14 September 2021, Tuesday

1 month ago

When staying arbitral awards, courts should not be swayed because large amounts are awarded against government corporations (Supreme Court of India)

02 August 2021| Toyo Engineering Corporation and another v. Indian Oil Corporation Limited | Civil Appeal No. 4549-4550 of 2021 | RF Nariman and BR Gavai JJ

The Supreme Court has reiterated that when staying arbitral awards under Section 36 (3) ACA, the court should follow principles under Order XLI Rule 5 CPC.

It said it found that “largely because public corporations are involved, discretion continues to be exercised not on principles of Order XLI Rule 54 but only because large amounts exist and that Government Corporations have to pay these amounts under arbitral awards.”

It said both considerations are irrelevant and set aside the High Court’s orders by which the award-debtor IOC was directed to make a deposit of 125 crores which was around 20% of the sum awarded in the award.

The court also pointed that in another decision relied on by the High Court, the set-aside petition was eventually dismissed, and, at its highest, it would be irrelevant.

Read here the High Court’s first order where Navin Chawla J considered the matter and prima facie agreed with IOC’s argument, among others, that the tribunal erred in overlooking that the extension of time granted by IOC was conditional upon price reduction. He also relied on another case (para 26), where although IOC’s set aside petition was dismissed, the court (Chawla J himself) had considered a similarly worded extension letter and found that it was conditional.

Read here the High Court’s order (Jyoti Singh J) dismissing Toyo’s application to modify Chawla J’s order. Singh J said that the settled principle that government bodies cannot be given special treatment was not disputed. Still, the point was that the court had already exercised its discretion, and there was no change in circumstance that called for a modification.

Read the court’s decision here.

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