{"id":258662,"date":"2021-12-17T17:00:45","date_gmt":"2021-12-17T11:30:45","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=258662"},"modified":"2021-12-17T13:02:30","modified_gmt":"2021-12-17T07:32:30","slug":"level-playing-field-no-preference-to-government-in-enforcement-of-awards-in-democratic-india","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/12\/17\/level-playing-field-no-preference-to-government-in-enforcement-of-awards-in-democratic-india\/","title":{"rendered":"Level Playing Field : No Preference to Government in Enforcement of Awards in Democratic India"},"content":{"rendered":"<p style=\"text-align: justify;\">In a recent judgment, <em>Pam Developments (P) Ltd.<\/em> v. <em>State of W.B.<\/em><u><sup>1<\/sup><\/u>, the Supreme Court has ruled that in the event of an award-debtor Government filing an application under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544939\"><u>34<\/u><\/a> of the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>Arbitration and Conciliation Act, 1996<\/u><\/a> (ACA) for stay of the award made against it, the Government is not entitled to any preferential treatment, rather it has to be treated like any other ordinary aggrieved party.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Under the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>Civil Procedure Code, 1908 (CPC)<\/u><\/a>, the normal rule for ordinary parties in civil suits in courts of law is that any judgment-debtor seeking interim relief from a money decree made against him is required to furnish a security for the due performance of the decree while applying in the appellate court for stay of the judgment and decree made against it. It is a pretty strict rule of civil procedure. The underlying reason is understandable, namely, to secure the interest of the winning party as against any default or delay in the satisfaction of the decree by the losing party in the event of the appeal being dismissed. However, a certain provision in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> itself also provides for an exemption from that normal rule when the Government is the judgment-debtor. That provision, Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a>, basically of British colonial vintage, treats the Government as a relatively solvent and, therefore, the superior party not expected to act with default or delay in the payment of a money decree affirmed in appeal against it and thus gives relaxation to the Government in the matter of furnishing security.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> does tend to follow <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> to quite some extent in matters of procedure. But in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u>, the Supreme Court has departed from the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> holding that in arbitration matters no such exemption or relaxation is available when the Government is the award-debtor. The court has cemented its ruling by holding that in an arbitration in India all parties should be treated equally. That is an ideal already envisaged under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544918\"><u>18<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> viz. Equal treatment of parties. \u2014The parties shall be treated with equality \u2026\u2019.<\/p>\n<p>&nbsp;<\/p>\n<h4 style=\"text-align: justify;\"><span style=\"color: #000080;\"><strong>The Factual Context<\/strong><\/span><\/h4>\n<p style=\"text-align: justify;\">On the facts of the case, an award had gone in favour of the claimant and against the West Bengal Government. On the Government&#8217;s application for setting aside and stay of the award under Section , the Calcutta High Court granted<u><sup>2<\/sup><\/u> an unconditional stay to the Government without the Government being made to furnish any security or deposit of the decretal amount. This was done on the ground of Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a><a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> which exempts the Government from furnishing any security if stay is to be granted in its favour in an appeal filed by it against a money decree. In the appeal filed by the award-creditor against the High Court&#8217;s order, the Supreme Court in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> has reversed the order given by the Calcutta High Court. It has laid down the principle of not giving under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544939\"><u>34<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> any special or differential treatment to the Government upon grant of stay of an award and money decree passed against it. Thereby, the Supreme Court has rendered the arbitral remedy in India to be a much more firm and decisive remedy by considering both the parties, the citizen (subject) and the Government (sovereign) as equals and on a par with each other.<\/p>\n<p>&nbsp;<\/p>\n<h4 style=\"text-align: justify;\"><span style=\"color: #000080;\"><strong>The Legal Context<\/strong><\/span><\/h4>\n<p style=\"text-align: justify;\">The case in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> primarily revolved around Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a><a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> which provides for the court to have <em>due regard<\/em> to the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> while deciding an application for stay of an award under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(2)<\/u><\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> provides:<\/p>\n<p style=\"text-align: justify;\"><strong>36.(3)<\/strong> 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:<\/p>\n<p style=\"text-align: justify;\">Provided that the court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>Code of Civil Procedure, 1908 (5 of 1908)<\/u><\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">As pleaded by the aggrieved Government, the Supreme Court first tackled the issue of unconditional stay. The court unraveled the decision in <em>BCCI<\/em> v. <em>Kochi Cricket (P) Ltd.<\/em><u><sup>3<\/sup><\/u> that has dealt with the question of unconditional stay in the wake of the 2015 Amendment in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a>. In the pre-amendment scenario prior to the 2015 Amendment, Section had provided for an automatic and unconditional stay of enforcement of an award until the expiry of time-limit for challenge of the award under Section or, after the filing of an application for such challenge, until the disposal of such a challenge by the court. Under the of 2015, that provision was deleted and a new provision was made to the effect that such stay could only be granted upon an application being made to the court and the court would have power to grant the stay only subject to certain conditions and having due regard to the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> provisions. The furnishing of security and\/or making a deposit of the decretal amount as per the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> provisions would, therefore, be an obvious condition. The dispute in <em>BCCI<\/em><u><sup>3<\/sup><\/u> arose with regard to the question whether the 2015 Amendment with its new package of conditions would apply even to awards which had been made from before the enforcement of the 2015 Amendment. The Supreme Court in <em>BCCI<\/em><u><sup>3<\/sup><\/u> held that the amended Section , being procedural in nature, would apply retrospectively even to awards that had been made and applications under Section that had been filed prior to the commencement of the . In essence, the Court in <em>BCCI<\/em><u><sup>3<\/sup><\/u>, not only endorsed the legislative abandonment of the concept of automatic stay on an application under Section but also made the said abandonment retrospectively applicable to pre-amendment awards.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Developing the <em>BCCI<\/em><u><sup>3<\/sup><\/u> theme further, now in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u>, the Supreme Court has taken a cue from the 246th Law Commission Report which recommended that there should be no automatic stay of an arbitral award on the mere filing of a petition challenging an award and has refused to carve any exception for the Government as an award-debtor.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The Law Commission in the said Report had actually relied on a previous judgment of the Supreme Court. Back in the year 2004, in <em>NALCO<\/em> v. <em>Pressteel &amp; Fabrications (P) Ltd.<\/em><u><sup>4<\/sup><\/u>, the Supreme Court itself had observed that the automatic suspension of execution of an award, the moment an application under Section is filed, defeats the very object of the alternative dispute resolution system. Endorsing that point of view, the court has now in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> rejected at the very outset, the Government&#8217;s claim of an unconditional stay.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Thus, taking aid from the 2015 Amendment, the Law Commission recommendation, and an earlier suggestion made by itself, the court has subjected the Government in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> to furnish security or make deposit of the decretal amount like any other ordinary litigant and award-debtor and refused to give to the Government the higher status it has traditionally enjoyed in civil matters in courts.<\/p>\n<p>&nbsp;<\/p>\n<h4 style=\"text-align: justify;\"><strong><span style=\"color: #000080;\">Exploring \u2018Discretion\u2019 of the Court Under Provisions of <\/span><a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u><span style=\"color: #000080;\">CPC<\/span><\/u><\/a><\/strong><\/h4>\n<p style=\"text-align: justify;\">Although <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> and <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> stand on different footings, Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> has given <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> a privileged place by demanding it (CPC) to be given <em>due regard<\/em> while granting stay of a money decree. For a long time, it had been believed that the \u201c<em>due regard<\/em>\u201d expression implied a blind application of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> to all arbitration proceedings. However, in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u>, the Court has abandoned the myth that <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> applies to Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> mechanically in all its aspects. It has held that <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> is a self-contained Act. Hence, in proceedings under <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a>, the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> apply to arbitration applications in the court only insofar as the same are not inconsistent with the spirit and provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a>. The Court has held that the expressions \u201c<em>having due regard<\/em>\u201d used in the proviso to Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> in relation to provisions of grant of stay of a money decree under <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> would only mean that the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> are only to be taken into consideration by the court, not that they are mandatory for the court to follow while passing the order. The verdict has the effect of declaring that the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> are merely directory and guiding in nature in the context of arbitration applications in court. The provision regarding imposition of conditions while granting stay against an award cannot be construed in such a manner that it takes away the power conferred on the court under Section .<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The Court in this context, has followed the dictum in <em>Shri Sitaram Sugar Co. Ltd.<\/em> v. <em>Union of India<\/em><u><sup>5<\/sup><\/u>. In that case, the Court held that the expression \u201c<em>having due regard<\/em>\u201d is not strictly mandatory but in essence a directory provision made as a legislative instruction for the general guidance of the Government in determining the price of sugar. Likewise, the Court in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> has drawn an inference that <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> provisions do not apply to <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> completely or mechanically. Thereby the sanctity of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> has been kept alive and intact by the Supreme Court.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Highlighting the importance of discretion being granted to the court, the Supreme Court in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> has also followed the ruling in <em>Union of India<\/em> v. <em>Amitava Paul<\/em><u><sup>6<\/sup><\/u>. The High Court in <em>Amitava Paul<\/em><u><sup>6<\/sup><\/u> held that:<\/p>\n<blockquote>\n<p style=\"text-align: justify;\">\u2026 Under such circumstances, when the Court chooses to exercise its discretion in favour of the appellant State to grant stay of execution of a money decree it must <em>balance the equities between the parties<\/em> and ensure that no undue hardship is caused to a decree-holder due to stay of execution of such decree. Hence, in appropriate cases, the <em>Court in its discretion may direct deposit of a part of the decretal sum<\/em> so that the decree-holder may withdraw the same without prejudice and subject to the result of the appeal. Such direction for deposit of the decretal sum is not for the purpose of furnishing security for due performance of the decree but an <em>equitable measure ensuring part satisfaction of the decree without prejudice to the parties and subject to the result of the appeal as a condition for stay of execution of the decree<\/em>. \u2026To hold that the Court is denuded of such equitable discretion while granting stay of execution of a money decree in favour of the Government, would <em>cause grave hardship to deserving decree-holders<\/em> who in the facts of a given case may be entitled to enjoy part satisfaction of the decree without prejudice and subject to the result of the appeal as a condition for stay of execution of the entire decree.<u><sup>7<\/sup><\/u><\/p>\n<\/blockquote>\n<p style=\"text-align: right;\">(emphasis supplied)<\/p>\n<p style=\"text-align: justify;\">The key elements of the ruling in <em>Amitava Paul<\/em><u><sup>6<\/sup><\/u> showcase the requirement and imminent need of the equitable measure to balance the scales of justice between the parties so as to ensure part satisfaction of the decree without causing prejudice to either of the parties. This balance can only be determined by the courts who have been vested with the power to do so. In <em>Pam Developments<\/em><u><sup>1<\/sup><\/u>, the Supreme Court has held that Section of the amended Act stipulates that if stay is to be granted under application of Section , then it shall be \u201c<em>subject to such conditions as it (the court) may deem fit<\/em>\u201d. The phrase \u201c<em>subject to such conditions as the court may deem fit<\/em>\u201d clearly establishes the court&#8217;s discretion to decide the manner in which and conditions subject to which the court desires to grant stay. The expression \u201c<em>the Court may deem fit<\/em>\u201d coupled with the expression \u201c<em>having due regard<\/em>\u201d clearly shows that the legislative intent is not to mandatorily compel the court under <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> to apply the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> but only to remind the court to keep the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> principles in mind and use its discretion when it deems their application necessary.<\/p>\n<p>&nbsp;<\/p>\n<h4 style=\"text-align: justify;\"><span style=\"color: #000080;\"><strong>A Republican Arbitral Ecosystem<\/strong><\/span><\/h4>\n<p style=\"text-align: justify;\">The Court in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u>, not only diluted the provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> as being merely guiding in nature and in no manner taking away discretion from the courts under <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> but also went a step ahead and examined as many as three provisions of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> viz. Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a>, Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523460\"><u>41 Rule 1(3)<\/u><\/a> and Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5(5)<\/u><\/a>. These three provisions read together on the face of it supported the case of the Government. However, the Court examined the three provisions individually as well as in unison and came to the conclusion that the Government is to be treated like any other private party in the event of an application for stay of award being filed by it under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a>. The three provisions are reproduced below:<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><strong><em>Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a>.<\/em><\/strong><\/p>\n<p style=\"text-align: justify;\">8-A. <em>No security to be required from Government or a public officer in certain cases<\/em>.\u2014No such security as is mentioned in Rules <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>5<\/u><\/a> and <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523499\"><u>6 of Order XLI<\/u><\/a> shall be required from the Government or, where the Government has undertaken the defence of the suit, from any public officer sued in respect of an act alleged to be done by him in his official capacity.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><strong><em>Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523460\"><u>41 Rule 1(3)<\/u><\/a>.<\/em><\/strong><\/p>\n<ol style=\"text-align: justify;\">\n<li><em>Form of appeal<\/em>.\u2014(1)-(2) * * *<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">(3) Where the <em>appeal is against a decree for payment of money, the appellant shall, within such time as the Appellate Court may allow, deposit the amount disputed in the appeal or furnish such security in respect thereof as the Court may think fit<\/em>.<\/p>\n<p style=\"text-align: right;\">(emphasis supplied)<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><strong><em>Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5(5)<\/u><\/a>.<\/em><\/strong><\/p>\n<ol style=\"text-align: justify;\" start=\"5\">\n<li><em>Stay by Appellate Court<\/em>.\u2014(1)-(4) * * *<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">(5) Notwithstanding anything contained in the foregoing sub-rules, where the <em>appellant fails to make the deposit or furnish the security specified in sub-rule (3) of Rule , the Court shall not make an order staying the execution of the decree<\/em>.<\/p>\n<p style=\"text-align: right;\">(emphasis supplied)<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The Supreme Court read the three provisions i.e. Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a>, Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523460\"><u>41 Rule 1(3)<\/u><\/a> and Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5(5)<\/u><\/a> harmoniously and reached the conclusion that the Government cannot be given preferential treatment as Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> does not provide in any way that the Government is to be exempted from <em>depositing the decretal amount<\/em>. The award-debtor Government contended that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> applies to the present case and therefore unconditional stay should be given to it. It argued that reading Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> along with Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523460\"><u>41 Rule 1(3)<\/u><\/a>, the expression \u201c<em>subject to<\/em> <em>such conditions<\/em>\u201d mentioned under Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544941\"><u>36(3)<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> gives the court complete discretion to grant stay subject to such conditions as it deems fit. The Government forged its defense under the garb of the assurance that since the Government, unlike private parties, is considered to be solvent and is expected to honor the decree made against it, it (the Government) would not avoid enforcement of the final decree and thus the award necessarily needs to be stayed when the Government is the award-debtor.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">On the other hand, the award-creditor, the appellant in the present case, pleaded that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> does not exempt the Government from <em>depositing the decretal amount<\/em> but only exempts it from <em>furnishing security<\/em>. The appellant contended that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5(5)<\/u><\/a> underlines rather unequivocally the court&#8217;s power to refuse stay in the event of the judgment-debtor failing to make the deposit of the money decree against it.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The Supreme Court in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> has agreed with the award-creditor on two counts : first, as explained above, on a purely textual and plain reading, the Court held that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> exempts the Government only from <em>furnishing security<\/em> and nothing more than that. Second, and most significantly, the Court took a historical perspective of the provisions, and seems to have been impressed by the fact that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> giving the Government (the British Crown) immunity from <em>furnishing security<\/em> was inserted in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> by the British colonial rulers of India in 1937 whereas sub-rule (5) in Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5<\/u><\/a> restraining the court from granting any stay of decree unless the judgment-debtor either <em>furnishes security<\/em> or <em>deposits the decretal amount<\/em> was inserted in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726944\"><u>CPC<\/u><\/a> by Parliament of independent India in 1977. The Court has elaborated that after insertion of sub-rule (5) in Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41 Rule 5<\/u><\/a> in 1977, there has been no amendment in Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> which means that Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> does not exempt the Government from <em>making the deposit<\/em> which the court now has the power to direct under Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523498\"><u>41-Rule 5(5)<\/u><\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">Thereby, the Court has ruled that the \u201carchaic\u201d principle of the Government standing at a higher pedestal than an ordinary litigant and award-debtor stands rejected in the context of the arbitral remedy in India. Under the scheme of the , no distinction is made nor any differential treatment is to be given to the Government while considering an application for grant of stay of a money decree in proceedings under Section . The Government and private entities\/individuals are to be considered as equals and in an appeal by the Government against a money decree passed against it, the Government is bound to furnish security or deposit the decretal amount awarded against it. Order <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001523310\"><u>27 Rule 8-A<\/u><\/a> was incorporated in 1937 during the British Raj, giving certain safeguards to the Government. The Court has held that this principle is not applicable anymore \u201c<em>in today&#8217;s time when we have a democratic Government<\/em>\u201d in the country.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The Court by invoking Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0001544918\"><u>18<\/u><\/a> of <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> which commands that all parties shall be treated equally has moved towards a fair, equitable and just arbitral ecosystem and illustrated the judiciary&#8217;s determination to treat all parties equally.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">The judgment in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> thus underlines the \u201crule of law\u201d in the \u201cdemocratic republic\u201d of India. It brings the Indian arbitral process as well as the Indian court system much closer to the desired international standard of fair and equal treatment to all parties in a dispute. It should serve as a great re-assurance to all spectators of foreign investment who have been seeking a \u201clevel playing field\u201d in international and even domestic commercial arbitrations in India.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><strong>Post Script<\/strong><\/p>\n<p style=\"text-align: justify;\">The 2015 Amendment Act sought to set right what was perceived to be an aberration in the original <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a>, namely, the presence of the automatic stay regime in Section . It was a big reform. The Supreme Court by its dictum in <em>BCCI<\/em><u><sup>3<\/sup><\/u> gave that reform a greater impetus by clarifying that the cessation of automatic stay regime by the 2015 Act would apply also to arbitral and court proceedings that had commenced before the commencement of the 2015 Act. But strange are the ways of Parliament and politicians who brought an end to the reform by a fresh amendment in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> by an Amendment Act in August 2019. The 2019 Amendment inserted Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-9000216884\"><u>87<\/u><\/a> in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> which declared that the cessation of automatic stay regime would <em>not<\/em> govern the arbitral and court proceedings which had commenced before the commencement of the 2015 Act. This new development clearly gave a jolt to the arbitration world. Many award-creditors who were about to benefit from the reform of the 2015 Amendment were left high and dry. They would either not be paid the decretal amount or, worse, may even have to refund the sum, if they had received any from the award-debtor on account of the 2015 reform. Various such award-creditors led by Hindustan Construction Company challenged the insertion of Section <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-9000216884\"><u>87<\/u><\/a> in <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> by the 2019 Act. The Supreme Court heard and decided the issue with lightning speed in <em>Hindustan Construction Co. Ltd.<\/em> v. <em>Union of India<\/em><u><sup>8<\/sup><\/u> declaring that, in the first place, it was a misconception that (even) in the original <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>ACA<\/u><\/a> there was any automatic stay regime and secondly, in any case, Section was a <em>manifestly arbitrary<\/em> step which had put the highly conducive 2015 reform on the <em>back-burner<\/em>. The Court held the 2019 change to be contrary to <em>public interest<\/em> and working in the <em>reverse direction<\/em>. In the words of the Court:<\/p>\n<ol style=\"text-align: justify;\" start=\"56\">\n<li><em>56<\/em>. \u2026 The retrospective resurrection of an automatic-stay not only turns the clock backwards contrary to the object of the <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002726958\"><u>Arbitration Act, 1996<\/u><\/a> and the 2015 Amendment Act, but also results in payments already made under the amended Section to award-holders in a situation of no-stay or conditional-stay now being reversed.<u><sup>9<\/sup><\/u><\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\">With the above ruling of the Supreme Court within weeks of the 2019 Amendment, the cloud of confusion and uncertainty that had come to hang over the salutary effects of the 2015 Amendment has been removed. But for the <em>HCC<\/em><u><sup>7<\/sup><\/u> ruling, who knows, the award-debtor Government of West Bengal in <em>Pam Developments<\/em><u><sup>1<\/sup><\/u> would have been able to escape the order of deposit made against it by the court. So, Pam Developments, stands out as the finally triumphant party notwithstanding the 2019 attempt of Parliament to deprive it of the fruits of its award. Arbitration in India continues on fast track with all the hope and promise of a speedy legal remedy and an effective alternative dispute resolution mechanism.<\/p>\n<hr \/>\n<h4>**The article has been published with kind permission of Eastern Book Company. Cite as <a href=\"http:\/\/www.scconline.com\/DocumentLink\/S2z6Dk7M\"><strong>(2020) 4 SCC J-41<\/strong><\/a><\/h4>\n<h4 style=\"text-align: justify;\"><span style=\"color: #000080;\"><sup>\u2020<\/sup> Manavendra Gupta, Advocate. Associate, Shardul Amarchand Mangaldas &amp; Co.<\/span><\/h4>\n<p style=\"text-align: justify;\"><sup>1<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-9000256529\"><u>(2019) 8 SCC 112<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>2<\/sup> <em>State of W.B.<\/em> v. <em>Pam Development (P) Ltd.<\/em>, <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-9000184393\"><u>2018 SCC OnLine Cal 14141<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>3<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002891915\"><u>(2018) 6 SCC 287<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>4<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0000034414\"><u>(2004) 1 SCC 540<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>5<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0000016823\"><u>(1990) 3 SCC 223<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>6<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-0002311990\"><u>2015 SCC OnLine Cal 872<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>7<\/sup> Ibid.<\/p>\n<p style=\"text-align: justify;\"><sup>8<\/sup> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/JTXT-9000317479\"><u>2019 SCC Online SC 1520<\/u><\/a>.<\/p>\n<p style=\"text-align: justify;\"><sup>9<\/sup> Id, para 56.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>by Manavendra Gupta\u2020<\/p>\n","protected":false},"author":8808,"featured_media":258663,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1191,42504],"tags":[],"class_list":["post-258662","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-op-ed","category-scc-journal-section"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - 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