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2024 Supreme(Online)(KER) 24857
HIGH COURT OF KERALA
ELIZABETH JASMINE – Appellant
Versus
JIMMY ELIAS – Respondent
OP(C) 151/2024
The court established that a stay on a monetary arbitral award requires adherence to specific conditions, including the requirement for security from the opposing party.
Headnote:
Arbitration - Arbitration and Conciliation Act, 1996 - Sections 36(2), 36(3) - Court emphasized the necessity for security in stay applications for monetary arbitral awards and clarified conditions under which stay could be granted.
Fact of the Case:
Petitioners challenged the stay order on an arbitral award for payment, arguing it was against the provisions of the Arbitration and Conciliation Act without securing the necessary conditions.
Finding of the Court:
The Court found that the stay under Ext.P4 did not comply with the provisions of Section 36(3) regarding security requirements, particularly for monetary awards, and made a provision to protect the petitioners' interests through a continuation of the attachment.
Issues: Whether the stay ordered on the arbitral award complied with the provisions requiring conditions for granting such stays, specifically in cases of monetary awards.
Ratio Decidendi: A stay of an arbitral award for payment must be accompanied by appropriate conditions, including requiring the opposing party to furnish security, as mandated by the Arbitration Act and relevant provisions of the CPC.
Final Decision: The original petition was disposed of with directions to ensure security requirements were met.
J U D G M E N T
Above original petition is filed challenging Ext.P4 order.
2. The brief facts necessary for the disposal of the original petition are as follows:-
Petitioners are the respondents 1 to 3 in OP Arbitration No.30 of 2023 filed by the 1st respondent herein under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’), before the Commercial Court-I, (Additional Sub Judge) Ernakulam. Consequent to dispute between the parties, an Arbitrator was appointed by this Court in ARC No.1 of 2018 and Ext.P1 award was passed which was against the petitioners herein. Therefore, the petitioners challenge the arbitration award in OP Arbitration No.101 of 2020, and the Commercial Court by Ext.P2 order set aside the award. After the issuance of Ext.P2, petitioners initiated 2nd round of arbitration proceedings in which the Arbitrator as per Ext.P3 award allowed the claim of the petitioners. Thereafter EP No.525 of 2023 was filed before the District Court, Ernakulam and while the same is pending consideration the 1st respondent filed OP Arbitration No.30 of 2023 and also filed IA No.1 of 2023 seeking stay of the operation of the arbitration award. The Commercial Court as per Ext.P4 stayed the operation of the award dated 18.04.2023. It is aggrieved by the same that the present original petition has been filed.
3. The specific case of the petitioners is that, Ext.P4 arbitration award passed in ARC 101 of 2022 is for payment of an amount of Rs.2.22 crores with interest, and therefore proviso to Section 36 (3) of the Act, 1996 will come into force, and the stay granted as per Ext.P4 to the operation of the arbitration award without directing the 1st respondent to furnish security is absolutely against the provisions of the Act, 1996. of the Act, 1996 deals with enforcement of the arbitration award. (2) and (3) of the said Act reads as follows:-
“36. Enforcement;
(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.
(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:-
PROVIDED that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908):
PROVIDED FURTHER that where the Court is satisfied that a prima facie case is made out,-
(a) that the arbitration agreement or contract which is the basis of the award;
or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.”
Going by Section 36 (2) when an application to set aside the arbitration award has been filed in the Court under Section 34, filing of such application shall not by itself render the award unenforceable unless the Court grants an order of stay of operation of the arbitration award on a separate application made for that purpose. On filing such an application the stay of operation of the arbitral award could be passed by the Court subject to conditions. The proviso to (3) provides that the Court shall while considering the application for grant of stay in case of arbitral award for payment of money, have due regard to the provisions of grant of stay of money decree under the provisions of Code of Civil Procedure, 1908 . Second proviso to (3) provides further that if the Court is satisfied that a
