Federal Agency for State Property Management of the Russian Federation (Rosimushcestvo) vs Sararf Agencies Private Limited

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Cal) 117

IN THE HIGH COURT AT CALCUTTA
MOUSHUMI BHATTACHARYA, J.

The Federal Agency for State Property Management of the Russian Federation (Rosimushcestvo) - Petitioner
Versus
Sararf Agencies Private Limited and Ors. – Respondents
EC 397 of 2023 with I.A. GA No. 1 of 2021 & 2 of 2021 in AP - COM 216 of 2024
Decided On : 23-02-2024

Advocates Appeared:
For the Petitioner: Mr. Ratnanko Banerji, Sr. Adv., Mr. Siddhartha Datta, Adv., Mr. Deepanjan Dutta Roy, Ms. Medha Sachdeva, Adv., Mr. Raunak Bose, Adv.
For the Respondents: Dr. Abhishek Manu Singhvi, Sr. Adv., Mr. Jishnu Chowdhury, Adv., Mr. Soumabho Ghose, Adv., Ms. Samriddha Sen, Adv., Mr. S.K. Singhi, Adv., Ms. Riti Basu, Adv., Mr. Aritra Basu, Adv., Ms. Piyali Pan, Adv., Mr. Sayan Banerjee, Adv.

Headnote:
Arbitration Award - Enforcement - The Arbitration and Conciliation Act, 1996, Section 31(7)(b), Section 34, Section 36(1), (2), and (3) - The court discussed the enforcement and execution of an Arbitral Award, the challenge to the Final Arbitral Award under section 34, and the stay of the Award under section 36(2). The court emphasized the obligation to enforce the Award unless a stay is granted by the Court and highlighted the conditions for stay of the Award under section 36(2) and (3). The court also addressed the time-bound interim protection assured to the award-debtor and the onus of resolving uncertainty regarding the continuation of interim protection.
Fact of the Case:
The petitioner seeks enforcement and execution of an Arbitral Award. The respondents challenged the Final Arbitral Award and sought stay under section 36(2). The limited question for adjudication was whether the order passed by the Court amounted to a stay of the Final Arbitral Award and whether the execution of the Award was inappropriate in view of the assurance given by the petitioner to the Court.
Finding of the Court:
The Court found that the order did not amount to a stay of the Final Arbitral Award and that the execution proceeding was not contrary to the time-bound interim protection assured to the award-debtor. The Court emphasized the obligation to enforce the Award unless a stay is granted by the Court and highlighted the conditions for stay of the Award under section 36(2) and (3). The Court also emphasized the onus of resolving uncertainty regarding the continuation of interim protection.
Issues: The issues included the interpretation of the order passed by the Court, the appropriateness of the execution of the Award in view of the assurance given by the petitioner, and the onus of resolving uncertainty regarding the continuation of interim protection.
Ratio Decidendi: The Court emphasized the obligation to enforce the Award unless a stay is granted by the Court and highlighted the conditions for stay of the Award under section 36(2) and (3). The Court also emphasized the onus of resolving uncertainty regarding the continuation of interim protection.
Final Decision: The Court directed the award-debtors to secure an amount of Rs. 300 crores for stay of the Award and dismissed the application for setting aside the Registrar's Report and the application for unconditional stay of the impugned award. The award-holder was given liberty to enforce the Award from a specified date without further reference to the Court.

JUDGMENT :

Moushumi Bhattacharya, J.

1. The petitioner award-holder seeks enforcement and execution of an Arbitral Award dated 26.3.2021. According to the petitioner, the “Final Arbitral Award” is for Rs. 731,22,51,049.41/- covering the principal amount of Rs. 248,37,58,195/- along with interest from 10.12.2008 – 26.3.2021. The petitioner also claims future interest in terms of section 31(7)(b) of The Arbitration and Conciliation Act, 1996 at the statutory rate to be calculated from 27.3.2021 till payment.

2. The respondent nos. 1 and 2 have challenged the Final Arbitral Award in an application under section 34 of the Act and have also made two applications for stay of the Award under section 36(2) of the Act and for setting aside of the Report of the Ld. Registrar, Original Side, of this Court.

3. The adjudication, which has been invited from the Court, needs to be placed in context.

4. The respondents resist the execution case on the basis of an undertaking given on behalf of the petitioner and an interim order premised on such assurance. The context will unfold with the narration of facts which will follow a bit later.

5. As of now, the limited question for adjudication is

i) Whether the order passed by this Court on 20.9.2021 amounts to a stay of the Final Arbitral Award; and

ii) Whether the execution of the Award is inappropriate or unjustified in view of the assurance given by the petitioner to the Court on 14.3.2022.

Whether the order passed by this Court on 20.9.2021 amounts to a Stay of the Final Arbitral Award

6. The award-debtors’ construction of the interim protection i.e. stay of the execution of the Award is patently contrary to section 36(1), (2) and (3) of the 1996 Act. The only construction underscored by these provisions is that an Award shall be enforced, regardless of whether the award-debtor has sought for setting aside of the arbitral Award, unless the Court stays the Award on appropriate conditions.

7. The award-debtor argues that the order dated 20.9.2021 amounts to a stay of the Final Arbitral Award. However, the order indicates that the impugned award would only be stayed upon the Ld. Registrar’s satisfaction of the valuation of the land which was offered by the award-debtor as security. The order records that the award-debtors were liable for a sum of Rs. 250 crores and that the valuation Report of the award-debtors’ property as on 26.7.2021 was Rs. 535 crores with a realisable sale value of Rs. 482 crores. The Court was hence of the view that the land which the award-debtor no. 1 was holding on that date could be treated as security under section 36(2) and (3) for stay of the impugned award. The relevant paragraph of the order dated 20.9.2021 is quoted below :

“There shall be stay of the impugned Award upon the Registrar being satisfied of the valuation of the land being in excess of or around Rs. 535 crores as on date. The Registrar shall also be at liberty to call for relevant documents for assessing the value of the land including the factory.”

8. The Ld. Registrar, Original Side specifically records in the Report that the Registrar was “not satisfied” that the land was valued in excess of or around Rs. 535 crores as on date. Prima facie, there is no reason to hold that the Report of the Ld. Registrar is incomplete or suffers from any factual or other infirmities. In any event, once the Ld. Registrar gave his opinion in the matter, it was the obligation of the respondents to undo the dissatisfaction on production of suitable documents for proving that the value of the land was indeed around Rs. 535 crores. The subsequent order of 23.11.2023 connects the dots by specifically holding that :

“It is clear from the documents that there is no continuing stay of the operation of the impugned Award”.

9. The points raised on behalf of the award-debtors are on the merits of the matter i.e. on the infirmities of the impugned Award and the proceedings before the Tribunal. These arguments are entirely within t