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2019 (7) TMI 716 - SC - Indian LawsUnconditional stay of Arbitral award - stay of money decree - Proceedings pending before High Court - paymnet on completion of works contract - non-filing of injunction application in the proceedings under Section 34 of the Arbitration Act - HELD THAT - The Law Commission has categorically recommended that there should be no automatic stay of the arbitral award. While so recommending, the Law Commission report makes no exception for the Government. On the basis of the said report of the Law Commission, the old Section 36 was substituted in 2016, with retrospective effect from 23.10.2015. The backbone of the submissions on behalf of the Respondent-State of West Bengal is that under the provisions of Order XXVII Rule 8A of the CPC, no security shall be required from the Government in case of there being a money decree passed against the Government, and the execution of which is prayed for. If such submission of the respondent is accepted then the same would mean that mere filing of an objection under Section 34 of the Arbitration Act by a Government shall render the award unenforceable as the stay order would be passed in a mechanical manner and as a matter of course, without imposing any condition against the Government judgment debtor. If the contention is accepted, the effect would be that insofar as the Government is concerned, the un-amended provision of Section 36 of the Arbitration Act would automatically come into force. In the present context, the phrase used is having regard to the provisions of CPC and not in accordance with the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. A plain reading of Order XXVII Rule 8A of CPC would make it clear that the same is only regarding security as mentioned in Rule 5 and 6 of Order XLI CPC, which is not to be demanded from the Government while considering the stay application filed by the Government. It, however, does not provide that the decretal amount cannot be required to be deposited in the appeal against a money decree. Although we are of the firm view that the archaic Rule 8A of Order XXVII CPC has no application or reference in the present times, we may only add that even if it is assumed that the provisions of Order XXVII Rule 8A of CPC are to be applied, the same would only exempt the Government from furnishing security, whereas under Order XLI Rule 5 of CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof. The impugned order passed by the Calcutta High Court granting unconditional stay of the arbitration award dated 21.01.2010, cannot be sustained in the eye of law - Appeal allowed.
Issues Involved:
1. Applicability of Order XXVII Rule 8A CPC to stay applications under Section 36 of the Arbitration Act. 2. Whether the Government should be treated differently under the Arbitration Act. 3. Conditions for granting stay of arbitral awards under Section 36 of the Arbitration Act. Detailed Analysis: 1. Applicability of Order XXVII Rule 8A CPC to Stay Applications under Section 36 of the Arbitration Act: The primary issue was whether Order XXVII Rule 8A of the Code of Civil Procedure (CPC), which exempts the Government from furnishing security in certain cases, applies to stay applications under Section 36 of the Arbitration Act. The appellant argued that the provision of Order XXVII Rule 8A CPC should not be applicable, and even if considered, the courts should not pass an order of unconditional stay of the award and could still direct the deposit of the awarded amount. The respondent contended that the phrase "have due regard to" in Section 36(3) of the Arbitration Act mandates the application of CPC provisions, including Order XXVII Rule 8A. The court held that the phrase "have due regard to" in Section 36(3) of the Arbitration Act indicates that the provisions of CPC are to be taken into consideration as a guiding principle and are not mandatory. The court emphasized that the Arbitration Act is a self-contained code, and the provisions of the CPC will apply only insofar as they are not inconsistent with the spirit and provisions of the Arbitration Act. 2. Whether the Government Should Be Treated Differently under the Arbitration Act: The appellant argued that the Arbitration Act does not provide for any special treatment to the Government while considering the application for stay under Section 36, and the provision of Order XXVII Rule 8A CPC would not be attracted. The respondent argued that the Government is always considered solvent and expected to honor the decree against it, unlike private parties. The court held that the Arbitration Act mandates equal treatment of all parties involved, including the Government. The court noted that the provisions of the Arbitration Act do not make any distinction or provide any differential treatment to the Government. The court emphasized that the reference to CPC in Section 36 of the Arbitration Act is only to guide the court as to what conditions can be imposed, and the same have to be consistent with the provisions of the Arbitration Act. 3. Conditions for Granting Stay of Arbitral Awards under Section 36 of the Arbitration Act: The appellant contended that under the amended Section 36 of the Arbitration Act, the filing of an application under Section 34 does not render the award unenforceable unless the stay of the operation of the award is granted by the court. The respondent argued that the court has complete discretion to grant a stay subject to such conditions as it may deem fit. The court held that Section 36 of the Arbitration Act provides that the court may grant a stay of the operation of the arbitral award subject to such conditions as it may deem fit. The court emphasized that the grant of stay is to be conditional and for reasons to be recorded in writing. The court noted that the phrase "have due regard to" the provisions of CPC means that the provisions of CPC are to be taken into consideration as a guiding principle and are not mandatory. The court further held that even if the provisions of Order XXVII Rule 8A CPC are to be applied, the same would only exempt the Government from furnishing security, whereas the court has the power to direct for full or part deposit of the decretal amount. The court emphasized that the provisions of Order XXVII Rule 8A CPC do not restrict the court from directing the deposit of the awarded amount. Conclusion: The court quashed the order of the Calcutta High Court granting unconditional stay of the arbitration award and restored the order of the Executing Court. The court held that the appellant (award holder) is entitled to pray for the release of the attached amount. The court emphasized that the provisions of the Arbitration Act are to be applied first, and the provisions of CPC are to be taken as a general guideline. The court reiterated that there is no special treatment to be given to the Government under the Arbitration Act while considering the application for stay of a money decree.
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