An unconditional stay of an arbitral award is impermissible unless specific statutory conditions under Section 36(3) of the Arbitration Act are fulfilled.

JUDGMENT :

SUNITA AGARWAL, C.J.

1. Heard the learned counsels for the parties and perused the record. The present petition invoking the supervisory jurisdiction of this Court under Article 227 of the Constitution of India has been filed to challenge the order dated 09.10.2024 passed by the Commercial Court in Commercial Civil Misc. Application No. 12 of 2024 in Commercial Execution Case No. 30 of 2024.

2. The application namely the Commercial Civil Misc. Application No. 12 of 2024 had been filed by the Award Debtor namely the respondent herein seeking for stay of the award of the arbitral tribunal dated 11.08.2023, invoking Section 36 (3) of the Arbitration and Conciliation Act 1996 (for short “the Arbitration Act 1996”).

3. It may be noted that the award ordering to pay Rs.6,54,60,814/- with interest was passed unanimously by three arbitrators in favour of the petitioner herein, while rejecting the counter claim of the respondent namely the award debtor. The Commercial Court, while passing the order impugned, has granted an absolute stay to the execution of the arbitral award while allowing the application under Section 36 (3) till the decision of the petition. The only reasoning given by the Commercial Court in passing an unconditional stay is that the validity of the award is subjected to consideration before the competent Court in an application filed under Section 34 of the Arbitration Act 1996. It was, though, noted that there is a very limited scope of intervention, however, it was further recorded that the applicant namely the respondent herein has made out a prima facie case in its favour to stay the implementation of the impugned award. It was also observed by the Commercial Court that, in case, the Court enters into the merits of the case of the parties to discuss in detail on each and every aspect, it may adversely affect the case of the parties.

4. Mr. Manish Bhatt, the learned Senior Advocate appearing for the petitioner would invite attention of the Court to Section 36 (3) of the Arbitration Act 1996 to submit that there cannot be a blanket stay of the operation of an arbitral award for payment of money unless and until any of the condition or the conditions mentioned in the second proviso to Sub-Section (3) of Section 36 is/are fulfilled. Sub-Section (3) of Section 36 categorically states that the Court while considering the application under Sub-Section (2) of Section 36 for stay of the operation of the arbitral award may grant stay, subject to such conditions as it may deem fit, for reasons to be recorded in writing.

5. The first proviso to Sub-Section (3) further makes it clear that while considering the application for grant of stay in the case of an arbitral award for payment of money, due regard is to be given to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure. Second proviso carves out an exception to the aforesaid conditions with a caveat that the unconditional stay of the arbitral award pending disposal of the challenge under Section 34 of the Award can be passed in a case where the Court is satisfied that a prima facie case is made out to the effect that:

(a) the arbitration agreement or contract, which is basis of the award.

(b) the making of the award itself; was induced or effected by fraud or corruption.

6. A comprehensive reading of Sub-Section (3) of Section 35, as per the contention of the learned counsel for the petitioner, thus, makes it clear that it is not permissible for the Court while dealing with the application under Section 36(3) for grant of stay of the operation of the arbitral award, to pass a blanket stay order simply stating that the prima facie case is made out for interference under Section 34.

7. Sub-Section (2) of Section 36 further makes it clear that filing of the application under Section 36 by itself shall not render the award unenforceable and there is a requirement for the Court to pass an order of stay of the operation of th