2018 (3) TMI 2042 - HC - Indian Laws

Bombay HC dismisses appeal challenging unconditional stay on arbitral award execution under Section 36

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The Bombay HC dismissed an appeal challenging the grant of unconditional stay on execution of an interim arbitral award. The court found the arbitral ... Legality of interim arbitral award - Grant of unconditional stay on the execution of the impugned interim award rendered by the arbitral tribunal - HELD THAT:- A perusal of the impugned interim award would clearly show that there is no reference whatsoever inter alia of the above contention as urged on behalf of the respondent. The case of the respondent in the written statement undoubtedly was required to be considered by the arbitral tribunal in its entirety and due consideration of the pleas as asserted by the respondent in the written statement. There is no reasoning whatsoever in the impugned interim award in rejecting the respondent's case as made out in the reply opposing the interim award. A bare perusal of the provisions of Section 36 shows that the jurisdiction so conferred on the Court is a discretionary jurisdiction. The proviso to Sub-section (3) further makes it implicit that the provisions of Order 41 Rule 1 Sub-Rule 3 and Rule 5 would become relevant. In exercising powers under Order 41 Rule 5 the Court exercises its discretion and may grant a stay to the execution of a decree if 'sufficient cause' is made out and the party seeking stay satisfies the Court that it will sustain substantial loss and inter-alia satisfies the condition as stipulated in sub-Rule 3 of Rule 5. Thus, the under scheme of the provisions of Section 36 read with Order 41 Rules 1 and 5 of the C.P.C., the party opposing grant of a stay cannot assert a proposition that it would be mandatory for the Court to impose a condition for a stay to the execution proceedings. The appeal lacks merit - Appeal dismissed. Issues:1. Interpretation of provisions under Section 36 of the Arbitration and Conciliation Act, 1996 regarding the grant of stay on the execution of an interim arbitral award.2. Consideration of the factual matrix and legal principles in granting a stay on the execution of an interim arbitral award.3. Evaluation of the arbitral tribunal's decision to make an interim award based on a purported admission of liability by the respondent.4. Assessment of whether the arbitral tribunal considered the entire case as pleaded by the respondent in the written statement.Issue 1: Interpretation of Section 36 of the Arbitration and Conciliation Act, 1996The appellant argued that the learned Single Judge should have directed the respondent to deposit the decretal amount as per Section 36 of the Act, which allows the court to grant a stay on the operation of the award subject to conditions. The appellant relied on legal precedents to support the argument that the court should consider the provisions of the Code of Civil Procedure, 1908, particularly Order 41 Rule 5. However, the court emphasized that the decision to impose conditions for a stay is discretionary and must be based on the specific facts and circumstances of each case. The court highlighted that there is no fixed formula for imposing conditions, and it is not mandatory for the court to order a deposit of the decretal amount in every case.Issue 2: Consideration of Factual Matrix and Legal PrinciplesThe respondent contended that the arbitral tribunal's interim award was based on a solitary paragraph in the written statement and did not consider the respondent's entire defense. The respondent argued that the alleged admission of liability should have been viewed in the context of the entire defense presented. The court agreed with the respondent, stating that the tribunal should have considered the respondent's case as pleaded in the written statement comprehensively. The court supported the learned Single Judge's observation that the tribunal should have allowed both parties to present evidence before making a final award.Issue 3: Evaluation of Arbitral Tribunal's DecisionThe court reviewed the interim arbitral award, which was based on the respondent's purported admission of liability in a specific paragraph of the written statement. The tribunal made the interim award solely on this admission without considering the respondent's entire case presented in the reply opposing the appellant's prayer for the award. The court noted that the tribunal should have given the respondent an opportunity to explain the alleged admission and should have considered the entire defense before making the interim award.Issue 4: Assessment of Arbitral Tribunal's Consideration of Written StatementThe court highlighted that the impugned interim award did not address the respondent's contentions presented in the written statement, which included an amount payable by the appellant to the respondent. The tribunal failed to consider the respondent's case in its entirety, leading to the court's agreement with the learned Single Judge's observation that the tribunal should have allowed both parties to present evidence before rendering a final award.In conclusion, the court dismissed the appeal as lacking merit, upholding the impugned order granting a stay on the execution of the interim arbitral award. The court emphasized the discretionary nature of granting stays under Section 36 of the Act and the importance of considering the facts and circumstances of each case before imposing conditions for a stay on the execution of an arbitral award.