Kolkata, August 30, 2025:

 

In a significant ruling on arbitration enforcement, the Calcutta High Court has reiterated that an executing court retains jurisdiction to modify the conditions of a stay order, even after such an order has been passed under Section 36 of the Arbitration and Conciliation Act, 1996.

 

Justice Shampa Sarkar, while deciding The State of West Bengal & Ors. vs. M/S B B M Enterprise (IA No. GA-COM/4/2024 in A.P. 808/2022), held that the court can direct the deposit of the remaining awarded amount with accrued interest as a precondition for continuing stay on enforcement of the arbitral award. The Court clarified that stay of an arbitral award is a discretionary relief and not an absolute right of the award debtor.

 

The Award Holder sought a direction for deposit of additional cash security representing the balance award amount with interest, arguing that unless such modification was allowed, they would be deprived of the fruits of the award for years while the setting-aside proceedings dragged on. Counsel relied on the principle under Order 39 Rule 4 CPC, submitting that courts can always modify or vary conditions of interim protection.

 

On the other hand, the State of West Bengal and other Award Debtors contended that the application was not maintainable since the proceedings under Section 36(2) stood disposed of once the stay was granted. According to them, once the order granting stay became final, no further direction could be issued until the Section 34 proceedings were finally adjudicated.

 

Rejecting the debtor’s plea, Justice Sarkar observed that courts cannot be seen as powerless to protect the legitimate interests of award holders, particularly where financial hardship is demonstrated. The Court emphasized that denying equitable discretion would cause grave injustice, especially since award holders may face severe consequences such as inability to repay bank loans, lack of working capital for business, and Covid-19-related financial losses.

 

The judgment referred to Supreme Court precedents which clarify that:

• Filing of a setting-aside application does not automatically stay the award.

• Deposit of the awarded sum is mandatory for grant of stay under Section 36(3).

• Courts must balance equities by permitting conditional withdrawal against counter-security to safeguard restitution in case the award is ultimately annulled.

 

The Court further clarified that:

• Stay merely bars execution of the award but does not bar accrual of interest on the deposited sum.

• Allowing withdrawal with security ensures the award holder is not unfairly prejudiced while the Section 34 proceedings remain pending.

• Arbitration law discourages indefinite enforcement delays and recognizes the principle that “justice delayed is justice denied” in the commercial context.

 

Accordingly, the Court directed the Award Debtors to deposit the balance awarded amount with interest. It also permitted the Award Holder to withdraw the deposited funds upon furnishing suitable counter-security, thereby ensuring both protection of the debtor’s rights and survival of the award holder’s business.

 

The application was thus allowed, reaffirming that arbitration enforcement proceedings must strike a balance between equitable protection of both parties and timely realization of arbitral awards.