Sikkim High Court
Sikkim Power Development ... vs M/S Amalgamated ... on 7 October, 2021
Bench: Hon'Ble The Justice, Bhaskar Raj Pradhan
THE HIGH COURT OF SIKKIM : GANGTOK
(Civil Appellate Jurisdiction)
DATED : 7th October, 2021
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DIVISION BENCH: THE HON'BLE ACTING CHIEF JUSTICE MRS. JUSTICE MEENAKSHI MADAN RAI
THE HON'BLE MR. JUSTICE BHASKAR RAJ PRADHAN, JUDGE
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I.A. No.01 of 2020 in Arb. A. No.01 of 2020
Petitioners/Appellants : Sikkim Power Development
Corporation Ltd. and Another
versus
Respondent : M/s Amalgamated Transpower
(India) Ltd.
Application under Section 151 of the
Code of Civil Procedure, 1908
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Appearance
Mr. Tarun Johri with Ms. Tamanna Chhetri, Advocates for the
Petitioners/Appellants.
Mr. Prateek K. Chadha with Ms. Rachana Rai, Advocates for
the Respondent.
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ORDER
Meenakshi Madan Rai, ACJ.
1.(i) Learned Counsel for the parties were heard on
the Application for Stay being I.A. No.01 of 2020 in Arbitration
Appeal No.01 of 2020, filed by the Petitioners/Appellants.
(ii) Relevantly, it may be mentioned that the Appeal
in which the instant I.A. has been filed, impugns the Judgment,
dated 26.12.2019, passed by the Learned Judge, Commercial
Court, East Sikkim at Gangtok in Arbitration Case No.05 of 2017
[(Sikkim Power Development Corporation Ltd.(SPDCL) and Another
vs. Amalgamated Transpower (India) Ltd.(ATPIL)], wherein the
Arbitral Award, dated 30.09.2017, was partly upheld. The
Appellants, under Section 34 of the Arbitration and Conciliation Act,
1996 (for short, the "Arbitration Act") had challenged the Arbitral
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
Award, dated 30.09.2017, before the Learned Commercial Court,
East Sikkim at Gangtok, passed by the sole Arbitrator.
(iii) It is pertinent to mention here that in Arbitration
Appeal No.01 of 2021, the Respondent herein also assails the same
Judgment being aggrieved by the setting aside of the Arbitral
Award with respect to Issues No.9, 11 and 20.
(iv) On 22.06.2020, I.A. No.01 of 2020, dated
06.03.2020, was heard and an ex parte ad interim Order of Stay
was granted and Notice issued to the Respondent. The Respondent
entered appearance on 17.09.2020 and sought eight weeks‟ time
to file response to the Stay Petition and the Appeal. Reply to the
Stay Petition was filed by the Respondent on 22.03.2021, a year
after the said I.A. was filed. The ex parte ad interim Order of Stay
was extended vide Order, dated 24.03.2021. On 17.08.2021, the
matter came to be listed before the Division Bench. This Appeal
(Arbitration Appeal No.01 of 2020) was ordered to be listed for
admission/final disposal along with Arbitration Appeal No.01 of
2021. On 24.09.2021, the matter was part heard and listed for
further hearing on 28.09.2021. On 28.09.2021, considering that
the ex parte ad interim Order of Stay had been granted on
22.06.2020, this Court deemed it fit to first hear the Stay
Application.
2. Learned Counsel for the Appellants advancing his
arguments contended that the Learned Commercial Court, East
District, had vide the impugned Judgment, dated 26.12.2019,
erroneously partly dismissed the Petition filed by the Appellants
under Section 34 of the Arbitration Act challenging the impugned
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
Arbitral Award, dated 30.09.2017. That, the I.A. consequently
sought Stay of the operation of the impugned Judgment to the
extent that it rejects the objections raised by the Appellants
against the impugned Award, dated 30.09.2017, passed by the
sole Arbitrator. It was further contended that a prima facie case, in
fact, exists in favour of the Appellants and against the Respondent
as the Learned Commercial Court failed to appreciate that under
the peculiar facts and circumstances of the case, the Respondent
neither factually nor legally, were entitled to an Award of Decree of
Specific Performance against the Appellants. That, the balance of
convenience and inconvenience lies in favour of the Appellants and
the documents on record clearly prove that the Respondent was
not willing to perform its part of the obligation and was therefore
not entitled to the Award of Decree of Specific Performance in its
favour. Besides, should the impugned Judgment not be stayed, the
Appellants would suffer irreparable loss and injury. Moreover, the
amount awarded is a large amount and should this Court ultimately
arrive at a finding that the Arbitral Tribunal and the Learned
Commercial Court have erroneously reached at their respective
findings, it would serve no purpose for the Appellants to deposit
any amount at this stage.
3.(i) Learned Counsel for the Respondent, while
vehemently repelling the submissions of Learned Counsel for the
Appellants, contended that the Arbitral Award can only be stayed
by means of a reasoned order, having due regard to the provisions
of a Money Decree and hence the Court is required to be guided by
the provisions of Order XLI Rules 5 and 6 of the Code of Civil
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
Procedure, 1908 (for short, the "CPC"). That, the Appellants could
not have sought a Stay of the Arbitral Award without satisfying the
necessary legal conditions and without complying with the
mandatory requirements of depositing the awarded amount in
Court. That, the provisions of the Arbitration and Conciliation Act,
1996 as amended in 2015, are applicable to the present case as
the proceedings before the Learned Commercial Court was initiated
subsequent to 23.10.2015. Referring to the decision of the Hon‟ble
Supreme Court in Board of Control for Cricket in India vs. Kochi Cricket
Private Limited and Others1 reconfirmed by a three Judge Bench of
the Hon‟ble Supreme Court in Hindustan Construction Company
Limited and Another vs. Union of India and Others2, it was urged that
the Appellants must deposit the amount awarded by the Arbitral
Tribunal, which was concurrently upheld by the Learned
Commercial Court while dealing with the case under Section 34 of
the Arbitration and Conciliation Act, 1996, as amended.
(ii) While walking this Court through the provisions of
Section 36 of the Arbitration Act of 1996, as amended in 2015, it
was contended that in view of the said provisions of the 2015
amendment and the ratiocinations of the Hon‟ble Supreme Court
supra, it is now mandatory that the entire awarded amount be
deposited prior to grant of Stay by the Court. It was further urged
that the Hon‟ble Supreme Court, while setting aside the Order of
the Hon‟ble Bombay High Court in Manish vs. Godawari Marathwada
Irrigation Development Corporation3 which had directed deposit of
(2018) 6 SCC 287
2019 SCC OnLine 1520
SLP(C) No(s).11760-11761/2018 dated 16.07.2018
and 26.09.2018
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
60% of the awarded amount prior to granting of Stay, directed that
100% of the awarded amount be deposited, keeping in mind that
the Award is now in the nature of a Money Decree. That, in terms
of the law laid down by the Hon‟ble Supreme Court discussed
supra, the entire amount of the Arbitral Award has to be deposited
by the Appellants herein.
(iii) It was further contended that in the instant
matter, the Arbitral Tribunal inter alia awarded the sums as
follows;
Prayer „G‟ pertaining to Bond Money: The
Principal Amount awarded was Rs.47,13,53,405/- only, with
interest calculated at Rs.38,29,58,499/- only.
Prayer „I‟ for Cost Escalation: The Principal
Amount Awarded was Rs.265,10,00,000/- only. No interest was
awarded on this aspect.
Further, Rs.41.07 Lakhs only, was also awarded
as Costs of Arbitration in Prayer „K‟ but since no finding with regard
to the Costs imposed was addressed by the Learned Commercial
Court in the impugned Judgment, the Respondent does not press it
at this stage. That, the alternative Award granted for Specific Relief
is also not being pressed at this stage, neither is the 18% interest
awarded by the Arbitral Tribunal from the date of the Award i.e.
30.09.2017, in view of the fact that the Hon‟ble Supreme Court has
not laid down any specific law pertaining to interest on the Arbitral
Award.
(iv) That, the Appellants, in fact, vide their averments
in the Appeal have admitted that the Arbitral Award given in terms
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
of Prayer „G‟ and Prayer „I‟ have been upheld by the Learned
Commercial Court. That, hence the Appellants be directed to
deposit the amounts awarded in Prayer „G‟ and Prayer „I‟ for the
present purposes. That, no special concessions can be extended to
the Government while dealing with grant of Stay as can be culled
out from the ratio in PAM Developments Pvt. Ltd. vs. State of West
Bengal4. Consequently, the Appellants cannot be given the benefit
of Stay sans payment of the Arbitral Award.
4. In rebuttal, Learned Counsel for the Appellants
submitted that the Respondent has sought for payment towards
Cost Escalation for construction of a Project which has not yet
commenced. That, Statutory Consent and Approvals for
construction of the Project have lapsed. That, the hard earned
revenue of the State cannot be handed over to the Respondent,
who has miserably failed to take up even preliminary steps in
respect of the development of the Project. That, the finances of the
Appellants would be seriously affected if the Arbitral Award, as
modified by the impugned Judgment, is not unconditionally stayed
during pendency of the Appeal. Further, no loss would be caused to
the Respondent if the Appeal would be heard by this Court without
directing deposit of the Arbitral Award. That, the proviso to Section
36 of the Arbitration Act, 1996, as amended in 2015, requires 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 CPC. The said specific words in the
Proviso does not mandate that the Court shall abide by all the
(2019) 8 SCC 112
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
terms of the CPC. Moreover, Order XLI Rule 1(3) of the CPC
provides that the Appellate Court may allow deposit of the amount
disputed in the Appeal or allow the concerned party to furnish
Security in respect thereof giving discretion to the Court in this
context. That, no precedent has been laid down by the Hon‟ble
Supreme Court with regard to Section 36 of the Arbitration Act as
the ratiocinations relied on by the Respondent are dependent on
the facts and circumstances of the particular case.
5.(i) The rival submissions having been heard in
extenso, it may appropriately be mentioned that the Stay granted
vide Order, dated 22.06.2020, was an ex parte ad interim relief
and hence the matter was taken up for hearing on 28.09.2021.
While considering the requirements of the provisions of Section 36
of the Arbitration Act and Order XLI Rules 5 and 6 of the CPC, it is
apposite to notice that in Manish vs. Godawari Marathwada Irrigation
Development Corporation (supra), the Hon‟ble Supreme Court, while
disagreeing with the decision of the Bombay High Court which had
ordered 60% deposit, pending the Section 37 Appeal, observed
inter alia as follows;
"...... since these are money decrees there should be 100%
deposit, with the respondent being entitled to withdraw the
amount deposited and furnish solvent security to the
satisfaction of the High Court."
The impugned Order of the High Court was set aside.
(ii) In Pam Developments Private Limited (supra), the
grant of unconditional Stay to Government with respect to
proceedings under Section 34 of the Arbitration Act, 1996, by
invoking the provisions of Order XXVII Rule 8-A of the CPC were
being considered. The Hon‟ble Supreme Court observed that the
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
invocation of Order XXVII Rule 8-A of the CPC by the High Court for
the grant of the unconditional Stay to Government with respect to
Arbitral Award passed against it was not proper. It was held inter
alia thus;
"28. Section 36 of the Arbitration Act also does not
provide for any special treatment to the Government while
dealing with grant of stay in an application under proceedings of
Section 34 of the Arbitration Act. Keeping the aforesaid in
consideration and also the provisions of Section 18 providing for
equal treatment of parties, it would, in our view, make it clear
that there is no exceptional treatment to be given to the
Government while considering the application for stay under
Section 36 filed by the Government in proceedings under
Section 34 of the Arbitration Act.
29. Although we are of the firm view that the archaic Rule
8-A of Order 27 CPC has no application or reference in the
present times, we may only add that even if it is assumed that
the provisions of Order 27 Rule 8-A CPC are to be applied, the
same would only exempt the Government from furnishing
security, whereas under Order 41 Rule 5 CPC, the Court has the
power to direct for full or part deposit and/or to furnish security
of the decretal amount. Rule 8-A only provides exemption from
furnishing security, which would not restrict the Court from
directing deposit of the awarded amount and part thereof.
30. For the foregoing reasons, we are of the opinion that
the impugned order passed by the Calcutta High Court granting
unconditional stay of the arbitration award dated 21-1-2010,
cannot be sustained in the eye of the law. ...................................."
(iii) In Board of Control for Cricket in India (supra),
Section 34 Applications under the Arbitration and Conciliation Act,
1996, were all filed prior to the coming into force of the
Amendment Act w.e.f. 23.10.2015. In the four Appeals, the Section
34 Applications were filed after the Amendment Act came into
force. The Court went into a detailed discussion about the pre-
amended Section 36 and amended Section 36 of the Arbitration
Act. The 246th Law Commission Report which led to the
Amendment Act was also discussed in the ratio, wherein the reason
for proposing to replace Section 36 of the Arbitration Act of 1996
was considered and it was observed therein that the unamended
Section 36 of the Act made it clear that an Arbitral Award became
enforceable as a Decree only after the time for filing a Petition
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
under Section 34 had expired, or after the Section 34 Petition was
dismissed. In other words, the pendency of a Section 34 Petition
rendered an Arbitral Award unenforceable, hence the admission of
a Section 34 Petition virtually paralysed the process for the
Winning Party/Award Creditor. The Report also observed that the
Hon‟ble Supreme Court in National Aluminium Co. Ltd. v. Pressteel &
Fabrications (P) Ltd.5 had criticized the said situation in the following
words;
"44. ..........................
„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.‟"
[Emphasis supplied]
That, the Amendment in Section 36 was to ensure that mere filing
of an Application under Section 34 does not operate as an
automatic Stay on the enforcement of the Award. It was held inter
alia as follows;
"60. This brings us to the manner of enforcement of a
decree under CPC. A decree is enforced under CPC only through
the execution process (see Order 21 of the Code of Civil
Procedure). Also, Section 36(3), as amended, refers to the
provisions of the Code of Civil Procedure for grant of stay of a
money decree. This, in turn, has reference to Order 41 Rule 5 of
the Code of Civil Procedure, which appears under the Chapter
heading, "Stay of Proceedings and of Execution". This being so,
it is clear that Section 36 refers to the execution of an award as
if it were a decree, attracting the provisions of Order 21 and
Order 41 Rule 5 of the Code of Civil Procedure and would,
therefore, be a provision dealing with the execution of arbitral
awards. ............"
6. In light of the ratiocinations referred to
hereinabove, it is evident that in terms of Section 36(2) and (3) of
(2004) 1 SCC 540
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
the Arbitration Act, which came into effect from 23.10.2015, in
order to obtain a Stay of operation of the Arbitral Award, the party
assailing the Award may file an application seeking such relief from
the Court. The Court, in turn, has the discretion to consider the
prayer and grant Stay of operation of the Arbitral Award, subject to
conditions that it may impose as deemed fit. As per Section 36(3)
of the Arbitration Act, however, when the party seeks Stay of the
operation of the Arbitral Award for payment of money, the Court is
to consider the provisions for grant of Stay of a Money Decree
under the provisions of Order XLI of the CPC. The argument of
Learned Counsel for the Appellants that the Court is only to be
guided by the provisions of the CPC and there is no mandate that
the Code is to be complied with cannot be countenanced, in view of
the specific direction of the Hon‟ble Supreme Court as laid down in
Manish vs. Godawari Marathwada Irrigation Development Corporation
supra and the discussions that have emanated in Board of Control
for Cricket in India supra. Thus, while considering the prayer of the
Appellants for grant of Stay of the operation of the Arbitral Award
made against them for payment of money, this Court is required to
follow the provisions of Order XLI Rule 5 of the CPC.
7. In consideration of the discussions that have
emanated supra and the law laid down by the Hon‟ble Supreme
Court, it is not necessary to delve into a prolix discussion of the
provisions of Section 36 of the Arbitration Act and Order XLI Rules
5 and 6 of the CPC. Suffice it to state that when Stay is to be
granted, a deposit is to be made by the party seeking Stay of the
operation of the Arbitral Award.
Sikkim Power Development Corporation Ltd. & Anr.
vs.
M/s Amalgamated Transpower (India) Ltd.
8.(i) In view of the rival contentions put forth, we are
of the considered opinion that Learned Counsel for the Appellants
has made out a case for grant of Stay of the operation of the
Arbitral Award till further orders of this Court.
(ii) Consequently, the ex parte ad interim Order of
Stay granted by this Court vide Order, dated 22.06.2020, stands
confirmed until further orders.
(iii) However, considering the submissions of Learned
Counsel for the Respondent as reflected supra, whereby his specific
prayer is for deposit of the amounts as granted in Prayer „G‟ and
Prayer „I,‟ the Appellants are directed to deposit two Bank Drafts,
one for a sum of Rs.85,43,11,904/- (Rupees eighty five crores,
forty three lakhs, eleven thousand, nine hundred and four) only,
(i.e. Rs.47,13,53,405/- + Rs.38,29,58,499/-) and another for a
sum of Rs.265,10,00,000/- (Rupees two hundred and sixty five
crores and ten lakhs) only, within sixteen weeks from today.
(iv) The aforestated sum shall be held by the Registry
by opening a separate Account or if deposited in any Account of the
High Court, separation of the amounts be maintained till further
Orders of this Court.
9. I.A. No.01 of 2020 stands disposed of
accordingly.
( Bhaskar Raj Pradhan ) ( Meenakshi Madan Rai )
Judge Acting Chief Justice
07.10.2021 07.10.2021
ml Approved for reporting : Yes
