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Constitutional validity of Section 87
Constitutional validity of section 87
Section 87 of The Arbitration and Conciliation Act, 1996 was introduced through amendment in 2019. Its effect was that changes made by the amendment 2015 will be applicable on and after the date on which the amendment 2015 were made.
Section 34 of the act provide the remedy against the arbitral award in case the party wants to appeal against the order of the arbitral tribunal. Section 36 of the act says that if the proceedings are pending under section 34 then arbitral award cannot be enforced but this does not means then pending proceedings will lead to automatic stay on the arbitral award, parties has to obtain separate stay order for the arbitral award. Contrary to this, section 26 of the act provides that changes of amendment in 2015 will applicable on the proceedings on or before the cut off date which means that automatic stay will be imposed on the proceedings instituted on the date of commencement of 2015 amendment. This section was interpreted by The Supreme Court of India in the case of BCCI vs. Kochi Cricket where court said that the word used in section 36 of the act implies that 2015 amendment will be applicable on proceedings instituted as on the date of commencement of 2015 amendment.
In 2019 section 87 was introduced via amendment in The Arbitration and Conciliation Act, 1996 which lead to automatic stay on proceedings due to the mere pendency of a petition under Section 34 of the Arbitration Act instituted as on the date of commencement of 2015 amendment. This section was challenged in the case of Hindustan Construction Company Limited vs. Union Of India, on the basis that this amendment has the effect of rendering the judgement given by court in BCCI vs. Kochi Cricket ineffective. Another issue which was raised regarding insertion of section 87 is that it violates article 19 (1) (g), article 14 and article 21 of The Constitution of India. Court answering the issue said that main purpose of the amendment in section 34 and section 36 was to decrease or eliminate the interference of court in the arbitral proceedings and introduction of section 87 via amendment 2019 frustrates that very purpose by giving effect to the provision of automatic stay on the arbitral award if the petition under section 34 of the arbitration act is pending on the date of commencement of 2015 amendment. These changes via amendment 2019 also delays the enforcement of arbitral award and which can lead to injustice to the award holder because despite having judgement in his favour he has to wait for the disposal of the petition which is pending under section 34 of the arbitration act, for enforcement of the arbitral Award. Court reinstated section 26 and said that insertion of section 87 leading to repeal of section 26 arbitration act was invalid, it means changes made through amendment 2015 will be applicable from the date of commencement of the 2015 amendment and automatic stay will not operate on arbitral award, party have to obtain a separate decree for stay order on arbitral award. Also with the removal of section 87 the decision in the case of BCCI vs. Kochi Cricket was restored. Finally court held section 87 of The Arbitration and Conciliation Act, 1996 in violation of article 14, article 21 and article 19 (1)(g) of The constitution of India and struck down section 87.
- 2015 amendment
- 2019 amendment
- case laws
