Arbitration Act Amendments Not Retroactive: Appellants Win Automatic Stay Rights

The court held that the amended provisions of the Arbitration and Conciliation Act, 1996 do not apply to arbitration proceedings that commenced before the amendments took effect. The appellants were entitled to an automatic stay of the arbitral award under the unamended provisions of Sections 34 and 36. The court ruled that the amendments impacted vested rights, including the right to automatic stay, and should not apply retrospectively. As a result, the order requiring a deposit of Rs 2.7 crores was set aside, and the appeals were allowed in favor of the appellants.

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Issues Involved:
1. Application of amended provisions of the Arbitration and Conciliation Act, 1996.
2. Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015.
3. Impact of amendments on vested rights and accrued rights.
4. Automatic stay of enforcement of arbitral awards under Section 34.

Detailed Analysis:

Application of Amended Provisions:
The main controversy revolves around whether the amended provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 34 and 36, apply to arbitration proceedings that commenced before the amendments came into effect on 23.10.2015. The appellants argue that their petitions under Section 34 should be governed by the unamended provisions, thereby entitling them to an automatic stay of the arbitral award. The respondents contend that the amended provisions should apply, negating any automatic stay and allowing the court to impose conditions, such as the deposit of Rs 2.7 crores.

Interpretation of Section 26:
Section 26 of the Amending Act is pivotal in this case. It states:
“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 appellants interpret this to mean that the unamended provisions apply to their case since their arbitration proceedings commenced before 23.10.2015. The respondents argue that "to the arbitral proceedings" refers only to proceedings before the arbitral tribunal and not to court proceedings, suggesting that the amended provisions should apply to court proceedings post-award.

Impact on Vested and Accrued Rights:
The appellants argue that the amendments affect their vested rights, particularly the right to an automatic stay of the enforcement of the arbitral award upon filing a petition under Section 34. They cite Section 6 of the General Clauses Act, 1897, which protects accrued rights unless a repealing Act explicitly states otherwise. The respondents counter that the amendments are procedural and do not affect substantive rights, thus should apply retrospectively.

Automatic Stay of Enforcement:
Prior to the amendments, filing a petition under Section 34 resulted in an automatic stay of the arbitral award's enforcement. The amended Section 36 requires a separate application for stay and allows the court to impose conditions. The appellants argue that this change adversely affects their substantive rights and should not apply retrospectively. The respondents argue that the change is procedural and does not affect the right to challenge the award itself.

Conclusion:
The court concluded that Section 26 of the Amending Act, if interpreted narrowly, does not address cases where arbitral proceedings commenced before 23.10.2015, but the award was made, or a petition under Section 34 was filed after this date. The amendments to Sections 34 and 36 affect accrued rights, particularly the right to an automatic stay. Therefore, the petitions under Section 34 should be governed by the unamended provisions, entitling the appellants to an automatic stay of the enforcement of the award. Consequently, the impugned order requiring the deposit of Rs 2.7 crores was set aside, and the appeals were allowed to this extent.

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