Sanchayita Lahkar

The High Court of Calcutta, Single Bench of Justice Shampa Sarkar on Tuesday dismissed an application by a railway production unit seeking an unconditional stay of a 14 March 2024 arbitral award made in favour of its equipment supplier. The dispute arose from a contract for design, manufacture and supply of driving gear systems for WAP-5 locomotives, in which the purchaser had imposed liquidated damages for delayed delivery and termination of the contract. Justice Sarkar, in an order dated 2 December 2025, held that the conduct of the parties and the arbitrator, including holding hearings and publishing the award in Kolkata, provided sufficient contrary indicia to displace Chittaranjan as the contractual venue, and granted only a conditional stay subject to security being furnished.

The petitioner sought an unconditional stay of an arbitral award dated 14 March 2024, passed by a sole arbitrator appointed by order dated 15 March 2022. The dispute originated from a 2009 tender issued by the Railway Administration for the design, manufacture, testing, supply and commissioning of driving gear systems for WAP-5 locomotives. A purchase order was issued on 12 March 2010, requiring phased delivery with a prototype inspection clause. The petitioner alleged delay and imposed liquidated damages under the IRS conditions, finally determining the contract and deducting Rs. 2,40,85,873/-, after which disputes arose and the respondent invoked arbitration. The arbitrator allowed all respondent’s claims and rejected the petitioner’s counterclaims.

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The petitioner challenged the award as being contrary to public policy, alleging patent illegality, lack of reasons, reliance on documents not part of the record, and invalid appointment of the arbitrator. The respondent raised a preliminary objection to jurisdiction, asserting that Clause 2900(g) fixed the seat at Chittaranjan. The petitioner argued that physical hearings occurred at Kolkata and communications arose within the court’s jurisdiction.

Statutory provisions cited include Sections 2(1)(e), 20, 34(2)(b), 34(2-A) and 36 of the Arbitration and Conciliation Act, 1996, and Order XLI Rule 5 CPC.

The Court recorded that the arbitral proceedings were “substantially conducted through virtual hearing” and that “two physical hearings were conducted at Punwani Chambers, 7B Kiran Shankar Roy Road, Kolkata-700001.” It stated that “the award was signed and published at Kolkata,” and held that these facts showed that “the proceedings were administered and controlled from Kolkata.” The Court noted that Clause 2900(g) referred to “venue,” not “seat,” and observed that the parties “consciously used the term venue” and that the arbitrator was empowered to select another venue. It stated: “The physical hearings were conducted within the jurisdiction of this court… Thus, the venue was accepted to be Kolkata by the parties and also by the learned arbitrator.”

The Court recorded that “venue cannot automatically be read as seat” and relied on the principle that the seat shifts when parties conduct proceedings elsewhere. It referred to the arbitrator's office being in Kolkata and stated: “Mere mention of Chittaranjan as venue, without any factual nexus linking the proceedings thereto, cannot oust the jurisdiction of this court.”

On unconditional stay, the Court recorded that this remedy is a “very narrow exception” and requires a prima facie showing that “the making of the award was perpetuated by fraud or corruption” or was based on forged material or violation of natural justice. It stated: “Here… reasons have been assigned. Thus, at this stage it cannot be prima facie held that the award is either perverse or a nullity.” It further observed that the petitioner “has failed to prove that the making of the award was induced by fraud and corruption,” explaining that fraud requires “deliberate deception” and corruption requires illegal gratification, neither of which was evident.

The Court stated that challenges relating to limitation, waiver, appreciation of documents, and merits “will have to be decided upon a detailed hearing” under Section 34, and concluded that the circumstances did not justify unconditional stay.

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The Court ordered: “The prayer for unconditional stay is thus rejected. At the conclusion of the hearing, the respondent was permitted to file a calculation with regard to the sum awarded. The same has been filed.”

“There shall be unconditional stay of the award for a period of 8 weeks. Within such time, the petitioner will furnish security to the tune of Rs 3,08,00,000/-, which shall be deposited by way of a demand draft before the learned Registrar Original Side. The demand draft shall be encashed and deposited in an interest bearing auto renewable fixed deposit with any nationalized bank, until further orders.”

“In the event the deposit is made as directed hereinabove, the unconditional stay will continue till disposal of the application under Section 34 of the Arbitration and Conciliation Act, 1996. In case of default, the execution case will proceed and the stay will stand automatically vacated, without further reference to this Court.”

Advocates Representing the Parties

For the Petitioners: Mr. Swatarup Banerjee, Advocate; Ms. Amrita Pandey, Advocate

For the Respondents: Mr. Amit Dubey, Advocate; Mr. Subhradip Roy, Advocate; Ms. Sananda Ganguli, Advocate

Case Title: Chittaranjan Locomotive Works v. Arihant Electricals
Case Number: AP-COM 910 of 2024
Bench: Justice Shampa Sarkar