Unconditional stay of execution of arbitral award in the form of a money-decree cannot be granted

Supreme Court Overturns Bombay High Court's Unconditional Stay on Arbitral Award Apex Court Directs Respondents to Deposit Rs. 4 Crore, Ensures Award Execution Stay Pending Deposit

In a significant ruling, the Supreme Court of India has set aside the Bombay High Court's decision granting an unconditional stay on the execution of an arbitral award involving Popular Caterers and Ameet Mehta along with other respondents. The Supreme Court, presided by Justices J.B. Pardiwala and K.V. Viswanathan, directed the respondents to deposit Rs. 4 crore with the Bombay High Court within eight weeks, ensuring the continuation of the stay on the award execution pending this deposit.

The case stems from a Memorandum of Understanding signed on May 25, 2017, between Popular Caterers and Maple Leaf Enterprises LLP, wherein Popular Caterers was to provide vegetarian catering services for events at the Tulip Star Hotel, Mumbai. The agreement stipulated a Rs. 8 crore interest-free security deposit, of which Rs. 4 crore was paid by Popular Caterers. However, disputes arose shortly after the signing due to State authorities prohibiting events at the Tulip Star Hotel, leading Popular Caterers to seek arbitration.

The arbitrator awarded Rs. 4 crore plus interest to Popular Caterers, a decision challenged by the respondents under Section 34 of the Arbitration and Conciliation Act, 1996. The Bombay High Court granted an unconditional stay of the award execution, prompting Popular Caterers to appeal the decision.

The Supreme Court emphasized that an unconditional stay of a money-decree is warranted only under exceptional circumstances, such as egregious perversity or patent illegalities. The Court found no such circumstances in this case, asserting that the High Court’s considerations should have been reserved for the final hearing of the Section 34 petitions.

Reaffirming the principles laid out in previous judgments, including Lifestyle Equities C.V. v. Amazon Technologies Inc., the Supreme Court highlighted that the High Court must evaluate the presence of exceptional circumstances before granting an unconditional stay. Consequently, the Supreme Court’s decision mandates the deposit of Rs. 4 crore by the respondents to maintain the stay of execution, ensuring the arbitral award remains enforceable under specified conditions.

The Supreme Court has instructed the Bombay High Court to expedite the hearing of the Section 34 applications, aiming for resolution within six months. The deposited amount, once received, is to be invested in a Fixed Deposit with a nationalized bank to accrue interest, safeguarding the financial interests involved.

This judgment not only underscores the judiciary's stance on enforcing arbitral awards but also reinforces the legal framework governing arbitration in India, ensuring that stays on awards are granted judiciously and under stringent conditions.

Bottom Line:

Arbitration - Unconditional stay of execution of arbitral award in the form of a money-decree cannot be granted unless an exceptional case is made out. The decree must be egregiously perverse, riddled with patent illegalities, facially untenable, or demonstrate exceptional causes similar in nature.

Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 34, Section 36

Popular Caterers v. Ameet Mehta, (SC) : Law Finder Doc Id # 2812391