Case Note & Summary
The case arises from a dispute between PAM Developments Private Ltd. (appellant) and the State of West Bengal (respondent) concerning a tender for road repair work. The appellant's bid was accepted on 26 March 2001, and an agreement was registered on 2 April 2001. After several extensions attributable to the respondent, the work was completed on 28 February 2002. The appellant raised claims on 26 May 2003, which were not paid, leading to an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Calcutta High Court appointed Retired Justice Sujit Kumar Sinha as arbitrator, who on 21 January 2010 awarded Rs. 2,87,11,553/- with interest at 18% per annum on Rs. 1,34,06,965/- from the date of award till payment. The respondent challenged the award under Section 34, which remained pending. Following the amendment to Section 36 by Act 3 of 2016 with retrospective effect from 23 October 2015, and the Supreme Court's decision in Board of Control for Cricket in India vs Kochi Cricket Private Limited (2018) 6 SCC 287, the appellant filed an execution application (E.C. No.297 of 2018). The executing court attached Rs. 2.75 Crores of the respondent's funds with the RBI on 3 October 2018. However, relying on a coordinate bench order granting unconditional stay to the State Government, the executing court dismissed the execution petition. The respondent then filed a fresh stay application, and the High Court passed an unconditional stay on 13 December 2018, relying on Order XXVII Rule 8A CPC. The appellant appealed to the Supreme Court. The Supreme Court considered two issues: whether Order XXVII Rule 8A CPC applies to stay applications under Section 36 of the Arbitration Act, and whether it mandates unconditional stay. The Court held that Section 36(3) requires the court to impose conditions while granting stay, and the proviso only requires 'due regard' to CPC provisions, not mandatory application. Order XXVII Rule 8A only exempts the Government from furnishing security but does not prevent the court from imposing other conditions like deposit of the awarded amount. The Court set aside the unconditional stay and remanded the matter to the High Court for fresh consideration, directing that the stay application be decided in accordance with Section 36(3) and that the court may impose appropriate conditions.
Headnote
A) Arbitration Law - Enforcement of Award - Section 36(3) of Arbitration and Conciliation Act, 1996 - Stay of Award - The court held that under Section 36(3), the grant of stay is conditional and subject to such conditions as the court deems fit, and the proviso requiring 'due regard' to CPC provisions does not mandate unconditional stay for the Government. The court must impose conditions and record reasons in writing. (Paras 6-9) B) Civil Procedure - Government as Party - Order XXVII Rule 8A CPC - Applicability in Arbitration - The court held that Order XXVII Rule 8A CPC, which exempts the Government from furnishing security, does not mandate an unconditional stay of the award. The court may still direct deposit of the awarded amount or part thereof while granting stay. (Paras 9, 13) C) Arbitration Law - Equal Treatment of Parties - Section 18 of Arbitration and Conciliation Act, 1996 - The court noted that the Arbitration Act does not provide special treatment to the Government, and Section 18 mandates equal treatment of all parties, which would include the Government. (Para 8)
Issue of Consideration
Whether Order XXVII Rule 8A of the Code of Civil Procedure, 1908 (CPC) mandates an unconditional stay of an arbitral award in favour of the Government under Section 36(3) of the Arbitration and Conciliation Act, 1996, and whether the court can impose conditions while granting stay.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned order dated 13.12.2018 of the Calcutta High Court granting unconditional stay, and remanded the matter to the High Court for fresh consideration of the stay application in accordance with Section 36(3) of the Arbitration and Conciliation Act, 1996, with liberty to impose appropriate conditions.
Law Points
- Section 36(3) of Arbitration and Conciliation Act
- 1996
- Order XXVII Rule 8A CPC
- Order XLI Rule 5 CPC
- Unconditional stay of arbitral award
- Government as party in arbitration
