Damodar Valley Corporation vs Reliance Infrastructure Ltd
2021 Latest Caselaw 1710 Cal/2

                                  1



                  IN THE HIGH COURT AT CALCUTTA
                ORDINARY ORIGINAL CIVIL JURISDICTION
                           ORIGINAL SIDE
                         Commercial Division
                        (Via Video Conference)

BEFORE:
The Hon'ble Mr. Justice Ravi Krishan Kapur

                           IA No: GA/1/2020
                         [Old No.GA 175/2020]
                              AP/40/2020


                     DAMODAR VALLEY CORPORATION

                                 -vs-

                     RELIANCE INFRASTRUCTURE LTD.



For the petitioner         : Mr. Tushar Mehta, Ld. Solicitor General,
                             Mr. Ratnanko Banerji, Sr. Adv.
                             Ms. Vineeta Meheria,
                             Mr. Amit Meheria,
                             Mr. Santanu Chatterjee,
                             Ms. Urmila Chakraborty,
                             Ms. Paramita Banerjee,
                             Ms. Subika Paul,
For the respondent         : Mr. Harish Salve, Senior Advocate,

Mr. Surajit Nath Mitra, Sr. Adv.

Mr. Joy Saha, Sr. Adv.

Mr. Prateek Sakseria, Mr. Atanu Roychaudhuri, Mr. Pushan Majumdar, Ms. Asmita Roychaudhuri.

Heard on                   : 17.11.2021, 18.11.2021, 21.12.2021

Judgment on                : 23.12.2021




              Ravi Krishan Kapur, J.:

1. This is an application under section 36(2) of the Arbitration and

Conciliation Act, 1996 ('the Act'). The petitioner prays for stay of an

award dated 21 December, 2019 ('the award').

2. The award has been passed in respect of disputes and differences

which had arisen out of three interconnected and inter-linked

contracts entered into by and between the parties for construction

of two units of 600 M.W power plants each near Raghunathpur in

the District of Purulia, West Bengal.

3. The award directs the petitioner to pay the respondent a sum of

approximately of Rs.898 crores, particulars whereof are set out

hereunder :

Cash Component of Award- Rs.898 Crores (approx.) - pending since December, 2019

INR Component Euro Component Euro converted to INR @ Rs.78.81 Total in INR

Description of Principal Interest @ 10% Principal Interest @ Principal Interest @ Principal Interest @ Claim from 21.08.2017 10% from 10% 10% from to 21.12.2019 21.08.2017 to 21.08.2017 to 21.12.2019 21.12.2019

Total Award 497,95,24,067 125,33,57,665 2,83,09,443 66,00,167 223,10,67,183 52,01,59,163 721,05,91,251 177,35,16,828

4. Being aggrieved by the award, the petitioner has also filed an

application under section 34 of the Act being AP 40/2020.

5. It is submitted on behalf of the petitioner that in view of an earlier

order dated 8 September, 2021 passed by a Coordinate Bench, the

application filed under section 34 of the Act ought to be heard first,

before the hearing of this application. It is also submitted on behalf

of the petitioner that there is no question of any security being

provided in terms of section 36 of the Act since the award is ex

facie perverse. Significantly, the petitioner chooses not to make any

submissions insofar as the mode or manner of security as a

condition for grant of stay of the award is concerned.

6. On behalf of the respondent, it is submitted that in view of the

amended section 36(2) of the Act, it is now obligatory on the party

seeking stay to secure the award on such terms and conditions

which a Court may deem fit and proper. The phrase "have due

regard to the provisions for grant of stay of a money decree under

the provisions of the Code of Civil Procedure 1908" mean that the

relevant provisions of the Code of Civil Procedure, 1908 may be

taken into consideration but the same are not mandatory. In this

context, reliance is placed on the decision of Pam Development

Private Limited vs. State of West Bengal reported in (2019) 8

SCC 112 [at paragraphs 8, 9, 19, 20, 21, 22, 23 and 25].

7. I have considered the submissions made on behalf of the parties.

8. I find that the award is for a sum of approximately Rs.898 crores.

Under section 36 of the unamended Act, an arbitral award became

enforceable only after the objection under section 34 of the Act was

dismissed. The pendency of the proceedings under section 34 thus

became an impediment for enforcement of an award which often

took years if not decades. The pendency of such proceedings also

effectively jettisoned the entire process for enforcement of awards

making it impossible to even seek an order from the Court directing

the award debtor to deposit any part of the award in Court. This

was also in conflict with the object of having an expeditious

alternative dispute realisation forum. It was to rectify this mischief

[which had also been pointed out in National Aluminum Co. Ltd.

vs. Pressteel & Fabrications reported in (2004) 1 SCC 540] that

an amendment was incorporated to section 36 of the Act. In the

said decision, the Supreme Court had criticized the then prevailing

situation in the following words:

"However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under section 34 of the Act leaving no discretion in the court to put the parties on terms, in our opinion, defeats the very objective of the alternate dispute resolution system to which arbitration belongs. We do find that there is a recommendation made by the concerned Ministry to the Parliament to amend section 34 with a proposal to empower the civil court to pass suitable interim orders in such cases. In view of the urgency of such amendment, we sincerely hope that necessary steps would be taken by the authorities concerned at the earliest to bring about the required change in law."

9. Accordingly, the Law Commission in the 246th Report had

recommended to amend the section with the sole object to

overcome the impediment of automatic suspension of awards.

Thereafter, section 36 has been amended and incorporated by way

of the 2015 Amended Act. In this connection, it is also relevant to

note that Article 36(2) of UNCITRAL Model Law provides as follows:

Article 36(2). "If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)9(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security."

10. The amended section 36 of the Act in its new avatar, makes a

significant change by incorporating the provisions which provides

that filing of an application under section 34 shall not by itself

render an award unenforceable, unless the Court grants an order

of stay and imposes such conditions as it deemed fit and proper.

Such discretion is to be exercised judicially depending upon the

facts and circumstances of the case. The Court may direct the

award debtor seeking stay of operation of an award to deposit the

arbitral sum or part thereof or furnish such security for the

amount covered under the award. In considering the application

for stay, a Court may also have regard to the provisions for grant of

stay of money decree under the Code of Civil Procedure, 1908.

However, the phrase "having due regard to" naturally means that

the provisions of CPC may be taken into consideration but the

same are mandatory. From an academic perspective, the amended

section 36 has partially restored the position with respect to the

enforcement of an award which was existing under the 1899 Act,

since the award has once again been made enforceable as a decree

of the Court, without the pre-condition of obtaining a judgment

and decree from a Court which was required under the 1940 Act.

11. In Pam Development Private Limited vs. State of West Bengal

reported in (2019) 8 SCC 112 while considering the amended

section 36 of the Act, the Supreme Court had categorically held

that the 246th Law Commission Report makes no exception for

State/Governments. In fact, it has been held that there is no

special or exceptional treatment which is to be given to

State/Governments whilst considering an application for stay

under the Act. Thus, in my view, there is no question of granting

any exceptional or special or unusual treatment to the petitioner

company, which I am aware is a statutory corporation constituted

under the provisions of the Damodar Valley Corporation Act, 1948.

12. One of the grounds which has been urged on behalf of the

petitioner is that, in view of the order dated 8 September, 2021 a

Coordinate Bench of this Court whilst hearing these matters had

held that the application for setting aside of the impugned award

being AP 40/2021, should he heard first. The order dated 8

September, 2021 further provided that "the other applications for

execution of the award, stay and for rejection of the execution

should be mentioned after AP 40/2021 is disposed of".

13. I am of the view that the order dated 8 September, 2021 passed by

a Coordinate Bench was purely procedural in nature. It is trite law

that such orders by their very nature are not cast in stone. On the

contrary, such orders by their very nature are interlocutory in

nature and cannot in my view normally bind any Court. I also do

not find any element of finality in the order dated 8 September,

2021 which makes it unalterable. In fact, I am of the view that to

permit the petitioner the privilege of having the section 34

application heard first without the disposal of the application

under section 36 of the Act would amount to affording special

treatment to the petitioner of not having to offer any security in

terms of the section, before disposal of the application under

section 34. This in my view would also amount to re-writing the

section and emasculating the very object and purpose of the

amendment. Accordingly, the submission made on behalf of the

petitioner that the hearing of this application be postponed stands

rejected.

14. Both parties had also made submissions on the merits of the

award. I am well aware that any finding or observation pertaining

to the merits of the challenge under section 34 of the Act which is

still pending before this Court is premature at this stage. However,

on a perusal of the award it appears that the award is a

unanimous award of the Arbitral Tribunal comprising of three

members. It ex facie appears that the Tribunal has taken into

consideration the pleadings filed by the parties. Issues had also

been framed. The award is a speaking award and prima facie deals

with the contentions of both the parties elaborately. The Arbitral

Tribunal has gone into each of the claims and the counterclaim

made by the parties and has adjudicated upon the same. At least,

at this prima facie stage, there is nothing in the award which

shocks my conscience nor indicates that the award is either

without jurisdiction of has been obtained by fraud or corruption or

is contrary to law. I reiterate that these are all prima facie findings

on the merits of the award and for the limited purpose of

adjudication of this application. Accordingly, I am of the view that

the petitioner has been unable to make out an exceptional case for

unconditional stay of the award.

15. The petitioner also refers to the pendency of Special Leave

Petitions. However, there is nothing to demonstrate that there is

any stay or embargo in the hearing of this application.

16. Insofar as the mode and the form of security is concerned, I

reiterate that the petitioner has chosen not to make any

submissions in respect of either the form or the mode of the

security. I do find that bald allegations have been made in

paragraphs 131 and 132 of the petition as to why there should be

an unconditional stay of the award. However, no arguments were

made on this aspect of the matter at the time of hearing of this

application. In any event, I do not find any grounds warranting an

unconditional stay of the award.

17. For the foregoing reasons, I am of the view that since the award is

a money award for approximately Rs.898 crores, I direct that there

shall be a stay of the award subject to the condition that the

petitioner deposit 50% of the awarded amount of Rs.898 crores by

way of cash security or its equivalent to the satisfaction of the

Registrar Original Side, High Court at Calcutta. Upon such deposit

being made, the Registrar Original Side is directed to make a fixed

deposit of the said amount with any nationalised bank and keep

the same renewed till the disposal of the application under section

34 of the Act or until further orders of Court. The remaining 50% of

the awarded amount of Rs.898 crores be secured by way of bank

guarantee(s) of a nationalised bank by the petitioner to the

satisfaction of the Registrar Original Side, High Court. The

aforesaid exercise is to be completed within a period of four weeks

from the date of this order. In the event security as directed above

is furnished, there shall be stay of execution of the award till the

disposal of AP 40 of 2020.

18. With the aforesaid directions, IA NO.GA 1 of 2020 (Old No.GA 175 of 2020) stands disposed of.

(Ravi Krishan Kapur, J.)