Calcutta High Court| Order XLI, Rule 5(1) of the CPC grants the court discretion to stay the execution of a decree for ‘sufficient cause’; Award by arbitral tribunal upheld

Calcutta High Court

   

Calcutta High Court: Shekhar B. Saraf, J. upheld the award granted by the Arbitral Tribunal holding that the award holder should be secured for the entirety of the amount along with interest and other costs.

The petitioner had filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) along with an application under Section 36(2) of the 1996 Act praying for stay of the award passed by the arbitral tribunal on 27-12-2021 where the respondent was entitled to a refund of Rs. 84.24 crores along with interest which it had deposited with the petitioner on 27-12-2006. Tribunal had also awarded a sum of Rs. 25,00,000/- towards reimbursement of litigation and arbitral costs.

The dispute between the parties had arisen out of an agreement to carry out a new township project for which the petitioner invited financial bids through a tender process. The financial bid of the respondent was accepted and the petitioner via letter dated 21-12-2006 issued a Letter of Award. Possession of 90.19 acres of land was handed to the respondent on 10-08-2007, however no lease deed was entered between the parties at the time of handing over of the possession. Even after a lapse of one year, the lease agreement for execution of work and the development agreement for the same were still not executed between the parties. Finally, in order to govern the relations between the parties a formal development agreement mentioning the terms and conditions were reduced in writing on 25-04-2008. Due to non-execution of the lease between the parties, the new township project was not commenced meanwhile, the petitioner demanded the remaining sums required to be paid by the respondent claimant. The respondent did not pay the remaining amount due to non-execution of the lease document. Finally, the petitioner terminated the development agreement due to nonpayment of the balance instalments constituting event of default by the respondent. Resultantly, arbitration clause was invoked for settlement of the dispute wherein the abovementioned order was passed by the Tribunal.

Senior Advocate appearing for the petitioner argued that the court has the discretion to decide the mode of security to be furnished by the petitioner. He stated that the land in possession of the respondent can be accepted as a valid security for granting stay of the arbitral award under Section 36 of the 1996 Act.

Advocate appearing for the respondent highlighted the default committed by the petitioner as per the development contract entered between them.

The Court perused the relevant clauses and provisions of law cited by the advocates and opined that proviso to Section 36(3) of the 1996 Act makes it clear that the Court must, while considering the stay application in proceedings under Section 34 of the Arbitration Act, have due regard to the provision for grant of stay of a money decree under the provisions of the Civil Procedure Code, 1908 (“CPC”). Order XLI, Rule 5(1) of the CPC grants the court discretion to stay the execution of a decree for ‘sufficient cause'.

The Court reiterated what was held in the case of Pam Developments (P) Ltd. v. State of West Bengal, (2019) 8 SCC 112 that the mandate of the amended Section 36 of the 1996 Act is such that the Court while considering an application for stay filed along with filing of quashing petitioner under Section 34 of the Arbitration Act can grant the stay subject to conditions as it deems fit. Section 36 also mandates recording of reasons for such stay being granted. The Court at the initial stage of proceeding, was satisfied that there does not appear to be any illegality, perversity or violation of any law on the face of the arbitral award as Arbitrator has duly considered the pleadings on behalf of the parties, and thereafter, framed issues and dealt with specific claims and counterclaims of the parties with reasons — hence, the award is a speaking award.

The petitioner was directed to deposit 50% of the arbitral award (including interest calculated till June, 2022) by way of cash security or its equivalent and the Registrar Original Side was directed to make a fixed deposit of the said amount with any nationalised bank and keep the same renewed till the disposal of the application under Section 34 of the Act or until further orders of Court. The remaining 50% of the awarded amount was directed to be secured by way of bank guarantee(s) of a nationalised bank by the petitioner to the satisfaction of the Registrar Original Side, High Court.

[Siliguri Jalpaiguri Development Authority v. Bengal Unitech Universal Siliguri Projects Ltd., I.A. G.A. No. 1 of 2022, decided on 22-06-2022]


Advocates who appeared in this case :

Mr S.N. Mookherjee, Senior Advocate, Mr Anirban Ray, Mr Raja Saha, Mr Chayan Gupta, Mr Sandip Dasgupta, Mr Saaqib Siddiqui, Mr Aviroop Mitra, Advocates, for the Plaintiff/Respondent;

Mr Siddharth Batra, Mr Ashish Shah, Mr Chinmay Dubey, Ms Moumita Chakraborti, Advocates, for the Respondent/Claimant.


*Suchita Shukla, Editorial Assistant has reported this brief.

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