In M/s. Balmer Lawrie & Co. Ltd. (“Applicant/Petitioner”) v. M/s. ShilpiEngineering Pvt. Ltd. (“Respondent”) [IA (L) No. 779/2024 in Commercial Arbitration Petition No. 1131/2018], the Bombay High Court (“the Court”)recently held that there is no difference between the parameters to be appliedby the Court in exercising discretion in an application for grant of stay of arbitralaward under Section 36(3) of the Arbitration and Conciliation Act, 1996 (“the Act”) vis a vis an application for stay under Section 37 of the Act.
FACTS
The Applicant filed the present application under Section 36(3) of the Act interalia seeking stay of an impugned arbitral award dated July 5, 2018 passed infavour of the Respondent (“Impugned Award”). Further, the Applicant hadalready filed a separate application for setting aside of the Impugned Awardunder section 34 of the Act before the Court.
The Respondent had filed execution proceedings bearing EC No. 45 of 2019before the High Court of Calcutta (“CalHC”), which were not proceeded with,pursuant to a bank guarantee furnished by the Applicant for the entire amount ofthe Impugned Award along with interest before the CalHC.
SUBMISSIONS
The Applicant sought to argue that the condition for deposit of 100% of theamount of the decretal award for granting a stay on an arbitral award is to beapplied in an application for stay under Section 37 of the Act, when the court hasalready rejected application under Section 34 of the Act for setting aside thearbitral award and the award has become a decree of the court. In this regard,the Applicant inter alia relied on the decision of the CalHC in Kolkata Metropolitan Development Authority v. South City Projects (Kolkata) Ltd. andOrs. [IA GA 1 of 2020 and A.P. No. 351 of 2020] (“Kolkata Metropolitan”) toargue that a distinction is required to be made between the principles to beapplied in an application for stay under Section 36(3) of the Act, when the courtis still considering a challenge to an award under Section 34 of the Act and anapplication for stay in appeal under Section 37 of the Act, when the court hasalready rejected the challenge under Section 34 of the Act.
Accordingly, the Applicant argued that in view that its application under Section34 of the Act was pending consideration before the Court and it had alreadyfurnished a bank guarantee for 100% of the amount of the Impugned Awardbefore the CalHC, the Applicant be allowed to furnish the same before the Courtfor securing the stay of the Impugned Award, rather than deposit 100% of theamount thereof before the Court.
On the other hand, the Respondent argued that the provisions of the Act do not contemplate any distinction in the criteria / principles to be applied by the courtin exercising its discretion while deciding an application for stay under Section36(3) of the Act as opposed to an application under Section 37 of the Act. Placing reliance on the decisions of the Supreme Court in Srei Infrastructure Finance Limited v. Candor Gurgaon Two Developers and Projects Pvt. Ltd. [SLP(C) No(s). 20895-20897/2018] and Manish v. Godawari Marathwada Irrigation Development Corporation [Special Leave to Appeal (C) Nos. 11760-11761-2018],the Respondent argued that given that the Impugned Award was in the nature ofa money decree, the Applicant ought to deposit 100% of the Impugned Awardfor grant of stay thereof, to secure the Respondent.
ISSUES
Whether the present application for stay of Impugned Award under Section36(3) of the Act ought to be allowed without the condition for deposit of 100%of amount thereof before the Court?
FINDINGS
At the outset, the Court observed that whether and the extent to which conditions are to be imposed in granting a stay under Section 36(6) of the Act isdependent on the facts and circumstances of each case. In this regard, the Courtnoted that there were no exigent circumstances in the present case indicatingany financial hardship / burden on the Applicant for depositing the amount ofthe Impugned Award. Further, the Court opined that the bank guarantee furnished by the Applicant before the CalHC would not be a relevant factor forthe Court in exercising its discretion in granting a stay under Section 36(3) of theAct. The Court also noted that the provisions of Section 36(3) and 37 of the Actdo not contemplate any distinction in the parameters to be applied in decidingan application for stay made thereunder. In this regard, the Court expressed disagreement with the views expressed by the CalHC in Kolkata Metropolitan,opining that once an award is passed, the award is in the form of an executable decree. The Court held that accordingly, whether or not a section 34 applicationfor setting aside of such award has been dismissed by the court would not haveany bearing on the conditions to be imposed by the court for stay thereof.
Lastly, the Court observed that the Supreme Court had taken a consistent standthat “where the Award is in the nature of money decree, there is a requirementfor deposit of 100% of the awarded amount for grant of stay”. Accordingly, theCourt allowed the present Application subject to deposit by the Applicant of 100% of the Impugned Award within six weeks from the date of the order.
CONCLUSION
This decision signifies that the conditions for stay of an arbitral award and therules that govern them (including the condition of pre-deposit of 100% of anarbitral award in the nature of a money decree) will be made applicable, irrespective of whether the application is made at the stage of challenge toarbitral award under Section 34 or Section 37 of the Act or otherwise.
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