IMPORTANT POINT
The court emphasized the limited scope of interference by the court in arbitration proceedings and the need to make a prima facie case for granting a stay of execution of the arbitration award.

ORDER :

(Sunita Agarwal, J.)

1. The instant petition is directed against the judgment and order dated 18.04.2024 passed by the Commercial Court at Vadodara in Commercial Civil Misc. Application No. 70 of 2023, whereby the petitioners herein has sought for Stay of the execution of arbitral award passed by the Sole-Arbitrator for, an amount of Rs.2,93,89,575/- along with the interest at the rate of 10 % from 03.07.2006 till realization, with the cost of arbitration at Rs.6,45,000/-.

2. At the outset, it may be noted that challenging the arbitral award dated 29.09.2023, the petitioner had moved an application under Section 34 of the Arbitration and Conciliation Act, 1996 (for short as the Act 1996 hereinafter), wherein, application for Stay of the execution of the award was filed under Section 36 (3), with the prayer that the execution of the award be stayed against furnishing bank guarantee of equivalent amount awarded to the respondent along with interest calculated till the date of deposit.

3. The Commercial Court, while dismissing the said application, has recorded that no arguments had been advanced on merits or demerits of the award. Only this much was argued before us that it was well within the power of the Commercial Court to grant conditional stay on the enforcement of arbitral award once challenged under Section 34 and the discretion is to the extent that the Court may grant interim order staying the execution of the award subject to the permission to deposit the security. It was urged that the discretion conferred upon the Court has not been exercised judiciously and the petitioner has been directed to deposit 100 % of the decretal amount and the prayer to accept the bank guarantee as security has not been acceded to, merely holding that the bank guarantee cannot be utilized by the decree holder to compensate its losses and that the contention of the applicant for furnishing the bank guarantee in place of the deposits cannot be accepted without a sufficient cause. It was submitted that a categorical statement has been made in the application seeking for stay of the execution of the award that the applicant has a strong prima facie case, inasmuch as, chances of success of the applicant in the present proceeding under Section 34 of the Act 1996 are exorbitantly high. The balance of convenience also lies in favour of the petitioner.

4. Reference has been made to the language employed in Order XLI Rule 1 (3) of the Code of Civil Procedure to submit that as per the procedure prescribed therein the Appellate Court is competent to allow deposit of the amount disputed in the appeal or to furnish such security in respect thereof, as it may thinks fit. By viture of the first proviso to Sub-Section (3) of Section 36 of the Act 1996, about the enforcement of the award, any application for the grant of stay in the case of arbitral award for payment of money is to be dealt with in accordance with the provisions pertaining to the grant of stay of a money decree under the Code of Civil Procedure. The Court is to be prima facie satisfied with the case of the applicant.

5. Reliance is placed on the decisions of the Apex Court in the case of SIHOR NAGAR PALIKA BUREAU VS. BHABHLUBHAI VIRABHAI AND CO. reported in (2005) 4 SCC 1, K. VENKATARAMAN VS. THE DIRECTOR OF INDUSTRIES AND COMMERCE reported in AIR On-line 1982 SC 29, CENTRAL BANK OF INDIA VS STATE OF GUJARAT AND ORS reported in (1987) 1 GLR 437 to substantiate the above submissions.

6. The learned counsel for the Respondent, in rebuttal, has relied upon the decisions of the Apex Court dated 16.07.2018 in Special Leave to Appeal (C) No. 11760 – 11761 of 2018 in MANISH VS GODAWARI MARATHAWADA IRRIGATION DEVELOPMENT; the Judgment of the Bombay High Court in the Interim Application (L) No. 779 of 2024 in Commercial Arbitration Petition No. 1131 of 2018 in M/S BALMER LAWRIE & CO. LTD. VS. M/S. SHILPI ENGINEERING PVT. LTD.; MANIBHAI AND BROTHER VS. BIRLA CELLULOSIC reported in 2016 SCC Online GU