Calcutta High Court
Posco India Pune Processing Centre Pvt. … vs Vijayshree Autocom Limited on 30 January, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
ORDER OCD - 11
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
AP-COM/33/2025
POSCO INDIA PUNE PROCESSING CENTRE PVT. LTD.
VS
VIJAYSHREE AUTOCOM LIMITED
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 30th January, 2025.
Appearance:
Mr. Sakya Sen, Senior Advocate
Mr. Rajarshi Dutta, Advocate
Mr. Ranajit Chatterjee, Advocate
...for the petitioner.
Ms. Nilanjana Adhya, Advocate
Mr. Dipankar Das, Advocate
... for the respondent.
The Court:- This is an application under Section 36(2) of the Arbitration
and Conciliation Act, 1996 [hereinafter referred to as ‘the said Act’].
The petitioner prays for unconditional stay of the award. It is urged before
this Court that the bank account of the petitioner has already been attached by
the order of the Executing Court. Thus, once the award-holder is enjoying
such order of attachment, the question of deposit of the sum awarded, together
with up-to-date interest, would not arise. The other contention of Ms. Adhya is
that the award contains a dissenting view. The concurring decision of the two
members of the Tribunal is erroneous. The issue of limitation was not
considered at all and claims from 2013 had been allowed. The dissenting view
clearly elaborated the reasons as to why part of such claim was barred by
limitation. The third member also held that loss of profit should not be
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allowed. The counter-claim was allowed and directed to be adjusted with
whatever was found due and payable to the award-holder. According to Ms.
Adhya, the award suffers from perversity. The same does not consider the
evidence. The claim for loss of profit for 10 years (5 + 5) was imaginary,
notional and futuristic. The claim for future loss of business for a period of five
years beyond the contract period could not have been allowed without proper
evidence to the effect that, the parties understood the term of the contract to be
for 10 years. Under such situation, the award-debtor is entitled to an
unconditional stay.
It is submitted that this Court can exercise discretion and grant such
stay. Reference has been made to the decision of the Hon’ble Apex Court in the
matter of Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai & Co. reported in
(2005) 4 Supreme Court Cases 1. It is urged that, securing the awarded
amount is not a sine qua non for grant of stay of the award in all cases. If the
Court, upon reading of the award, finds merit in the application under Section
34 of the said Act, discretion can be exercised, thereby, staying the award
without any monetary deposit. If the award-debtor can display from the
records that, the award is vitiated on account of non-application of mind, non-
consideration of material evidence and suffered from erroneous application of
law, the deposit should be waived. According to Ms. Adhya, every adjudicating
authority is bound to consider the issue of limitation, even if limitation is not
set up as a defence by the contesting party.
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Mr. Sen, learned senior advocate for the respondent submits that the
concurrent view of the two arbitrators considers the issue of limitation. The
merits of the application under Section 34 of the said Act, should not be taken
into consideration while deciding a prayer for unconditional stay of the award.
The expression ‘sum’ had been explained by the Hon’ble Apex Court to mean
the principal amount as also the interest and as such, this Court does not have
any discretion to allow stay of the award without deposit of the awarded
amount together with interest.
Heard learned counsel for the respective parties. The question to be
decided in this application is whether the petitioner is entitled to unconditional
stay of the award.
Section 35 of the said Act makes an arbitral award final, subject to the
provisions of Part 1. Section 36 deals with enforcement of awards. Section
36(1) provides that when the time for making an application for setting aside
an award under Section 34 had expired, then, subject to the provisions of Sub-
Section (2), the award shall be enforced in accordance with the provisions of
the Code of Civil Procedure, in the same manner as if it were a decree of court.
Sub-Section (2) provides that when an application to set aside the arbitral
award is filed before the Court under Section 34, filing of the same would not
itself amount to stay of operation of the award. Stay shall be granted by a
Court on a separate application to be filed by the party seeking such stay and
the Court can grant stay of the award in accordance with the provisions of
Sub-Section (3). Sub-Section (3) provides that, upon filing of an application
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under Sub-Section (2) of Section 34 for stay of the arbitral award, the court
may, subject to the conditions as it may deem fit, grant stay of operation of
such award, for reasons to be recorded in writing.
The first proviso to the sub-section (3) states that, while considering
the application for stay in case of an arbitral award for payment of money, due
regard to the provision of stay of the money decree under the provision of Code
of Civil Procedure must be taken into consideration. The second proviso states
that, if the Court is satisfied that a, prima facie, case had been made out to the
extent that, either the arbitration agreement or the contact or the making of
the award were induced or effected by fraud or corruption, it shall grant stay of
the award unconditionally, pending disposal of the application under Section
34 of the said Act.
A combined reading of the aforementioned provisions indicate that
stay of an award for payment of money can be granted only upon securing the
sum. The law permits the Court to exercise discretion, insofar as, the mode
and method of securing the ‘sum’ awarded is concerned, but no discretion has
been left to the Court to stay an award unconditionally on the ground that the
award is either erroneous or unsustainable, in the opinion of the award-debtor.
The principles which emerge from the above discussion are that:-
(a) Unlike the unamended Act, filing of an application for setting aside
the award will not ex facie operate as stay of the award;
5
(b) The expression ‘sum’ which is to be secured by the award debtor
for stay of an award for payment of money, includes principal and
interest;
(c) State Governments, Central Government, Authorities, Public
Sector Undertakings, are not privileged litigants and cannot pray
for unconditional stay of an award for payment of money;
(d) The legislative intent was to ensure that the money awarded is
secured, in order to enable the award holder to enjoy the fruits of
the award.
Upon considering the provisos to sub-section 3 of Section 36 of the said
Act, this Court is of the view that only when the Court is satisfied, prima facie,
that either the arbitration agreement or the contract which is the subject
matter of the arbitration proceeding or the making of the award, are products
of fraud or corruption, it can grant unconditional stay. Admittedly, this is a
case where payment of money had been awarded in favour of the respondent.
As per law, the award debtor has to secure the amount, which includes
principal and interest. The pleadings and submissions made by Ms. Adhya, do
not indicate that the petitioner had ever alleged before the learned Arbitral
Tribunal that, either the agreement or the contract was induced or effected by
fraud or corruption.
The next issue is whether the making of the award was effected by fraud
and corruption. The arguments advanced on behalf of the petitioners are on
the merits of the award. The learned dissenting member of the Tribunal came
6
to certain findings with regard to the counter claim filed by the petitioner. Part
of the claim of the claimant/respondent was found to be barred by limitation.
The learned dissenting Arbitrator also came to a finding that loss of profit could
not be allowed, without proper evidence. Further, the damages and the amount
sought to be recovered, had not been quantified separately. According to the
dissenting view, loss of profit was a notional calculation, and also based on
expected future losses. These aspects have been strongly urged by the
petitioner, to persuade this Court to pass a discretionary order, by waiving the
requirement to secure the ‘sum’ awarded by the majority view. On the other
hand, the concurring view takes care of all aspects. Thus, the Court, at this
stage, does not find any, prima facie, reason to hold that the making of the
award was perpetrated by fraud or corruption. There are no allegations that the
respondent had either misrepresented or suppressed vital evidence before the
Tribunal, which led the majority members of the Tribunal to make the award.
The records must reflect that by some deceitful act, the respondent had
obtained the award. The fact that the respondent had procured the award
either by deceiving the arbitrators or by unfair means, is not prima facie
evident from the records of this case. The majority view is supported by
reasons. The minority view also contains reasons. The minority view does not
totally disregard the claim of the respondent/award holder. Some of the claims
have been disallowed and some partly allowed.
Fraud and corruption, are the only grounds which can persuade this
Court to grant an unconditional stay of the award. Fraud has to be pleaded
7
and proved. Non-consideration of a point raised by the petitioner, incorrect
reasoning or erroneous findings by the Arbitrators, cannot be acts of either
fraud or corruption. The discretion which this Court has, is to balance the
situation and pass directions as to the mode in which the ‘sum’ is to be
secured in the facts of this case.
This Court deems it fit to direct a sum of Rs. 4 cores to be secured by the
petitioner for stay of the award and stay of the execution proceedings. 50% of
the said amount shall be secured by furnishing a bank guarantee to the
satisfaction of the learned Registrar, Original Side of this Court. The bank
guarantee shall be kept renewed from time to time. The remaining 50% shall
be secured in cash before the learned Registrar, Original Side. The learned
Registrar, Original Side of this Court shall deposit the amount in an auto
renewal, interest bearing, fixed deposit with any nationalised bank.
There shall be an unconditional stay of the award for a period of four
weeks. The above mentioned security, both in cash and by way of bank
guarantee, shall be furnished within the aforementioned period of four weeks.
Upon compliance of this order, the stay shall continue till disposal of the
application under section 34 of the said Act. In default, the stay shall stand
vacated without further reference to the Court and the execution case shall
proceed.
As the operation of the bank account of the petitioner has been restrained
and lien had been marked on it, pursuant to the order of the learned Executing
Court dated October 8, 2024, this Court directs that the bank shall, on the
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basis of the server copy of this order, remove the lien and allow the petitioner
to operate the said account for the purpose of securing the money as directed
by this Court, within the aforementioned period.
Accordingly, AP-COM/33/2025 is disposed of.
EC-COM/433/2024 shall appear in the list after four weeks under the
heading “To Be Mentioned” for further orders.
(SHAMPA SARKAR, J.)
S. Kumar/sb/pa/R.D. Barua
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