Shardul Amarchand Mangaldas & Co. Advised International Seaport Dredging Before The Supreme Court

Shardul Amarchand Mangaldas & Co. Advised International Seaport Dredging Before the Supreme Court

Shardul Amarchand Mangaldas & Co. represented International Seaport Dredging Pvt Ltd before the Hon’ble Supreme Court in an appeal filed on the High Court's decision to exempt a government entity from depositing other amounts in addition to the arbitral award amount.In a judgment dated 24 October 2024, the Chief Justice, Justice Pardiwala, and Justice Manoj Misra of the Supreme Court allowed Civil Appeal No 12097 of 2024 filed by International Seaport Dredging Pvt Ltd.

The Supreme Court has, in the operative portion of the judgment, directed that:

- The respondent shall deposit an amount quantified at 75% of the decretal amount, inclusive of interest, on or before 30 November 2024 before the High Court; and

- Conditional on the deposit of the aforesaid amount within the period stipulated above, there shall be a stay on the enforcement of the arbitral award.

The SLP was directed against a judgment of the Madras High Court dated 09.09.2024, whereby the Madras High Court, in an interlocutory proceeding during the pendency of the Section 34 challenge, had stayed the operation of the arbitral award on a condition that a BG be furnished in respect of the principal amount awarded.

The Supreme Court, in Para 15 of its judgment, stated as follows: Bearing in mind the above principles, we are of the view that the High Court was in error in not even prima facie considering the fact that, apart from the issue of cess, there was an arbitral award in favour of the appellant in regard to other claims as well.

Further, the High Court ought not to have based its decision on the condition for the grant of stay on the status of the respondent as a statutory authority. The Arbitration Act is a self- contained code – it does not distinguish between governmental and private entities.

Hence, the decision of the Court cannot be influenced by the position of the party before it and whether it is a fly-by-night operator. Moreover, an assessment as to whether a party is reliable or trustworthy is subjective.

Many private entities, too, may rely on the size of their undertaking, its success, public image, or other factors to argue that they are not fly-by-night operators. 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 non-compliance 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.

The Disputes Team at SAM&Co. was led by Shally Bhasin, Partner; Chaitanya Safaya, Partner; and Prateek Yadav, Senior Associate. SAM&Co. had engaged Mr. Shyam Divan, Senior Advocate, to argue the matter. Kamarajar Port Ltd. (the Respondent) was represented by Mr. C A Sundaram, Sr. Adv.