The Allahabad High Court has firmly reiterated that merely filing an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 does not automatically stay the operation of an arbitral award. This ruling was passed by Justice Piyush Agrawal in the matter of M/s LR Print Solutions vs. M/s Exflo Sanitation Pvt. Ltd. and others.
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Case Background
The dispute arose over an industrial plot located in Sector 10, NOIDA, which had been rented by the petitioner (M/s LR Print Solutions) since 2008. A conflict regarding rent payments eventually led the landlord (respondent) to initiate legal proceedings. Initially, a Small Causes Court case was filed for eviction, but the matter was later referred to arbitration due to an existing clause in the rent agreement.
On 19 July 2017, the Sole Arbitrator issued an award directing the petitioner to vacate the premises within 30 days, failing which mesne profits of ₹15,000 per month with 10% compound interest would be payable till possession was handed over.
The petitioner challenged the award under Section 34, which was dismissed. Appeals under Section 37 and then a Special Leave Petition before the Supreme Court were also rejected.
During the pendency of these proceedings, the rented property was sold, and the petitioner’s challenge against the sale deed was also dismissed. Subsequently, the Execution Court ordered the petitioner to pay ₹8,58,795/-, which led to the current writ petition under Article 227.
“In the present case, the application under Section 34 of the Arbitration Act was filed by the petitioner in the year 2017, which is much after the enforcement of the amended Act in the year 2015, therefore, the argument of the counsel for the petitioner that merely on filing of the application under Section 34 of the Arbitration Act, against the award in question was automatically stayed, is misplaced and cannot be accepted.”
– Justice Piyush Agrawal, Allahabad High Court
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The court relied on key Supreme Court decisions including:
- BCCI vs. Kochi Cricket Pvt. Ltd. (2018)
Held that Section 36 of the Arbitration Act, post its 2015 amendment, does not allow automatic stay of awards just by filing an application under Section 34. - Hindustan Construction Company Ltd. vs. Union of India (2020)
Reinforced that Section 34 proceedings are separate court proceedings, and filing them does not stay the arbitral award automatically. - M/s Shree Vishnu Constructions vs. Engineer-in-Chief, MES (2023)
Clarified that the amendment of 2015 applies prospectively, and proceedings filed after its commencement (as in this case, in 2017) fall under the amended regime.
The High Court pointed out that no interim stay was granted at any point by the courts, and hence, the award had attained finality.
“No automatic stay of the award would lie merely filing of an application under Section 34 of the Arbitration Act.”
– Supreme Court in Hindustan Construction Co. case
The petitioner claimed that since the Section 34 application was filed in time, the award stood stayed automatically and therefore, mesne profits were not payable. They also disputed the calculation of dues and claimed that payments for certain periods had already been made.
However, the Court found no merit in these arguments as the petitioner:
- Failed to vacate the premises within the stipulated 30 days.
- Could not produce any record showing an interim stay was granted.
- Had not complied with the arbitral award till April 2024.
“The petitioner has not brought any material on record to show that the award was stayed by any of the competent Court, therefore, the contesting respondent no. 1 is entitled for mesne profits.”
– Allahabad High Court
The Execution Court's order dated 24 June 2024, directing the petitioner to pay ₹8,58,795/- as per the arbitral award, was found to be in accordance with the law. The Allahabad High Court, upon evaluating the legal framework and the facts, dismissed the petition.
Justice Agrawal concluded that the amendments made to Section 36 in 2015 are prospective in nature, and apply to this case since the application under Section 34 was filed in 2017. Thus, the plea that the award was automatically stayed due to timely filing under Section 34 was rejected.
“No interference is called for by this Court in the impugned order. The petition lacks merit and is accordingly dismissed.”
– Allahabad High Court, Order dated 28 March 2025
Accordingly, the petition was dismissed.
Case Title: M/s LR Print Solutions v. M/s Exflo Sanitation Pvt Ltd. and 2 others [MATTERS UNDER ARTICLE 227 No. - 8387 of 2024]
