ELP – Arbitration weekly update – Hindustan Construction Company Limited and Anr. v. Union of India and Ors

Litigation, Arbitration & Dispute Resolution | Dec 4 2019

In the last seven days, the Supreme Court of India has rendered two decisions which are possibly the inflection point in the journey of arbitration in India. In this update, we will restrict ourselves to one of these decisions, namely Hindustan Construction Company Limited and Anr. v. Union of India and Ors.In this case, a constitutional challenge was made against the introduction of section 87 into the Arbitration and Conciliation Act, 1996 (Act) and also the deletion of section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment Act) by the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment Act). These provisions had in effect, made the amendments brought about in 2015 only applicable to arbitrations commenced after 23 October 2015 and to court proceedings in relation to such arbitrations. Through the insertion of section 87 and the deletion of section 26, a dichotomy was created. In arbitrations commenced prior to the cut-off date, if an award had been rendered or was yet to be rendered, the award debtor, by simply filing a setting aside petition, could frustrate the enforcement of the award as it would act as an automatic stay against enforcement. However, for all arbitrations commenced after the cut-off date, the award debtor had to file a specific application seeking for stay against the enforcement of the award, wherein the court could secure the award holder by ordering the award debtor to deposit part or whole of the award amount in court. The SC after considering both sides, struck down the introduction of section 87 of the Act as unconstitutional and also struck down the deletion of section 26 of the 2015 Amendment Act. The SC clarified that its own decision in BCCI v. Kochi Cricket Pvt. Ltd. continues to be the correct position, and further that no automatic stay was available against the enforcement of any award.The same should come as a great relief to award holders who were until now frustrated by the mere pendency of a setting aside petition filed by the award debtor. Award holders should now press for enforcement basis this seminal decision. Trust you will find this an interesting read.

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