Section 87 in The Arbitration And Conciliation Act, 1996
87. Effect of arbitral and related court proceedings commenced prior to 23rd October, 2015. [Inserted by Act No. 33 of 2019, dated 9.8.2019.]
- Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) shall(a)not apply to(i)arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016);(ii)court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016);(b)apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and to court proceedings arising out of or in relation to such arbitral proceedings.]The First Schedule See section 44) Convention on the Recognition and Enforcement of Foreign Arbitral Awards Article I[On November 27, 2019, the Supreme Court rendered a decision in Hindustan Construction Company v UOI (‘HCC Case’), which did away with automatic stays. The petitioners (infrastructure companies) approached the Court, pointing that they were being forced into insolvency even after the Indian Government and other government-owned companies owed them over INR 6000 crores (approximately USD 850 million) pursuant to various arbitral awards. They argued that they were disabled from recovering the money due to the automatic stay provisions. In this case, the Court struck down Section 87 as unconstitutional for being arbitrary and revived Section 26 of the 2015 Arbitration and conciliation act. The Court noted that the automatic stay provision was a “double-whammy” for firms in favor of whom arbitration awards were passed. Despite the arbitral award being in their favor, the creditors were not able to enjoy the fruits of the same, as the principal amount would be automatically stayed due to a Section 34 petition (challenging the award), which in turn takes years for final disposal. As a consequence, the firm could become financially unhealthy and vulnerable to being declared insolvent under the Indian Insolvency Code. This retrospective resurrection of an automatic stay also results in payments already made under the amended Section 36 to award-creditors in a situation of no-stay or conditional-stay now being reversed. Along with this absurdity, the Court noted that, on average, about six years are spent in defending these challenges. This delay defeats the very objective of the alternate dispute resolution system. The Supreme Court, therefore, brought back the position laid down by the BCCI v Kochi case, thus providing award creditors the immediate benefit of an award by way of security and not letting any automatic stay stymie the execution for several years. (https:indiankanoon.org/doc/102230863/, https:www.mondaq.com/india/trials-appeals-compensation/882124/hindustan-construction-company-limited-and-anr-v-union-of-india-and-ors)]
