I. Introduction
In modern era of dispute resolution, arbitration has become the preferred mode for dispute resolution. Over the last two decades, arbitration has gained a lot of traction and one of the chief reasons for the same is the legislative intent to facilitate and encourage arbitration and make it a more user-friendly, cost-effective and expeditious method of dispute resolution. The Arbitration and Conciliation Act, 2015 ("2015 Amendment Act") was a step towards fulfilling such legislative object as it brought far-reaching changes to the overall process of arbitration.
However, the applicability of the amended provisions on pending / freshly instituted proceedings under the Arbitration and Conciliation Act became a major issue. This article attempts to answer this issue through the various judgements passed by the Supreme Court. The article also deals with the interplay of Section 34 and 36 of the Arbitration Act.
II. Interplay of Section 34 and 36
Pre-2015 Amendment
One of the major impediments, prior to the 2015 Amendment Act, was that if an application was filed under Section 34 of Arbitration and Conciliation Act, 1996, ("the Arbitration Act, 1996") to challenge an arbitral award, the award would become inexecutable under Section 36 of the Arbitration Act, 1996 immediately on filing of such application. There was an automatic stay on the execution of the award till such application under Section 34 was pending before a Court. Such applications would remain pending before the courts for many years which would adversely affect the rights of the decree holder in obtaining speedy justice. This flaw in Section 36 of the pre-amendment era was also observed by the Hon'ble Supreme Court in the matter of
2015 Amendment
Upon the recommendations of the 246th Report of
Recently, the Supreme Court in the matter of
III. Applicability of the amended provisions on arbitration proceedings and the BCCI Judgement
BCCI Judgement
After the 2015 Amendment Act came into force, there was no clarity with regard to the applicability of the amended Section 36 to the petitions pending under Section 34 filed in the pre-amendment era. This issue was dealt by the Supreme Court in the matter of
The Amendment Act, 2015, is prospective with regard to the arbitral proceedings, unless the parties otherwise agree; and,
The Amendment Act, 2015, would apply to all court proceedings commenced on or after the commencement of the 2015 Amendment Act.
While answering the question about retrospective applicability of the amended Section 36 to the pending petitions under Section 34, the Hon'ble Supreme Court relied upon the language of sub-section (2) of Section 36. The amended Section 36(2) reads as "Where an application to set aside the arbitral award has been filed in the Court under Section 34, the filing of such an application shall not by itself render that award unenforceable . . ." (Emphasis added). The
During the pendency of the BCCI matter, the Government had proposed to enact Section 87 which provided that the 2015 Amendment Act shall not apply to the court proceedings which arose out of arbitral proceedings commenced before the 2015 Amendment Act. The
IV. Challenge before the Supreme Court - HCCL Judgement
Overlooking the observations made by the Supreme Court in the BCCI judgement, the Legislature enacted the proposed Section 87 vide the Arbitration and Conciliation (Amendment) Act, 2019 ("the 2019 Amendment Act"). The constitutionality of this provision came to be challenged and decided by the Supreme Court in HCCL judgement. A brief synopsis of the HCCL judgement on this aspect is summarized under:-
a) Brief facts
The Petitioners, which were construction engineering companies, were the contractors for government bodies and typically had large claims for cost overrun and delays etc. The Petitioners were in a tricky situation where even the awards passed in the Petitioner's favour involving large sums of money, were subject to the automatic stay on the filing of an Appeal by the Government body on awards.
b) Issue
The issues framed were whether Section 87 was constitutionally valid and whether the removal of Section 26 from the Amendment Act, 2015, violated Article 14 of the
c) Verdict by the Hon'ble Supreme Court
In a remarkable strike, the Hon'ble Supreme Court held that the 2019 Amendment Act removes the basis of the BCCI Judgment. The Srikrishna Committee Report dated 30-07-2017, which was long before the BCCI Judgment, had recommended the introduction of Section 87 owing to the fact that there were conflicting
V. Conclusion
Based on the aforesaid discussion, it is clear that the Hon'ble Supreme Court was right in striking down the Section 87 as it would have resulted in delay in completion of arbitral proceedings. For example, when the 2015 Amendment Act is applied to the pending court proceedings, such proceedings would then be disposed of in accordance with the benefits from the 2015 Amendment Act resulting in faster resolution of pending proceedings. On the contrary, the introduction of Section 87 would have resulted in a delay of disposal of arbitration proceedings, and an increase in the interference of courts in arbitration matters, which would have defeated the object of the Arbitration Act, 1996 and the 2015 Amendment Act.
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