Uttar Pradesh State Industrial Dvelopment Authority, Lucknow Thru Senior Manager vs M/S Ahluwalia Construction Group New Delhi Thru Its Proprietor

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Page No. 1 of 8

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High Court of Judicature at Allahabad

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Lucknow

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Reserved on : 21.05.2025 Delivered on: 27.05.2025

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Court No. - 2

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Case :- APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 12 of 2025

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Appellant :- Uttar Pradesh State Industrial Development Authority, Lucknow Thru Senior Manager Respondent :- M/S Ahluwalia Construction Group New Delhi Thru Its Proprietor

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Counsel for Appellant :- Kartikey Dubey Counsel for Respondent :- Anilesh Tewari

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Hon'ble Rajan Roy,J. Hon'ble Om Prakash Shukla,J.

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(1) Heard Shri Prashant Chandra, learned Senior Advocate assisted

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by Shri Kartikey Dubey, for the appellant and Shri Jaideep Narain Mathur, learned Senior Advocate assisted by Shri Anilesh Tewari, learned counsel for the respondent on the question of interim relief.

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(2) On 14.04.2025, while admitting the present appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 and summoning the record of trial Court, this Court had passed the following order :-

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“........

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If the appellant furnishes Bank Guarantee equivalent to the amount payable under the award impugned herein including interest awarded, then, execution of the said award shall remain stayed.

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Page No. 2 of 8

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Let the aforesaid bank guarantee be furnished before the Executing Court within a period of two weeks.

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If the bank guarantee is not submitted as aforesaid, then, the benefit of this order shall not be available to the appellant.

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In the event the appeal fails the appellant would be liable to pay interest on the due amount which remains unpaid to the respondent on account of the pendency of this appeal, at such rates as this Court may determine at the time of final disposal of appeal.

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//

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We had dictated the aforesaid order in Court, but, before signing it we find that we need to hear the matter further in the light of Section 36(3) of the Arbitration and Conciliation Act, 1996 and the principles contained therein with regard to stay of operation of an Arbitral Award as also the provisions and principles contained in Order 41 Rule 1(3) and Rule 5, therefore, the matter is posted for 22.04.2025 as fresh for further hearing on the question of interim relief.

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(3) Shri Prashant Chandra, learned Senior Advocate appearing for the appellant-UPSIDC has drawn our attention towards the Arbitral Award dated 30.11.2019 passed in the dispute concerning the ‘construction of exhibition and office building at Plot Number B9, Industrial Area, Amusi, Lucknow, Uttar Pradesh” and submitted that the learned Arbitrator has although recorded a finding that both parties were responsible for committing a breach of contract, however, the learned Arbitrator has perversely awarded an amount of Rs. 5 Crores under the head of ‘Loss of Profit’. According to him, whether it

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Page No. 3 of 8

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is the award of ‘Loss of Profit’ or the grant of exorbitant Interest @ 18% by the learned Arbitrator, there is absolutely no reasoning given by the learned Arbitrator, which makes the award patently illegal and also a ground for setting aside of the said Award. He further contends that apparently against a principal claim of Rs. 3,18,80,781/-, an amount of Rs. 4,59,78,701/- has been awarded under the head of Interest, while awarding a total Award of Rs. 18,37,24,782/-. His submission is that the award of Interest is higher than the principal amount, which shocks the judicial conscience of this Court. Shri Chandra contended that the impugned order dated 04.02.2025 of the learned Commercial Court has been passed on a misreading and mis-appreciation of the law laid down by the Apex Court relating to disposal of Application filed under Section 34 of the Arbitration and Conciliation Act. He, thus, submits that the operation of the award be stayed during the pendency of the present appeal.

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(4) On the other hand, Shri J.N. Mathur, learned Senior Counsel appearing for the Contractor-Ahluwalia Construction Group, while agitating the limited scope of this Court under its jurisdiction of Section 37 of the Arbitration and Conciliation Act, has submitted that his clients have already filed an Arbitration Execution Application under Section 36 of the Act, before the concerned Commercial Court, praying for executing of the Arbitral Award dated 30.11.2019 for an amount of Rs.

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Page No. 4 of 8

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12,78,59,482/-. According to him, the operation of the Arbitral Award as being a money decree can be stayed only on the provisions and principles as contained in Order XLI Rule 1 (3) and Rule 5 of the Civil Procedure Code. He submits that there is a rich precedent, which has emerged from the Courts in terms of which the sanctity of the arbitration must be preserved by requiring the deposit of the amount awarded as a condition for the stay of the enforcement of the Award.

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(5) Having heard the learned Senior Counsel for the parties, this Court finds that Section 36 (1) of the Arbitration and Conciliation Act, relating to enforcement of an Arbitral Award says that an Arbitral Award shall be enforced in accordance with the provisions of the Code of Civil Procedure in the same manner, as, if, it were a decree of the Court. Further, subsection (3) imbibes a situation, wherein a stay of the operation of the Arbitral Award by the Court, can be granted on conditions as the Court deems fit, for reasons to be recorded in writing and the proviso says that while considering such an application for stay in the case of an arbitral award for payment of money, due regard be given to the provisions for grant of stay of money decree under the provisions of the Civil Procedure Code.

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(6) Relating to the applicability of the Civil Procedure Code vis-àvis the Arbitration and Conciliation Act, Hon’ble Supreme

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Page No. 5 of 8

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Court in Pam Developments Private Limited v State of West Bengal : (2019) 8 SCC 112 observed in the following words :-

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“20. In our view, in the present context, the phrase used is “having regard to” the provisions of CPC and not “in accordance with” the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. the Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. The provisions of CPC are to be followed as a guidance, whereas the provisions of the Arbitration Act are essentially to be first applied. Since, the Arbitration Act is a selfcontained Act, the provisions of CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration Act.”

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(7) Having regard to the provisions of the Civil Procedure Code and since the Arbitral Award is for payment of money, this Court is of the view that the operation of the Arbitral Award dated 30.11.2019 can only be stayed, in case the appellant is directed to deposit or secure the entire awarded amount along with the interest accrued therein, which would be subject to the outcome of this Appeal.

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(8) Shri Chandra has submitted that the appellant is a statutory Authority and although he is ready to get the awarded amount secured by way of a Bank Guarantee, but any direction for deposit of the amount would cause irreparable loss to the Authority.

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Page No. 6 of 8

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(9) First and foremost, it has to be understood that the Arbitration Act is a self-contained code and it does not distinguish between Governmental and Private entities. Recently, Hon’ble Supreme Court in the case of International Seaport Dredging Pvt. Ltd. Vs Kamarajar Port Limited : 2024 INSC 827, while dealing with a situation where a High Court had directed State Authority to furnish Bank Guarantee for stay of an Arbitral Award has observed as under :-

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“15………………In the absence of any provision of law in this regard, it would be inappropriate for courts to apply this standard while adjudicating the conditions upon which a stay of an award may be granted. Similarly, the form of security required to be furnished should not depend on whether a party is a statutory or other governmental body or a private entity. Governmental entities must be treated in a similar fashion to private parties insofar as proceedings under the Arbitration Act are concerned, except where otherwise indicated by law. This is because the parties have entered into commercial transactions with full awareness of the implications of compliance and noncompliance with the concerned contracts and the consequences which will visit them in law. Hence, the argument that the High Court was correct in directing the respondent to furnish bank guarantees in relation to the amount awarded because it is a statutory body is rejected.”

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(10) The Hon’ble Supreme Court in the aforesaid case has held that under Order XLI Rule 5 of the CPC, the Court has the power to direct full or part deposit and/or the furnishing of security in respect of the decretal amount.

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(11) No doubt, the issue raised by the appellant needs consideration, as, it goes to the root of the validity of the Award on the claim

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Page No. 7 of 8

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of ‘Loss of Profit’ and ‘Interest of 18%’, however, at the same time, this Court has to balance the competing rights of the respondent, who not only have an Award in their favour, but also the application under Section 34 of the Arbitration and Conciliation Act, filed against them. Thus, in view of the facts of the present case and bearing in mind that the Arbitral Award is for recovery of money, this Court directs the Appellant to deposit 50% of the entire Arbitral Awarded amount along with the interest accrued till the date of filing of this Appeal before this Court. The balance amount of 50% of the entire Awarded amount along with the accrued interest as aforesaid, shall be secured to this Court by a Bank Guarantee from a Nationalized Bank.

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(12) Further, the respondents, if so they desire, shall be entitled to withdraw 50% of the deposited amount, subject to furnishing a Bank Guarantee from a Nationalized Bank. It is made clear that both, deposit by the appellant as well as the withdrawal of the amount by the respondent, shall be subject to the outcome of the present appeal.

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(13) If the respondents do not apply for such withdrawal within one month of aforesaid 50% deposit, the same shall be invested in interest bearing Fixed Deposit Account. The entire exercise of (i) deposit of 50% of the awarded amount along with Interest and (ii) securing of 50% of the awarded amount along with

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Page No. 8 of 8

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interest, shall be carried out on or before 15th of June, 2025; and subject to the said exercise being performed within the stipulated period, as aforesaid, there shall be stay on the enforcement of the Arbitral Award dated 30.11.2019. .

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(14) List this appeal in the 3^rd week of July, 2025 for hearing .

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(Om Prakash Shukla, J.) (Rajan Roy, J.)

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Order Date : 27^th May, 2025 Ajit/-

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Digitally signed by :- AJIT KUMAR High Court of Judicature at Allahabad, Lucknow Bench

Uttar Pradesh State Industrial Dvelopment Authority, Lucknow Thru Senior Manager v. M/S Ahluwalia Construction Group New Delhi Thru Its Proprietor

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Uttar Pradesh State Industrial Dvelopment Authority, Lucknow Thru Senior Manager v. M/S Ahluwalia Construction Group New Delhi Thru Its Proprietor

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