Ecopack India Paper Cup Pvt. Ltd vs Sphere International
2018 Latest Caselaw 1186 Bom

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                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                         ORDINARY ORIGINAL CIVIL JURISDICTION

                               APPEAL NO. 101 OF 2018
                                         IN
                          NOTICE OF MOTION NO. 2059 OF 2017

      Ecopack India Paper Cup Pvt. Ltd.                                     ...Appellant
           Versus
      Sphere International                                                  ...Respondent

      Mr.Aseem   Naphade   with   Mr.A.P.Singh   &   Mr.Kaushal   Amin   i/b. 
      S.K.Srivastav & Co., for the Appellant.

      Mr.Premlal Krishnan with Mr.Sankalp Anantwar i/b. Pan India Legal, 
      for the Respondent.
                                    ...... 
                             CORAM :  NARESH H. PATIL AND 
                                          G.S.KULKARNI, JJ.

                                    DATE    :    MARCH 14, 2018
                                             ---

      ORDER: (Per G.S.Kulkarni, J.)

1. Disputes between the appellant and the respondent are

subject matter of arbitration. The appellant is the claimant against the

respondent in the arbitration proceedings. The respondent filed a

written statement to the statement of claim of the appellant in which

the respondent is stated to have made purported admission of liability

towards the respondent of an amount of Rs.47,56,388/-. On this

purported admission the Arbitral Tribunal made an interim award

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dated 10 April 2017 under Section 31(6) of the Arbitration and

Conciliation Act,1996 (for short 'the Act') in favour of the appellant.

Being aggrieved by the impugned interim award, the respondent has

filed a petition under Section 34 of the Act before this Court

(Arbitration Petition No.393 of 2017). By an order dated 13 December

2017 the learned Single Judge has admitted the Section 34 petition.

As mere admission of the petition would not amount to stay on the

execution of the interim arbitral award, the respondent filed Notice of

Motion no.2039 of 2017 seeking an interim stay on the execution of

the interim award. By the impugned order dated 21 December 2017,

the learned Single Judge has allowed the said notice of motion thereby

granting unconditional stay on the execution of the impugned interim

award rendered by the arbitral tribunal. The appellant being aggrieved

by the said order has filed this appeal.

2. Learned Counsel for the appellant in assailing the

impugned order submits that the learned Single Judge ought to have

ordered deposit of the decreetal amount considering the provisions of

Section 36 of the Act and more particularly sub-section 3 which

mandates that the Court may subject to such conditions as it may

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deem fit, grant stay of the operation of the award, and the proviso to

this sub-section would stipulate that when the award is for payment of

money, the Court shall have due regard in grant of stay of a money

decree to the provisions of Code of Civil Procedure,1908. It is

submitted that the provisions of Order 41 Rule 5 of the Code of Civil

Procedure are imperative. It is thus submitted that considering the

said provisions the learned Single Judge should have directed the

respondent to deposit the decreetal amount. In supporting the

submissions, the learned Counsel for the appellant has placed reliance

on the decisions in (i) Sihor Nagar Palika Bureau Vs. Bhabhlubhai

Virabhai & Co.1; (ii) Malwa Strips Pvt.Ltd. Vs. Jyoti Limited 2; (iii)

Times Global Broadcasting Co.Ltd. & Anr. Vs. Parshuram Babaram

Sawant3.

3. On the other hand, the learned Counsel for the

respondent submits that the learned Single Judge has appropriately

considered the factual matrix and correctly observed that the arbitral

tribunal rendered the impugned interim award, based on a solitary

paragraph in the written statement and did not at all consider the case 1 (2005)4 SCC 1 2 (2009)2 SCC 426 3 (2011)113(6) Bom.L.R. 3801

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of the respondent as pleaded in the written statement. It is his

contention that the purported admission which is recorded in the

impugned interim arbitral award was required to be considered in the

context of the entire defence and the situation was not such that the

purported admission can be singled out so as to make an interim

award on admission. In supporting this submission, learned Counsel

for the respondent has taken us through the written statement as also

the impugned Award.

4. We have heard the learned Counsel for the parties. We

have also gone through the pleadings of the parties before the Arbitral

Tribunal and the impugned interim award. We have also perused the

impugned order passed by the learned Single Judge. Having so done,

we are not persuaded to accept the contention as urged on behalf of

the appellant. At the outset we may observe that when the Court

considers an application for stay of the arbitral award for payment of

money, no doubt the Court would be required to consider the

principles under the provisions of Order 41 Rule 5, however, it cannot

be overlooked that such an order to be passed by the Court is

discretionary and would be required to be passed taking into

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consideration the facts and circumstances of the case. There cannot be

a straight jacket formula that in every case the Court would impose

conditions and necessarily there has to be a deposit of decreetal

amount.

5. Coming to the facts of the case, on perusal of the interim

arbitral award, we may state that the learned Single Judge has rightly

observed that the interim arbitral award has merely considered the

statement as made on behalf of the respondent in paragraph 3(O) of

the statement of defence as the admission of liability by the

respondent, and it is on this statement, the arbitral tribunal has

proceeded to make the impugned interim award. It would be

appropriate to extract the relevant portion of the Arbitral Award

which reads thus:-

"4. The counsel for the plaintiff submits that the respondent has made an clear and unequivocal admission of liability to the tune of Rs.47,56,388/- in Para No.3(O) of the statement of defence and Para no.23 of the counter claim.

...... ...... .....

13. We find that in Para No.3(O) of the statement of defense, it is very clear that the respondent has made an admission of liability of Rs.47,56,388/-.

14. Since the respondent has made an admission of liability, we find that the Delhi High Court Judgment is applicable to the facts of the present case. Thus, the Plaintiff is entitled to an Interim Award in respect of the

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admitted liability of the respondent, i.e. for a sum of Rs.47,56,388/-."

6. As to whether the arbitral tribunal could at all have made

such an interim award, is a subject matter of consideration in the

arbitration petition which already stands admitted by the learned

Single Judge. We are also informed that now de hors the interim

award, the arbitration proceedings are in progress and the arbitral

tribunal would proceed to finally adjudicate the rival claims of the

parties.

7. Apart from the above situation, in regard to the

controversy in hand, before the arbitral tribunal the respondent in

opposing the appellant's prayer for an interim award on admission,

had filed its reply asserting that, there was an amount of

Rs.2,74,07,448/- which was payable by the appellant to the

respondent after adjustment of an amount of Rs.47,57,389/- stated to

the liability of the appellant on the part of the respondent. This

contention can be seen in paragraph 8 of the reply which reads thus:-

"8. The Respondent further states that in fact, an amount of Rs.3,21,64,837/- is due and payable by the Claimants to the Respondent. By adjusting the said amount payable by the Claimants against the amount receivable by

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the Claimants, an amount of Rs.2,74,07,448/- is balance and payable by the Claimants to the Respondent and its representatives jointly. In addition to this, the Respondent is also liable to pay an amount of Rs.6.37,44,606/- towards damages."

8. A perusal of the impugned interim award would clearly

show that there is no reference whatsoever interalia 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. The learned Single Judge is thus correct in his

observation that the Arbitral Tribunal has not considered the entire

case as pleaded by the applicant in the written statement and that the

respondents were entitled to explain the alleged admission as made in

the written statement. Considering the facts and circumstances of the

case, we are in agreement with the learned Single Judge when it is

observed that prima facie the Arbitral Tribunal ought to have rendered

a final award after giving an opportunity to both the parties to lead

evidence.

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9. As regards the decisions as relied on behalf of the

appellant, there cannot be any doubt on the proposition of law as

these decisions lay down. However, in the facts and circumstances of

the case, as noted above, this is not a case where the respondent could

be saddled with an order to deposit the amounts under the interim

award. Section 36 of the Act deals with enforcement of an arbitral

award. Section 36 of the Act was amended by the Arbitration

and Conciliation Act, 2015 with effect from 23 October 2015.

Sub-Section (2) of Section 36 now provides that mere filing of an

application in the Court to set aside the arbitral award shall not

by itself render the award unenforceable, unless the Court grants

an order of stay of the operation of the arbitral award in

accordance with the provisions of Sub-Section (3) of Section 36,

on a separate application made for that purpose. Sub-section (3)

provides that 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".

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Proviso to sub-section (3) stipulates that the Court while

considering the application for grant of stay of an arbitral award

for payment of money, shall have due regard to the provisions for

grant of stay of a money decree under the provisions of the Code

of Civil Procedure 1908.

10. 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

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stay to the execution proceedings. It is for the Court to consider

the facts and circumstances of the case and exercise its discretion

either to grant a stay to the execution of the decree or impose or

not impose any other condition, as the Court may deem

appropriate. The above position in law has been clearly

recognized by the Supreme Court in Malwa Strips Private

Limited Versus Jyoti Limited4. The discretion so vested in the

Court is required to be exercised judicially and not arbitrarily and

in the interest of justice. (see Sihor Nagar Palika Bureau Versus

Bhabhlubhai Virabhai & Co. (supra). Adverting to these principles

of law, the learned Single Judge in the facts of the case, has

appropriately exercised discretion as vested with the court under the

provisions of Section 36(3) of the Act read with provisions of Order 41

Rule 5 in passing the impugned order.

11. The appeal lacks merit. We are accordingly not inclined to

interfere with the impugned order. It is dismissed. No costs.

                  (G.S.KULKARNI, J.)                (NARESH  H. PATIL, J.)
      4 (2009) 2 Supreme Court Cases 426