Purti Vanaspati Private Limited vs Karvy Stock Broking Limited

An arbitration was held under the bylaws, rules and regulations of the National Stock Exchange (NSE) between Purti Vanaspati Private Limited, the petitioner and Karvy Stock Broking Limited, the respondent. It was a two tier arbitration.

It is very important to carefully analyse the facts of this case. On 18th May, 2016 an award for Rs. 93,71,888 was passed in favour of the petitioner by the first tier Arbitral Tribunal. The respondent was directed to pay this amount within one month of receipt of the award. The National Stock Exchange appears to have debited an amount of Rs. 93,71,888 from the account of the respondent. It was separately kept as a "blocked amount", under the award.

The petitioner preferred an appeal before the Appellate Tribunal stating that they were entitled to Rs. 1,85,53,667 along with interest etc. The respondent filed a cross objection challenging the award. The Appellate Tribunal by its award dated 4th October, 2016 set aside the award and directed the National Stock Exchange to "unblock the amount".

Promptly the exchange "unblocked" the amount. It is not known whether they did so even before the petitioner had filed the application under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award. It was filed by them, apparently within three months and thirty days of the award on 3rd February, 2017. On 14th March, 2017 the National Stock Exchange wrote to them that the "blocked amount" had been "unblocked".

In those circumstances, this application has been made by this court for the following reliefs: "a) The respondent be directed to forthwith deposit the amount of Rs. 93,71,888/- with the Registrar, Original Side of this Hon''ble Court.

b) The Registrar, Original Side of this Hon''ble Court be directed to keep the said amount in an interest bearing fixed deposit account with any nationalised bank."

This court is not called upon to adjudicate whether the "blocking" of the amount of Rs. 93,71,888 by the National Stock Exchange after the first tier Arbitral Tribunal pronounced its award was lawful or not. But the fact remains that at the time the Appellate Tribunal pronounced its award, this amount remained "blocked" by the exchange. Therefore, it passed the award inter alia to the effect that the National Stock Exchange should "unblock" the amount.

Section 36 of the said Act is in the following terms: "36. Enforcement---- Where the time for making an application to set aside the arbitral award under Section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court."

I concur with the ratio laid down by Mr. Justice Mohta of the Bombay High Court in Reliance Securities Ltd. v. Badrinath M. Bodhai and others reported in 2011 (3) Mh. L.J. 327 that an award under the said Act becomes final and executable only after the time to make an application to set aside the award has expired and no application to that effect has been made or such application was made and refused. This time to prefer an application to set aside the award is provided in Section 34 (3) of the said Act. The time granted is three months from the date of receipt of the award together and a further period of 30 days subject to condonation of this delay by the court. The Bombay High Court, in this case had deprecated the circular of SEBI stating that an award debtor had to obtain a stay from the High Court within 90 days of filing of the application to set aside the award, otherwise the awarded amount would be released from the "escrow account". It restrained such debit.

It is quite well-established that in relation to an arbitral proceedings like the present one to which the Arbitration and Conciliation Act before its amendment applied, filing of an application under Section 34 of the said Act for setting aside of the award operated as an automatic stay. Or to say it in a more legalistic way, the award never became an enforceable decree unless and until the Section 34 application was dismissed by the court.

The direction that Rs. 93,71,888 was to be "unblocked" was in my opinion, part and parcel of the award of the Appellate Tribunal.

It was not an enforceable decree when the money was "unblocked" either because the time to prefer the Section 34 application had not expired or it was pending. The award in question dated 4th October, 2016 is not an enforceable decree till date, as the Section 34 application is pending. Therefore, no one had any authority to enforce or seek enforcement of the award during this period.

In those circumstances, I direct the National Stock Exchange Limited to immediately "block" the said amount from the account or deposit of the respondent in the way it had done after the award by the first tier of the Arbitral Tribunal within two weeks of communication of this order. The prayer made for directing the respondent to deposit the amount with the Registrar Original Side, High Court cannot be granted as that would amount to rewriting the award by this court and another form of enforcement of the award. This court is only directing restitution by restoring the status quo ante on the date of the award by the Appellate Tribunal.

This application (G.A. No. 980 of 2017) is accordingly allowed to the above extent.

Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.