Section 36(3) of the AA – Unconditional stay to the Arbitral Award for money – Illegal – Conjoint application of Section 36(3) and Order 41 Rules 5(1) & 5(3) of the CPC

The respondent appointed the petitioner as Consultant cum Commodity Broker on execution of the Member Client Agreement.  The respondent executed transactions in castor and other commodities.

On 24.9.2019 the respondent instructed the petitioner to close all open positions and return balance amount.  However, the petitioner executed illegal and unauthorised transactions, created large debit in their books and on that basis, sent demand notice to the respondent to pay outstanding amount of Rs.11,02,11,532.35 ps.

Two awards passed on 12.2.2022 and 15.1.2021 were challenged by the respondent in the District Court under Section 34 of the Arbitration Act.

The respondent filed application for unconditional stay to the Awards and same was allowed.

The petitioner challenged the said order in the writ petition.

HELD that the provisions of the Arbitration Act are to be essentially applied first and the CPC are to be followed as guidance.  Order 41 Rules (1)(3) and (5)(3) of CPC shows that the substantial loss to the appellant is a condition precedent to grant stay and the appellate court shall not stay execution of the decree unless the security is furnished.  However, the District Judge did not record findings under Section 36(3) and therefore, unconditional stay was not granted under second proviso to sub-section (3) of Section 36 of the AA.   Thus, the District Judge failed to exercise jurisdiction.

Judgment dated 29.11.2023 in W.P.No.161 of 2023 of M/s. Anand Rathi Share & Stock Brokers Ltd.  Vs. Anish Navnitlal Mehta