LI Network
Published on: November 25, 2023 at 07:36 IST
The Delhi High Court, in a recent judgment established that an unconditional stay on an arbitral award under Section 36(3) cannot be granted unless a prima facie case of fraud is presented.
Justice Manoj Kumar Ohri presided over the bench and declined to grant an unconditional stay in favor of a foreign entity lacking roots in India.
The court emphasized that the petitioner failed to demonstrate assets for security and was unwilling to deposit any portion of the arbitral award. Insisting on an unconditional stay without establishing a case of fraud was deemed impermissible.
Factual Background:
The dispute arose from the Main Civil Works Package-1 involving the Kol Dam Hydro Electric Project in Bilaspur District. Following disputes, the matter was referred to an Arbitral Tribunal, which issued the challenged award.
The petitioner sought Rs. 3,66,34,27,582.45 initially but was awarded only Rs. 1,30,23,45,512/-. The Arbitral Tribunal directed a set-off against the Rs. 299.67 Crores advanced to the petitioner, resulting in a directive for the petitioner to refund the excess of Rs. 1,69,43,54,488/- to the respondent.
Petitioner’s Submissions:
The petitioner, pending Section 34 objections, sought an unconditional stay under Section 36(3) of the Arbitration and Conciliation Act. Challenged the set-off and refund ordered, claiming it exceeded the scope of the reference. he Argued for discretionary powers akin to Order XLI Rule 5 of the Civil Procedure Code.
Respondent’s Counter-Submissions:
Argued that unconditional stay powers under Section 36(3) are limited to fraud cases.
Denied exceeding the reference scope, asserting the Tribunal’s authority under Section 23(2A) of the A&C Act.
Court’s Analysis:
Under Section 36(3), an unconditional stay requires a prima facie fraud case, which the petitioner failed to establish.
Considering the petitioner as a foreign entity without Indian roots and lacking assets, the court noted reluctance to deposit any part of the award.
The court emphasized that showing bona fide could have been achieved by offering cash security.
Interference with a due process-based arbitral award should be on limited Section 34 grounds, and such intervention should be cautious.
The Court dismissed the application.
Case Title: Italian Thai Development v. NTPC Ltd, OMP(COMM) 343 of 2022
