Govt Authority Must Furnish Security Before Getting Stay On Award U/S 36(3) Of A&C Act, No Special Treatment Can Be Given: Calcutta High Court

The Calcutta High Court bench of Justice Shampa Sarkar has held that special treatment cannot be given to the government while hearing a petition seeking stay on the enforcement of the award under section 36(3) of the Arbitration Act. Every petitioner including the government will have to furnish security or deposit the awarded amount before a stay on the enforcement of the award can be granted. Brief Facts: The present application has been filed seeking stay on the enforcement of the award passed by the Sole Arbitrator. Contentions: The petitioner submitted that the award should be unconditionally stayed since the petitioner is a government authority and the government authority is not required to furnish security before seeking stay of the award as per Order 41 Rules 5 and 6 of the CPC. It was further argued that the award holder acted fraudulently as it failed to fulfill contractual obligations while claiming payment for incomplete work. It was further contended that such non-performance bars the award holder from reaping the benefits of the award. Per contra, the respondent placed reliance on the Supreme Court judgment in Pam Developments Private Limited Vs. State of West Bengal (2019) where it was held that Order 27 Rule 8-A of the Code of Civil Procedure would not govern the provisions of Section 36(2) of the Arbitration Act. Rather, the court opined that a Court had the power to direct full deposit of the decretal amount as security. It was further argued that the Supreme Court in Hyder Consulting (UK) Limited Vs. Governor, State of Orissa (2015) that the arbitral award would include the principal and the interest awarded and the party praying for stay of the award should secure the principal and the interest as well. Observations: The court rejected the submission that the provisions of Order 27 Rule 8A should be applied in this case. The court noted that the Supreme Court in Pam Development (Supra) held that Arbitration is essentially an alternate dispute resolution mechanism curated to provide a swift and quick resolution of disputes therefore if money decree award passed against the government is allowed to be stayed unconditionally, it would defeat the very purpose of the Arbitration Act as the award holder would be deprived of the fruits of the award on mere filming an application under section 34 of the Arbitration Act. The Supreme Court also observed that special treatment cannot be given to the Government under the Arbitration Act. No doubt special treatment is given to the Government under the CPC, when it comes to the Arbitration Act all parties are treated equally in light of section 18 of the Act. It held that “Keeping the aforesaid in consideration and also the provisions of Section 18 providing for equal treatment of parties, it would, in our view, make it clear that there is no exceptional treatment to be given to the Government while considering the application for stay under Section 36 filed by the Government in proceedings under Section 34 of the Arbitration Act.” In light of the above discussion, it cannot be said that the government is exempted from furnishing security or deposit of the awarded amount before the stay on the award can be granted. The court further observed that as per proviso to section 36(3) of the Act if an agreement or contract based on which an award had been passed is induced by fraud or corruption, such an award can be unconditionally stayed. It further added that however, in the present case the contention of the petitioner is that the arbitrator failed to take into consideration the relevant clause of the contract while passing the award therefore it should be stayed. The court said that such submissions relate to merit of the award which can be challenged under section 34 of the Act. Mere erroneous decision of the Arbitrator cannot be amounted to corruption or fraud and that too when the arbitrator was not induced or influenced by the award holder to make or publish the award. The court concluded that “Under such circumstances, there is no ex facie indication before this Court that either the agreement or the award were perpetrated by fraud and corruption. So, the question of unconditional stay does not arise.” Accordingly, the present petition was dismissed. Case Title:THE DIRECTOR GENERAL, NATIONAL LIBRARY, MINISTRY OF CULTURE, GOVERNMENT OF INDIA VS EXPRESSION 360 SERVICES INDIA PRIVATE LIMITED (NOW KNOWN AS EXPRESSION AD AGENCY PVT. LTD.) Case Number:AP-COM/860/2024, AP-COM/644/2024 and EC-COM/245/2024 Judgment Date: 22/01/2025 Mr. Nandlal Singhania,Adv.(VC) Ms. S.Roy Choudhary, Adv. …for the petitioner in AP-COM/860/2024 & AP-COM/644/2024 Mr. Raj Ratna Sen, Adv. Mr. Balarko Sen, Adv. Mr. Suvradal Choudhury, Adv. . . . for award holder/respondent. Click Here To Read/Download The Order

Govt Authority Must Furnish Security Before Getting Stay On Award U/S 36(3) Of A&C Act, No Special Treatment Can Be Given: Calcutta High Court

Mohd Malik Chauhan

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