Supreme Court Upholds Order to Deposit Award in Arbitration Case: Dharmesh S. Jain vs. Urban Infrastructure Real Estate Fund (2022)

Date of the Judgment: 25 January 2022

Citation: 2022 INSC 1002

Judges: Justice M.R. Shah and Justice Sanjiv Khanna

Can a party avoid complying with a court order by claiming they weren’t properly heard? The Supreme Court of India recently addressed this question when a party sought to recall an order directing them to deposit an arbitral award amount. The court’s decision highlights the importance of adhering to court orders and the consequences of delaying legal proceedings. The bench comprised of Justice M.R. Shah and Justice Sanjiv Khanna. The judgment was authored by Justice M.R. Shah.

Case Background

The case originated from a dispute where the High Court of Judicature at Bombay, on 08 August 2019, ordered the applicants (Dharmesh S. Jain & another) to deposit 50% of an arbitral award within twelve weeks. The applicants failed to deposit the amount within the given time, despite multiple extensions granted by the High Court. The applicants then filed a Special Leave Petition before the Supreme Court on 20 August 2021, which was delayed.

The Supreme Court condoned the delay and granted the applicants an additional eight weeks from 17 September 2021 to comply with the High Court’s order. The respondent (Urban Infrastructure Real Estate Fund) then filed a Miscellaneous Application (M.A. No. 1668/2021) to recall the Supreme Court’s order of 17 September 2021, arguing that the applicants were intentionally delaying the process. The Supreme Court, on 28 October 2021, directed the applicants to deposit the amount as per the High Court’s order. The applicants then filed the current application to recall the order dated 28 October 2021.

Timeline:

Arguments

The applicants, represented by Shri Shyam Divan, argued that:

• ✓ Miscellaneous Application No. 1668/2021 was not maintainable because it was filed in a disposed-of matter.
• ✓ They were not issued a notice in Miscellaneous Application No. 1668/2021, and they did not file a reply.
• ✓ The Supreme Court could not have directed them to deposit the amount, as the only consequence of non-compliance with the High Court’s order would be that the stay on the arbitral award would be lifted, and execution proceedings would continue.

The respondent, represented by Shri Jayant Bhushan, contended that the applicants were deliberately delaying the proceedings and had no intention of complying with the High Court’s order.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the order dated 28.10.2021 passed in M.A. No. 1668/2021 should be recalled.

Treatment of the Issue by the Court

Authorities

The Supreme Court did not specifically cite any legal precedents or statutes in its judgment. The decision was based on the specific facts and circumstances of the case.

Judgment

The Court held that the application to recall the order was an afterthought, filed only to avoid the contempt proceedings.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the applicants’ conduct, their repeated delays, and their attempts to avoid compliance with the High Court’s order. The Court emphasized that the order of 28 October 2021 was passed after hearing the applicants’ counsel, and the application to recall was an attempt to evade contempt proceedings. The Court considered the fact that the applicants had been granted multiple extensions by the High Court but still failed to deposit the amount.

The Court noted, “At the outset, it is required to be noted that when this Court passed order dated 28.10.2021, Shri Kunal Vajani, learned advocate appeared on behalf of the applicants – original petitioners and this Court passed order dated 28.10.2021 after hearing the learned counsel appeared on behalf of the applicants – original petitioners.”

The Court further observed, “Even otherwise, it is required to be noted that the present application is nothing but an afterthought and only with a view to get out the contempt proceedings initiated by the respondent by way of Contempt Petition No. 940/2021.”

The Court also stated, “Having taken the advantage/benefit of order dated 17.09.2021 of extension of time to comply with the order passed by the High Court, thereafter it would not be open for the applicants to contend that on non-compliance the necessary consequence under the Arbitration Act may follow and the execution proceedings may have to be proceeded further.”

Key Takeaways

• ✓ Parties must adhere to court orders and cannot avoid compliance by claiming lack of notice if their counsel was present and heard.
• ✓ Repeated delays and attempts to evade compliance can lead to adverse consequences, including contempt proceedings.
• ✓ The Supreme Court will not entertain applications to recall orders if they are deemed to be an afterthought to avoid legal obligations.

Directions

No specific directions were issued by the Supreme Court in this case.

Specific Amendments Analysis

Not Applicable

Development of Law

The ratio decidendi of this case is that the Supreme Court will not recall an order if it was passed after hearing the parties’ counsel and if the application to recall is an afterthought to avoid legal obligations. This case reinforces the principle that parties must comply with court orders and that delaying tactics will not be tolerated. There is no change in the previous position of law.

Conclusion

The Supreme Court dismissed the application to recall its order dated 28 October 2021, which had directed the applicants to deposit the amount as per the High Court’s order. The Court emphasized that the order was passed after hearing the applicants’ counsel and that the application to recall was an attempt to avoid contempt proceedings. This judgment underscores the importance of complying with court orders and the consequences of delaying legal proceedings.