2019 Supreme(SC) 736

SUPREME COURT OF INDIA
R. F. Nariman, Vineet Saran, JJ.
PAM DEVELOPMENTS PRIVATE LTD. – APPELLANT
VERSUS
STATE OF WEST BENGAL – RESPONDENT
CIVIL APPEAL NO. 5432 OF 2019 [ARISING OUT OF SPECIAL LEAVE PETITION [C] NO. 7383 OF 2019]
WITH
PAM DEVELOPMENTS PRIVATE LTD. – APPELLANT
VERSUS
STATE OF WEST BENGAL – RESPONDENT
CIVIL APPEAL NO. 5433 OF 2019 [ARISING OUT OF SPECIAL LEAVE PETITION [C] NO. 7790 OF 2019]
Decided On : 12-07-2019

IMPORTANT POINTS
Every party in an arbitration proceedings, Government or private, is equal. No special treatment can be given to Government.
Security which is exempted from Government under Order XXVII Rule 8A in stray proceedings pertain s to securities under Rule 5 and 6 of Order XLI. It does not provide that the decretal amount cannot be required to be deposited in the appeal against a money decree.

Headnote:

(a) Arbitration and Conciliation Act, 1996 - Section 34 and 36 r/w Order XXVII Rule 8A, Code of Civil Procedure, 1908 - Submission that no security shall be required from the Government in case of there being a money decree passed against the Government, and the execution of which is prayed for rejected - Acceptance of the submission would mean that mere filing of an objection under Section 34 by a Government shall render the award unenforceable - It would also result in passing of stay order in a mechanical manner and as a matter of course without imposing any condition on the judgment debtor-Government - In effect, unamended provision of Section 36 of the Arbitration Act would automatically come into force. (Para 16)

       (b) Arbitration and Conciliation Act, 1996 - Section 36 and Order XXVII Rule 8A, Code of Civil Procedure, 1908 - Section 36 mandates that stay, if granted, shall be subject to such conditions as deemed fit - Court shall “have due regard to” provisions of CPC - Meaning that provisions of CPC are to be taken into consideration - Doing so, however, is not mandatory - Provisions of CPC are to be followed as a guidance, but provisions of the Arbitration Act are essentially to be first applied - Provisions of the CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration Act. (Para 17, 18)

       (c) Code of Civil Procedure, 1908 - Order XXVII Rule 8A r/w Rule 5 and 6 of Order XLI - Rule 8A pertains to security as mentioned in Rule 5 and 6 - Such security is not to be demanded from Government while considering the stay application filed by the Government - It does not provide that the decretal amount cannot be required to be deposited in the appeal against a money decree.

       (Para 20, 21)

       (d) Arbitration and Conciliation Act, 1996 - Section 18 and 36 - Parties are to be treated equally - No special treatment can be given to Government. (Para 24, 26)

       Facts of the case:

       In response to a notice inviting tender issued by the respondent relating to the work of “Special Repair Programme 2000-2001 for different stretches of National High Way-II under the Hooghly High Way Division No.II in the District of Hooghly (Package No. II)”, the appellant was the successful bidder. An agreement was registered on 2nd April, 2001. The work under the agreement was completed by the appellant on 28.02.2002. Then, on 26th May 2003, the appellant raised its claims and dues before the Executive Engineer of Public Works (Roads) Department, Government of West Bengal. The claims of the appellant having not been paid, the parties went for arbitration. The Arbitrator allowed some claims of the appellant and held the appellant to be entitled to a sum of Rs.2,87,11,553/- plus interest at the rate of 18% per annum on a sum of Rs.1,34,06,965/- from the date of the award till the date of the payment. Challenging the award passed by the Arbitrator, the respondent State of West Bengal filed an application under Section 34 of the Arbitration Act before the High Court where it is still pending consideration.

       In view of the pre-amended provision of Section 36 of the Arbitration Act, the respondent had not filed injunction application in the proceedings under Section 34 of the Arbitration Act. The appellant filed an execution application before the High Court. The respondent then sought time to file an application for staying the award.

       In the executing proceedings the Executing Court adjourned the matter after recording that “in the event the operation of the award is not stayed by the adjourned date, the petitioner shall be entitled to pray for attachment of the said amount in execution of the said award”. In the meantime, the respondent filed stay application under the amended Section 36(2) of the Arbitration Act in the pending proceedings under Section 34 of the Arbitration Act before the High Court. On 27.09.2018, the stay application of the respondent was dismissed in default. Consequently, on 03.10.2018, which was the adjourned date fixed by the Executing Court, the Executing Court passed an order attaching the sum of Rs. 2.75 Crores lying to the credit of the respondent State of West Bengal with the Reserve Bank of India. The Executing Court dismissed the execution petition filed by the appellant.

       Without filing the application for recall of the order dated 27.09.2018, whereby the stay application of the respondent had been dismissed in default, the respondent filed a fresh application for stay of the award, in which the impugned order dated 13.12.2018 of unconditional stay was passed after relying on the provisions of Order XXVII Rule 8A, Code of Civil Procedure.

       Finding of the Court:

       Impugned judgment cannot be sustained.

       Result: Appeals allowed.