SC Overturns Bombay HC Order Granting Unconditional Stay On Arbitral Award

New Delhi, Nov 26 (KNN) The Supreme Court has overturned a Bombay High Court order granting an unconditional stay on a Rs 4-crore arbitral award to Popular Caterers, ruling that the case did not justify such an exceptional relief.

A bench of Justices JB Pardiwala and KV Viswanathan observed that an unconditional stay on the execution of an arbitral award can be granted only in rare circumstances. 

Referring to its recent ruling in Lifestyle Equities C.V. & Another v. Amazon Technologies Inc., the Court reiterated the narrow grounds for granting an unconditional stay. 

Such relief is permissible only when the award is egregiously perverse, riddled with patent illegalities, facially untenable, or when exceptional causes of a similar nature are established.

The matter arose from a 2017 Memorandum of Understanding (MoU) between Popular Caterers and Maple Leaf Enterprises LLP for catering services at Mumbai’s Tulip Star Hotel, under which the caterer deposited Rs 4 crore as security. 

The arrangement collapsed soon after when the Mumbai Suburban Collector prohibited the hotel from hosting events. In 2022, the arbitrator directed Maple Leaf’s promoters to refund the amount with interest.

Following a challenge under Section 34 of the Arbitration Act, the Bombay High Court admitted the petition and granted an unconditional stay, preventing recovery of the award amount. Popular Caterers then approached the Supreme Court.

The apex court held that the case did not involve allegations of fraud or corruption, which are the specific statutory grounds for an unconditional stay under the second proviso to Section 36(3) of the Arbitration Act. 

The bench noted that the High Court failed to examine whether the award debtor had made out an ‘exceptional case’ warranting such relief.

“It is not even the case of the judgment-debtor that the making of the award was induced or effected by fraud or corruption,” the Court observed. 

It added that the matter did not fall within any category that would justify an unconditional stay of a money decree.

Accordingly, the Supreme Court restored the requirement of deposit/security for the stay of execution of the award.

(KNN Bureau)