Topic: Board of Cricket in India v. Kochi Cricket Pvt. Ltd. And Ors.
In The Supreme Court Of India - Civil Appellate Jurisdiction - Civil Appeal Nos.2879-2880 Of 2018 (Arising Out Of Slp (C) Nos.19545-19546 Of 2016) Board Of Control For Cricket In India V/S Kochi Cricket Pvt. Ltd. And Etc
WITH CIVIL APPEAL NO. 2881 OF 2018 (Arising out of SLP (C) No.20224 of 2016) WITH CIVIL APPEAL NO. 2882 OF 2018 (Arising out of SLP (C) No.5021 of 2017)
R.F. NARIMAN, J.
1. Leave granted.
2. The present batch of appeals raises an important question as to the construction of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as the “Amendment Act”), which reads as follows:
“Section 26. Act not to apply to pending arbitral proceedings.
Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”
3. The questions raised in these appeals require the mentioning of only a few important dates. In four of these appeals, namely, Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors. (SLP(C) No. 19545- 19546 of 2016), Arup Deb & Ors. v. Global Asia Venture Company (SLP(C) No. 20224 of 2016), M/s Maharashtra Airports Development Company Ltd. v. M/s PBA Infrastructure Ltd. (SLP(C) No.5021 of 2017) and UB Cotton Pvt. Ltd. v. Jayshri Ginning and Spinning Pvt. Ltd. (SLP(C) No.33690 of 2017), Section 34 applications under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “1996 Act”) were all filed prior to the coming into force of the Amendment Act w.e.f. 23rd October, 2015. In the other four appeals, the Section 34 applications were filed after the Amendment Act came into force. The question with which we are confronted is as to whether Section 36, which was substituted by the Amendment Act, would apply in its amended form or in its original form to the appeals in question.
4. The relevant facts of the first appeal namely, Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors. (SLP(C) Nos. 19545-19546 of 2016), are as follows. A notice dated 18th January, 2012 was sent by Respondent No.1 invoking arbitration under a franchise agreement dated 12th March, 2011. A Sole Arbitrator was appointed, who delivered two arbitral awards dated 22 nd June, 2015 against the Appellant and in favour of the Respondents. On 16th September, 2015, the Appellants filed an application under Section 34 of the 1996 Act in the Bombay High Court challenging the aforesaid arbitral awards. On 26th November, 2015, the Respondents filed two execution applications in the High Court for payment of the amounts awarded under the two awards, pending enforcement of such awards. These were resisted by two Chamber Summons filed by the Appellants dated 3 rd December, 2015, praying for dismissal of the aforesaid execution applications stating that the old Section 36 would be applicable, and that, therefore, there would be an automatic stay of the awards until the Section 34 proceedings had been decided. The Chamber Summons were argued before a learned Single Judge, who, by the impugned judgment in Special Leave Petition (Civil) No.19545-19546 of 2016, dismissed the aforesaid Chamber Summons and found that the amended Section 36 would be applicable in the facts of this case. This is how the appeal from the aforesaid judgment has come before us.
5. As aforementioned, the skeletal dates necessary to decide the present appeals in the other cases would only be that so far as two of the other appeals are concerned, namely, Arup Deb & Ors. v. Global Asia Venture Company (SLP(C) No.20224 of 2016) and M/s Maharashtra Airports Development Company Ltd. v. M/s PBA Infrastructure Ltd. (SLP(C) No.5021 of 2017), the Section 34 applications were filed on 27 th April, 2015, and 25th May, 2015 respectively and the stay petitions or execution applications in those cases filed under Section 36 were dated 16th December, 2015 and 26 th October, 2016 respectively. In U.B. Cotton Pvt. Ltd. v. Jayshri Ginning and Spinning Pvt. Ltd. (SLP(C) No.33690 of 2017), the Section 34 application was filed on 22 nd February, 2013 and the execution application was filed in 2014, which was transferred, by an order dated 12 th January, 2017, to the Commercial Court, Rajkot as Execution Petition No. 1 of 2017. In the other cases, namely, Wind World (India) Ltd. v. Enercon GMBH through its Director (SLP(C) Nos.8372-8373 of 2017), Yogesh Mehra v. Enercon GMBH through its Director (SLP(C) Nos.8376-8378 of 2017), Ajay Mehra v. Enercon GMBH through its Director (SLP(C) Nos.8374-8375 of 2017), and Anuradha Bhatia v. M/s Ardee Infrastructure Pvt. Ltd. (SLP(C) Nos.9599-9600 of 2017), the Section 34 applications were filed after 23 rd October, 2015, viz., on 7th December, 2016 in the first two appeals, on 6th December, 2016 in the third appeal and on 4th January, 2016 in the last appeal.
6. Section 36, which is the bone of contention in the present appeals, is set out hereinbelow:
PRE-AMENDED PROVISION “Section 36. Enforcement.
Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.” AMENDED PROVISION “Section 36. Enforcement.
(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.
(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.
(3) Upon filing of an application under sub- section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).”
7. Wide ranging arguments have been made on behalf of the parties before us. Shri C.A. Sundaram, learned Senior Advocate, leading the charge on behalf of the Appellants, has argued that Section 26 of the Amendment Act consists of two parts. According to him, the second part, which makes the Amendment Act applicable in relation to arbitral proceedings commenced on or after the date of commencement of this Act, is the principal part, whereas the first part of Section 26 is in the nature of a proviso or exception. It is his submission, therefore, that so far as the first part is concerned, Section 6 of the General Clauses Act, 1897 would be attracted, in which event the vested right to challenge arbitral awards would continue by virtue of the said Section under the old Act, which would, therefore, apply to the facts of all these cases. For this purpose, he relied upon certain passages in Thyssen Stahlunion v. Steel Authority of India (1999) 9 SCC 334, N.S. Nayak & Sons v. State of Goa (2003) 6 SCC 56, and Milkfood Ltd. v GMC Ice Cream Pvt. Ltd. (2004) 7 SCC 288. Given the fact that the vested right is preserved, the amendment is only prospective in nature, and for this purpose, he has cited a large number of judgments, starting with the celebrated judgment in Garikapati Veeraya v. N. Subbiah Choudhry (1957) SCR 488. He then referred to a chart of the effect of the amendments made in general by the Amendment Act, in which he divided the amended sections into three parts, namely, those that are only procedural, those that are only substantive and those that are procedural as well as substantive. In his submission, Section 36 is substantive in nature, in that, in place of an automatic stay of the award under the old regime, Order LXI, Rule 5 of the CPC will now be applicable. As a result of this, instead of an automatic stay, a deposit of the entire amount or substantial amount of the award would now have to be made in the interim period between the award and the decision in the Section 34 application. He referred to the 246th Law Commission Report as well as the debates leading to the Amendment Act to buttress his submissions. He also referred to the report of a High Level Committee headed by Justice B.N. Srikrishna, delivered on 30th July, 2017, in which, after referring to the divergent views taken by the High Courts, the Committee recommended that the Amendment Act will not apply to arbitral proceedings as well as Court proceedings which arise out of such arbitral proceedings, where the arbitral proceedings themselves have commenced in accordance with Section 21 before the commencement of the Amendment Act. Concomitantly, according to the High Level Committee, the Amendment Act will only apply to arbitral proceedings commenced on or after the commencement of the Amendment Act and to Court proceedings that arise out of or in relation to such arbitral proceedings.
8. Shri K.V. Viswanathan, learned Senior Advocate appearing on behalf of the BCCI in Civil Appeal arising out of SLP(C) No.19546 of 2016, has argued that the expression “arbitral proceedings” in both parts of Section 26 refers only to proceedings before an arbitrator and is the same in both parts. Consequently, it is clear that it is only arbitral proceedings that have commenced after 23 rd October, 2015 and Court proceedings in relation thereto, that will be governed by the Amendment Act. If the arbitral proceedings have commenced under the old Act, then those proceedings as well as all Court proceedings in relation thereto, would be governed only by the old Act. According to him, Section 6 of the General Clauses Act would be attracted, insofar as Court proceedings are concerned, when the first part of Section 26 is applied. According to him, the second part would not become superfluous on his reading of Section 26, as the option given to the parties would be given only on application of the first part and not the second. According to the learned senior counsel, the judgment in Thyssen (supra) is determinative of the present case, inasmuch as an entirely new challenge procedure under Section 34 is laid down by the amendments made in 2015, somewhat like the challenge procedure laid down in the original Section 34 of the 1996 Act, when contrasted with Section 30 of the Arbitration Act, 1940. According to the learned senior counsel, party autonomy must be respected, and this being the position, parties who have entered into agreements in the expectation that the old regime will apply cannot suddenly be foisted with a completely different regime under the Amendment Act. According to the learned senior counsel, Section 85 of the 1996 Act is similar to Section 26 of the Amendment Act and, therefore, the judgment in Thyssen (supra) must apply on all fours. The learned senior counsel also forcefully put to us a number of anomalies that would arise if the amendment to Section 36 were to be given retrospective operation. According to him, the right to be governed by the broad appellate/supervisory procedure found in sections 34 and 37 of the 1996 Act would be a vested right, resulting in the Amendment Act not being applicable. Insofar as Section 36 is concerned, the learned senior counsel made elaborate submissions on the difference between enforceability and execution, and stated that whereas the former dealt with substantive rights, the latter dealt with procedural rights. Equally, the expression “has been” contained in the amended Section 36(2) is purely contextual and equivalent to the expression “is”. For this, he has cited certain judgments which we will refer to in due course. According to the learned senior counsel, the decision in National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004) 1 SCC 540, which exhorted the legislature to amend Section 36, cannot take the matter any further, in that the said decision cannot be read to say that Section 36 should be substituted with retrospective effect.
9. Shri Tushar Mehta, learned Additional Solicitor General appearing in SLP (C) No.5021 of 2017, supported the arguments of his predecessor and added that, given a retrospective operation of Section 36, various anomalies would arise, which would lead to hardship and inconvenience and that, therefore, we should not impart retrospective operation to the aforesaid provision.
10. Shri Arvind Datar, learned senior advocate appearing in SLP (C) No.20224 of 2016, supported Shri Viswanathan in stating that the amendments made by the Amendment Act were very far reaching and changed the basis of challenge to arbitral awards. It would not be fair to retrospectively change the rules of the game insofar as such awards are concerned. According to the learned senior counsel, the expression “in relation to” that was used in Section 85 of the 1996 Act, as expounded in Thyssen (supra), was because Section 85 repealed three enactments together, and not because it sought to refer to Court proceedings. He reiterated that in the interest of clarity, the report of the High Level Committee, headed by Justice B.N. Srikrishna referred to by Shri Sundaram, was the correct position so that it clearly be delineated that the moment arbitral proceedings commenced before the Amendment Act, such “proceedings”, which would include all Court proceedings in relation thereto, would be governed by the old Act, and only arbitral proceedings commenced after the Amendment Act came into force, together with related Court proceedings, would all be governed by the Amendment Act.
11. Shri Anirudh Krishnan, learned Advocate appearing for the intervenor in SLP (C) No.20224 of 2016, referred to Section 85A contained in the 246 th Law Commission Report which, according to him, was given a go-by and was not followed in Section 26. He referred to the Law Minister’s speech stating that the amendment must be given prospective effect and further argued that the reason why the expression “in relation to” was used in the second part of Section 26 was because a distinction was made on whether the seat of the arbitral tribunal was in India or outside India. According to the learned counsel, since amendments have been made in Part II of the 1996 Act as well, if a seat based categorization is seen, the expression “in relation to” would not apply to Court proceedings simpliciter, but to arbitral tribunals which have their seat outside India. He further argued that Sections 34 and 36 are part of one scheme and are the “appeal package” insofar as arbitral proceedings are concerned and must, therefore, go along with the arbitral proceedings. This being the position, it is clear that the pre-amendment position would apply in case of arbitrations which commenced before the Amendment Act came into force.
12. Leading arguments for the other side, Shri Neeraj Kaul, learned senior counsel appearing in SLP(C) Nos.19545-19546 of 2016, emphasized that in the first part of Section 26, there is an absence of the mention of Court proceedings. According to the learned senior counsel, this was of great significance and would, therefore, show that the Amendment Act would retrospectively apply to Court proceedings, as distinguished from arbitral proceedings. On a correct construction of Section 26, according to the learned senior counsel, the second part of Section 26 takes within its sweep both arbitral proceedings as well as Court proceedings in relation thereto and would, therefore, apply to arbitral proceedings as well as Court proceedings in relation thereto, which have commenced after the Amendment Act came into force. For this purpose, he relied heavily on paragraph 23 in Thyssen (supra) and, submitted that, therefore, on a true construction of Section 26, Section 34 proceedings that have commenced before the Amendment Act came into force would be governed by the Amendment Act, and arbitral proceedings which commenced after the Amendment Act, together with Section 34 applications made in relation thereto, would then be governed under the second part of Section 26 of the Amendment Act. According to the learned senior counsel, no vested right exists inasmuch as Section 34 proceedings are not appellate proceedings. In any case, Section 26 evinces a contrary intention and would take away any such right assuming a vested right is involved. He countered the arguments of Shri Viswanathan, in particular, by stating that the original intent of the 1996 Act was to minimise Court intervention and to restrict the grounds of challenge of arbitral awards, and inasmuch as the decisions of this Court in ONGC v. Saw Pipes Ltd (2003) 5 SCC 705 and ONGC Ltd. v. Western Geco International Ltd. (2014) 9 SCC 263 had gone contrary to the original intention of the 1996 Act, all that the Amendment Act did was to bring the 1996 Act back, in accordance with its original intent, by nullifying the aforesaid judgments. He added that the ground of patent illegality that had been added by the Amendment Act also differs from the said ground as understood in the earlier case law, and has been added only qua domestic and not international commercial arbitrations. Learned senior counsel then argued that given the fact that court proceedings in this country take an inordinately long time, the whole object of the amendment to Section 36 would be stultified, if Section 36 is only to apply to court proceedings that result from arbitral proceedings, which have commenced on and after the commencement of the Amendment Act. That this could never be the case is clear from a judgment of the House of Lords, reported as Minister of Public Works of the Government of the State of Kuwait v. Sir Frederick Snow and Partners, (1984) 2 WLR 340, which is strongly relied upon. Learned senior counsel also stated that there is no distinction between execution and enforcement, and “enforcement” under Section 36, is nothing but execution of an award, as if it were a decree under the Code of Civil Procedure, 1908. He further argued that it is well settled that execution proceedings are procedural in nature and would be retrospective and, therefore, the substituted Section 36 would apply even in cases where the Section 34 application is made before the commencement of the Amendment Act. Another argument was that the expression “has been” contained in Section 36(2), as amended, would, in any case, refer to Section 34 proceedings that have already been filed, even pre- amendment, and for this purpose, he referred to certain judgments.
13. Shri P. Chidambaram, learned senior counsel appearing for the Respondents in SLP (C) Nos.8372-8373 of 2017, emphasised the word “but” that appears in Section 26, which not only segregates the first part of Section 36 from the second part, but also makes it clear that the two parts apply to two different situations. The first part, according to learned senior counsel, would apply to the arbitral proceedings themselves i.e. from the Section 21 stage up to the Section 32 stage of the 1996 Act, whereas the second part would include all proceedings that begin from the Section 21 stage and all court proceedings in relation thereto. According to Shri Chidambaram, Section 36, in its original form, is only a clog on the right of the decree holder. He argued that there is no corresponding vested right in the judgment debtor to indefinitely delay proceedings and for this purpose, he cited several judgments. According to the learned senior counsel, Section 36 proceedings are entirely independent of Section 34 proceedings and the moment Section 36 speaks of an award being enforceable under the Code of Civil Procedure as if it were a decree, enforceability only means execution and nothing else. He then referred to Satish Kumar v. Surinder Kumar, (1969) 2 SCR 244 to show that an award is not mere waste paper when it is delivered and before it becomes a decree, as it decides the rights of the parties and, therefore, being final and binding on parties, is a judgment delivered between parties, which may become executable on certain conditions being met, but which do not detract from the fact that the award itself has “vitality”.
14. Shri Kapil Sibal, learned senior counsel appearing on behalf of the Respondents in SLP (C) Nos.8374-8375 of 2017, has argued before us that the Statement of Objects and Reasons for the Amendment Act, in particular paragraph 4 thereof, would make it clear that the Amendment Act was necessitated because of India’s poor performance in contract enforcement among the nations in the world. For this reason, according to the learned senior counsel, it is clear that Section 26 needs to be interpreted in such a manner as would further the object of the Amendment Act and that this being so, it is clear that Section 26 must be read as being a provision which is not a savings provision at all, but a provision which destroys all rights, if any, that vested in the Appellants in the 1996 Act as unamended. For this purpose, he cited certain judgments which will be referred to in the course of our judgment.
15. Dr. A.M. Singhvi, learned senior counsel appearing on behalf of the Respondents in SLP (C) Nos.8376-8378 of 2017, has stated that the correct construction of Section 26 would be the intermediate between the extremes that have been canvassed before us by learned counsel appearing on behalf of the Appellants. According to him, it is important to emphasise that the first part applies only to arbitral proceedings before an arbitral tribunal and the second part would apply only to court proceedings in relation thereto. This becomes clear from two things; one, the expression “to” appearing in the first part as contrasted with the expression “in relation to” appearing in the second part; and, two, the presence of Section 21 of the 1996 Act in the first part and its absence in the second part of Section 26. According to him, this would be the correct interpretation of Section 26, which would result in no anomalies, as it is clear that the date of commencement of an arbitral proceeding would be fixed with reference to Section 21 and the date of commencement of a court proceeding would be fixed with reference to the date on which the court proceeding is filed, and it is only arbitral proceedings and court proceedings which are filed after the commencement of the Amendment Act that would be so covered.
16. Shri Nakul Dewan, learned Advocate appearing on behalf of the Respondent in SLP (C) No.20224 of 2016 has argued that the first part of Section 26 speaks of “the arbitral proceedings” commenced in accordance with the provisions of Section 21. The second part of Section 26 omits the word “the” as well as Section 21, making it clear that it is the arbitral proceedings before the Arbitrator alone that is referred to in the first part of Section 26, as opposed to Court proceedings referred to in the second part of Section 26, where the expression “in relation to arbitral proceedings” does not contain the word “the”. According to him, such interpretation is not contrary to the doctrine of party autonomy, which is never conferred on any party without limits, there being non-derogable provisions in the 1996 Act from which parties, even by agreement, cannot derogate. According to the learned counsel, each and every Court proceeding under the 1996 Act is a separate and distinct proceeding and it is the date of such proceeding alone which is relevant for the purpose of determining whether the Amendment Act applies. According to the learned counsel, there is no vested right to resist the execution of an award merely because an application for setting aside the award is pending under Section 34 of the 1996 Act. Even on the assumption that there is such a vested right, it is taken away, given the clear legislative intent of Section 26 of the Amendment Act. Lastly, he argued that on facts, clause 22.2(5) of the agreement between the parties automatically brought in all amendments to the 1996 Act and that, therefore, Section 36 in its amended form would necessarily apply to the facts in this case.
17. Having heard extensive and wide ranging arguments on the reach of Section 26 of the Amendment Act, it will be important to first bear in mind the principles of interpretation of such a provision. That an Amendment Act does include within it provisions that may be repealed either wholly or partially and that the provisions of Section 6 of the General Clauses Act would generally apply to such Amendment Acts is beyond any doubt – See Bhagat Ram Sharma v. Union of India, 1988 (Supp) SCC 30 at 40-41. That such a provision is akin to a repeal and savings clause would be clear when it is read with Section 27 of the Amendment Act and Section 85 of the 1996 Act, which are set out hereinbelow:
“Section 27. Repeal and savings.
(1) The Arbitration and Conciliation (Amendment) Ordinance, 2015, is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the principal Act, as amended by the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of the principal Act, as amended by this Act.
xxx xxx xxx Section 85. Repeal and savings.— (1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,—
(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;
(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.”
18. At this point, it is instructive to refer to the 246 th Law Commission Report which led to the Amendment Act. This Report, which was handed over to the Government in August, 2014, had this to state on why it was proposing to replace Section 36 of the 1996 Act:
“AUTOMATIC STAY OF ENFORCEMENT OF THE AWARD UPON ADMISSION OF CHALLENGE
43. Section 36 of the Act makes it clear that an arbitral award becomes enforceable as a decree only after the time for filing a petition under section 34 has expired or after the section 34 petition has been dismissed. In other words, the pendency of a section 34 petition renders an arbitral award unenforceable. The Supreme Court, in National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540 held that by virtue of section 36, it was impermissible to pass an Order directing the losing party to deposit any part of the award into Court. While this decision was in relation to the powers of the Supreme Court to pass such an order under section 42, the Bombay High Court in Afcons Infrastructure Limited v. The Board of Trustees, Port of Mumbai 2014 (1) Arb LR 512 (Bom) applied the same principle to the powers of a Court under section 9 of the Act as well. Admission of a section 34 petition, therefore, virtually paralyzes the process for the winning party/award creditor.
44. The Supreme Court, in National Aluminium, has criticized the present situation in the following words:
“However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under section 34 of the Act leaving no discretion in the court to put the parties on terms, in our opinion, defeats the very objective of the alternate dispute resolution system to which arbitration belongs. We do find that there is a recommendation made by the concerned Ministry to the Parliament to amend section 34 with a proposal to empower the civil court to pass suitable interim orders in such cases. In view of the urgency of such amendment, we sincerely hope that necessary steps would be taken by the authorities concerned at the earliest to bring about the required change in law.”
45. In order to rectify this mischief, certain amendments have been suggested by the Commission to section 36 of the Act, which provide that the award will not become unenforceable merely upon the making of an application under section 34.
So far as the transitory provision, so described by the Report, is concerned, the Report stated:
“76. The Commission has proposed to insert the new section 85-A to the Act, to clarify the scope of operation of each of the amendments with respect to pending arbitrations/proceedings. As a general rule, the amendments will operate prospectively, except in certain cases as set out in section 85-A or otherwise set out in the amendment itself.” The Report then went on to amend Section 36 as follows:
“Amendment of Section 36
19. In section 36, (i) add numbering as sub- section (1) before the words “Where the time” and after the words “Section 34 has expired,” delete the words “or such application having been made, it has been refused” and add the words “then subject to the provision of sub-
section (2) hereof,”
(ii) insert sub-section “(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render the award unenforceable, unless upon a separate application made for that purpose, the Court grants stay of the operation of the award in accordance with the provisions of sub-section (3) hereof;”
(iii) insert sub-section “(3) Upon filing of the separate application under subsection (2) for stay of the operation of the award, the court may, subject to such conditions as it may deem fit, grant stay of the operation of the award for reasons to be recorded in writing.”
(iv) insert proviso ”Provided that the Court shall while considering the grant of stay, in the case of an award for money shall have due regard to the provisions for grant of stay of money decrees under the Code of Civil Procedure, 1908.” [NOTE: This amendment is to ensure that the mere filing of an application under section 34 does not operate as an automatic stay on the enforcement of the award. The Supreme Court in National Aluminium Co. Ltd. v.
Pressteel & Fabrications (P) Ltd. and Anr, (2004) 1 SCC 540, recommends that such an amendment is the need of the hour.]”1 As a matter of fact, the amended Section 36 only brings back Article 36(2) of the UNCITRAL Model Law, which is based on Article 6 of the New York Convention, and which reads as under:
“36(2). If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.” The transitory provision Section 85A was then set out as follows:
“Insertion of Section 85A A new section Section 85A on transitory provisions has been incorporated. Transitory provisions.— (1) Unless otherwise provided in the Arbitration and Conciliation (Amending) Act, 2014, the provisions of the instant Act (as amended) shall be prospective in operation and shall apply only to fresh arbitrations and fresh applications, except in the following situations –
(a) the provisions of section 6-A shall apply to all pending proceedings and arbitrations. Explanation: It is clarified that where the issue of costs has already been decided by the court/tribunal, the same shall not be opened to that extent.
(b) the provisions of section 16 sub-section (7) shall apply to all pending proceedings and arbitrations, except where the issue has been decided by the court/tribunal.
(c) the provisions of second proviso to section 24 shall apply to all pending arbitrations. (2) For the purposes of the instant section,—
(a) “fresh arbitrations” mean arbitrations where there has been no request for appointment of arbitral tribunal; or application for appointment of arbitral tribunal; or appointment of the arbitral tribunal, prior to the date of enforcement of the Arbitration and Conciliation (Amending) Act, 2014.
(b) “fresh applications” mean applications to a court or arbitral tribunal made subsequent to the date of enforcement of the Arbitration and Conciliation (Amending) Act, 2014. [NOTE: This amendment is to clarify the scope of operation of each of the proposed amendments with respect to pending arbitrations/proceedings.]”
19. The debates in Parliament in this context were referred to by counsel on both sides. Shri T. Satpathy (Dhenkanal) stated:
“You have brought in an amendment to Section 25 (a) saying that this Act will not be retrospective. When the Bill for judges’ pension and salary could be retrospective, why can you not amend it with retrospective effect so that ONGC-RIL case could be brought under this Act and let it be adjudicated as early as possible within 18 months and let the people of this country get some justice some time. Let us be fair to them.” To similar effect is the speech of Shri APJ Reddy, which reads as under:
“It is unclear whether the amended provisions shall apply to pending arbitration proceedings.
The Law Commission of India, in its 246th Report, which recommended amendments to the Arbitration & Conciliation Act, 1996, had proposed to insert a new Section 85-A to the Act, which would clarify the scope of operation to each amendment with respect to pending arbitration proceedings. However, this specific recommendation has not been incorporated into the Ordinance. One of the reasons for bringing about this ordinance is to instill a sense of confidence in foreign investors in our judicial process, with regard to certainty of implementation in practice and ease of doing business. Therefore, it is strongly urged to incorporate Section 85A as proposed by the 246th Report of the Law Commission of India, where it clearly states the scope of operation of the amended provisions.” The Law Minister in response to the aforesaid speeches stated:
“Nobody has objected to this Bill but some of our friends have observed certain things. They have said that the Bill is the need of the hour and that a good Bill has been brought. A few suggestions have been given by them. One of the suggestions was that it should have retrospective effect. If the parties agree, then there will be no problem. Otherwise, it will only have prospective effect.”
20. Finally, Section 26 in its present form was tabled as Section 25A at the fag end of the debates, and added to the Bill. A couple of things may be noticed on a comparison of Section 85A, as proposed by the Law Commission, and Section 26 as ultimately enacted. First and foremost, Section 85A states that the amendments shall be prospective in operation and then bifurcates proceedings into two parts – (i) fresh arbitrations, and (ii) fresh applications. Fresh arbitrations are defined as various proceedings before an arbitral tribunal that is constituted, whereas fresh applications mean applications to a Court or Tribunal, made subsequent to the date of enforcement of the Amendment Act. Three exceptions are provided by Section 85A, to which the Amendment Act will apply retrospectively. The first deals with provisions relating to costs, the second deals with the new provision contained in Section 16(7) (which has not been adopted by the Amendment Act) and the third deals with the second proviso to Section 24, which deals, inter alia, with oral hearings and arguments on a day-to-day basis and the non-grant of adjournments, unless sufficient cause is made out.
21. What can be seen from the above is that Section 26 has, while retaining the bifurcation of proceedings into arbitration and Court proceedings, departed somewhat from Section 85A as proposed by the Law Commission.
22. That a provision such as Section 26 has to be construed literally first, and then purposively and pragmatically, so as to keep the object of the provision also in mind, has been laid down in Thyssen (supra) in paragraph 26 as follows:
“26. Present-day courts tend to adopt a purposive approach while interpreting the statute which repeals the old law and for that purpose to take into account the objects and reasons which led to the enacting of the new Act. We have seen above that this approach was adopted by this Court in M.M.T.C. Ltd. case [(1996) 6 SCC 716]. Provisions of both the Acts, old and new, are very different and it has been so observed in Sundaram Finance Ltd. case [(1999) 2 SCC 479]. In that case, this Court also said that provisions of the new Act have to be interpreted and construed independently and that in fact reference to the old Act may actually lead to misconstruction of the provisions of the new Act. The Court said that it will be more relevant, while construing the provisions of the new Act, to refer to the UNCITRAL Model Law rather than the old Act.
In the case of Kuwait Minister of Public Works v. Sir Frederick Snow and Partners [(1984) 1 All ER 733 (HL)] the award was given before Kuwait became a party to the New York Convention recognised by an Order in Council in England. The House of Lords held that though a foreign award could be enforced in England under the (U.K.) Arbitration Act, 1975 as when the proceedings for enforcement of the award were initiated in England Kuwait had become a party to the Convention. It negatived the contention that on the date the award was given Kuwait was not a party to the New York Convention.” (at pages 370-371) Similarly, in Milkfood Limited (supra) at 315, this Court, while construing Section 85 of the 1996 Act, had this to say:
“70. Section 85 of the 1996 Act repeals the 1940 Act. Sub-section (2) of Section 85 provides for a non obstante clause. Clause (a) of the said sub-section provides for saving clause stating that the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before the said Act came into force. Thus, those arbitral proceedings which were commenced before coming into force of the 1996 Act are saved and the provisions of the 1996 Act would apply in relation to arbitral proceedings which commenced on or after the said Act came into force. Even for the said limited purpose, it is necessary to find out as to what is meant by commencement of arbitral proceedings for the purpose of the 1996 Act wherefor also necessity of reference to Section 21 would arise. The court is to interpret the repeal and savings clauses in such a manner so as to give a pragmatic and purposive meaning thereto. It is one thing to say that commencement of arbitration proceedings is dependent upon the facts of each case as that would be subject to the agreement between the parties. It is also another thing to say that the expression “commencement of arbitration proceedings” must be understood having regard to the context in which the same is used; but it would be a totally different thing to say that the arbitration proceedings commence only for the purpose of limitation upon issuance of a notice and for no other purpose. The statute does not say so. Even the case-laws do not suggest the same. On the contrary, the decisions of this Court operating in the field beginning from Shetty's Constructions [(1998) 5 SCC 599] are ad idem to the effect that Section 21 must be taken recourse to for the purpose of interpretation of Section 85(2)(a) of the Act. There is no reason, even if two views are possible, to make a departure from the decisions of this Court as referred to hereinbefore.”
23. All learned counsel have agreed, and this Court has found, on a reading of Section 26, that the provision is indeed in two parts. The first part refers to the Amendment Act not applying to certain proceedings, whereas the second part affirmatively applies the Amendment Act to certain proceedings. The question is what exactly is contained in both parts. The two parts are separated by the word ‘but’, which also shows that the two parts are separate and distinct. However, Shri Viswanathan has argued that the expression “but” means only that there is an emphatic repetition of the first part of Section 26 in the second part of the said Section. For this, he relied upon the Concise Oxford Dictionary on Current English, which states:
“introducing emphatic repetition; definitely (wanted to see nobody, but nobody)”.
Quite obviously, the context of the word “but” in Section 26 cannot bear the aforesaid meaning, but serves only to separate the two distinct parts of Section 26.
24. What will be noticed, so far as the first part is concerned, which states, “Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree…” is that: (1) “the arbitral proceedings” and their commencement is mentioned in the context of Section 21 of the principal Act; (2) the expression used is “to” and not “in relation to”; and (3) parties may otherwise agree. So far as the second part of Section 26 is concerned, namely, the part which reads, “…but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act” makes it clear that the expression “in relation to” is used; and the expression “the” arbitral proceedings and “in accordance with the provisions of Section 21 of the principal Act” is conspicuous by its absence.
25. That the expression “the arbitral proceedings” refers to proceedings before an arbitral tribunal is clear from the heading of Chapter V of the 1996 Act, which reads as follows:
“Conduct of Arbitral Proceedings” The entire chapter consists of Sections 18 to 27 dealing with the conduct of arbitral proceedings before an arbitral tribunal. What is also important to notice is that these proceedings alone are referred to, the expression “to” as contrasted with the expression “in relation to” making this clear. Also, the reference to Section 21 of the 1996 Act, which appears in Chapter V, and which speaks of the arbitral proceedings commencing on the date on which a request for a dispute to be referred to arbitration is received by the respondent, would also make it clear that it is these proceedings, and no others, that form the subject matter of the first part of Section 26. Also, since the conduct of arbitral proceedings is largely procedural in nature, parties may “otherwise agree” and apply the Amendment Act to arbitral proceedings that have commenced before the Amendment Act came into force. 2 Section 29A of the Amendment Act provides for time limits within which an arbitral award is to be made. In Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 at 633, this Court stated:
“(iii) Every litigant has a vested right in substantive law but no such right exists in procedural law.
(iv) A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished.
In stark contrast to the first part of Section 26 is the second part, where the Amendment Act is made applicable “in relation to” arbitral proceedings which commenced on or after the date of commencement of the Amendment Act. What is conspicuous by its absence in the second part is any reference to Section 21 of the 1996 Act. Whereas the first part refers only to arbitral proceedings before an arbitral tribunal, the second part refers to Court proceedings “in relation to” arbitral proceedings, and it is the commencement of these Court proceedings that is referred to in the second part of Section 26, as the words “in relation to the arbitral
(v) A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication.” It is, inter alia, because timelines for the making of an arbitral award have been laid down for the first time in Section 29A of the Amendment Act that parties were given the option to adopt such timelines which, though procedural in nature, create new obligations in respect of a proceeding already begun under the unamended Act. This is, of course, only one example of why parties may otherwise agree and apply the new procedure laid down by the Amendment Act to arbitral proceedings that have commenced before it came into force.
proceedings” in the second part are not controlled by the application of Section 21 of the 1996 Act. Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings – arbitral proceedings themselves, and Court proceedings in relation thereto. The reason why the first part of Section 26 is couched in negative form is only to state that the Amendment Act will apply even to arbitral proceedings commenced before the amendment if parties otherwise agree. If the first part of Section 26 were couched in positive language (like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, “arbitral proceedings” having been subsumed in the first part cannot re-appear in the second part, and the expression “in relation to arbitral proceedings” would, therefore, apply only to Court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force.
26. We now consider some of the submissions of learned counsel for the parties as to what ought to be the true construction of Section 26. According to Shri Sundaram, the second part of Section 26 should be taken to be the principal part, with the first part being read as an exception to the principal part. This is so that Section 6 of the General Clauses Act then gets attracted to the first part, the idea being to save accrued rights. Section 6 applies unless a contrary intention appears in the enactment in question. The plain language of Section 26 would make it clear that a contrary intention does so appear, Section 26 being a special provision having to be applied on its own terms.
27. Thus, in Transport and Dock Workers' Union & others v. New Dholera Steamship Ltd., Bombay and others, (1967) 1 LLJ 434, a Five Judge Bench of this Court held:
“6. It was contended before us that as an appeal is a continuation of the original proceeding the repeal should not affect the enforcement of the provisions of the Ordinance in this case. Reliance is placed upon Section 6 of the General Clauses Act, 1897 wherein is indicated the effect of repeal of an enactment by another. It is contended that as the Payment of Bonus Ordinance has been repealed by Section 40(1), the consequences envisaged in Section 6 of the General Clauses Act must follow and the present matter must be disposed of in accordance with the Ordinance as if the Act had not been passed. It is submitted that there was a right and a corresponding obligation to pay bonus under Section 10 of the Ordinance and that right and obligation cannot be obliterated because of the repeal of the Ordinance. This argument is not acceptable because of the provisions of the second sub-
section of Section 40. That sub-section reads as follows:
“40. Repeal and saving.
(1)*** (2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be deemed to have been done or taken under this Act as if this Act had commenced on the 29th May, 1965.” Section 6 of the General Clauses Act applies ordinarily but it does not apply if a different intention appears in the repealing Act. Here a different intention is made to appear expressly and the special saving incorporated in the repealing Act protects only anything done or any action taken under the Ordinance which is deemed to have been done or taken under this Act as if the Act had commenced on 29th May, 1965. Nothing had been done under the Ordinance and no action was taken which needs protection; nor was anything pending under the Ordinance which could be continued as if the Act had not been passed. There was thus nothing which was to be saved after the repeal of the Ordinance and this question which might have arisen under the Ordinance now ceases to exist.” In Kalawati Devi Harlalka v. CIT (1967) 3 SCR 833, a repeal and savings provision contained in Section 297 of the Income Tax Act, 1961 was held to evidence an intention to the contrary under Section 6 of the General Clauses Act as follows: