Municipal Corporations Not Entitled To Unconditional Stay U/S 36 A&C Act; Treated At Par With Private Parties: P&H High Court

The Punjab and Haryana High Court Bench of Chief Justice Sheel Nagu and Justice Sanjiv Berry has observed that being a statutory body does not entitle a party to claim unconditional grant of stay under Section 36, Arbitration and Conciliation Act (“ACA”) as a matter of right. And if a conditional stay is granted, a statutory body is to be treated at par with a private party. Facts Th Appellants i.e. Municipal Corporation of Jalandhar and Moga (“Municipal Corporations”) filed the present appeals against orders dated 08.01.2024 passed by Additional District Judge, Chandigarh (“Impugned Orders”) whereby Section 34 petitions preferred by the Municipal Corporations against arbitral award dated 15.01.2022 (“Award”) were dismissed. The Municipal Corporations had entered into a concession agreement dated 02.12.2011 with the Respondent i.e. M/s JITF Urban Waste Management Ltd. (“JITF”) for implementation of Integrated Municipal Solid Waste Management Project in Ferozepur Cluster as well as in the Jalandhar Cluster. Disputes arose between the parties leading to arbitration proceedings which culminated into the Award in favour of JITF. The Tribunal directed the Municipal Corporation, Moga and Municipal Corporation, Jalandhar pay Rs. 92.29 crores and Rs. 204.44 crores respectively to JITF. The Municipal Corporations filed objections under Section 34, ACA and sought unconditional stay under Section 36, ACA from the Commercial Court. Initially, an unconditional stay was granted by the Commercial Court, but this was repeatedly set aside by the High Court in revision proceedings. Ultimately vide order dated 23.08.2023, the Commercial Court granted stay subject to deposit of 100% of the award amount in the form of FDR. Despite multiple extensions the last one till 08.01.2024, the Municipal Corporations failed to deposit any amount. Consequently, the Commercial Court vide order dated 08.01.2024 dismissed the Section 34 petition for non-compliance of aforementioned order directing deposit. The present appeals challenged the dismissal of the Section 34 petition and the conditional stay order. Contentions The Senior Counsel for the Municipal Corporations argued that as statutory bodies, they should not be subjected to a condition of 100% deposit of grant of stay. By directing so, the Commercial Court failed to distinguish between a private party and a municipal/ statutory corporation. He contended that the Appellants were Municipalities constituted under Article 243-Q of the Constitution of India and the Punjab Municipal Corporation Act and by virtue of this fact they should not be subjected to the same conditions as any other private party. The Senior Counsel for JITF contended that the Municipal Corporations by moving different applications before the Commercial Court and Revisions Petitions before the High Court got sufficient time to deposit the amount. But the Municipal Corporations deliberately defaulted in complying with the directions to deposit the amount, leaving no option before the Commercial Court but to pass the Impugned Order. It was argued that being a statutory corporation did not entitle the Municipal Corporations to have any preferential treatment while the court is considering an application for stay under Section 36, ACA filed by the Government in proceedings under Section 34, ACA. Reliance was place on the judgment of the Apex Court in International Seaport Dredging Pvt. Ltd v. Kamarajar Port Limited 2024 SCC OnLine SC 3112. Observations The Court analysed Section 36, ACA in details and observed that by virtue of proviso to Section 36(3), ACA, if the Court is prima facie satisfied that the arbitration award was induced or effected by fraud or corruption, then in such a situation an unconditional stay of award may be granted pending disposal of the Section 34 petition. However, in the instant case, the Municipal Corporations had nowhere pleaded that the Award was effected by fraud or corruption. So, the proviso to Section 36(3) enabling the Court to grant unconditional stay did not apply to the present case. The Court further observed that while considering an application for stay of execution of the Award, the Court shall have due regard to the provisions of Order 41 Rule 5, CPC which provides that filing an appeal will not lead to automatic stay of a money decree and the appellant will have to show sufficient cause. As to the special status claimed by Municipal Corporations, the Court placed reliance on the judgment of the Apex Court in PAM Developments Private Limited v. State of West Bengal 2019 (8) SCC 112, wherein it was observed that Section 36, ACA does not provide for any special treatment to the Government while dealing with grant of stay in proceedings under Section 34, ACA. This is in line with Section 18, ACA which provides for equal treatment of parties. The Court observed that in...

Municipal Corporations Not Entitled To Unconditional Stay U/S 36 A&C Act; Treated At Par With Private Parties: P&H High Court

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Municipal Corporations Not Entitled To Unconditional Stay U/S 36 A&C Act; Treated At Par With Private Parties: P&H High Court

Arpita Pande

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