Calcutta High Court (Appellete Side)
Balajee Education Private Limited vs Rajani Kant Pandey on 28 January, 2020
Author: Hiranmay Bhattacharyya
Bench: Hiranmay Bhattacharyya
1
28.01.2020
Ct. 7
ab 19
C.O. 3371 of 2019
Balajee Education Private Limited
-Vs-
Rajani Kant Pandey
Ms. Lopita Banerjee,
Ms. Arijita Ghosh,
... for the petitioner
Mr. Amitava Nayek,
Mr. Souvik Majhi,
... for the opposite party
The claimant/petitioner has filed the instant application under Article 227
of the Constitution of India challenging an order being No. 2 dated March 15,
2017 passed by the learned District Judge, South 24- Parganas at Alipore in
Misc. Case No. 162 of 2017.
The opposite party filed an application under Section 34 of the Arbitration
and Conciliation Act (for short "the Act") being Misc. Case No. 162 of 2017
challenging an Award passed by the learned Arbitrator on October 26, 2016. The
learned District Judge, by the order impugned, passed an ad-interim order of
stay of operation of the impugned Award till April 17, 2017.
Ms. Banerjee, learned advocate appearing on behalf of the petitioner
submits that the order impugned cannot be sustained in view of the fact that the
same was passed without taking into consideration the provisions laid down
under Section 36 of the Act. She further relies on a judgement in the case of Pam
Developments Private Limited Vs. State of West Bengal reported in 2019 SCC
2
OnLine SC 852 in support of the submission that in view of the provisions laid
down under Section 36 of the Act read with Order 41 Rule 5 of the Code of Civil
Procedure, the Court has the power to direct deposit of full or part irrespective of
the awarded sum.
The learned Arbitrator passed the following Award:
i) I pass Award a sum of Rs. 11,30,173/- (Rupees eleven lacs thirty
thousand one hundred seventy three only) in favour of the claimant
as claimed in paragraph 18 of the Statement of Claim.
ii) I award interest @ 6% p.a. on such sum from the date of award till
the date of its realization.
iii) I further award a sum of Rs. 30,000/- in favour of the claimant
towards the amount paid by the claimant, on behalf of the
respondent, towards Arbitrator's fees.
iv) In compliance with the provisions of Arbitration & Conciliation Act, 1996, it is recorded that the arbitration proceeding was held at 19A. Priyanath Mullick Road, Kolkata- 700 026 and the same had commenced on 2nd November, 2015.
The opposite party filed an application under Section 34 of the Act challenging the aforesaid arbitral Award. The same was registered as Misc. Case No. 162 of 2017. In connection thereof, the opposite party took out an application for stay of operation of the ex parte Award dated October 26, 2016 till the disposal of the instant misc. case.
The learned District Judge, by the order impugned, passed an ad-interim order of stay of the operation of the impugned Award.
The learned advocate appearing on behalf of the opposite party submits that upon a plain reading of sub-section (3) of Section 36 of the Act, it is evident 3 that the Court has a discretion either to impose conditions for the grant of stay of operation of the Award or not. The learned District Judge after considering the case made out by the opposite party herein in the application for stay and on being satisfied was pleased to pass an ad-interim order of stay without imposing any condition.
The learned advocate appearing on behalf of the opposite party further submits that after passing of the order impugned, the petitioner herein filed an application for vacating the order impugned and the same is still pending. As such, this Court should not at this stage make any observation with regard to the power of the Court to grant an unconditional stay of operation of the impugned order.
The issue involved in the instant application under Article 227 of the Constitution of India as to whether the Court has the power to grant an ex parte order of stay of operation of the Award without imposing any condition. The same can be decided irrespective of the fact of pendency of the vacating application before the learned Court below.
Sub-section (2) of Section 36 of the Act provides that where an application to set aside the arbitral award has been filed in the Court under Section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.
Sub-Section (3) of Section 36 of the Act provides that upon filing 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.
4The proviso to sub-section (3) states that the Court 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 Code of Civil Procedure, 1908.
Order 41 Rule 5 (3) of the Code of Civil Procedure provides that no order for stay of execution shall be made unless the court making it is satisfied that the substantial loss may result to the party applying for stay of execution unless the order is made ; that the application has been made without unreasonable delay ; and that the security has been given by the applicant for the due performance of such decree and order as may ultimately be binding upon him.
Subrule 4 of Rule 5 of order 41 of the Code of Civil Procedure provides that the Court may make an ex parte order for stay of execution pending the hearing of the application subject to the provisions of Subrule 3.
Thus, Order 41 Rule 5 of the Code empowers the court to pass an order of stay subject to the court being satisfied with regard to the conditions for grant of stay. Though an ex parte order can also be passed pending the hearing of the application but the same shall be subject to the provisions of Subrule (3). Thus, even while passing an ex parte order of stay, the court has to record its reasons as to the satisfaction for fulfillment of the conditions for grant of stay.
In Pam Developments Private Ltd. (supra), it has been held that the Court has the power to direct for full or part deposit and/or upon furnishing security of the arbitral amount. The Hon'ble Supreme Court after considering the effect of Section 36 of the Act vis-à-vis the provisions of Civil Procedure Court held thus:
5" 18. In this backdrop, we have now to consider the effect of Section 36 of the Arbitration Act, vis-à-vis the provisions of Order XXVII Rule 8A of CPC. Sub-Section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub-section clearly mandates that the grant of stay of the operation of the award is to be for reasons to be recorded in writing "subject to such conditions, as it may deem fit". The proviso makes it clear that the Court has to "have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure". The phrase "having due regard to" would only mean that the provisions of CPC are to be taken into consideration, and not that they are mandatory. While considering the phrase "having regard to", this Court in the case of Shri Sitaram Sugar Company Limited v. Union of India (1990) 3 SCC 223 has held that "the words 'having regard to' in sub-section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory."
It has been further held in Pam Developments (Supra) that the reference to the Civil Procedure Code in Section 36 of the Arbitration Act is only to guide the court as to what conditions can be imposed and the same have to be consistent with the provisions of the Arbitration Act.
Thus, the provisions laid down under Order 41 of the Code of Civil Procedure for grant of stay of operation of a money decree cannot in any way be said to be inconsistent with the spirit and provisions of the Arbitration Act.
The instant Arbitral Award is in the nature of a money decree and the court while passing an ex parte order of stay has to record its reasons for passing such an order. The Court while exercising its power under Section 36 of the Act can direct the applicant to deposit the amount awarded by Award.
6The opposite party herein has filed an application for setting aside the Arbitral Award. If during pendency of such application the claimant/ petitioner herein is allowed to enforce the Arbitral Award by putting the same into execution, the opposite party herein will suffer irreparable loss and injury. It is also equally true that the claimant having obtained an award in his favour will be deprived from enjoying the fruits of the said award during the pendency of the proceeding for setting aside such award. Thus, in order to bring an equilibrium between the parties, the opposite party herein is to be put on terms as a condition for grant of an order of stay of operation of the Arbitral Award.
The impugned order granting stay of operation of the Arbitral Award was passed ex parte without recording any reasons therefor. For the reasons as aforesaid, the said unreasoned order cannot be sustained in the eye of law. However, since the opposite party herein was enjoying an order of stay, an opportunity is to be afforded to the opposite party herein to deposit the amount under the Arbitral Award before the court below as a condition for enjoying an order of stay.
The order impugned suffers from illegality and infirmity and the same is hereby set aside. C.O. 3371 of 2019 is allowed.
Liberty is given to the opposite party herein to deposit the entire awarded amount before the learned District Judge, South 24- Parganas at Alipore by February 7, 2020.
There shall be an unconditional stay of operation of the impugned Award till February 7, 2020. In case the opposite party herein deposits the said amount within the aforesaid time limit, the order of stay shall continue till the disposal of the Misc. Case No. 162 of 2017. Needless to mention that in case of default, the order of stay shall stand vacated without any reference to this Court.
Urgent Photostat certified copy of the order, if applied for, be supplied to the parties at an early date.
7(Hiranmay Bhattacharyya, J.)