Back
IN THE HIGH COURT AT CALCUTTA
MOUSHUMI BHATTACHARYA, J.
The State of West Bengal & Ors. – Appellants
Versus
M/s. BBM Enterprise – Respondent
IA No. GA 1 of 2023 in AP 808 of 2022
Decided on : 25-07-2023
ARBITRATION - ALLOWING AWARD HOLDER TO WITHDRAW SECURED AMOUNT - DOES NOT REQUIRE STATUTORY SANCTION - COURT CAN PERMIT AWARD HOLDER TO WITHDRAW MONEY SECURED BY AWARD DEBTOR - STEP IN AID OF AND IN KEEPING WITH STATUTORY INTENTION OF GIVING PRIMACY TO FINALITY OF ARBITRAL AWARD - SECTION 35 READ WITH SECTION 36 OF ACT MAKE IT CLEAR THAT THERE IS NO REQUIREMENT FOR A SPECIFIC STATUTORY PROVISION TO ALLOW AN AWARD HOLDER TO WITHDRAW THE SECURED AMOUNT - SECTIONS THEMSELVES PROVIDE FOR SUCH AN ORDER TO BE PASSED IN APPROPRIATE CASES.
Fact of the Case:
Award-holder sought to withdraw an amount of Rs. 9 crores which was directed to be secured by the award-debtor. The award-debtor resisted the prayer on the grounds that there is no provision under The Arbitration and Conciliation Act, 1996 for allowing such a prayer and the Court has to come to a prima facie view of the award before passing such an order.
Finding of the Court:
The Court held that there is no requirement for a specific statutory provision to allow an award-holder to withdraw the secured amount. Sections 35 read with section 36 of the Act make it clear that there is no requirement for a specific statutory provision to allow an award-holder to withdraw the secured amount. The sections themselves provide for such an order to be passed in appropriate cases. The attending circumstances would become relevant if the Court exercises its discretion for passing such an order. Events subsequent to the stay of the award would be material in this respect. The Court further held that the award-debtor will not face any prejudice if the award-holder is permitted to withdraw the amount. The prayer for withdrawal of the money deposited as security by the award-debtor is in consonance with the object of the amendment to the Act which has been stated above. Such an order will of course be refused if it would render the award-debtor without a remedy. This can only be where the award-holder departs with the money without ensuring a security–cover for the award-debtor in case the latter succeeds in having the award set aside. The Court also held that allowing the award-holder to withdraw the secured amount does not require a prima facie finding. Section 36(2) which gives discretion to a Court to stay an award does not require a prima facie case to be made out by the award-debtor. The absence of such a requirement in section 36(2), assumes significance when compared to the language of the second proviso to section 36(3) which requires the Court to come to a prima facie finding that the making of the award or the arbitration agreement which is the basis of the award was induced or effected by fraud or corruption before granting the unconditional stay of the award. The Court also held that the award-holder’s application for withdrawal of the money can be made by way of a separate application. The application for stay of the award is only filed for a limited purpose of the Court to consider whether the award needs to be stayed pending hearing of the application for setting aside of the award. The application is disposed of on a Court coming to a decision as to whether the award is required to be stayed on the conditions to be imposed by the Court under section 36(2) and (3) of the Act. The application for release of the secured amount to the award-holder is unconnected to a prayer for stay and is entirely different in cause and purpose.
Issues: Whether permitting an award-holder to withdraw the secured amount requires statutory sanction.
Ratio Decidendi: The Court held that there is no requirement for a specific statutory provision to allow an award-holder to withdraw the secured amount. Sections 35 read with section 36 of the Act make it clear that there is no requirement for a specific statutory provision to allow an award-holder to withdraw the secured amount. The sections themselves provide for such an order to be passed in appropriate cases. The award-debtor will not face any prejudice if the award-holder is permitted to withdraw the amount. Allowing the award-holder to withdraw the secured amount does not require a prima facie finding. The award-holder’s application for withdrawal of the money can be made by way of a separate application.
Final Decision: GA 1 of 2023 is accordingly allowed. The award-holder is permitted to withdraw the amount of Rs. 9 crores upon furnishing a bank guarantee of an equivalent amount with the Registrar, Original Side. The award-holder shall furnish the bank guarantee before withdrawing the money which shall be from a Bank which is a constituent of the RBI. The award-holder shall be at liberty of taking steps within such time as is found to be reasonable. The award-debtor shall be at liberty to take steps for listing of the application for setting aside of the award. GA 1 of 2023 is disposed of in terms of the above. The Bank guarantee shall be kept renewed till disposal.
JUDGMENT :
Moushumi Bhattacharya, J.
1. The present application has been made by the award-holder/respondent in AP no. 808 of 2022. The award-holder seeks to withdraw an amount of Rs. 9 crores which was directed to be secured by the award-debtor/petitioner in AP No. 808 of 2022. The AP was filed by the award-debtor for stay of the arbitral award dated 2.7.2022
2. The award-debtor also applied for setting aside of the arbitral award in A.P. 746 of 2022 and by an order dated 17.1.2023 the Court recorded the award-debtor’s submission that it will deposit Rs. 9 crores within 6 weeks from the date of the order and that the award would be stayed consequent to such deposit being made. The award-debtor made the deposit on 16th March, 2023.
3. The respondent/award-debtor resists the prayer of the award-holder for withdrawing the amount of Rs. 9 crores on primarily two grounds. First, that there is no provision under The Arbitration and Conciliation Act, 1996 for allowing such a prayer and second, the Court has to come to a prima facie view of the award before passing such an order. The award-debtor also says that the present application cannot be entertained since the application for stay of the award was disposed of by the order dated 17.1.2023.
4. Learned counsel appearing for the applicant/award-holder and the respondent/award-debtor in the present application (GA 1 of 2023) have argued in support of their respective contentions and relied on decisions.
5. The decision of the Court is as follows.
Whether permitting an award-holder to withdraw the secured amount requires statutory sanction:
6. Under the present statutory position, the status of an award-holder is that of a decree holder [Section 36(1)]. Section 36 of The Arbitration and Conciliation Act, 1996, makes an arbitral award final and binding on the parties and persons claiming under them subject to the provisions of Part I of the Act. The exception is contained in section 36(2) where the Court has discretion to grant an order of stay of the operation of the arbitral award in accordance with the guidelines provided under section 36(3) subject to a separate application being made by the award-debtor for stay of operation of the arbitral award.
7. The clog in the wheels of enforcement of arbitral awards was brought into the Act w.e.f 23.10.2015. The position pre-amendment for enforcement of an arbitral award under section 36 is reproduced below :
8. After the amendment of 2016, section 36(1) and (2) was transformed as under :
(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.”
9. A comparison of the positions before and after the amendment of 2016 (w.e.f. 23.10.2015) would show that an arbitral award was presumed to be enforceable subject to the filing and fate of an application for setting aside of the award. The amendment brought in two significant changes. First, it decoupled enforcement and setting aside of an award by the opening words of section 36(2). Second, it gave a temporary leg-room to the award-debtor to apply for stay of the award su
The Court held that there is no requirement for a specific statutory provision to allow an award-holder to withdraw the secured amount. Sections 35 read with section 36 of the Act make it clear that ....
The court clarified that award debtors must deposit the full awarded sum as a condition for staying enforcement, emphasizing that both public and private parties are subject to the same requirements ....
The court has discretion to modify security arrangements under the Arbitration Act based on changed circumstances, balancing equities between parties while allowing withdrawal of funds.
The Court emphasized the limited scope of challenge against an award under the Act and balanced the equities between the parties in granting or modifying the order.
The scope of Section 9 of the Arbitration and Conciliation Act is limited to interim protective measures and does not extend to enforcement of the award or granting the fruits of the award to the awa....
The main legal point established in the judgment is the discretion of the court to direct the petitioner to furnish security on the full arbitral award and the impact of the Arbitration and Conciliat....
power enshrined under Section 151 of the Code can be exercised if there is no express provision contained in the Code or the Special Act.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
