Executing Court Can Direct Award-Debtor To Deposit Decretal Amount In Court Until Petition U/S 34 Of Arbitration Act Is Disposed Of: P&H High Court

Brief Facts

Instant revision has been filed under Article 227 of the Constitution of India assailing order dated 06.09.2024 passed by the Commercial Court, Gurugram whereby while partly accepting an application under Section 36 (3) of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”),

The petitioner was directed to deposit the entire decretal amount with the Registrar General of the High Court of Delhi with a request that the amount be not disbursed till the final decision of the main petition under Section 34 of the Arbitration Act.

A memorandum of understanding dated 11.04.2019 was executed between the petitioner and the respondent. They submitted a tender for an award of a contract by the U.P. Power Transmission Corporation.

An LOI dated 22.02.2020 was awarded in favour of the parties, which was cancelled without executing a contract. A dispute arose between the parties, which was referred to arbitration and by award dated 10.10.2023 an amount of Rs.14,44,70,000/- besides interest and cost of arbitration, was passed in favour of the respondent.

The petitioner then filed a petition under Section 34 of the Arbitration Act along with an application under Section 36 (3) for stay of the enforcement of the arbitral award. The respondent filed an execution petition before the High Court of Delhi and by order dated 23.01.2024 the High Court directed the petitioner to maintain status quo in respect of its immovable properties and by subsequent order dated 15.07.2024 petitioner was directed to deposit the decretal amount with the Registrar General of the High Court within eight weeks.

Contentions

The petitioner submitted that the application for stay of enforcement of award was contested by the respondent and vide impugned order it has been partly allowed, as noticed above and that while partly accepting the application, learned Commercial Court has erred in directing the petitioner to deposit the decretal amount with the High Court.

Placing reliance on the Supreme Court judgment in M/s Unibros Versus All India Radio, 2023, it was submitted that the learned Arbitrator has accepted the claim relating to loss of profit in the absence of any evidence to substantiate the claim. Contending that the award is contrary to the public policy of India, it is urged that it is likely to be set aside under Section 34 of the Arbitration Act.

That as depositing such a huge decretal amount would result in a blockade of funds, impugned order be modified and the petitioner be permitted to furnish an insurance bond or bank guarantee in lieu of the deposit of the decretal amount.

Per contra, the respondent submitted that the award passed under the Arbitration Act has to be executed like a money decree and there is no error in the impugned order passed by the Commercial Court, Gurugram. Reference has been made to B.L. Kashyap and Sons Ltd. Versus Emaar India Ltd., 2024.

Court's Analysis

The court noted that Commercial Court, Gurugram directed the petitioner to deposit the awarded decretal amount with the Executing Court i.e. the High Court of Delhi and requested the Registrar General of Delhi High Court not to disburse the amount till the decision of the pending objections filed under Section 34 of the Arbitration Act.

Based on the above, the court observed that it cannot be disputed that an award passed under Section 36 of the Arbitration Act has to be executed like a money decree. It was observed that with the imposition of the above condition, the interest of the petitioner stands safeguarded. The amount has to be retained by the Executing Court and is not to be released to the respondent till the time the objections are adjudicated on merits.

Arbitration proceedings are primarily meant for a quick resolution of disputes. In case an award passed by the Arbitrator is allowed to be automatically stayed or the judgment debtor is granted permission to furnish an indemnity bond or is given liberty of not depositing the amount, the very purpose of quick resolution of disputes through arbitration would stand defeated, the court noted.

The court while agreeing with the submissions of the respondent noted that the Delhi High Court in B.L. Kashyap and Sons Ltd. Versus Emaar India Ltd., 2024 has held that business cannot be run on mere bank guarantees and liquid cash is required to run any enterprise. For deciding an application under Section 36 (3) of the Arbitration Act, whereby stay has been sought by the judgment debtor, the merit of the objections filed under Section 34 of the Arbitration Act are not to be considered. Accordingly, no substance was found in the arguments raised by counsel for the petitioner.

The court went through the proceedings before the High Court of Delhi wherein the petitioner prayed that more time should be given to deposit the decretal amount. When a favorable order was not secured, the petitioner approached this court by filing a revision petition. The court also observed that the petitioner cannot approbate and reprobate at the same time.

Base on the above, the court came to the conclusion that no illegality was committed by the commercial court by ordering to deposit the decretal amount in the court.Accordingly, the present petition was dismissed.

Case Title: Apollo International Limited Versus Man Structurals Private Limited

Case Reference:CR-5996-2024

Judgment Date: 20/11/2024

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