The Bombay High Court in a recent case of Balmer Lawrie & Co Ltd v Shipli Engineering Pvt Ltd has held that when an arbitral award is in the nature of a money decree and it is challenged under Section 34 of the Arbitration & Conciliation Act, 1996 ("Act"), it can be stayed under Section 36(3) of the Act only after deposit of 100% of the awarded amount.
Brief Facts:
The Petitioner was challenging an arbitral award ("Impugned Award") passed by a sole arbitrator, and was seeking to stay execution, operation and effect of the Impugned Award. The Petitioner offered to furnish a bank guarantee equivalent to 100% of the awarded amount as a condition to stay the operation of the Impugned Award.
Contention of the Parties:
The Petitioner sought to rely upon Pam Developments (P) Ltd v State of West Bengal, wherein the Supreme Court has held that reference to Civil Procedure Code, 1908 is directory in nature and, therefore, deposit of the decretal amount in case of money decree cannot be a mandatory requirement for stay on operation of the Impugned Award under Section 36(3) of the Act. The Petitioner also sought to draw distinction between grant of stay under Section 37 of the Act (appeal from rejection/dismissal of petition under Section 34 of the Act) and stay under Section 36(3) when petition under section 34 is still pending. The Respondent relied upon various judgements passed by the Delhi High Court and the Supreme Court wherein it was held that the Petitioner must deposit 100% of the awarded amount to secure the Respondent.
Held:
After considering rival submissions, the Bombay High Court has held that decision relied upon by both the parties clearly show that the Supreme Court has taken a consistent view that where the award is in the nature of money decree, there is a requirement for deposit of100% of the awarded amount for grant of stay. It also rejected contention of the Petitioner that there is any difference in application for stay under section 36(3) and 37 of the Act for application of different parameters. Finally, it concluded that a liberal view is not contemplated under Section 36(3) of the Act whilst imposing conditions for stay of the Impugned Award. And, therefore, an alternative offered by the Petitioner in the form of a bank guarantee was rejected and the Impugned Award was stayed, subject to the Petitioner depositing the awarded amount with interest as determined by the Sole Arbitrator on the date of this order within a period of six weeks from the date of the order.
MHCO Comment:
The view taken by the Bombay High Court will discourage frivolous or chance litigation initiated under Section 34 of the Act, thereby strengthening the mandate of the Arbitral Tribunal under the Act. However, on the other hand, this decision restricts discretion exercised by the Court at the time of grant of stay on arbitral award in the nature of money decree based on peculiar facts and circumstances of each case.
This article was released on 17 June 2024.
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