The court emphasizes the need for real and sufficient security to cover the entirety of the arbitral award value when considering a stay of the award under Section 36 of the 1996 Act.

JUDGMENT :

Shekhar B. Saraf, J.

1. The petitioner/respondent has filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”) along with an application under Section 36 (2) of the 1996 Act being GA No. 1 of 2022 in AP 230 of 2022 praying for stay of the award passed by the arbitral tribunal on December 27, 2021. As per the award, the respondent/claimant is entitled to a refund of Rs. 84.24 Crores which it had deposited with the petitioner on December 27, 2006. The arbitral tribunal also directed to pay the above refund with simple interest at the rate of 6% per annum for the period from the date of deposit to the date of full payment of the said amount. As per the award the petitioner was further directed to pay pendent-lite and future interest at the rate of 9% simple interest per annum from the date of award till the date of payment. However, the pendent-lite interest would apply to the awarded amount in case the same was not paid within three months commencing from the date of the award. Lastly, the Arbitral Tribunal also awarded a sum of Rs. 25,00,000/- towards reimbursement of litigation and arbitral costs.

2. The dispute between the parties arises out of an agreement to carry out a new township project for which the petitioner invited financial bids through a tender process. The financial bid of the respondent was accepted and the petitioner via letter dated December 21, 2006 issued a Letter of Award. As per the terms of the above letter the respondent was required to deposit 40% of the bid amount within 15 days. Pursuant to the deposit made by the respondent on December 27, 2006, the petitioner authority handed over the possession of 90.19 acres of land to the respondent on August 10, 2007. However, no lease deed was entered between the parties at the time of handing over of the possession of the land. After a lapse of one year, the lease agreement for execution of work and the development agreement for the same were still not executed between the parties. Finally, in order to govern the relations between the parties a formal development agreement mentioning the terms and conditions were reduced in writing on April 25, 2008. After entering into the above development agreement several communications took place between the parties, but the agreement for lease of the land measuring 90.19 acres was not executed in favour of the respondent/claimant. Due to non-execution of the lease between the parties, the new township project was not commenced by the respondent claimant. In the meanwhile, the petitioner demanded the remaining sums required to be paid by the respondent claimant. The respondent did not pay the remaining amount due to non-execution of the lease document. Finally, the petitioner terminated the development agreement due to nonpayment of the balance instalments constituting event of default by the respondent. The parties kept on holding to their respective stand and invoked the arbitration clause for settlement of the dispute. After considering the respective claims presented by both the parties during the arbitral proceedings, the tribunal awarded refund of the amount paid by the respondent towards the first instalment of Rs. 84.24 Crores.

3. Mr. S.N. Mookherjee, Senior Advocate appearing for the petitioner argues that the court has the discretion to decide the mode of security to be furnished by the petitioner. He states that the land in possession of the respondent can be accepted as a valid security for granting stay of the arbitral award under Section 36 of the 1996 Act. Mr. Siddharth Batra, advocate appearing for the respondent highlights the default committed by the petitioner as per the development contract entered between them. He relies on Clause 3 of the agreement. Sub-clause 3 of Clause 3 highlights the obligation of the petitioner to deliver peaceful possession of the project land in favour of the respondent free from all encumbrances for