Case Summary: Board of Control for Cricket in India (BCCI) v Kochi Cricket Pvt. Ltd. & Ors. along with other appeals

In a recent judgement, the Supreme Court dealt with the interpretation and applicability of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act) in relation to: (a) arbitration proceedings; and / or (b) legal proceedings in connection with such arbitration proceedings.

Facts

A number of appeals were heard together as they dealt with the same question of law. The facts which are relevant arise from the first appeal viz. Board of Control for Cricket in India vs. Kochi Cricket Pvt. Ltd. and Ors. Pursuant to a franchise agreement, certain disputes arose between the parties resulting in the respondents initiating arbitration proceedings. The arbitrator appointed passed two arbitral awards dated June 22, 2015 in favour of the respondents. BCCI challenged the said awards under Section 34 of the Arbitration and Conciliation Act, 1996 (Act). The respondents, thereafter, filed execution applications in connection with the said awards on November 26, 2015. The BCCI, through chamber summons, resisted the execution applications on the ground that Section 36 of the Act (as unamended)1[1] would be applicable and that there would be an automatic stay until its own Section 34 applications were disposed of. The Single Judge ruled that the amended Section 36[2] would apply (as opposed to the unamended Section 36) and, hence, no automatic stay could be pleaded.

Relevant Statute

Discussion on the applicability of amended Section 36 of the Act in light of Section 26[3] of the Amendment Act.

Discussions & Findings

The entire discussion revolves around the interpretation of Section 26 of the Amendment Act and, consequently, the applicability of various provisions of the Act. Section 26 of the Amendment Act provides the framework for applicability of the Amendment Act to pending proceedings. According to the Court, Section 26 comprises of two parts viz. (a) the first part refers to the Amendment Act not applying to arbitral proceedings which have commenced in accordance with Section 21 prior to the Amendment Act coming into force; and (b) the latter part refers to court proceedings “in relation to” arbitration proceedings that have commenced after the Amendment Act coming into force. Accordingly, the scheme of Section 26 of the Amendment Act is prospective in nature and will apply to arbitration proceedings that are commenced on or after the Amendment Act and court proceedings which commence on or after the Amendment Act, irrespective of whether they relate to arbitration proceedings initiated before or after the Arbitration Act.

Section 36, prior to its amendment, provided that an arbitral award will be enforceable as a decree only after the time for filing a petition under Section 34 had expired or after Section 34 petition had been dismissed. This interpretation, effectively, meant that there was an automatic stay on executing an award if a petition had been filed under Section 34 of the Act. The Court, applying the principle under Section 26 above, concluded that in cases where Section 34 petition has been filed after the commencement of the Amendment Act, an application for stay has to be made under Section 36.

The next logical question arose on the fate of Section 34 petitions which have been filed before the commencement of the Amendment Act, which were governed by unamended Section 36. For the same, the court sought to interpret and distinguish ‘enforcement’ from ‘execution’. The Court held that execution of a decree pertains to procedure and there is no substantive vested right in the judgment debtor to resist execution and the amended Section 36 would apply even to pending Section 34 applications as on the date of commencement of the Amendment Act.

Conclusion

The impact of the decision is that a stay will need to be specifically sought as the concept of automatic stay now stands lifted. While the move may be in line with the objective of the Amendment Act viz. to speed up enforcement of awards in India (given that the law provided an impediment to enforcement of awards until Section 34 petition was disposed of, thereby resulting in automatic stay), it does leave several questions unanswered. What is the applicability of the Amendment Act (except in context of Section 36) to the Act? Illustratively, whether the Amendment Act will apply to Sections 8,9,11 etc. of the Act or not?

Perhaps, more judicial intervention will be required for responses to these questions.

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Case Summarized by Siddharth Manchanda, Associate Partner and Neha Mirajgaoker, Associate, Themis Associates.

[1]Section 36. Enforcement Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

[2] Section 36. Enforcement. (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court. (2) 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. (3) Upon filing of an application under subsection (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).

[3] 3Section 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.