No Exceptional Treatment to Be Given To the Government While Considering the Application for Stay of Arbitration Award: SC

The Supreme Court had observed that there shall no exceptional treatment given to the government while it is considering the application for stay which is under section 36 filed by Government under section 34 of Arbitration and Conciliation act.

Section 36 of the act states that on an application for grant of stay of an arbitral award, the court has discretion to grant stay on conditions it may deem fit. It also states while passing a stay order the court must have “due regard” to provisions of CPC for the grant of stay of money decree.

Rule 8A Order XXVII of Code of Civil Procedure 1908 on the other hand has provisions which says “No security to be required from Government or a public officer in certain cases” i.e. no security must be required from the Government in case of there being a money decree passed against it.

Pam Developments private limited v State of West Bengal- The issue in this case was

• Whether the provisions of Order XXVII rule 8A of CPC should be followed and should the court consider that while deciding the application for stay of that award under Section 36 of the Arbitration and Conciliation act.
• Let’s consider even if the Order XXVII rule 8A of CPC was taken into account, then can the court pass the order of unconditional stay of the award.

OBSERVATIONS BY THE COURT

1. The provisions of CPC must be followed as guidance and not be followed as a mandatory one.– the bench comprising of Justice RF Nariman and Justice Vineet Saran observed the presence of the phrase “having due regard” which meant the provisions must only be taken into consideration and are not mandatory, if it was written “in accordance with” then I would imply that they are mandatory one.
2. No special treatment for government while dealing with grant of stay of arbitral award– The court also observed that Arbitration is an essential alternate dispute redressal system which is meant for quick resolution of disputes and if under any circumstances any decree is allowed to stay, the very purpose of this dispute settlement mechanism will be defeated as the one who holds the decree will be fully deprived of the benefits of Arbitration. This act is considered as an act which provides quick resolution of disputes and also makes it clear that every party must be heard and shall be treated equally(Section 18).