News By/Courtesy: Priyanka Patnaik | 25 May 2020 8:22am IST


  • How it all started?
  • Removed in 2015 amendment
  • Judgment given by the Supreme Court

In the case of Hindustan Construction Company Limited and Anr. vs Union of India and others, the Supreme Court struck down the validity of section 87 of Arbitration and Conciliation Act 1996 amended in 2019 (2019).
How it all started?
Hindustan construction company limited as a petition had challenged section 87 of the arbitration and conciliation Act 1996 which was amended in 2019. It was challenged because certain arbitral awards were in their favor and also due to the government bodies but after the judgment, the debtors filed an application under section 34 that challenged such arbitral awards. The court put a stay on such arbitral awards and the petitioner was remediless till the court proceeding was complete. The petition couldn't pay to various creditors who supplied machinery, manpower and due to this, they have to initiate the recovery of dues under the Insolvency Bankruptcy code 2016. Unnecessarily the petitioner became insolvent because a law was reinstated. So, in this case, the Supreme Court struck the section 87 to have speedy disposal of cases.
Removed in 2015 amendment 
It was discussed by the Supreme Court in this case that the 2015 amendment act had corrected the provision of application for setting aside an arbitral award, which paved for a stay on the enforcement of arbitral award leaving the payer remediless till the court proceeding were complete. The 2015 amendment had allowed several section 34 applications that were pending or commences on or after 23/10/2015 and also granted a conditional stay on enforcement of awards after deposits were made. This resulted in speedy disposal of court matters in arbitration cases.
Introduction of section 87 in 2019 amendment 
After the introduction of section 87 in 2019, the provision of the automatic stay on enforcement of the arbitral award was once again brought back causing a delay in disposal of cases and also caused he interference of courts.the 2019 amendment had court proceedings which arose out of court proceedings which commenced on or after 23/10//2015. Further, section 87 treated court proceedings pending on 23/10/2015 different than those commenced on or after 23/10/2015.
Judgment was given by the Supreme Court  
After this, the Supreme Court found that section 87 was arbitrary and violates article 14 of the constitution of India as it brings back the same law which was corrected by the 2015 amendment. So, the SC struck down the constitutional validity of section 87 and didn't agree to stay on the execution of the arbitral awards as there was a pre-existing dispute which was ongoing regarding the deposit made by the debtors.

Section Editor: Pushpit Singh | 25 May 2020 17:45pm IST

Tags : #Section87ofarbiteration

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