C&M E-ALERT: SUPREME COURT CLARIFIES - ONLY EXCEPTIONAL CIRCUMSTANCES WARRANT UNCONDITIONAL STAY ON EXECUTION OF ARBITRAL AWARDS

Rahul Narayan
3 days ago
4 min read

On 18 November 2025, the Supreme Court of India (“SC”) in Popular Caterers v. Ameet Mehta & Others 2025 INSC 1354, (“Popular Caterers”) delivered a significant ruling on the interpretation of Section 36(3) of the Arbitration and Conciliation Act, 1996 (“A&C Act”) opining on the Court’s power to grant unconditional stay on the execution of arbitral awards.

Section 36(3) of A&C Act provides for discretionary power of the Court to grant stay on the operation of arbitral awards subject to conditions as appropriate. Proviso (1) states that in case of stay of arbitral award for payment of money, the Court shall have due regard to stay of money decree provisions under the Civil Procedure Code, 1908 (“CPC”). Proviso (2) states that Court shall grant an unconditional stay on the award till disposal of challenge under Section 34 if it is satisfied that a prima facie case is made out that the arbitration agreement, the contract or the making of the award was induced or effected by fraud or corruption.

In Popular Caterers, the SC reiterated the view that an unconditional stay of an award can only be given in case the award was induced by fraud or corruption as provided in Section 36(3) or in exceptional circumstances. In the normal course of affairs, no stay would be granted without deposit of at least part of the due amount before the Court.

FACTUAL BACKGROUND

M/s. Popular Caterers (“Appellant”) and Mr. Ameet Mehta and others in the capacity as the promoters of Maple Leaf Enterprises LLP (together referred as “Respondents”) herein entered into a Memorandum of Understanding (“MoU”) dated 25.05.2017 basis which, the Respondents intended on availing services of the Appellant for the supply of food for events at a Hotel in Juhu, Mumbai.

Pursuant to the MoU, the Appellant was required to pay INR. 8,00,00,000/- (Rupees Eight Crore) towards an adjustable interest free security deposit. While half the security deposit was undisputedly received by the Respondents, before the other half could be paid, State authorities prohibited the Hotel from organising any event that culminated in disputes between the parties. In the said circumstances, the Appellant invoked arbitration.

The Arbitrator passed an award dated 28.11.2022 directing the Respondents to pay back the principal sum of INR. 4,00,00,000/- (Rupees Four Crore) along with interest @9% per annum from the date of payment till the date of realisation.

Thereafter, the Respondents challenged the award under Section 34 of the A&C Act before the High Court of Bombay. Additionally, the Respondents filed interim applications praying for unconditional stay of the execution of the award, which came to be allowed by the Court.

The Appellant filed an appeal against the order of the High Court of Bombay dated 22.01.2025 (“Impugned Order”) wherein an unconditional stay of execution of the arbitral award dated 28.11.2022 was granted pending disposal of the challenge of the award under Section 34 of the A&C Act.

ISSUE

Whether the High Court of Bombay committed any error in passing the Impugned Order granting unconditional stay of the execution of the arbitral award.

FINIDINGS

The SC, to answer the question regarding circumstances under which the Court may grant unconditional stay on arbitral awards, relied on its decision in Lifestyle Equities C.V. and Another v. Amazon Technologies Inc. 2025 INSC 1190 (“Lifestyle Equities”) and reiterated the interpretation of Section 36(3) of the A&C Act as stated therein. The SC, in Lifestyle Equities, held that:

Section 36(3) confers discretionary powers on the Court for grant of stay subject to conditions as may be imposed.
The grant of unconditional stay is guided by Proviso (2) of the said Section which limits its application to cases wherein the arbitration agreement, contract, or the award is induced by fraud or corruption. In exceptional cases, an unconditional stay can be granted even in cases falling outside the ambit of Proviso (2) of Section 36(3).[1]
With “due regard” to the provisions of CPC under Proviso (1) of Section 36(3) would merely mean that the Court should act within the guiding framework of CPC, rather than being rigidly bound by it while granting stay on award for payment of money.[2]

The SC has clarified that for the grant of unconditional stay of the award, it must be prima facie satisfied that (i) the award is egregiously perverse; (ii) is patently illegal; (iii) is facially untenable; or (iv) any other exceptional causes of similar nature.

In the instant case, the SC allowed the appeal by holding that the Respondents failed to demonstrate that the award was effected by fraud or corruption or that there was an exceptional case for obtaining an unconditional stay on the execution of the award. However, it was held that the stay as regards to the execution of the arbitral award shall continue only subject to the deposit of the principal amount.

C&M COMMENT

This judgement continues the general trend in India post the 2015 amendment steering clear from the system of automatic stay of awards when Section 34 objections were filed. It is made clear that Awards are enforceable and that a stay is only granted in particular cases. It is to be hoped that in future decisions the scope of “exceptional cases” is clarified further. However, for the time being, this decision of SC serves as a clarification on the discretionary power of Courts to grant unconditional stay and holds that this power is not unguided and, can only be exercised by the Court in exceptional circumstances such as patent illegality or untenability of the award.

[1] Sepco Electric Power Construction v. Power Mech Projects Limited, (2022) SCC Online SC 1243.

[2] Pam Developments v. State of West Bengal, (2019) 8 SCC 112.

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