Arbitral Award May Be Enforced Under CPC Where It Cannot Be Set Aside Due To Expiration Of Time U/s. 36 Of Arbitration Act- SC
The Supreme Court has observed that under Section 36 of the Arbitration and Conciliation Act, where the time for making an application to set aside the arbitral award has expired, the award might be enforced in accordance with the provisions of CPC.
"Section 36(2) makes it clear that filing an application for setting aside of an award under Section 34 is not to render the award unenforceable, unless the Court expressly grants an order of stay of operation of the arbitral award in accordance with the provisions of subsection (3) of Section 36, on a separate application made for that purpose," the Court observed, Justice Indira Banerjee and Justice Krishna Murari held.
The Court also held -
"Section 9 expressly empowers the Court to pass orders securing the amount in dispute in the arbitration and/or any interim measure or protection as may appear to the Court to be just and convenient. For grant of interim relief under Section 9, the Court would have to consider the prima facie case. In this case, prima facie there is an award for a huge amount of Rs. 142 Crores against the Appellant. The Respondent has a strong case for interim relief."
In this case, the Appellant an entity incorporated in China was awarded contracts in relation to various coal based power projects in India and the Respondent, an Indian company was sub-contractor of the Appellant. Disputes arose between the parties and were referred to Arbitration. The Arbitration culminated in an award amounting to Rs. 142 Crores in favour of the Respondent.
The Appellant thereafter filed an application under Section 34 of the Act challenging the Arbitral award before the Delhi High Court which is pending followed by an interim application under Section 36(2) of the Act seeking stay of the award.
The Respondent then filed an application under Section 9 of the Act before the High Court seeking orders on the Appellant to furnish security against the amount awarded by the Arbitral Tribunal.
Various interim applications were filed from time to time. The Respondent then in 2019 filed another application and sought orders for deposit of the awarded amount of Rs. 142 Crores along with interest.
In 2020, the Single Judge disposed of the application filed by the Respondent under Section 9 of the Act along with other connected interim applications.
The Single Judge passed another order on the same day directing notice to be issued to the Respondents on the application of the Appellant under Section 36(3) of the Act for the stay of the award. The Court directed that, on the deposit of Rs. 142 Crores, the enforcement of the award would remain stayed.
Counsel K.V. Vishwanathan appeared for the Appellant before the Apex Court.
The Court referred to Section 36 of the Act which deals with 'Enforcement of the Award', and Section 9 which deals with 'Interim measures by the Court etc.'
The Bench noted that there is no hard and fast rule that an application made earlier in point of time must be heard before an application made later in point of time.
The Court also noted that both the applications under Section 9 filed by the Respondent and the application for stay under Section 36(2) filed by the Appellant relate to the same impugned award.
The Bench then added that common factors are required to be considered for both the applications of the Respondent under Section 9 and the application of the Appellant under Section 36(2).
The Court held that the jurisdiction of the Court under Section 9 is wide and thus observed –
"A party may apply to a Court for interim measures before the commencement of Arbitral proceedings, during Arbitral proceedings or at any time after the making of the Arbitral Award, but before it is enforced in accordance with Section 36 of the Arbitration Act."
The Court also noted that in the case there is award for a huge amount of Rs. 142 Crores against the Appellant, thus the Respondent has a strong prima facie case for interim relief.
Further, the Court held, "It is settled law that grounds for interference with an award is restricted. Even before this Court, the Appellant has not been able to advert to any cogent and glaring error which goes to the root of the award. The contention of the award being opposed to the public policy of India, is devoid of any particulars whatsoever."
The Court also held, "Once an application under subsection (2) of Section 36 is filed for stay of operation of the arbitral award, the Court might subject to such conditions as it may deem fit, grant stay of the operation of such award, for reasons to be recorded in writing. The Court is empowered to impose such conditions as it might deem fit and may grant stay of operation of the award subject to furnishing of security covering entire amount of the award including interest."
While referring to the proviso to Section 36(3), the Court held –
"The proviso to Section 36(3) of the Arbitration Act, makes it clear that while considering an application for grant of stay in the case of an arbitral award for payment of money, due regard has to be given to the provisions for grant of stay of a money decree under the provisions of the CPC."
"The proviso to Section 36(3) further stipulates that where the Court is satisfied that a prima facie case is made out that (a) 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 of the award."
Furthermore, it was also held, "Section 9 of the Arbitration Act confers wide power on the Court to pass orders securing the amount in dispute in arbitration, whether before the commencement of the Arbitral proceedings, during the Arbitral proceedings or at any time after making of the arbitral award, but before its enforcement in accordance with Section 36 of the Arbitration Act. All that the Court is required to see is, whether the applicant for interim measure has a good prima facie case, whether the balance of convenience is in favour of interim relief as prayed for being granted and whether the applicant has approached the court with reasonable expedition."
The Court thus held that no cogent ground has been made out even prima facie for interference with the impugned award and dismissed the appeals.
Cause Title - Sepco Electric Power Construction Corporation v. Power Mech Projects Ltd.
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