Supreme Court Strikes Down Section 87 Of The Arbitration Act
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India: Supreme Court Strikes Down Section 87 Of The Arbitration Act
Last Updated: 26 December 2019
Article by Trilegal .Trilegal
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Taking a pro-arbitration stance, the Supreme Court of India has held that a challenge to an arbitral award does not automatically stay the execution of the arbitral award. While granting a stay on an application by the award debtor, courts can compel the award debtor to furnish suitable security to the award holder.
In a decision that should enhance the attraction of the arbitration regime in India, a three-judge bench of the Supreme Court of India in Hindustan Construction Company Limited and others v. Union of India and others1 has struck down Sections 13 and 15 of the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment Act). These sections had amended Section 87 of the Arbitration and Conciliation Act, 1996 (Act).
In doing so, the Supreme Court expressly overruled its earlier decisions in NALCO v. Pressteel & Fabrications (P) Ltd., NBCC Ltd. v. Lloyds Insulation India Ltd. and Fiza Developers and Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. (NALCO and subsequent cases) and held that a challenge to an arbitral award does not automatically stay the execution of such arbitral award. An award debtor would have to obtain a specific stay on the operation of such award and while granting such a stay, courts could compel the award debtor to furnish suitable security to the award holder with respect to the awarded amount.
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Footnote
[1] In this matter, Trilegal represented one of the infrastructure companies.
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