Section 36 After 2015 Amendment: Security As Price Of A Stay

It has been a decade since the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) came into force and fundamentally altered arbitration in India. One of the most important changes the 2015 amendment brought in was the insertion of a new section 36, which removed automatic stays of awards upon the filing of a challenge under Section 34.Post the 2015 amendment, unconditional stays of arbitral awards are rare, especially when the award directs payment to the successful party. The Supreme Court recently reiterated this principle in Popular Caterers v Ameet Mehta and Others[1], where it observed that unless the arbitration agreement, contract, or award is induced by fraud or misrepresentation, an unconditional stay should be granted only in exceptional circumstances. In fact, in this case, the Supreme Court set aside an order granting an unconditional stay of an award. It directed that the stay would be subject to the Respondent depositing the principal amount of the award.This shift in the law has left courts with a different question to answer, one whose importance is directly proportional to the award amount. What should a stay cost? A decade later, two judgments of the Bombay High Court, both arising out of the Mumbai Metro Rail project, provide valuable insight into how the courts deal with applications to stay arbitral awards.MMRDA v. MMOPL In Mumbai Metropolitan Regional Development Authority v Mumbai Metro One Private Limited[2], the Bombay High Court was seized of an application by the Mumbai Metropolitan Development Authority (MMRDA) seeking an unconditional stay of a one thousand crore rupee award against it in favour of Mumbai Metro One Private Limited (MMOPL). The award under challenge was the majority award of a three-member Tribunal, with the third member dissenting.MMRDA sought an unconditional stay of the award, essentially arguing that the majority award was so perverse that no reasonable person could have reached the findings it did. MMRDA argued that the Tribunal had allowed claims for rent recovery, which it could not have, since determining the quantum of rent lies within the exclusive jurisdiction of the Small Causes Court; hence, the issue was non-arbitrable. MMRDA also argued that the amounts awarded for additional costs and losses lacked any basis. MMOPL, on the other hand, strongly defended the majority award.The Court noted that its jurisdiction under Section 36 of the Arbitration Act is discretionary, and that each case must be examined on its own facts. Further, the Court highlighted the need for caution when granting stays of arbitral awards, especially unconditional stays, as doing so routinely would defeat the legislative purpose of the 2015 Amendment. The Court also recognised that unless the underlying agreement or the making of the award had been affected by fraud or corruption, the Court should examine the record and exercise its discretion in a reasonable manner.In the case at hand, the Court found that the award did not suffer from any such perversity or illegality to justify an unconditional stay of the award. The Court found that the Tribunal had, at least prima facie, appreciated the evidence reasonably, and that the appropriate stage for MMRDA's arguments would be the final hearing of the Petition. The Court also recognised that merely because MMRDA is an agency of the government, the principles governing stays and deposits could not be diluted.The Court eventually held that if MMRDA deposited the entire award amount in the Court by 15th July 2025, the operation of the award would be stayed. MMOPL was granted liberty to withdraw the amount, if deposited, subject to furnishing a bank guarantee for the entire amount.However, the Bombay High Court judgment was challenged in the Supreme Court in Mumbai Metropolitan Region Development Authority v Mumbai Metro One Private Limited[3], and the Apex Court, considering the quantum of the award, reduced the deposit to 50 percent of the award amount.MMRCL v. L&T–STEC JVA few months later, the Bombay High Court heard another application concerning an arbitral award related to the Mumbai Metro project. In Mumbai Metro Rail Corporation Limited v L&T-STEC JV Mumbai[4] the Mumbai Metro Rail Corporation Ltd (MMRCL) sought an unconditional stay on a 250 Crore Rupee award passed in favour of L&T-STEC JV. Similar to MMRDA, MMRCL sought an unconditional stay, alleging perversity and illegality. Specifically, MMRCL argued that the Tribunal completely disregarded the evidence of the Engineer-in-charge of the project, who, it was submitted, was an expert witness.However, as in MMRDA v MMOPL, the Bombay High Court declined to grant an unconditional stay. The Court found that the Tribunal had rightly found that the Engineer-in-charge was not an independent expert witness since he was on MMRCL's payroll. The Court also emphasised that an award that follows a contractually agreed pre-arbitral process should be given higher...

Section 36 After 2015 Amendment: Security As Price Of A Stay

Dushyant Krishnan

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