TO STAY OR NOT? THE CONFUSION THAT PREVAILS IN PASSING AN ARBITRAL AWARD

The harmony among an arbitral award and its implementation is complicated in whole. The courts are under pressure, when it comes to challenge of an arbitral award as it is time-consuming. There are various instances where an arbitral award is challenged by the award debtor and at the same time an execution petition is filed by the award holder for its further execution leading to and creating confusion for the courts to deal with and solve such questions posed before them.

Often, the questions posed before the courts is “What if an award is challenged under section 34 of Arbitration and Conciliation Act, 1996[1]?” Should the court put its hands away or should the court continue to proceed according to law as it commands upon it to do so. Another question posed before the arbitral courts is “Whether the court dealing with the challenge of an arbitral award should grant a stay or is a stay application an absolute essential for the arbitral award to be stayed by the court dealing with the issue?” These questions are of vital importance and there is no conclusive answer for these two questions posed before the arbitral courts.

Section 34 of the A&C Act lays out the lawful reason for testing the authenticity of an arbitral award. It gives parties the option to argue that an award be saved for any of reasons, like absence of ward, abnormalities in the technique, or infringement of public strategy, by presenting a request to the pertinent court while Section 36 of the A&C Act discusses the implementation of the arbitral award. It expresses that except if the court concedes a different application for stay, the arbitral award stays enforceable even after an application to save it, is documented. The court should consider arrangements for remaining cash orders for money related grants and may, in specific situations, grant a stay on the award’s requirement. The court’s choice should be recorded in compose. Moreover, the court will genuinely preserve the award until the test is settled assuming apparently misrepresentation or defilement affected the discretion understanding or the death of any of the party.

The answers to the above posed questions are also answered in a list of judgments as pronounced by the Hon’ble Supreme Court of India in the cases of National Aluminium Company Ltd. (NALCO) v. Pressteel & Fabrications (P) Ltd.[2]and Fiza Developers and Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd.[3] held that a programmed stay on an arbitral award kick at the time it is tested, making it difficult to uphold. Nevertheless, the programmed stay given by Section 36 of the A&C Act was not deciphered by these two decisions, nor did they consider the second piece of the part, which manages the requirement of a last and restricting award as a court order under the Code of Civil Procedure.

In Hindustan Construction Company Limited and Anr. v. Union of India and Ors.[4] the Hon’ble Supreme Court decided that the reason for the A&C Act would be crushed assuming programmed stays were to turn into the standard, denying the holders of arbitral awards of their efficiency from the second an application under Section 34 is filed. Moreover, Section 9 of the A&C Act loans backing to the possibility that there is no such thing as a programmed stay since it permits gatherings to demand brief alleviation preceding the requirement of an honor, and the 2015 Correction Act elucidated this idea. Accordingly, the possibility of programmed stays was killed when the judgment made sense of that, when deciphering Section 36 completely, the A&C Act, 1996, contains no reference to programmed stays. The A&C Act’s central fundamentals and design are abused at whatever point an application is filed under Section 34, and this idiosyncrasy has been killed by the decision within reach. It was concluded that Section 87 of the A&C Act, which talked about the programmed stay of an arbitral award, was included understanding with Article 14 of the Indian Constitution by the 2019 Amendment Act. This judgment of the Supreme Court goes about as a useful move toward bracing the Indian Arbitration System and laying out our country as a solid Arbitration hub and centre point.

Section 34 of the A&C Act brought to the fore the system of automatic stays, upon filing of a Petition, challenging the arbitral award, as was introduced by Section 87 of the A&C Act. The same was struck down by the Supreme Court. What Section 87 wanted to do was to bring to a halt the enforcement of an arbitral award, the moment an arbitral award was challenged. The aim of the Section was to help the parties to challenge sham and illegal awards but it became a hindrance to the award holders to reap the fruits of the award and ultimately became an obstacle in the burgeoning of the Act. The arbitrariness in the actions of the state is prevented by the right to equality flowing from the Constitution and this was swayed by the imposition of Section 87 automatic stays causing unnecessary hardships and inconvenience to the award holders holding a valid arbitral award. They were not entitled to the productivity of their awards like other litigants were, which left them open to unforeseen financial risks. Automatic stays are not necessary because parties may request interim reliefs prior to the enforcement of an award under Section 9 of the A&C Act. Furthermore, the 2015 Amendment Act eliminated any confusion regarding the automatic stay’s application, demonstrating the legislature’s intention to discontinue such practice. Consequently, Section 87 conflicted with these clauses, creating ambiguity and irregularities in the law’s implementation, hence it was declared as void.

It was pithily put by Justice Nariman (Retd.) that the arbitration amendment of the year 2019 had various inadequacies as the Section 87 invalidated the judgment of the Hon’ble Supreme Court in BCCI v. Kochi Cricket Private Limited,[5] wherein it was held that the arbitration amendment of 2015 to Section 36 would apply to the arbitration proceedings commenced on or after 23.10.2015 and the arbitration-court proceedings filed on or after 23.10.2015, even though the proceedings of arbitration had started before the amendments were brought into force. Hence, Section 87 of the A&C created a lot of chaos and confusion by totally unsettling the judgement in BCCI (supra).

The is no concept of automatic stay in the arbitration landscape as it prevents an arbitral award-holder from reaping the benefits of their award, which is typically acquired after years of litigation. A stay application is required to be filed before the court which is dealing with the challenge to an arbitral award and only then the executing court will be constrained to stay its hands away and not in the absence of a stay order, as the stay without a stay order will put the A&C Act into a back burner and would be in the teeth of the law. It is seen that the executing courts tend to stay their hands away in the absence of a stay order which is not the correct approach as the executing court has no hindrance not to execute the arbitral award in the absence of a stay order and it is only when an order granting stay is passed can the executing court confine its powers of not executing the award. A stay granted by the court has to be passed reasonably if the court is of the prima facie view that the arbitral award is manifestly arbitrary, grossly perverse, and against the fundamental norms of the law of the land. An arbitral award is challenged by the award debtor sometimes to prolong the process of arbitration which is dangerous for the burgeoning of arbitration in the country as the goal of the A&C Act is to make India a hub of arbitration and it is never meant to mirror litigation.

[1] Herein after A&C Act

[2] (2004) 1 SCC 540

[3] (2009) 17 SCC 796

[4] (2019) SCC Online SC 1520

[5] (2018) 6 SCC 287