Future Market Networks Limited vs Laxmi Pat Surana & Anr
2022 Latest Caselaw 1508 Cal/2

                         IN THE HIGH COURT AT CALCUTTA
                         Ordinary Original Civil Jurisdiction
                                  ORIGINAL SIDE

Present : The Hon'ble Justice Moushumi Bhattacharya.

                                   IA NO. G.A. 1 of 2022
                                            In

                                     A.P. 698 of 2016

                         FUTURE MARKET NETWORKS LIMITED
                                            vs
                                LAXMI PAT SURANA & ANR.



   For the Petitioners      :             Mr. Rishad Medora, Adv.
                                          Ms. Pooja Chakraborty, Adv.
                                          Ms. Radhika Misra, Adv.

   For the Respondents      :             Mr. Jishnu Chowdhury, Adv.
                                          Mr. Souradeep Banerjee, Adv.
                                          Mr. Abhidipto Tarafdar, Adv.


   Last Heard on            :             07.04.2022.



   Delivered on             :             28.04.2022.


   Moushumi Bhattacharya, J.

1. The issue in the present application filed by the award-debtor is whether

the Award would automatically include interest and would, in turn, have a

bearing on the conditions which may be imposed for grant of stay of the Award

under section 36 of The Arbitration and Conciliation Act, 1996.

2. The Arbitral Award in the present case is dated 19th May, 2016. The

parties to the Award have filed three separate applications including under

section 34 of the Act for setting aside of the Award, which are pending before

this court. The respondent no. 1 has also filed an Execution Case which is

pending as on date.

3. According to the petitioner, the respondent no. 1 is already secured and

hence there is no further requirement on the petitioner to provide for security

for stay of the Award. The petitioner also resists the prayer of the first

respondent to permit encashment of the bank guarantees furnished by the

petitioner unless the first respondent is directed to furnish counter

guarantees.

4. Learned counsel appearing for the petitioner submits that the Award is

for an amount of Rs. 12,90,52,379 /- carrying an interest of 18% per annum

from the date of Award till realization. According to counsel, the Arbitrator did

not allow pre-award interest and counsel further submits that post-award

interest also does not form part of the Arbitral Award. Counsel refers to an

order dated 21st March, 2012 passed by a learned Single Judge of this court

and that of a Division Bench dated 25th September, 2012 by which the

petitioner, being the appellant before the Division Bench, was directed to

furnish bank guarantee for an amount of Rs. 6.5 crores as security and keep

the same renewed. Counsel submits that the petitioner furnished such bank

guarantee and has been renewing the same from time to time. Counsel also

refers to an order passed by a learned Single Judge on 12th October, 2018 in

an Execution Petition filed by the first respondent, by which the respondent

no. 2 (Future Enterprises) was directed to furnish a bank guarantee of Rs. 5.5

crores with the Registrar, Original Side of this Court. Counsel submits that the

said bank guarantee was deposited by the respondent no. 2 and has also been

renewed from time to time. Counsel urges that an amount of Rs. 12 crores out

of the awarded sum of Rs. 12,90,52,379/- (being the principal amount) is

therefore already secured in the form of bank guarantees by the petitioner and

the respondent no. 2. The thrust of the submissions advanced on behalf of the

petitioner is that the entire awarded sum need not be secured while granting a

stay of operation of the award under section 36(2) of the Act.

5. Learned counsel appearing for the first respondent submits that the

petitioner is required to pay Rs. 12,90,52,379/- along with interest at 18% per

annum from the date of the Award which translates to Rs. 26,53,74,118 /- as

on 1st April, 2022. Counsel relies on section 31 (7) of the Act for urging that an

arbitral award includes interest. Counsel also relies on decisions to contend

that expeditious disposal of arbitral process and enforcement of the award is

an essential aspect of the Amendment Act of 2015. Counsel relies on Order XLI

Rule 5 of The Code of Civil Procedure, 1908, to urge that execution of a money

decree is ordinarily not stayed inasmuch as satisfaction of money decree does

not amount to irreparable injury. Counsel also relies on decisions to submit

that 100% deposit should be directed and part withdrawal allowed in favour of

the respondent no. 1.

6. From the submissions of learned counsel appearing for the parties, the

controversy in the present application is concerned with whether the petitioner

should be called upon to pay security over and above Rs. 12 crores which has

already been secured by the petitioner in the form of bank guarantees

pursuant to orders of court. According to the petitioner, Rs. 12 crores covers

the entire awarded amount of Rs. 12,90,52,379/- and hence there is no

requirement of any further payment. The respondent opposes this position by

reference to the statutory provisions and relevant case law.

7. Section 31(7) of the 1996 Act provides for interest where the arbitral

award is for the payment of money. Clause (a) of sub-section (7) of section 31

contemplates pre-award and pendente lite interest at the rate the arbitral

tribunal deems reasonable on the whole or any part of the money awarded and

for the whole or any part of the period between the date on which the cause of

action arose and the date on which the award is made. Sub-clause (b) of

section 31(7) provides for post-award interest at the rate of 2% higher than the

current rate of interest prevalent on the date of the award, from the date of the

award to the date of payment. Both sub-clauses (a) and (b) are subject to the

parties agreeing for awarding of interest and the direction of the tribunal,

respectively. The explanation to 31(7)(b) clarifies the expression "current rate of

interest" as having the same meaning as assigned under the Interest Act of

1978.

8. Section 31(7) was interpreted by a 3- judge Bench of the Supreme Court

in Hyder Consulting (UK) Limited vs Governor, State of Orissa; (2015) 2 SCC 189

to mean that for the purpose of an award, the interest component loses the

character of "interest" and takes the colour of "sum" for which the award is

made. The Supreme Court opined that post-award interest is for the purpose of

ensuring speedy payment in compliance of the award and is the mandate of

the statute. The decision lays emphasis on the words "include in the sum" and

holds that pre-award interest is not independent of the sum awarded. To quote

the relevant part of the decision :-

"28. Therefore for the purposes of an award, there is no distinction between a "sum" with interest and a "sum" without interest. Once the interest is "included in the sum" for which the award is made, the original sum and the interest component cannot be segregated and be seen independent of each other."

9. Although, Hyder Consulting (UK) interpreted the word "sum" to mean the

award plus interest taken as an indivisible whole in respect of section 31(7)(a)

for grant of pre-award interest, the same interpretation can be stretched to

cover section 31(7)(b) for post-award interest. Expanding the interpretation to

post-award or future interest would not be discordant to the context since

clause (b) opens with the words "A sum directed to be paid..." and makes it

mandatory for the arbitral award to carry interest at a rate higher than the

prevalent rate of interest unless the award contains a contrary direction. In the

present case, the Award is for a sum of Rs. 12,90,52,379/- along with interest

at 18% from the date of the Award i.e. 19th May, 2016 to the date of payment.

The exact direction of the learned Arbitrator is as follows:-

"108. In the premises, I award a sum of Rs. 12,90,52,379/- to be paid by the respondents to the Claimant Mahaveer Construction. The said award shall carry interest @ the rate of 18% p.a. from the date of award till total sum awarded is realized by the Claimant."

10. The Arbitral Award is hence specific and further uses the word "sum"

indicating the precise amount awarded together with interest at the rate of

18% from the date of the Award till the date of payment to the claimant

(respondent no. 1). A computation handed over by counsel appearing for

respondent no. 1 award-holder indicates that as on 1st April, 2022, the Award

is for a sum of Rs. 26,53,74,118 /-.

11. The point raised on behalf of the petitioner in relation to the variable rate

of future interest cannot be accepted since section 31(7)(b) makes award of

future interest mandatory with an added stipulation that the rate should be

higher than the prevailing market rate.

12. The marked difference in the language between 31(7)(a) - pre-award and

pendente lite interest and 31(7)(b) - future interest reflected from the transition

from 'may' to 'shall' respectively indicates that award of future/post-award

interest is not advisory but a mandate of the Act and is to be given its due

weightage. The object of the mandate has also been explained by the Supreme

Court in Hyder Consulting (UK) as a safeguard against delayed payment of the

amount awarded to the award-holder. This court also finds the direction of the

learned Arbitrator to be precise and devoid of any ambiguity. Besides, the

Award is of 19th May, 2016; the petitioner hence cannot take advantage of the

intervening delay of six years or take the plea of proceedings pending before

this court.

13. This court is in agreement with the stated position taken on behalf of the

first respondent that the object of the 1996 Act as amended in 2015 is

expeditious disposal of arbitral process and enforcement of the award. This

was specifically stressed by the Supreme Court in Icomm Tele Limited vs

Punjab State Water Supply and Sewerage Board; (2019) 4 SCC 401, where the

object was enunciated as "fair, speedy and inexpensive trial by an arbitral

tribunal" and unnecessary expense or delay was seen as frustrating the very

purpose of arbitration. The principle of speedy and effective resolution of

arbitral processes recognizes the financial investments made by a person to an

arbitration agreement and the consequent need to ensure that the person is

returned the value of his investment and compensated for the intervening

losses suffered by him. Delayed recovery is a serious clog in this process and

may also lead to obliteration of the investment and the very purpose for which

money was put in the project. The person putting in money may also lose the

chance to recover the investments in the event of a huge delay in realizing the

amount despite a decree in his favour.

14. The above reasons would lead to the firm conclusion that the sum

awarded to the respondent no. 1/award-holder is now Rs. 26,53,74,118/-

which is the sum of Rs. 12,90,52,379/- + interest at 18% per annum from 19th

May, 2016 till 1st April, 2022. 1st April, 2022 is taken as the end date for the

sake of certainty and for making the sum specific. The contention of the

petitioner that the respondent no. 1 is already secured to the extent of Rs. 12

crores by way of bank guarantees and the petitioner should not be called upon

to secure further amounts is hence rejected since the sum awarded was 12.96

crores approx. as of 19th May, 2016 and six years have passed thereafter. The

sum awarded to the respondent no. 1 cannot therefore be restricted to the sum

which was awarded in 2016 when the order specifically carried interest at 18%

per annum from the date of making of the Award till the date of realization by

the claimant/respondent no. 1/ award-holder. The petitioner cannot also take

refuge in the argument that post-award interest is a variable amount when the

petitioner has stalled realization of the sum awarded to the respondent no. 1

award-holder for six years.

15. The second issue which falls for consideration is the condition for grant

of stay of an arbitral award as envisaged under section 36(2) and (3). According

to the respondent no. 1, an exceptional case must be made out for an

unconditional stay of a money decree. Although the proviso to section 36(3) of

the Act casts an obligation on the court to have due regard to the provisions of

The Code of Civil Procedure, 1908 for grant of stay of a money decree, the said

mandate has been construed as a guiding principle on the Court considering

stay of an arbitral award. [Ref. Pam Developments Private Limited vs State of

West Bengal; (2019) 8 SCC 112]. Malwa Strips Private Limited vs Jyoti Limited;

(2009) 2 SCC 426 reinforces the proposition that compelling reasons will have

to be made out for stay of a money decree. The Supreme Court in Sihor Nagar

Palika Bureau vs Bhabhlubhai Virabhau & Co.; (2005) 4 SCC 1 advised a

judicious exercise of discretion on the facts and circumstances of the given

case and held that ordinarily execution of a money decree is not stayed

inasmuch as satisfaction of money decree does not amount to irreparable

injury since remedy of restitution is always available to the successful party.

16. A careful reading of section 36 of the Act indicates that the power to

grant stay of an arbitral award under sub-section (3) is discretionary and may

only be exercised if the Court is satisfied that conditions are conducive to

passing such an order. If the Court is inclined to grant stay, the Court shall be

guided by the principles under Order XLI Rules 1 and 5 of the CPC governing

grant of stay of a money decree. Order XLI Rule 1(3) of the CPC requires

deposit of the amount disputed in the appeal against a decree for payment of

money or furnishing such security as the Court may deem fit. Order XLI Rule

5(5) contemplates a deposit or a security as condition precedent for an order by

the Appellate Court staying the execution of the decree. Although it is clear

from section 36(3) of the 1996 Act that there is no compulsion on a court to

grant stay of an arbitral award and the Court has a clear discretion in that

respect, the discretion must be exercised bearing in mind not only to

imposition of conditions under section 36(3) and the proviso, but the impact of

the stay on present and future events and pending proceedings.

17. In the present case, all three parties including the respondent no. 1

award-holder, have applied for setting aside of the impugned award. The

hearing of the applications has already commenced before this Court. Hence

discretion must be exercised in favour of the petitioner who seeks stay of the

award taking into account the present fact situation. Further, on a practical

assessment of the matter if the award is not stayed and the respondent no. 1

takes steps for execution of the Award, which he already has, the applications

for setting aside of the Award may become infructuous in the short run. This

court therefore deems it fit to grant stay of the Arbitral Award so that the

applications filed under section 34 of the Act for setting aside of the Award can

be given a fair and effective consideration.

18. On the question of the petitioner being put to terms for seeking a stay of

the Award, this court draws reference from the recent trend of courts directing

deposit of a substantial amount by the award-debtor for grant of stay. Since

the value and sum of the Award as it stood on 1st April, 2022 amounts to Rs.

26,53,74,118/- and the respondent no. 1 is already secured to the extent of

Rs. 12 crores, the petitioner shall deposit 70% of the balance amount of Rs.

14,53,74,118/- (Rs. 26,53,74,118 - Rs. 12,00,00,000) i.e. Rs. 10,17,61,882/-

with the Registrar, Original Side of this court within four weeks from date. The

petitioner shall have the option of depositing 50% of the said amount (i.e., Rs.

5,08,80,941/-) by way of a bank guarantee and the remaining 50% (Rs.

5,08,80,941/-) in cash. If the petitioner defaults in complying with such

condition within the stipulated time, the respondent no. 1 award-holder shall

be free to take appropriate steps in the execution proceedings or as it may

think fit.

19. The prayer of the respondent no. 1 for withdrawing the amount

deposited by the petitioner cannot be entertained at this stage for two reasons.

First, the respondent no. 1 has already prayed for similar relief in the

execution proceeding which is not before this court and second, the prayer for

withdrawal cannot be considered without the respondent no. 1 furnishing a

counter bank guarantee or some form of security in aid of restitution at an

appropriate stage of the proceedings.

20. In view of the above reasons, G.A. 1 of 2022 is accordingly allowed and

disposed of in terms of prayer (a). There shall be stay of the operation of the

Arbitral Award dated 19th May, 2016 upon the petitioner depositing the

amount as directed in the preceding paragraph of this judgment with the

Registrar, Original Side within four weeks from date.

21. List the petitioner's application under section 34 of the 1996 Act on 11th

May, 2022.

Urgent photostat certified copies of this judgment, if applied for, be

supplied to the respective parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J)