Where Arbitral Award In Nature Of Money Decree, Requirement Of 100% Deposit Of Award For Grand Of Stay: Bombay High Court

Section 36(3):

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, 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.

Brief Facts:

The Applicant approached the Bombay High Court (“High Court”) and filed an Interim Application for recalling of an order dated 4th September 2019, which disposed Commercial Notice and seeking a stay on the execution of the Award dated 5th July 2018. The Applicant argued that the order incorrectly recorded the Notice of Motion as disposed of when it had not been.

Moreover, the Applicant contended that since there was a similar prayer in the Interim Application as in the Notice of Motion, there existed a multiplicity of proceedings, leading to the disposal of the latter.

The Applicant argued that a bank guarantee has been furnished as directed by the Calcutta High Court for the entire awarded amount along with accrued interest, resulting in a halt to execution proceedings. It further argued for a stay on the impugned Award, referencing oral directions from the Calcutta High Court regarding pending Section 34 Petition before the High Court.

Furthermore, it asserted that sufficient grounds existed for setting aside the arbitral Award, with emphasis on the 100% bank guarantee furnished before the Calcutta High Court. It argued that the provisions of the Arbitration Act should take precedence over those of the Code of Civil Procedure.

Observations by the High Court:

The High Court noted that under Section 36(3) of the Arbitration Act, the court exercises its discretion in granting a stay of the impugned Award. The imposition of conditions, if any, depends on the specific circumstances of each case. The High Court found no indication that the Respondent faced financial hardship in depositing the awarded amount. The fact that the Petitioner provided a bank guarantee in execution proceedings before the Calcutta High Court was not deemed relevant in exercising the High Court's discretion under Section 36(3) of the Arbitration Act for imposing conditions on the grant of stay.

The High Court noted that several Supreme Court decisions consistently requires the deposit of 100% of the awarded amount for stays when the Award is in the form of a money decree. There is no distinction in the application of parameters between stays sought under Section 36(3) and Section 37 of the Arbitration Act, as neither provision specifies such differentiation. Moreover, it held that Section 36(3) does not warrant a liberal interpretation when imposing conditions for the stay of the Award.

The High Court declined to follow the reasoning of the Calcutta High Court in Kolkata Metropolitan Development Authority Vs. South City Projects (Kolkata) Ltd. and Ors. IA GA 1 of 2020 and A.P. No. 351 of 2020, which differentiates the principles of granting stay under Sections 36(3) and 37 of the Arbitration Act. It held that regardless of whether a Section 34 Petition has been dismissed or is pending consideration, the same parameters apply for the stay of the Award. It held that once an Award is issued by the Arbitrator, it holds the status of a decree until stayed, and thus, the same standards apply irrespective of the status of the Section 34 Petition.

Consequently, the High Court found no merit in the argument for exercising discretion liberally by permitting the Petitioner to furnish a bank guarantee instead of depositing the awarded amount. Accordingly, the High Court granted a stay on the execution, operation, and effect of the impugned Award dated 5th July 2018 passed by the Sole Arbitrator. However, this stay was subject to the condition that the Petitioner deposits the awarded amount with interest as determined by the Sole Arbitrator within six weeks from the date of the order. Additionally, the Respondent was granted the liberty to file an application for withdrawal of the awarded amount with interest upon deposit.

Case Title: M/s. Balmer Lawrie & Co.Ltd vs M/s. Shilpi Engineering Pvt.Ltd.

Case Number: INTERIM APPLICATION (L) NO. 779 OF 2024 IN COMMERCIAL ARBITRATION PETITION NO. 1131 OF 2018.

Advocate for the Petitioner: Mr. Shyam Kapadia a/w Mr. Sanket Singh and Iyanah Parbhoo i/by Meraki Chambers for the Applicant/Petitioner.

Advocate for the Respondent: Mr. Darshit Jain A/W Neeli Sandesara, Deep Dighe i/by India Law LLP for the Respondent.

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