Kiran Raj

The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan set aside the Bombay High Court’s order granting an unconditional stay on an arbitral award arising from a catering services arrangement, directing the award debtors to deposit Rs 4 crore as security for the stay to continue. The dispute concerns a security deposit paid by a catering firm to venue promoters under a memorandum of understanding and an arbitral award directing refund of that amount, which the award debtors have challenged. Drawing on its recent decision in Lifestyle Equities C.V. and Another v. Amazon Technologies Inc., the Court stated that an unconditional stay of an arbitral award is permissible only when limited conditions are met, including a prima facie indication that the arbitration agreement or the making of the award was affected by fraud or corruption, and found no such basis here.

The dispute arises from a memorandum of understanding dated 25 May 2017 between a partnership firm engaged in catering services and a limited liability partnership, under which the caterer was to provide pure vegetarian catering for events proposed at a hotel in Mumbai. Under the arrangement, the caterer was required to pay an adjustable, interest-free security deposit of ₹8 crore. It is recorded that ₹4 crore was paid and received as security, after which disputes emerged within days of the MoU being signed.

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Subsequently, State authorities issued a notice to the hotel directing that it stop renting out its premises for events, leading the caterer to invoke arbitration seeking relief in respect of the security deposit. An arbitral tribunal was appointed by the High Court and later issued an award dealing with the parties’ claims and a counterclaim. Thereafter, the award debtors instituted petitions under Section 34 of the Arbitration and Conciliation Act, 1996, and sought a stay on execution of the award under Section 36(3). A Single Judge of the High Court granted an unconditional stay of execution pending disposal of the Section 34 petitions, which order is challenged in the present civil appeals.

The Court examined the framework under Section 36 of the Arbitration and Conciliation Act, noting that “Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).” It further recorded that “Provided further that where the Court is satisfied that a Prima facie case is made out that, — (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.”

Referring to its earlier analysis, the Court stated that “Certainly there is no blanket prohibition barring a Court from unconditionally staying either a money award or a money decree.” It then applied the standard restated in Lifestyle Equities, observing: “In the present case, it is not even the case of the judgment -debtor, i.e., respondents before us that the making of the award was induced or effected by fraud or corruption.” The Bench recalled that “In Lifestyle Equities (supra), we said in so many words that for the purpose of granting of benefit of unconditional stay of the execution of money -decree, it has to be established more than prima facie that: (i) The decree is egregiously perverse, (ii) is riddled with patent illegalities, (iii)is facially untenable; and/or (iv) such other exceptional causes similar in nature.”

Applying these principles, the Court concluded: “We are of the considered view that the case in hand does not fall in any of the aforesaid categories so as to seek the benefit of unconditional stay of the arbitral award which is in the form of a money -decree.”

The Court ordered: “In view of the aforesaid, these appeals succeed and the common impugned order is, accordingly, set aside. We direct the respondents to deposit the principal amount of Rs.4,00,00,000/- (Rs.Four crore only) with the Prothonotary and Senior Master, Original side, Bombay High Court within a period of eight weeks from today.”

“We clarify that the Section 34 applications preferred by the respondents shall be heard on its own merits without being influenced in any manner by the fact that we have thought fit to disturb the impugned judgment and order passed by the High Court.”

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“Once the principal amount of Rs.4,00,00,000/- (Rs.Four crore only) is deposited within the stipulated period of time, the Registry of the High Court shall invest the same by way of a Fixed Deposit in an interest bearing account with any Nationalised Bank with auto renewal facility initially for a period of six months.”

“Having regard to the nature of the dispute between the parties and in the peculiar facts and circumstances of this case, we request the High Court to take up the Section 34 applications for final hearing and see to it that those are disposed of within a period of six months from today. It is needless to clarify that the stay as regards execution of the Arbitral Award shall continue, subject to the deposit of the principal amount of Rs.4,00,00,000/- (Rs.Four crore only). Pending application(s), if any, shall stand disposed of.”

Advocates Representing the Parties

For the Petitioners: Mr. C.U. Singh, Senior Counsel

For the Respondents: Mr. Shailesh Madiyal, Senior Counsel; Ms. Bansuri Swaraj, Counsel; Ms. Nina Nariman, Counsel

Case Title: Popular Caterers v. Ameet Mehta & Ors.
Neutral Citation: 2025 INSC 1354
Case Number: Civil Appeal Nos………… …………….. of 2025 (Arising out of SLP (C)NOS.17231 -17233 OF 2025)
Bench: Justice J.B. Pardiwala; Justice K.V. Viswanathan