Award Holder U/S 36 Of Arbitration Act Entitled To Be Secured Of Entire Award Value: Calcutta High Court

The Calcutta High Court, in the case of Siliguri Jalpaiguri Development Authority v. Bengal Unitech Siliguri Projects Limited (A.P. NO. 230 of 2022), held that an award holder has the lawful authority, under Section 36 of the Arbitration and Conciliation Act, 1996 (Act), to secure the entire arbitral award amount even during the time that an application to set aside the award is pending. However, the above security must be substantial and not simply illusionary.

Brief Facts Of The Case: A petition under Section 34 of the Act as well as an application under Section 36 (2) of the Act seeking for a stay of the award issued by the arbitral tribunal on December 27, 2021, were just being heard by Justice Shekhar B. Saraf. The petitioner was directed to pay pendente lite and future interest at a rate of 9% simple interest per year from the date of the decision until the date of payment, according to the award. However, if the awarded sum was not paid within three months beginning on the date of the award, pendente-lite interest would be charged. The Arbitral Tribunal additionally gave a sum of Rs. 25,00,000 to cover legal and arbitral fees.

Judgement: The Court noted that the modified Section 36 of the Act allows for securing the award holder for the whole amount of the award value, dismissing the petitioner’s argument that the land in the respondent’s possession must be regarded as sufficient security under Section 36 of the Act. Furthermore, the security must be real and not insignificant. Therefore, the senior attorney representing the petitioner’s argument that the land the respondent is in possession of must be taken into account as sufficient security under Section 36 is unconvincing. The parties’ dispute involves the land that was provided as security. Furthermore, no evidence supporting the claim that the land’s worth would fully pay the judgement has been presented to the court. Therefore, the same cannot be accepted in order to protect the award holder’s interests. The Court also stated that although the award holder’s rights are not completed until the application under Section 34 of the Act is determined, the award holder still has the legal protection provided by Section 36 of the Act to be effectively secured throughout the term of the arbitral award.

Therefore, the Court decided that the award holder should be held accountable for the full sum decided upon by the Arbitral Tribunal, as well as interest and other fees. As a result, the Court ordered the petitioner to satisfy the Registrar Original Side, High Court at Calcutta, by deposit 50% of the arbitral judgement (with interest computed till June 2022) in the form of cash security or its equivalent. As a result, the petition was disposed of with the instruction that the aforesaid exercise be completed in four weeks.


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