Date of judgement
14 December 2020
Judge
Justice G.S.Patel
Parties
Appellant - Kishor N Shah, Vimal K Shah and Nainesh K Shah
Respondent - Urban Infrastructure Trustees
Issues
- Is a stay always conditional, requiring a deposit or security, especially when a monetary award is involved?
- In what circumstances would a court give an indefinite stay? What must an application under Section 36 accomplish in order to receive an unconditional stay?
Overview
- The three applicants were the subject of an arbitral award issued by a three-member arbitral tribunal on August 13, 2019. Commercial Arbitration Petition No. 1435 of 2019 is the Shahs' challenge petition under Section 34 of the Arbitration & Conciliation Act, 1996.
- Section 36 of the Arbitration Act governs the current interim application. The Shahs are requesting a stay on the award's execution, implementation, and enforcement.
- The Shahs have been ordered to pay Rs.106.61 crores, plus interest at 12% per annum, as the acquisition price for certain stocks held by Urban, beginning March 28, 2012. As a result, this is a monetary reward.
- Section 36(3) of the CPC clearly states that the court considering a stay of an arbitral award for money must have "due regard to" the provisions of the CPC, regardless of how mandatory the wording of Order 41 Rule 5 of the CPC may be.
- Even if an extraordinary case has been made for suspending execution of a pure money decree under Order 41 Rule 5, i.e. for a stay of a decree rather than an award, the judicial discretion to do justice is not lost.
- True, an unconditional stay requires a compelling and unique reason — and this is true of a monetary award as well as a decree — but there is no blanket bar on an appeal court absolutely delaying a monetary award or a monetary decree.
- He claims that this is one of those cases because the arbitral award is so twisted, nonsensical, and clearly unconstitutional that it must be delayed without conditions.
Legal provision
- Section 34 - In the case of an arbitration agreement, the court has the power to stay in legal proceedings.
- Section 36 - Power of the court to order that a clause, making an award a condition precedent to action, would not apply to a particular difference, where the arbitration agreement is ordered not to apply to that difference.
Judgement Analysis
- The impugned award will be stayed if and only if the applicants deposit with the Prothonotary& Senior Master, no later than January 29, 2021, the entire amount of Rs.106.61 crores with interest calculated, as per the award up to the date of deposit; the entire amount of Rs.16.56 crores with interest calculated as per the award, up to the date of deposit; and the entire amount of Rs. 7,04,90,666/- with interest calculated as per the award, up to date of the deposit
- Upon deposit, the Prothonotary& Senior Master will invest the funds individually in a nationalised bank for a six-month term at an optimal rate of interest, and then renew each deposit for one year until further instructions of the Court.
- The Shahs have the option of providing a single unconditional bank guarantee for all of the above amounts and interest, as well as future interest, to the satisfaction of the Prothonotary and Senior Master, and issued by a nationalised bank; OR separate bank guarantees for one or more of the amounts mentioned above on like terms.
- If deposits are made as directed above, Respondents Nos. 1 and 2 will be entitled to withdraw all or part of the amounts deposited upon providing a similar unconditional bank guarantee from a nationalised bank to the satisfaction of the Prothonotary& Senior Master covering the amounts withdrawn and additional interest; this order will remain in effect until the petition under Section 34 is finally resolved.
Conclusion
Not only are all observations and findings preliminary, but they are also limited to this application. Since this is a matter in the Commercial Division, costs must follow the event, and the losing party must be obliged to pay costs, under the terms of the CPC as amended by the Commercial Courts, Commercial Division, and Commercial Appellate Division of High Courts Act, 2015.Reasons must be supplied, if costs are not awarded. Not only are all observations and findings preliminary but they are also limited to this application. All claims in the execution and in the Section 34 petition are still on the table.
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