M/s. AFCONS Infrastructure Ltd. Vs The Board of Trustees of the Port of Mumbai

Roshan Dalvi, J.@mdashThis Petition is filed for reliefs u/s 9 of The Arbitration and Conciliation Act, 1996 (The Act) upon an award of Rs. 141,12,44,247/- being passed in favour of the Petitioner. The Petitioner had applied for directions against the Respondent to deposit the said amount in the Court and to permit the Petitioner to withdraw the same upon a bank guarantee. The Petitioner claims that the challenge to the award is frivolous on the grounds set out in the Petition and upon the provisions of law contend in the Act and judgments thereupon. It would contend that the award is highly unlikely to be unsettled. Consequently the Petitioner has applied for aforesaid interim reliefs pending the hearing of the Petition U/s. 34 of the Act filed by the Respondent challenging the award. It would be apt to set out Section 9 to see its applicability and its ambit for the grant of reliefs after the making of the arbitral award. Section 9 runs thus:

9. Interim measures, etc., by Court.-

A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court:-

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose, and in relation to, any proceedings before it.

2. The reading of the section does not mandate or even allow deposit of the award amount pending its challenge. It allows interim reliefs of protection, not of the award amount but, of the subject matter of the arbitration agreement and the property which is the subject matter of the arbitration agreement. It further provides for securing the amount in dispute in the arbitration, grant of injunction, appointment of receiver and any other measure of protection.

3. The application for deposit of the award amount as an interim measure after the making of the arbitral award and before its enforcement U/s. 36 of the Act would have to be read, considered and appreciated along with the provision contained in Section 36 of the Act itself which runs thus:

36. Enforcement.-Where the time for making an application to set aside the arbitral award u/s 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

4. u/s 36 enforcement can commence when the period of limitation being 90 or a further 30 days has expired or when the award is upheld upon an application made for setting it aside.

5. In the interregnum, between the date of the passing of the award and the date of its enforcement, the subject matter of the arbitration agreement must be protected and preserved for the award holder.

6. Further the order of the refusal to have the award set aside is appealable before the Division Bench of the Court and thereafter before Supreme Court U/s. 37 of the Act. Consequently the enforcement of the award would be, after so challenged, after the application is refused and the appeal therefrom are dismissed.

7. It may be mentioned that unlike the case of the decree passed by a Court of law the application for setting aside arbitral award U/s. 34 itself operates as stay. Hence its enforcement would be postponed at least until the application to set aside the award is refused. The stark difference in the provisions relating to an appeal from a decree of trial Court, called the First Appeal, is seen in Order 41 Rule 5(1) of the CPC which runs thus:

Stay of proceedings and of execution 5. Stay by Appellate Court.-

(1) An appeal shall not operate as a stay of proceedings under a decree or order appealed from except so far as the Appellate Court may order, nor shall execution of a decree be stayed by reason only of an appeal having been preferred from the decree; but the Appellate Court may for sufficient cause order stay of execution of such decree.

8. Therefore, whereas a decree of a Court can proceed to be executed, the arbitral award cannot proceed for enforcement or execution if it is challenged within the limitation period. The sufficient cause which the Court is required to see to stay execution of the decree enables the Court to pass orders for deposit of the decreetal amount in cases of first appeals. The requirement of postponement of the enforcement of the arbitral award would, therefore, have a contrary effect pending the challenge to the arbitration made.

9. Further under Order 41 Rule 5(3) of the CPC the parameters of the grant of stay to the execution of the decree upon the satisfaction of the Court upon the sufficient cause being shown are also specified. Order 41 Rule 5(3) runs thus:

5(3) No order for stay of execution shall be made under sub-rule (1) or sub-rule (2) unless the Court making it is satisfied-

(a) that substantial loss may result to the party applying for stay of execution unless the order is made;

(b) that the application has been made without unreasonable delay; and

(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.

10. Consequently execution would proceed unless security is given by the judgment debtor for parties to the decree pending the appeal. Such security may take the form of deposit of the full or part of the decreetal amount or a bank guarantee or such other like order.

11. The security contemplated u/s 9(b) of the Act is also available to an award holder. However, such security is ordered to be given or obtained upon settled principles of procedural law. (See Arvind Constructions Co. Pvt. Ltd. Vs. Kalinga Mining Corporation and Others, ) We are, however, not concerned with such security because the applicant has neither applied nor has specifically claimed any security to be given and not made out the case in that behalf.

12. It is argued on behalf of the Petitioner that the order of deposit by the Respondent and its withdrawal by the Petitioner would be an interim measure of protection which would be just and convenient u/s 9(ii)(e) of the Act. It is argued that this measure of protection must not be read ejusdem generis and that the provisions u/s 9(ii) (a), (b), (c) or (d), therefore, be not applied to relief sought for deposit and withdrawal as claimed. It is argued on behalf of the Petitioner that the protection claimed is of the Petitioner''s right to get the money under the money award passed which has become the property of the Petitioner under the arbitral award. The Petitioner, therefore, seeks to protect its proprietory right in the arbitral award. This proprietory right is subject to challenge u/s 34 of the Act. It would, therefore, have to be seen whether protecting the award amount itself by way of deposit and the offer of the withdrawal would be contemplated to be an interim measure of protection which is just and convenient.

13. It is argued on behalf of the Petitioner that the award represents the money of the Petitioner and the Court must balance evenly the right of the Petitioner to receive that money vis a vis the right of the Respondent to challenge the award. The Petitioner must be entitled to enjoy his money pending the years that the award would remain unexecuted upon the Respondent''s challenge. It is argued that, therefore, the deposit would be just and the offer of giving bank guarantee would make it convenient and would accordingly be an interim measure of protection of the Petitioner''s right to get its money. Consequently it is argued that Section 9 (ii) (b) and Section 9 (ii) (e) did not overlap and hence the Petitioner has not even claimed the security, it being a merely panacea.

14. The Petitioner, therefore, called upon the Court to interpret Section 9(ii) (e) such as to advance the cause and spirit of the legislation and which is to promote public interest and not to defeat its provisions.

15. It may be mentioned that even if such interpretation was put, the Court would have to consider whether the entire award amount or a part thereof and which part would be liable to such deposit. This would require the Court to go into the intrinsics of the award itself. The award being the money award would require the same parameters for upholding or rejecting its challenge as for the order of deposit, partly or fully. The arbitration petition U/s. 34 filed by the Respondent would itself be disposed off within those parameters. The interim order of protection U/s. 9 does not contemplate any such exercise by the Court. It only requires the Court to consider how an award cannot be rendered nugatory. The merits of the award are not gone into by counsel on behalf of the Petitioner though the Petition does mention the details of the award.

16. It is argued on behalf of the Respondent that the award does not represent the Petitioner''s merit pending the challenge to it and until it becomes executable. Consequently the omnibus protection contained in Section 9(ii) (e) would not take within its sway the deposit of the award amount as measure of protecting the award.

17. It is argued on behalf of the Respondent that Section 9 of the Act does not contemplate within its ambit the deposit of the award amount at all, with or without withdrawal, conditional or otherwise. It is argued that it only contemplates protection of the property which is the subject matter of the arbitration and not the award which is the result of the arbitration.

18. It must be appreciated that upon an award being passed the subject matter must remain for enforcement after all the legitimate applications for challenging the award and the appeals therefrom are disposed off by the competent courts so that the party against whom the award is passed would have the fruits of the award decided as per law. The amount under the award itself would have to be enforced under execution proceedings as per the CPC as a decree of the Court with appeals therefrom contemplated in initial challenge itself intrinsically operating as stay of the arbitral award unlike the specific provisions of law making an appeal against the decree or an order of the Court not per se operating as a stay.

19. This position in law has been enunciated and held by the Supreme Court in the case of National Aluminium Co. Ltd. Vs. Pressteel and Fabrications Pvt. Ltd. and Another, of which the Supreme Court observed that the Act having specifically provided the remedy U/s. 34, the Supreme Court could not direct the award amount to be deposited "so that the applicant could enjoy the fruits of the award during further proceedings", which is precisely why the Petitioner claims to have made this application for interim relief of deposit. The Supreme Court has observed the mandatory language of Section 34 and has held that in view thereof the award becomes unexecutable until the challenge U/s. 34 is refused. It is held that the Court has no discretion to pass an interlocutory order with regard to the award except to adjudicate any correctness of the claim. It is, therefore, held that the direction claimed by the award holder becomes impermissible to pass. The Supreme Court has also observed that there was no exceptional circumstances in that case which would compel it to ignore the statutory provisions even to exercise jurisdiction under Article 142 of the Constitution of India though it observed that the automatic suspension of the execution of the award would defeat the very objective of the alternate dispute resolution system to which the arbitration belongs. This said, the ambit of Section 9(ii) (e) for any other interim measure of protection, even if not ejusdem generis, clauses (a) to (d) would entail and require the Court to pass only an order for protection of the subject matter of the arbitration agreement and not for protection of the award or the Petitioner''s right to the receipt of the award, the attractive argument on behalf of the Petitioner notwithstanding.

20. The case of Mr. Amin Tharani and Mr. Amin Tharani Vs. Kotak Mahindra Prime Ltd. as Assignee of Tata Motors Ltd. Formerly Tata Finance Ltd. , relied upon on behalf of the Petitioner lends itself to the same scope having considered the judgment in the case of National Aluminum (Supra). In that case this Court found itself fully able to secure and protect the subject matter of the dispute being the vehicle despite the award being already challenged and pending the enforcement upon the refusal of the challenge. Though in that case this Court found a clear case of the amount being due and payable by the Respondents to the Petitioner and sought to exercise its jurisdiction U/s. 9 of the Act, that was for passing an interim order of protection despite observing that the award "becomes in executable" once the Petition U/s. 34 was filed. The Court, therefore, expressly observed that upon the mandate U/s. 9 of the Act it could pass ad-interim order or direction during the pendency of the execution in respect of transfer or disposal of the property so that the award would not be rendered nugatory or a paper decree. The Court did not order any deposit with or without withdrawal upon any conditions.

21. The case of Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals Pvt. Ltd., , which judgment of the Supreme Court was also considered in the case of Kotak Mahindra (Supra), the order of grant of interim relief U/s. 9 of the Act being an injunctive relief was required to be upon the principles enunciated in Order 39 of the CPC. In paragraph 8 of the Judgment the reliefs contemplated U/s. 9 of the Act as set out are the reliefs of injunction, appointment of Receiver, preservation of the property or securing the amount in dispute. None of these reliefs is claimed or prayed for.

22. This may be upon intention because the question of grant of injunction, appointment of Receiver or preservation of any property does not arise since there is none in this case meant for protection. The securing of the amount would require to be made also upon established principles under Order 38 upon the analogy in the case of Adhunik Steels (Supra) with regard to Order 39, and as considered by the Division Bench of this Court in the case of Deccan Chronicle Holidays Ltd. Vs. L & T Finance Ltd., in Appeal (L.) No. 130 of 2013 by order dated 8th August, 2013 with regard to Order 38 mandatory the Court not to travel in an "unchartered territory ignoring the basic principles of procedural law contained in the CPC and to take its principles as a guide in determining an application u/s 99 of the Act as formulated in the case of Nimbus Communications Limited Vs. Board of Control for Cricket in India and another, by another Division Bench of this Court. A case in that behalf is neither made out or claimed.

23. Consequently as held in the case of Steel Authority of India Ltd Vs. AMCI Pty Ltd. and Another, though the right to apply U/s. 9 even after a award is passed is clear, that right is for protection of the property in dispute and not the protection of the award itself which remains unexecutable as observed in that case of National Aluminium (Supra). Consequently in that case when the property in dispute was sought to be protected after the passing of the award and the application was challenged, the refusal to order to deposit of the award amount as held in the case of National Aluminium (Supra) was observed in paragraph 16 of the judgment thus:

The observation of the Supreme Court was made "in regard to the said award" and not in relation to the "subject matter of the dispute.

It was, therefore, observed that whatever be the observations in the case of National Aluminium (Supra), they were with regard to the deposit of the award amount which came to be rejected by the Supreme Court despite its observation about the provision being opposed to the alternate dispute resolution system but not with regard to the rights U/s. 9 of the Act post award and before its enforcement.

24. Consequently the Respondent has relied upon two orders of the Delhi High Court in the cases of Sterling and Wilson Electricals Pvt. Ltd. Vs. Silicon Graphics Systems (India) Pvt. Ltd., and SMJ-RK-SD(JV) Vs. National Highways Authority of India, OMP 613 of 2008. The application for an order of deposit of the award amount was rejected upon considering the case of National Aluminium (Supra) U/s. 9 of the Act. The orders in these matters have been considered in paragraph Nos. 22 to 24 of the judgment in the case of SAIL (Supra). It is specifically observed in the case of SMJ Supra that the parameters U/s. 9 are only for preservation of the subject matter of the arbitration agreement or securing the amount in dispute and not for execution of the award pending the objections against the award.

25. The order of the full deposit of arbitral Award would tantamount to and be in aid of execution of the award whilst money award statutorily remains unexecutable and enforceable. Consequently whatever be the laudable object of arbitration as a alternate dispute resolution mechanism, it must be guided by the parameters U/s. 9 r/w. 36 of the Act which does not permit the court to order a deposit much as it would in an appeal against the decree or order of the Court. In the result the Petition fails and is rejected.