Indian Oil Corporation Limited vs Toyo Engineering Corporation & Anr

Jyoti Singh, J

I.A. No. 1296/2020

This is an application filed under Section 36 (3) of the Arbitration and Conciliation Act, 1996 and Order XLI Rule 5 read with Section 151 CPC on

behalf of the respondents for modification of the order dated 09.08.2019 passed by this Court. The contention of the applicants/respondents is that the

current Arbitration was invoked on  13.05.2013 and the Award was rendered on 11.03.2019. The Arbitration and Conciliation Amendment Act,

2019 (hereinafter referred to as the ‘Act’) received the assent of the President of India on 09.08.2019 and was published in the Official Gazette

on the same date. The interim order whose modification is being sought was also passed on 09.08.2019 wherein the Court has directed the petitioner

to make only a partial deposit of the awarded amount, which works out to only about 20%.

Learned senior counsel for the respondents submits that without prejudice to the contentions that the Amendment Act was not applicable to the

present proceedings and there would not have been an automatic stay, the Supreme Court in a recent case in Hindustan Construction Company

Limited & Anr. Vs. Union of India & Ors., 2019 SCC OnLine SC 152 0has declared Section 87 introduced by way of the Amendment Act to be

unconstitutional. As a result of this, the current proceedings will be governed by the 2015 Amendment Act and there cannot be an automatic stay on

the Enforcement of the Arbitral Award.

Mr. Nayar, learned Senior Advocate, contends that in the case of HCC (Supra) the Supreme Court held that an award holder should not be

deprived of the fruits of the award rendered in his favour and therefore the petitioner should be directed to deposit the entire awarded amount, which

in his submission, along with the post-award interest as on 27.01.2020, is Rs. 695 Crores. Learned senior counsel further contends that in the recent

past, Co-ordinate Benches including the Division Benches of this Court have directed deposit of the full awarded amount. Reliance is placed on the

order dated 16.07.2019 passed in the case of Mathur & Kapre Associates Private Limited v. ESIC, OMP (ENF) (COMM) 114/2019 as

well as order dated 12.09.2019 in the case of Serum Institute of India Ltd. v. Union of India, OMP (ENF) (COMM) 158/2019. Reliance is further

placed on the following orders:-

i. Zapdor-UBS-ABN (JV) v. Central Organization of Railway Electrification (Core): Order dated 18.09.2019 passed in OMP (ENF) (COMM)

163/2019.

ii. S. Ghosh & Associates v. Delhi Development Authority: Order dated 25.09.2019 passed in OMP (ENF) (COMM) 169/2019

iii. Seaspray Shipping Co. Ltd. v. Steel Authority of India Ltd: Order dated 26.09.2019 passed in OMP (ENF) (COMM) 80/2019

Learned senior counsel further argues that this Court has recently in the case of Power Mech Projects Ltd. v. SEPCO Electric Power Construction

Corporation, OMP (I) (COMM) 523/2017 decided on 17.02.2020, directed the petitioner therein to deposit the entire principal amount, awarded in

favour of the respondent, despite the fact that there were previous orders of Court, in that very case, directing deposit of lesser amount, along with

Bank Guarantee of Rs. 30 Crores, as against the awarded amount of Rs. 142 Crores (Principal). The argument, therefore, is that the order dated

09.08.2019 should be modified to bring it in line with the recent judgments, and the petitioner be directed to deposit Rs. 695 Crores.

Learned counsel for the petitioner on the other hand vehemently opposes the application. Mr. Sharma arguing on behalf of petitioner/non-applicant

submits that the respondents are seeking modification of the interim order dated 09.08.2019 without there being any change in the circumstances and

none has even been pleaded by the respondents, to warrant a modification of the order. It is argued that the application is an abuse of the process of

law and the respondents are seeking a re-hearing of an issue which was argued at length on 09.08.2019 and settled by Court after a detailed hearing.

Mr. Sharma further argues that the respondents are giving a wrong impression, that the order was passed at a point in time when the law permitted

an automatic stay of the Arbitral Award, during the pendency of proceedings under Section 34 of the Act. He submits that this is completely wrong as

on 09.08.2019 the legal position was that there was no automatic stay of the Arbitral Awards and it is for this reason that the petitioner had filed an

application for stay of the operation of the Impugned Award. The respondents had argued at length opposing the application. Their opposition was

taken note of and the Court after hearing and being satisfied that the petitioner had a prima facie case on merits had passed the order directing deposit

of Rs. 125 crores. Learned counsel vehemently submits that the order itself indicates that the Court was of the view that the Impugned Award was

contrary to an earlier judgment of this Court and the case of the petitioner being covered by it warranted that the enforcement of the Award be

stayed.

Mr. Sharma further argues that the order was passed considering the 2015 Amendment Act and the judgment passed by the Supreme Court in

Board of Control for Cricket in India V. Kochi Cricket Private Limited and Ors., (2018) 6 SCC 28 7whereby the Amendments in 2015 were made

applicable to Court proceedings which had commenced thereafter. The Court was conscious of the legislative and legal mandate and so was the

petitioner who had filed a stay application being IA No. 10900/2019. It is argued that there is no mandate of law that the Court must direct a 100%

deposit by a party which is challenging the Award and it is merely the discretion of the Court to direct the amount of deposit depending on facts and

circumstances of each case. In the present case, the Court has already exercised its discretion under Section 36(2) & (3) of the Act and directed

deposit of Rs. 125 Crores.

Mr. Sharma has further argued that even the figure of Rs. 125 Crores which has been directed to be deposited is not without significance. He

points out that the principal amount awarded by the Arbitral Tribunal is Rs. 458 Crores and out of this a sum of Rs. 321 Crores is on account of the

price discount, which is an issue already covered against the respondent by an earlier judgment in the case of Indian Oil Corporation Ltd. v. Larsen &

Toubro Limited, OMP (COMM) 366/2017. Thus, the dispute between the parties that is not covered by the said judgment would only be for an

amount of Rs. 125 Crores, assuming that the petitioner was to succeed on account of the issue relating to Rs. 321 Crores. Keeping this in mind, the

Court has rightly directed deposit of Rs. 125 Crores and there is no reason why the order should be modified.

Mr. Sharma also argues that the petitioner is a ‘Maharatna’ Company and there is no risk of the Impugned Award not

being honored, if the petitioner fails in its endeavor to have the same set aside.

I have heard the learned counsels for the parties.

There is no quarrel with the proposition urged by Mr. Nayar, learned Senior Advocate that after the judgment of the Supreme Court in HCC

(Supra), there is no automatic stay on the enforcement of an Award, only because an Award is challenged by a party by filing a petition under Section

34 of the Act. Mr. Nayar is also right in his contention that the Supreme Court in the said case has clearly held that an award holder must be able to

reap the fruits of an award in its favour and should not suffer only because the other party has chosen to challenge the Award, as it is a well-known

fact that litigations can go on for a long time. The Supreme Court has clearly held that the Arbitral Award is a money decree and should be enforced

accordingly.

The controversy which this Court has to decide in the present application is whether the interim order passed by the Court on 09.08.2019 directing

the petitioner to deposit Rs. 125 crores which is approximately 20% of the awarded amount, deserves to be modified. Mr.Nayar rightly submits that in

the recent past the Supreme Court and this Court have passed several orders where the objector has been directed to deposit 75% or even 100% of

the awarded amount, before the enforcement of the award is stayed. But in my view the stage for considering the amount which the petitioner must

deposit for seeking stay on the enforcement of the Award was on 09.08.2019, when the Court heard both the parties on the stay application. It was at

that stage that the Court was called upon to exercise its discretion on the basis of the law and the facts and circumstances of the case and decide

whether the entire awarded amount should be deposited or a part of the said amount. Mr. Sharma, in my view, rightly contends that the Court at that

stage had heard the parties at length and had exercised its discretion directing a deposit of Rs. 125 Crores. The question therefore that arises is

whether the Court can be called upon to exercise this discretion once again and modify the order despite the fact that there has been no change of any

circumstance between 09.08.2019 and the date when the present application was filed. It is significant to note that the respondents have not pleaded

any change of circumstances in the application and nor was any such argument even raised during the hearing of the application. The two grounds

that are sought to be raised by the applicant do not relate to any change of circumstance.

The first ground raised by the respondents is that when the order was passed by the Court on 09.08.2019, the 2019 Amendment Act had been

notified on the said date itself. The Court was in a regime where Section 87 had been introduced and it was an era of an automatic stay. In my view,

the argument of the respondents is not correct. The petitioner is right in its contention that it was conscious of the fact that there would be no

automatic stay of the Award and therefore it had filed an application for stay of the operation of the Award. Had the contention of the respondents

been correct, in my view, the Court would not have passed an order of directing even the deposit of Rs. 125 Crores, before staying the Enforcement

of the Award as an automatic stay would not entail any deposit by the objector. In fact, the order itself indicates that even the Court was conscious

that there could not have been an automatic stay and therefore directed a deposit of Rs. 125 Crores by the petitioner subject to which it had stayed the

Enforcement of the Award.

In so far as the second ground is concerned, Mr. Nayar has vehemently argued that the Courts have in recent orders and judgments been insisting

on the full deposit of the entire amount. He has also relied upon a judgment of this Court in the case of SEPCO (supra) to contend that an earlier order

directing a deposit of lesser amount was modified by this Court and it was directed that the entire principal amount under the award be deposited.

I have gone through the various orders including the judgment passed by this Court in the case of SEPCO (supra). It is important to mention that in

the case of SEPCO (supra), this Court had noted that there is no mandate of law that in every case the Court should direct 100% deposit of the

awarded amount. This is purely in the discretion of the Court and the discretion has to be exercised in the facts and circumstances of each case. In so

far as SEPCO (supra) is concerned what had weighed was the fact that the petitioner therein was a foreign Company, with no assets in India. The

various affidavits filed by it disclosing its ongoing projects were also a subject matter of serious dispute between the parties. Most significantly, the

distinguishing factor in the case of SEPCO (supra) was that when the Court passed the order on 17.02.2020, it was exercising its discretion to direct

the petitioner to deposit an amount subject to which the Enforcement of the Award was to be stayed and it was also to be decided whether petition

was to be admitted to hearing. Therefore, the stage in SEPCO (supra) was a stage which is comparable with the stage in the present petition when

the order of 09.08.2019 was passed. Thus, in my view the two cases are incomparable.

Learned counsel for the petitioner in my view is also right in its contention that when the order was passed on 09.08.2019, the Court was of the

prima facie view that the petitioner had a good case on merits and was prima facie covered by an earlier judgment of this Court with regard to at least

one issue. The fact that this factor weighed with the Court is evident from a bare reading of the said Order of 09.08.2019 where the Court records

this contention of the petitioner as well as the judgment in the earlier case. The Order also indicates that the respondents were heard at length before

the said Order was passed and at the cost of repetition, I must state that there has been no change in any circumstance from the date of passing of

that Order till date.

In so far as the various orders relied upon by the respondents are concerned, I may only notice that the orders passed in those cases are in the

Enforcement petitions where obviously there have been no earlier orders of the Court directing deposit of the amount for staying the enforcement of

the award. In so far as the judgment in the case of Pam Developments Private Ltd. v. State of West Bengal, Civil Appeal No. 5432/2019, is

concerned and which is relied upon by the respondents, it can only be said that the proposition of law laid down therein can hardly be questioned. The

Supreme Court in the said judgment has held that no special treatment under the Act can be given only because Government is a party and the CPC

as well as the Arbitration Act cull out no difference between a private party and the Government as a party. In my view this judgment cannot help the

respondents since in the present case, the main ground of the petitioner is not that it must be given an exceptional treatment or indulgence only

because it is a Public Sector Undertaking. The main contention of the petitioner as brought out above is that the Court having exercised its discretion

once, there being no change of circumstance, the Order calls for no modification.

In my view there is thus no merit in the application and the same is hereby dismissed.