2018 (3) TMI 812 - SC - Indian Laws

Interpretation of statute - Enforcement of award - Where arbitration proceedings have been initiated before amendment to Section 36,whether Section 36, which was substituted by the Amendment Act, would apply in its amended form or in its original form to the appeals in question? - construction of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 Held that - If the first part of Section 26 were couched in positive language (like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, arbitral proceedings having been subsumed in the first part cannot re-appear in the second part, and the expression in relation to arbitral proceedings would, therefore, apply only to Court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force. From a reading of Section 26 as interpreted by us, it thus becomes clear that in all cases where the Section 34 petition is filed after the commencement of the Amendment Act, and an application for stay having been made under Section 36 therein, will be governed by Section 34 as amended and Section 36 as substituted. It is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature. Thereafter, whether certain provisions are clarificatory, declaratory or procedural and, therefore, retrospective, is a separate and independent enquiry, which we are not required to undertake in the facts of the present cases, except to the extent indicated above, namely, the effect of the substituted Section 36 of the Amendment Act. it will be important to first bear in mind the principles of interpretation of such a provision. That an Amendment Act does include within it provisions that may be repealed either wholly or partially and that the provisions of Section 6 of the General Clauses Act would generally apply to such Amendment Acts is beyond any doubt. Section 26 has, while retaining the bifurcation of proceedings into arbitration and Court proceedings, departed somewhat from Section 85A as proposed by the Law Commission - That a provision such as Section 26 has to be construed literally first, and then purposively and pragmatically, so as to keep the object of the provision also in mind. Even though the High Court may not be strictly correct in its appreciation of the law, yet it has attempted to do justice on the facts of the case. Appeal dismissed.

Issues Involved:
1. Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015.
2. Applicability of the amended Section 36 to pending Section 34 applications.
3. The distinction between "enforcement" and "execution" of arbitral awards.
4. The retrospective application of procedural amendments.
5. The impact of the Amendment Act on vested rights and ongoing proceedings.
6. The interpretation of "in relation to" in the context of arbitral and court proceedings.
7. The legislative intent and the object of the Amendment Act.
8. Specific case analysis regarding execution of arbitral awards by non-award holders.

Detailed Analysis:

1. Interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015:
The court analyzed Section 26, which bifurcates proceedings into arbitral proceedings and court proceedings related to them. The first part of Section 26 states that the Amendment Act does not apply to arbitral proceedings commenced before the Amendment Act came into force unless parties agree otherwise. The second part states that the Amendment Act applies to arbitral proceedings commenced on or after the Amendment Act came into force. The court clarified that "arbitral proceedings" refer to proceedings before an arbitral tribunal, and "in relation to arbitral proceedings" refers to court proceedings related to arbitration.

2. Applicability of the amended Section 36 to pending Section 34 applications:
The court examined whether the amended Section 36, which changes the enforcement mechanism of arbitral awards, applies to Section 34 applications filed before the Amendment Act. The court concluded that Section 36, being procedural, applies retrospectively to pending Section 34 applications. This is because execution proceedings, including the enforcement of awards, are procedural in nature and do not confer substantive rights on judgment debtors.

3. The distinction between "enforcement" and "execution" of arbitral awards:
The court clarified that "enforcement" under Section 36 refers to the execution of an award as if it were a decree under the Code of Civil Procedure. The court held that execution proceedings are procedural and, therefore, the amended Section 36 applies to pending Section 34 applications.

4. The retrospective application of procedural amendments:
The court held that procedural amendments, such as those in Section 36, apply retrospectively unless there is a clear contrary intention. The court found no such contrary intention in Section 26 of the Amendment Act, which indicates that the Amendment Act is prospective in nature but applies to procedural aspects of pending proceedings.

5. The impact of the Amendment Act on vested rights and ongoing proceedings:
The court addressed the argument that the Amendment Act affects vested rights by changing the enforcement mechanism of awards. The court held that there is no vested right in procedural law, and the Amendment Act's procedural changes apply to ongoing proceedings, including those under Section 34.

6. The interpretation of "in relation to" in the context of arbitral and court proceedings:
The court emphasized the difference between "to" and "in relation to" in Section 26. The first part of Section 26 applies to arbitral proceedings before an arbitral tribunal, while the second part applies to court proceedings related to arbitral proceedings. The court concluded that the Amendment Act applies to court proceedings commenced after the Amendment Act came into force.

7. The legislative intent and the object of the Amendment Act:
The court highlighted the legislative intent behind the Amendment Act, which aims to reduce court interference and expedite arbitration proceedings. The court noted that the Amendment Act's objective is to make arbitration more user-friendly, cost-effective, and efficient, and this intent supports the prospective application of the Amendment Act to procedural aspects of ongoing proceedings.

8. Specific case analysis regarding execution of arbitral awards by non-award holders:
In the specific case of Enercon GmbH, the court addressed the issue of whether Enercon could execute an award in favor of WWIL. The court noted that WWIL, controlled by the Mehra brothers, would not execute the award. Although the High Court's interpretation was not strictly correct, the Supreme Court upheld the decision in the interest of justice, allowing Enercon to execute the award.

Conclusion:
The Supreme Court dismissed the batch of appeals, holding that the Amendment Act applies prospectively to arbitral proceedings and court proceedings commenced after the Amendment Act came into force. The amended Section 36 applies to pending Section 34 applications, as it is procedural in nature. The court emphasized the legislative intent to expedite arbitration and reduce court interference, supporting the prospective application of the Amendment Act to procedural aspects of ongoing proceedings.

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