mohan, Pratyush Khanna, and Ira Mahajan appeared for the Respondent.

Facts of the Case

The Respondent (Anglo American Metallurgical Coal Pvt. Limited) invoked an arbitration clause in the Long Term Agreement (LTA) entered into between the Petitioner (MMTC Limited) and Anglo. The claim in the arbitration was for damages on account of the unlifted quantity of coal contracted by the Appellant-MMTC. The damages were computed based on the difference in the price between the contracted price of US$ 300 Per Metric Tonne (PMT) and the market price of US$ 126 PMT, multiplied by the unlifted quantity. In the arbitration, by an Award, Anglo was awarded a sum of US$ 78.720 million along with interest and costs by a majority of 2:1. Challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) failed before the Single Judge, however, the Division Bench allowed MMTC’s Appeal under Section 37 of the A&C Act and set aside the arbitral award along with the decision of the Single Judge.

In 2020, the Supreme Court allowed Anglo’s Appeal and after setting aside the Judgment of the Division Bench, restored the Judgment of the Single Judge and the arbitral award. Thereafter, a Review Petition was filed by MMTC, which was admitted on the limited issue of interest, was disposed of by reducing the pendente lite and future interest to 6%. The remaining findings were not disturbed. Subsequently, a clarification application filed by MMTC was disposed of by clarifying that MMTC would be liable to pay interest @ 6% from the date of reference till the date of payment and for the period from the date of breach till the date of reference, interest was to be paid @ 7.5%. In the meantime, the Respondent filed an Execution Petition seeking enforcement of award and the MMTC filed its objections under Section 47 CPC. When the Judgment was reserved, MMTC filed a Civil Suit praying that the award is void and unenforceable. However, the said suit was dismissed and the Executing Court dismissed the objections as well as Order XXI Rule 29 application. Hence, the case was before the Apex Court.

Court’s Observations

The Supreme Court in the above context of the case, said, “… in cases like this, a court cannot be swayed by what the Court thinks would have been a reasonable course of action for the director to adopt but the duty is to enquire whether on the available evidence before the Court to consider whether the course adopted by the director was one reasonably competent directors could have adopted.”

The Court remarked that it is not able to conclude that the Senior Managerial personnel involved at the helm in MMTC during the relevant period acted in a manner as no reasonable personnel/director in the circumstances would have acted.

“We are also not able to conclude on the material furnished that the decisions taken were not within the range of reasonableness or that the course adopted by them was not one, a reasonably competent personnel/director would adopt. Applying the business judgment rule, the course adopted by them cannot be said to be one to which a court of law would not defer to. The appellants have not been able to even prima facie demonstrate that circumstances exist to conclude that the personnel of MMTC did not act in the best interest of the company”, it added.

The Court was of the view that the suit filed itself now stands rejected under Order VII Rule 11 CPC but a Regular First Appeal has been filed and hence, an occasion for considering an Order XXI Rule 29 Application does not arise.

“Before we part, a small postscript. Whether in Government, Public Sector Corporations or even in the private sector, the driving force of the entity are the persons who administer them. A certain play in the joints is inevitable for their day-to-day functioning. If they are shackled with the fear that, their decisions taken for the day-to-day administration, could years later with the benefit of hindsight, be viewed with a jaundiced eye, it will create a chilling effect on them”, it noted.

The Court further observed that a tendency to play it safe will set in, decision making will be avoided, policy paralysis will descend, and all this will in the long run prove detrimental not just to that entity but to the nation itself.

Conclusion

The Court also clarified that it is not to be understood to be condoning decisions taken for improper purposes or extraneous considerations.

“All that we are at pains to drive home is that great caution and circumspection have to be exercised before such allegations are brought forward and adequate proof must exist to back them. Otherwise for fear that carefully built reputations could be casually tarnished, best of talent will not be forthcoming, especially for government and public sector corporations”, it concluded.

Accordingly, the Apex Court dismissed the Appeal, finding no merit in the objections filed by MMTC under Section 47 CPC.

Cause Title- MMTC Limited v. Anglo American Metallurgical Coal Pvt. Limited (Neutral Citation: 2025 INSC 1279)

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