No Bar In CPC/ Arbitration Act For Accepting Immovable Property As Security For Stay Of Decree: Calcutta High Court

While emphasizing that the intention behind seeking security is simply to furnish an effective cushion for the decree-holder in case the challenge to the decree fails, a Single Bench of Justice Moushumi Bhattacharya held that cash security is not sine qua non under the statutes.

The Bench noted that Section 36(3) of the Arbitration Act, which contemplates procedure for stay of an Award, does not mention the word "security" and only indicates that the Court may impose suitable terms for stay of the award.

The provision states that on filing of an application for stay of award, the Court may, "subject to such conditions as it may deem fit," grant stay of operation of such award for reasons to be recorded in writing.

The Bench observed that the language of Section 36(3) imparts discretion to the Court for deciding the conditions which may be imposed and the only stated requirement is that the Court must indicate its reasons in writing for granting an order of stay of the award in question.

"The intent of the provision relating to stay of a money decree is that the applicant who seeks stay of a decree must furnish some sort of effective cushion for the decree-holder to fall back on in the event the challenge to the decree fails," it added.

The Court also observed that various provisions of the CPC relating to stay of a money decree nowhere prescribes that such stay would only be in monetary terms.

It noted:

• Order XLI Rule1(3) of the Code provides that in cases of appeal against a decree for payment of money, the Appellate Court may allow the appellant to deposit the amount disputed in the appeal or furnish such security in respect thereof as the Court may think fit
• Order XXI Rule 26(3) mandates that before making an order of stay of execution or for restitution of property or the discharge of the judgment-debtor, the Court shall require such security from, or impose such conditions upon, the judgment-debtor as it thinks fit.
• Order XXI Rule 29 continues in the same vein to provide that the Court may on such terms, as it thinks fit, stay execution of a decree until the pending suit has been decided.

In this backdrop the Court held,

"On a conjoint reading of the above provisions it is clear that the intention of the framers of the law, which is relevant for consideration in the present case, was to refrain from a strict requirement that security to be furnished for stay of a decree would only be in monetary terms."

Reliance was also placed on Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai & Co., (2005) 4 SCC 1, where it was held that security in the form of immovable property could be accepted to the satisfaction of the Trial Court.

In the instant case, the Petitioner had moved an application under Section 36 of the Arbitration Act for stay of an arbitral award.

It was submitted that the Petitioner does not presently have sufficient liquidity or financial means to offer as cash security or by way of bank guarantee and therefore, title deed of a specified land be deposited with the Registrar.

As against an award worth Rs.67,04,681/-, the Petitioner had offered a land whose market value was Rs.65,00,000/-. It was also stated on affidavit that the said plot of land is free from all encumbrances, is butted and bounded on all sides and that there is no manner of encroachment whatsoever. Further, the land has not been let out and is in the exclusive possession of the Petitioner.

Taking a sympathetic view, the Bench said,

"This Court must respond to such submission by taking into account the afflicted state of the economy which has affected millions in the country in the aftermath of the pandemic. This Court would have taken a different view had the petitioner requested for a total go-by of the security requirement and asked for stay of the award without offering security in any form."

Case Title: Nitu Shaw v. Bharat Hitech (Cements) Pvt. Ltd.

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