Mumbai, Mar 26 (KNN) In an important ruling regarding stays on arbitral awards, the Bombay High Court has held that where an arbitral award is in the nature of a money decree, the party seeking a stay must deposit 100 per cent of the awarded amount.

The single judge bench of Justice R.I. Chagla rejected arguments that a bank guarantee should suffice, stating there is no distinction between the parameters for granting stays under Sections 36(3) and 37 of the Arbitration Act.

As per Section 36 of the Arbitration Act read with Order 41 Rules 1 and 5 of the Civil Procedure Code, courts have the discretion to consider the specific facts and circumstances of each case when deciding whether to grant a stay on the execution of a decree.

The court can direct the party seeking the stay to deposit either the full decretal amount or a certain percentage of it. However, the general practice is to grant stays on the execution of money decrees only in exceptional circumstances.

The case, titled M/s. Balmer Lawrie & Co.Ltd vs M/s. Shilpi Engineering Pvt.Ltd, arose from an interim application filed by a party seeking to recall an earlier order disposing of their notice of motion for stay on enforcement of an arbitral award dated July 5, 2018.

The applicant argued that since they had furnished a bank guarantee for the entire awarded amount before the Calcutta High Court, a liberal interpretation should be taken.

However, Justice Chagla noted that Supreme Court precedents consistently require deposit of the full awarded amount when the award is a money decree. The court held that Section 36(3) does not warrant a liberal interpretation when imposing conditions for staying an award's operation.

Differing from a Calcutta High Court judgment that distinguished between Sections 36(3) and 37, the Bombay High Court ruled that the same standards apply irrespective of whether a Section 34 petition to set aside the award is pending or dismissed.

Ultimately, while granting a conditional stay, the court directed the applicant to deposit the awarded amount with interest within six weeks, allowing the respondent to apply for withdrawal of the sum upon such deposit.

The ruling reinforces the need for successful parties to secure the awarded amount before obtaining a stay on execution of arbitral awards adjudging monetary claims.

(KNN Bureau)