Calcutta High Court
M/S. Kusari Enterprises & Ors vs Idfc First Bank Limited (Formerly ... on 14 December, 2021
Author: Ravi Krishan Kapur
Bench: Ravi Krishan Kapur
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
Commercial Division
(Via Video Conference)
BEFORE:
The Hon'ble Mr. Justice Ravi Krishan Kapur
IA No: GA/1/2021
AP/418/2021
M/s. Kusari Enterprises & Ors.
-vs-
IDFC First Bank Limited (Formerly Capital First Limited)
For the petitioners : Mr. Debashis Sinha,
Mr. Arijit Chatterjee,
Mr. Mohit Gupta,
Ms. Sharmistha Dhar,
Mr. R. Banerjee,
Mr. D. Dey,
For the Respondent : Mr. Soumya Roy,
Mr. Ranjit Singh,
Ms. Pooja Sett,
Mr. Amar Singh.
Heard on : 15.11.2021, 17.11.2021, 09.12.2021
Judgment on : 14.12.2021
Ravi Krishan Kapur, J.:
1. This is an application filed for unconditional stay of an award dated 21 June, 2021 ("the award").
2. Briefly, the disputes between the parties arise out of a Business Loan Agreement dated 31st October, 2018. Under the agreement, the 2 respondent financial institution provided a business loan of an amount of Rs.30,60,000/- to the petitioner which was repayable in 36 equal monthly instalments of Rs.109,098/-. The petitioner defaulted in making repayment of the monthly instalments which resulted in disputes and differences having arisen between the parties. Ultimately, the respondent terminated the agreement and issued a notice dated 12th January, 2021, whereby the petitioner was called upon to repay the entire outstanding dues aggregating to approximately Rs.25,59,302.08/-. The agreement contained an arbitration clause. The award is a culmination of the arbitration proceedings.
3. This application has been filed under Section 36 of the Arbitration and Conciliation Act, 1996 ('the Act') wherein the petitioner has prayed for an order of unconditional stay of operation of the award dated 21st June, 2021 on the ground that the award has been passed in violation of the principles of natural justice and without due process of law. It is pertinent to mention that the application under Section 34 of the Act being AP No.418 of 2021 is pending before this Court and the parties have been directed to file their affidavits. Accordingly, the 3 petitioners submit that, there is no question of securing the award and the petitioners are entitled to an unconditional order of stay.
4. Section 36 of the Act mandates that, while considering an application for stay, the Court has to adjudicate upon whether and on what conditions, stay ought to be granted pending the application under Section 34 of the Act. The Law Commission of India in its 246th Report had recommended a change in the section to ensure that the mere filing of an application under section 34 does not operate as an automatic stay on the enforcement of an award. The proviso to the section makes it clear that the Court ought to have "due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure". This in my view would mean that the provisions of the Code of Civil Procedure, 1908 may be taken into consideration but this is not mandatory.
5. The award is a money award for a sum of Rs.25,59,3002.28/- to be paid jointly or severely by the petitioners. The only submission made by the petitioners is that the award is a procured award and has been passed in violation of all principles of natural justice. Significantly, the petitioners do not make any submissions whatsoever as to the merits 4 of the underlying loan transaction whereby the petitioner had admittedly, indisputably and unequivocally received the principal loan amount of Rs.30,60,000/- from the respondents. The petitioners acknowledges receipt of the entire loan amount but submit that they are not in a position to repay nor will they secure any portion of the loan far less the entire outstanding amount inclusive of interest.
6. On behalf of the respondents, it is submitted that the award is a money decree and following the principles of Code of Civil Procedure, 1908 the petitioners are bound to secure the entirety of the award in any form or mode which this Court may think fit and proper during the pendency of the application under Section 34 of the Act.
7. The only issue before this Court is, at this stage, whether the award should be stayed pending the hearing of the Section 34 application and if so on what terms and conditions. Since the petitioners have unequivocally submitted that they are not willing nor are in any position to deposit any sum and will not deposit any amount even on account of the principal amount or even a portion thereof, I exercise my discretion in not granting an unconditional stay of the award. 5
8. Fairness is not a one way street. Nor is there any magic in the phrase "natural justice". Both the parties belong to the commercial world. In commercial matters such as the instant case, it is an affront to the Rule of Law, commercial sense, justice, equity and good conscience that in a classic money lent and advanced transaction of this nature, where the petitioners who have indisputably received, utilized and appropriated the entire amounts advanced, be permitted the luxury of litigating without securing any portion or the entirety of the principal claim (far less any portion of the interest) even after a final award has been passed. I am of the view that in such cases, where the debt or at least the principal amount is admitted, indisputable and incontrovertible the petitioners must be made to secure if they choose to litigate.
9. For the foregoing reasons GA 1 of 2021 is dismissed.
10. Costs are assessed at Rs.10,000/- to be paid to the respondent.
(Ravi Krishan Kapur, J.)