Calcutta High Court
The Board Of Trustees For The Port Of ... vs Abg Kolkata Container Terminal Private ... on 16 April, 2019
Author: Arindam Sinha
Bench: Arindam Sinha
ORDER SHEET
GA 589 OF 2019
WITH
AP 590 OF 2011
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
THE BOARD OF TRUSTEES FOR THE PORT OF KOLKATA
Versus
ABG KOLKATA CONTAINER TERMINAL PRIVATE LIMITED
............
BEFORE:
The Hon'ble JUSTICE ARINDAM SINHA Date : 16th April, 2019.
Mr. Tilok Bose, Sr. Adv., Mr. A. K. Jena, adv...for petitioner.
Mr. S. Chowdhury, Mr. K.R. Thaker, Mr. R. Dutta, Mr. S. Ganguli, Ms. Pooja Chakraborti, Mr. S. Bhattacharyya, Ms. R. Misra, advs...for respondent.
The Court : This application, made in arbitration petition for setting aside award, is for stay of it and listed under heading 'To Be Mentioned', for compliance with direction to furnish further security.
Submissions have been made on amount of security to be furnished.
Mr. Bose, learned senior advocate appearing on behalf of award debtor relied upon order dated 19th March, 2013 passed in execution case initiated by award holder, whereby executing Court, on cognizance of award debtor having partly secured the award by fixed deposit for Rs.5,74,24,568/-, deemed it appropriate to direct creation of another fixed deposit for sum of Rs.3.5 crores. This direction, executing Court made upon finding award passed in favor of award holder is for sum of Rs.9,02,81,436/- along with future interest calculated @ 18% per annum from date of award till payment.2
Mr. Bose drew attention to unamended clause [b] in sub-section [7] of section 31, Arbitration and Conciliation Act, 1996. Unamended clause in the sub-section because award is dated 18th April, 2011. Said unamended clause is reproduced below:
"[b] A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment."
He submitted, present, substituted by amendment, section 36 has in it sub- sections [1], [3] and its proviso conferring discretion upon Court, in case of arbitral award for payment of money, to be exercised with due regard to provisions for execution and grant of stay of a money decree under Code of Civil Procedure, 1908. This discretion was exercised by executing Court. In compliance with direction made by said Court, his client has created another fixed deposit. Exercise of that discretion should be accepted by this Court for purpose of this application, made under section 36.
Mr. Chowdhury, learned advocate appearing on behalf of award holder submitted, there is now mandate by Supreme Court regarding direction to be made, for 100% deposit of arbitral award of money for purpose of stay of it. Arbitral award includes interest. He relied on judgment of Supreme Court in Hyder Consulting [UK] Limited vs. Governor, State of Orissa, reported in [2015] 2 SCC 189. Relying upon paragraphs 26 and 27 he emphasized, interpretation was given to sub-section [7] in section 31, on pre-award interest to ensure arbitral proceedings are concluded without unnecessary delay and post award interest to ensure speedy payment in compliance with the award. Furthermore, interest is not independent of sum awarded but included in it.
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He then relied on judgment dated 19th March, 2018 of arbitration Bench of Bombay High Court in Shri Manish vs. Godawari Maharashtra Irrigation Development Corporation in, inter alia, Civil Application 14464 of 2017. Referring to paragraph 13 he demonstrated, said Bench had exercised discretion to direct deposit of 60% decretal [awarded] amount. He produced order dated 16th July, 2018 in Special Leave to Appeal [c] 11760-11761/2018 [Manish vs. Godawari Marathawada Irrigation Development Corporation], disposing of Special Leave Petitions against said judgment dated 19th March, 2018 [Bombay High Court], by which Supreme Court said, inter alia, as follows :
"No one appears for the respondent, even though served. The Bombay High Court has ordered 60% deposit, pending the section 37 appeal. We have passed orders stating that since these are money decree there should be 100% deposit, with the respondent being entitled to withdraw the amount deposited and furnish solvent security to the satisfaction of the High Court.
Accordingly, we set aside the impugned orders dated 19.03.2018 and mandate a 100% deposit be made within a period of eight weeks from today.
The Special Leave Petitions are disposed of accordingly."
Mr. Chowdhury also relied on an earlier judgment of Supreme Court in Atma Ram Properties [P] Ltd. Vs. Federal Motors [P] Ltd., reported in [2005] 1 SCC 705, to paragraph 9 in which, inter alia, following was said:
"9. ...... In our opinion, while granting an order of stay under Order 41 Rule 5 CPC, the appellate court does have jurisdiction to put the party seeking stay order on such terms as would reasonably compensate the party successful at the end of the appeal in so far as those proceedings are concerned. Thus, for example, though a decree for payment of money is not ordinarily stayed by the appellate court, yet, if it exercises its jurisdiction to grant stay in an exceptional case it may direct the appellant to make payment of the decretal amount with interest as a condition 4 precedent to the grant of stay, though the decree under appeal does not make provision for payment of interest by the judgment- debtor to the decree-holder. Robust common sense, common knowledge of human affairs and events gained by judicial experience and judicially noticeable facts, over and above the material available on record - all these provide useful inputs as relevant facts for exercise of discretion while passing an order and formulating the terms to put the parties on..."
Mr. Bose, in reply, handed up order dated 14th September, 2018 of Supreme Court in Special Leave to Appeal [c] 20895-20897/2018 [Srei Infrastructure Finance Ltd. vs. Candor Gurgaon Two Developers and Projects Pvt. Ltd.], by which Supreme Court made following directions:
"In the circumstances of the case, we consider it appropriate, in the interest of justice, that the following interim order shall be in force during the pendency of proceedings under section 34 of the Arbitration and Conciliation Act, 1996:-
There shall be interim stay of the award subject to the petitioner's depositing 60% of the amount of the decree. The remaining 40% of the amount shall be secured by way of bank guarantee[s] of the nationalized bank within eight weeks. The respondent shall be at liberty to withdraw the said amount on furnishing appropriate security."
Mr. Chowdhury submitted, direction for 100% deposit was there in Srei Infrastructure Ltd. (supra) but Supreme Court exercised discretion regarding manner in which the deposit was to be made. According to him 100% deposit as security should be directed, by additional amount of security on future interest calculated at 18% per annum on Rs.9,02,81,436/-, from 18th April, 2011 till date of deposit.
Sub-sections [1], [3] and its proviso, in section 36 are set out below :
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" S.36. Enforcement. - [1] Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section [2], such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 [5 of 1908], in the same manner as if it were a decree of the court.
[2] ...
[3] 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:
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 Code of Civil Procedure, 1908 [5 of 1908]."
It is seen that the statute gives discretion to Court in matter of enforcement of award, as in executing a decree under provisions of Code of Civil Procedure. By proviso to sub-section [3], discretion has also been given to Court regarding considering application for grant of stay in case of arbitral award for payment of money having due regard, again, to provisions of Code of Civil Procedure. Executing Court has exercised discretion in directing creation of further fixed deposit. Award debtor says such fixed deposit has been created. Awarded amount found by executing Court is Rs.9,02,81,436/-, which now stands secured by fixed deposits.
So far as future interest by impugned award is concerned, arbitrator said as follows :
"The parties are directed to bear their own costs as to the arbitral proceeding. The respondent is directed to make payment within two months and the claimant is however entitled to get statutory interest @ 18% from the date of the award till the date of full recovery."6
Unamended provision by clause [b] in sub-section [7] of section 31 said, 'unless the award otherwise directs', statutory interest would be 18% per annum from date of award till payment. Here, in impugned award Court finds, for pre-award period arbitrator granted 12% interest and for post award period, apparently no discretion was exercised but the statutory provision relied upon to grant interest. This statutory provision came into play only if the award did not otherwise direct payment of post award interest. In any event, post award interest being a variable sum depending on date of payment, where award debtor has not paid but challenged the award, direction for future interest cannot be taken to be a 'sum' included in the award. Furthermore, award holder has recourse to execution proceeding per provisions in Code of Civil Procedure, to be resorted to post success by causing challenge to the award being dismissed. As such, this Court does not see orders of Supreme Court passed under article 136 of the Constitution of India as declaration of law negating exercise of discretion, provided to be exercised by execution and arbitration Courts in matters of enforcement of arbitral awards for money. In Atma Ram Properties (supra) Supreme Court declared the law on exercise of discretion by Courts, in this regard. Exercise of discretion would be to put the party to such terms as would reasonably compensate the party successful at the end of the appeal. Court in its discretion may direct the appellant to make payment of the decretal amount with interest as a condition precedent. In this case that has been directed by executing Court.
Applicant has handed up copy of subsequent term deposit receipt for Rs.3.5 crores, carrying interest at 7.05% per annum. Applicant is directed to deposit original receipts with Registrar, Original Side and keep renewed the deposits by tendering renewal documents, to the Registrar. 7
Applicant will also issue unconditional authorisation to Registrar, Original Side for causing encashment of the deposits, which authorisation the Registrar will use to encash the deposits, either as may be directed by Court or on or before 15 days from expiry of them as not renewed. The award will remain stayed till disposal of the arbitration petition.
With above directions, this application, GA 589 of 2019 is disposed of.
List the arbitration petition on 1st May, 2019 in Commercial Division.
(ARINDAM SINHA, J.) pkd.