National Aluminium Co. Ltd v. Pressteels and Fabrications Private Ltd. & another), the execution of the
Case Details
IN THE HIGH COURT OF ORISSA, CUTTACK W.P.(C) No.34045 of 2023 Deepak Kumar Jena ....... Petitioner -Versus- M/s. IndusInd Bank Ltd., Bhubaneswar & another ....... Opposite Parties For Petitioner : Mr. M.R. Nayak Advocate Mr. B.Pujari, Advocate For Opposite Parties : Mr. R. Panigrahi Advocate Mr. B.K. Sethy Advocate ................... CORAM: JUSTICE SANJAY KUMAR MISHRA _____________________________________________________________ Date of Hearing and Judgment: 08.11.2023 _____________________________________________________________ S.K. MISHRA, J. 1. This Writ Petition has been preferred against the order dated 15.05.2023 passed in ARBP No.02 of 2023. Vide the said order the court below, while staying the operation of the impugned Award passed by the Arbitrator in (CV) Arbitral Claim Petition No.2378 of 2022, imposed the condition that the same is subject to the Petitioner depositing 50% of the Page 1 of 8 awarded sum with the Registrar, Civil Courts, Kendrapara, in shape of demand draft. 2. The case of the Petitioner is that once an application is preferred under Section-34 of the Arbitration and Conciliation Act, 1996, in view of the judgment of the apex Court reported in AIR 2005 SC 1514 (National Aluminium Co. Ltd. vs. Pressteels and Fabrications Private Ltd. & another), the execution of the award gets automatically suspended. But the court below, vide the impugned order, imposed a condition to deposit 50% of the awarded sum for staying the operation of the award passed by the Arbitrator. 3. To counter the said prayer made in the Writ Petition so also
Legal Reasoning
satisfied that a Prima facie case is made out that,— Page 3 of 8 (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge 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).” (Emphasis Supplied) 4. Mr. Panigrahi draws attention of this Court to paragraph nos.34 to 38 of the judgment of the apex Court reported in (2020) 17 SCC 324 (Hindustan Construction Company Limited and another vs. Union of India and others) and submits, the judgment of the apex Court in National Aluminium Co. Ltd. (Supra) has already been over ruled by the apex Court in the judgment rendered in Hindustan Construction Company Limited (Supra). The said paragraphs are extracted below for ready reference: “34. To read Section 36 as inferring something negative, namely, that where the time for making an application under Section 34 has not expired and therefore, on such application Page 4 of 8 being made within time, an automatic-stay ensues, is to read something into Section 36 which is not there at all. Also, this construction omits to consider the rest of Section 36, which deals with applications under Section 34 that have been dismissed, which leads to an award being final and binding (when read with Section 35 of the Arbitration Act, 1996) which then becomes enforceable under the CPC, the award being treated as a decree for this purpose. 35. This also finds support from the language of Section 9 of the Arbitration Act, 1996, which specifically enables a party to apply to a Court for reliefs “…after the making of the arbitration award but before it is enforced in accordance with Section 36.” The decisions in NALCO (supra) and Fiza Developers and Intra-trade Pvt. Ltd. (supra) overlook this statutory position. These words in Section 9 have not undergone any change by reason of the 2015 or 2019 Amendment Acts. 36. Interpreting Section 9 of the Arbitration Act, 1996, a Division Bench of the Bombay High Court in Dirk India Pvt. Ltd. v. Maharashtra State Power Generation Company Ltd. 2013 SCC Online Bom 481 held that: “13….The second facet of Section 9 is the proximate nexus between the orders that are sought and the arbitral proceedings. When an interim measure of protection is sought before or during arbitral proceedings, such a measure is a step in aid to the fruition of the arbitral proceedings. When sought after an arbitral award is made but before it is enforced, the measure of protection is intended to safeguard the fruit of the proceedings until the Page 5 of 8 eventual enforcement of the award. Here again the measure of protection is a step in aid of enforcement. It is intended to ensure that enforcement of the award results in a realisable claim and that the award is not rendered illusory by dealings that would put the subject of the award beyond the pale of enforcement.” 37. This being the legislative intent, the observation in NALCO (supra) that once a Section 34 application is filed, “there is no discretion left with the Court to pass any interlocutory order in regard to the said Award…” flies in the face of the opening words of Section 9 of the Arbitration Act, 1996, extracted above. 38. Thus, the reasoning of the judgments in NALCO (supra), and Fiza Developers and Intra-trade Pvt. Ltd. (supra) being per incuriam in not noticing Sections 9, 35 and the second part of Section 36 of the Arbitration Act, 1996, do not commend themselves to us and do not state the law correctly. The fact that NALCO (supra) has been followed in National Buildings Construction Corporation Ltd. v. Lloyds Insulation India Ltd. (supra) does not take us any further, as National Buildings Construction Corporation Ltd. (supra) in following NALCO (supra), a per incuriam judgement, also does not state the law correctly. Thus, it is clear that the automatic-stay of an award, as laid down by these decisions, is incorrect. The resultant position is that Section 36 - even as originally enacted - is not meant to do away with Article 36(2) of the UNCITRAL Model Law, but is really meant to do away with the two bites at the cherry doctrine in the context of awards made in India, and the fact that enforcement of a final award, when Page 6 of 8 read with Section 35, is to be under the CPC, treating the award as if it were a decree of the court.” (Emphasis Supplied) 5. Mr. Pujhari draws attention of this Court to relevant paragraph of the impugned order, wherein the court below has given an observation that the case of the Petitioner is a fit case where the operation of the impugned award passed by the Arbitrator needs to be stayed, but imposed condition for depositing 50% of the awarded amount. 6. Since there is no allegation that the making of the Award was induced or affected by fraud or corruption, this Court is of the view that the court below, having power to impose condition for granting stay, has rightly passed the impugned order. In view of the above, there being no infirmity in the impugned order passed in ARBP No.02 of 2023, this Court is not inclined to interfere with the said order. Accordingly, the writ petition stands dismissed. 7. At this stage Mr. Pujari, submits, because of the financial crunch, the Petitioner is not in a position to carry out the conditional stay order passed by the court below and prays, a direction be given to the court below to expedite the hearing and conclude the proceeding in ARBP No.02 of 2023 within a stipulated time frame. Page 7 of 8 8. Needless to mention, if an application is moved in ARBP No.02 of 2023 assigning sufficient reason for early hearing of the said proceeding pending before the Court of District Judge, Kendrapara, the court below shall do well to consider the application for early disposal of the ARBP No.02 of 2023 and pass appropriate order in the said regard and then proceed with the case in accordance with law. …….…………………… S.K. MISHRA, J. Orissa High Court, Cuttack. Dated, 8th November, 2023/ Banita Signature Not Verified Digitally Signed Signed by: BANITA PRIYADARSHINI PALEI Designation: JR. STENOGRAPHER Reason: AUTHENTICATION Location: HIGH COURT OF ORISSA, CUTTACK Date: 16-Nov-2023 18:35:33 Page 8 of 8
Arguments
submission made by Mr. Pujari, learned Counsel for the Petitioner, Mr. R. Panigrahi, learned Counsel for the Opposite Party No.1 submits, the amended provision under sub-section (3) in Section 36 of the Arbitration & Conciliation Act, 1996 is very clear. There cannot be automatic stay of the execution of the arbitral Award. In a proceeding under Section 34 of the Act, 1996 the court has ample power to grant stay of the operation of the arbitral Award, subject to such conditions, as it may deem fit. Hence, there is no illegality in the impugned order passed by the court below. For ready reference, provisions under Section 36 of the Arbitration & Conciliation Act, 1996 is extracted below: Page 2 of 8 “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 unenforceable, 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 operation 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 that where the Court is