Whether execution of Arbitration Award is automatically stayed by filing Section 34 Petition?

December 1, 2019

Recently in Hindustan Construction Company & Anr vs Union of Supreme Court section 87 was struck down. Judgment analysis in Nutshell: In the above matter Petitioners challenged the constitutional validity of Section 87 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Arbitration Act, 1996”) as inserted by Section 13 of the Arbitration and Conciliation (Amendment) Act, 2019 (hereinafter referred to as the “2019 Amendment Act”) and brought into force with effect from 30th August,2019. Petitioners  also challenged the repeal (with effect from 23rd October,2015) of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as the “2015 Amendment Act”) by Section 15 of the 2019 Amendment Act. Apart from the aforesaid challenge, a challenge is also made to various provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Insolvency Code”) which, as stated by the Petitioners, result in discriminatory treatment being meted out to them. Here we shall discuss the Judgment touching the Section 87 inserted by 2019 Amendment Act in Arbitration Act,1996. To be very specific whether upon filing Section 34 Petition challenging Award, the execution of Award is automatically stayed without security? Let us understand the law and arguments before the Supreme Court. Facts: The Arbitration Act, 1996 is based upon the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985)  (“UNCITRAL Model Law”), Article 36(2) of which specifically refers to applications for setting aside or suspension of an award, in which the other party may provide appropriate security. Contrary to Article 36 of the UNCITRAL Model Law, Section 36 of the Arbitration Act, 1996 has been construed by judgments of apex Court as granting an ‘automatic-stay’ the moment a Section 34 application is filed within time. From the plain language of Section 36, automatic-stay does not follow, and the judgments of Supreme Court which have so held would require a revisit by this larger bench. In any case, the 246th Report of the Law Commission of India titled, ‘Amendments to the Arbitration and Conciliation Act, 1996’ (August, 2014) (hereinafter referred to as the “246th Law Commission Report”) recommended that Section 36 be amended, which was in fact done by the 2015 Amendment Act, so that automatic-stays are now things of the past. However, despite the fact that the 2015 Amendment Act made large-scale changes to the Arbitration Act, 1996, keeping in view the objects of the Arbitration Act, 1996 of minimum judicial intervention, speedy determination and recovery of amounts contained in arbitral awards, yet, another ‘High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India’ headed by Retd. Justice B.N. Srikrishna by its report dated 30th July,2017 (hereinafter referred to as the “Srikrishna Committee Report”) opined that the 2015 Amendment Act should not apply to pending court proceedings which have commenced after 23rd October,2015 (i.e. the date of the 2015 Amendment Act coming into force), but should only apply in case arbitral proceedings have themselves been commenced post 23rd October, 2015, which would include court proceedings relating thereto. The Government of […]

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