IS THE GOVERNMENT ENTITLED TO SPECIAL EXEMPTIONS DURING ENFORCEMENT OF ARBITRAL AWARDS?
I. Introduction
Arbitration as a dispute resolution mechanism has evolved through time ever since its inception in 1940. The current legislation, the Arbitration and Conciliation Act, 1996 (hereinafter ‘Act’), too purports to make arbitration an effective and meaningful dispute resolution mechanism. The nature of arbitration is such that the parties to the dispute consent to resolution of the same through an agreed procedure. The ultimate fruit of the tree is an enforceable award in favour of one of the parties. The arbitral tribunal, just like any other quasi-judicial body, has powers and functions like that of a court.[1] This includes the powers of the arbitrators to consider procedural laws like Code of Civil Procedure (hereinafter ‘Code’) or even sometimes go beyond.[2] Such is the authority and discretion of an arbitrator.
II. Enforcement Hitches and application of CPC – Pam Developments vs State of West Bengal
Recently, the Supreme Court dealt with an interesting proposition, relating to Code of Civil Procedure and Section 36 of the Act, in the case of Pam Developments Private Ltd. vs. State of West Bengal. The facts of the case were that the Petitioner company had successfully bid to work for ‘Special Repairs Programme 2000-2001’ in the district of Hooghly. The work was completed with several setbacks and delays which, as alleged by the Petitioner company, is attributable to the Respondent. Ultimately, upon refusal of payment of claims and dues by the Respondent, arbitration was initiated. After the analysing the merits of the case, the arbitrator awarded the case in favour of Appellant. The award was challenged under section 34 of the Act. In view of the 2016 Amendment to the Act, the appellant filed an execution petition to execute the award before Calcutta High Court. The Executing Court attached the award money lying to the credit of West Bengal with the Reserve Bank of India. The Respondent meanwhile applied for staying the award. The Court granted an unconditional stay on the award relying on Order XXVII, Rule 8A of the Code. An appeal was filed in the Supreme Court.
The main contentions of the case were the provisions of the Code were applicable in the present case and even if it were, should the award be stayed unconditionally?
The Supreme Court, in its ultimate analysis, held that the provisions of the Code were only a guide and not mandatory to be followed. Further, the Government should not be given any special treatment while dealing with the question of grant of stay of the award. In its obiter, the court observed that the impugned order, which was passed relying on Order XXVII, Rule 8A, was an archaic law, applicable only during the British period when the Government was the British Crown.
III. Implications of PAM CAse in Arbitrations in India
The Supreme Court strengthened the position of law on the application of Section 36 of the Act, with regards to the extent of the application of CPC and other procedural laws of the land. While it is the case that arbitrators have powers wider than that of the code,[3] the catch lies in the fact that the application of the same is only discretionary.[4] This paves way for all current and future arbitrations to conduct the proceedings in a more unrestricted manner, a pro arbitration approach.
The second inference that could plausibly be drawn from the Pam case is the interpretation of Order XXVII, Rule 8A. Rule 8A introduced vide the 1977 amendment to the code exempts the Government from providing security in cases where the public officer acted in his official capacity. Approaching the predicament with a plain reading of the rule, the Apex court opined that the same is only in cases where the security cannot be demanded in appeal of a decree. It is silent on the question of the Government requiring to deposit the decretal amount in cases where the appeal is against a money decree.
The last and the most astounding observation by the court is the prevalence of archaic laws like Rule 8A, which were only in force to favour the British Raj. Law being a true reflection of society, cannot echo values and principles of the beginning of time. It is about time that these obsolete laws be removed and contemporaneousness of the law of the land be maintained.
By-
Yashchandra
Student Reporter, INBA
[1] Ajay Singh v Kal Airways Private Limited 2017 SCC OnLine Del 8934.
[2] Adhunik Steels Ltd. v Orissa Manganese and Minerals Pvt Ltd AIR 2007 SC 2563.
[3] SBP and Co v Patel Engg. Ltd (2005) 8 SCC 618.
[4] Pam Developments Private Ltd v State of West Bengal Civil Appeal No 5432 OF 2019.