INTERNATIONAL SEAPORT DREDGING PVT LTDversusKAMARAJAR PORT LIMITED

                [2024] 10 S.C.R. 1503 : 2024 INSC 827

               International Seaport Dredging Pvt Ltd
                                 v.
                       Kamarajar Port Limited
                       (Civil Appeal No. 12097 of 2024)
                                24 October 2024
                [Dr Dhananjaya Y Chandrachud,* CJI,
                 J.B. Pardiwala and Manoj Misra, JJ.]

                            Issue for Consideration
       Matter pertains to the correctness of the order passed by the High
       Court granting stay on the execution of the award conditional on
       the respondent furnishing a bank guarantee.

                                   Headnotes†
       Arbitration and Conciliation Act 1996 – ss.36, 34 – Arbitral
       award – Stay on enforcement – Dispute between parties –
       Invocation of arbitration agreement – Arbitral award passed
       directing the respondent to pay the appellant certain sum
       with 9% interest which would be increased to 12% p.a. if
       not paid within three months and certain amount as costs –
       Applications u/s.33 for correction of the award by both the
       parties – Arbitral tribunal dismissed the application filed by
       the respondent, however allowed the application filed by the
       appellant – Respondent challenged the arbitral award u/s.34
       and moved an application for stay of execution – High Court
       granted a stay on the execution of the award conditional on
       the respondent furnishing a bank guarantee – Correctness:
       Held: Law qua arbitration proceedings, cannot be any different
       merely because of the status of the respondent as a statutory
       undertaking – High Court ought not to have based its decision on
       the condition for the grant of stay on the status of the respondent
       as a statutory authority – Arbitration Act is a self-contained
       code, it does not distinguish between governmental and private
       entities – Hence, the decision of the Court cannot be influenced
       by the position of the party before it and whether it is a fly-by-night
       operator – In the absence of any provision of law, it would be
       inappropriate for courts to apply this standard while adjudicating

* Author
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    the conditions upon which a stay of an award may be granted –
    Similarly, the form of security required to be furnished should not
    depend on whether a party is a statutory or other governmental
    body or a private entity – Governmental entities must be treated in
    a similar fashion to private parties insofar as proceedings under the
    Arbitration Act are concerned, except where otherwise indicated by
    law – Parties have entered into commercial transactions with full
    awareness of the implications of compliance and non-compliance
    with the concerned contracts and the consequences which would
    visit them in law – Thus, the submission that the High Court was
    correct in directing the respondent to furnish bank guarantees in
    relation to the amount awarded because it is a statutory body,
    rejected – Under Ord. XLI r.5 CPC, the Court has the power
    to direct full or part deposit and/or the furnishing of security in
    respect of the decretal amount–Thus, order of the High Court to
    be modified – Respondent to deposit an amount quantified at
    75% of the decretal amount, inclusive of interest, on or before the
    stipulated date before the High Court – Conditional on the deposit
    of the said amount, there shall be a stay on the enforcement of
    the arbitral award. [Paras 12, 15, 17]

                             Case Law Cited
    Pam Developments Private Limited v. State of West Bengal [2019]
    9 SCR 252 : (2019) 8 SCC 112; Toyo Engineering Corpn. v. Indian
    Oil Corpn. Ltd., 2021 SCC OnLine SC 3455 – referred to.

                                List of Acts
    Arbitration and Conciliation Act 1996; Arbitration and Conciliation
    (Amendment) Act, 2015; Builidng and other Construction Worker’s
    Welfare Cess Act 1996; Code of Civil Procedure, 1908.

                             List of Keywords
    Stay on execution of award; Bank guarantee; Arbitral award;
    Stay on enforcement; Arbitration agreement; Correction of the
    award; Arbitration proceedings; Statutory undertaking; Grant of
    stay; Statutory authority; Arbitration Act, a self-contained code;
    Fly-by-night operator; Governmental body; Private entity;
    Governmental entities; Commercial transactions; Statutory body;
    Full or partial deposit; Furnishing of security in respect of decretal
    amount.
[2024] 10 S.C.R.                                                             1505

     International Seaport Dredging Pvt Ltd v. Kamarajar Port Limited


                             Case Arising From
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 12097 of 2024
      From the Judgment and Order dated 09.09.2024 of the High Court
      of Judicature at Madras in AN No. 4236 of 2024

                          Appearances for Parties
      Shyam Divan, Sr. Adv., Ms. Shally Bhasin, Chaitanya Safaya,
      Prateek Yadav, Adith Deshmukh, S. S. Shroff, Advs. for the Appellant.
      C A Sundaram, Sr. Adv., Ms. Rohini Musa, Adv. for the Respondent.

                 Judgment / Order of the Supreme Court
                                  Judgment

      Dr Dhananjaya Y Chandrachud, CJI.

1.    Leave granted.
2.    The appeal arises from an interim order dated 9 September 2024 of
      a Single Judge of the High Court of Judicature at Madras in A No
      4236 of 2024 in Arb OP (Com Div) No 335 of 2024.
3.    The respondent issued a Letter of Award for executing Capital
      Dredging Phase-III at Kamarajar Port to the appellant for an
      approximate sum of Rs 274 crores. On 12 August 2015, the parties
      entered into a contract for the following work to be conducted by
      the appellant:
      a.   Capital dredging of Container Berth and Multi Cargo Berths
           and their approaches;
      b.   Capital dredging of Coal Berth 3 & Coal Berth 4 and their
           approaches;
      c.   Removal of onshore boulders and transportation to the
           designated area;
      d.   Removal of offshore boulders and transportation to the
           designated area;
      e.   Removal of offshore identified debris/wrecks; and
      f.   Environmental monitoring.
4.    These tasks were to be completed on or before 11 April 2017.
      Thereafter, disputes arose between the parties. The appellant invoked
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      the arbitration agreement. The arbitral proceedings commenced and
      the three-member arbitral tribunal made an award on 7 March 2024
      directing the respondent to:
      a.      Pay the appellant a sum of Rs 21,07,66,621 towards the claims
              that were allowed in its favour;
      b.      Pay the appellant interest on the amount awarded at the rate
              of nine per cent per annum from 15 November 2017 until the
              date of the award if the payment was made within three months,
              and, if not, at the rate of twelve per cent per annum from the
              date of the award till the date of payment; and
      c.      Pay the appellant Rs 3,20,86,405 by way of costs.
5.    Both parties filed applications under Section 33 of the Arbitration and
      Conciliation Act 19961for correction of the award and for additional
      arbitral awards. The arbitral tribunal dismissed the application filed by
      the respondent. It allowed the application filed by the appellant only
      to the extent of increasing the costs awarded to it by Rs 12,00,000 to
      reflect the fees paid to the arbitral tribunal subsequent to the parties
      filing their memo of costs.
6.    The respondent challenged the arbitral award under Section 34 of the
      Arbitration Act and moved an application for stay of execution. The
      High Court, by its impugned judgment and order dated 9 September
      2024, granted a stay on the execution of the award conditional
      on the respondent furnishing a bank guarantee in the sum of
      Rs 21,07,66,621 within a period of eight weeks.
7.    The judgment of the High Court has been assailed by the original
      claimant of the arbitral proceeding (i.e., the appellant in this case)
      whose contention is that since the award operates as a money
      decree under Section 36 of the Arbitration Act, the High Court was
      not justified in directing merely the furnishing of a bank guarantee
      in relation to the principal amount. The appellant contends that
      the respondent ought to have instead been directed to deposit the
      amount awarded to it as a condition for the grant of a stay on the
      execution of the award.



1    “Arbitration Act”
[2024] 10 S.C.R.                                                       1507

     International Seaport Dredging Pvt Ltd v. Kamarajar Port Limited


8.    Mr Shyam Divan, senior counsel appearing on behalf of the appellant,
      has urged that: (i)A body of precedent has emerged from this Court
      in terms of which the sanctity of arbitration must be preserved by
      requiring the deposit of the amount awarded as a condition for the
      stay on the enforcement of the award; (ii) The amended provisions
      of the Arbitration Act require that while considering an application
      for stay of an award for the payment of money, due regard has to
      be had to the provisions of the Code of Civil Procedure 19082; and
      (iii)The award of Rs 21,07,66,621 covered ten claims of which three
      were awarded in full and seven in part. The High Courtwhile ordering
      a stay, has essentially furnished only two reasons. The first reason
      pertains to the question of cess, while the only other reason is that
      the respondent is not “a fly by operator”.
9.    Mr C A Sundaram, senior counsel appearing on behalf of the
      respondent, submits that: (i)The amended provisions of the statute
      incorporate provisions of the CPC in regard to ordering a stay of an
      award which contains provisions for the payment of money; (ii)Under
      Order XLI Rule 5 of the CPC, the requirement is for furnishing of
      security and the deposit of money should not, therefore, be regarded
      as a default option; (iii)The High Court had due regard to the fact that
      the respondent is a statutory body and correctly held that security
      should be furnished in the form of a bank guarantee; (iv) As such the
      impugned judgment should not be interfered with under Article 136
      of the Constitution; and (v) The body of precedents which Mr Divan
      relied on pertains to appeals under Section 37 of the Arbitration Act.
10. Section 36(2) of the Arbitration Act indicates that where an application
    to set aside an arbitral award has been filed under Section 34, the
    filing of such an application shall not, by itself, render that award
    unenforceable, unless the Court grants a stay on the enforcement of
    the arbitral award in terms of sub-section (3). The provision indicates
    that a separate application must be made for this purpose. Sub-
    section (3) of Section 36 stipulates that where such an application
    has been filed, the Court may, subject to such conditions as it may
    deem fit, grant stay of the operation of the award for reasons to be
    recorded in writing. Following the amendments brought about by the
    Arbitration and Conciliation (Amendment) Act 2015, the first proviso


2    “CPC”
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    to sub-section (3) stipulates that the Court shall, while considering
    an application for grant of stay in the case of an arbitral award for
    payment of money, have due regard to the provisions related to the
    grant of stay of a money decree under the CPC. The second proviso
    provides for a situation in which the Court may grant unconditional
    stay. Section 36(3) and its provisos are reproduced below:
         “36. Enforcement –
         …
         (3) Upon filing of an application under sub-section (2) for
         stay of the operation of the arbitral award, the Court may,
         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 of a money decree under
         the provisions of the Code of Civil Procedure, 1908
         (5 of 1908).
         Provided further that where the Court is satisfied that a
         Prima facie case is made out that, –
         (a) the arbitration agreement or contract which is the
         basis of the award; or
         (b)   the making of the award,
         was induced or effected by fraud or corruption, it shall
         stay the award unconditionally pending disposal of the
         challenge under section 34 to the award.
         Explanation.—For the removal of doubts, it is hereby
         clarified that the above proviso shall apply to all court
         cases arising out of or in relation to arbitral proceedings,
         irrespective of whether the arbitral or court proceedings
         were commenced prior to or after the commencement of
         the Arbitration and Conciliation (Amendment) Act, 2015
         (3 of 2016).”
                                               (emphasis supplied)
[2024] 10 S.C.R.                                                       1509

    International Seaport Dredging Pvt Ltd v. Kamarajar Port Limited


11. In the present case, there is an arbitral award to the tune of
    approximately Rs 21 crores in favour of the appellant. The High
    Court, while issuing a direction for furnishing of a bank guarantee,
    dealt with only one of the claims which was awarded by the arbitral
    tribunal, namely, that which pertained to the refund of the cess
    under the Building and Other Construction Workers’ Welfare Cess
    Act 1996.3 In this regard, the High Court observed that the Deputy
    Chief Labour Commissioner, by its order dated 6 November 2019,
    held that the Cess Act was not applicable to the appellant which
    was therefore not required to pay cess under that statute. It noted
    that the arbitral tribunal had, however, rendered an award in which
    it directed the respondent to pay the appellant this amount, which
    had already been paid by the respondent to the appellant. It held
    thatwhile the substance of the claims of the parties could only be
    determined in the proceedings under Section 34 of the Arbitration Act,
    it was prima facie satisfied that the arbitral tribunal had erred in not
    considering the claim of the respondent. Apart from discussing this
    claim, which was in the amount of approximately Rs 3 crores, the
    High Court did not address the other claims of the appellant which
    were allowed by the arbitral tribunal. The amount awarded in relation
    to the remaining claims is approximately Rs 18 crore.
12. The High Court granted a stay on the operation of the award subject
    to the respondent furnishing a bank guarantee for the principal
    amount awarded to the appellant, i.e. Rs 21,07,66,621. It held that
    it was not inclined to issue orders in relation to the interest and
    the costs awarded to the appellant because “the petitioner is not a
    fly-by operator and is a statutory undertaking.” The law qua arbitration
    proceedings, in our view, cannot be any different merely because of
    the status of the respondent as a statutory undertaking.
13. In this regard, it is necessary to advert to a decision of a two-Judge
    Bench of this Court in Pam Developments Private Limited v State
    of West Bengal4 where it was observed:
            “20. In our view, 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


3   “Cess Act”
4   [2019] 9 SCR 252 : (2019) 8 SCC 112
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         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. the 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
         the Arbitration Act are essentially to be first applied. Since,
         the Arbitration Act is a self-contained Act, the provisions of
         CPC will apply only insofar as the same are not inconsistent
         with the spirit and provisions of the Arbitration Act.”
14. The Court also observed:
         “26. Arbitration proceedings are essentially alternate
         dispute 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 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 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. 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.
         …
[2024] 10 S.C.R.                                                          1511

   International Seaport Dredging Pvt Ltd v. Kamarajar Port Limited


          28. 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 parties, it would, in our 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.”
                                                 (emphasis supplied)
15. Bearing in mind the above principles, we are of the view that the
    High Court was in error in not even prima facie considering the
    fact that apart from the issue of cess, there was an arbitral award
    in favour of the appellant in regard to other claims as well. Further,
    the High Court ought not to have based its decision on the condition
    for the grant of stay on the status of the respondent as a statutory
    authority. The Arbitration Act is a self-contained code – it does not
    distinguish between governmental and private entities. Hence, the
    decision of the Court cannot be influenced by the position of the
    party before it and whether it is a fly-by-night operator. Moreover,
    an assessment as to whether a party is reliable or trustworthy is
    subjective. Many private entities, too, may rely on the size of their
    undertaking, its success, public image, or other factors to argue that
    they are not fly-by-night operators. In the absence of any provision
    of law in this regard, it would be inappropriate for courts to apply
    this standard while adjudicating the conditions upon which a stay of
    an award may be granted. Similarly, the form of security required to
    be furnished should not depend on whether a party is a statutory or
    other governmental body or a private entity. Governmental entities
    must be treated in a similar fashion to private parties insofar as
    proceedings under the Arbitration Act are concerned, except where
    otherwise indicated by law. This is because the parties have entered
    into commercial transactions with full awareness of the implications
    of compliance and non-compliance with the concerned contracts and
    the consequences which will visit them in law. Hence, the argument
    that the High Court was correct in directing the respondent to furnish
    bank guarantees in relation to the amount awarded because it is a
    statutory body is rejected.
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16. In Toyo Engineering Corpn. v. Indian Oil Corpn. Ltd.,5 this Court
    reiterated the same principle in the following terms:
             “3. This Court repeatedly having held that Order XLI Rule
             5 principles are to be followed in these cases, we find that
             largely because public corporations are involved, discretion
             continues to be exercised not on principles under Order
             XLI Rule 5 but only because large amounts exist and that
             Government Corporations have to pay these amounts
             under Arbitral Awards. Both these considerations are
             irrelevant, as has been pointed out by us earlier.”
17. Under Order XLI Rule 5 of the CPC, the Court has the power to
    direct full or part deposit and/or the furnishing of security in respect
    of the decretal amount. Bearing in mind the principles which must
    guide the Court, we are of the view that the order of the High Court
    requires modification. In modification of the direction of the High Court
    in the impugned judgment dated 9 September 2024, we direct that:
     (i)     The respondent shall deposit an amount quantified at 75%
             of the decretal amount, inclusive of interest, on or before 30
             November 2024 before the High Court; and
     (ii)    Conditional on the deposit of the aforesaid amount within the
             period stipulated above, there shall be a stay on the enforcement
             of the arbitral award.
18. The impugned judgment of the High Court shall stand modified in
    the above terms. The appeal is allowed accordingly.
19. Pending applications, if any, stand disposed of.

     Result of the case: Appeal Allowed.



     †
         Headnotes prepared by: Nidhi Jain




5   2021 SCC OnLine SC 3455