Titagarh Logistics Infrastructure Private Limited vs. Durgapur Freight Terminal Private Limited And Ors

Facts

The petitioner, Titagarh Logistics Infrastructure Private Limited, is the award holder in an arbitration proceeding. The petitioner sought an interim award for Rs. 2,36,00,000/-. The Arbitral Tribunal passed an interim award for Rs. 2,00,00,000/- along with applicable GST and 18% interest per annum if not paid by a certain date. The petitioner initiated execution proceedings. The award debtors filed applications under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the interim award and under Section 36(2) for a stay. The Commercial Court granted a stay of the interim award on the condition that the award debtors deposit Rs. 1,75,00,000/- via bank guarantee within 30 days. The award debtors failed to comply, but the Court extended the time. The petitioner challenged the Commercial Court's orders, arguing the bank guarantee amount was insufficient and that the Court failed to adhere to mandatory provisions of the Code of Civil Procedure, 1908.

Held

The Court held that the Commercial Court did not commit an error in directing the award debtors to furnish a bank guarantee of an amount less than the interim award. The Court noted that Section 36(3) of the Arbitration and Conciliation Act, 1996, allows the Court to grant a stay subject to such conditions as it may deem fit, for reasons to be recorded in writing. While the Court must have due regard to the provisions for granting stay of a money decree under the CPC, the Supreme Court in Pam Developments (supra) clarified that the phrase "have due regard to" means the CPC provisions are to be taken into consideration, not that they are mandatory. The Arbitration Act is a self-contained code, and CPC provisions apply only if not inconsistent with its spirit. Therefore, the Court granting stay has discretion to demand full or partial deposit or security. Furthermore, the Court reasoned that Order XLI Rule 5(3)(c) of the CPC, which requires security for the "due performance of such decree or order as may ultimately be binding upon him," primarily applies to final decrees or awards. In this case, the award was interim, and the ultimate binding liability was yet to be decided. Thus, the impugned orders were not found to be illegal or irregular. The revisional application was dismissed, and the award debtors were directed to furnish the bank guarantee within fifteen days, failing which the stay order was to be set aside.

Key Issues

1. Whether the Commercial Court erred in granting a stay of the interim arbitral award by directing the award debtors to furnish a bank guarantee of an amount less than the awarded sum, including GST and interest, thereby allegedly violating Section 36(3) of the Arbitration and Conciliation Act, 1996, and Order XLI Rule 5 of the Code of Civil Procedure, 1908? Petitioner's Arguments: - The bank guarantee should not be less than the awarded interim sum with interest and GST. - The Court below bypassed mandatory provisions of Order XLI Rule 5 sub-rules 3(c) of the CPC. - The award debtors are profiting from the petitioner's property without payment, and a lesser bank guarantee would make recovery difficult. - Bank guarantees do not carry interest and should at least cover the awarded sum plus post-award interest. - Referred to Hyder Consulting (UK) Limited Vs. Governor, State of Orissa. Opposite Parties' (Award Debtors') Arguments: - There is no strict rule requiring the furnishing of the entire amount including GST and interest for a stay of an interim arbitral award. - It is within the Court's discretion to decide whether to ask for deposit or security. - It is not mandatory to secure 100% of the awarded sum, GST, and interest. - Provisions of CPC apply as guidance and only insofar as they are not inconsistent with the Arbitration Act, which is a self-contained Act. - Referred to Pam Developments Private Limited Vs. State of West Bengal.