This case was out of an order dated 23 December, 2021 (the order), this Court while disposing an application under Section 36(2) of the Arbitration and Conciliation Act, 1996 (the Act) seeking stay of an award dated 21 December, 2019. The judgement in Damodar Valley Corporation vs Reliance Infrastructure Ltd (Citation: AP No. 40 of 2020) was served by The Hon’ble Mr. Justice Ravi Krishan Kapur
FACTS OF THE CASE:
In this application, the award debtor seeks modification of the order to the extent that, the award debtor be permitted to deposit only 50% of the entire awarded amount i.e. Rs.449 crores, by furnishing a bank guarantee for Rs.337 crores and the remaining amount of Rs.112 crores by way of cash security. The award debtor also prays for time to furnish the same by 31 May, 2022. The primary ground on which the award debtor seeks modification is one of financial stringency. It is contended that the award debtor is facing a liquidity crunch. It is further alleged that the award debtor has limited access to cash and most of the cash has been earmarked towards different financing activities i.e. interest on loans and repayment of loans. Furthermore, the award debtor has a very high debt ratio which has compelled the award debtor to borrow more money from the market. There are also trade receivables which are yet to be recovered. The amount lying in the sinking fund is not available in liquid form. Furthermore, any reliance based on the CARE Report for the year ending 2020-21 is misplaced since the Report for the year ending 2021-22 shows that the rating of the award debtor has fallen from AAA to A(-). The award debtor also cites COVID-19 due to which the award debtor has suffered severe financial crisis. There is also an underlying theme in the petition of the award debtor performing a socio-economic statutory obligation for which discretion ought to be exercised in its favour
After going through the facts and arguments raised by both sides , the court held that :
a) The order dated 23 December, 2021 stands modified to the extent that the award debtor be directed to deposit a sum of Rs.595 crores by way of cash security or its equivalent to the satisfaction of the Registrar, Original Side, High Court at Calcutta. The balance of Rs.303 crores shall be secured by the award debtor by way of bank guarantee(s) of a nationalised bank to the satisfaction of the Registrar, Original Side, High Court at Calcutta.
b) If the deposit of Rs.595 crores as directed above is made, the award debtor shall be entitled to withdraw the whole or a portion of the amount deposit upon furnishing a similar unconditional bank guarantee to the satisfaction of the Registrar, Original Side, High Court covering the amount withdrawn.
c) All such bank guarantees as directed above should be kept alive until further orders of Court. The bank guarantees shall also be renewed at least one month before the schedule date of expiry.
d) The aforesaid exercise is to be completed within a period of four weeks from the date of this order.
e) In the event, security as directed is furnished, there shall be a stay of enforcement of the award.
f) In case the award holder does not withdraw the sum of Rs.595 crores or any portion thereof the Registrar, Original Side is directed to make a fixed deposit of the said amount with any nationalised bank and keep the same renewed till disposal of AP No.40 of 2020 or until further orders of the Court.
g) With the aforesaid modifications, GA 6 of 2021 stands disposed of.
h) GA 7 of 2021 stands dismissed.
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