Supreme Court holds that the provisions of the Arbitration Act are to be applied, and provisions of CPC are to be followed as a guidance, in arbitration matters.

Supreme Court of India

Justice Vineet Saran and Justice Rohinton Nariman

The SC {Palm development Private Limited and state of West Bengal} was seized of the matter, in which, the applicability of Order XXVII Rule 8A CPC in arbitration matters was in question before it. The issue is: regarding power of court to direct deposit of security by the government, while staying the arbitral award.

It was held by the SC that Order XXVII Rule 8A CPC was inserted in 1937 to give protection to the then government, that is, British crown. It was further held that the provisions which were incorporated in the year 1937 during the British raj, giving certain safeguards to the British Crown, would not be applicable in today's time when we have a democratic government.

Held, that in case a money decree / award as passed by the arbitrator against the government is allowed to be automatically stayed, the very purpose of quick resolution of dispute through arbitration would be defeated. As the decree holder would be fully deprived of the fruits of the award on the government filing of objection under Section 34 of the Arbitration Act. Further, held that the Arbitration Act, as per Section 18, makes it clear that the parties shall be treated with equality, as such under the scheme of Arbitration Act there cannot be any special treatment given to the government as a party.

It was also held that it may be true that the CPC provides for the differential treatment to the government in certain cases, but the case may not be so applicable, while considering a case against the government under the Arbitration Act. Finally, held that there is no exceptional treatment to be given to the government, while considering the application for stay, under Section 36 filed by the government, in proceedings under Section 34 of the Arbitration Act. And provisions of Order XXVII Rule 8A CPC are not applicable in present time. The order of the Calcutta High Court granting unconditional stay of the award to the government was set aside, and that of Executing Court was reinstated by the SC.