Important to File a Stay Application even in a pending Petition under Section 34 of the Arbitration and Conciliation Act, 1996

-Gunjan Chhabra

Partner, Dispute Resolution

In a recent judgment of the Supreme Court of India in Board of Control for Cricket in India v. Kochi Cricket Private Limited[note]SLP (C) Nos. 19545-19546 of 2016, decided on 15[/note], apart from reiterating the prospective nature of the Amendment Act, 2015, has held that an application seeking stay of the award would have to be filed even in Section 34 Petitions which are already pending before Courts, even before the Arbitration Amendment Act, 2015[note]The Arbitration and Conciliation (Amendment) Act, 2015, applicable from 23 rd October, 2015.[/note] became applicable.

Previously contrary views were existing on the applicability of various provisions of the amendment Act. Section 26 of the Amendment Act[note]Serial 26 of the Amendment Act, 2015, “Act not to apply to pending arbitral proceedings – Nothing contained in this Act shall apply to 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.”[/note] clearly provides that the amendment will be prospectively applicable. However, the Madras High Court[note]New Tirupur Area Development Corporation Ltd. v. M/s. Hindustan Construction Co. Ltd A. NO. 7674 of 2016 in O.P. No. 931 of 2015 judgment dated 27 January 2016 (Madras High Court)[/note] and Calcutta High Court[note]Tufan Chatterjee v. Rangan Dhar AIR 2016 Cal 213[/note] had previously held that the prospective applicability of the Amendment Act would be limited to ‘arbitral proceedings’ and not to ‘court proceedings’. The Bombay High Court[note]Rendezvous Sports World v. the Board of Control for Cricket in India, 2016 SCC Online Bom 255.[/note] had taken a divergent view as compared to these courts and it was held that “it makes no difference if the application under Section 34 filed by the award-debtor was prior to 23rd October, 2015” . The Delhi High Court on the other hand, in Ardee Infrastructure Pvt. Ltd. v. Ms. Anuradha Bhatia[note]udgment dated 06th January, 2017 in FAO (OS) No. 221 of 2016 alongwith connected matter being FAO(OS) No. 222 of 2016[/note], took the view that the Amendment Act, 2015 would not be applicable to pending Section 34 Petitions and the automatic stay would continue to be applicable for these pending petitions, even post Amendment Act of 2015.

The Supreme Court has now clarified by way of this judgment delivered in March, 2018, a few propositions which are as follows:-

1. If the arbitration commenced[note]an Arbitration Proceeding is said to be commenced when the request for invocation of arbitration is received by the Respondent within the meaning of Section 21 of the Arbitration and Conciliation Act, 1996.[/note] prior to 23.10.2015, but the Petition under Section 34 was filed after 23.10.2015, the stay application under Section 36(2) is required as no automatic stay would be applicable.
2. If the Section 34 Petition is pending before 23.10.2015, then also a stay application under Section 36(2) is required as automatic stay would not be applicable to such proceedings. This is owing to the use of the words “where an application to set aside the arbitral award has been filed in the Court….” Thus even applications which have already been filed before Court as on date of amendment would be covered by Section 36(2).
3. There is no concept of a “vested right” in any party whose arbitration has commenced or who has filed a Section 34 Petition prior to amendment, with regard to stay of award.

The Apex Court has thus made it very clear that incase a Petition under Section 34 has been pending before Courts, on date of amendment or was filed in respect of an arbitration commenced prior to the amendment a stay application must necessarily be filed. In absence of the Court having before it this stay application, the party challenging the award could face an awkward situation where despite challenging the award, it would have to face execution proceedings, or worse, attachment.