Court Cant Grant Unconditional Stay Of Award Under Section 36(3) Unless A Prima Facie Case Of Fraud: Delhi High Court

The bench of Justice Manoj Kumar Ohri refused to grant a stay in favour of a foreign entity with no roots in India. The Court observed that it has no assets that can be offered as security for securing stay on enforcement of the arbitral award. Moreover, it was not willing to deposit even part of the arbitral award and insisted on an unconditional stay which was not permissible since a case of fraud was not made out.

Facts

The parties were involved in the Main Civil Works Package-1: Dam, Spillway, and Power Intake of the Kol Dam Hydro Electric Project in Bilaspur District. Disputes arose, leading to the matter being referred to an Arbitral Tribunal, which ultimately issued the impugned award.

The petitioner initially claimed Rs. 3,66,34,27,582.45 but was awarded only Rs. 1,30,23,45,512/-. However, this awarded sum was directed to be set off against the Rs. 299.67 Crores previously paid to the petitioner by the respondent as an advance. As the awarded sum was less than the advance, the Arbitral Tribunal directed the petitioner to refund the excess advance of Rs. 1,69,43,54,488/- to the respondent.

Thereafter, the petitioner challenged the award under Section 34 of the Act and also made an application under Section 36(3) seeking an unconditional stay on the award.

Submissions on Behalf of the Parties:

The petitioner made the following submissions to get unconditional stay on the award:

• The petitioner, pending the disposal of objections under Section 34, sought an unconditional stay of the impugned arbitral award, relying on Section 36(3) of the Arbitration and Conciliation Act (A&C Act).
• The petitioner challenged the set off and refund ordered by the Arbitral Tribunal, arguing that it went beyond the scope of the reference. The specific relief of set off was not claimed by the respondent in its statement of defense.
• That courts have discretionary powers to grant unconditional under Section 36(3) of the A&C Act which are akin to powers under Order XLI Rule 5 of the Civil Procedure Code (CPC).

The respondent made the following counter-submissions:

• That the power to grant unconditional stay of decrees is limited to cases involving fraud and no other grounds.
• On merits, the respondent denied the Arbitral Tribunal exceeded its reference in awarding set-off and refund. It referred to an application it filed on 27.10.2015, specifically seeking relief of set-off and consequential refund of the excess advance, asserting that the Tribunal had the authority to adjudicate on this claim under Section 23(2A) of the A&C Act.

Analysis by the Court

The Court observed that under Section 36(3) of the A&C Act, the Court can grant an unconditional stay on the arbitral award if a prima facie case is made out that the award was induced by fraud. However, the petitioner did not make out any such case.

Considering the petitioner as a foreign entity without roots in India and lacking assets for security, the court noted the petitioner's reluctance to deposit any part of the arbitral award, insisting on an unconditional stay. The court highlighted that the petitioner could have shown bona fide by offering cash security. The arbitral award, achieved through due process, should only be interfered with on limited grounds available under Section 34, and such interference should not be taken lightly.

Accordingly, the Court dismissed the application.

Cas Title: Italian Thai Development v. NTPC Ltd

Citation: 2023 LiveLaw (Del) 1168

Date: 17.11.2023

Counsel for the Petitioner: Mr. Narender Hooda, Sr. Advocate with Mr. Aditya Mishra, Mr. S. Lamba and Ms. Rashi C., Advocates

Counsel for the Respondent: Mr. S.B. Upadhyay, Sr. Advocate with Mr Tarkeshwar Nath, Mr. Lalit Mohan, Mr. Harshit Singh and Mr. Akash Kumar, Advocates

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