The Arbitration & Conciliation Act, 1996 (herein after The Act) with its
advent has paved way for an effective alternate dispute resolution mechanism but
reduces importance of certain the procedural and other substantive laws that
forms the basis of settling disputes before the courts. The Act focuses on party
autonomy where the mutual rights and liabilities emerge out of the contract
between the parties at the same time treating all the parties involved alike.
The question in this case which perturbs us, as to what is the position when one
of the party is the Government? Does the government enjoy any special privilege
as it does in the case of suits filed before courts under Civil Procedure Code?
This is what exactly was an elaborate point of discussion in Pam Developments
Private Ltd. Vs. State of West Bengal
((2019)8 SCC 112).
As per the Indian law, if a party wishes to challenge the award and get a stay
of the enforcement of an award, court shall direct a deposit of a minimum of 80%
of the award amount. The Hon'ble Apex Court in the above said case, was faced
with a situation where the State of West Bengal had obtained an order of
unconditional stay of the award under section 36(2) of the Arbitration &
Conciliation Act, 1996 (as amended up to date) after relying on the provisions
of Order XXVII Rule 8A of CPC, in the pending proceedings under Section 34 of
the Arbitration Act filed in the High Court of Calcutta.
The execution petition
filed by Pam Developments Pvt. Ltd. was also dismissed by the executing court
based on an order of a co-ordinate bench of the High Court wherein an
unconditional stay of award had been granted to the State Government. Pam
Developments, visibly aggrieved, approached the Hon'ble Supreme Court.
Pam Developments assailed the order of unconditional stay on two main grounds (i)
The provision of Order XXVII Rule 8A of CPC could not have been applicable and
the same should not have been considered while deciding the application for stay
of the award under Section 36 of the Arbitration Act. (ii) Even if the provision
of Order XXVII Rule 8A is to be taken into account, then too the Courts should
not pass an order of unconditional stay of award and could still direct deposit
of the awarded amount as security.
It is relevant at this juncture first to see what Order XXVII Rule 8A of the
Code of Civil procedure, 1908 says: It says that no such security as is
mentioned in rules 5 and 6 of Order XLI shall be required from the Government,
for granting stay by the Appellate court or the court which passed the decree.
The moot question which came up for consideration was, whether the Government
can be given special treatment/privileges as per the Civil Procedure Code in the
Arbitration Proceedings like in civil proceedings before courts?
The Supreme Court while dealing with the said question & analyzing the law
w.r.t. the same, culled out the following:
- 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 makes it clear 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 says, the Court has to "have due
regard to the provisions for grant of stay of a money decree under the
provisions of the CPC". The phrase "have due regard to" would only mean that
the provisions of CPC are to be taken into consideration, and not that they
- The phrase used is having regard to the provisions of CPC and not in
accordance with" the provisions of CPC. 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. 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 Act.
- 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 of CPC (which is granting of stay in appeals before
courts), which is not to be demanded from the Government while considering
the stay application filed by the Government.
- 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. On a detailed reading of
the mandate of the Act, it is manifest that it nowhere provides for
differential/special treatment to the Government as a party, while
considering an application for grant of stay of a money decree in
proceedings under Section 34 of the Arbitration Act.
- Although 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.
The Hon'ble Apex court thus reached the conclusion that unconditional order of
stay of the arbitral award could not have been passed by the Calcutta High
Court, based on the detailed analysis of the Act, while clearly delineating the
position of the Government as it enjoys while being before the Civil court as
one of the party and its status under the Arbitration Act.
The ratio of this
judgment has been able to bind the ethos of the Arbitration Act. As has been
rightly observed by our Hon'ble Apex Court, the seepage of the strict rigours of
the Civil Procedure Code in the arbitral proceedings will denude this special
Act of its very element of being an informal & speedier dispute resolution