Section 26 of the Arbitration Act: Conflicting Views on Stay of Arbitral Award

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 deems fit.

Section 26 of the Amendment Act says: 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.

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 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 the award.

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.


ABOUT THE AUTHOR

Mousomi Panda

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Mousomi is a third-year student pursuing B.A. L.L.B. from University School of Law and Legal Studies, (IP University). She has an active interest in issues that plague the society. She’s a thinker, writer, and reader, though more of a dreamer. She’s interested in legal research in the field of ADR as well as IPR.

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