Orissa High Court: CPC Provisions Govern Stay Of Execution Proceedings Initiated Under Section 36(1) Of Arbitration Act

Orissa High Court: CPC Provisions Govern Stay Of Execution Proceedings Initiated Under Section 36(1) Of Arbitration Act

Justice Sanjay Kumar Mishra of the Orissa High Court has clarified the procedure for staying the execution of arbitral awards, stating that in the absence of specific provisions in the Arbitration Act, 1996, the Code of Civil Procedure (CPC) guidelines should be followed.

The court observed that while Section 35 of the Arbitration Act confirms that an arbitral award is final and binding, Section 36 governs its enforcement. According to Section 36, an arbitral award becomes enforceable as a court decree under the CPC once the time for challenging the award under Section 34 expires, unless a stay is granted under subsection (3).

Section 36(3) allows courts to stay the operation of an arbitral award upon application, with conditions they deem appropriate. The High Court referred to CPC Order 21, Rule 26, which governs the stay of execution of decrees and allows courts to impose conditions on judgment debtors, and CPC Order 41, Rules 1(3), 4, and 5, which address appeals.

In previous rulings, including Pam Developments Private Limited v. State of West Bengal and Board of Control for Cricket in India v. Kochi Cricket Private Limited, the Supreme Court emphasized that while CPC provisions guide courts in granting stays, they do not override the Arbitration Act's main provisions but act as advisory principles.

In this context, the High Court ruled that:

• Due Regard: The phrase in Section 36(3) requiring "due regard" to CPC provisions means these provisions are to be considered but are not mandatory. The Arbitration Act's provisions take precedence.

• Execution Application Timing: Applications for executing an arbitral award under Section 36(1) can only be filed after the deadline for challenging the award under Section 34 has passed.

• Stay Applications: Section 36(2) of the Arbitration Act does not apply to execution proceedings under Section 36(1). Requests to stay the award's operation must be made during the pendency of a Section 34 application.

• CPC Procedures for Stay: The CPC provides guidance on the execution of decrees. Under Order 41 Rule 5(2), if execution proceedings are initiated before the appeal period for a Section 34 application expires, the judgment debtor may request a stay from the original court. If appealing under Section 37, an application under Order 41 Rule 5(1) can be made to the Appellate Court.

• Conditions for Stay: According to CPC Order 41 Rule 5(3), a stay on execution may only be granted if the court finds substantial harm could occur without the stay, the application was made promptly, and appropriate security is provided.

The dispute arose from a contract for civil construction at the Birla Institute of Management and Technology in Bhubaneswar, Odisha. The petitioner, alleging breaches and delays by M/s. Fiberfill Interiors & Constructions, invoked arbitration, resulting in an award partially favoring both parties. After the District Judge dismissed the Section 34 applications challenging the award, the petitioner approached the High Court.

The opposite party argued that the arbitral award, upheld by the Supreme Court, should be executed without delay and criticized the petitioner for attempts to delay execution through pending appeals and review petitions. The petitioner contended that the executing court should have stayed execution under Section 36(2) while pending appeals and reviews were resolved.