[Arbitration] Executing Court Retains Jurisdiction To Modify Stay Order & Direct Deposit Of Remaining Amount With Interest: Calcutta HC

The Calcutta High Court bench of Justice Shampa Sarkar held that the court as an Executing Court retains jurisdiction to direct deposit of the remaining awarded amount along with interest before granting stay on the enforcement of the award, even if a stay order had already been passed upon filing an application to set aside the award, since modification of the conditions of the stay order is permissible The present application has been filed seeking the deposit of additional cash security from the award debtors for the balance award amount with interest. The Award Holder submitted that the court retained the power to modify or vary the conditions of stay imposed by the order dated January 17, 2023. Even if the application under Section 36(2) of the Arbitration Act was disposed of, the jurisdiction of this court to modify the order was guided by the principles of Order 39 Rule 4 of the Code of Civil Procedure. It was further submitted that such protection would include the right of the award holder to withdraw the money so deposited, upon furnishing any kind of security that the court would deem fit and proper. Otherwise, the award holder would be deprived of enjoying the fruits of the award until the application for setting aside the award was finally disposed of. Such disposal could take years. Per contra, the Award Debtors submitted that the application itself was not maintainable as it was filed in a disposed-of proceeding under Section 36(2) of the Arbitration Act. The moment a stay was granted on the enforceability of an award, the matter rested until the entire proceeding for setting aside the award was disposed of. No further order could be passed once the stay had become permanent, by the order of the Court. The court observed that to hold that the court was denuded of any equitable discretion while granting stay of execution of the award would cause grave hardship to deserving award holders who, in the facts of a given case, would be entitled to enjoy the fruits of the award without prejudice, by continuing to run its business and remain afloat. The court accepted the submissions of the Applicants, such as financial hardship, inability to repay bank dues, lack of investment in further contracts and Covid-19 losses as reasonable excuses for seeking withdrawal of the amount against further deposit. Referring to the Supreme Court's judgments, it held that a stay on the enforcement of the award under section 36(3) of the Arbitration Act is a discretionary relief, not a right and it applies equally to all parties, including the State. It further observed that stay just bars execution of the award, it neither bars withdrawal of deposit for a just cause nor accrual of interest on the deposited amount. Since the award debtors failed to deposit the awarded amount, the court directed deposit of the claimed amount and permitted withdrawal of the amount with counter security thereby balancing equities. It highlighted that the court discourages enforcement of the award for a long time and permits conditional withdrawal to ensure that no prejudice is caused to the award holder. It held that “Filing of an application for setting aside no longer operates as a stay. Deposit of the 'sum' awarded is a condition for stay. The law ensures that no hardship should be caused to the award holder on account of stay of the award. Allowing withdrawal of the 'sum' deposited is an extension of the principle. Directing withdrawal with a counter security, ensures restitution if the award is ultimately annulled.” Accordingly, the present application was allowed. Case Title: The State of West Bengal and Ors. Vs. M/S B B M ENTERPRISE. Case Number: Ia No. GA-COM/4/2024 In A.P - 808 of 2022 Judgment Date: 19/08/2025 For the Applicant/Award holder: Mr. Sakya Sen, Sr. Adv. Mr. Nilanjan Adhya, Adv. For the State Respondent: Mr. Anirban Ray, Ld. G.P. Ms. Noelle Banerjee, Adv. Mr. Paritosh Sinha, Adv. Mr. Arindam Mandal, Adv. Mr. Ritoban Sarkar, Adv. Ms. Swagata Ghosh, Adv.Click Here To Download/Read Order

[Arbitration] Executing Court Retains Jurisdiction To Modify Stay Order & Direct Deposit Of Remaining Amount With Interest: Calcutta HC

Mohd Malik Chauhan

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