Automatic Stay on Arbitral Awards in light of Hindustan Construction Company v Union of India
Volume III, Issue III, 2020
The provisions for automatic stay on the enforcement of an arbitral award under Section 36 of the Arbitration and Conciliation Act 1996, due to a challenge to set aside the award under Section 34 have long been criticized as going against the object of the Act, i.e. to provide a speedy and cost effective method of dispute resolution with minimal judicial intervention.
This irregularity was rectified by the Arbitration and Conciliation (Amendment) Act 2015 by amending Section 36 of the Act to negative the provisions for automatic stay on the filing of a Section 34 petition. Furthermore, the Supreme Court, in the case of BCCI v Kochi Cricket Pvt. Ltd. Had categorically stated that the judicial interpretation of Section 36 to allow an automatic stay on the enforcement of an arbitral award was patently false as the proceedings under Section 36 were merely procedural in nature. The Court also held that the 2015 amendment would also apply to Section 34 petitions filed before the commencement of the 2015 Amendment due to the same reason.
However, the legislature enacted the Arbitration and Conciliation (Amendment) Act 2019 to substantially negate all the progress made by the 2015 Amendment and the BCCI judgement by inserting Section 87 and repealing Section 26 that was inserted by the 2015 Amendment.
The present paper is an in-depth analysis of the evolution of the provisions for automatic stay on arbitral awards which finally led to the Supreme Court’s decision in the case of Hindustan Construction Company v Union of India, in which the Court has held that Section 87 of the 2019 Amendment was violative of Article 14 of the Constitution, and that the language of Section 36 warrants no automatic stay on enforcement.