Calcutta High Court
West Bengal Industrial Development … vs Tata Motors Limited on 7 May, 2026
Author: Aniruddha Roy
Bench: Aniruddha Roy
2026:CHC-OS:159
In The High Court at Calcutta
Ordinary Original Civil Jurisdiction
[Commercial Division]
Original Side
Present:
The Hon'ble Justice Aniruddha Roy
AP-COM/88/2024
WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD.
VERSUS
TATA MOTORS LIMITED
For award-debtor/WBDICL/
Applicant: Mr. Kishore Datta, Senior Advocate,
Learned Advocate General,
Mr. Siddharth Sethi, Advocate,
Mr. Manoj Kumar Tiwari, Advocate,
Mr. Raghvendra Pratap, Advocate,
Mr. Yuvraj Chatterjee, Advocate,
Mr. Suddhadev Adak, Advocate.
For award-holder/
Tata Motors LTD./
Respondent: Mr. Sudipto Sarkar, Senior Advocate (VC),
Mr. Siddhartha Mitra, Senior Advocate,
Mr. Deepan Kr. Sarkar, Advocate,
Mr. Samriddha Sen, Advocate,
Mr. Soumitra Datta, Advocate,
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Reserved on: 20.04.2026
Judgment on: 07.05.2026
ANIRUDDHA ROY, J.:
Facts:
1. This is an application filed under Sub-Section (2) to Section 36 of the
Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act).
2. The applicant WBIDC is the award debtor. The respondent TATA Motors is
the award holder.
3. The nature of disputes and differences by and between the parties are not
required to be narrated for adjudication of the instant application, as the
issue in this application is purely on a question of law coupled with few
facts. The facts to decide this application, which are relevant, are only
stated.
4. The disputes between the parties arose with regard to allotment of a land
and for setting up a car manufacturing unit for which the land was provided
by the applicant to the respondent. On diverse counts disputes and
differences arose. Arbitration proceeding was held before an Arbitral
Tribunal consisting of three learned arbitrators. Ultimately an award was
made and published dated October 30, 2023 by the Arbitral Tribunal,
Annexure-A at pages 23 to 65 of the application (Volume-I) in favour of the
respondent for an aggregate sum of Rs. 765. 78 crores along with interest
@ 11% per annum as directed thereunder.
5. The applicant has challenged the said award under Section 34 of the
Arbitration Act. Simultaneously, the applicant filed the instant application
with the following prayers:
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“(a) Unconditional stay of operation of the Award dated
30October 2023 passed by the Tribunal, being Annexure “A” to
the instant Application;
(b) An order of injunction restraining the Respondent, its men,
agents and assigns from proceeding for enforcing the Arbitral
Award dated 30 October 2023 passed by the Tribunal, till
disposal of the present Application and Application under
Section 34 of the Arbitration & Conciliation Act, 1996;
(c) Ad interim orders in terms of prayers above;
(d) Costs of and/or incidental to this application be borne by
the Respondent;
(e) Such other or further order or orders be passed as this
Hon’ble Court may deem fit and proper”.
6. In the interregnum the applicant has taken out an interlocutory application
being GA 01 of 2025 in connection with the instant application wherein,
the applicant prayed for impleadment of the one learned
Arbitrator/presiding arbitrator in the proceeding on the plea that since
fraud has been alleged by way of Bias against the learned Arbitrator, an
opportunity of hearing should be granted to the learned Arbitrator.
7. By a judgment dated June 19, 2025, the said impleadment application was
dismissed by this Court. Being aggrieved thereby the applicant has preferred
a Special Leave Petition being Special Leave to Appeal 21602 of 2025.
Hon’ble Supreme Court by its order dated August 8, 2025, was pleased not
to interfere with the judgment of this Court and accordingly, the Special
Leave Petition was dismissed.
8. Both the applicant/award-debtor and the respondent/award-holder have
filed their detail and extensive first written notes on argument and the
same are on record. The parties have also filed their respective additional
written notes on arguments and supplementary written notes on arguments.
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Second Notes and finally third written notes, in the circumstances stated
herein after.
Submissions:
9. Mr. Kishore Datta, Senior Advocate and Learned Advocate General for the
State appearing for the applicant submits that, though the award passed
against the applicant is a money award and applicant has already filed an
application for setting aside of the arbitral award under Section 34 of the
Arbitration Act, the same automatically would not by itself render the award
unenforceable unless this Court in accordance with the provisions of Sub-
Section (3) to Section 36 of the Arbitration Act, on a separate application
made for that purpose, stay the operation of the impugned award. Sub-
Section (3) to Section 36 provides, inter alia, that upon filing an
application for stay of operation of arbitral award, any condition as it may fit
deem by this Court can be imposed, upon reasons being so recorded. In
case of a money award the Court should have due regard to the provisions
for grant of stay of money decree as laid down under the provisions of Order
XLI Rule (5) of the Code of Civil Procedure, 1908 (for short, CPC).
10. On a further reading of the provisions under Section 36 of the Arbitration
Act Learned Advocate General submits that it provides further that where
the Court is satisfied that a prima facie case is made out that the making of
award was induced or effected by fraud or corruption, the Court shall stay
the award unconditionally pending Section 34 application.
11. Learned Advocate General appearing for the applicant has raised objection
against one of the learned arbitrators/presiding arbitrator of the arbitral
tribunal and submits that, at the post award stage it was discovered by the
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applicant that, the said learned arbitrator had a very close connection and
relation with the respondent, as on various occasions it was discovered that
while launching several cars manufactured by the respondent, the said
learned arbitrator either by himself or with his wife was present and
attended launching/inaugural programmes for inauguration of diverse
models of cars manufactured by the respondent from time to time. In
support of his contention, Learned Advocate General has relied upon
various photographs and news articles, inter alia, from pages 222 to 241 of
the instant application (Volume-II). The applicant also relies upon the
averments made in paragraph 3 and the documents at pages 6 and 7 to the
supplementary affidavit filed by the applicant affirmed on April 9, 2024.
12. The arbitration proceeding has commenced on May 7, 2019. Relying upon
the minute of the commencement meeting learned Advocate General
submits that ‘all the 3 learned arbitrators made a declaration that
they are not interested in any manner in any matter nor are they
related to any party in any manner’.
13. While analysing the documents at pages 222 to 241 of the application
(Volume-2) learned Advocate General submits that, these documents would
demonstrate, inter alia, on June 24, 2020 (page 222), October 9, 2021 (page
230), October 11, 2021 (page 233), May 17, 2022 (page 239), June 6, 2022
(page 245), March 15, 2023 (page 257), the said learned arbitrator either
himself or with his wife had attended the inaugural launching programme of
diverse models of cars manufactured by the respondent. He submits that
the arbitration proceeding took place during the period between May 7,
2019 and June 18, 2023. Learned advocate general submits that on the
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one hand the said learned arbitrator made a declaration that he had no
interest involved with either of the parties and on the other hand he has
meticulously attended the launching programmes organized by the
respondent and/or its dealers for diverse models of cars manufactured by
the respondent.
14. Learned Advocate General submits that the conduct of the said learned
arbitrator was fraudulent within the meaning of proviso 2 of Sub-Section 3
to Section 36 of the Arbitration Act, as prima facie evident from the
materials on record. Hence, the applicant prays for an unconditional stay of
the award dated October 30, 2020 pending disposal of the Section 34
proceeding for setting aside of the award.
15. On the strength of the facts and materials stated above, the applicant
submits that the conduct of the learned arbitrator was totally Bias against
the applicant while adjudicating the disputes between the parties.
16. Learned Advocate General submits that in the facts and circumstances of
the present case, the applicant-petitioner/award-debtor is entitled to
mandatory unconditional stay of operation of the award, in view of second
proviso to Section 36 (3) of the Arbitration Act. Referring to Sections 36 sub-
Sections (2) and (3) read with the first proviso thereto, he submits that the
Court has enormous discretion for grant of an unconditional stay of the
award considering facts of this case.
17. Learned Advocate General then submits on the scheme of the statute that
prior to October 23, 2015, mere filing of a petition under Section 34 of the
Act resulted in an automatic stay of the award, in view of the amendment to
Section 36 of the Act effected from October 23, 2015 mere filing of an
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application under Section 34 does not by itself stay the operation of the
award and makes it unenforceable, unless the Section 34 Court expressly
grants stay of operation of the arbitral award in accordance with the
provision under sub-Section (3) to Section 36 of the Act on a separate
application for such purpose. In the event, an unconditional stay is granted,
it is obligatory on the Court to cite reasons.
18. He then submits that sub-Section (3) to Section 36 provides that upon filing
of an application under sub-Section (2) praying for stay of operation of the
arbitral award, the Court may, subject to such condition as it may deem fit
grants stay of operation of the award for reasons to be recorded in writing.
Proviso to sub-Section (3) stipulates that the Court while considering the
application for grant of stay of an arbitral award for payment of money shall
have due regard to the provisions for grant of stay of a money decree in
accordance with Rule 5 to Order XLI of the Code of Civil Procedure, 1908
(for short CPC).
19. Learned Advocate General submits that under the amended provisions of
sub-Sections (2) and (3) to Section 36 of the Arbitration Act, the Court has
power and discretion to pass an order for unconditional stay of operation of
the impugned award, if facts situations so warrant. In this regard, he has
relied upon a decision of the Bombay High Court In the matter of:
Ecopark India Paper Cup Pvt. Ltd. vs. Sphere International, reported
at 2018 SCC OnLine Bom 540.
20. He then submits that under the scheme of the provision of Section 36 read
with Order XLI of CPC, the party opposing grant of stay cannot assert a
proposition that it would be mandatory for the Court to impose a condition
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for stay of the execution proceeding. Rather, it is for the Court to consider
the facts of each case and exercise its discretion either to grant stay of the
execution of the decree or to impose or not to impose any condition, as the
Court may deem fit and proper. Reliance has also been placed In the
matter of: Ecopark India Paper Cup Pvt. Ltd (Supra).
21. He submits that the Court has power to grant an unconditional stay on the
operation of the award and he placed reliance upon a decision of the Hon’ble
Supreme Court In the matter of: Gazal Taneja and Others vs.
Mahanagar Telephone Nigam Limited and Another, reported at (2013)
7 Supreme Court Cases 543.
22. Learned Advocate General then submits that in 2021, the second proviso
was inserted under Section 36(3) of the Act. As per the second proviso, in a
case where the making of award is induced or effected by Fraud or
Corruption and a prima facie case to that effect is made out, it is
incumbent on the Court to grant unconditional stay of operation of the
arbitral award. Fraud can be of infinite variety and the expression “fraud” in
the making of an award cannot be narrowly construed. Bias is a facet of
Fraud and that in the present case, the making of the award is effected by
fraud. On this ground alone, the impugned award ought to be stayed
unconditionally. In the present case, as submitted by the learned Advocate
General, the first procedural hearing took place on May 7, 2019, and the
last hearing was on June 18, 2023, when the award was reserved. After
passing of the award, the applicant has come to know of at least seven
incidents when the said learned arbitrator allegedly held repeated
engagements with the respondent which were never disclosed by him,
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despite clear mandate of both Sections 12(1) and 12 (2) of the Act. The seven
incidents cited by the applicant are apparent from the documents filed along
with Section 36 application, the particulars are herein below :-
(i) 24th June, 2020 @ Pg.222;
(ii) 20th October, 2020 @ Pg. 228;
(iii) 9th October, 2021 @ Pg. 230;
(iv) 11th October, 2021 @ Pg.233;
(v) 17th May, 2022 @ Pg. 239;
(vi) 6th June, 2022 @ Pg.241;
(vii) 15th March, 2023 @ Pg.257.
23. In addition, learned Advocate General submits that, during hearing before
this Court, the applicant also has filed a supplementary affidavit dated April
9, 2024, wherein it has placed on record a press release dated May 30,
2022, which was available at the official website of the respondent.
Immediately, after the said supplementary affidavit was filed, the respondent
has removed the press release from its official website and thereby destroyed
the evidence to vitiate the present proceeding. A gross mala fide on the part
of the respondent, as alleged by the applicant. Learned Advocate General
then submits that under Section 34 (2) (b) (ii), an arbitral award may be set
aside by the Court if it is in conflict with the public policy of India.
Explanation (1) (i) to Section 34 of the Act provides that an award is in
conflict with the public policy of India if the making of an award is induced
or effected by Fraud or Corruption. Under second proviso to Section 36 (3)
of the Act, where the Court is satisfied that a prima facie case is made out
that the making of award is effected by fraud or corruption, it shall stay the
award unconditionally. The apprehension of bias has to be tested on the
yardstick of reasonableness, as seen from the perspective of the affected
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party. Further, only proof of bias may not be necessary as in most cases it is
not possible. In this regard, learned Advocate General has placed reliance
upon a decision of the Delhi High Court In the matter of: Microsoft
Corporation vs. Zoai Founder, reported at 2023 SCC OnLine Del 3800
and a decision of a Coordinate Bench In the matter of: C and E Ltd.
(Components and Equipments Ltd.) and Another vs. Gopal Das Bagri
and Others, reported at 2023 SCC OnLine Cal 2166.
24. Mr. Datta then submits that the perception of bias on the part of the party is
enough, further, when one is required to judge the case of another, justice
should not only be done but it should also seems to be done. In this regard,
he has placed reliance upon a decision of the Hon’ble Supreme Court In the
matter of: Vinod Bhaiyalal Jain and Others vs. Wadhwani
Parmeshwari Cold Storage Private Limited Through its Director and
Another, reported at (2020) 15 Supreme Court Cases 726.
25. Learned Advocate General then submits that the law is well settled, the test
of real likelihood of bias is whether a reasonable person, in possession of
relevant information, would have thought that bias was likely. What is
relevant is the reasonableness of the apprehension in that regard in the
mind of the party. A judgment which is the result of bias or want of
impartiality is a nullity and the trial is corum-non-judice. Reliance is placed
In the matter of: Ranjit Thakur vs. Union of India and Others,
reported at (1987) 4 Supreme Court Cases 611.
26. Learned Advocate General further submits that when a Court looks at the
allegation of bias, a real likelihood of bias is enough and actual bias is not
required. There must be a circumstance wherefrom a reasonable ground of
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common prudence would think it likely or probable that the judge would, or
did, favour one-side unfairly at the expense of the other side. He placed
reliance upon a judgment In the matter of: Metropolitan Properties
Regina vs. London Rent Assessment Panel Committee and In the matter
of: Todd Figi Et Al. vs. New Hampshire Insurance Company.
27. Learned Advocate General submits that fraud can be of infinite varieties and
may take many forms. Fraud cannot be put in a straight-jacket and it has a
very wide connotation in legal parlance. Sometimes it is audacious and
unblushing fraud, in the contemplation of a civil court of justice, may be set
to include properly all Acts, omissions and concealments which involve a
breach of legal and equitable duty and injuries to another. In this regard he
has placed reliance upon In the matter of: Venture Global Engineering
vs. Satyam Computer Services Limited and Another, reported at (2010)
8 Supreme Court Cases 660.
28. He submits that bias, if alleged against an arbitrator, can always be brought
within the ambit and scope of the expression Fraud. Bias and breach are
contrary to public policy. It cannot be imagined that legislature intend not to
make bias as one of the grounds of challenge to an arbitral award. The
Court often grants unconditional stay of award on the ground of bias of the
arbitrator. In support, Mr. Datta has placed reliance on the following
decisions :-
(i) In the matter of: D.R. Norula vs. Central Coal Fields Ltd. and
Ors, CWJC No.2190 of 2011 [MANU/JH/0517/2001]
(ii) In the matter of: Bharat Heavy Electricals Ltd. vs. C. N. Garg,
reported at 2011 (57) DRJ 154 (DB),
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(iii) In the matter of: Arup Mohanty & Anr. Vs. Magma Fincorp
Limited, AP 164 of 2019/GA 692 of 2019, vide order dated 1st
April 2019.
29. Learned Advocate General further submits that failure to disclose all
relevant and material facts, which one has a positive duty to disclose, is also
fraud. In support, he has relied upon a decision In the matter of: State of
Maharastra vs. Dr. Budhikota Subbarao, reported at (1993) 2 Supreme
Court Cases 567.
30. Learned Advocate General further submits that even if, one of the members
of the tribunal is biased it affects the mind of other members as well. In a
group deliberation each member of the group is bound to influence the
others and his bias is likely to operate in a subtle manner. In support, he
has relied upon the following decisions:
(i) In the matter of: A. K. Kraipak vs. Union of India reported at
(1969) 2 SCC 262;
(ii) In the matter of: P D Dinakaran vs. Judges Appointment
Committee & Ors. reported at 2011 SCC OnLine SC 887;
(iii) In the matter of: Narinder Singh Arora vs. State (Govt. of NCT
of Delhi) reported at (2012) 1 SCC 561.
31. Learned Advocate General then submits that the law is well settled that the
importance of independence and impartiality to arbitrators and mandatory
disclosure requirement and also the doctrine of bias and the tests which are
applied by Indian Courts while evaluating an award of the arbitrators.
Disclosure allows an arbitrator to overcome an appearance of bias. Under
the Arbitration Act an obligation to bias can only be waived by an express
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agreement in writing and it cannot be conferred from conduct. In support,
the learned Advocate General has placed reliance In the matter of: Central
Organization for Railway Electrification vs. ECI SPIC SMO MCML (JV),
reported at (2024) SCC OnLine SC 3219.
32. He then submits that with a view to balance the award and to make it look
fair, even if an arbitrator makes a part of the award as favourable, it does
not mean that it is good in law. He submits that the applicant has made out
a prima facie case that the award ought to be unconditionally stayed in view
of the second proviso to Section 36 (3) of the Act. Prima facie case does not
mean a case proved to the hilt but a case which can be said to be
established if the evidence which is lead in support of the same were
believed. In support, he has placed reliance upon the following decisions :-
(i) In the matter of: Union of India vs. D. Khosla reported at
2022 SCC OnLine J&K 358;
(ii) In the matter of: Martin Burn Ltd. vs. R.N. Banerjee reported
at 1957 SCC OnLine SC 51.
33. In reply to the query raised by the Court, leaned Advocate General submits
that it is settled law that in every application for an interim injunction in a
pending suit, it is necessary for the Court to enter to some degree into the
merits of the case in order to determine whether a prima facie case exists.
When the Court declares that a prima facie case exists, it intends to say that
the case of the plaintiff is not without merit. It is only an opinion rendered
on the state of the evidence then existing on the record. In support, he
places reliance on the following decisions :-
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(i) In the matter of: Kanshi Ram vs. Bansi Lal reported at 1976
SCC OnLine HP 38;
(ii) In the matter of: Kaka Ram vs. Mangat Ram, Judgment dated
5th February, 2024, CM No.387 of 2024 (High Court of Jammu
& Kashmir);
34. Learned Advocate General then submits that the said learned Arbitrator
attended events, as narrated above, during the currency of the arbitration
and yet did not make any disclosure thereof, as mandated under Section 12
of the Arbitration Act. Section 12 requires an arbitrator to disclose in writing
any direct or indirect relationship and the purpose of the disclosure is to
ensure that the arbitrator is impartial and independent. In the instant case,
the seven events, narrated above, have not been disclosed. The said learned
arbitrator has acted in breach of the mandatory requirements of law
provided under Section 12 of the Act. In support, reliance has been placed
In the matter of: Jagdish Kishinchand Valecha vs. Srie Equipment
Finance Limited reported at 2021 SCC OnLine Cal 2076.
35. In the event of violation of the mandate of the statute under Section 12(5) of
the Arbitration Act, an unconditional stay of the impugned award is
permitted, at the discretion of the Court. In support, learned Advocate
General has placed reliance upon In the matter of: DRN Infrastructure
Pvt. Ltd. vs. Konkan Railway Corporation Ltd. reported at AIR 2023
BOM 1323.
36. Learned Advocate General further submits that an unconditional stay of
award is permitted when the petitioner has made out an exceptional and
compelling case. If this Court comes to a prima facie view of perversity and
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patent illegality, an unconditional stay of a money award is permitted in law
pending hearing of the Section 34 challenge. In support, learned Advocate
General has placed reliance upon a Coordinate Bench decision of Bombay High
Court In the matter of: Alkem Laboratories Limited vs. Issar
Pharmaceuticals Pvt. Limited dated February 5, 2024 rendered in
Commercial Arbitration Petition No. 389 of 2023. The said decision was
not interfered by the Hon’ble Supreme Court in SLP (C) No.10764 of 2024
under order dated September 6, 2024 and also In the matter of: Jackie
Kakubhai Shroff vs. Ratnam Sudesh Iyer, reported at 2018 SCC
OnLine Bom 21214.
37. Learned Advocate General further submits that there are several instances
of judicial pronouncement when the Court is of the prima facie view that
patent illegality exists on the face of the impugned award, the constant
approach of the Court is to grant unconditional stay of the impugned award.
In support, learned Advocate General has placed reliance on the following
decisions :-
(a) A Coordinate Bench decision of Bombay High Court dated May 8,
2024 In the matter of: Ramesh Sumermal Shah & Ors. Vs.
Bharat Kishoremal Shah & Ors., rendered in Commercial
Arbitration Petition (L) No. 10500 of 2023;
(b) In the matter of: CFM Asset Reconstruction Pvt. Ltd. And Another
vs. SAR Parivahan Pvt. Ltd., reported at 2024 SCC OnLine Bom
1659;
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(c) A decision of the Delhi High Court In the matter of : M/s
Vishnurupa Developers Pvt. Ltd. vs. M/s S&S Technocrats Pvt.
Ltd., OMP (Comm) 164 of 2023, order dated 24th May, 2023.
38. Learned Advocate General thereafter has referred to various portions from
the impugned award and submits that the tribunal has awarded
compensation to the respondent without any evidence and came to its
conclusion on certain SAP entries alone by accepting them as primary
evidence, which admittedly there are not, according to the applicant. In
paragraph 72 of the award the tribunal has recorded that the claim of the
respondent was placed on audited books of account, whereas, the auditor
concerned, was not called upon as witness and even though he was named
in the list of witnesses. The tribunal has also not dealt with any of the
serious doubt raised by the applicant in its pleadings or the argument and
the written submissions with regard to the alleged audit. Learned Advocate
General further drew attention on some portion of the impugned award and
then submits that the tribunal rejected the counter-claim of the applicant
which was in excess of Rs.260 crore, in just one sentence at paragraph 71 of
the award. No reason for rejection was ascribed. The counter-claims were
lodged by the applicant on various counts and heads. Detailed submissions
were also made in support thereof as would be available in the written
submission submitted before the tribunal. None of those submissions were
taken into consideration by the tribunal while passing the award. In support
of the counter-claim, the witness (RW-1) of the applicant had relied upon
relevant report of the auditor and proved the same. Yet, the counter-claim
was rejected without any reason and finding in the eye of law.
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39. Learned Advocate General, Mr. Datta submits that all these factors, as
narrated above, has vitiated the impugned award. The infirmities and
illegalities are prima facie apparent on the face of the award. Hence, the
award is not only bad and illegal, it warrants an unconditional stay till the
final adjudication of the Section 34 proceeding. In view of the above, learned
Advocate General prays for unconditional stay of operation of the impugned
award till the final adjudication of the Section 34 proceeding.
40. Mr. Sudipto Sarkar, learned Senior Advocate appearing for the
respondent/award-holder, at the threshold, has pointed out that the award
in principal is Rs.765.78 crore and thereafter, calculating the interest and
costs during the period September 01, 2026 till August 21, 2025 is
amounting to Rs.1521,82,51,528.77/-. The award is available at Page 65
to the application – Volume 1.
41. Mr. Sarkar then submits that the instant application is frivolous one. The
same is a result of an afterthought only to delay in making payment of the
awarded amount to the respondent. He submits that post 2015 it is
mandatory to secure the money award for obtaining stay of operation of the
money award, so that execution proceeding does not take place during
pendency of Section 34 proceeding.
42. Mr. Sarkar, learned Senior Advocate submits that, in an application for
unconditional stay of an arbitral award under sub-Section (2) to Section 36
of the Act, unless the case made out squarely falls under either of the two
heads, Fraud or Corruption, provided under the second proviso to Section
36(3) of the Act, there can be no unconditional stay of such award. The
consistent stand of the applicant is an allegation of bias against the said
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learned arbitrator and neither fraud nor corruption. The second proviso to
Section 36(3) of the Act permits unconditional stay of an arbitral award only
when there is a irrefutable case of fraud or corruption. This proviso was
introduced by way of an amendment in 2021. In support, learned Senior
Advocate has placed reliance upon a decision In the matter of : WBSIDC
vs. KIDCO reported At 2023 SCC OnLine Cal 2142.
43. Learned Senior Advocate then submits a prima facie case under Section 36
(3) must mean a finding that the award was induced by fraud on the face of
the record or from a first blush like at the said award. It would mean that
the fraudulent inducement or effectuation qua the making of the award
must be plain and read to be discovered even without going into the merits
or a detailed enquiry into the facts. Fraud has to be obvious to the eye for
unconditional stay of an arbitral award. The applicant has failed to make
out or satisfy any such test in its favour. In support, he has relied upon a
decision of this Court In the matter of : SRMB Srijan Ltd. vs. Great
Eastern Energy Corporation Ltd. reported at 2024 SCC OnLine Cal
2089.
44. He then submits that, the purported act of fraud must substantially point to
a consensus that the facts concealed or suppressed must have causative
link with the facts constituted or culminated in the award or inducing or
effecting making of the award. No such case has been made out by the
applicant in Section 36 (2) application. Launching a new car at the invitation
of a dealer and not that of the respondent is not inducing of fraud in making
of the award. Therefore, no issue other than a prima facie case of an arbitral
award being induced or effected by fraud or corruption can be relevant at
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the present stage for deciding the said Section 36 (2) application. None of
these statutory pre-conditions have been satisfied at the end of the
applicant.
45. Mr. Sarkar then submits that, the instant application has been filed under
the specific provision under sub-Section 3 to Section 36 of the Act, which is
a statutory provision. Therefore, when an application has been filed under a
specific statutory provision, the same has to qualify the tests laid down
under the said specific statutory provision. The consistent plea of the
applicant is the allegation of bias against one of the learned Arbitrators. Bias
is not a ground for unconditional stay provided under sub-Section 3 to
Section 36 of the Act. The second proviso to Section 36 (3) of the Act was
introduced by virtue of an amendment with effect from October 23, 2015.
The arbitral award can only be stayed unconditionally if a prima facie case
that the making of the award was induced or effected by fraud or corruption
is made out. No such case has been made out for bias in the instant
application. No particulars have also been pleaded. Therefore, the instant
application cannot be termed to be an application within the meaning of
sub-Section (3) to Section 36 of the Act seeking unconditional stay of the
award. In support, Mr. Sarkar once again placed reliance upon In the
matter of : SRMB Srijan Ltd. (Supra).
46. Mr. Sarkar then submits that bias is not a ground for unconditional stay
under the second proviso to Section 36 (3) of the Act. Bias is neither fraud
nor corruption and nondisclosure by an arbitrator or arbitrator having
represented a party will not amount to fraud. In support, reliance has been
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placed In the matter of : C and E Ltd. vs. Gopal Das Bagri reported at
(2023) 2 HCC (Cal) 146.
47. Grounds for setting aside the award under Section 34 cannot be considered
in Section 36 (2) application. Further the second proviso to Section 36 (3) of
the Act has to be strictly construed since it curbs out an exception to the
general rule. The exception being the second proviso cannot govern or
override the main section which has to be construed strictly. The proviso
was introduced by 2021 amendment, as according to the settled law and the
legislature, no unconditional stay was otherwise permissible or possible on
any of the other grounds of challenge under Section 34. In support, reliance
has been placed by Mr. Sarkar In the matter of : Satnam Singh vs.
Panjab & Haryana High Court reported at (1997) 3 SCC 353.
48. Mr. Sarkar learned Senior Advocate submits that the applicant has failed to
make out any case of bias under the Arbitration Act. The case made out by
the applicant for unconditional stay of the award is only the case of alleged
bias on the part of the said learned arbitrator only because he attended the
said alleged seven events concerning the third parties, who are the dealers of
Tata Cars. The events were never organized by the respondent who is party
to the arbitration proceeding.
49. Learned Senior Advocate submits that the statutory lists have been given
under the Arbitration Act in detail under 5th and 7th schedules read with
Section 12 of the Act. Explanation 1 to Section 12 (1) (a) states that
ground under the 5th Schedule shall guide in determining whether
circumstance exists which give rise to justifiable doubt as to the
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independence or impartiality of the arbitrator. This has been judicially
interpreted being an exhaustive list.
50. He submits that Section 12(2) provides for an arbitrator to disclose to the
parties in writing, without delay, any circumstance referred to in Section 12
(1) read with 5th schedule arises from time to time at the time of his
appointment or thereafter and throughout the arbitration proceeding. The
alleged seven events on which the applicant has raised objection that the
said learned arbitrator was biased do not fall within the ambit and scope of
the said 5th schedule either at the time of appointment of the said learned
arbitrator or throughout the arbitration proceeding. At no point of time there
was any allegation that any entry of the 5th Schedule was attracted. Specific
submission of Mr. Sarkar is that as the arbitrator is meant to make a
disclosure, it must know under what circumstance he shall do so. If none of
the entry under the 5th Schedule contemplates any such circumstance,
there is no obligation on the part of the arbitrator to disclose anything, save
and except that the arbitrator has no interest on the issue under arbitration
or any relation with the parties.
51. Learned Senior Advocate for the respondent submits that the 5th Schedule
to the Arbitration Act is exhaustive. The complaint in the instant case is of
non-disclosure despite an obligation to disclose. In order to be so bound the
arbitrator must know that he was so obliged. The award-holder has
admitted that no single entry in the 5th Schedule has been attracted or has
been violated by the said learned arbitrator in the present case. Therefore,
the question of any bias within the meaning of Arbitration Act does not
arise. In support, the learned Senior Advocate has relied upon a decision In
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the matter of : Voestalpine Schienen vs. Delhi Metro Rail Corpn. Ltd.
reported at (2017) 4 SCC 665.
52. Mr. Sarkar submits that the substantive grounds and rules for
disqualification or ineligibility of an arbitrator are absolute and restricted to
the conditions enumerated under the said 5th and 7th Schedules read with
Sections 12 and 13 of the Act. Any allegation on any ground not enumerated
in the 5th or 7th Schedule or other than those outlined in terms of Section 12
(5) of the Act cannot be sustained, as that would lead to an unforeseen
consequence and result in the sanctity of the arbitration when the situation
being made open to one not contemplated under the Arbitration Act. In
support, reliance has been placed on a decision In the matter of : Chennai
Metro Rail vs. Transtonnels Troy Afcons reported at (2023) SCC OnLine
SC 1370.
53. He further submits that the likelihood of bias, as argued on behalf of the
applicant, is to be determined from a fair reading and/or fair and proper
application of the statutory mandate laid down under Section 12 of the
Arbitration Act. In support, Mr. Sarkar has once again relied upon In the
matter of : C and E Ltd. (Supra).
54. Mr. Sarkar learned Senior Advocate thereafter submits that the Arbitration
Act has laid down the contractual parameters of impartiality and
independence of arbitrators. Impartiality according to Law Lexicon means
a man who is impartial is one who is not biased in favour of one party more
than another …The primary idea contained in the definition is freedom from
personal bias. According to Oxford concise dictionary, 11th Edition, the
expression Partial is defined as including: biased. Therefore, according to
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Mr. Sarkar, although the expression “bias” has not been defined under the
said Arbitration Act, the 5th and 7th Schedules to the Act are the heads of
bias contractually agreed and no other head is permissible. This is a
contractual arbitration and not a statutory arbitration. Parties had agreed
on the modes, means and manner to proceed with the subject arbitration
proceeding within the ambit of the said Arbitration Act and the Indian
Contract Act, 1872 would also govern the field.
55. Referring to the impugned award Mr. Sarkar submits that all along it was
the case of the applicant of bias against one learned arbitrator/presiding
arbitrator. The award is a unanimous award of three learned arbitrators.
One of the three learned arbitrators was the nominee of the applicant also.
Admittedly, there has been no allegation of bias or fraud against the other
two learned members of the tribunal. He further submits that no case has
been made out by the applicant for unconditional stay of the award.
56. Mr. Sudipto Sarkar, learned Senior Advocate further submits that for stay of
operation of the impugned award under Section 36 (2) of the Act, the entire
awarded sum including the interest accrued thereupon has to be deposited
or to be furnished as security and only then a money award can be stayed.
Such deposit/security is a pre-condition for stay of operation of the money
award. No special treatment can be granted to the applicant though the
same is a State Authority. He further submits that post-deposit, the
respondent may be permitted to withdraw the deposit upon furnishing
solvent security to the satisfaction of the Court. In support, learned Senior
Advocate has placed reliance upon the following decisions :-
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(a) In the matter of :Toyo Engineering Corporation vs. Indian Oil
Corporation Limited, reported at 2021 SCC OnLine SC 3455;
(b) In the matter of :State of WB vs. Essex reported at 2024 SCC
OnLine Cal 6791;
(c) In the matter of :Manish vs. Godawari Mavathawada Irrigation
Development Corporation reported at 2018 SCC OnLine SC 3863;
(d) In the matter of : WBSIDC vs. KIDCO, reported at 2023 SCC
OnLine Cal 2142.
57. Mr. Sarkar learned Senior Advocate appearing for the respondent/award-
holder on his next limb of submission submits that, the applicant had
contemporaneous knowledge of the participation and attendance of the said
learned arbitrator in the said alleged seven social events during the
subsistence of the arbitration proceeding but not at any point of time the
respondent has raised its objection under sub-Section (2) to Section 13 of
the Arbitration Act. He specifically refers to the chronological events stated
by the respondent at pages 18 to 22 to the affidavit-in-opposition filed by
Tata Motors to IA GA(COM) No.1 of 2025. All the events spoken of by the
applicant were organized by the dealers of the respondent who were not the
party to the arbitration proceeding and none of the events were organized by
the respondent, where the learned arbitrator had attended.
58. The arbitration proceeding was held during the period May 7, 2019 till
October 18, 2023. The allegation of bias against one of the learned
arbitrators raised by the applicant was based on a news article dated
January 24, 2020 published by Hita vida covering an alleged event where
the said learned arbitrator was attending and the same was organized by a
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car dealer of Tata Motors. Learned Senior Advocate has referred to pages
222 to 227 from Section 36 (2) application -volume 2.
59. The articles/news items referred to by the applicant on the basis whereof
the applicant had taken the plea of alleged bias against one of the
arbitrators were there in the public domain, on the official website, at least
since January 2020 and subsequent thereto during the currency of the
arbitration proceeding. The copies of the news articles annexed by the
applicant to Section 36(2) application shows that the applicant had access
to the same in or around September 12, 2022, during currency of the
arbitration proceeding, as would be evident from pages 224 to 226 to the
Section 36(2) application – volume 2. Mr. Sarkar submits that over the
course of hearing on January 7, 2025, respondent to demonstrate such fact
has made over a copy of the self-same article which was accessed by
respondent in January 2025 and the same shows article published and the
date of access in 2025 appearing under the heading “related news” and
“latest news”. Further the date of access appears on top of the page which
appears to have been removed from pages 222 to 227 by the applicant.
While making these submissions, Mr. Sarkar has placed reliance on pages
30 to 35, specifically at pages 32-33 of the affidavit-in-opposition filed by the
respondent in IA-GA(COM) No.1 of 2025.
60. With reference to the above facts and documents, Mr. Sarkar, learned Senior
Advocate submits that the applicant failed to challenge the procedure of
arbitration within 15 days from the date of actual knowledge under Section
13 (1) read with 12 (2) of the Arbitration Act. Accordingly, the tribunal
including the said learned arbitrator was deprived of an opportunity to deal
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with the contentions of the applicant. Thus, the applicant has waived its
right within the meaning of Section 4 of the Arbitration Act to challenge the
arbitration procedure. Inasmuch as, the alleged plea of bias against one
such learned arbitrator can only be challenged in the Section 34 proceeding
and not at Section 36 (3) stage. In support, he has further placed reliance
upon the decision In the matter of : Chennai Metro Rail (Supra).
61. According to Mr. Sarkar, even if the applicant is permitted in law to raise the
question of violation of Section 12 read with the 5th schedule to the
Arbitration Act, the same can only be raised at the stage of Section 34
hearing and not at this stage under Section 36 (3) of the Act.
Dealing the submissions made on behalf of the applicant :
62. Mr. Sudipto Sarkar learned Senior Advocate while dealing with the
submissions made by the learned Advocate General for the State on behalf
of the applicant submits that the submissions made that there cannot be
waiver by conduct of any right under Section 12 (5) of the Arbitration Act,
unless it is in writing, is ex facie incorrect as Section 12 (5) applies only to
the 7th schedule and not the 5th schedule. The submission made on behalf of
the applicant is also contrary to Section 4 of the Arbitration Act.
63. Mr. Sarkar then submits that the applicant has nowhere stated when the
alleged incidents of bias came to its knowledge, save and except an
expression used by the applicant “recently (came) to know” after making
of the award. In this regard he refers to the averment made in paragraph 25
at page 12 to the Section 36 (2) application. This submission is contrary
to the news articles disclosed by the applicant itself in its Section 36 (2)
application. The submissions with regard to the time of knowledge of the
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applicant in respect of alleged bias against the learned arbitrator is not only
vague but also bold and devoid of truth and particulars and contrary to the
records disclosed by the applicant in the Section 36 (2) application.
64. Mr. Sarkar then submits that all the aforesaid facts read with the existing
records coupled with the submissions made by the learned Advocate
General would demonstrate that there is at least a doubt as to when the
applicant came to know such alleged seven social events and as such, no
irrefutable acts of bias has been established, especially in the light of the
statutory time line for such challenge having been laid down under Section
13 (2) of the Arbitration Act. Even one such event as alleged of September
2022 would suffice to disbelieve the case sought to be made out by the
applicant.
Distinguishing the judgments :
65. Mr. Sudipto Sarkar, learned Senior Advocate appearing for the
respondent/award-holder submits that the judgments cited by the learned
Advocate General on behalf of the applicant would have no application and
the ratios laid down therein would have no relevance in the facts and
circumstances of the instant case.
66. With regard to the judgments In the matter of : Microsoft Corporation
(Supra), In the matter of : Vinod Jain and Ors. (Supra), In the matter of
: Venture Global (Supra), In the matter of : D. Koshla (Supra), In the
matter of : Alkame Laboratory Limited (Supra), In the matter of :
Jacki Kauko Bhai Sraf (Supra), In the matter of : CPN Associate
Construction (Supra) and In the matter of : DRM Infrastructure Pvt.
Ltd. (Supra), the learned Senior Advocate submits that these judgments
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were rendered at Section 34 stage where the Court has to proceed withdetailed enquiry while assessing an award within the scope of Section 34 of
the Arbitration Act, whereas the instant application filed under Section 36
(3) of the Act. The scope of this application is totally different from Section
34 of the Act. Hence, the ratios decided in the said judgments would not
apply in the instant application. Inasmuch as, some of the judgments were
of pre 2021 amendment of the Arbitration Act, when the second proviso to
Section 36 (3) was introduced with a retrospective effect from October 23,
2015.
67. In the matter of : D R Narula (Supra) Mr. Sarkar submits that this was
not a judgment rendered in an arbitration case. It was a writ petition
challenging the constitutional validity and vires of Sections 13 (3) and (4) of
the Arbitration Act. The dispute arose therein in respect of an agreement
which contemplated unilateral appointment of sole arbitrator by one party
and arbitrator appointed was a former director of the respondent therein.
The principles applied by the concerned High Court which were existing pre
2021 amendment under the said Arbitration Act. Hence, the ratio decided in
the judgment has no relevance in the facts of this case.
68. In the matter of : Central Organization for Railway Electrification
(Supra), Mr. Sarkar submits that the law laid down therein was specifically
made prospective and would apply only to arbitrations where the arbitrator
is appointed after the date of pronouncement of the judgment i.e.
November 8, 2024. In the instant case the arbitration has commenced in
2019 when the tribunal was constituted. The issue framed by the Hon’ble
Supreme Court for decision in the said judgment and the decisions rendered
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thereupon with the ratio laid down therein are not applicable in the facts
and circumstances of this case. The issue was relating to appointment
process allowing a party to unilaterally appoint sole arbitrator. Principle of
equal treatment of parties at that stage of the appointment for arbitrator and
appointment process in a public-private contract permitting Government to
appoint unilateral sole arbitrator.
69. In the matter of : Gopal Das Bagri (Supra), Mr. Sarkar submits in that
matter the sole arbitrator appeared on behalf of one who was affiliated with
one of the parties during pendency of the arbitration proceeding and the
ratio was decided against the arbitrator’s conduct which squarely violated
the entries enumerated under 5th and 7th schedule to the Act, which is not
the case in the facts herein. The Court reached to an independent finding
that non-disclosure would not be fraud. Hence, the ratio laid down in the
said judgment to the extent relied upon on behalf of the applicant are not
applicable in the facts of this case.
70. In the matter of : Ranjit Thakur (Supra), learned Senior Advocate
submits that this was not in a case under the Arbitration Act and the case
arose from the disciplinary proceeding under the Army Act 1950. Thus, the
ratio laid down in the said judgment has no application in the facts and
circumstances of this case.
71. In the matter of : Gazal Taneja (Supra), Mr. Sarkar submits that this was
not a case under the Arbitration Act. There was a civil suit pertaining to
usage of telephone connection wherein the principle under Order XLI Rule 5
of CPC was applied which is otherwise a directory provision insofar as
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Section 36 of the Arbitration Act is concerned. In any event for money award
full deposit of the awarded sum is mandatory.
72. In the matter of : Jagadish Krisinchand (Supra), Mr. Sarkar submits in
that case the arbitrator acted as arbitrator in another arbitration proceeding
instituted at the instance of the respondent/award-holder. This fell within
the ambit of the entries under 7th schedule. Hence, the ratio laid down in
the said decision has no application in the facts of the instant case.
73. In the matter of : Metropolitan Properties (Supra), Mr. Sarkar submits
that this is not an arbitration case. The chairman of the rent assessment
committee was a solicitor who advised tenants due to which the landlord
raised an objection of bias against him. Hence, the ratio laid down in the
said judgment has no application in the facts of the instant case.
74. In the matter of : P. D. Dinakann (Supra), Mr. Sarkar submits this was
not an arbitration case. In that case respondent/judge in question
performed overt acts expressing opinion against the petitioner prior to the
conduct of the judicial proceeding, as such the allegation of likelihood of
bias was raised. The ratio laid down in the said judgment has no application
in the facts of this case.
75. In the matter of : A. K. Crypack (Supra), Mr. Sarkar submits that this is
not an arbitration case. This case consists of constitutional issue of public
and does not relate to the commercial matter concerning contractual justice.
In that case the member alleged to be biased being a member of a selection
committee who was himself a candidate for selection for which the selection
committee was deliberating. Hence, the ratio laid down in the said judgment
shall not apply in the facts of this case.
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76. In the matter of : State of Maharashtra (Supra), learned Senior Advocate
submits that this is not an arbitration case. The case consists an application
for declaration that a charge-sheet was null and void and the charges
thereunder were vitiated by fraud as panchnama was fabricated. This is not
the case of the instant case. Neither it is pleaded anywhere by the applicant
that the respondent has induced the learned arbitrator or the arbitral
tribunal to pass the impugned award. Fraud has to be strictly pleaded and
proved. Hence, the ratio laid down in the said judgment shall not apply in
the facts of the instant case.
77. In the matter of : Ramesh Sumermal Shah and Ors. (Supra), Mr. Sarkar
submits that in the said case the arbitrator failed to deliver with one of the
conditions of the party which the court held was prima facie suffering from
illegality on the face of the award. The ratio laid down in the said case would
not apply in the facts of this case, more so, under Section 36 (3) of the
Arbitration Act.
78. In the matter of : Vishnurupa Developers (Supra), the learned Senior
Advocate submits that the case arose out of rejection of review of an order.
In this case the award impugned was passed rejecting the counter-claim of
the petitioner which was in ignorance of the vital clause of the agreement.
The ratio of the judgment shall not apply in the facts of the instant case,
more so at the Section 36 (2) of the Act stage.
79. In the matter of : Kashi Ram (Supra) and Kakaram and Ors. (Supra),
Mr. Sarkar submits that prima facie tests under Section 36 (3) of the
Arbitration Act had not been satisfied in the facts of the instant application.
No prima facie case of fraud or corruption made out by the applicant in its
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application and the court cannot go into the merit of the award for a detailed
enquiry at this Section 36 (2) stage. Thus, the ratio laid down in the said
decision has no application in the facts of the instant case.
80. In the matter of : Ecopack India Power (Supra), Mr. Sarkar submits that
the challenge therein was to an interim award passed under Section 31 (6)
of the Arbitration Act and not a final award. In that case, the award was
passed prior to 2021 amendment of the 1996 Act. The law thereafter has
subsequently been changed.
81. In the matter of : Pam Developments and Toyo Engineering (Supra), it
was in respect of applicability of principle of Order XLI CPC in relation with
Section 36 (3) of the Arbitration Act. The said decision is also contrary to the
law laid down by this Court In the matter of : Essesx (Supra). Hence, the
ratio laid down in the said judgment has no application in the instant case
which is post 2021 amendment of the Arbitration Act.
82. In the matter of : Arup Mohanty (Supra), Mr. Sarkar submits the facts in
that case was incorrect recording in the minutes made by the arbitrator and
discovery of incorrect disclosure regarding arbitrator’s connection with the
respondents. This case was also of pre 2021 amendment of the Arbitration
Act and before the second proviso to Section 36 (3) of the Act came with
retrospective effect from October 23, 2015. Thus, the ratio laid down in the
said case has no application in the facts of the instant application.
83. In the matter of : Bharat Heavy Electricals Ltd. (Supra), Mr. Sarkar
submits that the case arose out of a writ petition challenging the vires of
Section 13 (3) and (4) of the Arbitration Act which was dismissed by the
Delhi High Court. This case dealt with the Arbitration Act at its pre 2021
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amendment stage even prior to 2015. Even if a party makes out an arguable
case of bias which requires to be examined under a detailed enquiry, the
same should have been raised at Section 34 stage and not at Section 36 (2)
stage. Thus, the ratio of the said judgment has no application in the facts of
the instant case.
84. In the matter of : Himansu Shake (Supra), Mr. Sarkar submits that this
case did not consider Vestal Pine (Supra). Therefore, the finding in this
judgment that the 7th schedule is not exhaustive is per incurium. Inasmuch
as the facts of the instant case does not fall within the meaning of the 7th
schedule to the Act. In that case, the arbitrator had a close family
relationship with the family members of one of the parties. This is not the
fact here. Thus, the ratio laid down in the said judgment has no application
in the facts of the instant case.
In reply :
85. Mr. Datta, learned Advocate General for the State appearing for the
applicant submits that the contention of the respondent that the petitioner
was aware of the alleged connection of the said learned arbitrator with the
seven events since 2020 and thereafter, during the currency of the
arbitration proceeding is baseless and incorrect. The applicant has
categorically stated in Section 36 application that it was not aware of the
relationship between the respondent and the learned arbitrator and that it
came to know the same after the award was made and published. He further
submits that out of several documents and evidences, the respondent has
picked up one news item and made its submission. The documents at pages
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224 to 227 to Section 36 application, as alleged by the respondent that
applicant had knowledge on September 12, 2022 has been denied.
86. Learned Advocate General further submits referring to second proviso to
Section 36 of the Act which was introduced by way of amendment in 2021,
that it provides additional ground for an unconditional stay on the operation
of the award. Under this additional ground, if a party make out a prima facie
case of fraud, the award has to be mandatorily stayed. He then submits that
attempt on the part of the respondent to disassociate itself with these seven
events is an afterthought. The news items were also available on the official
website of the respondent.
87. In its written notes the applicant has dealt with the judgments cited on
behalf of the respondent. While dealing with the judgments relied upon on
behalf of the respondent, learned Advocate General made his submissions
which are narrated herein below.
88. In the matter of : Satnam Singh (Supra), learned Advocate General
submits that a proviso is not to be construed as excluding or adding
something by implication. A proviso has been enacted as an exception or
qualification to the main provision and does not travel beyond the provision
to which it is a proviso. The second proviso does not in any manner take
away the discretion available to the court under the first proviso to Section
36 (2) and 36 (3) to stay the award unconditionally. Hence, the ratio laid
down in the said judgment has no application in the facts of the instant
case. Section 36 second proviso was inserted in 2021 which only provides
an additional ground for an unconditional stay on the operation of the
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award. Under this additional ground if a party can make out a prima facie
case of fraud, the award has to be mandatorily stayed unconditionally.
89. In the matter of : Reliance Industry Limited (Supra), learned Advocate
General submits that this decision explains the difference and scope of
application of the 5th and 7th schedule. It is further submitted that the said
seven events gave rise to justifiable doubts as to the independence and
impartiality of the learned arbitrator. In view of Section 12 (2) of the
Arbitration Act, it was a continuous obligation of the said learned arbitrator
to disclose the chain of events and non-disclosure thereof has deprived the
applicant of a valuable right available under Section 12(3) read with Section
13 of the Arbitration Act. The same has also deprived the petitioner of its
valuable right under Section 14 of the Arbitration Act. He submits that the
ratio laid down in the said judgment has no application in the facts of the
instant case.
90. In the matter of : Chennai Metro Rail (Supra), he submits that it is
unclear how this decision assisted the respondent. In paragraph 42 of the
judgment it is categorically mentioned that Section 12 requires a continuous
disclosure and if this is not done, the law provides for ineligibility and
disqualification. He submits that the ratio decided in the said judgment is of
no assistance in the facts of the instant case.
91. In the matter of : HRD Corporation (Supra), learned Advocate General
submits that the judgment only shows that the incidents mentioned in the
schedules serve a guideline merely. Therefore, the schedules are not
exhaustive. He submits that the ratio laid down in the said judgment will
not support the contention of the respondent in the facts of this case.
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92. In the matter of : Joy Engineering Works Limited (Supra), learned
Advocate General submits that this is the settled and general proposition of
law how to read a judgment.
93. In the matter of : Manish (Supra), learned Advocate General submits that
it was a case under Section 37 of the Arbitration Act and not at Section 34
and Section 36 stage. Therefore, the ratio laid down therein will not apply in
the facts of this case.
94. In the matter of : Toyo Engineering Corporation and Another (Supra),
learned Advocate General submits that under Order XLI Rule 5, the Court
also exercises its discretion and may grant a stay to the execution of a
decree if sufficient cause is made out and the parties seeking stay if satisfies
the Court that it will sustain substantial loss and, inter alia, satisfies the
conditions as stipulated in sub-Rule 3 to Rule 5 therein. Thus, under the
scheme of the provisions of Section 36 read with Order XLI Rules 1 and 5 of
CPC, the party opposing the grant of a stay cannot assert a proposition that
it would be mandatory for the Court to impose a condition for stay to the
execution proceeding. It is for the Court to consider the facts and
circumstances of the case and exercise its discretion.
95. In the matter of : Essex Development Investment (Supra), learned
Advocate General submits that this judgment was challenged before the
Hon’ble Supreme Court. By an order dated November 11, 2024, passed in
SLP (C) No.20583 of 2024, Hon’ble Supreme Court held that the
observations made in the said judgment would not be treated as a binding
findings when the application filed under Section 34 of the Arbitration Act is
taken up for consideration.
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96. In the matter of : West Bengal Small Industries Development
Corporation Limited (Supra), learned Advocate General submits that the
facts are completely different. The most crucial difference on facts was in
that case fraud was alleged. Therefore, the ratio decided in the said
judgment has no application in the facts of the instant case.
97. In the matter of : SRMB Srijon Limited (Supra), learned Advocate General
submits that on facts, the judgment is clearly distinguishable. In that case
there was no allegation of bias or fraud. Hence, the ratio laid down in the
said judgment has no application in the instant case.
98. In the light of the above, learned Advocate General submits that there was
no substance in the submissions made on behalf of the respondent. Hence,
the application should be allowed by granting an unconditional stay of
operation of the impugned award.
Later
99. (a) The hearing of application was concluded on August 28, 2025 when the
parties had filed their written notes. The order dated October 28, 2025
shows that the matter was mentioned at the instance of the applicant and it
was submitted that after the judgment was reserved by this Court, Hon’ble
Supreme Court had delivered judgment which would have a material
bearing in support of the contentions of the applicant. Accordingly, by
consent of the parties, the matter was fixed for further hearing and the order
dated August 28, 2025 was recalled. On November 18, 2025, Mr. Kishore
Datta, Learned Advocate General appearing for the applicant has informed
this Court that even thereafter Hon’ble Supreme Court had delivered
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another judgment which would also have a material bearing on the issue
under adjudication. Thereafter, the learned Advocate General has proceeded
with his submissions on the basis of the said subsequent judgments
delivered by Hon’ble Supreme Court. The order dated December 12, 2025
shows that the learned Advocate General had placed reliance upon three
judgments of Hon’ble Supreme Court. The matter was thus heard at length.
The award-debtor/applicant has filed its (additional) second written notes
and the award-holder has also filed its (supplementary) second written
notes. The matter was heard and finally the hearing was concluded and
the judgment was reserved on January 29, 2026.
(b) On March 30, 2026 Mr. Kishore Datta, learned Advocate General once
again mentioned the matter and has submitted that two more judgments of
Hon’ble Supreme Court were required to be relied upon which were
subsequent judgments. Accordingly, the matter was directed to appear
under the heading “to be mentioned” on March 31, 2026 when in the facts
and circumstances and on the basis of the submissions of the parties
recorded in the order dated March 31, 2026 and by consent of the parties,
the order dated January 29, 2026 was recalled and the matter was placed
for further consideration in the list on April 16, 2026. On April 7, 2026 the
matter was mentioned by Mr. Sudipta Sarkar, learned Senior Advocate
appearing for the award-holder when the matter was directed to appear in
the supplementary list on the very day and accordingly was taken up in
presence of parties. The submissions and counter-submissions of the
parties have duly been recorded in the said order of April 7, 2026. Mr.
Sudipto Sarkar, learned Senior Advocate appearing for the award-holder
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opposed vehemently the submissions of the learned Advocate General
appearing for the award-debtor and prayed for recalling of the order dated
March 31, 2026. After considering the submissions and counter-
submissions of the parties, this Court disallowed the prayer of Mr. Sarkar
and did not recall the order dated March 31, 2026 but, for ends of justice
directed the award-debtor to file its written notes which shall be restricted to
the judgments mentioned in the said order dated April 7, 2026 and shall be
served upon the award-holder when the award-holder shall deal with the
said two judgments and file its written notes and the matter was directed to
appear on April 20, 2026 under the heading “to be mentioned”. The order
dated March 31, 2026 and April 7, 2026 speak for themselves.
(c) On April 20, 2026 the matter appeared under the heading “to be
mentioned” when both the parties have filed their respective third written
notes and the hearing was concluded and judgment was reserved.
Post 28th August, 2025
100. Mr. Kishore Datta, Learned Advocate General appearing for the award-
debtor/applicant submits that in addition to fraud and corruption, as
provided under sub-Section (3) to Section 36 of the Arbitration Act, the
Court is also empowered to exercise its discretion to grant an unconditional
stay of the award in case of a fit and exceptional case. According to the
learned Advocate General, the case in hand constitutes a fit and exceptional
case warranting exercise of its discretion by this Court to grant an
unconditional stay of the award. He reiterated his submission that there
exists circumstance giving rise to justifiable doubt as to the independence
and impartiality of one of the learned Arbitrators who served as presiding
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arbitrator also. The principal plea, as already narrated above, taken on
behalf of the applicant is that the said learned Arbitrator had an association
with the respondent and he had failed to disclose the same at the
commencement of the arbitral proceeding or during the currency thereof.
Learned Advocate General has reiterated the said seven incidents with
reference to those documents which are already narrated above and submits
that the award is vitiated by patent perversity.
101. He submits that the award has been made having been induced and/or
affected by fraud within the meaning of sub-Section (3) to Section 36 of the
Act, as bias is an element of fraud.
102. The second plea in support of his submissions for fit and exceptional case to
exercise discretion of this Court was that the claim of the award-
holder/respondent was allowed without any reasons and the counter-claim
of the applicant was rejected by arbitral tribunal without any reasons and in
a single sentence. It has been further submitted that while rejecting the
counter-claim, arbitral tribunal did not consider and appreciate the evidence
on record.
103. In support of his contentions, learned Advocate General has placed reliance
upon a judgment of the Hon’ble Supreme Court In the matter of : Lifestyle
Equities C.V. & Anr. vs. Amazon Technologies Inc. reported at 2025
SCC OnLine SC 2153. He submits that in this judgment, Hon’ble Supreme
Court held that in exceptional cases, an unconditional stay of enforcement
of the award may be granted even where the case does not fall within the
ambit of the second proviso to sub-Section (3) to Section 36 of the
Arbitration Act.
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104. The next compartment of submission made by the learned Advocate
General on behalf of the applicant is that the entire cause of action for the
respondent to initiate arbitration proceeding was the basis of a judgment of
the Hon’ble Supreme Court In the matter of : Kedar Nath Yadav vs.
State of West Bengal reported at AIR 2016 SC 4156. The applicant
contented that the land acquisition at Singur, West Bengal for Tata Nano
Project, being declared illegal triggered Clauses V (4)(a) and V (4)(b) of the
lease deed dated March 15, 2007 and obliged the applicant to indemnify
respondent for alleged capital expenditure. It is submitted on behalf of the
applicant that it had categorically demonstrated before the arbitral tribunal
that Clause V(4)(b) was never activated. The specific case of the applicant
before the arbitral tribunal was that the respondent herein had already
abandoned the project and shifted its operation from Singur in October
2008, at the time when the acquisition had been upheld by the Hon’ble
Division Bench of this Court (Judgment dated 18th January, 2008). The shift
was purely a commercial decision and there was no judicial finding then
declaring the acquisition illegal or invalid. Consequently, there was no
breach or misrepresentation by applicant and the respondent also did not
thereafter use the demised land for any purpose.
105. Learned Advocate General appearing for the applicant submits that the
entire cause of action of the respondent on the basis of the said judgment In
the matter of : Kedar Nath Yadav (supra) stands negated in view of the
law laid down by Hon’ble Supreme Court In the matter of : M/s Santi
Ceramics Private Limited (supra). Consequently, the clause of the lease
deed, referred to above, could neither have triggered nor invoked by
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respondent. Therefore, the respondent did not have any cause of action for
arbitration and the arbitral tribunal had failed to appreciate such plea taken
by the applicant before it. He further submits that in view of the law laid
down In the matter of : M/s Santi Ceramics Private Limited (supra) it
has been decided that the ratio In the matter of : Kedar Nath Yadav
(supra) does not confer any cause of action upon industrial or corporate
entities, such as the respondent.
106. Learned Advocate General further submits that notably, In the matter of :
M/s Santi Ceramics Private Limited (supra), the Hon’ble Supreme Court
clarified that the relief granted In the matter of : Kedar Nath Yadav
(supra) was a limited remedial framework anchored in the protection of
vulnerable farmers and agricultural workers and was not intended to
operate as a general remedy for all affected parties, particularly commercial
entities. Hon’ble Supreme Court further held that relief meant to prevent
improverishment of disadvantaged communities cannot be extended to
industrial/commercial enterprises, which possess sufficient resources and
institutional access to pursue ordinary legal remedies. In the matter of :
M/s Santi Ceramics Private Limited (supra), the Hon’ble Supreme Court
rejected the respondent’s claim of parity despite its plea of being deprived of
industrial property. Likewise, TML cannot rely on alleged deprivation of land
use to extend the scope of the ratio In the matter of : Kedar Nath Yadav
(supra), which was meant for vulnerable farmers, not corporate entities.
107. In view of the above, learned Advocate General has submitted that an
exceptional case has been made out when this Hon’ble Court has discretion
to stay the award without imposing any condition whatsoever.
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108. Mr. Kishore Datta, Learned Advocate General then submits that under
Article 141 of the Constitution of India, the law declared by the Hon’ble
Supreme Court is binding on all courts including the High Courts. He
submits that the law laid down In the matter of : Lifestyle Equities C.V.
(supra) is binding upon this Court. Even if, a judgment of the Hon’ble
Supreme Court is found to be obiter, the same is also binding upon the High
Courts. In support, reliance has been placed In the matter of : Punjab
Land Development and Reclamation Corpn. Ltd. vs. Labour Court
reported at (1990) 3 SCC 682.
109. Per contra, Mr. Sudipto Sarkar learned Senior Advocate appearing for the
award-holder/respondent submits that on the plea of the applicant with
regard to the allegation of fraud against the said learned Arbitrator, as bias
is an element of fraud, detailed submissions have already been made and
therefore, he shall not reiterate the same. He further submits that to cause a
deeper enquiry into the allegation of fraud as alleged, is not within the scope
and ambit of Section 36 of the Arbitration Act, the same might be done, if
there any such allegation exists though not admitted by the respondent, in
the pending Section 34 proceeding. Similarly, he submits that the
correctness and justification of rejection of the alleged counter-claim of the
applicant and allowing the claim of the respondent by the arbitral tribunal is
not permitted to be gone into at Section 36 stage and the same may be
within the scope of Section 34 of the Act.
110. Mr. Sudipto Sarkar learned Senior Advocate further submits that this is not
an exceptional case. Neither the applicant has pleaded any such exceptional
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case for which the Court should exercise its discretion to grant an
unconditional stay of the award.
111. While dealing with In the matter of : Lifestyle Equities C.V. (supra) Mr.
Sarkar submits that it is not an arbitration case. It arises out of a trade
mark dispute where a suit filed for infringement of registered trade mark
and compensation had been decreed ex parte. The defendant no.1 filed an
appeal along with an application under Order XLI Rule 1 (5) and 5(3) of
the Code of Civil Procedure, 1908 (for short CPC) for stay of operation of
such decree which was allowed without insisting on deposit of the decretal
amount. Lifestyle Equities C.V. (supra) was not connected with Section 36
of the Arbitration Act. Reference to Section 36 of the Arbitration Act was
made purely for academic purposes. The judgment had not considered the
amendment to Section 36 of the Arbitration Act effected in 2021. He submits
that the ratio laid down In the matter of : Lifestyle Equities C.V. (supra)
is not binding.
112. To distinguish the judgment In the matter of : M/s Santi Ceramics
Private Limited (supra) at the threshold Mr. Sarkar submits that the issue
raised by the learned Advocate General on the basis of the said judgment
touches the merits of the award whether the respondent had cause of action
for arbitration. This is impermissible at Section 36 stage. In the matter of :
M/s Santi Ceramics Private Limited (supra) the private acquiring party
had also taken compensation and was guilty of gross delay, in view whereof
the Hon’ble Supreme Court declined to grant any relief to such party. In the
instant case, the respondent is the beneficiary of the acquisition. The
respondent is neither acquiring body nor requiring body neither the land-
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looser. Therefore, the ratio laid down In the matter of : M/s SantiCeramics Private Limited (supra) has no relevance in the facts and
circumstances of the case.
113. Mr. Sarkar while distinguishing the judgment In the matter of : Punjab
Land Development and Reclamation Corpn. Ltd. (supra) submits that
the judgment of the Hon’ble Supreme Court In the matter of : Lifestyle
Equities C.V. (supra) is per incuriam and obiter would have no binding
effect. Therefore, the ratio of the said judgment would have no application in
the facts of this case.
114. In reply, learned Advocate General Submits that the decision of the Hon’ble
Supreme Court In the matter of : Lifestyle Equities C.V. (supra) is a
reasoned judgment and the principle laid down therein lays down the law
with regard to the discretion of the Court under Section 36 of the Arbitration
Act in granting unconditional stay of award in the event of an exceptional
case.
115. Mr. Datta further submits that a purposive construction of Section 36 (3) of
the Arbitration Act cannot be used to restrict the Court’s power in a manner
to defeat the principle of fairness, neutrality and integrity of arbitral
tribunal. The statutory purpose of Section 36 is to regulate enforcement,
while preserving the judicial discretion to protect parties to manifest
injustice in appropriate cases. Therefore, according to learned Advocate
General, the interpretation adopted In the matter of : Lifestyle Equities
C.V. (supra) aligns with the object of the Act and cannot be brushed aside
as inapplicable.
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116. Learned Advocate General further submits that in any event, the present
case demonstratively falls within the exceptional case. Records of the
arbitration proceeding discloses before this Court would show serious
procedural irregularities and denial of equal treatment, and circumstances
gave rise to justifiable doubt as to the independence and impartiality of the
said learned Arbitrator/presiding Arbitrator. These are grievances go to the
root of the arbitral process and the credibility of the award itself. He submits
that reliance placed In the matter of : Lifestyle Equities C.V. (supra) is
well founded.
117. Learned Advocate General finally submits that the facts of the instant case
warrant an unconditional stay of the award pending adjudication of the
Section 34 challenge.
Post 29th January, 2026
118. Mr. Kishore Datta, learned Advocate General for the State appearing for the
award-debtor submits that the Hon’ble Supreme Court is of the view that
there is no legal necessity for courts to direct the deposit of the entire
awarded amount as a condition precedent for deciding the proceeding with
respect to challenge to an arbitral award. It has been submitted that the
Hon’ble Supreme Court has clarified that an award-debtor shall not be
required to deposit the entire decretal amount or furnish any bank
guarantee as a condition precedent in a Section 34 proceeding. He submits
that if the award-debtor is directed to furnish an undertaking along with
particulars of immovable assets/properties, the same will be sufficient to
secure the awarded sum and on that basis the operation of the money
award can by stayed pending Section 34 proceeding. He submits that, the
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Courts are empowered to exercise their discretion to grant an unconditional
stay on the operation of an arbitral award, without requiring deposit of
decretal amount or furnishing any bank guarantee. In support, he has relied
an order dated December 01, 2025 In the matter of : Mumbai Metro Rail
Corporation Limited vs. L & T STEC JV Mumbai passed in Civil Appeal
No.14483 of 2025.
119. In response to the submissions made on behalf of the award-holder that a
reading of Sections 13(2), 12(3), explanation 1 to Section 12(1) and Section 4
of the Arbitration Act demonstrates that if an arbitrator is not challenged
within 15 days, the parties waived its right to object. It is contended that the
award-debtor has always maintained its stand that it has not waived any
right to object. He submits that a party must expressly agree in writing to
waive the ineligibility of the proposed arbitrator. Moreover, it has been held
that the right to object to the appointment of an ineligible arbitrator in terms
of Section 12(5) of the Act, such a right cannot be taken away by mere
implication. Notably, when an arbitrator is found to be ineligible by virtue of
Section 12(5) read with the Seventh Schedule, his mandate is automatically
terminated. Unless an express agreement in writing within the meaning of
Section 12(5) of the Arbitration Act is there, there shall not and cannot be
waiver of the plea of the party concerned regarding ineligibility of the
arbitrator within the meaning of the Seventh Schedule of the Act. Learned
Advocate General further submits that when an arbitrator is de jure
ineligible, the ineligibility strikes at the very root of the arbitrator’s mandate.
Further, an objection in relation to such ineligibility could be raised at any
stage, including for the first time in the proceeding under Section 34 of the
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Act as the award passed in such circumstance is non-est. The facts alleged
by the award-debtor in the facts of this case showing the alleged ineligibility
of the said learned arbitrator, was not disclosed during the arbitration
proceeding by the learned arbitrator and as such, the ineligibility goes at the
root. In support, he has placed reliance on the judgment of the Hon’ble
Supreme Court In the matter of : Bhadra International (India) Private
Limited vs. Airports Authority of India reported at 2026 SCC OnLine
SC 7 decided on 5th January, 2026.
120. Per contra, on behalf of the award-holder, at the threshold, it has been
contended that both the said order and the judgment of the Hon’ble
Supreme Court were there on January 29, 2026 and the award-debtor had
and/or deemed to have knowledge thereof as on January 29, 2026. Thus,
the conduct of the award-debtor was misleading and abuse of the process of
law.
121. It has been contended on behalf of the award-holder that the order passed
by the Hon’ble Supreme Court In the matter of : Mumbai Metro Rail
Corporation Limited (Supra) was an order passed in connection with a
Section 34 proceeding and not in a Section 36 case or scenario, as would be
ex facie evident on the face of the order.
122. The award-holder further contended that the present proceeding is under
Section 36(2) of the Arbitration Act. There is statutory bar under the Second
proviso to Section 36(3) in granting an unconditional stay of arbitral award
unless there is irrefutable case of fraud or corruption. In any event, no
condition can be imposed for hearing a Section 34 application. After 2015
and 2021 amendments to Section 36 of the Arbitration Act, stay of arbitral
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award can be granted pending Section 34 proceeding and any party seeking
stay of operation of the arbitral award has to separately apply for such
purpose under Section 36(2) of the Arbitration Act and only then can the
court grants say of an award in terms of Section 36 (3) by directing deposit
of awarded sum as a condition. Therefore, the observation of the Hon’ble
Supreme Court in the order passed In the matter of : Mumbai Metro Rail
Corporation Limited (Supra) would have no relevance or applicability in
the present proceeding under Section 36(2) of the Arbitration Act.
123. On behalf of the award-holder, it has been further contended that the
judgment In the matter of : Bhadra International (India) Private
Limited (Supra) was rendered in a Section 34 proceeding and not under
Section 36(2) of the Act. In the said judgment ineligibility of an unilaterally
appointed arbitrator was alleged at Section 34 stage under Section 12(5)
read with Seventh Schedule of the Arbitration Act. In that factual scenario,
the judgment was delivered.
124. It has been contended on behalf of the award-holder that when an
arbitration agreement is in violation of sub-Section (5) of Section 12 of the
Act, the parties can neither insist on appointment of arbitrator in terms of
agreement nor would any appointment so made be valid in the eye of law.
Unilateral appointments are not consistent with the basic tenet of
arbitration. It would not be reasonable for a party to apprehend that an
arbitrator unilaterally appointed by the opposite party may not act with
complete impartiality. The said judgment was rendered on the principle of
Section 12(5) read with Seventh Schedule scenario. The Hon’ble Supreme
Court opined that even if an award is passed with such an ineligibility of the
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arbitrator, an aggrieved party may approach the Court under Section 34 of
the Act.
Decision:
125. After considering the rival contentions of the parties and upon perusal of the
materials on record, at the outset, it appears to this Court that the scope of
the provisions under sub-Section (2) to Section 36 and Section 34 of the
Arbitration Act is required to be discussed in brief. Section 34 of the
Arbitration Act provides for setting aside of arbitral award on the grounds
mentioned therein. The law is also well settled that for scrutiny of an
arbitral award a deeper enquiry by the Court is permitted under Section 34
of the Act, of course, subject to the restrictions imposed upon the Court
within the meaning and scope of Section 34. Section 36 provides for
enforcement of the award. Sub-Section (2), inter alia, provides that during
pendency of a proceeding under Section 34, the filing of such an application
shall not by itself render the award unenforceable, unless the Court grants
an order of stay of operation of the said arbitral award in accordance with
the provisions of sub-Section (3), and a separate application made for that
purpose. Sub-Section (3) to Section 36 provides upon filing of an application
under Sub-Section (2), the Court may, subject to such conditions as it may
deem fit, grant stay of operation of the award for reasons to be recorded in
writing. The first proviso to sub-Section (3) provides that the Court shall
while considering the application for grant of stay in the case of arbitral
award for payment of money, have due regard to the provisions of the Code
of Civil Procedure, 1908 while staying the operation of the money award.
The second proviso was introduced by virtue of an amendment of 2021 but
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with effect from October 23, 2025, providing further that where the Court
is satisfied a prima facie case is made out that, inter alia, making of an
award was induced or affected by fraud or corruption, it shall stay the award
unconditionally pending disposal of the challenge under Section 34 of the
Award.
126. On a harmonious and meaningful reading of the provisions under Section
36 of the Arbitration Act after its amendment in 2021, it appears that
unconditional stay of money award is permitted if it prima facie appears to
Court that making of award was induced or affected by fraud or corruption.
However, the said two expressions fraud or corruption have not been defined
specifically in the statute. While making his submissions, learned Advocate
General has specifically submitted that his submission is restricted only on
the expression “fraud” and he submits that bias is an element of fraud.
However, the expression “bias” has not been included anywhere under
Section 36 of the Arbitration Act. Explanation 1 to sub-Section (2)(b) of
Section 34 of the Act, inter alia, provides that for avoidance of any doubt, it
is clarified that an award is in conflict with the public policy of India, only if,
inter alia, the making of the award was induced or affected by fraud or
corruption.
127. On harmonious and conjoint reading of the said two provisions i.e. Section
34 and Section 36 of the Act, makes it clear that sub-Section (3) to Section
36 requires a prima facie view of Court on fraud or corruption whereas
Section 34 does not contain the expression prima facie. Thus, Section 34
provides for a detail scrutiny of the award for setting it aside if the award is
induced or affected by fraud or corruption. While adjudicating the instant
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application, the Court has to make a limited enquiry to come to a prima
facie view whether the making of the impugned award is induced or affected
by fraud or corruption, which shall be a tentative finding of the Court
without going into a detail and deeper enquiry on scrutiny of the award.
While adjudicating a Section 34 proceeding, the Court has a wider power to
cause a detail and deeper enquiry whether the making of award was induced
or affected by fraud or corruption as, significantly, the expression “prima
facie” has not been inserted by the legislature while enacting the provision
under Section 34 of the Arbitration Act or in its amendment.
128. While alleging the conduct of the said learned Arbitrator/presiding
arbitrator, the specific contention of the applicant was that the said learned
Arbitrator was “bias”, which is an element of fraud. When a provision has
been inserted in a statute under the second proviso to Sub-Section (3) to
Section 36 of the Arbitration Act that the Court has to come to a prima facie
finding of fraud resulting the award, a case of fraud has to be clearly made
out. No particular of fraud has been specifically pleaded in the instant
application. By drawing an inference with reference to certain set of facts
which alleged to have taken place during pendency of the arbitration, the
applicant contended that the said learned Arbitrator was bias, which is an
element of fraud.
129. Explanation 1 to Section 12(i) (b) of the Arbitration Act provides that the
grounds stated in the Fifth Schedule shall guide in determining whether
circumstances exist which give rise to justiciable doubt as to the
independence or impartiality of an arbitrator. On a close scrutiny of the
entries enumerated under the Fifth Schedule, it appears to this Court that
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none of those entries have been satisfied for the alleged ground of bias urged
on behalf of the applicant. The expression Bias is also not included in the
Fifth Schedule. Sub-Section (5) to Section 12 of the Arbitration Act, inter
alia, provides that notwithstanding any prior agreement to the contrary, any
person whose relationship with the parties or counsel or the subject-matter
of the dispute falls under any categories specified in the Seventh Schedule
shall be ineligible to be appointed as an arbitrator. On a close scrutiny of the
entries enumerated under Seventh Schedule of the statute, it appears to this
Court that the alleged ground of bias, as argued on behalf of the applicant,
does not include any of the act or omission enumerated in the entries under
Seventh Schedule to the statute.
130. Both the said Fifth and Seventh Schedules are part of the statute. None of
these schedules either defines or includes the expression “fraud” or “bias”.
When the statute provides for a specific provision, the jurisdiction of the
Court is circumscribed within the said provision to assess the allegations
and counter-allegations alleged by the parties before it. In the event, it is
found that the allegations and counter-allegations of the parties do not fall
within such statutory prescription, the Court has no authority to supplant
such allegations and counter-allegations or read them within the statute.
This Court is of the considered view that, while adjudicating an application
in terms of sub-Section (3) to Section 36 of the Arbitration Act, the prima
facie satisfaction of the Court with regard to allegation of fraud, as alleged
by the applicant, must be drawn primarily in the light of the provisions laid
down under the Act read with the existing facts and materials before it.
Thus, the submissions made on behalf of the applicant, to establish the
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allegation of fraud against the said learned Arbitrator in the light of the
provisions made under Sections 12 and 13 of the Arbitration Act is not
acceptable to this Court and the same is not sustainable.
131. It is already discussed above that the scope and jurisdiction of Court in
exercise of its power under Section 34 of the Arbitration Act is much wider
than under Section 36 of the Arbitration Act. While adjudicating an
application filed under sub-Section (2) to Section 36 of the Arbitration Act
and the plea taken in support of unconditional stay of the award in the light
of sub-Section (3) to Section 36 of the Arbitration Act, the scope of enquiry
by the Court is very limited and the Court cannot go for a deeper and detail
enquiry. Accordingly, the ratio of the judgments rendered under Section
34 of the Arbitration Act would not apply in the facts and circumstances
of the instant case. In the matter of : Microsoft Corporation (Supra), In
the matter of : Vinod Jain and Ors. (Supra), In the matter of : Venture
Global (Supra), In the matter of : D. Koshla (Supra), In the matter of :
Alkame Laboratory Limited (Supra), In the matter of : Jacki Kauko
Bhai Sraf (Supra), In the matter of : CPN Associate Construction
(Supra) and In the matter of : DRM Infrastructure Pvt. Ltd. (Supra), the
ratio laid down would not apply in the facts and circumstances of this case
as the instant application has been filed under Section 36(2) of the
Arbitration Act.
132. In the matter of : D R Narula (Supra), the judgment was rendered by the
Jharkhand High Court in a writ petition challenging the validity and vires
of Section 13(3) and (4) of the Arbitration Act. The judgment is of 2001,
whereas, the instant case is governed under the amended Arbitration Act
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amended in 2021, when Second proviso to sub-Section (3) to Section 36 was
introduced. Hence, the ratio decided in the matter pre 2021 amendment
would not apply in the facts and circumstances of the instant case.
133. The judgment In the matter of: Central Organization for Railway
Electrification (Supra), deals with the waiver of application of Section 12(5)
under the Arbitration Act. The judgment was pronounced on November 8,
2024. The issue fell for consideration was the independence and impartiality
of an arbitral tribunal in the light of both Arbitration and Contract Act. It
was specifically held that the occasion for the Court to examine the
constitution of the independent and impartial tribunal under the Arbitration
clause will arise when one of the parties applies under Sections 11, 14 or
34 of the Arbitration Act. In the instant case, the award-debtor has filed
an application under Section 36 (2) of the Act. Inasmuch as the ratio laid
down in the judgment was specifically made prospective and would make
applicable only to arbitrations where the arbitrator was appointed after the
date of pronouncement of the judgment i.e., November 08, 2024. In the
instant case, the arbitration had commenced in 2019 and the tribunal was
constituted then. Hence, the ratio laid down in the said judgment would not
apply in the facts of the instant case.
134. In the matter of: C and E Ltd. (Components and Equipments Ltd.) and
Another (Supra), the sole arbitrator therein appeared on behalf of one who
was affiliated with one of the parties during pendency of the arbitration
proceeding and the arbitrator’s conduct was found to be within the entries
enumerated under Fifth and Seventh Schedule of the Arbitration Act. In the
instant case, the allegation of the award-debtor is bias and the award-debtor
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submits that bias being an element of fraud, an unconditional stay of award
is permitted within the meaning of Section 36(3) of the Arbitration Act.
Admittedly, the allegations made in the instant case against the said learned
Arbitrator is not within the meaning and purview of the entries under Fifth
and Seventh Schedule of the Arbitration Act. Inasmuch as in the said
judgment the Court came to an independent finding that non-disclosure
would not be fraud. Hence, the ratio laid down in the said judgment has no
application in the facts and circumstances of this case.
135. In the matter of: Gazal Taneja and Others (Supra), the judgment was
rendered pertaining to usage of telephone connection where the principle
under Order XLI Rule 5 of Code of Civil Procedure was applied. The said
provision of Code of Civil Procedure though incorporated under Section
36(3) of the Arbitration Act in case of a money award but, the same is a
directory provision and not mandatory. Insofar as an application under
Section 36(2) of the Arbitration Act is concerned, it is the discretion of the
Court. The law is settled that in the event of stay of a money award under
the present Arbitration Act, the money is required to be secured. Therefore,
unless, in the instant case, the Second proviso to Section 36(3) of the
Arbitration Act is satisfied, there shall be no unconditional stay of the
money award. The ratio in the said judgment is therefore, is not applicable
in the facts and circumstances of this case.
136. In the matter of: Ranjit Thakur (Supra), the judgment was rendered not
under the Arbitration Act but in respect of a disciplinary proceeding initiated
under the Army Act, 1950. The decision-making process of the authority of
the disciplinary proceeding was challenged by way of a writ petition on the
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ground of bias. In the facts of the instant case, the parties by agreement
have accepted the application of the Arbitration Act on the subject-matter.
The plea taken by the award-debtor under Section 36(3) on the ground of
bias of the said learned Arbitrator, on a plain reading of the statute is not
available. The scope of adjudication where the decision-making process is
challenged by way of a writ petition is totally different from the scope of
adjudication when a decision-making process is challenged under the
Arbitration Act. As already discussed above, the scope of enquiry under
Section 36 of the Arbitration Act is extremely narrow in comparison with the
scope of Section 34. Thus, the scope of adjudication in the instant case
being different from an adjudication under Article 226 of the Constitution of
India, the ratio laid down in the said judgment would not apply in the facts
and circumstances of the instant case.
137. In the matter of : Jagadish Krisinchand (Supra), the petitioner
challenged the award primarily on the ground that opportunity of hearing
was not granted to the petitioner in the arbitration proceeding and also
alleged several other procedural latches on the part of the arbitral tribunal.
The judgment was rendered under Section 34 of the Arbitration Act. There
the arbitrator acted as an arbitrator in another proceeding instituted at the
instance of the respondent. It was held that the issue was covered within the
ambit of the entries under Seventh Schedule of the Arbitration Act. The
instant application has been filed under Section 36(2) and the plea has been
taken under Section 36(3) of the Arbitration Act, where a detail enquiry is
not permitted as is permitted under Section 34 of the Act. Inasmuch as, this
is not an application neither any objection was taken by the award-debtor
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under Section 12 of the Arbitration Act. Hence, the ratio of the said
judgment shall not apply in the facts and circumstances of the instant case.
138. In the matter of: Metropolitan Properties Regina (Supra), the chairman
of the rent assessment committee, who was the adjudicator, was a solicitor
who advised the tenants and the landlord raised an objection of bias against
the said adjudicator. Hence, the ratio laid down in the said judgment would
not apply in the facts and circumstances of this case.
139. In the matter of: P D Dinakaran (Supra), the judgment was not rendered
in an arbitration case. The respondent/judge in that case performed overt
acts expressing opinion against the petitioner prior to the conduct of the
judicial proceeding. Hence, the allegation of likelihood of bias was raised. In
the instant case, no such case has been made out in the instant application
filed by the award-debtor. Therefore, the ratio laid down in the said
judgment would not apply in the facts and circumstances of the instant
case.
140. In the matter of : A. K. Crypack (Supra), the judgment was rendered not
in an arbitration case. In that case an allegation of bias was raised against
a member of the selection committee who himself was a candidate for
selection process. The principle is well established that a person cannot be a
judge of his own cause. In the instant case, the allegation of the award-
debtor is not the same or identical. The said arbitrator, in the instant case,
was not a judge of his own cause. Hence, the ratio laid down in the said
judgment would not apply in the facts and circumstances of the instant
case.
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141. In the matter of: State of Maharastra (Supra), proceeding arose for a
declaration that a charge-sheet was to be declared to be null and void and
the charges were vitiated by fraud as panchanama was fabricated. No such
case of fabrication is the subject-matter of the instant application.
Therefore, the ratio decided in the said judgment would not apply in the
facts and circumstances of the instant case.
142. In the matter of: Ramesh Sumermal Shah & Ors.(Supra), the challenge
was in respect of an interim award. The scope of the proceeding is totally
different from the proceeding under Section 36(2) of the Arbitration Act.
Inasmuch as, there the Court found that the arbitral tribunal had failed to
deal with the defense taken by the party concerned, which was considered
to be a patent illegality in the impugned interim award. The impugned
interim award was found to be perverse. The interim award was found to be
without reasons. Hence, the Court was of the opinion that it was an
exceptional, unique and compelling case for unconditional stay of the
impugned interim award. Inasmuch as, under Section 36(2) along with the
plea taken under Section 36(3) of the Arbitration Act, the scope of
adjudication is very narrow and different from the scope of adjudication on
an interim award. Therefore, the ratio decided in the said judgment would
not apply in the facts and circumstances of the instant case.
143. In the matter of : M/s Vishnurupa Developers Pvt. Ltd. (Supra), in the
said judgment the impugned award was passed rejecting the counter-claim
of the petitioner in ignorance of the vital clause of the agreement between
the parties/the subject work-order. Such is not the case here. The
submissions made on behalf of the award-debtor/applicant that its counter-
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claim has been rejected in a single sentence without any reasons is not
within the scope of Section 36(2) of the Arbitration Act, the instant
application. Hence, the ratio laid down in the said judgment would not apply
in the facts and circumstances of the instant case.
144. In the matter of: Kanshi Ram (Supra), the matter arose out of a landlord
tenant dispute under the East Punjab Urban Rent Restriction Act,
claiming eviction. The ratio decided in the said judgment would not apply to
come to a finding for a prima facie case under Section 36(2) on the plea of
Section 36 (3) of the Arbitration Act, which is a special statute and has been
agreed by and between the parties being the cural law. Court cannot go into
the merits of the award at this stage.
145. In the matter of: Ecopark India Paper Cup Pvt. Ltd.(Supra), the
challenge was from an interim award passed under Section 31(6) of the
Arbitration Act and not from a final award. Inasmuch as, the said judgment
was of 2018 prior to the 2021 amendment in the Arbitration Act, by virtue
whereof, Section 36(3) has been engrafted in the Act. Therefore, the ratio
laid down in the said judgment shall not apply in the facts and
circumstances of the instant case.
146. In the matter of : Pam Developments (Supra) and Toyo Engineering
(Supra), both the judgments were on applicability of principle under Order
XLI of Code of Civil Procedure in relation with Section 36(3) of the
Arbitration Act. The judgments were delivered pre 2021, before the
amendment of the Arbitration Act was introduced. To exercise the discretion
of the Court under the said directory provision of Order XLI of Code of Civil
Procedure while adjudicating an application under Section 36(2) of the
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Arbitration Act, the Court must find out a clear prima facie case within the
statutory framework. The expression ‘bias’ is not there under Section 36 of
the Arbitration Act. Detail enquiry which is otherwise permitted under
Section 34 of the Arbitration Act is not permitted under Section 36(2) of the
Arbitration Act. Therefore, there cannot be any mandate on a Section 36
Court to grant an unconditional stay of award in the facts and
circumstances of every instant case. Thus, the ratio of the said judgment
shall not apply in the facts and circumstances of the instant case.
147. In the matter of: Arup Mohanty & Anr. (Supra), the fact was incorrect
recording in the minutes by the arbitrator and discovery of incorrect
disclosure regarding arbitrator’s connection with the respondent. The
judgment was also delivered before 2021. Section 36(3) of the Arbitration Act
had been introduced by virtue of the amendment of 2021 with retrospective
effect from October 2015. In the facts of this case, though bias has not been
included under Section 36(3) of the Arbitration Act but the applicant seeks
to establish that fraud includes bias, within the meaning of Section 36(3) of
the Arbitration Act. Within the limited scope of enquiry under Section 36 of
the Arbitration Act, to draw such an inference is not permitted. Therefore,
the ratio decided in the said judgment would not apply in the facts and
circumstances of the instant case.
148. In the matter of : Bharat Heavy Electricals Ltd. (Supra), the
constitutional validity of Section 13(3) and (4) of the Arbitration Act was
challenged by way of a writ petition, which was dismissed. This was also a
judgment of pre 2021 when the amendment in the Arbitration Act was not
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there inserting Section 36(3). Thus, the ratio decided in the said judgment
would not apply in the facts and circumstances of the instant case.
149. In the matter of : Himansu Shake (Supra), the judgment was rendered on
the Seventh Schedule of this statute. Admittedly, bias has not been defined
under any of the entry of the Seventh Schedule of the statute. To come to a
conclusion on fraud within the meaning of Section 36(3) of the Arbitration
Act whether it includes bias may call for a detail enquiry which is not
permitted to be done by this Court under Section 36(2) of the Act. Hence,
the ratio in the said judgment will not apply in the facts and circumstances
of the instant case.
150. In the matter of: Lifestyle Equities C.V. & Anr. (Supra), the Hon’ble
Supreme Court had held that in the event of an exceptional case having
been made out, unconditional stay of award is permitted in exercise of
power under Section 36(2) of the Arbitration Act. This is the settled law now.
In the facts and circumstances of the instant case, it is therefore required to
be examined in the light of the law laid down in the said judgment, whether
any exceptional case is made out.
151. In the matter of: M/s Santi Ceramics Private Limited (Supra), the
judgment was rendered in a writ petition and not in an arbitration case,
the scope of adjudication within the meaning of Section 36(2) of the
Arbitration Act, which is a special statute and codified law, is different from
the jurisdictional authority of a constitutional court in judicial review under
Article 226 of the Constitution of India. At Section 36(2) stage, this Court is
not authorized to scrutinize the award with a deeper enquiry and whether
the factors mentioned under Section 36(3) of the Arbitration Act exists, the
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Court is only empowered to take a prima facie view and not beyond that.
Whether the invocation of Arbitration clause by the award-holder was bad or
whether the award-holder had no cause of action for arbitration in view of
the ratio laid down in the said judgment is not to be looked at the present
stage under Section 36(2) of the Arbitration Act. Therefore, the ratio laid
down in the said judgment would not apply in the facts and circumstance of
this case while adjudicating the instant application under Section 36(2) on
the plea of Section 36(3) of the Arbitration Act.
152. In the matter of : WBSIDC (Supra) a Coordinate Bench of this Court had
observed that fraud, as is commonly understood, has the potential to vitiate
and undo all attendant and consequent happenings as a ripple-effect of
unraveling the layers of cover and concealment of the truth. Fraud must be
plain and indefensible on the face of the record so that the Court is not
required to venture into the depths of the facts presented. The Court must
be alarmed and taken aback, even at first blush, of the extent of deception
and cunning. The act must be so flagrant so as to undo and upset the award
on the egregiousness alone. Ultimately, on the existing facts and
circumstances in that case, the Court did not find any prima facie view to
hold fraud.
153. In the matter of : SRMB Srijan Ltd. (Supra), a Coordinate Bench of this
Court was of the opinion that the inducement of the complaining party to
enter into an arbitration agreement or the making of the award being tainted
by fraud must be plain and ready to be discovered even without a detail
enquiry into the facts. Fraud has to be spelt out and must be obvious to the
eye at least for the purpose of unconditional stay of an award. Fraud must
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also be reprehensible or unconscientious conduct with the active intention
of deceiving another where the outcome of the award of the execution of an
agreement when altogether have been different if fraud had been discovered.
Finally, the prayer for unconditional stay of award was rejected.
154. In the matter of: C and E Ltd. (Components and Equipments Ltd.) and
Another (Supra) the case was dealt with under Section 12 of the
Arbitration Act and the Coordinate Bench of this Court found that the
conduct of the concerned arbitrator was covered under the entries made in
Fifth and Seventh schedule read with explanation. In the facts of the
instant case, there was no such proceeding under Section 12 of the
Arbitration Act, though the documents and incidents spoken of on behalf of
the applicant/award-debtor were available during the arbitration proceeding
in the respective websites, which is a public domain. Thus, the ratio is not
applicable in the facts of the instant case.
155. In the matter of : Satnam Singh (Supra) the Hon’ble Supreme Court had
opined that any exception provided by way of a proviso to a Section cannot
override the main Section, which has to be construed strictly.
156. In the matter of : Voestalpine Schienen (Supra) the Hon’ble Supreme
Court had held that the Fifth schedule to the Arbitration Act is exhaustive.
157. In the matter of : Chennai Metro Rail (Supra) the Hon’ble Supreme Court
had opined that the concept of de jure ineligibility because of existence of
justifiable doubts about impartiality or independence of the tribunal and
un-enumerated grounds other than those outlined as statutory ineligibility
conditions in terms of Section 12(5), therefore, cannot be sustained.
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158. In the matter of :Toyo Engineering Corporation (Supra), In the matter
of :Manish (Supra) and In the matter of : WBSIDC (Supra) the Court had
repeatedly held that for a money award unless a prima facie case is made
out under sub-Section (3) to Section 36 of the Arbitration Act, the entire
awarded sum has to be deposited to obtain stay of the award.
159. The order passed by the Hon’ble Supreme Court In the matter of : Mumbai
Metro Rail Corporation Limited (Supra) is a discretionary order passed in
the particular facts and circumstances of that case. First proviso to sub-
Section (3) of Section 36 of the Arbitration Act provides that the Court, 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 CPC. This borrowed provision is not
mandatory but directory. The nature of security to be furnished and the
strength of it would largely depend on the discretion of the Court. The Court
must exercise such discretion judiciously. The law is well settled that the
discretion if it is not arbitrarily exercised by the Court, the same sustains in
the eye of law.
160. In the matter of : Bhadra International (India) Private Limited (Supra)
the judgment was rendered in a Section 34 proceeding. The law is settled
that within the statutory framework as laid down under the Arbitration Act,
the plea of ineligibility of an arbitrator under Section 12(5) of the Arbitration
Act read with the Seventh Schedule shall not and cannot be waived unless
there is a specific agreement in writing to that effect by the party. This is a
statutory mandate and an exception to the provisions laid down under
Section 4 of the Arbitration Act. If an arbitration is proceeded with and an
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award is passed by the arbitral tribunal, if a party is aggrieved and alleged
the ineligibility of the arbitral tribunal within the meaning of Section 12(5)
read with the Seventh Schedule of the Act, such a party can agitate the
issue in a Section 34 proceeding. However, the scope of adjudication in the
instant application filed under Section 36 (2) of the Act is different from the
scope of adjudication under Section 34 of the Act, as already discussed
above. Thus, the ratio laid down in the said judgment shall not apply in the
facts and circumstances of this case, at Section 36(2) stage.
161. There is a sea difference between the adjudication process when a
constitutional Court exercises its high prerogative writ jurisdiction under
Article 226 or 32 of the Constitution of India and an adjudication under the
Arbitration Act. Both are legal remedies, but they operate in totally different
universes. A writ remedy or a judicial review through a writ petition is a
constitutional remedy whereas, remedy under arbitration is contractual.
Sources of power and authority of Court are also different. To exercise the
power and authority by a Court in a writ proceeding, the source is the
constitution whereas, for arbitration proceeding it is the Arbitration Act
which is otherwise a self-contained and complete Code. A writ court
exercising its equitable jurisdiction is permitted to proceed on an inferred
conclusion whereas an arbitration Court is not empowered to proceed on
any inferred conclusion. Any person who are authorized to invoke writ
jurisdiction can invoke it for violation of fundamental/legal rights by the
State or any authority within the meaning of Article 12 of the Constitution of
India. On the other hand, a party to a particular contract containing
arbitration clause is entitled to invoke the jurisdiction under the Arbitration
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Act alleging violation of contractual right under that particular contract.
Writ remedy is a public law remedy guaranteed by the Constitution whereas,
arbitration remedy lies before a tribunal which is derived from consent of
parties/agreement between the parties. Eventually, when facts are disputed
and several triable issues are there, writ Court refuses to exercise its
discretion and jurisdiction. Whereas, arbitration permits a larger scope of
enquiry on disputed questions of facts where issues are triable. Thus, the
ratio laid down in the judgments in the writ petitions, as cited on behalf of
the award-debtor, would not apply in the facts and circumstances of the
instant case.
162. When an arbitration proceeding has been initiated and the parties by
agreement have accepted to proceed under the Arbitration Act, the same
should be within the statutory framework of the Arbitration Act. The
adjudication in an arbitration proceeding has to be made within the four
corners of the statute and in the manner and mode as specifically provided
therein. The age old golden cardinal rule is that when a procedure and
provision is prescribed in a particular statute, such procedure and provision
has to be strictly applied and no other procedure or provision shall be
applied in an adjudication process under a particular statute. All other
modes are forbidden in law. When the award-debtor has made a prayer for
unconditional stay of the award on the plea that the said learned arbitrator
was bias and bias being an element of fraud and the ground is available
under the Second proviso to Sub-Section (3) to Section 36 of the Arbitration
Act for unconditional stay, the Court shall restrict its adjudication within
the statutory framework of the Arbitration Act. It is noteworthy that the
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expression fraud has not been defined or clarified under the Arbitration Act.
The expression bias is also nowhere defined under Section 36 of the Act.
163. Fraud, as in its plain meaning, is an act with the potential to vitiate and
undo all subsequent incidents which had occurred as a result of practicing
of fraud. Fraud unravels the layers of cover concealing of truth. Fraud must
be and clearly should be apparent on the face of the record, so that the
Court is not required to go for a deeper enquiry into the depth of the facts
presented. The Court must be cautious on the basis of such record before it,
even at first blush of the extent of deception. The act of fraud must be so
egregious and glaring so as to undo and unsettle the award on the sole
nature of egregiousness alone. In an arbitration proceeding, the scope of
adjudication is such so that there cannot and should not be any inferred
conclusion which is not there on the face of record. The conclusion in an
arbitration proceeding, by an arbitration court, must and should arrive at
within the statutory framework prescribed under the Arbitration Act and not
on any inferred conclusion.
164. The allegations made by the award-debtor of bias against the said learned
Arbitrator was on the basis of alleged seven incidents along with the
supportive materials produced by the award-debtor, as already narrated
above and are on records. Each of such incidents was allegedly there in
existence during currency of the arbitration proceeding. It is also admitted
by the award-debtor that the supportive materials in connection with those
alleged seven incidents were available on the respective websites, which
therefore, were available in the public domain. The specific case of the
award-debtor is that after the arbitration proceeding was concluded, all
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those alleged materials came to the knowledge of the award-debtor and the
award-debtor had raised the issue of bias as an element of fraud, after it
had come to know those alleged facts and raised the plea in Section 34
proceeding. The law is well settled that when the information and the
supportive material is available in the public domain, it is known to
everybody concerned/parties concerned. Therefore all such alleged seven
incidents and the supportive materials were known and/or deemed to have
been known to the award-debtor, still the award-debtor did not apply before
the arbitral tribunal alleging fraud/bias against the learned arbitrator,
before the arbitral tribunal within the prescribed statutory procedure. Had
this application been filed by the award-debtor, the tribunal could have an
opportunity to deal with the allegations against the tribunal.
165. Hon’ble Supreme Court In the matter of : Bhadra International (India)
Private Limited (Supra) though a judgment delivered in a Section 34
proceeding, had observed that when an award has been passed by an
ineligible arbitrator, the aggrieved party even though, not approached under
Section 14 read with Section 15 of the Arbitration Act may approach the
Court under Section 34 for setting aside of the award.
166. Second proviso to Sub-Section (3) to Section 36 requires the Court to be
satisfied of a prima facie case of fraud. The expression prima facie
contemplates a finding by the Court on fraud on the face of the record and
on a first blush look on the record. Prima facie finding would not amount to
hold a mini trial either to draw an inferred conclusion or to go deeper on the
merits of the allegation. The facts on records show that during the currency
of the arbitration proceeding, the alleged seven incidents talked about by the
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award-debtor being in public domain were known to and/or deemed to have
been known to the award-debtor, still the award-debtor did not apply within
the statutory framework before the tribunal. This Court is of the firm and
considered view that a meaningful reading of the provisions of Second
proviso to sub-Section (3) to Section 36 of the Arbitration Act shows that a
prima face opinion on fraud should be arrived at by the Court within the
prescribed statutory procedure under the Arbitration Act and not by any
inferred conclusion. This Court has not found any prima facie case of fraud
during its enquiry within the scope of Section 36(3) of the Arbitration Act.
167. In the matter of : Lifestyle Equities C.V. (Supra) the Hon’ble Supreme
Court had held that even if the Court finds an exceptional case, the Court
may unconditionally stay the operation of the award.
168. Considering the facts and circumstances of the instant case and the
materials before this Court and more so the glaring fact that all those
alleged seven incidents with all supportive materials as alleged being there
in the public domain during currency of the arbitration proceeding and still
the award-debtor did not apply before the arbitral tribunal within the
statutory framework to which it was entitled to, this Court is of the
considered view that there is no exceptional case for which this Court can
stay the award impugned unconditionally. Inasmuch as, the
applicant/award-debtor could not furnish an unimpeachable evidence on
record which on a first blush shows that all those alleged seven events
where the learned Arbitrator allegedly attended, were arranged and
organized by the award-holder. Furthermore, the plea of the award-debtor
regarding that alleged rejection of counter-claim of the award-debtor by a
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single sentence without any reason or allowing the claim of the award-
holder without appreciating the evidence on record or without being proved
or without any reason, can only be adjudicated in the pending Section 34
proceeding and not in this proceeding under Section 36 of the Act. Thus, no
exceptional case has also been found for unconditional stay of the award,
on this score.
169. In view of the foregoing discussions and reasons, this Court holds that there
is no prima facie case made out to arrive at a finding of fraud as alleged by
the award-debtor within the meaning and scope of the Second proviso to
sub-Section (3) to Section 36 of the Arbitration Act. This Court is also of the
firm and considered view and holds that there is no exceptional case for
which the impugned award can be stayed unconditionally.
170. It is also noteworthy that the First proviso to sub-Section (3) to Section 36 of
the Arbitration Act, inter alia, provides that upon filing an application under
Section 36(2) of the Act for stay of operation of arbitral award, the Court
may subject to such condition as it may deem fit, grants stay of operation of
such award for reasons to be recorded in writing and further provides that
the Court shall, while considering the application for grant of stay in the
case of an arbitral award for payment of money, having due regard to the
provisions for grant of stay of a money decree under the provisions of Code
of Civil Procedure. Rule 5 to Order XLI of Code of Civil Procedure does not
specify about the mode, manner, form or nature of security and reading of
the said provisions shows it is left with the discretion of the Court. Use of
discretion by the Court depends on facts of each case and there cannot be
any common theory or formula for it.
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171. In the matter of : Mumbai Metro Rail Corporation Limited (Supra) the
appellant at whose instance the order was passed by the Hon’ble Supreme
Court on December 01, 2025 was a Government Company where State was
a stakeholder. In the instant case, the award-debtor/applicant is also a
Government company where State is a stakeholder.
172. Accordingly, for stay of the award dated October 30, 2023, the following
terms and conditions are imposed on the award-debtor, which are:
(a) After calculating the entire principal and interest amount under the
impugned award as on today subject to the satisfaction of the
Registrar, Original Side, the applicant/award-debtor is directed to
furnish an undertaking by way of an affidavit through its managing
director or chairman, as the case may be, with the supportive
current board resolution in accordance with law along with
particular/particulars of the immovable property/properties owned by
it in the city of Kolkata and elsewhere, in the event of necessity to
cover the entire awarded sum, which is/are free from any
encumbrances with copies of the supportive title deeds/documents.
The undertaking shall expressly recite that in the event of arbitral
award attained finality, the applicant/award-debtor shall pay the
entire awarded amount both principal and interest positively within
a period of eight weeks from date of finality of award. The
undertaking in the form of an affidavit shall also contain a chart
containing the description of the property/properties which shall be
the subject-matter of the undertaking.
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(b) Such undertaking in the form of an affidavit should be filed by the
applicant/award-debtor positively within a period of eight weeks from
date before the Registrar, Original Side. The Registrar, Original Side
then shall prepare a report and keep the report in the original file of
Section 34 application.
(c) In the event, it is found that the security in the form of immovable
property/properties is not sufficient to cover the entire awarded sum
or any part thereof, then in that event the award-debtor/applicant, to
that extent shall furnish cash security to secure the said excess
awarded amount within said period of eight weeks with the Registrar,
Original Side.
(d) In the event, the entire awarded amount both principal and interest
together is not possible to be secured by the award-debtor by
furnishing the undertaking by immovable property/properties, as
directed herein, in that event, the entire awarded amount shall be
secured by way of cash deposit to be deposited by the award-debtor
within the said period of eight weeks, directed hereinabove.
(e) On receipt of any amount, the Registrar, Original Side shall keep the
said sum in an interest bearing fixed deposit with the State Bank of
India, SPG Branch under the auto renewal mode and prepare a report
and keep the same in the original file of Section 34 application.
(f) There shall be an unconditional stay of the impugned award till
eight weeks from date. Thereafter, if the undertaking is not filed
before the Registrar, Original Side or the cash security is not
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A.R.J.
74
2026:CHC-OS:159
deposited as the case may be, as directed herein, within the said
period of eight weeks, the stay will automatically be vacated.
173. With the above observations and findings the instant application being AP-
COM 88 of 2024 stands dismissed with cost assessed at Rs.50,000/- to be
paid by the applicant/award-debtor in favour of West Bengal State Legal
Services Authority positively within a period of four weeks from date by
way of a banker’s instrument.
(Aniruddha Roy, J.)
D.Das,(P.A).
AP-COM/88/2024
A.R.J.
