Arbitration Amendment Act 2015: New Section 36 Apply Even To pending Section 34 Applications On The Date Of Commencement Of The Amendment Act [Read Judgment]

“Since it is clear that execution of a decree pertains to the realm of procedure, and that there is no substantive vested right in a judgment debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the Amendment Act”, said the Bench.

A Supreme Court bench of Justice R.F. Nariman and Justice Navin Sinha on Thursday pronounced the judgment in Board of Control for Cricket in India v Kochi Cricket Pvt. Ltd and etc.  The question before the bench was whether the substitution made to Section 36 of the Arbitration Act by 2015 Amendment would apply even to appeals under Section 34 filed before the date of amendment, i.e 23.10.2015.

It may be noted that the 2015 amendment made to Section 36 clarified that mere filing of appeal would not amount to stay of enforcement proceedings, and further introduced a provision that stay will be only conditional on furnishing security if the award relates to payment of money. Before the amendment, one could get a stay of enforcement of award by mere filing of appeal even without any security.

The court has clarified that since execution of a decree pertains to the realm of procedure, and that there is no substantive vested right in a judgment debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 applications on the date of commencement of the Amendment Act.

The Supreme Court has held that on a reading of Section 26 of the Arbitration act it becomes clear 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.

It was further held that: “…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.”

Interestingly, while taking note of the Arbitration Amendment Bill, 2018 the court held that if such bill is passed it would be contrary to the objective of the Arbitration Act. For the foregoing reason, the court also held that a copy of the judgment is to be sent to the Ministry of Law and Justice and the Learned Attorney General for India. The observation of the court in this regard is as follows:

“57. The Government will be well-advised in keeping the aforesaid Statement of Objects and Reasons in the forefront, if it proposes to enact Section 87 on the lines indicated in the Government’s press release dated 7^th March, 2018. The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular, which, as has been stated by the Statement of Objects and Reasons, “…have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act”, and will now not be applicable to Section 34 petitions filed after 23rd October, 102 2015, but will be applicable to Section 34 petitions filed in cases where arbitration proceedings have themselves commenced only after 23rd October, 2015. This would mean that in all matters which are in the pipeline, despite the fact that Section 34 proceedings have been initiated only after 23rd October, 2015, yet, the old law would continue to apply resulting in delay of disposal of arbitration proceedings by increased interference of Courts, which ultimately defeats the object of the 1996 Act….”

It is noteworthy that the court did not express any opinion on the amendments made to Section 34 as the same were not directly before the bench. However, the court observed that “it is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature.”

Read the Judgment Here