Suresh Shah vs M/S Tata Consultancy Services Ltd ...
2017 Latest Caselaw 2160 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI


%                                     Date of decision: 2.5.2017
+     O.M.P. 1118/2013
      SURESH SHAH                        ..... Petitioner
                         Through    Mr.Vikas Dhawan, Mr.S.Panda,
                         Mr.S.Nanda and Mr.Puneet Gupta, Advs.

                         versus

      M/S TATA CONSULTANCY SERVICES LTD & ANTOHER
                                            ..... Respondent
                         Through    Mr.Suhail Dutt, Sr. Adv. with
                         Ms.Divya Bhalla and Mr.Bhavitt Rastogi, Advs.

      CORAM:
      HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J. (ORAL)

IA No.5347/2017 Exemption allowed, subject to all just exceptions. O.A.77/2017

1. Present appeal is filed seeking to impugn the order of the Joint Registrar dated 27.04.2017 whereby he has allowed an application filed by the respondent for discharge of Bank Guarantee of Rs.10 crores.

2. The petitioner initially filed a petition under section 9 of the Arbitration and Conciliation Act,1996 which was disposed of on 20.12.2013. The relevant direction given in the said order dated 20.12.2013

was that the respondent was directed to furnish a bank guarantee favouring the Registrar General of this court qua the outstanding rent. It is pursuant to this direction that the respondent has furnished the Bank Guarantee for a sum of Rs.10 crores. The order further directed that the captioned petition be also placed before the learned Arbitrator so appointed by the same order, to consider the application as one under section 17 of the Act. The interim directions passed by this court were to continue to operate. Opportunity was given to the learned Arbitrator to pass appropriate orders after hearing the parties on the said application.

3. The learned Arbitrator by his order dated 16.4.2014 disposed of the application under section 17 of the Act reiterating the interim directions passed by this court on 20.12.2013 regarding furnishing of a Bank Guarantee of Rs.10 crores by the respondent apart from other reliefs. This order was also impugned by a petition before this court. This court dismissed the challenge.

4. The learned Arbitrator has now passed an Award in favour of the petitioner on 16.12.2016. There is some dispute as to how much amount has been awarded in favour of the petitioner. Learned counsel for the petitioner submits that the exact calculation has not yet been made as per the Award but about Rs.6 to Rs.6.5 crores has been awarded in favour of the petitioner. Learned senior counsel for the respondent, however, submits that the amount is between Rs.5.50 crores to Rs.6 crores in favour of the petitioner. The learned Arbitrator on the issue of Bank Guarantee in the Award noted that the Bank Guarantee shall stand discharged.

5. It is in this background that the respondent has moved this application seeking discharge of the Bank Guarantee which is valid up to 29.12.2017

and which is lying with the Registrar General of this Court. The impugned order has been passed by the Joint Registrar directing discharge of the bank guarantee.

6. I have heard learned counsel for the parties. Learned counsel for the petitioner has vehemently argued that the orders passed under Section 17 of the Act would get merged with the Award. He further submits that as the Award has not allowed the full claim of the petitioners the petitioners have filed objections to the entire Award under section 34 of the Act and notice in the same has already been issued. He further points out that the recent amendments to the Arbitration Act would not be applicable to the present proceedings and hence the filing and pendency of the petition under Section 34 of the Act would tantamount to a stay of the Award. He reiterates that the order under section 17 of the learned Arbitrator would get merged with the Award and the effect of the same would be that the directions in the Award to discharge the bank guarantee are not enforceable as the Award stands stayed. He submits that the JR who passed the impugned order cannot enforce the award in this manner especially keeping in view Section 5 of the Arbitration Act.

7. On the other hand, learned counsel for the respondents submits that the impugned order has rightly been passed. He further points out that the admitted fact is that the petitioner is retaining a security amount of Rs.5.6crores. Hence, as per the Award no substantial amount is payable to the petitioner. Hence, he submits that no purpose is served by keeping the bank guarantee.

8. It is quite clear that as per the Award the bank guarantee gets discharged. The submission of the petitioner is that the Award gets stayed on

the filing of a petition under Section 34 of the Act and hence, ipso facto the directions for discharge of the bank guarantee also gets stayed and the original order under Section 17 continues to remain in operation. I may note that this proposition has not been supported in any manner by the petitioner. Sections 35 and 36 prior to the amendments of 2015 read as follows:-

"35. Finality of arbitral awards. -Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively.

36. Enforcement. - Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court."

9. Hence Section 36 states that after objections are filed and the same are refused, the award would be enforced under CPC, as a decree of the court. Mere filing of Section 34 petition against the Award renders the Award "unenforceable".

10. Reference in this regard may be had to the judgment of the Supreme Court in the case of National Aluminium Co. Ltd. vs. Pressteel & Fabrications (P) Ltd. & Anr., (2004) 1 SCC 540 where the Supreme Court held as follows:-

"10. ... At one point of time, considering the award as a money decree, we were inclined to direct the party to deposit the awarded amount in the court below so that the applicant can withdraw it on such terms and conditions as the said court might permit them to do as an interim measure. But then we noticed from the mandatory language of Section 34 of the 1996 Act, that an award, when challenged under Section 34within the time stipulated therein, becomes unexecutable. There is no

discretion left with the court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the applicant therein. Therefore, that being the legislative intent, any direction from us contrary to that, also becomes impermissible. On facts of this case, there being no exceptional situation which would compel us to ignore such statutory provision, and to use our jurisdiction under Article 142, we restrain ourselves from passing any such order, as prayed for by the applicant."

11. Hence, under the Act prior to the amendments of 2015, on filing of objections under section 34 against the Award rendered the same "unenforceable". It cannot be construed to mean that interim orders/directions passed by the learned Arbitrator under section 17 will continue to operate after the award is passed.

12. In any case, in my view this controversy is not relevant to the facts of this case. We may see the original order under Section 17 of the Act passed on 16.04.2014 by the learned Arbitrator. The same reads as follows:-

"28) In view of the above, the claimant's application for interim measures is disposed of as under:- (A) ....

(B) Interim prayer (c) and second part of interim prayer (b) will be considered along with the main prayers (a) and (b) in the claim statement. As a consequence, both the interim directions issued by the Hon'ble High Court to the respondent (for furnishing Bank Guarantee for Ten Crores and paying the rent for an area of 1,35,000 Sq.Ft from January 2014) shall continue till conclusion of the Arbitration proceedings. (C) .......

(D) .........."

13. Hence, the direction to furnish the bank guarantee was to continue only till the conclusion of the arbitration proceedings. Hence, de-hors the

directions in the Award, the injunction order came to an end on conclusion of the arbitration proceedings. Hence even otherwise, the order under section 17 of the Act came to an end after the Award was passed.

14. In fact, it was put to the learned counsel for the petitioner that what purpose would be achieved by continuing with the bank guarantee inasmuch as per the Award, there is no substantial sum of money recoverable by the petitioner from the respondents. There was no plausible explanation to this question. The object of furnishing the bank guarantee was to protect the petitioner for its claims. After the award prima facie now there are no substantial dues payable by the respondent. Hence, no purpose is served to keep the bank guarantee alive.

15. Reference may be had to the judgment of the Division Bench of the Bombay High Court in Dirk India Private Limited. vs. Maharashtra State Electricity Generation Company Limited. (MANU/MH/0268/2013) where the court held as follows:-

"12....Contextually, therefore, the scheme of Section 9 postulates an application for the grant of an interim measure of protection after the making of an arbitral award and before it is enforced for the benefit of the party which seeks enforcement of the award. An interim measure of protection within the meaning of Section 9(ii) is intended to protect through the measure, the fruits of a successful conclusion of the arbitral proceedings. A party whose claim has been rejected in the course of the arbitral proceedings cannot obviously have an arbitral award enforced in accordance with Section 36. The object and purpose of an interim measure after the passing of the arbitral award but before it is enforced is to secure the property, goods or amount for the benefit of the party which seeks enforcement.

13..... The object and purpose of Section 9 is to provide an

interim measure that would protect the subject-matter of the arbitral proceedings whether before or during the continuance of the arbitral proceedings and even thereafter upon conclusion of the proceedings until the award is enforced. Once the award has been made and a claim has been rejected as in the present case, even a successful challenge to the award under Section 34 does not result an order decreeing the claim. In this view of the matter, there could be no occasion to take recourse to Section 9. Enforcement for the purpose of Section 36 as a decree of the Court is at the behest of a person who seeks to enforce the award."

16. I see no merit in the present appeal and the same is dismissed.

JAYANT NATH, J MAY 02, 2017/n