Arbitration and Conciliation Act, 1996 – Code of Civil Procedure, 1908 – Effect of s. 36 of the Arbitration Act, vis-a-vis the provisions of Or. XXVII, r. 8A of CPC – Respondent-State invited tender relating to the work of ‘Special Repair Programme 20002001 for different stretches of National Highway-II’ – The bid of appellant was accepted and an agreement was registered – The work under the agreement was completed – The appellant raised its claims and dues before the State – The claims of the appellant were not paid – Appellant filed an application u/s. 11(6) of the Act, 1996 – Arbitrator allowed claims of the appellant – Aggrieved, the Respondent-State filed application u/s.34 of the Act, 1996 before the High Court – Thereafter, appellant filed an execution application before the High Court – Executing Court by order dated 3.10.2018 attached the sum of Rs. 2.75 crores and clarified that in the event there was no stay of operation of the award, it was open to the appellant to pray for release of the said amount – In the meantime, the respondent filed stay application u/s. 36(2) of the Act, 1996 and order of the unconditional stay was passed relying on the provisions of Or. XXVII, r. 8A of CPC – Relying on the order of the unconditional stay, the Executing Court dismissed the execution petition – On appeal, held: The Arbitration Act is a special Act which provides for quick resolution of disputes between the parties and s.18 of the Act makes it clear that the parties shall be treated with equality – Once the Act mandates so, there cannot be any special treatment given to the Government as a party – As such, under the scheme of the Arbitration Act, no distinction is made nor any differential treatment is to be given to the Government, while considering an application for grant of stay of a money decree in proceedings u/s. 34 of the Arbitration Act – The reference to CPC in s.36 of the Arbitration Act is only to guide the Court as to what conditions can be imposed, and the same have to be consistent with the provisions of the Arbitration Act – Insofar Or. XXVII, r.8A of CPC is concerned, r.8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof – Thus, order of the High Court granting unconditional stay of the arbitration award not sustainable in the eyes of the law – Accordingly, order dated 03.10.2018 of the Executing Court restored and as already directed, it is open for the appellant-award holder to pray for release of the attached amount.
Code of Civil Procedure, 1908 – Or.XXVII, r.8A – Application of – Held: The archaic r. 8A of Order XXVII, CPC has no application or reference in the present times, even if it is assumed that the provisions of Or.XXVII, r.8A of CPC are to be applied, the same would only exempt the Government from furnishing security, whereas u/Or. XLI, r. 5 of CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount – r.8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof.
Allowing the appeals, the Court
HELD: 1. Sub-Section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub-section clearly mandates that the grant of stay of the operation of the award is to be for reasons to be recorded in writing “subject to such conditions as it may deem fit”. The proviso makes it clear that the Court has to “have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure”. The phrase “have due regard to” would only mean that the provisions of CPC are to be taken into consideration, and not that they are mandatory. While considering the phrase “having regard to”, this Court in the case of Shri Sitaram Sugar Company Limited. v. Union of India (1990) 3 SCC 223 has held that “the words ‘having regard to’ in sub-section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory.”. [Para 17] [266-H; 267-A-C]
2. In view of this Court, in the present context, the phrase used is ‘having regard to’ the provisions of CPC and not ‘in accordance with” the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. The provisions of CPC are to be followed as a guidance, whereas the provisions of the Arbitration Act are essentially to be first applied. Since, the Arbitration Act is a self-contained Act, the provisions of the CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration Act. [Para 18] [267-D-F]
3. Arbitration proceedings are essentially alternate dispute redressal system meant for early/quick resolution of disputes and in case a money decree - award as passed by the Arbitrator against the Government is allowed to be automatically stayed, the very purpose of quick resolution of dispute through arbitration would be defeated as the decree holder would be fully deprived of the fruits of the award on mere filing of objection under Section 34 of the Arbitration Act. The Arbitration Act is a special Act which provides for quick resolution of disputes between the parties and Section 18 of the Act makes it clear that the parties shall be treated with equality. Once the Act mandates so, there cannot be any special treatment given to the Government as a party. As such, under the scheme of the Arbitration Act, no distinction is made nor any differential treatment is to be given to the Government, while considering an application for grant of stay of a money decree in proceedings under Section 34 of the Arbitration Act. The reference to CPC in Section 36 of the Arbitration Act is only to guide the Court as to what conditions can be imposed, and the same have to be consistent with the provisions of the Arbitration Act. [Para 24] [270-G-H; 271-A-C]
4. It may be true that the CPC provides for a differential treatment to the Government in certain cases, but the same may not be so applicable while considering a case against the Government under the Arbitration Act. For instance, Section 80 of CPC provides for a notice of two months to be given before any suit is instituted against the Government. Further, it is also provides that no ex-parte injunction order can be passed against the Government. Whereas on the other hand, under the Arbitration Act no such special provision has been made with regard to arbitration by or against the Government. There is no requirement under the Arbitration Act for a notice of two months to be given to the Government before invoking arbitration proceeding against the Government. Further, Sections 9 and 17 of the Arbitration Act also provide for grant of ex-parte interim orders against the Government. [Para 25] [271-C-E]
5. 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 view of this Court, makes 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. [Para 26] [271-F-G]
6. Although this Court is of the firm view that the archaic Rule 8A of Order XXVII CPC has no application or reference in the present times, this Court may only add that even if it is assumed that the provisions of Order XXVII Rule 8A of CPC are to be applied, the same would only exempt the Government from furnishing security, whereas under Order XLI Rule 5 of CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof. [Para 27] [271-G-H; 272-A]
Superintendent & Legal Remembrancer, State of West Bengal v. Corporation of Calcutta (1967) 2 SCC 170 – followed.
Board of Control for Cricket in India v. Kochi Cricket Private Limited (2018) 6 SCC 287 : [2018] 2 SCR 829; Shri Sitaram Sugar Company Limited. v. Union of India (1990) 3 SCC 223 : [1990] 1 SCR 909 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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