Holding

Section 36(3) of the Arbitration Act requires courts to consider CPC provisions only as a non‑mandatory guide, and the Act does not permit an unconditional stay or special treatment for the Government, rendering the High Court's stay order unsustainable.

Summary

The appellant, Pam Developments Private Ltd., was awarded a sum of Rs.2.87 crore by an arbitrator in a dispute with the State of West Bengal over a highway repair contract, but the award remained unpaid. The State filed a Section 34 petition challenging the award and later sought a stay of its operation under the amended Section 36(2) of the Arbitration and Conciliation Act, invoking Order XXVII Rule 8A of the CPC which exempts the Government from furnishing security. The High Court granted an unconditional stay, leading the Executing Court to dismiss the appellant's execution petition. On appeal, the Supreme Court examined whether the CPC provision could override the special provisions of the Arbitration Act and whether the Government is entitled to differential treatment. The Court held that Section 36(3) requires the court to have "due regard" to CPC provisions only as a guideline, not as a mandatory rule, and that the Arbitration Act, being a self‑contained special law, does not permit automatic stay or special treatment for the Government. Consequently, the unconditional stay was set aside, the order of the Executing Court was restored, and the appellant was allowed to seek release of the attached amount.

Issues considered

The effect of Order XXVII Rule 8A of the CPC on a stay application under Section 36 of the Arbitration Act when the Government is a party.
Whether the phrase "have due regard to" in the proviso to Section 36(3) makes CPC provisions mandatory or directory.
Whether the Arbitration Act mandates equal treatment of parties, precluding any special treatment for the Government in stay applications.
Whether a court may direct deposit of the award amount despite the exemption from furnishing security under Rule 8A.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 17, s. 18, s. 34, s. 36, s. 9
Code of Civil Procedure, 1908s. Order XLI Rule 1, s. Order XLI Rule 5, s. Order XXVII Rule 8A

Subjects

ArbitrationSection 36Stay of awardOrder XXVII Rule 8AEquality of partiesGovernment exemptionCPCExecution of award

Judgment

252 [2019]REPORTS
SUPREME COURT 9 S.C.R. 252 [2019] 9 S.C.R.

A PAM DEVELOPMENTS PRIVATE LTD.
v.
STATE OF WEST BENGAL
(Civil Appeal No.5432 of 2019)
B JULY 12, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Arbitration and Conciliation Act, 1996 – Code of Civil
Procedure, 1908 – Effect of s. 36 of the Arbitration Act, vis-a-vis
the provisions of Or. XXVII, r. 8A of CPC – Respondent-State invited
C
tender relating to the work of ‘Special Repair Programme 2000-
2001 for different stretches of National Highway-II’ – The bid of
appellant was accepted and an agreement was registered – The
work under the agreement was completed – The appellant raised its
claims and dues before the State – The claims of the appellant were
D not paid – Appellant filed an application u/s. 11(6) of the Act, 1996
– Arbitrator allowed claims of the appellant – Aggrieved, the
Respondent-State filed application u/s.34 of the Act, 1996 before
the High Court – Thereafter, appellant filed an execution application
before the High Court – Executing Court by order dated 3.10.2018
attached the sum of Rs. 2.75 crores and clarified that in the event
E
there was no stay of operation of the award, it was open to the
appellant to pray for release of the said amount – In the meantime,
the respondent filed stay application u/s. 36(2) of the Act, 1996
and order of the unconditional stay was passed relying on the
provisions of Or. XXVII, r. 8A of CPC – Relying on the order of the
F unconditional stay, the Executing Court dismissed the execution
petition – On appeal, held: The Arbitration Act is a special Act
which provides for quick resolution of disputes between the parties
and s.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
G
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 u/s. 34 of the Arbitration Act – The reference to CPC

H
252
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 253
WEST BENGAL

in s.36 of the Arbitration Act is only to guide the Court as to what A
conditions can be imposed, and the same have to be consistent with
the provisions of the Arbitration Act – Insofar Or. XXVII, r.8A of
CPC is concerned, r.8A only provides exemption from furnishing
security, which would not restrict the Court from directing deposit
of the awarded amount and part thereof – Thus, order of the High
B
Court granting unconditional stay of the arbitration award not
sustainable in the eyes of the law – Accordingly, order dated
03.10.2018 of the Executing Court restored and as already directed,
it is open for the appellant-award holder to pray for release of the
attached amount.
Code of Civil Procedure, 1908 – Or.XXVII, r.8A – Application C
of – Held: The archaic r. 8A of Order XXVII, CPC has no application
or reference in the present times, even if it is assumed that the
provisions of Or.XXVII, r.8A of CPC are to be applied, the same
would only exempt the Government from furnishing security, whereas
u/Or. XLI, r. 5 of CPC, the Court has the power to direct for full or D
part deposit and/or to furnish security of the decretal amount –
r.8A only provides exemption from furnishing security, which would
not restrict the Court from directing deposit of the awarded amount
and part thereof.
Allowing the appeals, the Court E
HELD: 1. Sub-Section (3) of Section 36 of the Arbitration
Act mandates that while considering an application for stay filed
along with or after filing of objection under Section 34 of the
Arbitration Act, if stay is to be granted then it shall be subject to
such conditions as may be deemed fit. The said sub-section clearly F
mandates that the grant of stay of the operation of the award is to
be for reasons to be recorded in writing “subject to such conditions
as it may deem fit”. The proviso makes it clear that the Court has
to “have due regard to the provisions for grant of stay of a money
decree under the provisions of the Code of Civil Procedure”. The
phrase “have due regard to” would only mean that the provisions G
of CPC are to be taken into consideration, and not that they are
mandatory. While considering the phrase “having regard to”,
this Court in the case of Shri Sitaram Sugar Company Limited. v.

H
254 SUPREME COURT REPORTS [2019] 9 S.C.R.

A Union of India (1990) 3 SCC 223 has held that “the words ‘having
regard to’ in sub-section are the legislative instruction for the general
guidance of the Government in determining the price of sugar. They
are not strictly mandatory, but in essence directory.”.
[Para 17] [266-H; 267-A-C]
B 2. In view of this Court, in the present context, the phrase
used is ‘having regard to’ the provisions of CPC and not ‘in
accordance with” the provisions of CPC. In the latter case, it
would have been mandatory, but in the form as mentioned in Rule
36(3) of the Arbitration Act, it would only be directory or as a
guiding factor. Mere reference to CPC in the said Section 36
C cannot be construed in such a manner that it takes away the power
conferred in the main statute (i.e. Arbitration Act) itself. It is to
be taken as a general guideline, which will not make the main
provision of the Arbitration Act inapplicable. The provisions of
CPC are to be followed as a guidance, whereas the provisions of
D the Arbitration Act are essentially to be first applied. Since, the
Arbitration Act is a self-contained Act, the provisions of the CPC
will apply only insofar as the same are not inconsistent with the
spirit and provisions of the Arbitration Act. [Para 18] [267-D-F]
3. Arbitration proceedings are essentially alternate dispute
E redressal system meant for early/quick resolution of disputes and
in case a money decree - award as passed by the Arbitrator against
the Government is allowed to be automatically stayed, the very
purpose of quick resolution of dispute through 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
F the Arbitration Act. The Arbitration 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
G 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 reference to CPC in Section 36 of the Arbitration Act is
only to guide the Court as to what conditions can be imposed,
H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 255
WEST BENGAL

and the same have to be consistent with the provisions of the A
Arbitration Act. [Para 24] [270-G-H; 271-A-C]
4. It may be true that the CPC provides for a differential
treatment to the Government in certain cases, but the same may
not be so applicable while considering a case against the
Government under the Arbitration Act. For instance, Section 80 B
of CPC provides for a notice of two months to be given before
any suit is instituted against the Government. Further, it is also
provides that no ex-parte injunction order can be passed against
the Government. Whereas on the other hand, under the
Arbitration Act no such special provision has been made with
regard to arbitration by or against the Government. There is no C
requirement under the Arbitration Act for a notice of two months
to be given to the Government before invoking arbitration
proceeding against the Government. Further, Sections 9 and 17
of the Arbitration Act also provide for grant of ex-parte interim
orders against the Government. [Para 25] [271-C-E] D
5. Section 36 of the Arbitration Act also does not provide
for any special treatment to the Government while dealing with
grant of stay in an application under proceedings of Section 34 of
the Arbitration Act. Keeping the aforesaid in consideration and
also the provisions of Section 18 providing for equal treatment of E
parties, it would, in view of this Court, makes it clear that there
is no exceptional treatment to be given to the Government while
considering the application for stay under Section 36 filed by the
Government in proceedings under Section 34 of the Arbitration
Act. [Para 26] [271-F-G]
F
6. Although this Court is of the firm view that the archaic
Rule 8A of Order XXVII CPC has no application or reference in
the present times, this Court may only add that even if it is
assumed that the provisions of Order XXVII Rule 8A of CPC are
to be applied, the same would only exempt the Government from
furnishing security, whereas under Order XLI Rule 5 of CPC, G
the Court has the power to direct for full or part deposit and/or to
furnish security of the decretal amount. Rule 8A only provides
exemption from furnishing security, which would not restrict the
Court from directing deposit of the awarded amount and part
thereof. [Para 27] [271-G-H; 272-A] H
256 SUPREME COURT REPORTS [2019] 9 S.C.R.

A Superintendent & Legal Remembrancer, State of West
Bengal v. Corporation of Calcutta (1967) 2 SCC 170
– followed.
Board of Control for Cricket in India v. Kochi Cricket
Private Limited (2018) 6 SCC 287 : [2018] 2 SCR 829;
B Shri Sitaram Sugar Company Limited. v. Union of India
(1990) 3 SCC 223 : [1990] 1 SCR 909 – relied on.
Case Law Reference
[2018] 2 SCR 829 relied on Para 3

C [1990] 1 SCR 909 relied on Para 17
(1967) 2 SCC 170 followed Para 22

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5432
of 2019
D
From the Judgment and Order dated 13.12.2018 of the High Court
at Calcutta in G.A. No. 2680 of 2018 in A.P. No. 212 of 2010
With
Civil Appeal No. 5433 of 2019.
E
Saurav Agarwal, Priyankar Saha, Sarad Kumar Singhania,
Ms. Rashmi Singhania, Rajat Kapoor, Anshuman Chowdhury,
Ms. G. Goyal, Subhasish Bhowmick, Advs. for the Appellant.
Anand Grover, Sr. Adv., Ms. Chitra Lekha Das, Suhaan Mukerji,
F Ms. Astha Sharma, Amit Verma, Prastut Dalvi, Ms. Dimple Nagpal
(for PLR Chambers & Co.), Advs. for the Respondent.
The Judgment of the Court was delivered by
VINEET SARAN, J. 1. Leave granted.
2. In response to a notice inviting tender issued by the respondent
G relating to the work of “Special Repair Programme 2000-2001 for
different stretches of National High Way-II from 622 Kmp to 625
Kmp, 627 Kmp to 628 Kmp and 630 Kmp to 631 Kmp (vide Job
No.CRF/W.B./70/2000) under the Hooghly High Way Division No.II
in the District of Hooghly (Package No. II)”, the appellant,alongwith
H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 257
WEST BENGAL [VINEET SARAN, J.]

others, had applied. The bid of the appellantwas accepted on 26th March A
2001, for which an agreement was registered on 2nd April, 2001. After
several extensions were granted by the respondent for the delay which,
according to the appellant, was entirely attributable to the respondent,
the work under the agreement was completed by the appellant on
28.02.2002. Then, on 26th May 2003, the appellant raised its claims and
B
dues before the Executive Engineer of Public Works (Roads) Department,
Government of West Bengal. The claims of the appellant having not
been paid, an application under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (for short ‘the Arbitration Act’) was filed by the
appellant. By an order dated 14th August 2003, the Calcutta High Court
was pleased to appoint Retired Justice Sujit Kumar Sinha as the Arbitrator C
to decide the disputes. By his award dated 21st January, 2010, the
Arbitrator allowed some claims of the appellant and held the appellant to
be entitled to a sum of Rs.2,87,11,553/- plus interest at the rate of 18%
per annum on a sum of Rs.1,34,06,965/- from the date of the award till
the date of the payment. Challenging the award passed by the Arbitrator,
D
the respondent State of West Bengal filed an application under Section
34 of the Arbitration Act before the Calcutta High Court. The appellant
filed its affidavit in opposition of the aforesaid, to which reply had also
been filed by the respondent. The matter is still pending consideration
before the Calcutta High Court.
3. Section 36 of the Arbitration Act has been amended by Act E
number 3 of 2016 with retrospective effect from 23.10.2015.In view of
the pre-amended provision of Section 36 of the Arbitration Act, the
respondent had not filed injunction application in the proceedings under
Section 34 of the Arbitration Act. However, in view of the
pronouncement of the judgment by this Court in the case of Board of F
Control for Cricket in India vs Kochi Cricket Private Limited(2018)
6 SCC 287, wherein it was held that the amended provisions of Section
36 of the Arbitration Act would also apply to the pending proceedings
under Section 34 of the Arbitration Act, the appellant filed an execution
application before the Calcutta High Court (registered as E. C. No.297
of 2018). The respondent then sought time to file an application for staying G
the award.
4. In the executing proceedings, on 18.09.2018, the Executing
Court adjourned the matter after recording that “in the event the
operation of the award is not stayed by the adjourned date, the
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258 SUPREME COURT REPORTS [2019] 9 S.C.R.

A petitioner shall be entitled to pray for attachment of the said amount
in execution of the said award”. In the meantime, the respondent
filed stay application under the amended Section 36(2) of the Arbitration
Act in the pending proceedings under Section 34 of the Arbitration Act
before the Calcutta High Court. On 27.09.2018, the stay application of
the respondent was dismissed in default. Consequently, on 03.10.2018,
B
which was the adjourned date fixed by the Executing Court in E.C.
No.297 of 2018, the Executing Court passed an order attaching the sum
of Rs. 2.75 Crores lying to the credit of the respondent-State ofWest
Bengal with the Reserve Bank of India. It was further clarified that in
the event there was no stay of operation of the award by the adjourned
C date (04.12.2018), it would be open to the appellant (award holder) to
pray for release of the said amount. Relying on an order dated 05.09.2018
of a coordinate bench of the High Court wherein an unconditional stay
of award had been granted to the State Government and the SLP against
such order had been dismissed inlimine, the Executing Court dismissed
the execution petition filed by the appellant.
D
5. Without filing the application for recall of the order dated
27.09.2018, whereby the stay application of the respondent had been
dismissed in default, the respondent filed afresh application for stay of
the award, in which the impugned order dated 13.12.2018 of unconditional
stay was passed after relying on the provisionsof Order XXVII Rule8A,
E Code of Civil Procedure (for short ‘CPC’). Challenging the said order,the
present Appeal has been filed.
6. The submission of Shri Saurav Agarwal, learned counsel for
the appellant is two-fold. Firstly, thatthe provision of Order XXVII Rule
8A CPC would not be applicable to the present case, and as such the
F Court ought not to have considered the same while deciding the application
for stay of the award under Section 36 of the Arbitration Act. Secondly,
it has been submitted that even if the provision of Order XXVII Rule 8A
are to be taken into account,then too the Courts should not pass an order
of unconditional stay of award and could still direct deposit of the awarded
G amount.
7. The contention of the learned counsel for the appellant is that
as per the amended Section 36 of the Arbitration Act, filing of an
application under Section 34 of the Arbitration Act shall not by itself
render the award unenforceable unless the stay of the operation of the
H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 259
WEST BENGAL [VINEET SARAN, J.]

award is granted by the Court in accordance of the provisions of sub- A
Section(3)of Section 36.It is submitted that under sub-Section (3) of
Section 36, it is provided that “the court maysubject to such conditions
as it may deem fit, grant stay of the operation of such award for
reasons to be recorded in writing.” According to the learned counsel
for the appellant, the proviso to the saidSection merely provides that the
B
application for grant of stay is to be considered after “having due regard
to the provisions for grant of stay of money decree under the
provisions of CPC”. It is thus been submitted by the learned counsel
for the appellant that under sub-Section (3) of Section 36, the CPC would
be applicable “subject to” the provisions of sub-Section (2) of Section
36. According to the learned counsel, the phrase “subject to” the C
conditions, would mean that it is obligatory for the Court to impose such
conditions at it may deem fit, if it decides to grant a stay of the award,
meaning thereby the grant of stay is to be conditional.It is further
contended that the proviso to the saidSection merely states that the Court
shall”have due regard” to the provisions of CPC, which would mean
D
that the Court will take the said provisions of the CPC into consideration
as a guiding principle and the same would not be mandatory. Learned
counsel for the appellant has contended that the Arbitration Act is a
complete code in itself and the stay application has to be considered as
per the provisions of Section 36 of the Arbitration Act, having due regard
to the provisions of CPC, which would not be same as “in accordance E
with” the provisions of CPC.It is vehemently urged that the provisions
of Order XXVII Rule 8A CPC, which is an exception in the CPC, should
not be brought into the Arbitration Act as it would then result in limiting
the effect of Section 36 of the Arbitration Act itself. According to the
learned counsel, the provisions of Order XLI Rule 5 CPC alone have to
F
be considered by the Court as generalguidelines while deciding the
application for stay filed under Section 36 of the Arbitration Act.
8. Learned counsel for the appellant submitted that the Arbitration
Act does not provide for any special treatment to the Government while
considering the application for stay under Section 36, and the provision
of Order XXVII Rule 8A CPC would not be attracted while deciding an G
application for stay filed under Section 36 of the Arbitration Act.
According to the learned counsel, under CPC the Government is treated
differently, which is not the case in the Arbitration Act. As an illustration,
it has been stated that two months noticeunder Section 80 CPC is provided
H
260 SUPREME COURT REPORTS [2019] 9 S.C.R.

A for before any suit is filed against the Government, which is not so in the
case of arbitration proceedings. He has also contended that Section 18
of the Arbitration Act expressly provides for equal treatment of all parties
involved, which would include the Government as a party.
9. In the alternative, learned counsel for the appellant has submitted
B that even if the provisions of Order XXVII Rule 8A are to be taken into
account, then also the Courtsought not to pass an order of unconditional
stay of the award, and could still direct deposit of the awarded amount
or part thereof, as the said Rule 8A only exempts the Government from
furnishing security,which would not mean that the Courts are mandated
to pass an unconditional stay of the award.In support of his submissions,
C the learned counsel for the appellant has relied upon various decisions of
this Court as well as 246th report of the Law Commission, which shall be
considered at the time of dealing with the arguments.
10. Per contra, Shri Anand Grover, learnedSenior Counsel
appearing for the respondent State of West Bengal has contended that
D the proceedings contemplated under the Arbitration Act are two-fold.
Chapters V and VI deal with the conduct of arbitral proceedings, whereas
Chapters VII, VIII and IX of the Arbitration Act deal with proceedings
after the award. According to him, Section 36 of the Arbitration Act
(falling in Chapter VIII) which deals with the enforcement of the award,
E is the relevant provision. Sub-Section (1) specifies that the award shall
be enforced in accordance with the provisions of the CPC in the same
manner as if it was a decree of the Court, which would be subject to the
provisions of sub-Section (2). According to the learned Senior Counsel,
the phrase used in sub-Section (3) that “subject to such
conditions”would make it clear that the Court has complete discretion,
F though judicially guided, to grant a stay subject to such conditions that it
may deem fit and for the reasons to be recorded in writing. It is contended
that the phrase used “have due regard to” in the proviso to sub-Section
(3) would apply to all provisions of the CPC including a money decree.
It is thus been contended that by virtue of Section 36(3) of the Arbitration
G Act, all the relevant provisions of the CPC namely Order XLI Rule 5
and Order XXVII Rule 8A would come into play.
11. Shri Grover has further submitted that while considering the
stay of money decree, Order XXVII Rule 8A would directly be applicable,

H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 261
WEST BENGAL [VINEET SARAN, J.]

read with Order XLI Rule 5. He has emphasised on the use of word A
“shall” in the proviso to Section 36(3) of the Arbitration Act, which
according to him makes a provision of CPC mandatorily to be applied
while considering the application for stay under Section 36. The phrase
“subject to such conditions” used in Section 36(3) of the Arbitration
Act is only with regard to discretion exercised by the High Court in
B
deciding the stay application and reasons to be recorded and no conditions
as specified in the Statute. He has thus contended that the phrase
“having due regard to” in the proviso to Section 36(3) would mean the
same to be mandatory because of the use of word shall in the opening
part of the proviso.
12. It has also been urged that Order XXVII Rule 8A deals with C
operation of stay in respect of suits against Government, which is distinct
from private parties. Since, the Government is always considered to be
solvent and expected to honour the decree against it, unlike private parties,
the Government cannot avoid the enforcement of final decree against it
and thus the award necessarily requires to be stayed in the case of a D
Government being the judgment debtor. He has further submitted that
under Order XLI Rule 5(3), substantial loss has to be shown by the
party applying for stay unless such order is made and in the case of the
Government, since a large number of arbitration proceedings are made
against it, cumulatively they would result in substantial loss. The
submission thus is that Order XLI Rule 5(5) requires the applicant to E
make a deposit or furnish security, failing which, stay would not be granted,
but in view of the provisions of Order XXVII Rule 8A the Government
would be exempted from furnishing any security or making any deposit.
According to the learned counsel, the furnishing of security is the genus
and making of deposit is a species and when the security itself is not F
required to be deposited by the Government under Order XXVII Rule
8A, there would be no requirement of the Government being made to
deposit the money, when the genus (security) itself is not to be furnished
by the Government.
13. We have heard learned counsel for the parties at length and G
perused the material on record. For proper appreciation of the facts of
this case, the relevant provisions of the Arbitration and Conciliation Act,
1996 and Code of Civil Procedure, 1908are reproduced hereunder:

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262 SUPREME COURT REPORTS [2019] 9 S.C.R.

A The Arbitration and Conciliation Act, 1996.
“Section 18. Equal treatment of parties. – The parties shall
be treated with equality and each party shall be given a full
opportunity to present his case.”
1
"Section 36.Enforcement. –
B
(1) Where the timefor making an application to set aside the
arbitral award under section 34 has expired, then, subject to
the provisions of sub-section (2), such award shall be en-
forced in accordance with the provisions of the Code of Civil
Procedure, 1908 (5 of 1908), in the same manner as if it were
C a decree of the court.
(2) Where an application to set aside the arbitral award has
been filed in the Court under section 34, the filing of such an
application shall not by itself render that award unenforceable,
unless the Court grants an order of stay of the operation of
D the said arbitral award in accordance with the provisions of
sub-section (3), on a separate application made for that
purpose.
(3) Upon filing of an application under sub-section (2) for
stay of the operation of the arbitral award, the Court may,
E subject to such conditions as it may deem fit, grant stay of the
operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application
for grant of stay in the case of an arbitral award for payment
of money, have due regard to the provisions for grant of stay
F of a money decree under the provisions of the Code of Civil
Procedure, 1908 (5 of 1908).”

1
Subs. by Act 3 of 2016, sec. 19, for section 36, for section 36 (w.r.e.f. 23-10-2015).
Section 36, before substitution, stood as under:
G “36. Enforcement. —Where the time for making an application to set aside
the arbitral award under section 34 has expired, or such application having
been made, it has been refused, the award shall be enforced under the Code of
Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of
the Court.”

H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 263
WEST BENGAL [VINEET SARAN, J.]

CODE OF CIVIL PROCEDURE, 1908. A
“Order XXVII, Rule 8A
8A. No security to be required from Government or a public
officer in certain cases.—No such security as is mentioned in
rules 5 and 6 of Order XLI shall be requiredfrom the
Government or, where the Government has undertaken the B
defence of the suit, from any public officer sued in respect of
an act alleged to be done by him in his official capacity.”
“Order XLI, Rule 1
Form of appeal – What to accompany memorandum. – (1) C
Every appeal shall be preferred in the form of a memorandum
signed by the appellant or his pleader and presented to the
Court or to such officer as it appoints in this behalf. The
memorandum shall be accompanied by a copy of the judgment:
Provided that where two or more suits have been tried together D
and a common judgment has been delivered therefore and
two or more appeals are filed against any decree covered by
that judgment, whether by the same appellant or by different
appellants, the Appellate Court may dispense with the filing
of more than one copy of the judgments.
E
(2)Contents of memorandum.—The memorandum shall set
forth, concisely and under distinct heads, the grounds of
objection to the decree appealed from without any argument
or narrative; and such grounds shall be numbered
consecutively.
F
(3) Where the appeal is against a decree for payment of money,
the appellant shall, within such time as the Appellate Court
may allow, deposit, the amount disputed in the appeal or
furnish such security in respect thereof as the Court may think
fit.”
“Order XLI, Rule 5 G

Stay by Appellate Court.—
(1) An appeal shall not operate as a stay of proceedings under
a decree or order appealed from except so far as the Appellate
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264 SUPREME COURT REPORTS [2019] 9 S.C.R.

A Court may order, nor shall execution of a decree be stayed by
reason only of an appeal having been preferred from the
decree; but the Appellate Court may for sufficient cause order
stay of execution of such decree.
Explanation.—An order by the Appellate Court for the stay
B of execution of the decree shall be effective from the date of
the communication of such order to the Court of first instance,
but an affidavit sworn by the appellant, based on his personal
knowledge, stating that an order for the stay of execution of
the decree has been made by the Appellate Court shall,
pending the receipt from the Appellate Court of the order for
C the stay of execution or any order to the contrary, be acted
upon by the Court of first instance.
(2) Stay by Court which passed the decree.—Where an
application is made for stay of execution of an appealable
decree before the expiration of the time allowed for appealing
D therefrom, the Court which passed the decree may on sufficient
cause being shown order the execution to be stayed.
(3) No order for stay of execution shall be made under sub-
rule (1) or sub-rule (2) unless the Court making it is satisfied—

E (a) that substantial loss may result to the party applying
for stay of execution unless the order is made;
(b) that the application has been made without
unreasonable delay; and
(c) that security has been given by the applicant for the
F due performance of such decree or order as may ultimately
be binding upon him.
(4) Subject to the provisions of sub-rule (3), the Court may
make an ex parte order for stay of execution pending the
hearing of the application.
G (5) Notwithstanding anything contained in the foregoing sub-
rules, where the appellant fails to make the deposit or furnish
the security specified in sub-rule (3) of rule 1, the Court shall
not make an order staying the execution of the decrees.”
(emphasis supplied)
H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 265
WEST BENGAL [VINEET SARAN, J.]

14. Section 36 of the Arbitration Act was amended/substituted A
vide Act 3 of 2016 with retrospective effect from 23.10.2015.Sub-Section
(3) of Section 36 of the Arbitration Act was introduced on the
recommendation of 246th Law Commission Report which reads as
under:-
AUTOMATIC STAY OF ENFORCEMENT OF THE AWARD B
UPON ADMISSION OF CHALLENGE
43. Section 36 of the Act makes it clear that an arbitral award
becomes enforceable as a decree only after the time for filing
a petition under section 34 has expired or after the section
34 petition has been dismissed. In other words, the pendency C
of a section 34 petition renders an arbitral award
unenforceable. The Supreme Court, in National Aluminum
Co. Ltd. V. Pressteel& Fabrications, (2004) 1 SCC 540 held
that by virtue of section 36, it was impermissible to pass an
Order directing the losing party to deposit any part of the
award into Court. While this decision was in relation to the D
powers of the Supreme Court to pass such an order under
section 42, the Bombay High Court in Afcons Infrastructure
Limited v. The Board of Trustees, Port of Mumbai 2014 (1)
Arb LR 512 (Bom) applied the same principle to the powers
of a Court under section 9 of the Act as well. Admission of a E
section 34 petition, therefore, virtually paralyzes the process
for the winning party/award creditor.
44. The Supreme Court, in National Aluminium, has criticized
the present situation in the following words:
“However, we do notice that this automatic suspension of the F
execution of the award, the moment an application
challenging the said award is filed under section 34 of the
Act leaving no discretion in the court to put the parties on
terms, in our opinion, defeats the very objective of the
alternate dispute resolution system to which arbitration G
belongs. We do find that there is a recommendation made by
the concerned Ministry to the Parliament to amend section
34 with a proposal to empower the civil court to pass suitable
interim orders in such cases. In view of the urgency of such
amendment, we sincerely hope that necessary steps would be
H
266 SUPREME COURT REPORTS [2019] 9 S.C.R.

A taken by the authorities concerned at the earliest to bring
about the required change in law.”
45. In order to rectify this mischief, certain amendments have
been suggested by the Commission to section 36 of the Act,
which provide that the award will not become unenforceable
B merely upon the making of an application under section 34.
In essence, the Law Commissionhas categorically recommended
that there should be no automatic stay of the arbitral award. While so
recommending, the Law Commission report makes no exception for the
Government.On the basis of the said report of the Law Commission,the
C old Section 36 was substituted in 2016,with retrospective effect from
23.10.2015.
15. The amended Section 36 of the Arbitration Act provides for:
(a) after expiry of making an application to set aside the arbitral
award (i.e. 90 days from the award) the award shall be enforced as if it
D was a decree of the Court; (b) filing of an application under Section 34
shall not by itself render the award unenforceable; (c) upon an application
for grant of stay of the award, the Court has the discretion to grant stay,
which may be subject to such conditions as it may deem fit; (d) while
passing any stay order the Court is to “have due regard” to the provisions
E of CPC for grant of stay of money decree.
16. The backbone of the submissions on behalf of the respondent-
State of West Bengal is that under the provisions of Order XXVII Rule
8A of the CPC, no security shall be required from the Government in
case of there being a money decree passed against the Government,
F and the execution of which is prayed for.If such submission of the
respondent is accepted then the same would mean that mere filing of an
objection under Section 34 of the Arbitration Act by a Government shall
render the award unenforceable as the stay order would be passed in a
mechanical manner and as a matter of course, without imposing any
condition against the Government-judgment debtor. If the contention is
G accepted, the effect would be that insofar as the Government is
concerned, the unamended provision of Section 36 of the Arbitration
Act would automatically come into force.
17. In this backdrop, we have now to consider the effect of Section
36 of the Arbitration Act, vis-a-vis the provisions of Order XXVII Rule
H 8A of CPC. Sub-Section (3) of Section 36 of the Arbitration Act mandates
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 267
WEST BENGAL [VINEET SARAN, J.]

that while considering an application for stay filed along with or after A
filing of objection under Section 34 of the Arbitration Act, if stay is to be
granted then it shall be subject to such conditions as may be deemed
fit.The said sub-section clearly mandates that the grant of stay of the
operation of the award is to be for reasonsto be recorded in writing
“subject to such conditions as it may deem fit”.The proviso makes it
B
clear that the Court has to “have due regard to the provisions for
grant of stay of a money decree under the provisions of the Code
of Civil Procedure”. The phrase “have due regard to” would only
mean that the provisions of CPC are to be taken into consideration,and
not that they are mandatory.While considering the phrase “having regard
to”, this Court in the case of Shri Sitaram Sugar Company Limited.v. C
Union of India(1990)3 SCC 223 has held that “the words ‘having
regard to’ in sub-section are the legislative instruction for the general
guidance of the Government in determining the price of sugar. They
are not strictly mandatory, but in essence directory.”.
18. In our view, in the present context, the phrase used is ‘having D
regard to’ the provisions of CPC and not ‘in accordance with” the
provisions of CPC. In the latter case, it would have been mandatory, but
in the form as mentioned in Rule 36(3) of the Arbitration Act, it would
only be directory or as a guiding factor. Mere reference to CPC in the
said Section 36 cannot be construed in such a manner that it takes away
the power conferred in the main statute (i.e. Arbitration Act) itself. It is E
to be taken as a general guideline, which will not make the main provision
of the Arbitration Act inapplicable. The provisions of CPC are to be
followed as a guidance, whereas the provisions of the Arbitration Act
are essentially to be first applied. Since, the Arbitration Act is a self-
contained Act, the provisions of the CPC will apply only insofar as the F
same are not inconsistent with the spirit and provisions of the Arbitration
Act.
19. A Full Bench of the Calcutta High Court, while considering
the question as to whether in an appeal preferred by the Government,
the Government is entitled to get stay of execution of decree impugned G
by taking aid of Order XXVII Rule 8A of the CPC, even if the conditions
mentioned in Clauses (a) and (b) of sub-rule (3) of Rule 5 of Order XLI
are not complied with, held as follows:
“36. In order to resolve the aforesaid controversy, one must
examine the legislative intent for incorporating Order 27, Rule H
268 SUPREME COURT REPORTS [2019] 9 S.C.R.

A 8A in the Code. The aforesaid provision was engrafted to
exempt the Government to furnish security as a guarantee
for due performance of a decree as mentioned in Rules 5 and
6 of Order XLI. Notwithstanding such exemption,
discretionary power of the Court to grant stay of execution
of a decree can be exercised in favour of the Appellant
B
Government only if it satisfies the Court as to the existence of
clauses (a) and (b) of Rule 5(3) of Order XLI. As “substantial
loss” to the appellant is a condition precedent to grant stay,
execution of a money decree is ordinarily not stayed since
satisfaction of a money decree does not amount to irreparable
C injury to the appellant as the remedy of restitution is available
to him in the event the appeal is allowed. [See,Sihor Nagar
Palika Bureau v. BhabhlubhaiVirabhai, 2005 (4) SCC 1, para
6]. Under such circumstances, when the court chooses to
exercise its discretion in favour of the appellant State to grant
stay of execution of a money decree it must be balance the
D
equities between the parties and ensure that no undue hardship
is caused to a decree holder due to stay of execution of such
decree. Hence, in appropriate cases, the Court in its discretion
may direct deposit of a part of the decretal sum so that the
decree holder may with draw the same without prejudice and
E subject to the result of the appeal. Such direction for deposit
of the decretal sum is not for the purpose of furnishing
security for due performance of the decreebut an equitable
measure ensuring part satisfaction of the decree without
prejudice to the parties and subject to the result of the appeal
as a condition for stay of execution of the decree.
F
37. To hold that the Court is denuded of such equitable
discretion while granting stay of execution of a money decree
in favour of the Government, would cause grave hardship to
deserving decree holders who in the facts of a given case
may be entitled to enjoy part satisfaction of the decree without
G prejudice and subject to the result of the appeal as a condition
for stay of execution of the entire decree.
38. Hence, it is opined although Order 27, Rule 8A may exempt
the appellant Government from the mandatory obligation of
furnishing security in terms of Rule 1(3) for seeking stay of
H
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 269
WEST BENGAL [VINEET SARAN, J.]

execution of a money decree as under Rule 5(5) of Order A
XLI, the said provision cannot be said to operate as an absolute
clog on the discretion of the court to direct the deposit of the
decretal amount as a condition for grant of stay of execution
of the decree in appropriate cases more particularly when
such direction is coupled with the liberty to the decree holder
B
to withdraw a portion thereof in part satisfaction of the decree
without prejudice and subject to the result of the appeal.”
We find no reason to disagree with such view taken by the Full
Bench of the Calcutta High Court and are thus in agreement with the
same.
C
20. Even otherwise a plain reading of Order XXVII Rule 8A of
CPC would make it clear that the same is only regarding security as
mentioned in Rule 5 and 6 of Order XLI CPC, which is not to be
demanded from the Government while considering the stay application
filed by the Government. It, however, does not provide that the decretal
amount cannot be required to be deposited in the appeal against a money D
decree.
21. It is also noteworthy that when Order XXVII Rule 8A of
CPC was incorporated in the year 1937, at that time Rule 5 of Order
XLI CPC had only four sub-Rules. Sub Rule (5) in Rule 5 of Order XLI
was inserted by Act 104 of 1976 w.e.f. 01.02.1977. Prior to that, it was E
sub-Rule (3) (c) of Rule 5 aforesaid which provided that no order for
stay of execution was to be made unless the Court was satisfied that
security had been given by the applicant for performance of the decree.
It was in such context when only security had to be been given at the
time of grant of stay that Rule 8A of Order XVII CPC was incorporated F
to give certain protection to the Government by providing for no
requirement of security from the Government. It was probably for the
reason that the Government is always considered to be solvent, thus
was exempted from providing security under Rule 8A of Order XXVII
of CPC. However, in 1976 Sub Rule (5) to Rule 5 of Order XLI CPC
was inserted, which reads as follows: G
(5) Notwithstanding anything contained in the foregoing sub-
rules, where the appellant fails to make the deposit or furnish
the security specified in sub-rule (3) of rule 1, the Court shall
not make an order staying the execution of the decrees.”
H
270 SUPREME COURT REPORTS [2019] 9 S.C.R.

A The same provides for making of deposit or furnishing security by
the decree holder seeking stay. It would thus mean that after 1977, the
Appellate Court had the power to direct for deposit of the decretal amount,
which was earlier limited only to furnishing of security under sub-Rule
(3) of Rule 5 of Order XLI CPC. It is noteworthy that after insertion of
sub-Rule (5), there was no amendment to Order XXVII Rule 8A CPC
B
to exempt the State Government for making such deposit, which would
mean that Rule 8A does not exempt the Government from making
deposit,which the Court has the power to now direct under Order XLI
Rule 5(5) CPC.
22. Further, it is to be noticed that Order XXVII Rule 8A of CPC
C was inserted in 1937 when the British Crown was ruling our country.
The same was brought in during the period of British Raj to protect the
interest of the then Government (Crown). While considering a case where
the State of West Bengal was carrying on trade as owner and occupier
of a market in Calcutta (now Kolkata) without obtaining a license as
D required under Section 218 of Calcutta Municipal Act, 1951,a Constitution
Bench of this Court in the case of Superintendent & Legal
Remembrancer, State of West Bengal v. Corporation of Calcutta
(1967) 2 SCC 170 considered the question as to whether this Court
should adopt the rule of construction accepted by the Privy Council in
interpreting Statute vis-a-vis the Crown and held that “There are many
E reasons why the said rule of construction is inconsistent with and
incongruous in the present set-up we have no Crown, the archaic
rule based on the prerogative and perfection of the Crown has no
relevance to a democratic republic; it is inconsistent with the rule
of law based on the doctrine of equality.”
F 23. In our considered view, the provision which was incorporated
in the year 1937 during the British Raj, giving certain safeguards to the
Government (which was thenthe British Crown) would not be applicable
in today’s time, when we have a democratic Government.
24. Arbitration proceedings are essentially alternate dispute
G redressal system meant for early/quick resolution of disputes and in case
a money decree-award as passed by the Arbitrator against the
Government is allowed to be automatically stayed, the very purpose of
quick resolution of dispute through arbitration would be defeated as the
decree holder would be fully deprived of the fruits of the award on mere
H filing of objection under Section 34 of the Arbitration Act. The Arbitration
PAM DEVELOPMENTS PRIVATE LTD. v. STATE OF 271
WEST BENGAL [VINEET SARAN, J.]

Act is a special Act which provides for quick resolution of disputes A
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 givento 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
B
considering an application for grant of stay of a money decree in
proceedings under Section 34 of the Arbitration Act. As we have already
mentioned above, the reference to CPC in Section 36 of the Arbitration
Act 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. C
25. It may be true that the CPC provides for a differential treatment
to the Government in certain cases, but the samemay not be so applicable
while considering a case against the Government under the Arbitration
Act. For instance, Section 80 of CPC provides for a notice of two monthsto
be given before any suit is instituted against the Government.Further, it D
is also provides that no ex-parte injunction order can be passed against
the Government. Whereas on the other hand, under the Arbitration Act
no such special provision has been made with regard to arbitration by or
against the Government. There is no requirement under the Arbitration
Act for a notice of two monthsto be given to the Government before
invoking arbitration proceeding against the Government. Further, Sections E
9 and 17 of the Arbitration Act also provide for grant of ex-parte interim
orders against the Government.
26. Section 36 of the Arbitration Act also does not provide for any
special treatment to the Government while dealing with grant of stay in
an application under proceedings of Section 34 of the Arbitration Act. F
Keeping the aforesaid in consideration and also the provisions of Section
18 providing for equal treatment of parties, it would, inour view, make it
clear that there is no exceptional treatment to be given to the Government
while considering the application for stay under Section 36 filed by the
Government in proceedings under Section 34 of the Arbitration Act. G
27. Although we are of the firm view that the archaic Rule 8A of
Order XXVII CPC has no application or reference in the present times,
we may only add that even if it is assumed that the provisions of Order
XXVII Rule 8A of CPC are to be applied, the same would only exempt
the Government from furnishing security, whereas under Order XLI H
272 SUPREME COURT REPORTS [2019] 9 S.C.R.

A Rule 5 of CPC, the Court has the power to directfor full or part deposit
and/or to furnish security of the decretal amount. Rule 8A only provides
exemption from furnishing security, which would not restrict the Court
from directing deposit of the awarded amount and part thereof.
28. For the foregoing reasons, we are of the opinion that the
B impugned order passed by the Calcutta High Court granting unconditional
stay of the arbitration award dated 21.01.2010, cannot be sustained in
the eye of law. Accordingly, we allow these appeals and quash the
order dated 13.12.2018 passed by the Calcutta High Court and restore
the order dated 03.10.2018 of the Executing Court passed in E.C No.
297 of 2018 (Pam Development Pvt. Ltd. vs. State of West Bengal).
C As already directed by order dated 03.10.2018, it shall be open for the
petitioner-award holder to pray for release of the attached amount.
29. No order as to costs.

D Ankit Gyan Appeals allowed.

E

F

G

H