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Security not to be demanded by govt, but decretal amount can be required to be deposited in the appeal against a money decree

Esheta Lunkad ,
  14 September 2020       Share Bookmark

Court :

Brief :
Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount.
Citation :
Petitioner:PAM Developments Private Ltd Respondent:State of West Bengal Citation:2019 Vol 0 SC 736


Uday Umesh Lalit, Vineet Saran


Whether the court has the right to grant stay in the order where the government is a party?


  • There was construction work to be done on the highway II in the district of Hooghly by the respondent for which the appellant and others, applied.
  • The bid of the appellant was accepted and extensions were granted by the respondent for delays, which according to the appellant, was because of the respondent itself.
  • The work was finally completed but the appellant was not paid.
  • An arbitration followed where the respondent was ordered to pay the specified amount.
  • The respondent approached the court for stay on the award.

Appellant's contentions:

  • Submission by learned counsel of appellant is twofold.
  • Firstly, the provision of Order XXVII Rule 8A CPC would not be applicable to the present case.
  • Thus, the court should not have examined that when they were deciding the application for the stay of award under Sec 36 of the Arbitration Act.
  • Secondly, even if Order XXVII Rule 8A is considered, then also the court should not pass an order of unconditional stay on the award and direct the deposit of the amount of the award.
  • Provisions of Order XXVII Rule 8A CPCshould not be brought into the Arbitration Act as it would then result in limiting the effect of Section 36 of the Arbitration Act in itself, and provisions of Order XLI Rule 5 CPC alone have to be considered by the Court as general guidelines.
  • There is no special treatment given to the government under this Act, under CPC the govt might be treated differently but not under the Arbitration Act.

Respondent's contentions:

  • The respondent filed an application for stay order of the award filed under Section 36 of the Arbitration Act.
  • Under sec 80 of CPC, two months’ notice is given before filing the suit against the government.
  • Under Rule 8A, the government is exempted from furnishing security.
  • Under sec 36 of Arbitration Act, award is enforceable under CPC in sameway as a court, and the court has complete discretion to grant a stay order as it may deem fit.

Final judgement:

  • Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount.
  • Rule 8A only provides exemption from furnishing security, and it will not restrict the Court from directing deposit of the award.
  • The appeals are thus allowed.

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Published in Corporate Law
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