In the case of Hindustan Construction Company Ltd. v. Union of India, Section 87 of the Arbitration and Conciliation Act, 1996 was considered manifestly arbitrary under Article 14 of the Indian Constitution.
The Arbitration and Conciliation (Amendment) Act, 2019 introduced Section 87, which mentions that any changes brought to the Arbitration and Conciliation Act, 1996 after the 2015 amendment will not apply to the court proceedings. It also stated that this would apply to all the arbitral proceedings taking place after the 2015 Amendment Act commencement and the Court proceedings arising out of such arbitration.
The Court opined that it would lead to a delay in arbitration proceedings and their disposal as well. Also due to continuous interference of the Court in the arbitration matters will defeat the purpose of the arbitration as to what was stated by the 2015 Amendment Act.
After the deletion of Section 26 of the Arbitration and Conciliation Act, 1996, Section 87 was brought into the picture. Section 87 can be interpreted in two parts when contracted with Section 26:
- Non-applicability of the 2015 Amendment Act to Court proceedings arising from arbitral proceedings either the proceedings started before or after the 2015 Amendment Act.
- This thing was applied to all the Court Proceedings irrespective of whether it started before starting the 2015 Amendment Act or after that.
It is very clearly visible that Section 87 is not the same as Section 26. Due to the implementation of Section 87, the arbitral proceedings are losing their essence because of too much interference of the Court. The object and purpose of the arbitral proceedings would be lost if Section 87 would not have been struck down. The Court said that “the deletion of Section 26 of the 2015 Amendment Act, together with the insertion of Section 87 into the Arbitration Act, 1996 by the 2019 Amendment Act, is struck down as being manifestly arbitrary under Article 14 of the Constitution of India.”
It can also be said that the retrospective application of Section 87 will turn the clock backwards and will affect those who have already received an arbitral award. Now the already made payment will have to be reversed and will become a difficulty. There was a need to strike down the said Section to maintain the sanctity of the Arbitration and Conciliation Act, 1996.
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