Calcutta High Court
Hooghly River Bridge Commissioners vs Mbl Infrastructure Limited on 13 January, 2025
Author: Ravi Krishan Kapur
Bench: Ravi Krishan Kapur
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
GA-Com. 5 of 2023
GA 2 of 2022
AP-Com 187 of 2024
(Old No: 340 of 2020)
Hooghly River Bridge Commissioners
Petitioner
Versus
MBL Infrastructure Limited
Respondent/Award Holder/Applicant
For the Petitioner/
Award Holder :Mr. Ratnanko Banerjee, Sr. Advocate
Mr. Shaunak Mitra, Advocate
Ms. Sristi Barman Roy, Advocate
Ms. Pritha Basu, Advocate
Ms. N. Ghosh, Advocate
Mr. Debartha Chakraborty, Advocate
For the Respondent/
Award Debtor :Mr. Kishore Datta, Ld. Advocate General
Mr. Anirban Ray, Advocate
Mr. Chayan Gupta, Advocate
Mr. Sarvapriya Mukherjee, Advocate
Mr. Aviroop Mitra, Advocate
Judgment on : 13 January 2025
Ravi Krishan Kapur J.
1. GA/5/2023 is an application filed by the award-holder/petitioner seeking
directions on the award debtor/respondent to furnish cash security for a
sum of Rs.19,70,98,273/- and also permit withdrawal of the entire
deposited amount (including any additional amount) on such terms and
conditions as this Court thinks fit and proper.
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2. Briefly, the disputes between the parties arise out of a works contract for
construction of a multi-storied bus terminus and commercial complex at
Serampore, West Bengal. Disputes and differences having arisen between
the parties, the award holder was compelled to initiate arbitration
proceedings for recovery of their dues. Ultimately, by an award dated 29th
June, 2020, a sum of Rs.14.68 crores together with interest thereon was
awarded in favour of the petitioner.
3. Being aggrieved by the award, the respondent had filed an application
under section 34 of the Arbitration and Conciliation Act, 1996.
Subsequently, the respondent had also filed an application for stay of the
award. By an order dated 16th September, 2021, stay of the award was
granted upon the respondent furnishing security for an amount of Rs. 10
crores (half in cash and half by way of bank guarantee) with the Registrar,
Original Side. Being dissatisfied with the order dated 16th September, 2021,
the respondent preferred a Special Leave Petition which was dismissed by an
order dated 5 June, 2022, granting liberty to the petitioner to pray for
withdrawal of the amount deposited subject to terms and conditions as this
Court may direct.
4. In the above background, the petitioner had filed an application being
GA/2/2022 seeking permission to withdraw Rs.5 crores lying deposited with
the Registrar, Original Side of this Court. The said application is still
pending. In view of the common questions of law and fact raised in both
these applications the same were heard analogously.
5. On behalf of the petitioner, it is submitted that the prayer for additional
cash security of Rs.19,70,98,273/- over and above the amount of Rs.10
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crores deposited in terms of the order dated 16th September, 2021 ought to
be granted. The arbitral award as on 29th June, 2020 was for
Rs.22,40,35,152/- and has now escalated to Rs.29,93,40,754/- due to the
interest component in terms of the award. It is also contended that the
petitioner is in dire needs of funds to carry on business. The subsequent
event of an amount of approximately Rs.7.5 crores having accrued on
account of interest and the requirement of the petitioner to seek withdrawal
of the amount furnished as security warrants reconsideration of the security
furnished in terms of section 36(2) of the Act. In support of such
contentions, the petitioner relies on Manish v. Godawari Marathawada
Irrigation Development Corporation 2018 SCC OnLine SC 3863, State of West
Bengal v. BBM Enterprises (A.P. No. 808 of 2022), Damodar Valley
Corporation v. Reliance Infrastructure Limited 2022 SCC OnLine Cal 553 and
Dilip Kumar Chatterjee v. State of West Bengal (E.C. No. 467 of 2019).
6. On behalf of the respondent, it is contended that there is no provision under
the Act which provides for withdrawal of the amount furnished as security
under section 36 of the Act. The Act is a consolidating Act and a complete
Code by itself. The provisions of the Code of Civil Procedure, 1908 are
merely applicable as guidance. In the absence of any specific provision, the
High Court exercising jurisdiction under the Act does not have any power to
pass orders on equitable considerations. Section 36(2) of the Act only
contemplates securing an award. There is no scope for exercising any
equitable jurisdiction in permitting the prayer for withdrawal of the awarded
amount or any portion thereof. Any such prayer is in the nature of
restitution and is impermissible under the Act. In any event, once the
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enforceability of the award has been stayed, any review of such order would
tantamount to enforcement of the award. In support of such contentions,
the respondent relies on Fuerst Day Lawson -vs- Jindal Export (2011) 8 SCC
333,Pam Development (P) Ltd -vs- State of West Bengal (2019) 8 SCC 112,Shiv
Kumar Sharma -vs- Santosh Kumari (2007) 8 SCC 600,Supreme Court Bar
Association -vs- Union of India (1998) 4 SCC 409.
7. Section 36 of the Act provides as follows:
(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).]
2[Provided further that where the Court is satisfied that a prima facie case ismade 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 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).]
8. In Union of India vs. Amitava Paul, AIR 2015 Cal 89, a Full Bench of this
Court held as follows:
Under such circumstances, when the Court chooses to exercise its discretion in
favour of the appellant State to grant stay of execution of a money decree it
must balance the equities between the parties and ensure that no undue
5hardship is caused to a decree-holder due to stay of execution of such decree.
Hence, in appropriate cases, the Court in its discretion may direct deposit of a
part of the decretal sum so that the decree-holder may withdraw the same
without prejudice and subject to the result of the appeal. Such direction for
deposit of the decretal sum is not for the purpose of furnishing security for due
performance of the decree but an equitable measure ensuring part satisfaction
of the decree without prejudice to the parties and subject to the result of the
appeal as a condition for stay of execution of the decree.
To hold that the Court is denuded of such equitable discretion while granting
stay of execution of a money decree in favour of the Government, would cause
grave hardship to deserving decree-holders who in the facts of a given case
may be entitled to enjoy part satisfaction of the decree without prejudice and
subject to the result of the appeal as a condition for stay of execution of the
entire decree.
9. In Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhal & Co.. (2005) 4 SCC 1,
the Hon’ble Supreme Court while interpreting of the Code of Civil Procedure,
1908 Order 41 Rule 5, it was held as follows:
“6. Order 41 Rule 1(3) CPC provides that in an appeal against a decree for
payment of amount the Appellant shall, within the time per permitted by the
Appellate Court, deposit the amount disputed in the appeal or furnish such
security in respect thereof as the court may think fit. Under Order 41 Rule 5(5),
a deposit or security, as abovesaid, is a condition precedent for an order by
the appellate court staying the execution of the decree. A bare reading of the
two provisions referred to hereinabove, shows a discretion having been
conferred on the appellate court to direct either deposit of the amount disputed
in the appeal or to permit such security in respect thereof being furnished as
the appellate court may think fit. Needless to say that the discretion is to be
exercised judicially and not arbitrarily depending on the facts and
circumstances of a given case. Ordinarily, execution of a money decree is not
stayed inasmuch as satisfaction of money decree does not amount to
irreparable injury and in the event of the appeal being allowed, the remedy of
restitution is always available to the successful party. Still the power is there,
of course a discretionary power, and is meant to be exercised in appropriate
cases.”
10. In Dilip Kumar Chatterjee vs. State of West Bengal and Another (Unreported
decision dated 18th October, 2023 passed in GA/4/2022 in EC/464/2009)
this Court, inter alia, held as follows:
7. In deciding the question of stay, the provisions of the Code of Civil of
Procedure, 1908 may be followed as a guiding tool and the same are to be
applied only insofar as the same are not inconsistent with the spirit and
6provisions of the Act [Pam Developments Private Limited vs. State of West
Bengal (2019) 8 SCC 112]. Post amendment, section 36(2) protects an award
holder inasmuch as the section has been introduced keeping in mind that
challenges to awards take years to attain finality. Ordinarily, in cases of
money decrees, the most commercially suitable form for securing an award
holder is by way of cash or bank guarantee. If such cash or bank guarantee is
furnished it would be commercially prudent to permit the award holder to
utilize the same on terms and conditions rather than keep the money lying
idle. The relief for withdrawal of money on terms and conditions is also in
consonance with the object and implicit in section 36(2) of the Act.
8. In view of the aforesaid, there is no merit in the submission on behalf of the
award debtor that there is no power to permit withdrawal of the security and
the same cannot be granted by Court. The power to permit withdrawal of
security depends on the terms and conditions on which stay of an award is to
be granted. Any exercise of discretion in this regard should be with the aim of
protecting both the award holder as well as the award debtor. [Pam
Developments Pvt. Ltd. vs. State of West Bengal (2019) 8 SCC 112, Damodar
Valley Corporation vs. Reliance Infrastructure Limited unreported
judgmentdated 25.03.2022 in AP/40/2020, Union of India vs. Pam
Development Pvt. Ltd. unreported judgment dated 17.05.2022 in
AP/1121/2016, State of Maharashtra through the Executive Engineer vs.
Patel Engineering Ltd. &Ors. 2021 SCC OnLineBom 12596, The State of West
Bengal vs. Dilip Kumar Chatterjee unreported judgment dated 30.01.2023 in
AP/557/2012 and The State of West Bengal &Ors. vs. M/s BBM Enterprise
unreported judgmentdated 25.07.2023 in AP/808/2022].
11. In its amended form, section 36 contemplates a party now being statutorily
obliged to furnish security in order to obtain stay of an arbitral award. The
purpose of security is to ensure and facilitate fulfilment and enjoyment of
the ultimate fruits of an award. In such matters, there cannot be any
straight jacket formula. Each case has to be decided on its own merits. In
exercising the powers under section 36 of the Act, the provisions of the Civil
Procedure Code, 1908, may be taken into consideration. However, even
though not mandatory, a Court is obliged to give “due regard to the
provisions of the Code”. The order also requires to be reasoned. Needless to
say, the discretion by a Court has to be exercised judicially and not
arbitrarily depending on the facts and circumstances of each case.
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12. In this background, it is important to examine the nature of an order passed
in an application under section 36 of the Act. There are different situations
which may arise even after the passing of an order under this section. The
parties or any one of them may need to approach Court in view of
subsequent events or changed circumstances. A party may wish to
substitute the form of security originally directed by the Court. The security
may also require to be renewed, revalued or re-examined. Thus, once a
Court exercises its jurisdiction under section 36 of the Act and directs
security in a particular mode and manner, it always retains inherent
jurisdiction in respect of such security. In such circumstances, any order
passed at this stage of the proceeding is an interim order and by nature
subject to alteration, variation or modification. As such, a Court always
retains the power and jurisdiction to pass necessary orders. [Damodar Valley
Corporation v. Reliance Infrastructure Limited 2022 SCC OnLine (Cal)].
13. There is also no question of res judicata as contended by the respondent. In
Arjun Singh v. Mohindra Kumar AIR 1969 SC 993, it has been held as
follows:
“14. It is needless to point out that interlocutory orders are of various kinds;
some like orders of stay, injunction or receiver are designed to preserve the
status quo pending the litigation and to ensure that the parties might not be
prejudiced by the normal delay which the proceedings before the court,
usually take. They do not, in that sense, decide in any manner the merits of
the controversy in issue in the suit and do not, of course, put an end to it even
in part. Such orders are certainly capable of being altered or varied by
subsequent applications for the same relief, though normally only on proof of
new facts or new situation which subsequently emerge.”
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14. A reading of the order dated 5 January, 2022 passed by the Supreme Court
also preserves and recognizes the right of the petitioner to seek withdrawal of
the amount already deposited. The purpose of section 36 is for securing the
awarded amount. The object of the section in its amended form is a step in
aid of and keeping with the statutory intention of giving primacy to the
finality of the arbitral award. The question of withdrawal of the same is
commercially prudent and can always be taken into account in balancing
the equities between the parties. It does not serve any commercial purpose
to allow money to remain lying idle. In view of the above, the contention that
there is no power to direct withdrawal of the sum deposited is rejected.
15. It is also contended that the respondent is a public undertaking and is not
facing any financial crisis. In Pam Development Pvt. Ltd. v. State of West
Bengal, (2019) 8 SCC 112 it has been held that, “in certain cases few
provisions exist under the Civil Procedure Code, 1908 which provide for
differential treatment to the government. However, no special or exceptional
treatment need be given to the State, while considering an application under
Section 36 of the Act”. Hence, there is no question of the respondent
deserving any special treatment on this account. The petitioner has cited
facing a cash flow problem and requirement of immediate funds for business
purposes. The decision not to seek withdrawal of the money lying pursuant
to the initial order dated 16 September 2021 is always subject to
reconsideration. The substantial increase of the interest component after
passing of the award is also a fact which has subsequently emerged.
Admittedly, the awarded amount stood at Rs. 22,40,35,183/- as on 29 June
2020. After, the passing of the order by the Hon’ble Supreme Court, post
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award interest @ 9.50% calculated from January 6, 2022 till November 16,
2024 has accumulated to Rs. 7,67,06,721.12/-. This is no meagre amount.
In view of the clear mandate of the section, it is now obligatory for the
respondent to secure the entirety of the awarded amount so that the
security ordered is real.
16. In such circumstances, both the above facts are subsequent events which
warrant re-examination of the security furnished in terms of the order dated
September 16, 2021. Significantly, the above facts have transpired after
passing of the order by the Supreme Court dated 6 January 2022. The
attempt of the award holder/petitioner to reopen the aspect of security for
the balance amount which was also covered in terms of the order dated 16
September 2021 read with the order dated 5 January 2022 stands rejected.
17. In view of the above, GA 5 of 2023 stands allowed. There shall be an order in
terms of prayers (a), (b) and (c) of the Notice of Motion. It is clarified that the
amount to be secured by the judgment debtor is only to the extent of
Rs.7,69,50,360/-. To this extent, prayer (a) of the Notice of Motion stands
modified. Such security is directed to be furnished to the extent of Rs.3.50
crores in the form of cash security or its equivalent form to the satisfaction
of the Registrar, Original Side, High Court and the remaining amount of
Rs.4,19,50,360/- in the form of bank guarantee of any nationalised bank
also to the satisfaction of the Registrar, Original Side, High Court.
18. Liberty is also granted to the petitioner/award holder to seek withdrawal of
the sum of Rs.5 crores lying as cash security in terms of the order dated 16
September 2021 upon furnishing counter security in the form of bank
guarantee of an equivalent amount to the satisfaction of the Registrar
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Original Side of this Court. To this extent, the Registrar, Original Side is
permitted to encash any fixed deposit created in respect of the amount of
Rs.5 crores. Liberty is also granted to the Registrar, Original Side to encash
the bank guarantees furnished by the respondent/award debtor and
transfer such proceeds for the balance amount of Rs.5 crores furnished in
terms of the order dated 16 September 2021, to the petitioner upon the
petitioner furnishing a counter bank guarantee for an equivalent amount.
Similar directions for withdrawal of the security be granted in respect of the
amount of Rs.3.50 crores directed in terms above and for encashment of the
proposed bank guarantee also directed to be deposited in terms of this
order, upon furnishing of bank guarantees for an equivalent amount to the
satisfaction of the Registrar, Original Side. All such guarantees are directed
to be kept alive until further orders of Court and should be renewed at least
one month before the date of expiry. In the event, security as directed above
is furnished, there shall be a stay of enforcement of the award for the
additional awarded amount as directed above. In case the petitioner does not
withdraw the above amount of cash, the Registrar, Original Side, is directed
to make a fixed deposit of the said amount with any nationalised bank and
keep the same renewed until further orders of the Court. The order dated 16
September 2021 stands modified to the above extent. The above exercise is
to be completed within a period of four weeks from the date of passing of
this order.
19. In view of the above, nothing survives in GA 2 of 2022 and the same stands
disposed of. With the above directions, GA 5 of 2023 also stands disposed of.
(Ravi Krishan Kapur, J.)
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