Rajkot Municipal Corporation vs M/S Jay Hind Project Ltd
2024 Latest Caselaw 151 Guj

Gujarat High Court

Rajkot Municipal Corporation vs M/S Jay Hind Project Ltd on 8 January, 2024

Author: Sangeeta K. Vishen

Bench: Sangeeta K. Vishen

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     C/SCA/19550/2022                              JUDGMENT DATED: 08/01/2024

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             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/SPECIAL CIVIL APPLICATION NO. 19550 of 2022


FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE SANGEETA K. VISHEN                              Sd/-

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1     Whether Reporters of Local Papers may be allowed                   NO
      to see the judgment ?

2     To be referred to the Reporter or not ?                           YES

3     Whether their Lordships wish to see the fair copy                  NO
      of the judgment ?

4     Whether this case involves a substantial question                  NO
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

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                        RAJKOT MUNICIPAL CORPORATION
                                     Versus
                           M/S JAY HIND PROJECT LTD.
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Appearance:
MR HS MUNSHAW(495) for the Petitioner(s) No. 1
MR MITUL K. SHELAT FOR MS DISHA N NANAVATY(2957) for the
Respondent(s) No. 1
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    CORAM:HONOURABLE MS. JUSTICE SANGEETA K. VISHEN

                               Date : 08/01/2024
                              ORAL JUDGMENT

1. With the consent of the learned advocates appearing for the respective parties, the captioned writ petition is taken up for final disposal.

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2. Issue rule, returnable forthwith. Mr Mitul K. Shelat, learned advocate for Ms Disha N. Nanavati, learned advocate waives service of notice of rule on behalf of respondent.

3. By this petition, Rajkot Municipal Corporation, that is, the petitioner (hereinafter referred to as the 'petitioner Corporation'), inter alia, has prayed for passing of the appropriate orders directing the learned Principal Senior Civil Judge, Rajkot to hear Civil Miscellaneous Application no.47 of 2015 within a stipulated time limit and meanwhile to pass appropriate orders staying the implementation, execution and operation of the award dated 02.12.2014 passed by the learned Sole Arbitrator in Arbitration Reference case no.3 of 2013. Petitioner Corporation, has also prayed for direction to the learned Principal District Judge, Rajkot to hear Commercial Execution no.381 of 2021 preferred by M/s. Jay Hind Project Ltd., that is, the respondent (hereinafter referred to as 'the respondent') coupled with the further direction not to pass any order of disbursement for an amount of Rs.1,91,40,001/- deposited by the petitioner Corporation with the registry pending final hearing and disposal of Civil Miscellaneous Application no.47 of 2015.

4. The facts, in brief, are that the petitioner Corporation had executed a contract with the respondent for implementation and execution of Underground Drainage Project under Jawaharlal Nehru National Urban Renewal Mission. Owing to certain disputes, a retired learned District Judge was appointed as an Arbitrator, and the arbitration proceeding culminated into passing of the award dated 02.12.2014 whereby, 50% of the security deposit, that is, Rs.1,07,75,000/- was directed to be refunded and an amount of Rs.83,65,000/- to be paid towards other claims. Hence, the petitioner Corporation preferred a Civil Miscellaneous Application no.47 of 2015 before the learned Principal District Judge, Rajkot

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which remained pending. Civil Miscellaneous Application no.52 of 2015 has also been preferred by the respondent under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") which also, is pending.

4.1 After six years of filing of the Civil Miscellaneous Application no.47 of 2015, the respondent preferred Commercial Execution no.381 of 2021 before the learned Principal District Judge, Rajkot, inter alia, praying for execution of the award dated 02.12.2014 passed in Arbitration Reference case no.3 of 2013 under the provisions of Section 36 of the Act of 1996 read with Order XXI Rule 10 and 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as "the Code") together with the application under Order XXI Rule 41 read with Section 151 of the Code and it remained pending. In the said pending application, the respondent on 08.03.2021 preferred an application for Possession and Seizure (Jangam) Warrant to be executed against the petitioner Corporation. Neither the officer nor the learned advocate for the petitioner Corporation remained present before the Court though the notice was duly served, as a result whereof, order dated 11.03.2022 issuing the Seizure (Jangam) Warrant was granted. Being aggrieved, that the captioned writ petition with the above referred prayers.

5. Mr H. S. Munshaw, learned advocate appearing for the petitioner Corporation, submitted that award was passed on 02.12.2014 and immediately, within the period of limitation, in the month of February 2015, Civil Miscellaneous Application no.47 of 2015 under the provisions of Section 34 of the Act of 1996 was filed. The application remained pending for all these years and was not heard and therefore, there was no fault on the part of the petitioner Corporation. It is next submitted that despite the pendency of the Civil Miscellaneous Application no.47 of 2015, in the year 2021,

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Commercial Execution no.381 of 2021 came to be filed by the respondent seeking execution of the award dated 02.12.2014. Application was also filed for Possession and Seizure (Jangam) Warrant in the month of March 2022 which culminated into the order dated 11.03.2022, whereby the learned Judge, Commercial Court has issued the Jangam Warrant.

5.1 It is submitted that the petitioner Corporation, in the month of May 2022, has deposited an amount of Rs.1,91,40,001/- with the Nazir of the court concerned and therefore, it is not that the petitioner Corporation has not deposited any amount. Being a statutory Corporation and public money involved, the respondent cannot be permitted to withdraw the same. It is further submitted that the petitioner Corporation was compelled to file the captioned writ petition as, on one hand, learned Principal Senior Civil Judge, Rajkot was neither hearing the Civil Miscellaneous Application no.47 of 2015 nor passing appropriate interim order and on the other hand, the Executing Court, has issued a Jangam Warrant in Commercial Execution no.381 of 2021. Therefore, left with no option, the petitioner Corporation has approached this Court by way of a writ petition seeking relief of early hearing of Civil Miscellaneous Application no.47 of 2015 and also stay of the proceedings of Commercial Execution no.381 of 2021. It is submitted that since the public exchequer is involved, restraint order is also prayed for not to disburse the said amount till the final hearing of the Civil Miscellaneous Application no.47 of 2015. It is urged that let the court below hear the application at the earliest.

6. On the other hand, Mr Mitul K. Shelat, learned advocate for Ms Disha Nanavati, learned advocate for the respondent, submitted that award has been passed in the year 2014, followed by filing of Civil Miscellaneous Application no.47 of 2015 under the provisions of

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Section 34 of the Act of 1996; however, application for stay was never preferred. It is submitted that the total decreetal amount comes to Rs.3,85,23,267/- that is, including the principal amount of Rs.1,91,40,001/- and interest of Rs.1,93,83,266/- calculated at 12% upto 31.01.2021. Application was filed for possession and seizure in the month of March 2022, when, notice was issued and despite the service of notice, no appearance was filed and therefore, another application was filed and that the order dated 11.03.2022 came to be passed issuing the Seizure Warrant. It is owing to the said order, that an amount of Rs.1,91,40,000/- came to be deposited. Respondent, had therefore, filed an application for conditional withdrawal by offering a corporate guarantee. In the meantime, that the captioned writ petition has been filed.

6.1 It is further submitted that with this background, the petitioner Corporation has, inter alia, prayed for direction to hear the Civil Miscellaneous Application no.47 of 2015 and in the meanwhile, to pass appropriate order staying the implementation, execution and operation of the award dated 02.12.2014. It is submitted that a bare reading of prayer B suggest that there is no challenge; except seeking restraint order. In fact, considering the prayer, there does not exist any prayer. So far as the prayers C and D are concerned, contents are difficult to appreciate for, prayer C prays for direction to the learned Principal District Judge, Rajkot to hear the Commercial Execution no.381 of 2021 and prayer D, on the other hand, seeks stay of the further hearing of the very same Commercial Execution no.381 of 2021. Common prayer, is in the second part which is a direction not to disburse an amount of Rs.1,91,40,001/- deposited with the Nazir.

6.2 It is submitted that so far as the stay of the award is concerned, application was never filed. Even during the pendency of

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the captioned petition, the petitioner Corporation did not file any application. The language contained in Section 36 provides for enforcement and more particularly sub-section (3) of Section 36 of the Act of 1996. Hence, for stay of the arbitration award, there has to be a separate application made for that purpose. It states that where an application to set aside the arbitral award has been filed in the Court, filing of such an application shall not by itself, render the award unenforceable. Sub-section (3), further 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. Therefore, an application seeking stay of the operation of the arbitral award is must.

6.3 It is further submitted that prior to the amendment in the Act of 1996, there existed lack of clarity; however, issue now has been settled by the Apex Court in the case of Hindustan Construction Company Limited v. Union of India and Others reported in (2020) 17 SCC 324. The Apex Court, interpreting the provisions of Section 36, held and observed that the amended Section 36, being clarificatory in nature, merely restates the position that the unamended Section 36 does not stand in the way of the law as to grant of stay of a money decree under the provisions of the Code.

6.4 Reliance is also placed on the judgment in the case of Sepco Electric Power Construction Corporation v. Power Mech Projects Ltd. reported in 2022 SCC OnLine SC 1243. Apex Court has held and observed that once an application under sub-section (2) of Section 36 is filed for stay of operation of the arbitral award, the Court,

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subject to such conditions as it may deem fit, grant stay of the operation of such award. It is therefore submitted that clearly there has to be an application as provided under the provisions of sub- section (3) of Section 36 of the Act of 1996 and the discretion to be exercised by the Court grating the stay. In the present case, admittedly, no application has been filed as envisaged under the provisions of the Act of 1996 seeking stay of the operation of the award passed by the learned Arbitrator. In absence whereof, the captioned writ petition with such prayers, would not be maintainable and does not deserve interference.

7. Heard the learned advocates appearing for the respective parties and perused the documents made available on the record.

8. Facts have been referred to in the preceding paragraphs and therefore, repetition is not necessitated. Grievance raised in the captioned writ petition is that Civil Miscellaneous Application no.47 of 2015 be heard within stipulated time so also to stay the implementation, execution and operation of the award dated 02.12.2014. Hence, reliefs prayed for in the writ petition, would be apt and are reproduced herein below for ready reference:-

"9.(A) Be pleased to admit the present Special Civil Application;

(B) Be pleased to allowed this Special Civil Application by way of passing appropriate orders, writ, mandamus or writ directing the Principal Senior Civil Judge, Rajkot to hear Civil Misc. Application No.47/15 within a stipulated time limit and meanwhile to pass appropriate orders staying the implementation, execution and operation of the award dated 2.12.14 delivered by the Sole Arbitrator Shri C.T. Parikh [Retired District Judge] in Arbitration Ref. Case No.313 in the interest of justice.

(C) Be pleased to direct the Principal District Judge, Rajkot to hear Commercial Execution No.381/21 preferred by the respnt. And not to pass any order for disbursement of an amount of Rs.1,91,40,001/- deposited by Rajkot Municipal Corporation in Registry of court on 05/05/2022 pending the

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final hearing and final disposal of Civil Misc. Application No.47/15 in the interest of justice.

(D) Pending the final hearing and final disposal of present Special Civil Application be pleased to stay the further hearing of Commercial Execution No.381/21 preferred by the respnt.

Before the ld. Principal District Judge at Rajkot and further be pleased to direct the said lower court not to pass any order for disbursement of an amount of Rs.1,19,40,001/- deposited by Rajkot Municipal Corporation in Registry of court on 05/05/2022 in the said Commercial Execution No.381/21 in the interest of justice.

(E) Be pleased to call for the record of above case from the respective lower court.

(F) Be pleased to pass such other and further orders as the nature of the case may be required and the Hon'ble court may deem thought fit to pass such order."

9. Discernibly, one of the prayers in the captioned writ petition is seeking direction to the learned Principal Senior Civil Judge, Rajkot to hear Civil Miscellaneous Application no.47 of 2015 within the stipulated time and in the meantime, grant stay of the implementation, execution and operation of the award dated 02.12.2014. So far as prayers C and D are concerned, there appears to be a lack of clarity inasmuch as, in prayer C, the petitioner Corporation has prayed for direction to the learned Principal District Judge, Rajkot to hear the Commercial Execution no.381 of 2021 with a further prayer to not to pass any orders for disbursement of the amount deposited by the petitioner Corporation. So far as prayer D is concerned, the direction sought for, is to not hear the Commercial Execution no.381 of 2021 coupled with the direction not to disburse the amount of Rs.1,91,40,001/-. One one hand, main prayer is to hear and interim prayer not to hear, that appears to be quiet contrary.

10. Pertinently, petitioner Corporation for such prayer has to approach the Court concerned first, but it has thought it fit and has

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chosen to approach this Court for issuance of mandamus, seeking direction to the learned Principal Senior Civil Judge to hear Civil Miscellaneous Application. It is difficult to fathom as to how the mandamus would lie against the trial Court. Be that as it may. Also, the petitioner Corporation has prayed for staying the implementation, execution and operation of the award; however, the said relief is also not capable of being granted for, a self sufficient mechanism has been provided in the Act of 1996 for stay of the operation of the arbitral award and the nature of powers to be exercised by the Court concerned. In view of the above so also for the reasons discussed herein below, the said prayer does not deserve acceptance.

11. Pertinently, Civil Miscellaneous Application no.47 of 2015 was preferred in the year 2015 under the provisions of Section 34 of the Act of 1996 and admittedly it was not accompanied by any application seeking stay of the execution of the arbitral award dated 02.12.2014. The said application remained pending for all these years, with no order of stay. Though it has been argued that the learned judge has not been hearing, nothing has been placed on the record to suggest that any attempt, was put by the petitioner Corporation seeking early hearing much less the hearing of the Civil Miscellaneous Application no.47 of 2015. Petitioner Corporation was satisfied by simply filing the application challenging the award dated 02.12.2014 without any application seeking stay of the award. Moreover, except stating that efforts were put, Mr H. S. Munshaw, learned advocate has not been able to point out as to what steps were taken either by the petitioner Corporation or by the lawyer seeking hearing of the application.

12. Moreover, Civil Miscellaneous Application no.47 of 2015

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remained pending with no development and therefore, in the year 2021, application Exhibit 1 came to be preferred by the respondent seeking execution of the award dated 02.12.2014 under the provisions of Section 36 of the Act of 1996 read with Order XXI Rule 10 and 11 of the Code. It has prayed for execution of the decree/order of the amount to the tune of Rs.3,85,23,267/- including the principal amount of Rs.1,91,40,001/- and the interest of Rs.1,93,83,266/-. The said application was followed by application for Possession and Seizure (Jangam) Warrant and was heard; however, neither the officer of the petitioner Corporation nor the learned advocate remained present which led to the passing of the order dated 11.03.2022 by the learned Judge, Commercial Court, Rajkot, issuing the Seizure Warrant. Pertinently, the petitioner Corporation has not challenged the said order dated 11.03.2022 in the captioned writ petition.

13. Since, there was no application preferred for hearing of the application, it does not lie in the mouth of the petitioner Corporation to contend before this Court that learned Principal Senior Civil Judge, Rajkot was not hearing the civil miscellaneous application no.47 of 2015 (now renumbered as civil miscellaneous application no.257 of 2022) preferred by the petitioner Corporation against the award. If at all the petitioner Corporation had any grievance, the petitioner Corporation ought to have taken steps. In absence of any steps taken, the prayer of the petitioner Corporation seeking direction to learned Principal Senior Civil Judge, Rajkot to hear civil miscellaneous application no.47 of 2015 (now renumbered as civil miscellaneous application no.257 of 2022), cannot be accepted and is hereby rejected.

14. Adverting to the prayer of stay of implementation, operation,

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execution of the award, it is required to be noted that undisputedly, there is no application filed by the petitioner Corporation together with Civil Miscellaneous Application no.47 of 2015, seeking stay of the award dated 02.12.2014. When the order dated 11.03.2022 was passed issuing seizure warrant, that the captioned writ petition has been filed seeking stay of implementation and execution of the award dated 02.12.2014. Such mode adopted by the petitioner Corporation is not proper for, Section 36 of the Act of 1996 speaks about the 'Enforcement of Arbitral Awards' which reads thus:

"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 satisfied that a Prima facie case is made out that,--

(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

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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)."

15. Sub-section (2) of Section 36 of the Act of 1996 provides that where an application to set aside the arbitral award has been filed, 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. Sub-section (2) of Section 36 envisages filing of separate application for stay of the operation of the arbitral award. Sub-section (3) provides that once an application is filed 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. Discretion, has been left to the Court to decide the application for stay of the operation of the arbitral award subject to conditions as it may deem fit.

16. Apt would be the judgment of the Apex Court in the case of Hindustan Construction Company Limited v. Union of India and Others (supra). Considering the provisions of Section 36 as it stood before and after 2015, it has been held and observed that automatic stay/suspension of execution, challenging the award was never envisaged by Section 36. There is no automatic stay or suspension of execution of award, if the same is challenged. Whether the case pertains to period before 2015 amendment or period subsequent thereto, the provisions of Section 36, would apply. It has been held and observed that to state that an award when challenged under

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Section 34 becomes unexecutable merely by virtue of such challenge being made because of the language of Section 36, is plainly incorrect. Section 36 was enacted for a different purpose and when read with Section 35, all what it provides is that enforcement of a final award will be under the CPC, and in the same manner as if it were a decree of the Court. Paragraphs 26 to 41 read thus:

"26. At the outset, it is important to advert to Section 36 of the Arbitration Act, 1996 and the judgments interpreting it. Section 36 (prior to the 2015 Amendment Act) stated as follows:

"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."

27. The UNCITRAL Model Law is important in understanding the provisions of the Arbitration Act, 1996 as the said Act is explicitly based upon it. The preamble of the Arbitration Act, 1996 specifically states as follows:

"Preamble. -- WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985;

AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice;

AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;

AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;

AND WHEREAS the said Model Law and Rules make

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significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;

AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules."

28. As a matter of fact, the judgment in Chloro Controls (I) Pvt. Ltd. v. Seven Trent Water Purification Inc. (2013) 1 SCC 641 says as much in paragraph 93 thereof, which reads as under:

"93. As noticed above, the legislative intent and essence of the 1996 Act was to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and the Geneva Convention. The New York Convention was physically before the legislature and available for its consideration when it enacted the 1996 Act. Article II of the Convention provides that each contracting State shall recognise an agreement and submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not concerning a subject-matter capable of settlement by arbitration. Once the agreement is there and the court is seized of an action in relation to such subject-matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance."

29. What is important so far as the UNCITRAL Model Law is concerned is Article 36(2) thereof, which states as follows:

"36. Grounds for refusing recognition or enforcement- (1) * * *

(2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(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."

30. Shri Dewan has argued that under the UNCITRAL Model Law, Articles 34 and 35 provide for two bites at the cherry: (i) in cases in which an award is sought to be set aside, and (ii) thereafter when not set aside, sought to be recognised and

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enforced in the same country in which it has been made. He is right in stating that Section 36 of the Arbitration Act, 1996 does not follow the two bites at the cherry doctrine, for the reason that when an award made in India becomes final and binding, it shall straightaway be enforced under the CPC, and in the same manner as if it were a decree of the Court, there being no recourse to the self-same grounds when it comes to recognition and enforcement. In point of fact, the raison d'etre for Section 36 is only to make it clear that when an arbitral award is not susceptible to challenge, either because the time for making an application to set it aside has expired, or such application having been made is refused, the award, being final and binding, shall be enforced under the CPC as if it were a decree of the court. This becomes clear when Section 36 and 35 of the Arbitration Act, 1996 are read together. Section 35 of the Arbitration Act, 1996 reads 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."

31. However, in National Aluminum Company Ltd. (NALCO) v. Pressteel & Fabrications (P) Ltd., this Court held: (SCC p.546, paras 10-11)

"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 it 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 34 within 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. 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

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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 Ministry concerned to 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."

32. When this court speaks of "the mandatory language of Section 34" of the Arbitration Act, 1996 obviously what is meant is the language of Section 36 of the Arbitration Act, 1996, as noted by National Buildings Construction Corpn. Ltd. v. Lloyds Insulation India Ltd., SCC para 6. In Fiza Developers & Inter-Trade (P) Ltd. v. AMCI (India) (P) Ltd., this Court held:

[Fiza Developers & Inter-Trade case, SCC p.801, para 20]

"20. Section 36 provides that an award shall be enforced in the same manner as if it were a decree of the court, but only on the expiry of the time for making an application to set aside the arbitral award under Section 34, or such application having been made, only after it has been refused. Thus, until the disposal of the application under Section 34 of the Act, there is an implied prohibition of enforcement of the arbitral award. The very filing and pendency of an application under Section 34, in effect, operates as a stay of the enforcement of the award."

33. To state that an award when challenged under Section 34 becomes unexecutable merely by virtue of such challenge being made because of the language of Section 36 is plainly incorrect. As has been pointed out hereinabove, Section 36 was enacted for a different purpose. When read with Section 35, all that Section 36 states is that enforcement of a final award will be under the CPC, and in the same manner as if it were a decree of the Court. In fact, this is how Section 36 has been read by a three-judge bench in Leela Hotels Ltd. V. Housing and Urban Development Corpn. Ltd. as follows: (SCC p.313, para 45)

"45. Regarding the question as to whether the award of the learned arbitrator tantamounts to a decree or not, the language used in Section 36 of the Arbitration and Conciliation Act, 1996, makes it very clear that such an award has to be enforced under the Code of Civil Procedure in the same manner as it were a decree of the court. The said language leaves no room

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for doubt as to the manner in which the award of the learned arbitrator was to be accepted."

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 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 and Fiza Developers & Intra-Trade (P) Ltd. 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) (P) Ltd. v. Maharashtra State Power Generation Co. Ltd. held that:

(SCC OnLine Bom para 13)

"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 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 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.

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38. Thus, the reasoning of the judgments in NALCO and Fiza Developers and Intra-Trade (P) Ltd. 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 has been followed in National Buildings Construction Corpn. Ltd. v. Lloyds Insulation (India) Ltd. does not take us any further, as National Buildings Construction Corpn. Ltd. in following NALCO, 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 read with Section 35, is to be under the CPC, treating the award as if it were a decree of the court.

39. In any event, on this aspect of the case, the Kochi Cricket judgment referred, in paragraph 25 thereof, to the 246th Law Commission Report on Section 36 as follows: (SCC pp.307-308)

"25. At this point, it is instructive to refer to the 246th Law Commission Report which led to the Amendment Act. This Report, which was handed over to the Government in August 2014, had this to state on why it was proposing to replace Section 36 of the 1996 Act:

"AUTOMATIC STAY OF ENFORCEMENT OF THE AWARD UPON ADMISSION OF CHALLENGE"

43. Section 36 of the Act makes it clear that an arbitral award becomes enforceable as a decree only after the time for filing a petition under Section 34 has expired or after the Section 34 petition has been dismissed. In other words, the pendency of a Section 34 petition renders an arbitral award unenforceable. The Supreme Court, in National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. held that by virtue of Section 36, it was impermissible to pass an order directing the losing party to deposit any part of the award into Court. While this decision was in relation to the powers of the Supreme Court to pass such an order under Section 42, the Bombay High Court in Afcons Infrastructure Ltd. v. Port of Mumbai applied the same principle to the powers of a court under Section 9 of the Act as well. Admission of a Section 34 petition, therefore, virtually paralyses the process for the winning party/award creditor.

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44. The Supreme Court, in National Aluminium, has criticised the present situation in the following words:

(SCC p. 546, para 11)

"11. 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 Ministry concerned to 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."

45. In order to rectify this mischief, certain amendments have been suggested by the Commission to Section 36 of the Act, which provide that the award will not become unenforceable merely upon the making of an application under Section 34."

It then further went on to state: (SCC p.327, para 62)

"62...Since it is clear that execution of a decree pertains to the realm of procedure, and that there is no substantive vested right in a judgment-debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the Amendment Act."

The Court then commented on this Court's judgment in NALCO as follows: (Kochi Cricket case, SCC p.331, para 67)

"67. In 2004, this Court's judgment in National Aluminium Co. had recommended that Section 36 be substituted, as it defeats the very objective of the alternative dispute resolution system, and that the section should be amended at the earliest to bring about the required change in law. It would be clear that looking at the practical aspect and the nature of rights presently involved, and the sheer unfairness of the unamended provision, which granted an automatic stay to execution of an award before the enforcement process of Section 34 was over (and which stay could last for a number of years) without having to look at the facts of each case, it is clear

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that Section 36 as amended should apply to Section 34 applications filed before the commencement of the Amendment Act also for the aforesaid reasons."

(emphasis supplied)

40. Section 36, as amended by the 2015 Amendment Act, now reads as follows:

"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 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 subsection (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)."

41. Given the fact that we have declared that the judgments in NALCO, National Buildings Construction Corpn. Ltd. and Fiza Developers have laid down the law incorrectly, it is also clear that the amended Section 36, being clarificatory in nature, merely restates the position that the unamended Section 36 does not stand in the way of the law as to grant of stay of a money decree under the provisions of the CPC."

17. Yet in another decision of the Apex Court in the case of Sepco Electric Power Construction Corporation v. Power Mech Projects Ltd. (supra), the Apex Court, in paragraphs 27 to 30, has held and

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observed thus:

"27. Under Section 36, where the time for making an application to set aside arbitral award has expired, the award might be enforced in accordance with the provisions of the CPC in the same manner as it were a decree of the Court. Section 36(2) makes it clear that filing an application for setting aside of an award under Section 34 is not to render the award unenforceable, unless the Court expressly grants an order of stay of 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.

28. Once an application under subsection (2) of Section 36 is filed for stay of operation of the arbitral award, the Court might subject to such conditions as it may deem fit, grant stay of the operation of such award, for reasons to be recorded in writing. The Court is empowered to impose such conditions as it might deem fit and may grant stay of operation of the award subject to furnishing of security covering entire amount of the award including interest.

29. The proviso to Section 36(3) of the Arbitration Act, makes it clear that while considering an application for grant of stay in the case of an arbitral award for payment of money, due regard has to be given to the provisions for grant of stay of a money decree under the provisions of the CPC.

30. The proviso to Section 36(3) further stipulates that where the Court is satisfied that a prima facie case is made out that

(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 of the award."

18. Therefore, it is well settled that sub-sections (2) and (3) of Section 36 of the Act of 1996 stipulate filing of the application and grant of express stay of the operation of the arbitral award in accordance with the said provisions. In the present case, as stated herein above, there was no such application and in absence of any application, there cannot be automatic stay of the operation of the award dated 02.12.2014. In absence of any stay granted, the respondent was at liberty to file an execution application. If at all the petitioner Corporation was desirous of seeking stay of the

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execution and enforcement of the award, it ought to have filed an application as envisaged under sub-section (2) of Section 36 of the Act of 1996; however, neither any application was filed nor any request was made to the court below for hearing of the Civil Miscellaneous Application no.47 of 2015.

19. Also, it is difficult to fathom as to how a writ petition under Article 226 and 227 of the Constitution of India, would be maintainable seeking a prayer to stay the implementation, execution and operation of the award dated 02.12.2014 of the learned Arbitrator. Remedy available to the petitioner Corporation is under Section 36 of the Act of 1996 and not before this Court invoking the extraordinary jurisdiction of this Court under Article 226 and 227 of the Constitution of India. Therefore, on this count as well, the petition deserves to be dismissed.

20. Therefore, on all counts, the writ petition does not deserve to be entertained and is hereby rejected. Stay granted by this Court, stands vacated. Rule is discharged. No order as to costs.

21. Mr Mitul K. Shelat, learned advocate submitted that this Court has been kind enough to pass an order dated 04.10.2022 directing petitioner Corporation to deposit sum of Rs.25,000/- in the Registry and to be paid to the respondent on or before 11.10.2022; however, till date, the amount has not been paid. The respondent shall comply the order dated 04.10.2022.

22. At this stage, Mr H. S. Munshaw, learned advocate has prayed for stay of this judgment upto 15.02.2024 to approach the higher forum which request, is strongly objected by Mr Mitul K. Shelat, learned advocate on the ground that as no cause is available, the stay may not be extended further. Considering the fact that the stay

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was operating since the year 2022, and with a view to enabling the petitioner Corporation to approach higher forum, operation of this judgment is stayed upto 15.02.2024.

Sd/-

(SANGEETA K. VISHEN,J) RAVI P. PATEL