Case: PAM DEVELOPMENTS PRIVATE LTD Vs. THE STATE OF WEST BENGAL

2. In response to a notice inviting tender issued by the respondent relating to the work of Special Repair Programme 2000- 2001 for different stretches of National High Way-II from 622 Kmp to 625 Kmp, 627 Kmp to 628 Kmp and 630 Kmp to 631 Kmp (vide Job No.CRF/W.B./70/2000) under the Hooghly High Way Division No.II in the District of Hooghly (Package No. II) , the appellant, alongwith others, had applied. The bid of the appellant was accepted on 26 th March 2001, for which an agreement was registered on 2 nd April, 2001. After several extensions were granted by the respondent for the delay which, according to the appellant, was entirely attributable to the respondent, the work under the agreement was completed by the appellant on 28.02.2002. Then, on 26 th May 2003, the appellant raised its claims and dues before the Executive Engineer of Public Works (Roads) Department, Government of West Bengal. The claims of the appellant having not been paid, an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short the Arbitration Act) was filed by the appellant. By an order dated 14 th August 2003, the Calcutta High Court was pleased to appoint Retired Justice Sujit Kumar Sinha as the Arbitrator to decide the disputes. By his award dated 21st January, 2010, the Arbitrator allowed some claims of the appellant and held the appellant to be entitled to a sum of Rs.2,87,11,553/- plus interest at the rate of 18% per annum on a sum of Rs.1,34,06,965/- from the date of the award till the date of the payment. Challenging the award passed by the Arbitrator, the respondent State of West Bengal filed an application under Section 34 of the Arbitration Act before the Calcutta High Court. The appellant filed its affidavit in opposition of the aforesaid, to which reply had also been filed by the respondent. The matter is still pending consideration before the Calcutta High Court3. Section 36 of the Arbitration Act has been amended by Act number 3 of 2016 with retrospective effect from 23.10.2015. In view of the pre-amended provision of Section 36 of the Arbitration Act, the respondent had not filed injunction application in the proceedings under Section 34 of the Arbitration Act. However, in view of the pronouncement of the judgment by this Court in the case of Board of Control for Cricket in India vs Kochi Cricket Private Limited (2018) 6 SCC 287 , wherein it was held that the amended provisions of Section 36 of the Arbitration Act would also apply to the pending proceedings under Section 34 of the Arbitration Act, the appellant filed an execution application before the Calcutta High Court (registered as E. C. No.297 of 2018). The respondent then sought time to file an application for staying the award4. In the executing proceedings, on 18.09.2018, the Executing Court adjourned the matter after recording that in the event the operation of the award is not stayed by the adjourned date, the petitioner shall be entitled to pray for attachment of the said amount in execution of the said award. In the meantime, the respondent filed stay application under the amended Section 36(2) of the Arbitration Act in the pending proceedings under Section 34 of the Arbitration Act before the Calcutta High Court. On 27.09.2018, the stay application of the respondent was dismissed in default. Consequently, on 03.10.2018, which was the adjourned date fixed by the Executing Court in E.C. No.297 of 2018, the Executing Court passed an order attaching the sum of Rs. 2.75 Crores lying to the credit of the respondent-State of West Bengal with the Reserve Bank of India. It was further clarified that in the event there was no stay of operation of the award by the adjourned date (04.12.2018), it would be open to the appellant (award holder) to pray for release of the said amount. Relying on an order dated 05.09.2018 of a coordinate bench of the High Court wherein an unconditional stay of award had been granted to the State Government and the SLP against such order had been dismissed in limine, the Executing Court dismissed the execution petition filed by the appellant5. Without filing the application for recall of the order dated 27.09.2018, whereby the stay application of the respondent had been dismissed in default, the respondent filed a fresh application for stay of the award, in which the impugned order dated 13.12.2018 of unconditional stay was passed after relying on the provisions of Order XXVII Rule 8A, Code of Civil Procedure (for short CPC). Challenging the said order, the present Appeal has been filed.

Reasoning: 16. The backbone of the submissions on behalf of the respondent-State of West Bengal is that under the provisions of Order XXVII Rule 8A of the CPC, no security shall be required from the Government in case of there being a money decree passed against the Government, and the execution of which is prayed for. If such submission of the respondent is accepted then the same would mean that mere filing of an objection under Section 34 of the Arbitration Act by a Government shall render the award unenforceable as the stay order would be passed in a mechanical manner and as a matter of course, without imposing any condition against the Government - judgment debtor. If the contention is accepted, the effect would be that insofar as the Government is concerned, the unamended provision of Section 36 of the Arbitration Act would automatically come into force17. In this backdrop, we have now to consider the effect of Section 36 of the Arbitration Act, vis-a-vis the provisions of Order XXVII Rule 8A of CPC. Sub-Section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub-section clearly mandates that the grant of stay of the operation of the award is to be for reasons to be recorded in writing subject to such conditions as it may deem fit. The proviso makes it clear that the Court has to have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure. The phrase have due regard to would only mean that the provisions of CPC are to be taken into consideration, and not that they are mandatory.18. In our view, in the present context, the phrase used is having regard to the provisions of CPC and not in accordance with the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. The provisions of CPC are to be followed as a guidance, whereas the provisions of the Arbitration Act are essentially to be first applied. Since, the Arbitration Act is a self- contained Act, the provisions of the CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration ActWe find no reason to disagree with such view taken by the Full Bench of the Calcutta High Court and are thus in agreement with the same20. Even otherwise a plain reading of Order XXVII Rule 8A of CPC would make it clear that the same is only regarding security as mentioned in Rule 5 and 6 of Order XLI CPC, which is not to be demanded from the Government while considering the stay application filed by the Government. It, however, does not provide that the decretal amount cannot be required to be deposited in the appeal against a money decreeThe same provides for making of deposit or furnishing security by the decree holder seeking stay. It would thus mean that after 1977, the Appellate Court had the power to direct for deposit of the decretal amount, which was earlier limited only to furnishing of security under sub-Rule (3) of Rule 5 of Order XLI CPC. It is noteworthy that after insertion of sub-Rule (5), there was no amendment to Order XXVII Rule 8A CPC to exempt the State Government for making such deposit, which would mean that Rule 8A does not exempt the Government from making deposit, which the Court has the power to now direct under Order XLI Rule 5(5) CPC. 22. Further, it is to be noticed that Order XXVII Rule 8A of CPC was inserted in 1937 when the British Crown was ruling our country. The same was brought in during the period of British Raj to protect the interest of the then Government (Crown). While considering a case where the State of West Bengal was carrying on trade as owner and occupier of a market in Calcutta (now Kolkata) without obtaining a license as required under Section 218 of Calcutta Municipal Act, 1951, a Constitution Bench of this Court in the case of Superintendent & Legal Remembrancer, State of West Bengal v. Corporation of Calcutta (1967) 2 SCC 170 considered the question as to whether this Court should adopt the rule of construction accepted by the Privy Council in interpreting Statute vis-a-vis the Crown and held thatThere are many reasons why the said rule of construction is inconsistent with and incongruous in the present set-up we have no Crown, the archaic rule based on the prerogative and perfection of the Crown has no relevance to a democratic republic; it is inconsistent with the rule of law based on the doctrine of equality23. In our considered view, the provision which was incorporated in the year 1937 during the British Raj, giving certain safeguards to the Government (which was then the British Crown) would not be applicable in todays time, when we have a democratic Government24. Arbitration proceedings are essentially alternate dispute redressal system meant for early/quick resolution of disputes and in case a money decree - award as passed by the Arbitrator against the Government is allowed to be automatically stayed, the very purpose of quick resolution of dispute through arbitration would be defeated as the decree holder would be fully deprived of the fruits of the award on mere filing of objection under Section 34 of the Arbitration Act. The Arbitration Act is a special Act which provides for quick resolution of disputes between the parties and Section 18 of the Act makes it clear that the parties shall be treated with equality. Once the Act mandates so, there cannot be any special treatment given to the Government as a party. As such, under the scheme of the Arbitration Act, no distinction is made nor any differential treatment is to be given to the Government, while considering an application for grant of stay of a money decree in proceedings under Section 34 of the Arbitration Act. As we have already mentioned above, the reference to CPC in Section 36 of the Arbitration Act is only to guide the Court as to what conditions can be imposed, and the same have to be consistent with the provisions of the Arbitration Act25. It may be true that the CPC provides for a differential treatment to the Government in certain cases, but the same may not be so applicable while considering a case against the Government under the Arbitration Act. For instance, Section 80 of CPC provides for a notice of two months to be given before any suit is instituted against the Government. Further, it is also provides that no ex-parte injunction order can be passed against the Government. Whereas on the other hand, under the Arbitration Act no such special provision has been made with regard to arbitration by or against the Government. There is no requirement under the Arbitration Act for a notice of two months to be given to the Government before invoking arbitration proceeding against the Government. Further, Sections 9 and 17 of the Arbitration Act also provide for grant of ex-parte interim orders against the Government26. Section 36 of the Arbitration Act also does not provide for any special treatment to the Government while dealing with grant of stay in an application under proceedings of Section 34 of the Arbitration Act. Keeping the aforesaid in consideration and also the provisions of Section 18 providing for equal treatment of parties, it would, in our view, make it clear that there is no exceptional treatment to be given to the Government while considering the application for stay under Section 36 filed by the Government in proceedings under Section 34 of the Arbitration Act27. Although we are of the firm view that the archaic Rule 8A of Order XXVII CPC has no application or reference in the present times, we may only add that even if it is assumed that the provisions of Order XXVII Rule 8A of CPC are to be applied, the same would only exempt the Government from furnishing security, whereas under Order XLI Rule 5 of CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof.