The Striking of s.87 of the Arbitration & Conciliation Act, 1999.
The various amendments made to the Act governing arbitration and conciliation proceedings in India have provided a plethora of changes to keep track of. The provision dealing with the stay on arbitral awards has also seen a fluctuating opinion from the judiciary. For understanding what changes have been made to the provision, it is important to understand what a “stay on the arbitral award” means.
According to the original 1999 Act, the meaning of Section 87 entails that any time an arbitral award that has already been passed is challenged before a court of law, it automatically converts into a stay on the arbitral award which means that the passing of an arbitral award sees a temporary pause, till further action by the Court, which in the Act is originally under s.34. This provision put the interest of the award receiver at risk, but it also creates an opportunity for the delay in the procedure and delivery of justice.
Evolution of Stay on Arbitral Award
In the primary Act of 1999, an award could only be enforceable after the lapse of the period for filing a petition against the award, which was mentioned in the act under s.34. During this period, a stay on award became inevitable as there was no discretion given to the court to pass any interim orders or awards.
This was seen as an obvious shortcoming of the act. In order to rectify this, the Arbitration and Conciliation Act of 2015 included an amendment to s.36 as well, which further made it mandatory to file a petition requesting a stay on the arbitral award, which would only be passed if the court was satisfied. This rectification was a step in the right direction as, in accepting such a petition, the court would ensure that there is a guarantee or security provided by the person who has to fulfil specific duties against the individual who has to receive the said award.
Through the introduction of Section 87 in the 2019 Act, a divide between which cases could be solved with the application of the 2015 Amendment Act and which could be solved with the application of the 1999 Act was created and the question before the court of law through the Hindustan Construction Company Limited & Anr. v. Union of India & Ors. The case was to clarify whether s.87 was constitutional or not, owing to the mischief it caused in the precedent cases.
The Supreme Court took cognisance of the fact that the introduction of s.87 via is the 2019 Amendment Act opened the grounds for vagueness and ambiguity, for which the decision to scrap s.87 was finally reached, in favour of not reversing the effect of the 2-15 Amendment made to the automatic stay on order clause.
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