Judicial discretion in granting stay of arbitral awards under Section 36 must align with established legal principles, treating all parties equitably.

JUDGMENT :

S.SUNIL DUTT YADAV, J.

This writ petition is filed questioning the legality of the order passed on I.A.No.1 in COM.AP No.150/2024 whereby the Trial Court has allowed the application filed underSection 36 (2) of the Arbitration & Conciliation Act, 1996, staying the award of the Arbitrator subject to condition that the petitioner was to deposit 75% of the award amount within sixty days from the date of the award. The order passed by the Trial Court was in the context of proceedings under Section 34 challenging the award before the Commercial Court.

2. The facts as made out are that the petitioner, a Public Sector Undertaking was awarded with a project and in this regard the respondent was engaged on a back to back contractual basis. The relationship was governed by contractual documents including a Memorandum of Understanding dated 08.03.2006, Master Agreement dated 23.04.2006 and subsequent addendum entered into under which the respondent-HCL Infosystems Ltd., had undertaken to absolve certain losses incurred by ITI Limited.

3. As disputes arose regarding the entitlement of the respondent, the respondent eventually initiated arbitration making claims. The Arbitrator was appointed under ICADR Rules and Arbitration proceedings were conducted in Arbitration Case No.56/2017.

4. The proceedings culminated into an award whereby the claim of M/s.HCL Infosystems came to be allowed while the counter-claim of ITI came to be rejected. As against such award, the petitioner herein had initiated proceedings under Section 34 challenging the award. It is in such proceedings that application was filed under Section 36 (2) r/w 34 of the Arbitration & Conciliation Act, 1996 seeking stay of the operation of the arbitral award dated 29.04.2024.

5. The Commercial Court after hearing both sides has disposed off the application staying the impugned award subject to deposit of 75% of the award amount.

6. Sri.C.K.Nanda Kumar, learned Senior Counsel appearing on behalf of Smt.Varsha Hittinhalli for petitioner has contended that; the condition imposed for deposit of 75% of the award amount was unreasonable, exorbitant, the principles of Order 41 Rule 5 of CPC were not considered, the exercise of judicial discretion was faulty, that unconditional stay ought to have been granted, that there are no sufficient reasons assigned for imposing conditional stay of 75%.

7. On the other hand, Sri K.G.Raghavan, learned Senior Counsel appearing on behalf of Smt.Priyanka Ajjannavar for the respondent would submit that the discretion exercised by the Commercial Court ought not to be interfered with as judicial discretion has been exercised and no grounds are made out to interfere with such judicial discretion, that only ground of interference may have been undue hardship which has not been adequately pleaded, that the award by the Arbitrator is detailed and even on merits calls for no interference, that condition of deposit could also be 100%.

8. It is necessary to notice the legal framework governing the aspect relating to grant of stay of award where application is filed under Section 36. The relevant extracts of the provisions are as follows:

“Sec. 36…

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