Supreme Court Clarifies Applicability of 2015 Amendment Act to Arbitration Proceedings: BCCI vs. Kochi Cricket (2018) INSC 227

Introduction

Date of the Judgment: 15 March 2018

Citation: (2018) INSC 227

Judges: R.F. Nariman, J., Navin Sinha, J.

When does a change in law apply to ongoing legal disputes? The Supreme Court of India recently addressed this crucial question in a batch of appeals concerning the Arbitration and Conciliation Act, 1996, as amended in 2015. The core issue was whether the amended provisions of the Act, particularly Section 36 relating to the enforcement of arbitral awards, would apply to arbitral proceedings commenced before the 2015 Amendment Act came into force, or only to those initiated after. The bench comprised Justices R.F. Nariman and Navin Sinha, with the majority opinion authored by Justice R.F. Nariman.

Case Background

The primary case involved a dispute between the Board of Control for Cricket in India (BCCI) and Kochi Cricket Pvt. Ltd. The dispute arose from a franchise agreement dated 12th March 2011. On 18th January 2012, Kochi Cricket invoked arbitration. The Sole Arbitrator delivered two awards on 22nd June 2015 in favor of Kochi Cricket. The BCCI challenged these awards on 16th September 2015 by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, in the Bombay High Court.

On 26th November 2015, Kochi Cricket filed execution applications for payment of the awarded amounts. The BCCI resisted these applications, arguing that the old Section 36 of the Act, which provided for an automatic stay of the award upon filing of a Section 34 application, should apply. The High Court, however, ruled that the amended Section 36 applied, leading to the appeal before the Supreme Court.

Timeline

Course of Proceedings

The Bombay High Court dismissed the BCCI’s Chamber Summons, holding that the amended Section 36 of the Arbitration and Conciliation Act, 1996, would apply. This decision was based on the interpretation that the amended Section 36, which does not provide for an automatic stay of the arbitral award upon filing of a Section 34 application, would be applicable to the case. This led to the BCCI filing an appeal before the Supreme Court.

Legal Framework

The core of the dispute revolves around Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015, which states:

“Section 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.”

The Supreme Court also considered Section 36 of the Arbitration and Conciliation Act, 1996, both in its pre-amended and amended forms.

The pre-amended Section 36 stated:

“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.”

The amended Section 36 states:

“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 sub-section (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).”

Arguments

The Appellants, led by Shri C.A. Sundaram, argued that Section 26 of the Amendment Act has two distinct parts. The first part, they contended, is an exception to the second part, which is the principal part. They argued that Section 6 of the General Clauses Act, 1897, would apply to the first part, preserving the vested right to challenge arbitral awards under the old Act. They cited Thyssen Stahlunion v. Steel Authority of India (1999) 9 SCC 334, N.S. Nayak & Sons v. State of Goa (2003) 6 SCC 56, and Milkfood Ltd. v GMC Ice Cream Pvt. Ltd. (2004) 7 SCC 288, to support their claim that the amendment should be prospective.

Shri K.V. Viswanathan, also for the Appellants, argued that the term “arbitral proceedings” in Section 26 refers only to proceedings before an arbitrator. He argued that if arbitral proceedings commenced under the old Act, all court proceedings related to it should also be governed by the old Act. He emphasized party autonomy and the need to respect agreements made under the old regime.

Shri Tushar Mehta, Additional Solicitor General, supported the Appellants, arguing that retrospective application of Section 36 would lead to anomalies and hardship.

Shri Arvind Datar argued that the amendments changed the basis of challenging arbitral awards and should not be retrospectively applied. He emphasized that the High Level Committee’s report, headed by Justice B.N. Srikrishna, supported the view that arbitral proceedings commenced before the Amendment Act, and all related court proceedings, should be governed by the old Act.

Shri Anirudh Krishnan argued that Section 85A of the 246th Law Commission Report, which was not followed in Section 26, was intended to make the amendment prospective. He also argued that Sections 34 and 36 are part of an “appeal package” and should be applied together.

The Respondents, led by Shri Neeraj Kaul, argued that the absence of “court proceedings” in the first part of Section 26 indicates that the Amendment Act should apply retrospectively to court proceedings. He argued that the second part of Section 26 covers both arbitral and court proceedings commenced after the Amendment Act. He contended that no vested right exists in Section 34 proceedings, which are not appellate proceedings.

Shri P. Chidambaram argued that the word “but” in Section 26 separates two distinct situations, with the first part applying to arbitral proceedings and the second to all proceedings starting from Section 21 and all court proceedings related to it. He argued that Section 36 is a clog on the decree holder’s right and that there is no vested right in the judgment debtor to delay proceedings.

Shri Kapil Sibal argued that Section 26 should be interpreted to further the object of the Amendment Act, which was to improve India’s contract enforcement ranking. He argued that Section 26 is not a savings provision but a provision that destroys all vested rights under the old Act.

Dr. A.M. Singhvi argued for an intermediate approach, stating that the first part of Section 26 applies only to arbitral proceedings before a tribunal, and the second part applies only to court proceedings in relation to them. He emphasized that the absence of Section 21 in the second part is significant.

Shri Nakul Dewan argued that the first part of Section 26 refers to “the arbitral proceedings” before the arbitrator, while the second part refers to court proceedings. He contended that there is no vested right to resist the execution of an award merely because a Section 34 application is pending.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue for consideration:

1. What is the correct interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015, particularly regarding its applicability to arbitral proceedings and court proceedings related to them?

Treatment of the Issue by the Court

Authorities

The Court considered various authorities, categorized by the legal points they addressed:

On Interpretation of Repeal and Savings Clauses:

• Bhagat Ram Sharma v. Union of India, 1988 (Supp) SCC 30 – Principles of interpretation of amendment acts.
• State of Punjab v. Mohar Singh, 1955 1 SCR 893 – Approach to statutes amending by way of repeal.
• Transport and Dock Workers’ Union & others v. New Dholera Steamship Ltd., Bombay and others, (1967) 1 LLJ 434 – Applicability of Section 6 of the General Clauses Act.
• Kalawati Devi Harlalka v. CIT (1967) 3 SCR 833 – Intention to the contrary under Section 6 of the General Clauses Act.

On Construction of Section 85 of the 1996 Act:

• Thyssen Stahlunion v. Steel Authority of India (1999) 9 SCC 334 – Interpretation of the expression “in relation to” in Section 85(2)(a) of the 1996 Act.
• Milkfood Limited v GMC Ice Cream Pvt. Ltd. (2004) 7 SCC 288 – Pragmatic and purposive meaning to repeal and savings clauses.
• N.S. Nayak & Sons v. State of Goa (2003) 6 SCC 56 – Application of the old Act to arbitral proceedings commenced before the new Act.

On Enforcement and Execution:

• Lalji Raja and Sons v. Hansraj Nathuram, (1971) 1 SCC 721 – Judgment debtor’s right to resist execution of a decree.
• Narhari Shivram Shet Narvekar v. Pannalal Umediram (1976) 3 SCC 203 – Executability of a decree is not a substantive vested right.
• Satish Kumar v. Surinder Kumar, (1969) 2 SCR 244 – An award has legal efficacy before it becomes a decree.

On Retrospective Application of Statutes:

• Garikapati Veeraya v. N. Subbiah Choudhry (1957) SCR 488 – Vested right of appeal can be taken away only by a subsequent enactment.
• State of Bombay v. Vishnu Ramchandra (1961) 2 SCR 26 – Interpretation of “has been punished” in a statute.
• Workmen v. Firestone Tyre & Rubber Co. of India (P) Ltd., (1973) 1 SCC 813 – Retrospective operation of procedural law.
• L’Office Cherifien Des Phosphates and another v. Yamashita-Shinnihon Steamship Co. Ltd., (1994) 1 AC 486 – Retrospective application of a new section in arbitration.

On the difference between execution and enforcement:

• Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573 – Execution and enforcement are different concepts in law.
• Akkayanaicker v. A.A.A. Kotchadainaidu and Anr. (2004) 12 SCC 469 – Time period for execution of a decree.

Other Authorities:

• Minister of Public Works of the Government of the State of Kuwait v. Sir Frederick Snow and Partners, (1984) 2 WLR 340 – Retrospective effect of a statute.
• Regional Manager & Anr. v. Pawan Kumar Dubey (1976) 3 SCR 540 – Ratio decidendi of a case.

Judgment

The Court held that Section 26 of the Amendment Act bifurcates proceedings into two categories: (1) arbitral proceedings before an arbitral tribunal, and (2) court proceedings “in relation to” arbitral proceedings. The first part of Section 26 refers to arbitral proceedings commenced under Section 21 of the 1996 Act before the Amendment Act, and the second part refers to court proceedings commenced on or after the Amendment Act.

The Court clarified that the expression “to” in the first part of Section 26 refers only to arbitral proceedings before a tribunal, while “in relation to” in the second part refers to court proceedings related to arbitral proceedings. The absence of a reference to Section 21 in the second part of Section 26 is also significant.

The Court also held that Section 36 of the Arbitration and Conciliation Act, 1996, deals with the execution of arbitral awards. Since execution is a procedural matter, the amended Section 36 applies even to pending Section 34 applications.

The Court rejected the argument that Section 26 is a savings clause that preserves all rights under the old Act. It held that Section 26 specifically provides that court proceedings related to arbitral proceedings are separate and would not be viewed as a continuation of arbitral proceedings.

The Court held that the expression “has been” in Section 36(2), as amended, refers to Section 34 petitions filed before the commencement of the Amendment Act, further indicating that the amended Section 36 would apply to such petitions.

The Court also held that the amended Section 36 does not take away any vested right or accrued privilege of the judgment debtor.

How each authority was viewed by the Court?

✓ Thyssen Stahlunion v. Steel Authority of India (1999) 9 SCC 334*: Distinguished. The Court held that this case dealt with a differently worded provision and emphasized the difference in language between the expression “to” and the expression “in relation to”.

✓ Lalji Raja and Sons v. Hansraj Nathuram, (1971) 1 SCC 721*: Followed. The Court followed this judgment to hold that execution of a decree pertains to the realm of procedure and that there is no substantive vested right in a judgment debtor to resist execution.

✓ Satish Kumar v. Surinder Kumar, (1969) 2 SCR 244*: Followed. The Court followed this case to hold that an award has some legal force and is not a mere waste paper.

✓ Minister of Public Works of the Government of the State of Kuwait v. Sir Frederick Snow and Partners, (1984) 2 WLR 340*: Distinguished. The Court held that this case had no application to the present case, as the Amendment Act includes substantive law applicable to court proceedings.

✓ Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573*: Distinguished. The Court held that the observations made in this case were in a completely different context.

✓ Garikapati Veeraya v. N. Subbiah Choudhry (1957) SCR 488*: Cited. The Court cited this case to state that the vested right of appeal can be taken away by a subsequent enactment.

What weighed in the mind of the Court?

The Supreme Court’s reasoning was heavily influenced by the need to give effect to the object of the Arbitration and Conciliation (Amendment) Act, 2015, which was to facilitate speedy disposal of cases relating to arbitration with least court intervention. The Court emphasized that the interpretation of Section 26 should be pragmatic and purposive, keeping in mind the legislative intent behind the amendment. The Court also considered the practical implications of its decision, particularly the need to avoid anomalies and hardships that could arise from a retrospective application of the Amendment Act. The Court also emphasized that the amended Section 36 was a procedural provision and that there was no vested right in a judgment debtor to resist the execution of an award.

Fact:Law Ratio:

The Court’s reasoning was primarily based on the interpretation of the legal provisions and the legislative intent behind the amendment. While the factual aspects of the case were considered, they were secondary to the legal analysis.

Logical Reasoning

Issue: Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015.

Final Order

In light of the above, the Supreme Court dismissed the appeals and upheld the decision of the Bombay High Court. The Court held that the amended Section 36 of the Arbitration and Conciliation Act, 1996, would apply to all court proceedings commenced on or after the date of the Amendment Act, irrespective of when the arbitral proceedings were initiated.

Impact

The judgment clarified the applicability of the 2015 Amendment Act to arbitration proceedings in India. It established that the amended provisions, particularly Section 36, would apply to all court proceedings commenced after the amendment date, even if the arbitral proceedings were initiated before the amendment. This ruling has had a significant impact on the enforcement of arbitral awards in India, making it more difficult for parties to delay the execution of awards by merely filing a Section 34 application. The judgment has also clarified the distinction between arbitral proceedings and court proceedings related to them, which has helped to streamline the arbitration process in India.

Conclusion

The Supreme Court’s decision in BCCI vs. Kochi Cricket is a landmark judgment that has clarified the applicability of the 2015 Amendment Act to arbitration proceedings. The Court’s analysis of Section 26 of the Amendment Act is crucial in understanding how the amended provisions apply to ongoing disputes. The judgment emphasizes the importance of a purposive and pragmatic interpretation of statutes, particularly in the context of arbitration law, where the aim is to ensure speedy and efficient resolution of disputes. The ruling has also reinforced the principle that there is no vested right to delay the execution of an arbitral award by merely filing a Section 34 application. This judgment has contributed significantly to the development of arbitration law in India and is likely to remain a key reference point for future cases involving the interpretation of the 2015 Amendment Act.