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TMI Blog2019 (7) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. By an order dated 14th August 2003, the Calcutta High Court was pleased to appoint Retired Justice Sujit Kumar Sinha as the Arbitrator to decide the disputes. By his award dated 21st January, 2010, the Arbitrator allowed some claims of the appellant and held the appellant to be entitled to a sum of ₹ 2,87,11,553/plus interest at the rate of 18% per annum on a sum of ₹ 1,34,06,965/from the date of the award till the date of the payment. Challenging the award passed by the Arbitrator, the respondent State of West Bengal filed an application under Section 34 of the Arbitration Act before the Calcutta High Court. The appellant filed its affidavit in opposition of the aforesaid, to which reply had also been filed by the respondent. The matter is still pending consideration before the Calcutta High Court. 3. Section 36 of the Arbitration Act has been amended by Act number 3 of 2016 with retrospective effect from 23.10.2015. In view of the pre-amended provision of Section 36 of the Arbitration Act, the respondent had not filed injunction application in the proceedings under Section 34 of the Arbitration Act. However, in view of the pronouncement of the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the appellant is twofold. Firstly, that the provision of Order XXVII Rule 8A CPC would not be applicable to the present case, and as such the Court ought not to have considered the same while deciding the application for stay of the award under Section 36 of the Arbitration Act. Secondly, it has been submitted that even if the provision of Order XXVII Rule 8A are to be taken into account, then too the Courts should not pass an order of unconditional stay of award and could still direct deposit of the awarded amount. 7. The contention of the learned counsel for the appellant is that as per the amended Section 36 of the Arbitration Act, filing of an application under Section 34 of the Arbitration Act shall not by itself render the award unenforceable unless the stay of the operation of the award is granted by the Court in accordance of the provisions of sub-Section (3) of Section 36. It is submitted that under sub-Section (3) of Section 36, it is provided that the court may subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing. According to the learned counsel for the appellant, the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of arbitration proceedings. He has also contended that Section 18 of the Arbitration Act expressly provides for equal treatment of all parties involved, which would include the Government as a party. 9. In the alternative, learned counsel for the appellant has submitted that even if the provisions of Order XXVII Rule 8A are to be taken into account, then also the Courts ought not to pass an order of unconditional stay of the award, and could still direct deposit of the awarded amount or part thereof, as the said Rule 8A only exempts the Government from furnishing security, which would not mean that the Courts are mandated to pass an unconditional stay of the award. In support of his submissions, the learned counsel for the appellant has relied upon various decisions of this Court as well as 246th report of the Law Commission, which shall be considered at the time of dealing with the arguments. 10. Per contra, Shri Anand Grover, learned Senior Counsel appearing for the respondent State of West Bengal has contended that the proceedings contemplated under the Arbitration Act are twofold. Chapters V and VI deal with the conduct of arbitral proceedings, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stayed in the case of a Government being the judgment debtor. He has further submitted that under Order XLI Rule 5(3), substantial loss has to be shown by the party applying for stay unless such order is made and in the case of the Government, since a large number of arbitration proceedings are made against it, cumulatively they would result in substantial loss. The submission thus is that Order XLI Rule 5(5) requires the applicant to make a deposit or furnish security, failing which, stay would not be granted, but in view of the provisions of Order XXVII Rule 8A the Government would be exempted from furnishing any security or making any deposit. According to the learned counsel, the furnishing of security is the genus and making of deposit is a species and when the security itself is not required to be deposited by the Government under Order XXVII Rule 8A, there would be no requirement of the Government being made to deposit the money, when the genus (security) itself is not to be furnished by the Government. 13. We have heard learned counsel for the parties at length and perused the material on record. For proper appreciation of the facts of this case, the relevant pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be accompanied by a copy of the judgment: Provided that where two or more suits have been tried together and a common judgment has been delivered therefore and two or more appeals are filed against any decree covered by that judgment, whether by the same appellant or by different appellants, the Appellate Court may dispense with the filing of more than one copy of the judgments. (2) Contents of memorandum. - The memorandum shall set forth, concisely and under distinct heads, the grounds of objection to the decree appealed from without any argument or narrative; and such grounds shall be numbered consecutively. (3) Where the appeal is against a decree for payment of money, the appellant shall, within such time as the Appellate Court may allow, deposit, the amount disputed in the appeal or furnish such security in respect thereof as the Court may think fit . Order XLI, Rule 5 Stay by Appellate Court.- (1) An appeal shall not operate as a stay of proceedings under a decree or order appealed from except so far as the Appellate Court may order, nor shall execution of a decree be stayed by reason only of an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a petition under section 34 has expired or after the section 34 petition has been dismissed. In other words, the pendency of a section 34 petition renders an arbitral award unenforceable. The Supreme Court, in National Aluminum Co. Ltd. V. Pressteel Fabrications, (2004) 1 SCC 540 held that by virtue of section 36, it was impermissible to pass an Order directing the losing party to deposit any part of the award into Court. While this decision was in relation to the powers of the Supreme Court to pass such an order under section 42, the Bombay High Court in Afcons Infrastructure Limited v. The Board of Trustees, Port of Mumbai 2014 (1) Arb LR 512 (Bom) applied the same principle to the powers of a Court under section 9 of the Act as well. Admission of a section 34 petition, therefore, virtually paralyzes the process for the winning party/award creditor. 44. The Supreme Court, in National Aluminium, has criticized the present situation in the following words: However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under section 34 of the Act leaving no discretion in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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. 17. In this backdrop, we have now to consider the effect of Section 36 of the Arbitration Act, vis-a-vis the provisions of Order XXVII Rule 8A of CPC. Sub-Section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub-Section clearly mandates that the grant of stay of the operation of the award is to be for reasons to be recorded in writing subject to such conditions as it may deem fit . The proviso makes it clear that the Court has to have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure . The phrase have due regard to would only mean that the provisions of CPC are to be taken into consideration, and not that they are manda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a money decree is ordinarily not stayed since satisfaction of a money decree does not amount to irreparable injury to the appellant as the remedy of restitution is available to him in the event the appeal is allowed. [See, Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai, 2005 (4) SCC 1, para 6]. Under such circumstances, when the court chooses to exercise its discretion in favour of the appellant State to grant stay of execution of a money decree it must be balance the equities between the parties and ensure that no undue hardship is caused to a decree holder due to stay of execution of such decree. Hence, in appropriate cases, the Court in its discretion may direct deposit of a part of the decretal sum so that the decree holder may with draw the same without prejudice and subject to the result of the appeal. Such direction for deposit of the decretal sum is not for the purpose of furnishing security for due performance of the decree but an equitable measure ensuring part satisfaction of the decree without prejudice to the parties and subject to the result of the appeal as a condition for stay of execution of the decree. 37. To hold that the Court is denuded of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Government is always considered to be solvent, thus was exempted from providing security under Rule 8A of Order XXVII of CPC. However, in 1976 Sub Rule (5) to Rule 5 of Order XLI CPC was inserted, which reads as follows: (5) Notwithstanding anything contained in the foregoing sub-rules, where the appellant fails to make the deposit or furnish the security specified in subrule (3) of rule 1, the Court shall not make an order staying the execution of the decrees. The same provides for making of deposit or furnishing security by the decree holder seeking stay. It would thus mean that after 1977, the Appellate Court had the power to direct for deposit of the decretal amount, which was earlier limited only to furnishing of security under sub-Rule (3) of Rule 5 of Order XLI CPC. It is noteworthy that after insertion of sub-Rule (5), there was no amendment to Order XXVII Rule 8A CPC to exempt the State Government for making such deposit, which would mean that Rule 8A does not exempt the Government from making deposit, which the Court has the power to now direct under Order XLI Rule 5(5) CPC. 22. Further, it is to be noticed that Order XXVII Rule 8A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned above, 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. 25. It may be true that the CPC provides for a differential treatment to the Government in certain cases, but the same may not be so applicable while considering a case against the Government under the Arbitration Act. For instance, Section 80 of CPC provides for a notice of two months to be given before any suit is instituted against the Government. Further, it is also provides that no ex-parte injunction order can be passed against the Government. Whereas on the other hand, under the Arbitration Act no such special provision has been made with regard to arbitration by or against the Government. There is no requirement under the Arbitration Act for a notice of two months to be given to the Government before invoking arbitration proceeding against the Government. Further, Sections 9 and 17 of the Arbitration Act also provide for grant of ex-parte interim orders against the Government. 26. Section 36 of the Arbitration Act also does not provide fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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