Appeals to lie under the un-amended Arbitration Act

19/04/2017

Issue related to ‘automatic stay’ that has been done away with in the amended Arbitration and Conciliation Act, 1996 (mainly for sections 34 and 36) will be applicable on an Award passed prior to 23 October, 2015.

The Delhi High Court has observed the application of the amended provisions of the Arbitration and Conciliation (Amendment) Act, 2015 which also dealt with the issue related to ‘automatic stay’, that has now been done away with in the amended section 36 of the Arbitration and Conciliation Act, 1996. It also differentiates between the interpretation accorded to the terms ‘in relation to arbitral proceedings’ and ‘to the arbitral proceedings’ in the amended Arbitration and Conciliation Act, 1996, s 26.

In the recent judgment of Ardee Infrastructure Pvt. Ltd. v. Anuradha Bhatia and Ors., the Delhi High Court has addressed the controversy with regard to the application of the amended provisions of the Arbitration and Conciliation (Amendment) Act, 2015 (Amending Act). The amendments to, inter alia, Arbitration and Conciliation Act, 1996, s 34 and Arbitration and Conciliation Act, 1996, s 36 were brought about by the Amending Act with retrospective effect from 23 October, 2015. It was the case of the petitioners that as the arbitration process was governed by the un-amended provisions of the Arbitration and Conciliation Act, 1996, the appeal under Arbitration and Conciliation Act, 1996, s 34 would be governed by the un-amended provisions of the Arbitration and Conciliation Act, 1996, and therefore, the petitioners would have the right of an automatic stay on the filing of the appeal under said section. On the other hand, the respondents argue that as the appeal has been filed after 23 October, 2015, the amended provisions would apply and, therefore, there would be no question of any automatic stay and that it was well within the powers of the Ld. Single Judge to pass conditional order even for issuance of notice to the respondent.

The Hon’ble Court has placed reliance on the judgment of ThyssenStahlunionGmbh v Steel Authority of India Ltd. LNIND 1999 SC 906wherein the Hon’ble Apex Court held that, “the provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (the Arbitration and Conciliation Act, 1996).” The Hon’ble Apex Court also defined the scope of the phrase ‘in relation to arbitral proceedings’ mentioned in Arbitration and Conciliation Act, 1996, s 82(2)(a). It held that, “the phrase ‘in relation to arbitral proceedings’ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder.”

In light of the above, the Hon’ble Court analyzed Arbitration and Conciliation Act, 1996, s 26 of the Amending Act and held that the second part of the section makes it clear that the Amending Act and, consequently, the amendments brought about by it in the Arbitration and Conciliation Act, 1996 shall apply in relation to arbitral proceedings commenced on or after the date of commencement of the Amending Act. The Hon’ble Court also observed that it is, therefore, clear this section bifurcates cases on the basis of the commencement of the arbitral proceedings being ‘prior’ or ‘on or after’ the date of commencement of the Amending Act.

The Hon’ble Court then went on to evaluate the matter by way of an illustration wherein three categories were taken. The first category being where the arbitral proceedings commenced prior to 23 October, 2015 and were pending before an arbitral tribunal on 23 October, 2015; the second category being of those cases where arbitral proceedings commenced prior to 23 October, 2015 and the award was also made prior to 23 October, 2015, but the petition under Arbitration and Conciliation Act, 1996, s 34 seeking the setting aside of the award was made after 23 October, 2015; the third category comprising of those cases where the arbitral proceedings commenced prior to 23 October, 2015 and not only the award was made prior to 23 October, 2015, but the petition under Arbitration and Conciliation Act, 1996, s 34 had also been instituted before court prior to 23 October, 2015.

The Hon’ble Court following the law laid down by the Hon’ble Apex Court in the Thyssen case held that “In such a situation, it would have to be considered, independent of Section 26 of the Amending Act, as to whether the amended provisions applied to the said second and third category of cases.” The Hon’ble Supreme Court in this case after considering several earlier decisions, held that all the 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. It was also held that for the right to accrue, there is no necessity that legal proceedings must be pending when the new Act comes into force.

Based on the above observation, the Hon’ble High Court held that, “this exactly covers the situation as obtaining in the second category of cases, where the arbitral proceedings were commenced prior to 23.10.2015 and the award was also made prior to 23.10.2015, but the petition under Section 34 had not yet been filed. This is the same situation as in the present case. Thus, the pendency of any legal proceedings or otherwise would not come in the way of determining as to whether the right had accrued under the unamended provisions or not. Given the fact that the amended Section 36 takes away the right of an automatic stay of enforcement of an award, it is clear that the amendment introduced in Section 36 by virtue of the Amending Act would definitely impinge upon the accrued right of the party against whom the award is given after the arbitral proceedings have been held under the unamended provisions. Since an accrued right is affected, unless a contrary intention appears in the amending statute, the amendments would have to be treated as prospective in operation; prospective from the standpoint of commencement of the arbitral proceedings.”

Lastly, the court drew the following conclusions:

“1) Section 26 of the Amending Act, if a narrow view of the expression ‘to the arbitral proceedings’ is to be taken, is silent on those categories of cases where the arbitral proceedings commenced prior to 23.10.2015 and where even 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

2) In such eventuality, the amended provisions pertaining to those categories would apply only if they were merely procedural and did not affect any accrued right

3) In the facts of the present case, the amendment to Sections 34 and 36, which pertain to the enforceability of an award, certainly affect the accrued rights of the parties.”

The same stance has been taken by the High Court of Calcutta in the case of Saraf Agencies Pvt. Ltd. and Ors. v Federal Agencies for State Property Management and Ors LNIND 2017 CAL 443 wherein it has been held that, “the Act before amendment would apply in relation to the subject Arbitral proceedings and the Court proceedings, and that no application for stay or furnishing of security by the award debtor is necessary.”

Updates powered by Singh & Associates, Founder- Manoj K. Singh, Advocates & Solicitors

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