Calcutta High Court
Gng Exports vs Sinosteel Pvt. Ltd on 5 December, 2018
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
Present :
The Hon'ble Mr. Justice Ashis Kumar Chakraborty
A.P. 463 OF 2018
GNG Exports
Vs
Sinosteel Pvt. Ltd.
For the petitioner : Mr. Ranjan Deb, Sr. Adv.
Mr. Tilak Bose, Sr. Adv.
Mr. Rudraman Bhattacharya, Adv.
Mr. Vivek Jhunjhunwala, Adv.
Mr. Sourajit Dasgupta, Adv.
Ms. Debdatta Roy Choudhury, Adv.
For the respondent : Mr. Suman Kumar Dutt, Adv.
Mr. Debmalya Ghosal, Adv.
Judgement on : 05.12.2018
Ashis Kumar Chakraborty, J.
This is an application, at instance of the respondent in the arbitral proceeding for setting aside of the award dated April 9, 2018 made by the sole arbitrator directing it to pay Rs. 61,15,659 to the claimant, the respondent herein. The petitioner has also prayed for stay of operation of the arbitral award. Since the petitioner has filed the application within 90 days from the date of receipt of the award, the application for setting of the arbitral award is admitted. However, with regard to 2 the relief claimed for stay of operation of the arbitral award learned counsel appearing for the respective parties raised various contentions which are required to be considered by this Court.
In the arbitral proceeding before the arbitrator, the present respondent and the petitioner were the claimant and the respondent, respectively.
The disputes between the parties arose out of the sale and purchase contract dated December 27, 2011 (hereinafter referred to as "the said contract"), under which the present respondent agreed to purchase 10,000 MT of Mill Scale (hereinafter referred to as "the said goods") from the petitioner. The port of loading of the said goods was Kakinada Port and the destination port was either Nanjing Port or Tianjin Port, in China. Clause 07 of the said contract provided that within seven working days after signing of the contract the respondent would issue an irrevocable and non-transferable sight LC in favour of the petitioner, in an amount of 100% CFR contract value including 95% CFRE contract value for provisional payment and 5% for balance payment. According to the petitioner, the respondent committed breaches of its obligations under the contract and wrongfully terminated the said contract. The respondent, however, invoked the arbitration agreement between the parties contained in the said contract and filed an application under Section 11 of the Act of 1996, before this High Court, seeking for appointment of an arbitrator to adjudicate the claims raised by it against the petitioner. The said application was allowed and the soles arbitrator was appointed to adjudicate the disputes between the parties. Before the arbitrator the present respondent, as the claimant filed its statement of claim, claiming an award against the present petitioner for USD 283915.00 or equivalent value in Indian currency of Rs. 1, 51, 15,659.00. Out of the said amount of Rs. 1, 51, 15,659.00 the present respondent claimed Rs. 26, 59,500 for damages suffered on account of loss of profit with interest thereon at the rate of 12% per annum from 11.04.2012 to 03.01.2013, Rs. 9, 00,680 on account of 3 cost and expenses incurred for opening the letter of credit together with the interest thereon and Rs. 1, 00,000,000.00 towards loss of its reputation. The present petitioner contested the arbitral proceeding and filed its counter-statement denying all material allegations made by the respondent herein in its statement of claim. On the basis of the pleadings of the respective parties, the arbitrator framed various issues. After considering the pleadings of the respective parties and the evidence adduced by them the arbitrator held that it was the respondent in the arbitral proceeding (the petitioner herein), who committed breach of the said contract and made the award dated April 9, 2018. By the said award the arbitrator further held that the claimant do get an award to the tune of Rs. 10,00,000/- towards the damages on account of loss of reputation, Rs. 26, 59,500/- towards the damage suffered by it on account of loss of profit, Rs. 2, 33,453/- on account of interest at the rate of 12% per annum, from April 11,2012 till March 1,2013, Rs 9,00,680 towards LC opening charges and Rs. 13,22,026 as interest on the said sum of Rs. 9,00,680 at the rate of 12 per cent, per annum from January 5, 2012 to March 2, 2013 on account of LC opening cost amounting to Rs. 61,15,659. It is the said award dated April 9, 2018 made by the arbitrator (hereinafter referred to as "the impugned award") that has been challenged by the present petitioner in this application and a prayer has also been made for stay of operation of the impugned award under Section 36 (3) of the Act of 1996.
Mr. Deb learned Senior Counsel appearing for the petitioner strenuously contended that though the provisions contained in sub-sections (2) and (3) of the Section 36 of the Act of 1996, incorporated by the Act 3 of 2016 are applicable in the present case, but while considering the prayer for stay of operation of the impugned award this Court has the discretion to decide whether the petitioner is at all required to either deposit or secure the entire awarded amount when portions of the arbitral award is ex facie vitiated by the grounds stipulated in sub-sections (2) and (2-A) of 4 Section 34 of the Act of 1996. According to the petitioner, the Proviso to sub-section (3) of Section 36 of the Act of 1996 requiring the Court, while considering an application for stay of an arbitral award for payment of money, to have due regard to the provisions to the grant of stay of a money decree under the Code of Civil Procedure, 1908 (in short, "the Code") is not a mandatory requirement. Citing the decision of the Supreme Court in the case of Puri Construction Pvt. Ltd. - vs- Union of India, reported in (1989) 1 SCC 411 it was submitted that an application for stay of operation of an arbitral award is not an appeal under Order XLI of the Code. Thus, the provisions of sub-rule (3) of Rule 1 and sub-rule (5) of Rule 5 of Order XLI of the Code are not automatically applicable to an application under sub-section (2) of Section 36 of the Act of 1996. It is only for the provisions incorporated in sub-section (3) of Section 36 of the Act of 1996 and the Proviso thereto, while considering the prayer of a party for stay of operation of a money award made by an arbitrator the Court mays have regard to the provisions for grant of stay of a money decree under the provisions of the Code. It was emphasised that the words "shall have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908", appearing in the Proviso to sub-section (3) of section 36 of the Act of 1996, confers wide discretion on the Court and does not make it imperative for the Court to follow the provisions of sub-rule (5) of Rule 5 of order XLI of the Code. According to the petitioner, when the words used in the Proviso to sub-section (3) of Section 36 of the Act of 1996 directs the Court to have "due regard to" and the Legislature has not used either of the phrases "must have regard to" or "shall only have regard to", the Court has wide discretion vested in it not to require an award debtor to make deposit of the awarded amount or secure the same as a condition for obtaining stay of operation of an arbitral award which is ex facie vitiated by any of the grounds stipulated in sub- sections (2) and (2-A) of Section 34 of the Act of 1996. In support of such contention, learned 5 Senior Counsel for the petitioner relied on the decisions of the Supreme Court in the cases of Shri Sitaram Sugar Co. Ltd.-vs- Union of India & Ors. reported in (1990) 3 SCC 223 and Suresh Estate Pvt. Ltd. & Ors.-vs- Municipal Corporation of Greater Mumbai & Ors. reported in (2007) 14 SCC
439. In this regard, the petitioner also relied on the decision of the England and Wales High Court (Administrative Court) in the case of London Oratory School, R -Vs- The School Adjudicator & Anr, reported in [2015]EWHC 1012 (Admn). In paragraphs 50 and 59 of the said decision it was held that the phrase 'to have regard to' means to take into account and it does not connote slavish obedience or deference on every occasion and it is perfectly possible to have regard to a provision, but not to follow that provision in a particular situation.
Relying on the decision of the Supreme Court in the case of the Supreme Court in the case Devi Theatre- vs- Bishwanath Raju reported in (2004) 7 SCC 337, learned Senior Counsel appearing for the petitioner submitted that for admission of an appeal against a money decree under Section 96 read with Order XL1 Rule11 of the Code, the appellant is not required to deposit the amount of money directed to be paid under the trial Court decree and it is only when the appellant seeks for an order of stay of operation of the money decree or the execution proceeding, the Appellate Court may require the appellant to deposit or secure the decreed amount. The petitioner further referred to the decision of the Supreme Court in the case of Sihor Nagar Palika Bureau - Vs.- Bhabhlubhai Virabhai & Co. reported in (2005) 4 SCC 1 and submitted that even after admission of the appeal against a money decree, when the appellant prays for stay of operation that the that the money decree or stay of execution proceeding , the Appellate Court has the discretion to direct the appellant either to deposit the decretal amount or to furnish such security as it may think fit. Learned Senior Counsel for the petitioner also cited the decision of the Supreme Court in the case of Malwa Strips Pvt. Ltd. -Vs- Jyoti Ltd. reported in (2009) 2 SCC 426. 6
According to the petitioner, when the present respondent, as the claimant neither adduced any evidence nor proved its claim on account of loss of profit allegedly suffered by it, the arbitrator has committed a patent illegality in passing the impugned award allowing the claim of the claimant for Rs. 26, 59,500 on account of loss of profit. It was further contended that even it be accepted for the sake of argument that the present respondent had proved its claim on account of loss of profit, even then the arbitrator committed a patent illegality which goes to the root of the matter by allowing the claim for interest at the rate of 12%, per annum on the said claim on account of loss of profit. It was further argued for the petitioner that when the claim of the present respondent arose on account of alleged breaches of the said contract by the petitioner, the respondent's claim against the petitioner on account of its alleged loss of reputation was not maintainable in law. It was next contended that in any event, the decision of the arbitrator allowing the claim of the present respondent on account of loss of reputation is based on no evidence and ex- facie vitiated by perversity. Further, there was no evidence from the side of the present respondent to prove that it had in fact parted with Rs.13, 22,026 to open any Letter of Credit and, as such, the decision of the arbitrator to direct the petitioner to pay the said amount to the respondent herein is also ex- facie perverse. It was strenuously argued for the petitioner that when the portions of the impugned award made by the arbitrator, in so far as the same allowed the claim of the present respondent on account of loss of reputation, interest on the amount for loss of profit, LC opening bank charges together with interest thereon are vitiated by patent illegality this Court would exercise the discretion not to direct the petitioner either to deposit or secure the amounts awarded on account of those claims, as a condition for obtaining stay of operation of the impugned award. .
On the other hand, Mr. Suman Dutt, learned counsel appearing for the present respondent, the claimant award holder submitted from a reading of the impugned award it is evident only after 7 appreciating the evidence adduced by the respective parties before him the arbitrator held that the present petitioner committed breach of the contract and by reason thereof the present respondent(the claimant) suffered loss of profit, loss of its reputation and it is also entitled to recover the amount paid to the bank to open the letter of credit in favour of the present petitioner . Even the arbitrator has assigned reasons for allowing the claims of the present respondent, the claimant in the arbitration. Mr. Dutt further argued that before the Act 3 of 2016 came into force, in the absence of sub-sections (2) and (3) of Section 36 of the Act of 1996, with the admission of an application under Section 34 of the Act of 1996 the enforcement of the arbitral award remained stayed. However, after the Act 3 of 2016 came into force, with the incorporation of sub-sections (2) and (3) of Section 36 of the Act of 1996, in order to obtain stay of operation of the arbitral award a party is required to file a separate application and obtain an order directing stay of operation of the arbitral award, subject to such conditions as the Court may deem fit. Mr. Dutt strenuously argued that the Proviso to sub-section (3) of Section 36 of the Act of 1996 makes an exception and lays down that while considering the application for grant of stay an arbitral award directing payment of money, the Court shall have due regard to the provisions for grant of stay of money decree under the provisions of the Code. According to him, the wide power conferred upon the Court under sub- section (3) of Section 36 of the Act of 1996 to grant stay of operation of an arbitral award is controlled by the Proviso to the said sub-section and for granting stay of operation of an arbitral award for payment of money, the Court is mandatorily required to have due regard to the provisions for grant of stay of money decree under the Code, namely, the provisions of sub-rule (5) of Rule 5 of Order XL1 of the Code. It was further submitted that it is well settled law that the requirement under sub-rule (3) of Rule 1 of Order XL1 of the Code to deposit the entire decretal amount by the judgment debtor is not a condition precedent for admission of an appeal against a 8 money decree. Similarly, for admission of an application under Section 34 of the Act of 1996 the applicant award debtor is not required to either deposit or secure the amount awarded by arbitrator against it. But the provisions which are to be followed by a judgment debtor for obtaining stay of operation of the money decree passed against it are stipulated in the provisions of rule 5 of Order XL1 of the Code and the sub-rules thereunder. It was strenuously contended that the provisions contained in sub-rule (5) of Rule 5 of Order XL1 of the Code starting with the non-obstante clause, mandatorily requires an appellant challenging a money decree to deposit or furnish the security specified in sub-rule (3) of Rule 1 of Order XLI of the Code, otherwise the Appellate Court shall not make an order directing stay of execution of the money decree. In this regard, he also relied upon the decision of the Supreme Court in the case of in Sihor Nagar Palika Bureau (supra). Mr. Dutt further cited the decision of the Supreme Court in the case of S. Sundaram Pillai vs. V.R. Pattabiraman reported in AIR 1985 SC 582 and argued that it is settled law that a Proviso in a statutory provision may serve four different purposes, namely (i) qualifying or excepting certain provisions from the main enactment; (ii) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (iii) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (iv) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. It was urged that the Proviso to sub- section (3) of Section 36 of the Act of 1996 has been incorporated to serve the second purpose mentioned above, that is, to insist on the mandatory condition to follow the provisions of the Code relating to grant of stay of a money decree, stipulated in sub-rule (5) of Rule 5 of Order XLI of the Code. Learned counsel for the respondent also relied on a judgment and order dated July 19, 2018 9 passed by this Court in the applications, GA No.1401 of 2018 with AP 346 of 2018 and GA No. 1399 of 2018 with AP 343 of 2018 and GA No. 1400 of 2018 AP 345 of 2018 (Srei Infrastructure Finance Ltd. -vs- Candor Gurgaon Two Developers & Projects Pvt. Ltd.) and submitted that this Court has already held that in order to obtain stay of operation of an arbitral award directing for payment of money, under sub-section (3) of Section 36 of the Act of 1996, the award debtor has to comply with the conditions under sub-rule (5) of Rule 5 of Order XLI of the Code.
With regard to the decision in Shri Sitaram Sugar Co. Ltd. (supra) cited by the petitioner, Mr. Dutt submitted that in the said case the Supreme Court was considering the validity of the notification dated November 28, 1974 and July 11, 1975 issued by the Central Government in exercise of its power under sub-section (3-C) of Section 3 of the Essential Commodities Act, 1955 (in short, "the Act 10 of 1955") for the purpose of fixing the prices of levy sugar produced by the factories of the different geographical zones of the country, divided into sixteen zones. It was further submitted that sub-section (3-C) of Section 3 of the Act of 1955 contemplated fixation of the price to be paid to a producer of sugar and in case of the latter being required to sell sugar by an order made under sub-section (3)(2)(f) of the said Act, an amount had to be calculated with reference to such price of sugar as the Central Government may, by order, determine, having regard to - (a) the minimum price, if any, fixed for sugarcane by the Central Government under this section; (b) the manufacturing cost of sugar; (c) the duty or tax, if any, paid or payable thereon; and
(d) the securing of a reasonable return on the capital employed in the business of manufacturing sugar. According to the present respondent, inasmuch as the expression " having due regard to"
appearing in sub-section (3-C) of Section 3 of the Act of 1955 were used in the context of fixation price of levy of sugar, the Supreme Court although held that the clauses (a) to (d) appearing in sub- section (3-C) of Section 3 of the Act of 1955 are in essence directory, but the reasonableness of the 10 order made by the Government in exercise of its power under sub-section (3-C) will, of course, be tested by asking the question whether or not matters mentioned in the said clauses have been generally considered by the Government in making its estimate of the price. It was strenuously argued that the interpretation of the said expression "having regard to" rendered by the Supreme court in the case of Shri Sitaram Sugar Co. Ltd. (supra) for deciding the validity of the notifications issued by the Central Government under section (3-C) of Section 3 of the Act 10 of 1955 towards determining the price of levy of sugar in the state of Uttar Pradesh has no bearing on this case. However, while concluding his arguments Mr. Dutt, on instruction, submitted that the respondent is not pressing for the deposit of the amount awarded by the arbitrator in its favour on account of the charges paid to open the letter of credit. He urged that for stay of operation of the arbitral award, this Court would direct the petitioner to deposit the amounts awarded against it by the arbitrator on account loss of reputation and loss of profit together with interest.
I have considered the facts of the case, as well as the arguments advanced by the learned counsel appearing for the respective parties. Unlike the provisions of the Arbitration Act, 1940 an award made by an arbitrator under the Act of 1996 is itself enforceable under the Code in the same manner as if, it were a decree. Until the Act 3 of 2016 came into force, with the filing of an application under section 34 within the stipulated time period, the enforceability of an arbitral award would remain stayed. With the incorporation of sub-sections (2) and (3) of Section 36 of the Act of 1996 with effect from October 25, 2015, in order to obtain stay of operation of the arbitral award the party challenging the same under section 34 of the Act has to file an application for such relief and the Court has the discretion to allow such prayer, subject to such conditions as it may deem fit. However, the Proviso to sub-section (3) of Section 36 of the Act of s1996 enjoins that when a party seeks for stay of operation of an arbitral award for payment of money, the Court shall 11 have regard to the provisions for grant of stay of money decree under the provisions of the Code. As stated above, any award made by an arbitrator under the Act of 1996 including an award for payment of money, unless stayed by the Court under sub-sections (2) and (3) of section 36 of the said Act, is executable as a decree under the provisions of the Code. As regards the forum for challenging an arbitral award the Court exercising jurisdiction under section 34 of the Act of 1996 and the Appellate Court exercising power under Order XLI of the Code against a decree passed by the trial Court are on the same footing. In order to avoid a situation that during the pendency of an application under section 34 of the Act of 1996 the award debtor commits any act to render the award for payment of money, ultimately upheld by the Court, infructuous the Legislature has incorporated the provisions of sub- sections (2) and (3) in Section 36 of the Act of 1996. Further, the Legislature consciously incorporated the Proviso to sub-section (3) of Section 36 of the Act of 1996. In this regard, I also find merit in the contention of the present respondent that out of the four purposes for incorporation of a Proviso to a statutory provision as laid down by the Supreme Court in the case of S. Sundaram Pillai (supra), the Proviso to sub-section (3) of Section 36 of the Act of 1996 has been incorporated to serve the second purpose, that is, to insist a mandatory provision of sub-rule (5) of Rule 5 of Order XL1 of the Code to follow. Therefore, in the present case, while considering the prayer of the petitioner for stay of operation of the arbitral award made against it for payment of money, this Court has to follow the provisions contained in sub rule (5) of Rule 5 of Order XL1 of the Code. In the case of Shri Sitaram Sugar Co. Ltd. (supra) the writ petitioners , as the owners of sugar mills operating of the State of Uttar Pradesh had challenged the validity of the notifications issued by the Central Government in exercise of power under sub-section (3-C) of Section 3 of the Act of 1955 of a particular zone, that is, after taking into consideration the average cost of various items of the factories grouped together in zones without regard to their individual 12 capacity and cost characteristic of a particular manufacturer. In support of their contention, the writ petitioners in the case contended before the Supreme Court in view of the expressed "having regard to" appearing in sub-section (3-C) of Section 3 of the Act 10 of 1955 as quoted above, it was mandatory on the part of the Government to fix the price of levy of sugar by strictly considering the ingredients stipulated in clauses (a) to (d) above. In paragraph 29 of the said decision, the Supreme Court held that the expression "having regard to" must be understood in the context in which it is used in the statute. After considering the object of conferment of power upon the Central Government to issue a notification under sub-section (3-C) of Section 3 of the Act 10 of 1955 in the said case the Supreme Court held that the words "having regard to" used by the legislature do not mean that the Government cannot, after taking into account the matters mentioned in clauses (a) to
(d) , consider any other matter which may be relevant for fixation of price of levy sugar of a particular zone of the country. In the background of the facts and the statutory provisions involved in the said case, the Supreme Court held that the expression is not "having regard only to" but "having regard to" and that the words "having regard to" are not a fetter; they are not the words of limitation, but general guidance to make an estimate. The Supreme Court further held that the reasonableness of the order made by the Government in exercise of its power under sub-section (3- C) of Section 3 of the Act of 1955 will, of course, be tested by asking the question whether or not the matters mentioned in clauses (a) to (d) have generally been considered by the Government in making its estimate of the price. Accordingly, when the context of incorporation of the Proviso to sub-section (3) of Section 36 of the Act of 1996 is to secure realisation of the amount awarded by the arbitrator if, upheld in the application under Section 34 of the Act of 1996 while considering the prayer for stay of operation of the money award the Court has to follows the provisions of Rule 5 of Order XL1 of the Code and sub-rule (5) thereunder. Even from paragraph 26 of the decision of the 13 Supreme Court in the case of Suresh Estates (supra) cited by the petitioner it appears that the expressions "shall have regard" and "must have regard" are mandatory in nature. For all these reasons, I am unable to accept the argument advanced by the petitioner that even after incorporation of sub-sections (2) and (3) of Section 36 of the Act of 1996 while considering a prayer for stay of operation of an arbitral award Court has the discretion not to require the applicant to comply with the requirement of the provisions of Rule 5 of Order XL1 of the Code and sub-rule (5) thereunder.
In view of the Proviso to sub section (3) of Section 36 of the Act of 1996 and the decisions of the Supreme Court in the cases of Shri Sitaram Sugar Mills (supra) and Suresh Estates (supra), as discussed above I am unable to accept the contention raised by the petitioner on the strength of the decision of the England and Wales High Court (Administrative Court) in the case of London Oratory School, R -Vs- The School Adjudicator & Anr (supra). The decision of the Supreme Court in the case of Puri Construction (supra) cited by the petitioner has no application to the issues involved in this case. Similarly, the decision of the Supreme Court in the case of Devi Theatre (supra) that for admission of an appeal, under Section 96 of the Code read with Order XLI of the Code, against a money decree the appellant is not required to deposit the decretal amount has no application to this case.
While interpreting the scope and effect of sub-rule (5) of rule 5 of Order XL1 of the Code in paragraph 6 of the judgement in the case of Sihor Nagar Palika Bureau (supra), the Supreme Court held as follows:
"6. Order 41 Rule 1(3) CPC provides that in an appeal against a decree for payment of amount the appellant shall, within the time permitted by the appellate court, deposit the amount disputed in the appeal or furnish such security in respect thereof as the court may think fit. Under Order 41 Rule 14 5(5), a deposit or security, as abovesaid, is a condition precedent for an order by the appellate court staying the execution of the decree. A bare reading of the two provisions referred to hereinabove, shows a discretion having been conferred on the appellate court to direct either deposit of the amount disputed in the appeal or to permit such security in respect thereof being furnished as the appellate court may think fit. Needless to say that the discretion is to be exercised judicially and not arbitrarily depending on the facts and circumstances of a given case. Ordinarily, execution of a money decree is not stayed inasmuch as satisfaction of money decree does not amount to irreparable injury and in the event of the appeal being allowed, the remedy of restitution is always available to the successful party. Still the power is there, of course a discretionary power, and is meant to be exercised in appropriate cases."
With regard to the scope and purport of sub-rule (5) of Rule 5 of Order XL1 of the Code, the above finding in the case of Sihor Nagar Palika Bureau (supra) was reiterated by the Supreme Court in the cases of Malwa Strips Pvt. Ltd. (supra). In view of the Proviso to sub-section (3) of Section 36 of the Act, when the provisions of sub-rule (5) of Rule 5 of Order XL1 are squarely applicable to the present case and this Court is required to exercise judicial discretion as to whether the petitioner should be directed either to deposit the amounts awarded by the impugned award or to permit it to furnish any security in respect of the awarded amounts.
By a judgment dated July 19, 2018 passed in G. A. No. 1401 of 2018 with A. P. No. 346 of 2018, G. A. No. 1399 of 2018 with A. P. No. 343 of 2018 and G. A. No. 1400 of 2018 with A. P. No. 345 of 2018 (Srei Infrastructure Finance Ltd. -Vs- Candor Gurgaon Two Developers and 15 Projects Pvt. Ltd.) this Court directed the petitioner in the application under Section 36(2) of the Act of 1996 to comply with the provisions of sub-rule (5) of Rule 5 of Order XLI of the Code for obtaining stay of operation of the money award passed by the sole arbitrator against it. This Court directed the petitioner in a said application under Section 36 (2) of the Act of 1996 to deposit the entire amount awarded by the learned Arbitrator. The said judgment and order dated July 19, 2018 was carried before the Supreme Court in Petitions for Special Leave Application Nos. 20895- 30897/2018. By an order dated September 14, 2018 the Supreme Court upheld the findings of this Court requiring the petitioner to comply with the provisions of sub-rule (5) of Rule 5 of Order XLI of the Code as a condition for obtaining stay of operation of the arbitral award for payment of money. By the said order, the Supreme Court only modified the judgment dated July 19, 2018 passed by this Court only to the fact that there shall be interim stay of the award subject to the petitioner's depositing 60% of the awarded amount and the remaining 40% of the awarded amount shall be secured by way of bank guarantee(s) of any nationalised bank.
As stated above, in view of the incorporation of the provisions of sub-sections (2) and (3) in Section 36 of the Act of 1996, an arbitral award operation of which has not been stayed by the Court is executable under the provisions of the Code, as if, it were a decree. As held by the Supreme Court in the case of Sihor Nagar Palika Bureau (supra) ordinarily, execution of a money decree is not stated inasmuch as satisfaction of a money decree does not amount to any irreparable injury and in the event of the appeal being allowed, the remedy of restitution is always available to the successful party. In the said case, the Supreme Court also held that for granting an order of stay of operation of a money decree, the discretion which has been conferred on the appellate Court is to direct either deposit of the amount disputed in the appeal or to permit such security in respect thereof being furnished as the Appellate Court may think fit. Such discretion is to be exercised 16 judicially and not arbitrarily depending on the facts and circumstances of the given case. Thus, when it is found that the Proviso to sub-section (3) of Section 36 of the Act of 1996 mandatorily requires the Court to follow the provisions of sub-rule (5) of Rule 5 of Order XLI of the Code to grant stay of operation of an award for payment of money, the only discretion to be exercised by this Court for granting stay of operation of the impugned arbitral award to direct the petitioner either to deposit the amount awarded by the arbitrator or to permit such security in respect thereof being furnished as may be found fit. However, in the instant case, the respondent award holder on its own submitted that the petitioner may not be required to deposit in Court or secure the amount awarded by the arbitrator on account of recovery of expenses incurred for issuance of the letter of credit amounting to Rs.22,22,706/-.
For the reasons as aforesaid, subject to deposit of Rs.20 lakhs in cash with the Registrar, Original Side of this Court and furnishing a bank guarantee of Rs. 18,92,000/- to the satisfaction of the Registrar, Original Side of this Court by the petitioner within December 20, 2018, the impugned award dated April 9, 2018 made by the arbitrator shall remain stayed till disposal of the application under Section 34 of the Act of 1996. The petitioner shall keep the above bank guarantee renewed from time to time, till disposal of the application under Section 34 of the Act of 1996.
There shall be an unconditional stay of operation of the award dated April 9, 2018 till December 21, 2018.
It is, however, made clear that in the event of any failure on the part of the petitioner to deposit the aforementioned amount in cash with the Registrar, Original Side, of this Court or to furnish of the bank guarantee as directed above, the respondent will be at liberty to execute the arbitral impugned award.
17
Let the application, A.P. No.463 0f 2018 appear for hearing in the monthly list of March 2019. In the meantime, within the month of February, 2019 the petitioner shall file informal paper books disclosing therein all the records of the arbitral proceeding, upon service of the same on the respondent.
Urgent certified copies of this judgment, if applied for, be made available to the parties subject to compliance with all requisite formalities.
(ASHIS KUMAR CHAKRABORTY, J.)