Arbitration award: Government as a party can’t get special stay, says SC

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Published: July 18, 2019 8:04 AM

Arbitration proceedings are essentially alternate dispute redressal system meant for quick resolution of disputes and in case a money decree against the government is allowed to be automatically stayed, the very purpose of 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 Act, the apex court stated. 

Supreme Court, Calcutta High Court, Calcutta HC, Arbitration and Conciliation Act, PAM Development,West Bengal eservation, ranjan gogoi, Arbitration ActThe top court said that the provision, which was incorporated in 1937 during the British Raj, gave certain safeguards to the government (which was then the British Crown) and “it would not be applicable in today’s time, when we have a democratic government”. (Reuters)

The Supreme Court has held that no special or exceptional treatment will be given to the government as a party in granting stay of the arbitration award during the course of the proceedings. A bench comprising justices RF Nariman and Vineet Saran while quashing the Calcutta High Court’s order that stayed the award against the West Bengal government said that the Arbitration and Conciliation 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,” the apex court said in its decision in PAM Developments versus State of West Bengal case.

The top court said that the provision, which was incorporated in 1937 during the British Raj, gave certain safeguards to the government (which was then the British Crown) and “it would not be applicable in today’s time, when we have a democratic government”.

Arbitration proceedings are essentially alternate dispute redressal system meant for quick resolution of disputes and in case a money decree against the government is allowed to be automatically stayed, the very purpose of 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 Act, the apex court stated.  It further said that the reference to CPC in Section 36 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 Act.

The company and the West Bengal government had entered into a contract in April 2001 for a repair programme for different stretches of national highway in Hooghly district. As the state government didn’t clear the contractor’s dues after the work was completed, the HC in August 2003 appointed a retired judge as the arbitrator to decide the disputes. The sole arbitrator awarded `2.87 crore with interest to the company and the same was challenged by the state.

While the executing court in October 2018 attached the award money lying to the credit of West Bengal with RBI, the HC stayed the award. Counsel Saurav Agarwal, appearing for the company, argued that the courts should not have given unconditional stay and could have still directed deposit of the awarded amount. Section 18 of the Arbitration Act expressly provides for equal treatment of all parties involved, which would include the government as a party, he added.

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