Arbitration in its today's dimension is a phenomenon that represents an
alternative system to a state organized litigation. Arbitration is way of
settling disputes among subjects in various fields of economic activities. There
is commercial arbitration which is the most spread and used in the world, sport
arbitration, mixed arbitration and others.
Arbitration is a private system of litigation in which private neutrals are
called by parties to resolve their dispute. Arbitration held by individual
neutrals chosen particularly for determinate cause is called ad hoc arbitration.
In response to a stabilization of arbitration procedure, the arbitration
institutions were established to provide arbitrational services and other
dispute resolution services. Arbitration administrated by such institutions is
in theory called institutional arbitration, which is the subject of present
The Supreme Court has, in its latest judgment in the case of Board of Cricket
Council of India v. Kochi Cricket Board
, settled an important issue about
the applicability of the 2015 amendments to the Arbitration and Conciliation
Act, 1996. The Court was called upon to decide whether section 36 of the Act, as
amended by the 2015 Amendment Act, was applicable to applications filed under
section 34 before the commencement of the Amendment Act. The Court decided in
the affirmative. The decision is welcome as it is in line with the
pro-arbitration approach followed by the Supreme Court in its recent decisions.
Section 26 of the 2015 Amendment Act, which deals with the applicability of the
amendments, has been controversial ever since its introduction as it left
unclear whether the amendments would apply to the court proceedings in relation
to the arbitration proceedings commenced prior to the commencement of the
Amendment Act. There have been several conflicting decisions by various High
Courts in the country in this regard.
The Arbitration & Conciliation Act, 1996 (Arbitration Act) was amended by way of
the Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act) with
effect from 23 October 2015. One of the significant changes was the removal of
the automatic stay that operated in favour of the award debtor under the
un-amended Section 36 of the Arbitration Act on filing of a challenge petition
under section 34.
Soon thereafter, courts across the country were confronted with the question of
whether section 36, as substituted by the Amendment Act, applied to a section 34
petition arising out of arbitrations invoked prior to commencement of the
Amendment Act, leading to several conflicting views on this issue.
In this background, the Hon'ble Supreme Court was called upon to interpret
section 26 of the Amendment Act. The court considered the question in 8
different special leave petitions which were clubbed together, the lead matter
being Board of Cricket in India v. Kochi Cricket Pvt. Ltd. And Ors. (SLP (C) )
Nos. 19545-19546 of 2016.
The judgment of the Supreme Court was delivered on 15 March 2018.
The 2015 amendment to the Arbitration and Conciliation Act, 1996 which came into
force from 23.10.2015 also brought with itself a host of controversy. This
controversy had arisen because of the conflicting views taken by various High
courts while interpreting Section 26 of the amendment Act and thereby affecting
the position on the stay of an arbitral award under newly added Sections i.e.
32(2) and 36(3).
These newly added sections under enforcement of award say that mere filing of a
petition under Section 34 for setting aside the arbitral award by itself will
not render it unenforceable unless the court grants a stay on such award, for
which now a separate application has to be moved under Section 32(2). It further
gives such court the discretion to grant stay subject to such conditions as it
The Supreme Court, in Board of Control for Cricket in India v. Kochi Cricket
Private Limited, has put to rest the controversy surrounding the construction
and interpretation of Section 26 of the Arbitration and Conciliation (Amendment)
Act, 2015 ("Amendment Act") with respect to the applicability of the amended
Section 36. Section 26 of the Amendment Act 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.
In view of the controversy at hand, the relevant facts are the dates of filing
of applications under Section 34 of the Arbitration and Conciliation Act, 1996
("Act"). Out of the eight appeals, in four instances Section 34 applications
were filed prior to the coming into force of the Amendment Act (i.e., 23 October
2015, or "Commencement Date"), while the others were filed after the
While dealing with the interpretation of Section 26 of the Amendment Act, the
primary issue before the Court was whether the substituted Section 36
(Enforcement)1, as introduced by the Amendment Act, would apply in its original
form or its amended form. The unamended Section 36 provided for an automatic
stay on the enforcement of an arbitral award, on the filing of an application
for setting aside such award under Section 34. In contrast, the newly-introduced
Section 36(2) does away with such automatic stay and instead requires a separate
application to be made before the Court for an order granting stay of the
operation of the award.
This can be separated into two discrete issues:
Whether the amended Section 36 will be applicable to a Section 34 application
filed after the Commencement Date even though the arbitral proceedings commenced
before such date; and
Whether the amended Section 36 will be applicable to a Section 34 application
filed prior to the Commencement Date.
The Supreme Court has conclusively determined that the substituted Section 36
will be applicable to Section 34 applications filed both before and after the
Commencement Date. The factors considered by the Court in reaching these
conclusions are detailed below.
In dealing with the first issue, the Court referred to the 246th Report of the
Law Commission of India, which observed that the automatic stay against the
enforcement of an arbitral award under the unamended Section 36, on the filing
of an application under Section 34, was leading to delays and rendering the
arbitration scenario in India ineffective. The Law Commission had suggested the
insertion of a new Section 85A2, which bifurcated proceedings into arbitral
proceedings (pending before the arbitral tribunal) and Court proceedings, and
made the amendments prospective in application, with certain exceptions.
Noting that Section 26 departed from the language suggested by the Law
Commission, the Court looked into the manner in which a provision akin to
Section 26 of the Amendment Act ought to be interpreted, stating that such a
provision should first be construed literally, then purposively and
Dealing with the scope and ambit of Section 26, the Court held that Section 26
of the Amendment Act consists of two parts separated by the word "but", which
signifies that the parts are separate and distinct. While the first part, which
is couched in negative terms, applies only to arbitral proceedings, the second
part affirmatively applies the Amendment Act to Court proceedings in relation to
That the first part refers exclusively to arbitral proceedings is evident from
the use of the words "to the arbitral proceedings" in contrast with the
expression "in relation to" (which is used in second part), the reference to
Section 21 of the Act (Commencement of arbitral proceedings) and the option
provided to parties to "otherwise agree" to apply the Amendment Act to arbitral
proceedings that have commenced before the Commencement Date, since the conduct
of arbitral proceedings is merely procedural in nature.
Therefore, Section 26 bifurcates proceedings into two sets – arbitral
proceedings themselves, i.e., proceedings before an arbitral tribunal, as
covered under Chapter V of the Act [First Part]; and Court proceedings in
relation thereto [Second Part]. Since arbitral proceedings are subsumed within
the First Part of Section 26, the same cannot fall within the scope of the
Second Part thereof, and hence the Second Part refers exclusively to Court
With regard to the scheme of Section 26, the Court held that the Amendment Act
is prospective in application and applies only to arbitral proceedings and Court
proceedings which commenced on or after the Commencement Date.
The Court thought it necessary to discuss the judgment in Thyssen Stahlunion
GmBH v. Steel Authority of India Limited3, as it was strongly relied upon by
counsels on both sides. The issue in Thyssen was the interpretation of Section
85(2)(a) of the Act.4 The Court distinguished the present case from Thyssen,
stating that the judgment in Thyssen dealt with a differently worded provision
and emphasised the difference in language between the expressions "to" and "in
Section 85(2)(a) of the Act has two major differences in language from Section
26 of the Amendment Act. First, the expression "in relation to" appears in both
parts of Section 85(2)(a), in contrast to Section 26, where it appears only in
the Second Part while the expression "to" arbitral proceedings is used in the
First Part. Second, commencement in the First Part of Section 26 must be
understood in the context of Section 21 of the Act, which reference is absent in
In view of the above, the Court held that the substituted Section 36 will be
applicable to Section 34 applications which have been filed after the
Commencement Date even if the arbitral proceedings were initiated prior to such
In determining the applicability of the substituted Section 36 to Section 34
applications filed before the Commencement Date, the Court looked into the
meaning and import of the word "enforcement" used in Section 36.
After setting out the scheme of the Act, the Court stated that under Section 36,
an arbitral award is deemed to be a decree of Court and shall be enforced under
the Code of Civil Procedure, 1908 ("CPC"). The manner of enforcement of a decree
under the CPC is through the execution process, i.e., under Order XXI of the
Next, the Court considered whether execution proceedings gave rise to vested
rights and whether they are substantive in nature. Relying upon the decisions of
the Supreme Court in Lalji Raja and Sons v. Hansraj Nathuram
Narhari Shivram Shet Narvekar v. Pannalal Umediram
6, the Court concluded
that the execution of a decree pertains to the realm of procedure and there is
no substantive vested right in a judgment debtor to resist execution. Further,
the Court held that the unamended Section 36 was only a clog on the right of the
decree holder, who could not execute the award in his favour till the conditions
of this section were met. This does not give rise to a corresponding right in
the judgment debtor to stay the execution of the award.
In addition, the Court looked into the use of the words "has been" in the newly
introduced Section 36(2), and stated that Section 36 being a procedural
provision, the words "has been" would refer to Section 34 applications which
were filed before the Commencement Date.
Thus, the Court concluded that the amended Section 36 will apply even to Section
34 applications pending as on the Commencement Date.
Analysis And Personal Opinion:
The judgment has conclusively laid to rest a controversy which had generated
widely divergent views from various High Courts. With its focus on minimising
judicial intervention and reducing delays, this decision represents a step
forward in improving the arbitration landscape in India.
The judgment seems to have settled the ambiguity that surrounded section 26 at
least for now. The ruling of the Court that substituted section 34 applies even
to pending section 34 applications was taken by considering the objects and
reasons for the Amendment Act. The Amendment Act of 2015 was enacted to provide
for a speedy disposal of cases relating to arbitration with less court
intervention. Thus, in the context of amendments to section 36, the
interpretation of section 26 may be correct as it is in favour of arbitration
and also is in line with the objects of the Amendment Act.
However, the Court seems to have overlooked the impact of retrospective
application of the Amendment Act with respect to other aspects of the Act.
However, in Thyssen, the Court had identified this potential difficulty and
stated that if a narrow interpretation to the phrase “in relation to arbitral
proceedings” is to be accepted, it is likely to create a great deal of confusion
with regard to the matters where the award is made under the old Act.
The Court also referred to section 87 of the proposed Arbitration and
Conciliation (Amendment) Bill, 2018. Section 87 of the Bill clarifies that the
2015 amendments will apply only to arbitration proceedings commenced after 23
October 2015 and to court proceedings in relation thereto.
The Court thus emphasized the need for the legislature to reconsider section 87.
The Court stated that the immediate effect of the proposed provision would be to
put all the important amendments made by the Amendment Act on a back-burner. The
fate of this decision will now depend upon whether or not the Parliament will
accept the recommendations of the Court.
While there is no fault to be found in the reasoning of the Supreme Court here,
a glaring lacuna in the judgment is why the analysis of vested rights and effect
of the 2015 Amendment was only restricted to the amended Section 36. There are
several other amendments such as those of Section 9, 17, 8, 16, etc., which also
include court proceedings and arbitral proceedings and would be covered by the
2015 Amendment, but they were not even considered by the Supreme Court. In fact,
it refused to look into the said aspects claiming that they were independent and
Further, by not addressing the above amended sections, the Supreme Court also
completely skipped the anomalies that will arise if the interpretation as
accorded by it to Section 26, is applied to other situations. For instance,
while a Section 17 amendment will only to apply to arbitral proceedings
commenced after the 2015 Amendment, a Section 9 amendment, being a court
proceeding, will apply even before amendments came into force.
This was highlighted in Ardee infrastructure. One argument which may be taken
here is that while Section 36 did not affect vested rights, amendments of
Section 9 and 17 will affect vested rights, and therefore, a Section 9 amendment
would not apply retrospectively. However, instead of leaving the parties to work
these issues out for themselves, the Supreme Court could have pronounced upon
them. Whether these potential anomalies will give rise to another set of
litigation is yet to be seen.
It appears, however, that we may expect some clarity on these issues from the
Executive realm. On March 7, 2018 the Union Cabinet issued a press release
announcing that it had approved the Arbitration and Conciliation (Amendment)
Bill, 2018 (the Bill) for introduction in Parliament. The Bill was introduced to
implement recommendations contained in the Report dated July 30, 2017 issued by
the High Level Committee (HLC) under the Chairmanship of Justice B. H.
Srikrishna, which was constituted inter alia, to evolve an effective and
efficient arbitration eco-system for commercial dispute resolution.
Among other proposals, the Bill has sought to clarify the applicability of the
2015 Amendment by introducing a new Section 87 in the Arbitration & Conciliation
Act, 1996. The Bill is in line with the interpretation of Ardee Infrastructure –
i.e., the 2015 Amendment will only apply to arbitral proceedings and court
proceedings arising out of such arbitral proceedings, initiated after the
commencement of the 2015 Amendment.
It will not apply to arbitral proceedings and court proceedings arising out of
such arbitral proceedings, initiated before the commencement of the 2015
Amendment, even if the court proceedings have been initiated after the
commencement of the 2015 Amendment.
Interestingly, the Court noted the proposed Section 87 of the Arbitration and
Conciliation (Amendment) Bill, 2018 ("Bill"), approved by the Cabinet of
Ministers on 7 March 2018, which stipulates that the Amendment Act shall not
apply to Court proceedings arising out of or in relation to arbitral proceedings
which commenced prior to the Commencement Date, irrespective of whether such
Court proceedings commenced prior to or after the Commencement Date.
However, the Court refused to look into Section 87 of the proposed Bill for the
interpretation of Section 26 of the Amendment Act for two reasons: first, that
the ultimate form in which Section 87 is enacted may not be the same as is
presently proposed; and second, a proposed Bill introducing a new provision of
law cannot be the basis for interpretation of a provision of law as it now
The Court has cautioned the Government of India that the immediate effect of the
proposed Section 87 would be to "put all the important changes made by the
Amendment Act on a back-burner". Quoting from the Statement of Objects and
Reasons of the Amendment Act, the Court stated that the Amendment Act was
enacted for the specific purpose of providing speedy disposal of cases and
minimising court intervention in arbitration in order to make India an
investor-friendly jurisdiction; and such purpose must be given effect.
The Court has warned that the basic scheme of bifurcation of proceedings into
two parts ought not to be displaced as the very object of the enactment of the
amendments would otherwise be defeated. The effect of the judgment in light of
the proposed Bill is yet to be seen.
Some High Courts had taken the view that the term ‘in relation to' in Section 26
of amendment act would not include the court proceedings commenced after
amendment ; hence no separate application is needed to be filed whereas the
other interpretation is that those arbitral proceedings would include the
present court proceedings and would be governed by the amended provisions.
While the Bill is yet to be passed in both Houses of Parliament, it is expected
that this amendment will conclusively determine the issue regarding
applicability of the amended provisions to proceedings before courts, especially
in view of the conflicting views of the various High Courts.
While the Madras High Court in New Tirupur Area Development Corporation Ltd. v.
M/s Hindustan Construction Co. Ltd had taken the first view, the Division Bench
of Kolkata in Sri Tufan Chatterjee v. Sri Rangan Dhar, had taken the latter view
i.e. even the pending court proceedings relating to arbitration, which was
pending as on date when the amendments were notified, must be governed by the
amended act and not the unamended one.
Though the Bombay High Court in Rendezvous Sports World v. BCCI had taken the
latter view, the reasoning given by it was different. It said that amendments
brought to Section 36 of the Act are procedural in nature and further balances
the rights of both parties and ordered the BCCI to file an application seeking
stay against enforcement of arbitral awards under challenge.
The latest view is taken by Delhi high court in Ardee Infrastructure Pvt. Ltd
vs Yashpal & Sons
where it said; the petitions filed under section 34 for
challenging the award prior to the amendment would be governed by the unamended
provision and would be entitled to automatic stay whereas for the petitions
filed after it, will have to move a separate application for seeking a stay on
Thus all the arbitral proceedings (the entire gamut, including the court
proceedings in relation to proceedings before the arbitral tribunal), which
commenced in accordance with the provisions of Section 21 of the said Act prior
to 23.10.2015, would be governed, subject to an agreement between the parties to
the contrary, by the unamended provisions and, all those in terms of the second
part of Section 26, which commenced on or after 23.10.2015 would be governed by
the amended provisions.
Though the view taken by the Delhi court seems to be the most logical
interpretation on this point, we must watch out for the Supreme Court's decision
which is pending adjudication in Rendezvous Sports World v. BCCI
. It is
essential that this controversy is put to rest by the apex court as soon as
possible both for the purpose of having logical interpretation and enforcement
of the award.
- Notably, newly introduced Section 36(2) provides that "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".
- The proposed Section 85A
- (1999) 9 SCC 334.
- Section 85(2)(a) of the Act provides that "Notwithstanding such repeal,
the provisions of the said 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".
- (1971) 1 SCC 721.
- (1976) 3 SCC 203.