Delhi High CourtSuresh Shah vs M/S Tata Consultancy Services Ltd & ... on 2 May, 2017Author:Jayant NathBench:Jayant Nath$~OS-32
*     IN THE HIGH COURT OF DELHI AT NEW DELHI


%                                     Date of decision: 2.5.2017
+     O.M.P. 1118/2013
      SURESH SHAH                        ..... Petitioner
                         Through    Mr.Vikas Dhawan, Mr.S.Panda,
                         Mr.S.Nanda and Mr.Puneet Gupta, Advs.

                         versus

      M/S TATA CONSULTANCY SERVICES LTD & ANTOHER
                                            ..... Respondent
                         Through    Mr.Suhail Dutt, Sr. Adv. with
                         Ms.Divya Bhalla and Mr.Bhavitt Rastogi, Advs.

      CORAM:
      HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J. (ORAL)IA No.5347/2017Exemption allowed, subject to all just exceptions.O.A.77/20171.    Present appeal is filed seeking to impugn the order of the Joint
Registrar dated 27.04.2017 whereby he has allowed an application filed by
the respondent for discharge of Bank Guarantee of Rs.10 crores.2.    The petitioner initially filed a petition undersection 9of the
Arbitration and Conciliation Act,1996 which was disposed of on
20.12.2013. The relevant direction given in the said order dated 20.12.2013OMP 1118/2013                                               Page 1 of 7was that the respondent was directed to furnish a bank guarantee favouring
the Registrar General of this court qua the outstanding rent. It is pursuant to
this direction that the respondent has furnished the Bank Guarantee for a
sum of Rs.10 crores. The order further directed that the captioned petition be
also placed before the learned Arbitrator so appointed by the same order, to
consider the application as one undersection 17of the Act. The interim
directions passed by this court were to continue to operate. Opportunity was
given to the learned Arbitrator to pass appropriate orders after hearing the
parties on the said application.3.    The learned Arbitrator by his order dated 16.4.2014 disposed of the
application undersection 17of the Act reiterating the interim directions
passed by this court on 20.12.2013 regarding furnishing of a Bank
Guarantee of Rs.10 crores by the respondent apart from other reliefs. This
order was also impugned by a petition before this court. This court
dismissed the challenge.4.    The learned Arbitrator has now passed an Award in favour of the
petitioner on 16.12.2016. There is some dispute as to how much amount has
been awarded in favour of the petitioner. Learned counsel for the petitioner
submits that the exact calculation has not yet been made as per the Award
but about Rs.6 to Rs.6.5 crores has been awarded in favour of the petitioner.
Learned senior counsel for the respondent, however, submits that the
amount is between Rs.5.50 crores to Rs.6 crores in favour of the petitioner.
The learned Arbitrator on the issue of Bank Guarantee in the Award noted
that the Bank Guarantee shall stand discharged.5.    It is in this background that the respondent has moved this application
seeking discharge of the Bank Guarantee which is valid up to 29.12.2017OMP 1118/2013                                                 Page 2 of 7and which is lying with the Registrar General of this Court. The impugned
order has been passed by the Joint Registrar directing discharge of the bank
guarantee.6.    I have heard learned counsel for the parties. Learned counsel for the
petitioner has vehemently argued that the orders passed underSection 17of
the Act would get merged with the Award. He further submits that as the
Award has not allowed the full claim of the petitioners the petitioners have
filed objections to the entire Award undersection 34of the Act and notice
in the same has already been issued. He further points out that the recent
amendments to theArbitration Actwould not be applicable to the present
proceedings and hence the filing and pendency of the petition underSection
34of the Act would tantamount to a stay of the Award. He reiterates that the
order undersection 17of the learned Arbitrator would get merged with the
Award and the effect of the same would be that the directions in the Award
to discharge the bank guarantee are not enforceable as the Award stands
stayed. He submits that the JR who passed the impugned order cannot
enforce the award in this manner especially keeping in viewSection 5of the
Arbitration Act.7.    On the other hand, learned counsel for the respondents submits that
the impugned order has rightly been passed. He further points out that the
admitted fact is that the petitioner is retaining a security amount of
Rs.5.6crores. Hence, as per the Award no substantial amount is payable to
the petitioner. Hence, he submits that no purpose is served by keeping the
bank guarantee.8.    It is quite clear that as per the Award the bank guarantee gets
discharged. The submission of the petitioner is that the Award gets stayed onOMP 1118/2013                                               Page 3 of 7the filing of a petition underSection 34of the Act and hence, ipso facto the
directions for discharge of the bank guarantee also gets stayed and the
original order underSection 17continues to remain in operation. I may note
that this proposition has not been supported in any manner by the petitioner.Sections 35and36prior to the amendments of 2015 read as follows:-"35. Finality of arbitral awards. -Subject to this Part an arbitral
      award shall be final and binding on the parties and persons,
      claiming under them respectively.36. Enforcement. - Where the time for making an application to
      set aside the arbitral award undersection 34has expired, or
      such application having been made, it has been refused, the
      award shall be enforced underthe Code of Civil Procedure,
      1908 (5 of 1908) in the same manner as if it were a decree of
      the court."9.    HenceSection 36states that after objections are filed and the same are
refused, the award would be enforced underCPC, as a decree of the court.
Mere filing ofSection 34petition against the Award renders the Award
"unenforceable".10.   Reference in this regard may be had to the judgment of the Supreme
Court in the case ofNational Aluminium Co. Ltd. vs. Pressteel &
Fabrications (P) Ltd. & Anr., (2004) 1 SCC 540 where the Supreme Court
held as follows:-"10. ... At one point of time, considering the award as a money
      decree, we were inclined to direct the party to deposit the
      awarded amount in the court below so that the applicant can
      withdraw it on such terms and conditions as the said court
      might permit them to do as an interim measure. But then we
      noticed from the mandatory language ofSection 34of the 1996
      Act, that an award, when challenged under Section 34within the
      time stipulated therein, becomes unexecutable. There is noOMP 1118/2013                                                 Page 4 of 7discretion left with the court to pass any interlocutory order in
      regard to the said award except to adjudicate on the correctness
      of the claim made by the applicant therein. Therefore, that
      being the legislative intent, any direction from us contrary to
      that, also becomes impermissible. On facts of this case, there
      being no exceptional situation which would compel us to ignore
      such statutory provision, and to use our jurisdiction underArticle 142, we restrain ourselves from passing any such order,
      as prayed for by the applicant."11.   Hence, under the Act prior to the amendments of 2015, on filing of
objections undersection 34against the Award rendered the same
"unenforceable".    It   cannot   be   construed   to   mean     that   interim
orders/directions passed by the learned Arbitrator undersection 17will
continue to operate after the award is passed.12.   In any case, in my view this controversy is not relevant to the facts of
this case. We may see the original order underSection 17of the Act passed
on 16.04.2014 by the learned Arbitrator. The same reads as follows:-"28) In view of the above, the claimant's application for
      interim measures is disposed of as under:-(A) ....(B) Interim prayer (c) and second part of interim prayer (b) will
      be considered along with the main prayers (a) and (b) in the
      claim statement. As a consequence, both the interim directions
      issued by the Hon'ble High Court to the respondent (for
      furnishing Bank Guarantee for Ten Crores and paying the rent
      for an area of 1,35,000 Sq.Ft from January 2014) shall continue
      till conclusion of the Arbitration proceedings.
      (C) .......(D) .........."13.   Hence, the direction to furnish the bank guarantee was to continue
only till the conclusion of the arbitration proceedings. Hence, de-hors theOMP 1118/2013                                                  Page 5 of 7directions in the Award, the injunction order came to an end on conclusion
of the arbitration proceedings. Hence even otherwise, the order            undersection 17of the Act came to an end after the Award was passed.14.   In fact, it was put to the learned counsel for the petitioner that what
purpose would be achieved by continuing with the bank guarantee inasmuch
as per the Award, there is no substantial sum of money recoverable by the
petitioner from the respondents. There was no plausible explanation to this
question. The object of furnishing the bank guarantee was to protect the
petitioner for its claims. After the award prima facie now there are no
substantial dues payable by the respondent. Hence, no purpose is served to
keep the bank guarantee alive.15.   Reference may be had to the judgment of the Division Bench of the
Bombay High Court in Dirk India Private Limited. vs. Maharashtra State
Electricity Generation Company Limited. (MANU/MH/0268/2013) where
the court held as follows:-"12....Contextually, therefore, the scheme ofSection
      9postulates an application for the grant of an interim
      measure of protection after the making of an arbitral award
      and before it is enforced for the benefit of the party which
      seeks enforcement of the award. An interim measure of
      protection within the meaning ofSection 9(ii)is intended to
      protect through the measure, the fruits of a successful
      conclusion of the arbitral proceedings. A party whose claim
      has been rejected in the course of the arbitral proceedings
      cannot obviously have an arbitral award enforced in
      accordance withSection 36. The object and purpose of an
      interim measure after the passing of the arbitral award but
      before it is enforced is to secure the property, goods or
      amount for the benefit of the party which seeks enforcement.13..... The object and purpose ofSection 9is to provide anOMP 1118/2013                                                Page 6 of 7interim measure that would protect the subject-matter of the
      arbitral proceedings whether before or during the
      continuance of the arbitral proceedings and even thereafter
      upon conclusion of the proceedings until the award is
      enforced. Once the award has been made and a claim has
      been rejected as in the present case, even a successful
      challenge to the award underSection 34does not result an
      order decreeing the claim. In this view of the matter, there
      could be no occasion to take recourse toSection 9.
      Enforcement for the purpose ofSection 36as a decree of
      the Court is at the behest of a person who seeks to enforce
      the award."16.   I see no merit in the present appeal and the same is dismissed.JAYANT NATH, J
MAY 02, 2017/nOMP 1118/2013                                                Page 7 of 7