Madrasreserved High Court · 2025

A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 20253. Quintessential Designs India Pvt.Ltd (Apparel Venture (QDIPL-AV) 5th Floor, Status Quo, 38, Sterling Road, Nungambakkam, Chennai-600 034.Application filed under Order XIV Rule 8 of Original Side Rules for grant of Interim Stay of the effect, operation and implementation of the impugned Arbitral Award dated 17.10.2024 passed by the Hon'ble Arbitral Tribunal in Arb.No.3 of 2023.For Applicant: Mr.Nithyaesh Nataraj For Mr.Vaibhav R.VenkateshFor Respondents : Mr.Sathish Parasaran Senior Counsel for Mr.Subhang Nair Mr.Sidhant Goel Mr.Deepam Kar Mishra Mr.Varsha Balasubramaniam Mr.Prasanth Narayanan P.M For R.1 No appearance – For R.2 and R.3ORDERThis is an application taken out by the petitioner in Arb.O.P.(Com.Div.)No.17 of 2025, which is an Original Petition challenging the Award of the learned Arbitral Tribunal dated 17.10.2024. In the present 2/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025application, the applicant seeks an interim stay of the impugned Arbitral Award dated 17.10.2024.2. I have heard Mr.Nithyaesh Nataraj, learned counsel for the applicant and Mr.Sathish Parasaran, learned Senior Counsel for Mr.Subhang Nair, counsel for the first respondent/Award Holder. The brief facts which would be necessary for me to decide the stay application are as hereunder:-3. The first respondent herein, as claimant, invoked arbitration proceedings and made 12 claims before the learned Arbitrator. The claims are in nature of losses and damages, refund of excess agency fee paid, losses and damages caused due to loss of business growth, losses and damages caused due to loss of retail sales, expenditure/additional costs incurred in engaging alternate sources for redeveloping new apparel styles, losses and damages caused due to short fall in retail sales, refund of amounts paid towards providing brand and other services under the Contract towards Fall 2017 collection, losses and damages caused due to cancellation of projected volumes of sale of apparel from the pre-planned expansion plans in the GCC market, loss of Goodwill and reputation (both of the brand and as a business entity), loss of future business 3/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025opportunities, unwarranted litigation and consequential expenses and payment of interest.4. The applicant herein who was the respondent before the arbtiral Tribunal besides filing its statement of defence, made a counter claim for agency commission, brand service fee as well as damages on account of delayed payment of agency commission as well as brand service fee and retail team expenses, losses occurred on account of pull out of business from the second respondent factory and reimbursement of expenses towards litigation thrust upon the applicant.5. Additional claims were also made by the applicant to declare that he is the owner of the artistic work of the design of the apparel designs/styles created by the applicant for Fall '17 collection including the badges and the typography of the surface embellishments, the colour palette of the Fall “17 collection and Brand manuals, permanent injunction restraining the respondents, their promoters, licensees, partners, their employees, officers, servants, agents from aiding in manufacturing, causing to manufacture, launching, using, selling, distributing, advertising, exporting, offering for sale and in any other manner 4/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025directly or indirectly, infringing upon the Copyright of the applicant in various apparel designs/styles and the illustrations of the artistic work of various apparel designs/styles created by the applicant for the Fall 17 season and for various other reliefs.6. The learned Arbitrator in and by the Award dated 17.10.2024 passed an Award for USD 11,608,664.8 (Eleven Million Six Hundred Eight Thousand Six Hundred Sixty Four Dollars and Eight Cents only) and dismissed the counter claim filed by the applicant.7. Learned counsel for the applicant, Mr.Nithyaesh Nataraj would attack the Award on several grounds. The primordial attack/challenge to the Award is on the basis that (1) the learned Arbitrator has not given a single reason for arriving at various findings (2) the Arbitral Tribunal has not even given a finding that the 2nd respondent/applicant in A.No.306 of 2025 has over priced the products and exceeded the permissible margin costs of 15% (3) There are apparent contradictions in the findings of the learned Arbitrator and (4) The Arbitral Tribunal while holding that the ratio of the Hon'ble Decision of the Hon'ble Supreme Court in Vidya Drolia applies to the facts of the present case, 5/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025the learned Arbitrator has not detailed or given reasons as to which paragraphs of the judgment of Vidya Drolia applies to the facts of the present case (5) the learned Arbitrator adopts a particular line of thinking while deciding claims 2.1 and 2.2 and the same is given a go bye and different yardstick is applied when it comes to deciding other claims.8. Learned counsel would take me through the various paragraphs in the Award to fortify the above legal submissions made by him.9. Learned counsel also would rely on the decision of the Bombay High Court in CFM Asset Reconstruction Pvt. Ltd and Another vs SAR Parivahan Pvt Ltd through its Director Rajesh Gupta and Others reported in 2024 SCC Online Bom 1659, where the Bombay High Court held that it is within the discretion of the Court to consider whether to grant conditional stay or unconditional stay even in the case of a monetary decree. 10. Learned counsel also placed reliance on the decision of Bombay High Court in Alkem Laboratories Limited vs Issar Pharmaceuticals Pvt Ltd in Interim Application No.377 of 2024 in Commercial Arbitration Petition 6/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025No.389 of 2023 dated 05.02.2024, where the Bombay High Court finding that the impugned Award suffers from perversity as well as patent illegalities and that the learned Arbitrator has given a total go bye to the settled law laid with regard to the claim of damages requiring proof for actual loss, proceeded to grant an unconditional stay of the impugned Award finding that it was an unique, exceptional and compelling case warranting grant of unconditional stay in the matter.11. Learned counsel also brings to my notice that the said decision of the Bombay High Court was unsuccessfully challenged before the Hon'ble Supreme Court in Special Leave to Appeal (c) No.10764 of 2024, where the Hon'ble Supreme Court by Order dated 06.09.2024 refused to interfere with the order of the Bombay High Court exercising jurisdiction under Section 36 of the Arbitration and Conciliation Act, 1996 by granting unconditional stay. Learned counsel would therefore request this Court to grant unconditional stay on the impugned order pending disposal of the Arbitration Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996. 12. Per contra, Mr.Sathish Parasaran, learned Senior Counsel appearing 7/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025for the first respondent/claimant before the Arbitral Tribunal would first and foremost contend that this is a matter which arises under International Commercial Arbitration and therefore, the considerations even for setting aside the Award is much narrow and limited than the regular Commercial Arbitration matters and the Award cannot be challenged even if the Award is vitiated by patent illegalities.13. In this regard, learned Senior Counsel invites my attention to sub section 2(a) of Section 34 which carves out an exception in cases of Arbitral Award arising out of International Commercial Arbitration. 14. Learned Senior Counsel would further submit that the first respondent has admittedly succeeded before the Arbitral Tribunal and his interest needs to be protected. Learned Senior Counsel would also elaborately argued on various pointsthat have been raised by the learned counsel for the applicant, meeting each of the submissions by taking me through various portions of the Award. In short, the contention of the learned Senior Counsel for the first respondent Mr.Sathish Parasaran that the Award itself runs to more than 300 pages and the learned Arbitrator has considered all aspects including the evidence adduced by 8/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025the parties. He would also invite my attention to the specific reference to the conduct of the applicant before the Arbitral Tribunal not only before the learned Arbitrator who passed the Award but also before the earlier Arbitrators. That apart, learned Senior Counsel would also contend that the fees of the learned Arbitrator has also not been paid by the applicant and in such circumstances, there is more reason for a need to protect the interest of the respondent/Award holder.15. Learned Senior Counsel would rely on the decision of the Hon'ble Supreme Court in Pam Developments Private Limited vs State of West Bengal reported in (2019) 8 SCC 112, where the Hon'ble Supreme Court held that Arbitration proceedings being alternate dispute redressal system meant for early/quick resolution of disputes and in case a money decree, the Award as passed by the Arbitrator should not be automatically stayed since the very purpose of quick resolution of dispute through arbtiration would be defeated as the decree-holder would be fully deprived of the fruits of the Award on mere filing of objection under Section 34 of the Arbitration Act. The Hon'ble Supreme Court further held that the Arbitration Act is a special Act which provides for quick resolution of disputes between the parties and Section 18 of 9/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025the Act makes it clear that the parties shall be treated with equality and once the Act mandates so, no special treatment given to any party and while considering the application for grant of stay of a money decree in proceedings under Section 34 of the Arbitration Act, the reference to Section 36 of Code of Civil Procedure is only a guide to the court to impose conditions.16. The Hon'ble Supreme Court further held that the Court has power to direct a full or a part deposit/furnish security and Rule 8-A provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof. 17. Learned Senior Counsel would also rely on two Orders of the Hon'ble Supreme Court in Manish vs Godawari Marathawada Irrigatioin Development Corporation in Special Leave to Appeal (c) Nos.11760-11761 of 2018 dated 16.07.2018 and in M/s Shinde and Sons vs Executive Director in Special Leave to Appeal (c) No.3702 of 2018 dated 02.04.2018.18. In the case of Manish vs Godawari Marathawada Irrigatioin Development Corporation, Hon'ble Supreme Court modified the order of the Bombay High Court ordering 60% deposit in a stay application, pending 10/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025Section 37 Appeal and directed deposit of 100%.19. In the case of Shinde and Sons vs Executive Director, the Hon'ble Supreme Court has modified to the effect calling upon the respondent to deposit the entire award amount and also permitting withdrawal of the same against security by the petitioners in that case.20. Relying on the above decision, the learned Senior Counsel Mr.Sathish Parasaran would submit that the Award in the present case is also a money decree and the Court should grant stay only on condition of the applicant depositing 100% of the Award amount. 21. Learned Senior Counsel also provides calculation of interest on the Award dated 17.10.2024 and the amount payable as on first week of January 2025 to be USD 11,934,198.94 and converted into Indian Rupees 102,97,93,883.83. Even insofar as the payment to be made by the applicant as on date of the Award, it is USD 11,432,779.64 and including cost it is USD 11,503,471.2 as on 17.10.2024.11/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202522. Learned Senior Counsel would therefore submit that such a huge amount being awarded by the Tribunal, the applicant has to certainly secure the interest of the first respondent, pending Section 34 petition.23. I have carefully considered the submissions advanced by the learned counsel on either side.24. For better appreciation of the scope and power of this Court to grant interim stay of the Award, under challenge, I am reproducing Section 36 of the Arbitration and Conciliation Act, 1996:-“ 36. Enforcement:- (1) Where the time for making an application to set aside the arbitral award under Section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court.(2) Where an application to set aside the arbitral award has been filed in the Court under Section 34, the filing of such an application shall not by itself render that award 12/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub-section (2) for stay of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing; Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908); [Provided further there where the Court is satisfied that a prima facie case is made out that,- (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award,was induced or effected fraud or corruption, it shall stay the award unconditionally pending disposal of the 13/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025challenge under section 34 to the award.Explanation:- For the removal of doubts, it is hereby clarified that the above proviso shall apply to all Court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or Court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).]25. From reading of the above provision, it is clear that this Court can subject the applicant to any conditions that it may deem fit for granting stay of the operation of the Award, provided the reasons for granting stay are recorded in writing.26. The first proviso to Section 36 of the Act provides that while considering the application for grant of stay of arbitral award for payment of money, this Court has to have due regard to the provisions of grant of stay of the money decree under the provisions of the Code of Civil Procedure, 1908.27. The second proviso provides that if the Court is satisfied that a prima facie case is made out that either the Arbitration Agreement which is the basis 14/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025of the Award or the making of the Award was induced or affected by fraud or corruption, then, this Court shall stay of the Award unconditionally pending disposal of the challenge to the Award. 28. From reading of the two provisions of Section 36 (3) of the Arbitration and Conciliation Act, 1996 it is clear that the discretion is vested with the Court to grant stay of the operation of the Award under challenge. Such grant of stay can either be subject to the conditions as the case may deem fit and proper and in cases where there is prima facie satisfaction of the Court that there is fraud or corruption which has induced or affected either the Arbitration agreement or making of the Award, then, there shall be an unconditional stay of the operation of the Award.29. It is not the case of the applicant that there is either fraud or corruption that has resulted in the making of the Award, leave alone, the original agreement itself which forms the basis of the Award. Therefore, on this ground, there is no necessity for the Court to consider grant of unconditional stay of the Award.15/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202530. However, with regard to the first proviso to Section 3 read with (3) itself, this Court has to keep in mind the relevant provisions of Code of Civil Procedure for enabling the Court to grant stay of the money decree while considering the application for stay and imposing any conditions on the applicant, seeking stay of the operation of the Award. At the same time, it is clear that even when fraud or corruption is not set up as a defence, the Court can still grant an unconditional stay of the Award and that is the right way of interpreting Section 36(3) of the Arbitration ad Conciliation Act, 1996. It is therefore, now necessary to see if the applicant has made out a case for grant of such unconditional stay.31. As rightly pointed out by the learned Senior Counsel appearing for the first respondent, this dispute, being International Commercial Arbitration, the ground of patent illegality is also not available for challenge at the hands of the applicant in the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996. The applicant's challenge itself is therefore circumscribe and limited to the other grounds available under Section 34(2) of the Arbitration and Conciliation Act, 1996.16/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202532. Though the learned counsel for the applicant would vehemently contend that the arbitral Tribunal has not given any reasons whatsoever for the findings arrived at, on a perusal of not only the grounds of challenge, but even from the averments in the affidavit filed in support of the stay petition, the applicant has only stated that the Award has been passed on irrelevant considerations and findings which are perverse and amounting to travesty of justice, warranting interim stay of the Award, which runs contrary to the main thrust of arguments advanced by the counsel for the Applicant that the Arbitrator has merely discussed the contentions of the parties and has not rendered any findings.33. On a perusal of the Award, prima facie, I am unable to accept the contentions of the learned counsel for the applicant that the learned Arbitrator has not given any reasons to substantiate the findings arrived at. The Award runs to 300 pages and the learned Arbitrator has in detail dealt with the oral and documentary evidence and also the various decisions on which reliance has been placed by the parties. It cannot be said that the Arbitrator has arrived at findings without any discussions whatsoever. 17/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202534. The Arbitrator has allowed Claims 1 and 2 which pertain to excess payments made to respondents. Claim 3 was however rejected by the Arbitrator. This claim related to loss of business, resulting out of overpricing of apparel on retail sales and the Arbitrator found that the claim was founded on assumptions and not justified. Claims 5 and 7 was allowed and Claims 6, 8 and 9 were rejected after elaborate discussion of the contentions of both sides and also looking into the applicable case law. Even the counter claim has been elaborately dealt with, while allowing a part of the counter claim in favour of the applicant. Therefore, I do not find merit in the arguments of the learned counsel for the applicant that the Arbitrator's findings are perverse and not backed by any evidence.35. Even with regard to the alleged contradictions, prima facie, the argument regarding the inconsistencies in the Award also cannot be countenanced because the Arbitrator has applied the ratio laid down by the Hon'ble Supreme Court in Vidya Drolia's case while dealing with different heads of claims and in the process has accepted and applied the ratio to different claims and this cannot be termed as an inconsistency. 18/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202536. Even with regard to arbitrability, the Arbitrator has found that the applicant has taken advantage of the order of the Hon'ble Supreme Court and made additional claims and it would not therefore be proper to contend that the disputes were not arbitrable. I also find that the Arbitrator has discussed the effect of non-signatories to the Arbitration Agreement and found that not only the claims were arbitrable, but also found that the respondents before the Tribunal, having made counter claims, they cannot take such pleas.37. The argument of the learned counsel for the applicant on most of the issues touch upon the merits of the award and can only be gone into when the Original Petition is heard. At this juncture, considering the stay petiiton, I can only prima facie examine the challenge to the Award to see the entitlement of the applicant to grant of an interim stay of the Award.38. Keeping in mind the dictum of the Hon'ble Supreme Court in Pam Development's case, prima face I find that the arbitral Tribunal has allowed part of the claims made by the first respondent, while also allowing the Applicant's counter claim in part and the learned Arbitral Tribunal has considered the materials available before it and has also discussed the oral and documentary 19/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025evidence on record and in such circumstances, being a money decree, the applicant has to necessarily be put on terms, for grant of stay.39. Keeping in mind and conscious of the grounds of challenge, I find that the Applicant has prima facie made out quite strong grounds for challenging the Award. However, being alternate dispute resolution mechanism chosen by the parties, this Court has also balance equities and protect the interests of the first respondent also. In my considered opinion, given the facts and circumstances of the case, the applicant having suffered a money decree in arbitration proceedings, should deposit 50% of the Award amount as a condition for grant of stay which will sub serve the interest of the parties to the lis. It is not a case as before the Bombay High Court where the High Court found that the entire claim was granted by the Arbtirator on the basis of a valuation report which had not even proved in the manner known to law. On such facts, the Bombay High Court felt that it was a fit case for grant of unconditional stay. However, in the present case, I do not find such exceptional, unique or compelling case made out for granting an unconditional stay. 20/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 202540. Accordingly, there shall be an order of interim stay of the Award on condition the Applicant deposits 50% of the Arbitral award of USD 11,432,779.64 within a period of 12 weeks from the date of receipt of the copy of this order.41. Post the matter on 02.04.2025 for reporting compliance. 31-01-20251/2srIndex:yes/nowebsite:yes/no21/22 https://www.mhc.tn.gov.in/judis A.No.201 of 2025 in Arb.O.P.(Com.Div.) No.17 of 2025 P.B.BALAJI,J., sr Pre-Delivery Order in A.No.201 of 2025 in Arb.O.P.(Com.Div.)No.17 of 20251/2 31.01-202522/22