Arbitration and Conciliation (Amendment) Act, 2015: s. 26 – Construction of – Application of s. 36 (substituted by the Amendment Act), in its amended form or its original form to s.34 applications for setting aside the arbitral award, filed prior to commencement of the Amendment Act – On facts, passing of arbitral award – Application u/s.34 challenging the arbitral award, filed prior to coming into force of the Amendment Act and few after the Amendment Act came into force – Execution applications by the award creditor – Dismissal of execution applications sought by award debtor stating that old s.36 would be applicable, thus, there would be automatic stay to the execution of the awards until s.34 proceedings had been decided – However, the Single Judge of the High Court held that the amended s.36 would be applicable and execution of an award would be as if it were a decree, there would be no automatic stay and ordered execution – On appeal, held: Scheme of s.26 is clear that the Amendment Act is to be applied only prospectively with effect from the date of its commencement, and only to arbitral proceedings and to court proceedings in relation thereto, which have commenced on or after the commencement of the Amendment Act – Further, s. 36 being a procedural provision, the context of the Section is that the expression “has been” would refer to s.34 petitions filed before the commencement of the Amendment Act and indicates that the said Section would apply, in its substituted form, even to such petitions – Thus, s.36 as amended should apply to s.34 applications filed before the commencement of the Amendment Act – Arbitration and Conciliation Act, 1996 – ss. 36 and 34.
Dismissing the appeals, the Court
HELD: 1.1 The scheme of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 is 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. [Para 25] [859-C-D]
1.2 On a reading of Section 26, it is found that the provision is 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 two parts are separated by the word ‘but’, which also shows that the two parts are separate and distinct. It cannot be said 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. 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. What will be noticed from the first part, 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. The expression “the arbitral proceedings” refers to proceedings before an arbitral tribunal. 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. 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 proceedings” in the second part are not controlled by the application of Section 21 of the 1996 Act. Section 26, therefore, bifurcates proceedings, 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.[Paras 23-25][856-H; 857-A-H; 858-A-E; 589-A-C]
1.3 When the first part of Section 26 makes it clear that arbitral proceedings commenced before the Amendment Act would not be governed by the Amendment Act, it is clear that arbitral proceedings that have commenced after the Amendment Act comes into force would be so governed by it. The negative form of the language of the first part only becomes necessary to indicate that parties may otherwise agree to apply the Amendment Act to arbitral proceedings commenced even before the Amendment Act comes into force. The absence of any reference to Section 21 of the 1996 Act in the second part of Section 26 of the Amendment Act is also a good reason as to why arbitral proceedings before an arbitral tribunal are not contemplated in the second part. It cannot be said that Section 26 manifests a clear intention to destroy all rights, vested or otherwise, which have accrued under the unamended 1996 Act. It is clear that the intendment of Section 26 is to apply the Amendment Act prospectively, with effect from the date of its commencement, to arbitral proceedings and to court proceedings in relation thereto. [Paras 32-34] [866-C-D, E-F, H]
1.4 From a reading of Section 26 as interpreted, it becomes clear that in all cases where the Section 34 petition is filed after the commencement of the Amendment Act, and an application for stay having been made under Section 36 therein, will be governed by Section 34 as amended and Section 36 as substituted. But, what is to happen to Section 34 petitions that have been filed before the commencement of the Amendment Act, which were governed by Section 36 of the old Act? Would Section 36, as substituted, apply to such petitions? To answer this question, it is to be decided on what is meant by “enforcement” in Section
36. On the one hand, it has been argued that “enforcement” is nothing but “execution”, and on the other hand, it has been argued that “enforcement” and “execution” are different concepts, “enforcement” being substantive and “execution” being procedural in nature. [Para 39] [871-A-C]
1.5 An arbitral proceeding commences under Section 21, unless otherwise agreed by parties, when a dispute arises between the parties for which a request for the dispute to be referred to arbitration is received by the respondent. The arbitral proceedings terminate under Section 32(1) by the delivery of a final arbitral award or by the circumstances mentioned in Section 32(2). The mandate of the arbitral tribunal terminates with the termination of arbitral proceedings, save and except for correction and interpretation of the award within the bounds of Section 33, or the making of an additional arbitral award as to claims presented in the proceedings, but omitted from the award. Once this is over, in cases where an arbitral award is delivered, such award shall be final and binding on the parties and persons claiming under them, under Section 35 of the 1996 Act. Under Section 36, both pre and post amendment, 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. It is clear that the scheme of the 1996 Act is materially different from the scheme of the 1940 Act. Under Section 17 of the 1940 Act, once an award was delivered, the Court had to pronounce judgment in accordance with the award, following which a decree would be drawn up, which would then be executable under the Code of Civil Procedure. Under Section 36 of the 1996 Act, the Court does not have to deliver judgment in terms of the award, which is then followed by a decree, which is the formal expression of the adjudication between the parties. Under Section 36 of the 1996 Act, the award is deemed to be a decree and shall be enforced under the CPC as such. Further, it is clear that Section 36 refers to the execution of an award as if it were a decree, attracting the provisions of Order XXI and Order LXI, Rule 5 CPC and would, therefore, be a provision dealing with the execution of arbitral awards. 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. [Para 40-42] [871-DH; 872-A-C; 874-F-G]
1.6 Section 36, prior to the Amendment Act, is only a clog on the right of the decree holder, who cannot execute the award in his favour, unless the conditions of this section are met. This does not mean that there is a corresponding right in the judgment debtor to stay the execution of such an award. It has been held that Section 26 does specifically provide that the court proceedings in relation to arbitral proceedings, being independent from arbitral proceedings would not be viewed as a continuation of arbitral proceedings but would be viewed separately. [Para 43] [874-H; 875-A, D]
1.7 Being a procedural provision, it is obvious that the context of Section 36 is that the expression “has been” would refer to Section 34 petitions filed before the commencement of the Amendment Act and would be one pointer to the fact that the said section would indeed apply, in its substituted form, even to such petitions. The unamended Section 36 granted an automatic stay (which could last for a number of years) on execution of an award before the enforcement process of Section 34 was over without having to look at the facts of each case. Due to the sheer unfairness of this, Section 36 as amended should apply to Section 34 applications filed before the commencement of the amendment Act. [Paras 45-46] [877-E-F; 879-E]
1.8 In the instant case, it is clear that “enforcement” in Section 36 is to treat the award as if it were a decree and enforce it as such under the Code of Civil Procedure, which would only mean that such decree has to be executed in the manner indicated. Also, a stray sentence in a judgment in a particular context cannot be torn out of such context and applied in a situation where it has been argued that enforcement and execution are one and the same, at least for the purpose of the 1996 Act. [Para 48] [880-B-C]
1.9 Since the Amendment Act is only prospective in application, no anomalies can possibly arise. The choosing of Section 21 as being the date on which the Amendment Act would apply to arbitral proceedings that have been commenced could equally be stated to give rise to various anomalies. One such anomaly could be that the arbitration agreement itself may have been entered into years earlier, and disputes between the parties could have arisen many years after the said arbitration agreement. The argument on behalf of the appellants is that parties are entitled to proceed on the basis of the law as it exists on the date on which they entered into an agreement to refer disputes to arbitration. If this were to be the case, the starting point of the application of the Amendment Act being only when a notice to arbitrate has been received by the respondent, which could be many years after the arbitration agreement has been entered into, would itself give rise to the anomaly that the amended law would apply even to arbitration proceedings years afterwards as and when a dispute arises and a notice to arbitrate has been issued under Section 21. In such a case, the parties, having entered into an arbitration agreement years earlier, could well turn around and say that they never bargained for the change in law that has taken place many years after, and which change would apply to them, since the notice, referred to in Section 21, has been issued after the Amendment Act has come into force. Cut off dates, by their very nature, are bound to lead to certain anomalies, but that does not mean that the process of interpretation must be so twisted as to negate both the plain language as well as the object of the amending statute. On this ground also, it cannot be seen how an emotive argument could be converted into a legal one, so as to interpret Section 26 in a manner that would be contrary to both its plain language and object. [Para 55] [885-C-H; 886-A]
1.10 The Government will be well-advised in keeping the 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 7th 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, 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. The 246th Law Commission Report has itself bifurcated proceedings into two parts, so that the Amendment Act can apply to Court proceedings commenced on or after 23rd October, 2015. It is this basic scheme which is adhered to by Section 26 of the Amendment Act, which ought not to be displaced as the very object of the enactment of the Amendment Act would otherwise be defeated.[Para 57] [888-DG; 889-A]
1.11 The Counsel for BCCI in SLP(C) No. 8374-75 of 2017 and 8376-78 of 2017 submitted that the impugned judgment, when it dealt with the majority award in favour of respondent went behind the award in ordering execution of a portion of the award in favour of respondent, when the majority award specifically ordered the 2nd and 3 rd defendants to pay to the joint venture company, a sum of Rs.6,77,24,56,570/-. It is only thereafter that the tribunal awarded the said amount. It is thus the submission that it is the decree holder alone who can execute such decree in its favour, and that in the instant case it is WWIL who is the decree holder and that, therefore, respondent’s Chamber Summons, to execute this portion of the award, is contrary to the CPC as well as a number of judgments construing the Code. On the other hand, the submission of the other side is that the 2nd and 3rd defendants in the arbitration proceedings, are in control and management of WWIL, and have wrongfully excluded respondent from such control and management. WWIL, therefore, will never put this decree into execution. This being so, the interest of justice requires that the High Court judgment should not be interfered as there is no person that would be in a position to enforce the award apart from the respondent. [Paras 58-60] 889-B-C; 890-C, E-G]
1.12 Even though the High Court may not be strictly correct in its appreciation of the law, yet it has attempted to do justice on the facts of the case. It is not appropriate, in the interest of justice, to interfere with the impugned judgment on this count. [Para 61] [890-H; 891-D]
Milkfood Ltd. v. GMC Ice Cream Pvt. Ltd. (2004) 7 SCC
288 : [2004] 3 SCR 854; Thyssen Stahlunion v. Steel Authority of India (1999) 9 SCC 334 : [1999] 3 Suppl. SCR 461; N.S. Nayak & Sons v. State of Goa (2003) 6 SCC 56 : [2003] 1 Suppl. SCR 69 – distinguished. Garikapati Veeraya v. N. Subbiah Choudhry [1957] SCR 488; National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004) 1 SCC 540; ONGC v. Saw Pipes Ltd (2003) 5 SCC 705 : [2003] 3 SCR 691; ONGC Ltd. v. Western Geco International Ltd. (2014) 9 SCC
263 : [2014] 12 SCR 1; Satish Kumar v. Surinder Kumar [1969] 2 SCR 244; Bhagat Ram Sharma v. Union of India (1988) (Supp) SCC 30 : [1988] SCR 1034; Hitendra Vishnu Thakur v. State of Maharashtra (1994)
4 SCC 602 : [1994] 1 Suppl. SCR 360; Transport and Dock Workers’ Union & others v. New Dholera Steamship Ltd., Bombay and others, (1967) 1 LLJ 434; Kalawati Devi Harlalka v. CIT (1967) 3 SCR 833; State of Punjab v. Mohar Singh, [1955] 1 SCR 893; T.S. Baliah v. T.S. Rengachari [1969] 3 SCR 65; Lalji Raja and Sons v. Hansraj Nathuram, (1971) 1 SCC 721 : [1971] 3 SCR 815; Narhari Shivram Shet Narvekar v. Pannalal Umediram (1976) 3 SCC 203: [1976] 3 SCR 149; Union of India v. A.L. Rallia Ram [1964] 3 SCR 164; NBCC Ltd. v. J.G. Engineering (P) Ltd., (2010) 2 SCC 385 : [2010] 1 SCR 109; Snehadeep Structures (P) Ltd. v. Maharashtra Small-Scale Industries Development Corpn. Ltd., (2010) 3 SCC 34 : [2010] 1 SCR 76; State of Bombay v. Vishnu Ramchandra (1961) 2 SCR 26;
Workmen v. Firestone Tyre & Rubber Co. of India (P) Ltd. (1973) 1 SCC 813 : [1973] 3 SCR 587; Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573: [2001] 1 Suppl. SCR 469; Regional Manager & Anr. v. Pawan Kumar Dubey [1976] 3 SCR 540; Akkayanaicker v. A.A.A. Kotchadainaidu and Anr. (2004) 12 SCC 469: [2004] 4 Suppl. SCR 638; R. Rajagopal Reddy v. Padmini Chandrasekharan (1995) 2 SCC 630 : [1995] 1 SCR 715; Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2001) 6 SCC 356 : [2001] 3 SCR 479; Sedco Forex International Drill. Inc. v. CIT (2005) 12 SCC 717 : [2005] 5 Suppl. SCR 302; Bank of Baroda v. Anita Nandrajog (2009) 9 SCC 462; ONGC v. Western Geco International Ltd. (2014) 9 SCC 263 : [2014] 12 SCR1; HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited (Formerly Gas Authority of India Ltd.) 2017 SCC Online 1024 – referred to.
Minister of Public Works of the Government of the State of Kuwait v. Sir Frederick Snow and Partners (1984) 2 WLR 340; L’Office Cherifien Des Phosphates and another v. Yamashita-Shinnihon Steamship Co. Ltd. (1994) 1 AC 486 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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