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Section 87 of the A & C Act, 1996 struck down
Section 87 of the A & C Act, 1996 struck down
The programmed stay on the arbitration award upon the documenting of a challenge under Section 34, for setting aside an Arbitration Award has caused a lot of difficulties waitings for the imposing of the Arbitral Award. The SC in Hindustan Construction Company Limited and Anr v. Association of India, 2019 (6) ARB LR 171 (SC), held, Section 87 of the A&C Act, as unlawful.
Section 87 was presented through the A&C (Amendment) Act, 2019. It expresses that there will be an automatic stay on the enforcement of the award, in situations where the award was challenged that emerged out of Arbitration started before October 23, 2015.
The Court noticed that automatic Stay on awards marks as an old issue that existed in the A&C Act, 1996. This provision led to challenging a large portion of the awards so as to cause the delay. The 2015 Amendment settled this issue and gave that there will be no automatic stay of the award, however, the amendment failed to answer if this will have a review impact. The Supreme Court addressed this in BCCI Case, (2018) 6 SCC 287, expressing that Section 26 of the 2015 Amendment explained that except otherwise concluded it will be prospective. In particular, the court held that there would be no automatic stay even in cases where the challenge was filed prior to the commencement date.
Petitioner, a construction engineering company that worked on Government Projects was in a circumstance where a lot of cash was locked because of the automatic stay on award passed in its favor. The Supreme Court basically examined the NALCO judgment, 2004 1 SCC 540, and said the order passed incorrectly interpreted Section 36, as it was said that the award will be upheld as a decree only when the time to file the application under Sec. 34 has expired or such application has been refused. The court failed to consider Section 9 (the courts the liberty to pass any interlocutory even after passing of the award prior to its enforcement) and Section 35 of the Act (that Section 36 has to be read in the light of Section 35, which states that award is binding on the parties and persons claiming under them). Therefore, the concept of automatic Stay was never there, further 2015 Amendment clarified it. The Court likewise held that the 2019 Amendment Act neglected to watch the Supreme Court's decision in BCCI. The insertion of Section 87 and the deletion of Section 26 was arbitrary and is contrary to the public interest. The court accordingly struck down Section 87 as it violates Article 14 of the Constitution.
- It expresses that there will be an automatic stay on the enforcement of the award, in situations where the award was challenged that emerged out of Arbitration started before October 23, 2015.
- The Court noticed that automatic Stay on awards marks as an old issue that existed in the A&C Act, 1996. This provision led to challenging a large portion of the awards so as to cause the delay.
- The 2015 Amendment settled this issue and gave that there will be no automatic stay of the award, however, the amendment failed to answer if this will have a review impact.
