India: The Fate Of Automatic Stay On Section 34 Petitions Filed Post Amendment

INTRODUCTION

The Division bench1 of the Delhi High Court ("HC") in a batch of Petitions titled, "Ardee Infrastructure Pvt. Ltd. v. Ms. Anuradha Bhatia &Ardee Infrastructure Pvt. Ltd. v. Yashpal & Sons"2 augments more ambiguity to the already existing controversy with regard to the applicability of the amended provisions viz. Section 34 and Section 36 of the Arbitration and Conciliation (Amendment) Act, 2015 ("The Amendment Act").

The HC observed that all petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 ("The Act") prior to the amendment i.e. 23.10.2015, would be considered under the Unamended provisions of the 1996 Act and consequently, the contesting party would be entitled to automatic stay of enforcement of the award till the disposal of the said petitions.

The Bench keeping Section 26 of The Amendment Act as the axis of the dispute, not only discusses the applicability of the amended Section 34 and Section 36(2), 36(3) of The Amendment Act, but also hinges out the much awaited interpretation of Section 26 of The Amendment Act in regard to arbitral and court proceedings. It thus pivots a clear interpretation of the amended section, thereby adding to the spectrum of conflicting decisions.

FACTUAL BACKGROUND:

An Arbitration notice was sent on 07.06.2011 by the Respondents. The statement of claim was filed in February 2013 and an interim award was made on 10.07.2014. The final award was made by the Arbitral tribunal on 13.10.2015. The batch petitions challenging the award under Section 34 was however filed on 04.01.2016.

On 31.05.2016, learned Single Judge of the HC passed an order directing the Appellants to deposit Rs. 2.70 crores without prejudice to the rights and contentions of the parties. It was further directed that failure to make such a deposit would result in dismissal of objections filed by the Appellant under Section 34 of The Act whereas successful deposit of the said amount would amount to issuance of notice to the Respondents regarding the objections filed by the Appellants under Section 34.

The Appellants contended that their petitions under Section 34 of The Act shall be governed by the unamended provisions and they shall thus have the right to an automatic stay on the award upon filing the said petitions. Whereas the Respondents argued that the amended provisions shall apply thereby denying an automatic stay to the Appellants and requiring them to deposit Rs.2.70 crores as ordered by the Court.

ARGUMENTS BY THE APPELLANT:

  1. The Act gives a vested right in the form of an automatic stay on the enforcement of an award to a party filing an objection under Section 34. However, The Amendment Act, by virtue of Section 36(2) and Section 36(3) takes away such right.
  2. Section 26 of The Amendment Act3 does not express any intention of retrospective operation; and therefore the amended provisions of Sections 34 and 36 would have a prospective operation and would not be applicable to the present case. In such scenario, Section 6 of the General Clauses Act, 18974 would be applicable which states that the repeal of an enactment would not affect any right accrued or acquired under the previous enactment, unless a different intention appears in the repealing act.

ARGUMENTS BY THE RESPONDENTS:

  1. The legislature in the first half of Section 26 of The Amendment Act has deliberately used the phrase "to arbitral proceedings" instead of "in relation to arbitral proceedings" to limit its scope so that it cannot be expanded to include post arbitration proceedings (including court proceedings).
  2. Section 6 of the General Clauses Act ought not to be resorted because of the use of the restrictive phrase in Section 26 of The Amendment Act. Section 6 does not apply to the present case as the legislature deliberately kept "post-arbitral proceedings" outside the application of the first part of Section 26 of The Amendment Act.
  3. Hence, automatic stay can only be viewed as an interim relief and not a right and such relief is not completely taken away but made subject to an order of the Court upon application.

ISSUES:

Whether there is/was any difference in the expressions "to the arbitral proceedings" and "in relation to arbitral proceedings" appearing in the two parts of Section 26 of The Amendment Act?

JUDGMENT

The HC observed that if a narrow view of the expression "to the arbitral proceedings" is to be taken, then Section 26 of the Amendment Act is silent on those categories of cases where the arbitral proceedings were commenced prior to 23.10.2015 and where the award was made prior to 23.10.2015, but where either a petition under Section 34 was under contemplation or was already pending on 23.10.2015.

If the applicability of the amendments to both parts of Section 26 is treated differently, it would lead to serious inconsistencies especially in the interplay between Section 9 and 17, where the court proceedings (in relation to arbitral proceedings which commenced before the amendment) would be under Section 9 of the new Amendment Act and the arbitral proceedings (which commenced before the Amendment) would have to be under the old regime (including Section 17).

The Court further classified all arbitral proceedings which commenced in accordance with Section 21, prior to 23.10.2015 into three categories:

  1. where the arbitral proceedings had commenced prior to 23.10.2015 and were pending before an arbitral tribunal on 23.10.2015;
  2. where the arbitral proceedings had commenced prior to 23.10.2015 and the award was also made prior to 23.10.2015, but the petition under Section 34 seeking the setting aside of the award was made after 23.10.2015;
  3. Where the arbitral proceedings had commenced prior to 23.10.2015 and not only the award was made prior to 23.10.2015, but the petition under Section 34 had also been instituted before court prior to 23.10.2015.

With respect to these categories the HC opined that if the first part of Section 26 would only deal with the first category of cases i.e. before arbitral tribunals and not to court proceedings, then nothing in Section 26 of the Amending Act shall pertain to the second or third category of cases.

Thus, if the expression 'to arbitral proceedings' used in the first limb of Section 26 is given the same expansive meaning as the expression 'in relation to arbitration proceedings' as appearing in the second limb of Section 26, then, the matter becomes very simple and does not result in any anomaly. It would certainly not be the intention of the legislature to have the arbitral tribunal and the courts apply different standard in relation to the same proceedings.

HC while relying on the observations of the Supreme Court in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited5 held with regard to automatic stay that all aspects of enforceability of an award entail an accrued right both; in the person in whose favour the award is made and against whom the award is pronounced and henceforward, an automatic stay on the award upon filing of petition under Section 34 of The Act was an accrued right in favour of the Appellants. Thus, all the arbitral proceedings (the entire gamut, including the court proceedings in relation to proceedings before the arbitral tribunal), which commenced in accordance with the provisions of Section 21 of the said Act prior to 23.10.2015, would be governed, subject to an agreement between the parties to the contrary, by the unamended provisions and, all those in terms of the second part of Section 26, which commenced on or after 23.10.2015 would be governed by the amended provisions.

Analysis:

Although this decision comes as a refreshing respite for some, it adds to the prevailing confusion infused by the contradictory decisions of various High Courts with regard to the application of the provisions of Section 26& Section 36 of The Amendment Act, wherein it was opined that 'arbitral proceedings' do not include 'court proceedings' and thus, the amendments would apply to court proceedings but not to arbitral proceedings. These decisions are discussed as follows:

  1. The Division Bench of Kolkata High Court in Sri Tufan Chatterjee v. Sri Rangan Dhar6, held that even the pending court proceedings relating to arbitration, which were pending as on date when the amendments were notified, must be governed by The Amendment Act and not the unamended one.
  2. The Madras High Court in the matter of New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd7, decided against the use of provisions contained in The Amendment Act to court proceedings, for such arbitrations which commenced prior to amendments being notified.
  3. Bombay High Court, adding to the confusion, held in the matters of Rendezvous Sports World v. BCCI8 that amendments brought to Section 36 of The Act are procedural in nature and further balances the rights of both parties and ordered the BCCI to file an application seeking stay against enforcement of arbitral awards under challenge. This decision is pending adjudication before the Supreme Court of India now.
  4. Although, The Delhi High Court had previously also taken a view contradictory to that of the Bombay High Court and in consonance with the current judgment in the case of Ministry of Defence, Government of India v. Cenrex SP. Z.O.O. &Ors9, The Court while relying upon Section 6 of the General Clauses Act, came to a conclusion that an Act (or an Ordinance for that matter) cannot have retrospective operation unless so provided in the Act and any vested right in such Act/ provision cannot be deemed to be taken away by means of the amending or the repealing Act.

Amidst the opposing views of different High Courts across the realm, if the ratio of the present case in hand is accepted and followed, then the mere intention and purpose behind the amendment of Section 36 of The Act is lost. Although the present decision may seem plausible enough, but the conflict between these wide-ranging observations and judgments across the nation has to be settled by the Supreme Court at the earliest, giving such polemic it's logical and peaceful conclusion.

Footnotes

1 Comprising of Hon'ble Mr. Justice BD Ahmed and Hon'ble Mr. Justice Ashutosh Kumar

2 FAO(OS) no. 221/2016 and FAO(OS) No.222/2016, judgment delivered on 06.01.2017

3 Section 26, Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

4 Section 6,Effect of repeal. Where this Act, or any 1 [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not—

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) Affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

5 1999 (9) SCC 334

6 AIR (2016) Cal 213

7 Application No. 7674 of 2015 in O.P. No. 931 of 2015

8 2016 SCC Online Bom 255.

9 2016 (1) Arb LR

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.