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REPORTABLE  

IN THE SUPREME COURT OF INDIA  

CIVIL ORIGINAL/APPELLATE JURISDICTION  

WRIT PETITION (CIVIL) NO. 1074 OF 2019  

Hindustan Construction Company Limited    …Petitioners  

& Anr.   

Versus  

 Union of India & Ors.           …Respondents  

WITH  

WRIT PETITION (CIVIL) No.1276 of 2019  

WITH  

WRIT PETITION (CIVIL) No.1310 of 2019  

WITH  

M.A. NOS.2140-2144 OF 2019   

IN   

CIVIL APPEAL NOS. 2621-2625 OF 2019  

J U D G M E N T  

R.F. NARIMAN, J.  

1. This set of Writ Petitions seek to challenge the constitutional  

validity of Section 87 of the Arbitration and Conciliation Act, 1996

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(hereinafter referred to as the “Arbitration Act, 1996”) as inserted by  

Section 13 of the Arbitration and Conciliation (Amendment) Act,  

2019 (hereinafter referred to as the “2019 Amendment Act”) and  

brought into force with effect from 30.08.2019. They also seek to  

challenge the repeal (with effect from 23.10.2015) of Section 26 of  

the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter  

referred to as the “2015 Amendment Act”) by Section 15 of the 2019  

Amendment Act. Apart from the aforesaid challenge, a challenge is  

also made to various provisions of the Insolvency and Bankruptcy  

Code, 2016 (hereinafter referred to as the “Insolvency Code”) which,  

as stated by the Petitioners, result in discriminatory treatment being  

meted out to them.  

2. The facts relevant for the determination of these matters may  

be gleaned from Writ Petition (Civil) No.1074 of 2019. The Petitioner  

No.1 therein, i.e. Hindustan Construction Company Limited, is an  

infrastructure construction company involved in the business of  

construction of public-utilities and projects like roads, bridges,  

hydropower and nuclear plants, tunnels and rail facilities. The

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Petitioner company, inter alia, undertakes these building projects as  

a contractor for government bodies such as the National Highways  

Authority of India (“NHAI”, i.e. Respondent No.5 in the Writ Petition),  

NHPC Ltd. (“NHPC”, i.e. Respondent No.6), NTPC Ltd. (“NTPC”, i.e.  

Respondent No.8), IRCON International Ltd. (“IRCON”, i.e.  

Respondent No.7) and the Public Works Department (“PWD”). Such  

projects are allotted to the Petitioner through the public tendering  

system. As Government bodies are owners and beneficiaries of  

such projects, cost overrun is almost invariably disputed by these  

bodies, leading to huge delays in the recovery of the legitimate dues  

of the petitioners. Also, these dues can only be recovered through  

civil proceedings or through arbitrations.  

3. Arbitration awards that are in favour of the Petitioner  

company are invariably challenged under Sections 34 and 37 of the  

Arbitration Act, 1996, and on average, more than 6 years are spent  

in defending these challenges. The major problem in the way of the  

Petitioners is that the moment a challenge is made under Section

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34, there is an ‘automatic-stay’ of such awards under the Arbitration  

Act, 1996.  

4. The Petitioners are then subjected to a double-whammy.  

Government bodies other than Government companies are exempt  

from the Insolvency Code because they are statutory authorities or  

government departments. Even if they can be said to be operational  

debtors - which is not the case - the moment a challenge is filed to  

an award under Section 34 and/or Section 37 of the Arbitration Act,  

1996, such debt becomes a ‘disputed debt’ under the judgments of  

this Court, and proceedings initiated under the Insolvency Code at  

the behest of the Petitioner company, not being maintainable in any  

case, would be dismissed at the threshold. Huge sums of money are  

therefore due from all these companies/government/government  

bodies to the Petitioners.  

5. On the other hand, in order that the Petitioner company  

continue to operate, the Petitioner owes large sums to operational  

creditors for supplying men, machinery and material for the projects.  

It is stated in the Writ Petition No.1074 of 2019 that Demand Notices

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have been issued to the Petitioner by a large number of operational  

creditors for sums amounting to over a hundred crores.   

6. Dr. Abhishek Manu Singhvi, learned Senior Advocate  

appearing on behalf of the Petitioner No.1 in Writ Petition No.1074  

of 2019, has argued that the Arbitration Act, 1996 is based upon the  

UNCITRAL Model Law on International Commercial Arbitration (as  

adopted by the United Nations Commission on International Trade  

Law on 21 June 1985) (hereinafter referred to as the “UNCITRAL  

Model Law”), Article 36(2) of which specifically refers to applications  

for setting aside or suspension of an award, in which the other party  

may provide appropriate security. Contrary to Article 36 of the  

UNCITRAL Model Law, Section 36 of the Arbitration Act, 1996 has  

been construed by judgments of this Court as granting an  

‘automatic-stay’ the moment a Section 34 application is filed within  

time. According to the learned Senior Advocate, from the plain  

language of Section 36, automatic-stay does not follow, and the  

judgments of this Court which have so held would require a revisit  

by this larger bench. In any case, the 246th Report of the Law

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Commission of India titled, ‘Amendments to the Arbitration and  

Conciliation Act, 1996’ (August, 2014) (hereinafter referred to as the  

“246th Law Commission Report”) recommended that Section 36 be  

amended, which was in fact done by the 2015 Amendment Act, so  

that automatic-stays are now things of the past. However, despite  

the fact that the 2015 Amendment Act made large-scale changes to  

the Arbitration Act, 1996, keeping in view the objects of the  

Arbitration Act, 1996 of minimum judicial intervention, speedy  

determination and recovery of amounts contained in arbitral awards,  

yet, another ‘High-Level Committee to Review the Institutionalisation  

of Arbitration Mechanism in India’ headed by Retd. Justice B.N.  

Srikrishna by its report dated 30.07.2017 (hereinafter referred to as  

the “Srikrishna Committee Report”) opined that the 2015  

Amendment Act should not apply to pending court proceedings  

which have commenced after 23.10.2015 (i.e. the date of the 2015  

Amendment Act coming into force), but should only apply in case  

arbitral proceedings have themselves been commenced post  

23.10.2015, which would include court proceedings relating thereto.  

He argued that the Government of India issued a Press Release on

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07.03.2018 to enact a new Section 87 in accord with what the  

Srikrishna Committee Report had opined, which was pointed out to  

this Court before it decided the case of BCCI v. Kochi Cricket Pvt.  

Ltd. (2018) 6 SCC 287 (which was decided on 15.03.2018). Despite  

the fact that this Court specifically opined in the said judgment that  

the aforesaid provision would be contrary to the object of the 2015  

Amendment Act, and despite the fact that the judgment was  

specifically sent to the Ministry of Law and Justice and to the  

learned Attorney General for India, Section 87 was enacted,  

reference being made only to the Srikrishna Committee Report,  

without even a mention of the aforesaid judgment of this Court in  

BCCI (supra). Consequently, the learned Senior Advocate argued  

that since the basis of a judgment of the Supreme Court can only be  

removed if there is a pointed reference to the said judgment,  

obviously the judgment of this Court has been sought to be directly  

overturned without removing its basis. Further, Section 87 flies in the  

face of not only the object of the Arbitration Act, 1996 as a whole  

and the objects for enacting the 2015 Amendment Act, but is also  

contrary to Section 35 of the Arbitration Act, 1996. He has stated

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that it is amazing that in a Civil Court where a full-blooded appeal is  

filed, Order XLI Rule 5 of the Code of Civil Procedure, 1908  

(hereinafter referred to as the “CPC”) is to apply, there being no  

automatic-stay of a money decree; whereas in a summary  

proceeding under Section 34 of the Arbitration Act, 1996, where the  

court does not sit in appeal over the award – and if the view of the  

arbitrator is a possible view, it passes muster – there is an  

automatic-stay of an arbitral award on the mere filing of Section 34  

application, which in turn takes years for final disposal.   

7. Dr. Singhvi then trained his guns against Section 87, stating  

that it is violative of Articles 14, 19(1)(g), 21 and 300-A of the  

Constitution of India, as it is contrary to the object of the principal  

Arbitration Act, 1996 itself; takes away the vested right of  

enforcement and binding nature of an arbitral award; and without  

removing the basis of the BCCI  judgment (supra), acts in the teeth  

of the said judgment, making the said section unreasonable,  

excessive, disproportionate as well as arbitrary. He then argued that  

in effect, the 2019 Amendment Act reverses the beneficial effects of

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the 2015 Amendment Act which remedied the original mischief  

contained in the Arbitration Act, 1996, that too after a period of more  

than 19 years. To bring back this mischief of automatic-stays would  

result in manifest arbitrariness, rendering the provision  

constitutionally infirm. He argued that the Srikrishna Committee  

Report also did not take into account the enforcement of the  

Insolvency Code. On the one hand, arbitral awards for crores of  

rupees will get automatically stayed through the application of  

Section 87, and on the other hand, non-payment of any amount  

beyond INR one lakh by the Petitioner to its operational creditors  

would render it open to being declared insolvent. The absurd  

consequence of this is that the fruits of an award are denied to the  

Petitioner, resulting in financial hardship, which in turn results in  

applications being filed against the Petitioner under the Insolvency  

Code for lesser amounts than what is due to it as an award-holder.  

Further, the retrospective resurrection of the automatic-stay  

provision allows award-debtors who have challenged arbitral awards  

before the Courts, and who have in fact made payments to award-

holders, to now claim the aforesaid sums back from such award-

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holders. For all these reasons, it is contended that Section 87 is  

constitutionally infirm. Also, according to Dr. Singhvi, since almost all  

the arbitration clauses with Government/Government Bodies state  

that the Arbitration Act, 1996 together with its amendments shall  

apply, this would make the 2019 Amendment Act applicable to its  

pending arbitral awards, resulting in wholly arbitrary consequences.  

8. So far as the challenge to the Insolvency Code is concerned,  

Dr. Singhvi exhorted us to read ‘corporate person’, as defined by  

Section 3(7) of the Insolvency Code, to include Government Bodies  

other than Government Companies (which are already included).  

This was based on the argument that qua the object sought to be  

achieved by the Insolvency Code, it makes no difference as to  

whether the person sued as a corporate person is a government  

company or a body corporate set up under a statute. He exhorted us  

to either delete the words ‘limited liability’ contained in Section 3(7)  

of the Code, or read Section 3(23)(g) of the Code into Section 3(7),  

and relied upon judgments which stressed the ‘positive’ aspect of  

Article 14 of the Constitution of India, which permit such

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interpretation. He then pointed out that whereas ‘financial position’  

(as defined under Section 5(9) of the Insolvency Code) mandates  

taking into consideration the financial information and balance  

sheets, such financial position is irrelevant at the stage of triggering  

the Insolvency Code, and only becomes relevant at the stage of  

declaring such position to prospective resolution applicants, which  

itself makes the provision manifestly arbitrary. He then argued as to  

the omission of initiation of the resolution process by a creditor in  

Section 6 of the Insolvency Code, together with the absence of a  

mechanism for forcing debtors of a corporate debtor to make  

payments to avoid insolvency of such corporate debtors. He then  

referred to the principle of ‘casus omissus’ and how the modern view  

is that such casus omissus can be supplied by the Courts, so as to  

save the provisions of the Insolvency Code from the vice of manifest  

arbitrariness. He also argued that there is no level playing field so  

far as his client is concerned, as a statutory authority can initiate the  

resolution process against persons like his client, but not vice-versa.  

He then made an impassioned plea that, in any event, this Court  

ought to follow its earlier judgments and restate the principle that

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payment of a money-decree under an award, even when under  

challenge, is the rule - stay being the exception. Also in cases like  

the present, even if deposits are made as a condition of stay of  

money-decrees, withdrawal ought to be permitted - not on onerous  

conditions such as bank guarantees - but on other conditions such  

as corporate guarantees and the like, so that such monies are  

available for payment to other creditors, including operational  

creditors, who are free to invoke the Insolvency Code against the  

Petitioner.  

9. Dr. Singhvi then argued that his client was forced to avail of  

the NITI Aayog’s Office Memorandum No.14070/14/2016-PPPAU  

dated 05.09.2016 (hereinafter referred to as the “NITI Aayog  

Scheme”) given the fact that the moment arbitral awards were  

passed in his client’s favour, they were challenged under Section 34  

of the Arbitration Act, 1996 as a result of which, there was an  

automatic-stay. Thus, under the said NITI Aayog Scheme, his client  

in order to retrieve amounts payable under such awards, was able to  

get 75% of a “pay-out amount”, which is the amount for which the

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award has been announced, plus payment of interest. This can only  

be done against a bank guarantee of the equivalent amount.  

However, apart from such bank guarantee, an additional bank  

guarantee of 10% per year on the pay-out amount would also have  

to be given, which is then compounded annually. According to him,  

given the fact that 75% of such pay-out amount can only be  

released on the bank guarantee of the equivalent amount, asking for  

anything over and above this would amount to an arbitrary exercise  

of power, which is liable to be struck down. Dr. Singhvi contended  

that this extra amount of 10% per annum, being severable, can be  

struck down without otherwise impacting the NITI Aayog Scheme.  

10. Shri Neeraj Kishan Kaul, also appearing for Hindustan  

Construction Company, reiterated some of the submissions of Dr.  

Singhvi and argued, based on a reading of Section 87 as introduced  

by the 2019 Amendment Act and Section 26 of the 2015  

Amendment Act, that Section 87 is nothing but a re-hash of Section  

26 and this being so, is therefore a direct attack on the judgment of  

this Court in BCCI (supra), without removing its basis. He also

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added that since there is no set-off mechanism provided by the  

Insolvency Code, the provisions of the Insolvency Code will have to  

be held to be manifestly arbitrary so far as his client is concerned, to  

this extent.   

11. Shri C.A. Sundaram, learned Senior Advocate appearing for  

M/s Patel Engineering Ltd. in I.A. No. 157742 of 2019 in W.P (C) No.  

1074 of 2019, reiterated the submissions that Section 87, being  

directly contrary to this Court’s judgment in BCCI (supra), needs to  

be set aside. He also argued that it retrospectively removes a vested  

right in the petitioner, as is reflected in paragraph 62 and 63 of the  

BCCI judgment (supra).   

12. Shri Ritin Rai, learned Senior Advocate appearing for M/s  

Gammon Engineers and Contractors Private Limited, i.e. the  

Petitioner No.1 in W.P.(C) 1276 of 2019, pointed out various  

paragraphs of the Counter-Affidavit of the Union of India to show  

that there is no real answer to the submission that Section 87  

directly interferes with the judgment of this Court in BCCI (supra),  

and that the introduction of Section 87 is manifestly arbitrary. In any

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case, he relied upon Section 6 of the General Clauses Act, 1897 to  

save the application of Section 36 as amended by the 2015  

Amendment Act. When it came to the provisions of the Insolvency  

Code, he referred to this Court’s judgment in Mobilox Innovations  

Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 and  

stated that Section 5(6) of the Insolvency Code, which defines  

‘disputes’, read with Section 8(2) of the Insolvency Code, would  

make it clear that there is no bar to applying an Order VIII-A of the  

CPC type procedure to proceedings under the Insolvency Code, so  

that when his client’s sub-contractor triggers the Insolvency Code  

against his client, his client in-turn should be able to make its  

principal employer a party to such proceedings, so that the sub-

contractor may then recover these amounts from the principal  

employer directly, thereby absolving his client from the clutches of  

the Insolvency Code.  

13. Shri Nakul Dewan, learned Senior Advocate appearing on  

behalf of M/s Gangotri Enterprises Limited, i.e. the Petitioner No.1 in  

W.P. (C) No. 1310 of 2019, referred copiously to the UNCITRAL

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Model Law and stated that under the UNCITRAL Model Law, in case  

an award were to be passed, whether domestic or international, in  

the same country, two bites at the cherry would be available: one at  

the time of setting aside the award, and one at the time of  

recognition and enforcement. The Arbitration Act, 1996 has not  

followed this model and has a far more robust enforcement regime,  

as Section 36 of the Arbitration Act, 1996 mandates that once an  

award can be said to be final, it can be executed in the manner  

provided by the CPC.  

14. Mr. Dewan then went on to state that Section 87 destroyed a  

level playing field in relation to enforcement of arbitral awards, by re-

imposing an arbitrary cut-off date qua application of the amended  

Section 36. He then argued that even though Section 15 of the 2019  

Amendment Act has deleted Section 26 of the 2015 Amendment  

Act, this has not changed the basis on which the judgment in BCCI  

(supra) was delivered, as there is no vested right to resist the  

enforcement of an arbitral award, and that arbitration proceedings  

and court proceedings are distinct sets of proceedings as

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recognized by Section 87 itself. Further, classification of parties on  

the basis of this cut-off date has no rational nexus to the object  

sought to be achieved by the Arbitration Act, 1996. Finally, he urged  

that the Counter-Affidavit filed by the Union of India, after referring to  

this Court’s judgment, then mouthed the same reasons for  

introducing Section 87 as were in the Srikrishna Committee Report,  

which was prior to, and could not have taken into account, this  

Court’s judgment in BCCI (supra). Therefore, to state that even after  

this Court settled the law in BCCI (supra) there would still be  

‘uncertainty’ would itself show that the provision contained in Section  

87 would be manifestly arbitrary. He then argued, based on a  

treatise by Ian F. Fletcher on the law of insolvency, that a distinction  

is made in insolvency law between refusal to pay, and inability to  

pay. Since the automatic-stay provision would render persons like  

his client unable to pay debts, his client, though otherwise financially  

healthy, would suddenly become vulnerable to being declared  

insolvent under the Insolvency Code.

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15. The learned Attorney General for India, Shri K.K. Venugopal,  

defended the repeal of Section 26 of the 2015 Arbitration  

Amendment and the insertion of Section 87 into the Arbitration Act,  

1996 by the 2019 Amendment Act. He argued that in BCCI’s case  

(supra), the interpretation of Section 26 of the 2015 Amendment Act  

is only declaratory in nature. Since the said judgment neither sets  

aside any executive action, nor any provision of a statute, it does not  

require a validating act to neutralise its effect. It is open to  

Parliament, if it finds that a view expressed by the Apex Court does  

not reflect its original intent, to clarify its original intent through  

amendment. This is in fact what was done by deleting Section 26 of  

the 2015 Amendment Act, and inserting Section 87 into the  

Arbitration Act, 1996. He relied on the clarificatory aspect of the  

amendment by referring to paragraph 6(vi) of the Statement of  

Objects and Reasons to the Arbitration and Conciliation  

(Amendment) Bill, 2019. In any event, even if the principles  

governing validating acts are applied, the deletion of Section 26  

retrospectively removes the basis of the judgment in the BCCI case  

(supra). Further, there is no substance to the challenge to Section

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87 on the ground of the date being fixed as 23.10.2015, as cut-off  

dates have been upheld in a plethora of cases as being within the  

exclusive domain of Parliament, and the courts should not normally  

interfere with the fixation of such cut-off date, unless blatantly  

arbitrary or discriminatory. He referred to some of our judgments in  

support of this proposition.  

16. Shri Tushar Mehta, learned Solicitor General of India,  

defending the constitutional challenge to the provisions of the  

Insolvency Code, argued that a Writ Petition filed under Article 32 of  

the Constitution of India cannot be converted into a recovery  

proceeding by the Petitioners. According to Shri Mehta, the conduct  

of the Petitioner No.1 in W.P. (C) 1074 of 2019 is such that the Writ  

Petition ought to be dismissed at the threshold itself. First and  

foremost, it was contended that the petitioner has mislead this Court  

by stating that a sum of INR 6070 crores is liable to be paid by the  

Government entities mentioned therein, as such sums amount to  

awards that have not been stayed by any Court. He referred to and  

relied upon a chart appended to the Counter-Affidavit of the Union of

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India dated 21.10.2019, in which he was at pains to point out that in  

each of the awards in favour of the Petitioner No.1 in Writ Petition  

No.1074 of 2019, the contract value was much less than the actual  

amount paid on completion of work, in addition to which, deposit  

orders have been passed by courts in all these cases, which have  

not been appealed against. He further argued that there was a gross  

suppression of facts and figures by Petitioner No.1, as a result of  

which the Writ Petition ought to be dismissed at the threshold. He  

contended that what was deliberately hidden by the Petitioner No.1  

was the fact that the Respondent Public Sector Undertakings  

(hereinafter referred to as “PSUs”) have deposited/paid substantial  

amounts that are due against them under arbitral awards, amounting  

percentage wise to 83.3%. He also pointed out that insofar as  

IRCON is concerned, in relation to one particular arbitral award,  

IRCON has accused the Petitioner No.1 of trying to influence the  

arbitrator by providing unsolicited facilities to the arbitrator, and  

actually getting orders drafted on behalf of the arbitrator by the  

lawyer of the Petitioners and otherwise providing undue favours to  

the arbitrator; all of which is the subject matter of adjudication

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pending in the Delhi High Court. When it came to the challenge to  

the Insolvency Code, he argued that except for the sums owing  

under some arbitral awards, none of the PSUs have any other dues  

that are owing to the Petitioner No.1. He also pointed out that  

whether a person is an operational creditor has to be decided based  

upon the fact situation in each case. The very fundamental basis of  

the Petitioner’s argument that the Insolvency Code is  

unconstitutional because it does not give the Petitioners a right to  

recover monies from their debtors - and that the same Insolvency  

Code gives the debtor a right to recover from the Petitioner No.1 - is  

flawed, because the Insolvency Code is not a statute for recovery of  

debts, but is a statute for reorganisation of corporate persons and  

resolution of stressed assets of corporate persons. According to  

him, three of the five entities who have arbitral awards against them,  

namely NTPC, NHPC and IRCON, are Government Companies,  

which certainly fall within the definition of ‘corporate person’ and  

‘corporate debtor’ under Section 3(7) and 3(8) of the Insolvency  

Code. So far as the NHAI is concerned, he referred to the Statement  

of Objects and Reasons of the National Highways Authority of India

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Act, 1988 (hereinafter referred to as the “NHAI Act”) and some  

sections of the said Act to show that NHAI is a statutory body which  

functions as an extended limb of the Central Government, and which  

is to carry out the sovereign function of laying down national  

highways. Obviously, the Insolvency Code cannot be used against  

such a statutory body, because no resolution professional or private  

individual can take over the management of such body, as it  

performs sovereign functions, nor can such body be driven to  

insolvency under an Insolvency Code. He also referred to the  

definitions contained in Section 3(7) and 3(23) of the Insolvency  

Code, and stated that they are separate and independent of each  

other, Section 3(7) lifting only two out of seven entities mentioned in  

Section 3(23). Thus, being mutually exclusive, nothing from Section  

3(23) which defines ‘person’ can possibly be imported into Section  

3(7) which defines ‘corporate person’. He further argued that this  

Court’s judgment in K. Kishan v. Vijay Nirman Company Pvt. Ltd.  

(2018) 17 SCC 662 made it clear that arbitral awards that are  

pending adjudication under Section 34 would show that a pre-

existing dispute exists in such cases, and therefore would in any

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case be outside the strong arm of the law contained in the  

Insolvency Code.  

17. Ms. Pinky Anand, learned Additional Solicitor General,  

supported the submissions of both the learned Attorney General and  

the Solicitor General. She further argued, based on a copious  

reading of the Counter-Affidavit filed on behalf of the Union of India,  

that no inroads have been made into the objects sought to be  

achieved by the 2015 Amendment Act by merely following a  

particular cut-off date. In any case, the fixing of such cut-off date,  

being the sole prerogative of the Parliament, cannot be interfered  

with by the courts as this pertains to policy matters. She also cited  

some judgments of this Court to buttress her submissions.  

Interpretation of Section 36 of the Arbitration Act, 1996   

18. At the outset, it is important to advert to Section 36 of the  

Arbitration Act, 1996 and the judgments interpreting it. Section 36  

(prior to the 2015 Amendment Act) stated as follows:  

“36. Enforcement.—Where the time for  making an application to set aside the arbitral  award under section 34 has expired, or such

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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.”  

19. The UNCITRAL Model Law is important in understanding the  

provisions of the Arbitration Act, 1996 as the said Act is explicitly  

based upon it. The preamble of the Arbitration Act, 1996 specifically  

states as follows:  

“Preamble. -- WHEREAS the United Nations  Commission on International Trade Law  (UNCITRAL) has adopted the UNCITRAL  Model Law on International Commercial  Arbitration in 1985; AND   

WHEREAS the General Assembly of the  United Nations has recommended that all  countries give due consideration to the said  Model Law, in view of the desirability of  uniformity of the law of arbitral procedures and  the specific needs of international commercial  arbitration practice;   

AND WHEREAS the UNCITRAL has adopted  the UNCITRAL Conciliation Rules in 1980;  AND   

WHEREAS the General Assembly of the  United Nations has recommended the use of  the said Rules in cases where a dispute arises  in the context of international commercial  relations and the parties seek an amicable

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settlement of that dispute by recourse to  conciliation;  

AND WHEREAS the said Model Law and  Rules make significant contribution to the  establishment of a unified legal framework for  the fair and efficient settlement of disputes  arising in international commercial relations;  

AND WHEREAS it is expedient to make law  respecting arbitration and conciliation, taking  into account the aforesaid Model Law and  Rules.”  

20. As a matter of fact, the judgment in Chloro Controls (I) Pvt.  

Ltd. v. Seven Trent Water Purification Inc. (2013) 1 SCC 641  

says as much in paragraph 93 thereof, which reads as under:  

“93. As noticed above, the legislative intent  and essence of the 1996 Act was to bring  domestic as well as international commercial  arbitration in consonance with  the UNCITRAL Model Rules, the New York  Convention and the Geneva Convention. The  New York Convention was physically before  the legislature and available for its  consideration when it enacted the 1996 Act.  Article II of the Convention provides that each  contracting State shall recognise an  agreement and submit to arbitration all or any  differences which have arisen or which may  arise between them in respect of a defined  legal relationship, whether contractual or not  concerning a subject-matter capable of  settlement by arbitration. Once the agreement

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is there and the court is seized of an action in  relation to such subject-matter, then on the  request of one of the parties, it would refer the  parties to arbitration unless the agreement is  null and void, inoperative or incapable of  performance.”  

21. What is important so far as the UNCITRAL Model Law is  

concerned is Article 36(2) thereof, which states as follows:  

“Article 36. Grounds for refusing recognition or  enforcement-  

xxx xxx xxx  

(2) If an application for setting aside or  suspension of an award has been made to a  court referred to in paragraph (1)(a)(v) of this  article, the court where recognition or  enforcement is sought may, if it considers it  proper, adjourn its decision and may also, on  the application of the party claiming  recognition or enforcement of the award, order  the other party to provide appropriate  security.”  

22. Shri Dewan has argued that under the UNCITRAL Model  

Law, Articles 34 and 35 provide for two bites at the cherry: (i) in  

cases in which an award is sought to be set aside, and (ii) thereafter  

when not set aside, sought to be recognised and enforced in the  

same country in which it has been made. He is right in stating that

27    

Section 36 of the Arbitration Act, 1996 does not follow the two bites  

at the cherry doctrine, for the reason that when an award made in  

India becomes final and binding, it shall straightaway be enforced  

under the CPC, and in the same manner as if it were a decree of the  

Court, there being no recourse to the self-same grounds when it  

comes to recognition and enforcement. In point of fact, the raison  

d'etre for Section 36 is only to make it clear that when an arbitral  

award is not susceptible to challenge, either because the time for  

making an application to set it aside has expired, or such application  

having been made is refused, the award, being final and binding,  

shall be enforced under the CPC as if it were a decree of the court.  

This becomes clear when Section 36 and 35 of the Arbitration Act,  

1996 are read together. Section 35 of the Arbitration Act, 1996 reads  

as follows:  

“35. Finality of arbitral awards.- Subject to  this Part an arbitral award shall be final and  binding on the parties and persons claiming  under them respectively.”  

28    

23. However, in National Aluminum Company Ltd. (NALCO) v.  

Pressteel & Fabrications (P) Ltd. and Anr. 2004 1 SCC 540, this  

Court held:  

“10…At one point of time, considering the  award as a money decree, we were inclined to  direct the party to deposit the awarded amount  in the court below so that the applicant can  withdraw it, on such terms and conditions as  the said court might permit it to do as an  interim measure. But then we noticed from the  mandatory language of Section 34 of the 1996  Act, that an award, when challenged under  Section 34 within the time stipulated therein,  becomes unexecutable. There is no discretion  left with the court to pass any interlocutory  order in regard to the said award except to  adjudicate on the correctness of the claim  made by the applicant therein. Therefore, that  being the legislative intent, any direction from  us contrary to that, also becomes  impermissible. On facts of this case, there  being no exceptional situation which would  compel us to ignore such statutory provision,  and to use our jurisdiction under Article 142,  we restrain ourselves from passing any such  order, as prayed for by the applicant.  

11. However, we do notice that this automatic  suspension of the execution of the award, the  moment an application challenging the said  award is filed under Section 34 of the Act  leaving no discretion in the court to put the  parties on terms, in our opinion, defeats the  very objective of the alternate dispute

29    

resolution system to which arbitration belongs.  We do find that there is a recommendation  made by the Ministry concerned to Parliament  to amend Section 34 with a proposal to  empower the civil court to pass suitable  interim orders in such cases. In view of the  urgency of such amendment, we sincerely  hope that necessary steps would be taken by  the authorities concerned at the earliest to  bring about the required change in law.”  

24. When this court speaks of “the mandatory language of  

Section 34” of the Arbitration Act, 1996 obviously what is meant is  

the language of Section 36 of the Arbitration Act, 1996, as noted by  

National Buildings Construction Corporation Ltd. v. Lloyds  

Insulation India Ltd. (2005) 2 SCC 367 (in paragraph 6). In Fiza  

Developers and Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd.  

and Anr. (2009) 17 SCC 796, this Court held:   

“20. Section 36 provides that an award shall  be enforced in the same manner as if it were a  decree of the court, but only on the expiry of  the time for making an application to set aside  the arbitral award under Section 34, or such  application having been made, only after it has  been refused. Thus, until the disposal of the  application under Section 34 of the Act, there  is an implied prohibition of enforcement of the  arbitral award. The very filing and pendency of  an application under Section 34, in effect,

30    

operates as a stay of the enforcement of the  award.”  

25. To state that an award when challenged under Section 34  

becomes unexecutable merely by virtue of such challenge being  

made because of the language of Section 36 is plainly incorrect. As  

has been pointed out hereinabove, Section 36 was enacted for a  

different purpose. When read with Section 35, all that Section 36  

states is that enforcement of a final award will be under the CPC,  

and in the same manner as if it were a decree of the Court. In fact,  

this is how Section 36 has been read by a three-judge bench in  

Leela Hotels Ltd. V. Housing and Urban Development  

Corporation Ltd. (2012) 1 SCC 302 as follows:  

“45. Regarding the question as to whether the  award of the learned arbitrator tantamounts to  a decree or not, the language used in Section  36 of the Arbitration and Conciliation Act,  1996, makes it very clear that such an award  has to be enforced under the Code of Civil  Procedure in the same manner as it were a  decree of the court. The said language leaves  no room for doubt as to the manner in which  the award of the learned arbitrator was to be  accepted.”

31    

26.  To read Section 36 as inferring something negative, namely,  

that where the time for making an application under Section 34 has  

not expired and therefore, on such application being made within  

time, an automatic-stay ensues, is to read something into Section 36  

which is not there at all. Also, this construction omits to consider the  

rest of Section 36, which deals with applications under Section 34  

that have been dismissed, which leads to an award being final and  

binding (when read with Section 35 of the Arbitration Act, 1996)  

which then becomes enforceable under the CPC, the award being  

treated as a decree for this purpose.   

27. This also finds support from the language of Section 9 of the  

Arbitration Act, 1996, which specifically enables a party to apply to a  

Court for reliefs “…after the making of the arbitration award but  

before it is enforced in accordance with Section 36.” The decisions  

in NALCO (supra) and Fiza Developers and Intra-trade Pvt. Ltd.  

(supra) overlook this statutory position. These words in Section 9  

have not undergone any change by reason of the 2015 or 2019  

Amendment Acts.

32    

28. Interpreting Section 9 of the Arbitration Act, 1996, a Division  

Bench of the Bombay High Court in Dirk India Pvt. Ltd. v.  

Maharashtra State Power Generation Company Ltd. 2013 SCC  

Online Bom 481 held that:  

“13….The second facet of Section 9 is the  proximate nexus between the orders that are  sought and the arbitral proceedings. When an  interim measure of protection is sought before  or during arbitral proceedings, such a measure  is a step in aid to the fruition of the arbitral  proceedings. When sought after an arbitral  award is made but before it is enforced, the  measure of protection is intended to safeguard  the fruit of the proceedings until the eventual  enforcement of the award. Here again the  measure of protection is a step in aid of  enforcement. It is intended to ensure that  enforcement of the award results in a  realisable claim and that the award is not  rendered illusory by dealings that would put  the subject of the award beyond the pale of  enforcement.”  

29. This being the legislative intent, the observation in NALCO  

(supra) that once a Section 34 application is filed, “there is no  

discretion left with the Court to pass any interlocutory order in regard  

to the said Award…” flies in the face of the opening words of Section  

9 of the Arbitration Act, 1996, extracted above.  

33    

30. Thus, the reasoning of the judgments in NALCO (supra), and  

Fiza Developers and Intra-trade Pvt. Ltd. (supra) being per  

incuriam in not noticing Sections 9, 35 and the second part of  

Section 36 of the Arbitration Act, 1996, do not commend themselves  

to us and do not state the law correctly.1 The fact that NALCO  

(supra) has been followed in National Buildings Construction  

Corporation Ltd. v. Lloyds Insulation India Ltd. (supra) does not  

take us any further, as National Buildings Construction  

Corporation Ltd. (supra) in following NALCO (supra), a per  

incuriam judgement, also does not state the law correctly. Thus, it is  

clear that the automatic-stay of an award, as laid down by these  

 1 In NALCO (supra), this Court was concerned with two questions – the  second question being whether the appropriate Court, for the purpose of  challenging or seeking modification of an award, was the Supreme  Court, or the principal Civil Court of original jurisdiction under Section  2(e) of the Arbitration Act, 1996. This Court held, distinguishing State of  M.P. v. Saith and Skeleton (P) Ltd. (1972) 1 SCC 702 and Guru  Nanak Foundation v. Rattan Singh and Sons. (1981) 4 SCC 634, that  the Court which had jurisdiction to modify and/or set aside the award  was not the Supreme Court. On this point, NALCO (supra) has  subsequently been followed by a number of judgments and continues to  be good law. Also, the ratio of the judgment in Fiza Developers and  Intra-trade Pvt. Ltd. (supra) on the construction of Section 34 of the  Arbitration Act, 1996 relating to the framing of issues and pleadings and  proof required in Section 34 proceedings remains untouched by the  present judgment.

34    

decisions, is incorrect. The resultant position is that Section 36 -  

even as originally enacted - is not meant to do away with Article  

36(2) of the UNCITRAL Model Law, but is really meant to do away  

with the two bites at the cherry doctrine in the context of awards  

made in India, and the fact that enforcement of a final award, when  

read with Section 35, is to be under the CPC, treating the award as  

if it were a decree of the court.   

31. In any event, on this aspect of the case, the BCCI judgment  

(supra) referred, in paragraph 25 thereof, to the 246th Law  

Commission Report on Section 36 as follows:  

“25. At this point, it is instructive to refer to the  246th Law Commission Report which led to  the Amendment Act. This Report, which was  handed over to the Government in August  2014, had this to state on why it was  proposing to replace Section 36 of the 1996  Act:  

“AUTOMATIC STAY OF ENFORCEMENT OF THE  AWARD UPON ADMISSION OF CHALLENGE  

“43. Section 36 of the Act makes it clear that  an arbitral award becomes enforceable as a  decree only after the time for filing a petition  under Section 34 has expired or after the  Section 34 petition has been dismissed. In  other words, the pendency of a Section 34

35    

petition renders an arbitral award  unenforceable. The Supreme Court,  in National Aluminium Co. Ltd. v. Pressteel &  Fabrications (P) Ltd. [National Aluminium Co.  Ltd. v. Pressteel & Fabrications (P) Ltd.,  (2004) 1 SCC 540] held that by virtue of  Section 36, it was impermissible to pass an  order directing the losing party to deposit any  part of the award into Court. While this  decision was in relation to the powers of the  Supreme Court to pass such an order under  Section 42, the Bombay High Court in Afcons  Infrastructure Ltd. v. Port of Mumbai [Afcons  Infrastructure Ltd. v. Port of Mumbai, (2014) 1  Arb LR 512 (Bom)] applied the same principle  to the powers of a court under Section 9 of the  Act as well. Admission of a Section 34 petition,  therefore, virtually paralyses the process for  the winning party/award creditor.  

44. The Supreme Court, in National  Aluminium [National Aluminium Co.  Ltd. v. Pressteel & Fabrications (P) Ltd.,  (2004) 1 SCC 540] , has criticised the present  situation in the following words: (SCC p. 546,  para 11)  

‘11. However, we do notice that this automatic  suspension of the execution of the award, the  moment an application challenging the said  award is filed under Section 34 of the Act  leaving no discretion in the court to put the  parties on terms, in our opinion, defeats the  very objective of the alternate dispute  resolution system to which arbitration belongs.  We do find that there is a recommendation  made by the Ministry concerned to Parliament

36    

to amend Section 34 with a proposal to  empower the civil court to pass suitable  interim orders in such cases. In view of the  urgency of such amendment, we sincerely  hope that necessary steps would be taken by  the authorities concerned at the earliest to  bring about the required change in law.’  

45. In order to rectify this mischief, certain  amendments have been suggested by the  Commission to Section 36 of the Act, which  provide that the award will not become  unenforceable merely upon the making of an  application under Section 34.”  

It then further went on to state:  

“62…Since it is clear 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, Section  36, as substituted, would apply even to  pending Section 34 applications on the date of  commencement of the Amendment Act.”  

The Court then commented on this Court’s judgment in NALCO  

(supra) as follows:  

“67. In 2004, this Court's judgment in National  Aluminium Co. [National Aluminium Co.  Ltd. v. Pressteel & Fabrications (P) Ltd.,  (2004) 1 SCC 540] had recommended that  Section 36 be substituted, as it defeats the  very objective of the alternative dispute  resolution system, and that the section should  be amended at the earliest to bring about the

37    

required change in law. It would be clear that  looking at the practical aspect and the nature  of rights presently involved, and the sheer  unfairness of the unamended provision, which  granted an automatic stay to execution of an  award before the enforcement process of  Section 34 was over (and which stay could  last for a number of years) without having to  look at the facts of each case, it is clear that  Section 36 as amended should apply to  Section 34 applications filed before the  commencement of the Amendment Act also  for the aforesaid reasons.”  

(emphasis supplied)  

32. Section 36, as amended by the 2015 Amendment Act, now  

reads as follows:  

“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 (5 of 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 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

38    

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).”   

Given the fact that we have declared that the judgments in NALCO  

(supra), National Buildings Construction Corporation Ltd.  

(supra) and Fiza Developers (supra) have laid down the law  

incorrectly, it is also clear that the amended Section 36, being  

clarificatory in nature, merely restates the position that the  

unamended Section 36 does not stand in the way of the law as to  

grant of stay of a money decree under the provisions of the CPC.   

39    

Removal of the basis of the BCCI judgment by the 2019  

Amendment Act  

33. It now falls to be determined as to whether the 2019  

Amendment Act removes the basis of the BCCI judgment (supra) of  

this Court.  

34. For this purpose, it is necessary to set out the relevant  

provisions of the 2019 Amendment Act. Section 87 as introduced by  

Section 13 of the 2019 Amendment Act reads as follows:  

“87. Unless the parties otherwise agree, the  amendments made to this Act by the  Arbitration and Conciliation (Amendment) Act,  2015 shall–  

(a) not apply to-  

(i) arbitral proceedings commenced before  the commencement of the Arbitration  and Conciliation (Amendment) Act,  2015;   

(ii) court proceedings arising out of or in  relation to such arbitral proceedings  irrespective of whether such court  proceedings are commenced prior to or  after the commencement of the  Arbitration and Conciliation  (Amendment) Act, 2015;  

(b) apply only to arbitral proceedings  commenced on or after the

40    

commencement of the Arbitration and  Conciliation (Amendment) Act, 2015 and to  court proceedings arising out of or in  relation to such arbitral proceedings.”  

By Section 15 of the same Amendment Act, Section 26 of the  

2015 Amendment Act was omitted as follows:  

“15. Section 26 of the Arbitration and  Conciliation (Amendment) Act, 2015 shall be  omitted and shall be deemed to have been  omitted with effect from the 23rd October,  2015.”  

Section 26 of the 2015 Amendment Act reads as follows:  

“26. 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.”  

35. This Court’s judgment in BCCI (supra) had occasion to deal  

with the important question as to the true interpretation of Section 26  

of the 2015 Amendment Act. This Court, in paragraph 28, referred to  

the transitory provision contained in Section 85-A as proposed in the  

246th Law Commission Report, and thereafter in paragraphs 29 to  

31, referred to the debates on the floor of the House. In paragraph

41    

32, this Court referred to the differences between Section 26 and  

Section 85-A as proposed, and then held:  

“33. What can be seen from the above is that  Section 26 has, while retaining the bifurcation  of proceedings into arbitration and court  proceedings, departed somewhat from Section  85-A as proposed by the Law Commission.”  

36. Section 26 was then stated to have bifurcated proceedings  

with a great degree of clarity into two sets of proceedings – arbitral  

proceedings themselves, and court proceedings in relation thereto.  

Paragraph 39 of the judgment refers to this and states as follows:  

“39. Section 26, therefore, bifurcates  proceedings, as has been stated above, with a  great degree of clarity, into two sets of  proceedings — arbitral proceedings  themselves, and court proceedings in relation  thereto. The reason why the first part of  Section 26 is couched in negative form is only  to state that the Amendment Act will apply  even to arbitral proceedings commenced  before the amendment if parties otherwise  agree. 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

42    

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.”  

(emphasis supplied)  

37. The Court was alive to the Srikrishna Committee Report’s  

recommendation of a proposed Section 87, as is clear from footnote  

23 appended to paragraph 44 of the judgment. The Court then made  

a reference to the Statement of Objects and Reasons for the 2015  

Amendment Act and stated as follows:  

“77. However, it is important to remember that  the Amendment Act was enacted for the  following reasons, as the Statement of Objects  and Reasons for the Amendment Act states:  

“2. The Act was enacted to provide for  speedy disposal of cases relating to  arbitration with least court intervention. With  the passage of time, some difficulties in the  applicability of the Act have been

43    

noticed. Interpretation of the provisions of the  Act by courts in some cases have resulted in  delay of disposal of arbitration proceedings  and increase in interference of courts in  arbitration matters, which tend to defeat the  object of the Act. With a view to overcome  the difficulties, the matter was referred to the  Law Commission of India, which examined  the issue in detail and submitted its 176th  Report. On the basis of the said Report, the  Arbitration and Conciliation (Amendment)  Bill, 2003 was introduced in the Rajya Sabha  on 22-12-2003. The said Bill was referred to  the Department-related Parliamentary  Standing Committee on Personnel, Public  Grievances, Law and Justice for examination  and report. The said Committee, submitted  its Report to Parliament on 4-8-2005,  wherein the Committee recommended that  since many provisions of the said Bill were  contentious, the Bill may be withdrawn and a  fresh legislation may be brought after  considering its recommendations.  Accordingly, the said Bill was withdrawn from  the Rajya Sabha.  

3. On a reference made again in pursuance  of the above, the Law Commission examined  and submitted its 246th Report on  “Amendments to the Arbitration and  Conciliation Act, 1996” in August 2014 and  recommended various amendments in the  Act. The proposed amendments to the Act  would facilitate and encourage Alternative  Dispute Mechanism, especially arbitration,  for settlement of disputes in a more user- friendly, cost-effective and expeditious

44    

disposal of cases since India is committed to  improve its legal framework to obviate in  disposal of cases.  

4. As India has been ranked at 178 out of  189 nations in the world in contract  enforcement, it is high time that urgent steps  are taken to facilitate quick enforcement of  contracts, easy recovery of monetary claims  and award of just compensation for damages  suffered and reduce the pendency of cases  in courts and hasten the process of dispute  resolution through arbitration, so as to  encourage investment and economic activity.  

5. As Parliament was not in session and  immediate steps were required to be taken to  make necessary amendments to the  Arbitration and Conciliation Act, 1996 to  attract foreign investment by projecting India  as an investor friendly country having a  sound legal framework, the President was  pleased to promulgate the Arbitration and  Conciliation (Amendment) Ordinance, 2015.  

6. It is proposed to introduce the Arbitration  and Conciliation (Amendment) Bill, 2015, to  replace the Arbitration and Conciliation  (Amendment) Ordinance, 2015, which inter  alia, provides for the following, namely—  

(i) to amend the definition of “Court” to  provide that in the case of international  commercial arbitrations, the Court should  be the High Court;  

(ii) to ensure that an Indian court can  exercise jurisdiction to grant interim

45    

measures, etc., even where the seat of the  arbitration is outside India;  

(iii) an application for appointment of an  arbitrator shall be disposed of by the High  Court or Supreme Court, as the case may  be, as expeditiously as possible and an  endeavour should be made to dispose of  the matter within a period of sixty days;  

(iv) to provide that while considering any  application for appointment of arbitrator,  the High Court or the Supreme Court shall  examine the existence of a prima facie  arbitration agreement and not other  issues;  

(v) to provide that the Arbitral Tribunal  shall make its award within a period of  twelve months from the date it enters upon  the reference and that the parties may,  however, extend such period up to six  months, beyond which period any  extension can only be granted by the  Court, on sufficient cause;  

(vi) to provide for a model fee schedule on  the basis of which High Courts may frame  rules for the purpose of determination of  fees of Arbitral Tribunal, where a High  Court appoints arbitrator in terms of  Section 11 of the Act;  

(vii) to provide that the parties to dispute  may at any stage agree in writing that their  dispute be resolved through fast-track  procedure and the award in such cases

46    

shall be made within a period of six  months;  

(viii) to provide for neutrality of arbitrators,  when a person is approached in  connection with possible appointment as  an arbitrator;  

(ix) to provide that application to challenge  the award is to be disposed of by the Court  within one year.  

7. The amendments proposed in the Bill will  ensure that arbitration process becomes  more user-friendly, cost-effective and lead to  expeditious disposal of cases.”  

78. The Government will be well-advised in  keeping the aforesaid Statement of Objects  and Reasons in the forefront, if it proposes to  enact Section 87 on the lines indicated in the  Government's Press Release dated 7-3-2018.  The immediate effect of the proposed Section  87 would be to put all the important  amendments made by the Amendment Act on  a back-burner, such as the important  amendments made to Sections 28 and 34 in  particular, which, as has been stated by the  Statement of Objects and Reasons,  

“… have resulted in delay of disposal of  arbitration proceedings and increase in  interference of courts in arbitration matters,  which tend to defeat the object of the Act”,  

and will now not be applicable to Section 34  petitions filed after 23-10-2015, but will be  applicable to Section 34 petitions filed in cases

47    

where arbitration proceedings have  themselves commenced only after 23-10- 2015. This would mean that in all matters  which are in the pipeline, despite the fact that  Section 34 proceedings have been initiated  only after 23-10-2015, yet, the old law would  continue to apply resulting in delay of disposal  of arbitration proceedings by increased  interference of courts, which ultimately defeats  the object of the 1996 Act. [These  amendments have the effect, as stated  in HRD Corpn. v. GAIL (India) Ltd., (2018) 12  SCC 471 of limiting the grounds of challenge  to awards as follows: (SCC p. 493, para  18)“18. In fact, the same Law Commission  Report has amended Sections 28 and 34 so  as to narrow grounds of challenge available  under the Act. The judgment in ONGC  Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 has  been expressly done away with. So has the  judgment in ONGC Ltd. v. Western Geco  International Ltd., (2014) 9 SCC 263. Both  Sections 34 and 48 have been brought back to  the position of law contained in Renusagar  Power Plant Co. Ltd. v. General Electric  Company, 1994 Supp (1) SCC 644, where  “public policy” will now include only two of the  three things set out therein viz. “fundamental  policy of Indian law” and “justice or morality”.  The ground relating to “the interest of India” no  longer obtains. “Fundamental policy of Indian  law” is now to be understood as laid down  in Renusagar, 1994 Supp (1) SCC 644.  “Justice or morality” has been tightened and is  now to be understood as meaning only basic  notions of justice and morality i.e. such notions  as would shock the conscience of the Court as

48    

understood in Associate Builders v. DDA,  (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204.  Section 28(3) has also been amended to bring  it in line with the judgment of this Court  in Associate Builders, (2015) 3 SCC 49 :  (2015) 2 SCC (Civ) 204, making it clear that  the construction of the terms of the contract is  primarily for the arbitrator to decide unless it is  found that such a construction is not a  possible one.”] It would be important to  remember that the 246th Law Commission  Report has itself bifurcated proceedings into  two parts, so that the Amendment Act can  apply to court proceedings commenced on or  after 23-10-2015. It is this basic scheme which  is adhered to by Section 26 of the Amendment  Act, which ought not to be displaced as the  very object of the enactment of the  Amendment Act would otherwise be  defeated.”  

(emphasis supplied)  

In paragraph 83, the Court then concluded:  

“83. In view of the above, the present batch of  appeals is dismissed. A copy of the judgment  is to be sent to the Ministry of Law and Justice  and the learned Attorney General for India in  view of what is stated in paras 77 and 78  supra.”  

38. After construing Section 26 in the manner stated in the  

judgment, this Court cautioned the Government by stating that the  

immediate effect of enacting the proposed Section 87 would be

49    

directly contrary to the Statement of Objects and Reasons of the  

2015 Amendment Act, which made it clear that the law prior to the  

2015 Amendment Act resulted in delay of disposal of arbitral  

proceedings, and an increase in interference by courts in arbitration  

matters, which tends to defeat a primary object of the Arbitration Act,  

1996 itself. It was therefore stated that all the amendments made by  

the 2015 Amendment Act, and important amendments in particular  

that were made to Sections 28 and 34, would now be put on a  

backburner, which would be contrary not only to what the 246th Law  

Commission had in mind, but also directly contrary to the salutary  

provisions that were made to correct defects that were found in the  

working of the Arbitration Act, 1996.  

39. At this point it is important to refer to the relevant paragraphs  

of the Statement of Objects and Reasons of the 2019 Amendment  

Act which introduced Section 87. In paragraphs 2 to 6 of the  

Statement of Objects and Reasons, the Srikrishna Committee  

Report alone is referred to, and paragraph 6(vi) in particular states  

as follows:

50    

“6. The salient features of the Arbitration and  Conciliation (Amendment) Bill, 2019, inter alia,  are as follows:-  

xxx xxx xxx  

(vi) to clarify that Section 26 of the Arbitration  and Conciliation (Amendment) Act, 2015 is  applicable only to the arbitral proceedings  which commenced on or after 23rd October,  2015 and to such court proceedings which  emanate from such arbitral proceedings.”  

40. Interestingly, no such clarification was made by the 2019  

Amendment Act. Instead, Section 26 was omitted with effect from  

23.10.2015 and Section 87 introduced.   

41. Dr. Singhvi has argued, based on a number of judgments of  

this Court, that the question of removing the basis of a judgment  

cannot arise unless and until the judgment is present to the mind of  

the legislature. He stated that in all the major cases in which a  

judgment of a court is nullified by removing its basis, the judgment in  

question has been expressly referred to in the concerned Statement  

of Objects and Reasons. We are afraid that we cannot agree with  

this line of argument. What is important is to see whether, in  

substance, the basis of a particular judgment is in fact removed,

51    

whether or not that judgment is referred to in the Statement of  

Objects and Reasons of the amending act which seeks to remove its  

basis.   

42. In Shri Prithvi Cotton Mills Ltd. and Anr. v. Broad  

Borough Municipality and Ors. (1969) 2 SCC 283, this Court held:  

“4….Granted legislative competence, it is not  sufficient to declare merely that the decision of  the Court shall not bind for that is tantamount  to reversing the decision in exercise of judicial  power which the Legislature does not possess  or exercise. A court's decision must always  bind unless the conditions on which it is based  are so fundamentally altered that the decision  could not have been given in the altered  circumstances.”  

43. In State of Tamil Nadu v. Arooran Sugars Ltd. (1997) 1  

SCC 326, this Court after setting out what was held in Shri Prithvi  

Cotton Mills (supra) stated:  

“16…The same view was reiterated in the  cases of West Ramnad Electric Distribution  Co. Ltd. v. State of Madras [(1963) 2 SCR 747  : AIR 1962 SC 1753] ; Udai Ram  Sharma v. Union of India [(1968) 3 SCR 41 :  AIR 1968 SC 1138] ; Tirath Ram Rajindra  Nath v. State of U.P. [(1973) 3 SCC 585 :  1973 SCC (Tax) 300] ; Krishna Chandra  Gangopadhyaya v. Union of India [(1975) 2  SCC 302] ; Hindustan Gum & Chemicals

52    

Ltd. v. State of Haryana [(1985) 4 SCC 124]  ; Utkal Contractors and Joinery (P)  Ltd. v. State of Orissa [1987 Supp SCC 751]  ; D. Cawasji & Co v. State of Mysore [1984  Supp SCC 490 : 1985 SCC (Tax) 63]  and Bhubaneshwar Singh v. Union of  India [(1994) 6 SCC 77] . It is open to the  legislature to remove the defect pointed out by  the court or to amend the definition or any  other provision of the Act in question  retrospectively. In this process it cannot be  said that there has been an encroachment by  the legislature over the power of the judiciary.  A court's directive must always bind unless the  conditions on which it is based are so  fundamentally altered that under altered  circumstances such decisions could not have  been given. This will include removal of the  defect in a statute pointed out in the judgment  in question, as well as alteration or substitution  of provisions of the enactment on which such  judgment is based, with retrospective effect.”.   

44. Likewise, in Goa Foundation v. State of Goa (2016) 6 SCC  

602, this Court held:  

“24…The power to invalidate a legislative or  executive act lies with the Court. A judicial  pronouncement, either declaratory or  conferring rights on the citizens cannot be set  at naught by a subsequent legislative act for  that would amount to an encroachment on the  judicial powers. However, the legislature  would be competent to pass an amending or a  validating act, if deemed fit, with retrospective  effect removing the basis of the decision of the

53    

Court. Even in such a situation the courts may  not approve a retrospective deprivation of  accrued rights arising from a judgment by  means of a subsequent legislation (Madan  Mohan Pathak v. Union of India [Madan  Mohan Pathak v. Union of India, (1978) 2 SCC  50 : 1978 SCC (L&S) 103] ). However, where  the Court's judgment is purely declaratory, the  courts will lean in support of the legislative  power to remove the basis of a court judgment  even retrospectively, paving the way for a  restoration of the status quo ante. Though the  consequence may appear to be an exercise to  overcome the judicial pronouncement it is so  only at first blush; a closer scrutiny would  confer legitimacy on such an exercise as the  same is a normal adjunct of the legislative  power. The whole exercise is one of viewing  the different spheres of jurisdiction exercised  by the two bodies i.e. the judiciary and the  legislature. The balancing act, delicate as it is,  to the constitutional scheme is guided by the  well-defined values which have found succinct  manifestation in the views of this Court  in Bakhtawar Trust [Bakhtawar Trust v. M.D.  Narayan, (2003) 5 SCC 298].”  

45. Given the aforesaid judgments, Section 15 of the 2019  

Amendment Act removes the basis of BCCI (supra) by omitting from  

the very start Section 26 of the 2015 Amendment Act. Since this is  

the provision that has been construed in the BCCI judgment (supra),  

there can be no doubt whatsoever that one fundamental prop of the

54    

said judgment has been removed by retrospectively omitting Section  

26 altogether from the very day when it came into force. This  

argument must therefore be rejected.  

46. Equally, Shri Neeraj Kishan Kaul’s argument that Section 87  

is nothing but a re-hash of Section 26, and therefore in substance  

there is a direct encroachment on a judgment of this Court, must  

also be rejected. When contrasted with Section 26, Section 87 is in  

two parts: Section 87(a) negatively stating that the 2015 Amendment  

Act shall not apply to Court proceedings arising out of arbitral  

proceedings irrespective of whether such court proceedings are  

commenced before or after the commencement of the 2015  

Amendment Act; and positively applying only to court proceedings in  

case they arise out of arbitral proceedings that are commenced on  

or after the commencement of the 2015 Amendment Act. It can thus  

be seen that the scheme of Section 87 is different from that of  

Section 26, and is explicit in stating that court proceedings are  

merely parasitical on arbitral proceedings. It is therefore clear that  

only arbitral proceedings have to be looked at to see whether the

55    

2015 Amendment Act kicks in. It is therefore not possible to accept  

Shri Kaul’s argument that in the present case there is a direct  

assault on a judgment of this Court without first removing its basis.  

Constitutional Challenge to the 2019 Amendment Act  

47. This now sets the stage for the examination of the  

constitutional validity of the introduction of Section 87 into the  

Arbitration Act, 1996, and deletion of Section 26 of the 2015  

Amendment Act by the 2019 Amendment Act against Articles 14,  

19(1)(g), 21 and Article 300-A of the Constitution of India. The  

Srikrishna Committee Report recommended the introduction of  

Section 87 owing to the fact that there were conflicting High Court  

judgments on the reach of the 2015 Amendment Act at the time  

when the Committee deliberated on this subject. This was stated as  

follows in the Srikrishna Committee Report:  

“However, section 26 has remained silent on  the applicability of the 2015 amendment Act to  court proceedings, both pending and newly  initiated in case of arbitrations commenced  prior to 23 October 2015. Different High  Courts in India have taken divergent views on  the applicability of the 2015 Amendment Act to

56    

such court proceedings. Broadly, there are  three sets of views as summarised below:  

(a) The 2015 Amendment Act is not applicable  to court proceedings (fresh and pending)  where the arbitral proceedings to which  they relate commenced before 23 October  2015.    

(b) The first part of section 26 is narrower than  the second and only excludes arbitral  proceedings commenced prior to 23  October 2015 from the application of the  2015 Amendment Act. The 2015  Amendment Act would, however, apply to  fresh or pending court proceedings in  relation to arbitral proceedings commenced  prior to 23 October 2015.  

 (c) The wording “arbitral proceedings” in  

section 26 cannot be construed to include  related court proceedings. Accordingly, the  2015 Amendment Act applied to all  arbitrations commenced on or after 23  October 2015. As far as court proceedings  are concerned, the 2015 Amendment Act  would apply to all court proceedings from  23October 2015, including fresh or pending  court proceedings in relation to arbitration  commenced before, on or after 23 October  2015.  

Thus, it is evident that there is considerable  confusion regarding the applicability of the  2015 Amendment Act to related court  proceedings in arbitration commenced before  23 October 2015.The Committee is of the view

57    

that a suitable legislative amendment is  required to address this issue.  

The committee feels that permitting the 2015  Amendment Act to apply to pending court  proceedings related to arbitrations  commenced prior to 23 October 2015 would  result in uncertainty and prejudice to parties,  as they may have to be heard again. It may  also not be advisable to make the 2015  Amendment Act applicable to fresh court  proceedings in relation to such arbitrations, as  it may result in an inconsistent position.  Therefore, it is felt that it may be desirable to  limit the applicability of the 2015 Amendment  Act to arbitrations commenced on or after 23  October 2015 and related court proceedings.”  

(emphasis supplied)  

48. The Srikrishna Committee Report is dated 30.07.2017, which  

is long before this Court’s judgment in the BCCI case (supra).  

Whatever uncertainty there may have been because of the  

interpretation by different High Courts has disappeared as a result of  

the BCCI judgment (supra), the law on Section 26 of the 2015  

Amendment Act being laid down with great clarity. To thereafter  

delete this salutary provision and introduce Section 87 in its place,  

would be wholly without justification and contrary to the object  

sought to be achieved by the 2015 Amendment Act, which was

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enacted pursuant to a detailed Law Commission report which found  

various infirmities in the working of the original 1996 statute. Also, it  

is not understood as to how “uncertainty and prejudice would be  

caused, as they may have to be heard again”, resulting in an  

‘inconsistent position’. The amended law would be applied to  

pending court proceedings, which would then have to be disposed of  

in accordance therewith, resulting in the benefits of the 2015  

Amendment Act now being applied. To refer to the Srikrishna  

Committee Report (without at all referring to this Court’s judgment)  

even after the judgment has pointed out the pitfalls of following such  

provision, would render Section 87 and the deletion of Section 26 of  

the 2015 Amendment Act manifestly arbitrary, having been enacted  

unreasonably, without adequate determining principle, and contrary  

to the public interest sought to be subserved by the Arbitration Act,  

1996 and the 2015 Amendment Act. This is for the reason that a key  

finding of the BCCI judgment (supra) is that the introduction of  

Section 87 would result in a delay of disposal of arbitration  

proceedings, and an increase in the interference of courts in

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arbitration matters, which defeats the very object of the Arbitration  

Act, 1996, which was strengthened by the 2015 Amendment Act.  

49. Further, this Court has repeatedly held that an application  

under Section 34 of the Arbitration Act, 1996 is a summary  

proceeding not in the nature of a regular suit – see Canara Nidhi  

Ltd. v. M. Shashikala 2019 SCC Online SC 1244 at paragraph 20.   

As a result, a court reviewing an arbitral award under Section 34  

does not sit in appeal over the award, and if the view taken by the  

arbitrator is possible, no interference is called for – see Associated  

Construction v. Pawanhans Helicopters Ltd.  (2008) 16 SCC 128  

at paragraph 17.   

50. Also, as has been held in the recent decision Ssangyong  

Engineering & Construction Co. Ltd. v. NHAI 2019 SCC Online  

677, after the 2015 Amendment Act, this Court cannot interfere with  

an arbitral award on merits (see paragraph 28 and 76 therein). The  

anomaly, therefore, of Order XLI Rule 5 of the CPC applying in the  

case of full-blown appeals, and not being applicable by reason of  

Section 36 of the Arbitration Act, 1996 when it comes to review of

60    

arbitral awards, (where an appeal is in the nature of a rehearing of  

the original proceeding, where the chance of succeeding is far  

greater than in a restricted review of arbitral awards under Section  

34), is itself a circumstance which militates against the enactment of  

Section 87, placing the amendments made in the 2015 Amendment  

Act, in particular Section 36, on a backburner. For this reason also,  

Section 87 must be struck down as manifestly arbitrary under Article  

14. The petitioners are also correct in stating that when the mischief  

of the misconstruction of Section 36 was corrected after a period of  

more than 19 years by legislative intervention in 2015, to now work  

in the reverse direction and bring back the aforesaid mischief itself  

results in manifest arbitrariness. The retrospective resurrection of an  

automatic-stay not only turns the clock backwards contrary to the  

object of the Arbitration Act, 1996 and the 2015 Amendment Act, but  

also results in payments already made under the amended Section  

36 to award-holders in a situation of no-stay or conditional-stay now  

being reversed. In fact, refund applications have been filed in some  

of the cases before us, praying that monies that have been released

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for payment as a result of conditional stay orders be returned to the  

judgment-debtor.  

51. Also, it is important to notice that the Srikrishna Committee  

Report did not refer to the provisions of the Insolvency Code. After  

the advent of the Insolvency Code on 01.12.2016, the consequence  

of applying Section 87 is that due to the automatic-stay doctrine laid  

down by judgments of this Court - which have only been reversed  

today by the present judgment - the award-holder may become  

insolvent by defaulting on its payment to its suppliers, when such  

payments would be forthcoming from arbitral awards in cases where  

there is no stay, or even in cases where conditional stays are  

granted. Also, an arbitral award-holder is deprived of the fruits of its  

award - which is usually obtained after several years of litigating - as  

a result of the automatic-stay, whereas it would be faced with  

immediate payment to its operational creditors, which payments may  

not be forthcoming due to monies not being released on account of  

automatic-stays of arbitral awards, exposing such award-holders to  

the rigors of the Insolvency Code. For all these reasons, the deletion

62    

of Section 26 of the 2015 Amendment Act, together with the  

insertion of Section 87 into the Arbitration Act, 1996 by the 2019  

Amendment Act, is struck down as being manifestly arbitrary under  

Article 14 of the Constitution of India.   

52. However, the learned Attorney General cited a number of  

judgments which state that the court should not ordinarily interfere  

with the fixation of cut-off dates, unless such fixation appears to be  

arbitrary or discriminatory (see for e.g., UOI v. Parameswaran  

Match Works (1975) 1 SCC 305 at paragraph 102 and Govt. of  

A.P. v. N. Subbarayudu (2008) 14 SCC 702 at paragraphs 5 to 93).  

 2 “10….The choice of a date as a basis for classification cannot be  always be dubbed as arbitrary even if no particular reason is  forthcoming for the choice unless it is shown to be capricious or  whimsical in the circumstances. Where it is seen that a line or point  there must be, and there is no mathematical or logical way of fixing it  precisely, the decision of the legislature or its delegate must be  accepted unless we can say that it is very wide of the reasonable mark.”  

3 “5….This Court is also of the view that fixing cut-off dates is within the  domain of the executive authority and the court should not normally  interfere with the fixation of a cut-off date by the executive authority  unless such Court order appears to be on the face of it blatantly  discriminatory and arbitrary.”

63    

53. In the present case, the challenge is not to the fixing of  

23.10.2015 as a cut-off date, as the aforesaid date is the date on  

which the 2015 Amendment Act came into force. For this reason,  

the aforesaid judgments have no application. Instead, what has  

been found to be manifestly arbitrary is the non-bifurcation of court  

proceedings and arbitration proceedings with reference to the  

aforesaid date, resulting in improvements in the working of the  

Arbitration Act, 1996 being put on a backburner. This argument of  

the learned Attorney General for India also therefore must be  

rejected.  

54. The result is that the BCCI judgment (supra) will therefore  

continue to apply so as to make applicable the salutary amendments  

made by the 2015 Amendment Act to all court proceedings initiated  

after 23.10.2015.   

55. In this view of the matter, it is unnecessary to examine the  

constitutional challenge to the 2019 Amendment Act based on  

Articles 19(1)(g), 21 and 300-A of the Constitution of India.  

64    

Constitutional Challenge to the Insolvency Code  

56. It now falls on us to decide the second part of the challenges  

made in the present Writ Petitions, i.e. the challenge to the  

constitutionality of the Insolvency Code. As mentioned above, Dr.  

Singhvi has argued that the provisions of the Insolvency Code would  

operate arbitrarily on his client inasmuch as, on the one hand, an  

automatic-stay of arbitral awards in his favour would be granted  

under the Arbitration Act, 1996 as a result of which those monies  

cannot be used to pay-off the debts of his client’s creditors. On the  

other hand, any debt of over INR one lakh owed to a financial or  

operational creditor which remains unpaid, would attract the  

provisions of the Insolvency Code against the Petitioner No.1 -  

making these provisions arbitrary, discriminatory and violative of  

Articles 14 and 19(1)(g) of the Constitution of India. As a result, he  

has suggested that in order for his client, in turn, to recover monies  

from Government Companies and NHAI, the definition of ‘corporate  

person’ contained in Section 3(7) of the Insolvency Code should  

either be read without the words “with limited liability” contained in

65    

the third part of the definition, or have Section 3(23)(g) of the  

Insolvency Code, which is the definition of ‘person’, read into the  

aforesaid provision. In order to appreciate this contention it is  

necessary to set out these definitions:  

“Definitions  3. In this Code, unless the context otherwise  requires,-  xxx xxx xxx    (7) "corporate person" means a company as  defined in clause (20) of section 2 of the  Companies Act, 2013 (18 of 2013), a limited  liability partnership, as defined in clause (n) of  sub-section (1) of section 2 of the Limited  Liability Partnership Act, 2008 (6 of 2009), or  any other person incorporated with limited  liability under any law for the time being in  force but shall not include any financial service  provider;    (8) "corporate debtor" means a corporate  person who owes a debt to any person;    (23) “person” includes-  (a) an individual;  (b) a Hindu Undivided Family;  (c) a company;  (d) a trust;  (e) a partnership;  (f) a limited liability partnership;  (g) any other entity established under a  

statute;  and includes a person resident outside India.”

66    

57. As correctly argued by the learned Solicitor General, Shri  

Tushar Mehta, the first part of ‘corporate person’, as defined in  

Section 3(7) of the Insolvency Code, means a company as defined  

in Clause 20 of Section 2 of the Companies Act 2013. Sections  

2(20) and 2(45) of the Companies Act, 2013, which define  

‘company’ and ‘Government company’ respectively, are set out  

hereinbelow:  

“2(20). "company" means a company  incorporated under this Act or under any  previous company law;”    “2(45). "Government company" means any  company in which not less than fifty-one per  cent of the paid-up share capital is held by the  Central Government, or by any State  Government or Governments, or partly by the  Central Government and partly by one or more  State Governments, and includes a company  which is a subsidiary company of such a  Government company.”    

58. From a reading of the aforesaid definition, Shri Tushar Mehta  

is clearly right in stating that the three entities who owe monies  

under arbitral awards to the Petitioner No.1, being Government  

companies, would be subsumed within the first part of the definition.  

However, so far as NHAI is concerned, Dr. Singhvi’s argument of

67    

either deleting certain words in Section 3(7) of the Insolvency Code,  

or adding certain words in Section 3(23)(g) of the Insolvency Code  

into Section 3(7) cannot be accepted.   

59. It is clear from a reading of the Statement of Objects and  

Reasons of the NHAI Act, that the development and maintenance of  

national highways is a government function that falls within Entry 23  

of List I of the Seventh Schedule to the Constitution of India. Further,  

under Section 5 of the National Highways Act, 1956, the Central  

Government may direct that any function in relation to the  

development or maintenance of national highways shall also be  

exercisable by any officer or authority subordinate to the Central  

Government. Under this provision, the function of execution of  

activities relatable to national highways was earlier delegated to the  

State Governments under an “agency system”. Though the system  

worked through the State Public Works Departments for a period of  

40 years, as difficulties were experienced, the Centre itself decided  

to take over development and maintenance of the national highways  

system through the creation of a national highways authority.

68    

60. The following provisions of the NHAI Act are relevant and are  

set out hereinbelow:   

“3. Constitution of the Authority.—    (1) With effect from such date as the Central  Government may, by notification in the Official  Gazette, appoint in this behalf, there shall be  constituted for the purposes of this Act an  Authority to be called the National Highways  Authority of India.    (2) The Authority shall be a body corporate by  the name aforesaid having perpetual  succession and a common seal, with power,  subject to the provisions of this Act, to acquire,  hold and dispose of property, both movable  and immovable, and to contract and shall by  the said name sue and be sued.    [(3) The Authority shall consist of—    (a) a Chairman;  (b) not more than six full-time members; and  (c) not more than six part-time members, to be  appointed by the Central Government by  notification in the Official Gazette:    Provided that the Central Government shall,  while appointing the part-time members,  ensure that at least two of them are non- Government professionals having knowledge  or experience in financial management,  transportation planning or any other relevant  discipline.]   

69    

xxx xxx xxx    12. Transfer of assets and liabilities of the  Central Government to the Authority—    (1) On and from the date of publication of the  notification under section 11.—    (a) all debts, obligations and liabilities  incurred, all contracts entered into and all  matters and things engaged to be done by,  with, or for, the Central Government,  immediately before such date for or in  connection with the purposes of any national  highway or any stretch thereof vested in, or  entrusted to, the Authority under that section,  shall be deemed to have been incurred,  entered into and engaged to be done by, with,  or for, the Authority;    (b) all non-recurring expenditure incurred by or  for the Central Government for or in  connection with the purposes of any national  highway or any stretch thereof, so vested in,  or entrusted to, the Authority, up to such date  and declared to be capital expenditure by the  Central Government shall, subject to such  terms and conditions as may be prescribed,  be treated as capital provided by the Central  Government to the Authority;    (c) all sums of money due to the Central  Government in relation to any national  highway or any stretch thereof, so vested in,  or entrusted to, the Authority immediately  before such date shall be deemed to be due to  the Authority;

70    

 (d) all suits and other legal proceedings  instituted or which could have been instituted  by or against the Central Government  immediately before such date for any matter in  relation to such national highway or any  stretch thereof may be continued or instituted  by or against the Authority.    (2) If any dispute arises as to which of the  assets, rights or liabilities of the Central  Government have been transferred to the  Authority, such dispute shall be decided by the  Central Government.    xxx xxx xxx    14.  Contracts by the Authority.—    Subject to the provisions of section 15, the  Authority shall be competent to enter into and  perform any contract necessary for the  discharge of its functions under this Act.    15.  Mode of executing contracts on behalf  of the Authority.—    (1) Every contract shall, on behalf of the  Authority, be made by the Chairman or such  other member or such officer of the Authority  as may be generally or specially empowered  in this behalf by the Authority and such  contracts or classes of contracts as may be  specified in the regulations shall be sealed  with the common seal of the Authority:   

71    

Provided that no contract exceeding such  value or amount as the Central Government  may prescribe in this behalf shall be made  unless it has been previously approved by that  Government:    Provided further that no contract for the  acquisition or sale of immovable property or  for the lease of any such property for a term  exceeding thirty years and no other contract  exceeding such value or amount as the  Central Government may prescribe in this  behalf shall be made unless it has been  previously approved by that Government.    (2) Subject to the provisions of sub-section (1),  the form and manner in which any contract  shall be made under this Act shall be such as  may be provided by regulations.    (3) No contract which is not in accordance with  the provisions of this Act and the regulations  shall be binding on the Authority.    16. Functions of the Authority.---    (1) Subject to the rules made by the Central  Government in this behalf, it shall be the  function of the Authority to develop, maintain  and manage the national highways and any  other highways vested in, or entrusted to, it by  the Government.    (2) Without prejudice to the generality of the  provisions contained in sub-section (1), the  Authority may, for the discharge of its  functions—

72    

 (a) survey, develop, maintain and manage  highways vested in, or entrusted to, it;  (b) construct offices or workshops and  establish and maintain hotels, motels,  restaurants and rest-rooms at or near the  highways vested in, or entrusted to, it;  (c) construct residential buildings and  townships for its employees;  (d) regulate and control the plying of vehicles  on the highways vested in, or entrusted to, it  for the proper management thereof;  (e) develop and provide consultancy and  construction services in India and abroad and  carry on research activities in relation to the  development, maintenance and management  of highways or any facilities thereat;  (f) provide such facilities and amenities for the  users of the highways vested in, or entrusted  to, it as are, in the opinion of the Authority,  necessary for the smooth flow of traffic on  such highways;  (g) form one or more companies under the  Companies Act, 1956 to further the efficient  discharge of the functions imposed on it by  this Act;  [(h) engage, or entrust any of its functions to,  any person on such terms and conditions as  may be prescribed;]  (i) advise the Central Government on matters  relating to highways;  (j) assist, on such terms and conditions as  may be mutually agreed upon, any State  Government in the formulation and  implementation of schemes for highway  development;

73    

(k) collect fees on behalf of the Central  Government for services or benefits rendered  under section 7 of the National Highways Act,  1956, as amended from time to time, and such  other fees on behalf of the State Governments  on such terms and conditions as may be  specified by such State Governments; and  (l) take all such steps as may be necessary or  convenient for, or may be incidental to, the  exercise of any power or the discharge of any  function conferred or imposed on it by this Act.    (3) Nothing contained in this section shall be  construed as—    (a) authorising the disregard by the Authority  of any law for the time being in force; or    (b) authorising any person to institute any  proceeding in respect of a duty or liability to  which the Authority or its officers or other  employees would not otherwise be subject  under this Act.    17.  Additional capital and grants to the  Authority by the Central Government.--     The Central Government may, after due  appropriation made by Parliament, by law in  this behalf,--    (a) provide any capital that may be required by  the Authority for the discharge of its functions  under this Act or for any purpose connected  therewith on such terms and conditions as that  Government may determine;   

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(b) pay to the Authority, on such terms and  conditions as the Central Government may  determine, by way of loans or grants such  sums of money as that Government may  consider necessary for the efficient discharge  by the Authority of its functions under this Act.    18.  Funds of the Authority.-- (1) There shall  be constituted a Fund to be called the National  Highways Authority of India Fund and there  shall be credited thereto—    (a) any grant or aid received by the Authority;  (b) any loan taken by the Authority or any  borrowings made by it;  (c) any other sums received by the Authority.    (2) The Fund shall be utilised for meeting—    (a) expenses of the Authority in the discharge  of its functions having regard to the purposes  for which such grants, loans or borrowings are  received and for matters connected therewith  or incidental thereto;  (b) salary, allowances, other remuneration and  facilities provided to the members, officers and  other employees of the Authority;  (c) expenses on objects and for purposes  authorised by this Act.    19. Budget.--The Authority shall prepare, in  such form and at such time in each financial  year as may be prescribed, its budget for the  next financial year, showing the estimated  receipts and expenditure of the Authority and  forward the same to the Central Government.   

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20.  Investment of funds.---The Authority  may invest its funds (including any reserve  fund) in the securities of the Central  Government or in such other manner as may  be prescribed.    21.  Borrowing  powers of the Authority.---    (1) The Authority may, with the consent of the  Central Government or in accordance with the  terms of any general or special authority given  to it by the Central Government, borrow  money from any source by the issue of bonds,  debentures or such other instruments as it  may deem fit for discharging all or any of its  functions under this Act.    (2) Subject to such limits as the Central  Government may, from time to time, lay down,  the Authority may borrow temporarily by way  of overdraft or otherwise, such amounts as it  may require for discharging its functions under  this Act.    (3) The Central Government may guarantee in  such manner as it thinks fit the repayment of  the principal and the payment of interest  thereon with respect to the borrowings made  by the Authority under sub-section (1).    22.   Annual report.---The Authority shall  prepare, in such form and at such time in each  financial year as may be prescribed, its annual  report, giving a full account of its activities  during the previous financial year, and submit  a copy thereof to the Central Government.   

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23.   Accounts and  audit.---The accounts of  the Authority shall be maintained and audited  in such manner as may, in consultation with  the Comptroller and Auditor-General of India,  be prescribed and the Authority shall furnish,  to the Central Government before such date  as may be prescribed, its audited copy of  accounts together with the auditors report  thereon.    24.   Annual report and auditor’s report to  be laid before Parliament.--- The Central  Government shall cause the annual report and  auditor’s report to be laid, as soon as may be  after they are received, before each House of  Parliament.    xxx xxx xxx    33. Power of the Central Government to  issue directions.-    (1) Without prejudice to the other provisions of  this Act, the Authority shall, in the discharge of  its functions and duties under this Act, be  bound by such directions on questions of  policy as the Central Government may give in  writing from time to time.    (2) The decision of the Central Government  whether a question is one of policy or not shall  be final.”    

61. Under Section 3 of the aforementioned Act, the Authority  

shall be a body corporate which shall consist of a Chairman and six

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full-time members, together with six part-time members, all  

appointed by the Central Government. The assets and liabilities of  

the Central Government in relation to national highways are then  

transferred to the Authority under Section 12. Under Sections 14  

and 15, contracts that can be made on behalf of the Authority can  

only be made, if they exceed a certain value, after previous approval  

by the Government. Section 16 deals with the functions of the  

Authority, which makes it clear that these are governmental  

functions to be carried out only by the Government or by its agent  

appointed in this behalf.  

62. Under Section 19, the budget prepared for the Authority has  

to be sent to the Central Government, capital and grants to the  

authority being made by the Central Government into the fund of the  

Authority (see Sections 17 and 18 of the NHAI Act supra). Likewise,  

an annual report is to be given to the Central Government under  

Section 22. Accounts and audit have to be made in consultation with  

the Comptroller and Auditor General of India, and furnished to the  

Central Government, which have then to be laid before the

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Parliament [see Sections 22 to 24 of the NHAI Act (supra)]. Under  

Section 33, the Central Government can issue directions on  

questions of policy, which would then be binding on the Authority.   

63. From a conspectus of the above provisions, what is clear is  

that NHAI is a statutory body which functions as an extended limb of  

the Central Government, and performs governmental functions  

which obviously cannot be taken over by a resolution professional  

under the Insolvency Code, or by any other corporate body. Nor can  

such Authority ultimately be wound-up under the Insolvency Code.  

For all these reasons, it is not possible to accede to Dr. Singhvi’s  

argument to either read in, or read down, the definition of ‘corporate  

person’ in Section 3(7) of the Insolvency Code.   

64. Even otherwise, on the footing that the NHAI can be roped in  

under the Insolvency Code, this Court in K. Kishan (supra) has  

held:  

“22. Following this judgment, it becomes clear  that operational creditors cannot use the  Insolvency Code either prematurely or for  extraneous considerations or as a substitute  for debt enforcement procedures. The  alarming result of an operational debt

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contained in an arbitral award for a small  amount of say, two lakhs of rupees, cannot  possibly jeopardise an otherwise solvent  company worth several crores of rupees. Such  a company would be well within its rights to  state that it is challenging the arbitral award  passed against it, and the mere factum of  challenge would be sufficient to state that it  disputes the award. Such a case would clearly  come within para 38 of Mobilox  Innovations [Mobilox Innovations (P)  Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC  353 : (2018) 1 SCC (Civ) 311] , being a case  of a pre-existing ongoing dispute between the  parties. The Code cannot be used in  terrorem to extract this sum of money of  rupees two lakhs even though it may not be  finally payable as adjudication proceedings in  respect thereto are still pending. We repeat  that the object of the Code, at least insofar as  operational creditors are concerned, is to put  the insolvency process against a corporate  debtor only in clear cases where a real dispute  between the parties as to the debt owed does  not exist.    xxx xxx xxx    27. We repeat with emphasis that under our  Code, insofar as an operational debt is  concerned, all that has to be seen is whether  the said debt can be said to be disputed, and  we have no doubt in stating that the filing of a  Section 34 petition against an arbitral award  shows that a pre-existing dispute which  culminates at the first stage of the proceedings  in an award, continues even after the award,

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at least till the final adjudicatory process under  Sections 34 and 37 has taken place.”    

65. In this view of the matter, the moment challenges are made  

to the arbitral awards, the amount said to be due by an operational  

debtor would become disputed, and therefore be outside the  

clutches of the Insolvency Code. Looked at from any point of view,  

therefore, proceeding against the NHAI under the Insolvency code  

by the Petitioner No.1 is not possible.   

66. Dr. Singhvi then argued that under Section 5(9) of the  

Insolvency Code, ‘financial position’ is defined, which is only taken  

into account after a resolution professional is appointed, and is not  

taken into account when adjudicating ‘default’ under Section 3(12) of  

the Insolvency Code. This does not in any manner lead to the  

position that such provision is manifestly arbitrary. As has been held  

by our judgment in Pioneer Urban Land and Infrastructure  

Limited and Anr. v. Union of India and Ors. (2019) 8 SCC 416,  

the Insolvency Code is not meant to be a recovery mechanism (see  

paragraph 41 thereof) - the idea of the Insolvency Code being a  

mechanism which is triggered in order that resolution of stressed

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assets then takes place. For this purpose, the definitions of ‘dispute’  

under Section 5(6), ‘claim’ under Section 3(6), ‘debt’ under Section  

3(11), and ‘default’ under Section 3(12), have all to be read together.  

Also, the Insolvency Code, belonging to the realm of economic  

legislation, raises a higher threshold of challenge, leaving the  

Parliament a free play in the joints, as has been held in Swiss  

Ribbons (P) Ltd. v. UOI (2019) 4 SCC 17 (see paragraphs 17 to 24  

thereof). For all these reasons, this contention of Dr. Singhvi must  

needs be rejected.  

67. Dr. Singhvi’s argument as to the need to fill in a casus  

omissus in the Code in order that his client get relief is again not  

tenable. The argument that an Order VIII-A CPC type mechanism is  

missing, and can be provided by us through interpretation - there  

being no third-party procedure by which debts owed to persons like  

the Petitioner can then be, by some theory of contribution or  

indemnity, fastened on to PSUs when operational creditors invoke  

the Insolvency Code against persons like the Petitioner - is again an

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argument which is answered by stating that the Insolvency Code is  

not meant to be a debt recovery legislation.  

68. The argument of Shri Rai that the definition of ‘dispute’ under  

Section 5(6) of the Insolvency Code does not speak of the ‘parties’  

to a dispute, and can therefore be interpreted to include a dispute  

between a sub-contractor and the principal employer with whom the  

sub-contractor may have no privity of contract, also does not  

commend itself to us. The definition of ‘dispute’ in Section 5(6) of the  

Insolvency Code deals with a suit or arbitration proceedings relating  

to one of three things - (a) the existence of the amount of debt; (b)  

the quality of goods or service; or (c) the breach of a representation  

or warranty.  

69. Insofar as (a) is concerned, the definition of the word ‘debt’  

contained in Section 3(11) of the Insolvency Code, refers to a  

liability or obligation in respect of a claim which is due from any  

person. This necessarily postulates the existence of a contractual or  

other relationship, which gives rise to a liability or obligation between  

parties in law. The same goes for (c), as a breach of a

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representation or warranty can only be by one contracting party to  

another. Also, when the quality of goods or service is referred to in  

(b), this again postulates some contractual or other relationship in  

law by which one party may sue the other.  

70. In Mobilox (supra), after setting out the definition of ‘dispute’,  

this Court held:  

“34. Therefore, the adjudicating authority,  when examining an application under Section  9 of the Act will have to determine:    

i. Whether there is an “operational debt” as  defined exceeding Rs 1 lakh? (See  Section 4 of the Act)    

ii. Whether the documentary evidence  furnished with the application shows that  the aforesaid debt is due and payable and  has not yet been paid? And  

 iii. Whether there is existence of a dispute  

between the parties or the record of the  pendency of a suit or arbitration  proceeding filed before the receipt of the  demand notice of the unpaid operational  debt in relation to such dispute?  

 If any one of the aforesaid conditions is  lacking, the application would have to be  rejected. Apart from the above, the  adjudicating authority must follow the mandate

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of Section 9, as outlined above, and in  particular the mandate of Section 9(5) of the  Act, and admit or reject the application, as the  case may be, depending upon the factors  mentioned in Section 9(5) of the Act.”    

71. It is clear therefore that a dispute must be between the  

parties as understood under the Insolvency Code, which does not  

contain an Order VIII-A CPC type mechanism. This contention must  

also therefore be rejected.  

72. For all these reasons, we find the challenge to the provisions  

of Insolvency Code, insofar as the present Writ Petitions are  

concerned, to be wholly devoid of merit.   

Conclusion on facts   

73. In the Writ Petition No.1074 of 2019 filed on 16.08.2019, the  

Petitioner company had alleged that a sum of INR 6070 crores was  

the sum awarded to the Petitioner company under various arbitral  

awards from 2008 to 2019 which had been challenged by the  

Respondent PSUs before various Courts, but the operation of which  

had not been stayed by such courts. On this factual premise, the  

Petitioner sought interim reliefs from this Court for the repayment of

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the said amounts from the Respondent PSUs, so as to enable it to  

repay its pending dues to its own operational creditors. This Court  

recorded as much in its order dated 13.09.2019 in Writ Petition  

No.1074 of 2019 as follows:  

“The two interlocutory applications are filed for  two reliefs. One is to stay further proceedings  before the National Company Law Tribunal,  and the second is to direct respondent nos.5-8  – Union of India, National Highways Authority  of India, NHPC Ltd., IRCON International Ltd.  and NTPC Limited to pay off amounts due  under the Awards of Arbitrators which have  not been stayed by any Court, amounting to a  sum of Rs.6,070 crores.    Dr. Singhvi, learned Senior Counsel, states  that his client will pay the Operational  Creditors in these two interlocutory  applications, amounts of Rs.8.81 crores and  26.21 crores within a period of 12 weeks from  today. We record the aforesaid statement.     We also issue notice to the Respondents in  the two interlocutory applications.     Dasti service, in addition, is permitted.    List the matter on 04th October, 2019.    Dr. Singhvi further states that this order which  is passed by us at 11:45am today, will be  communicated orally to the NCLT which,

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apparently, is taking up these matters today.                                            (emphasis supplied)  

 74. However, in its Counter Affidavit dated 21.10.2019, the Union  

of India contended that this prayer was ‘factually incorrect’ and  

‘deliberately misleading’. The Union of India reproduced charts filed  

by IRCON, NHPC and NHAI before this Court regarding the status  

of arbitral awards against them in favour of the Petitioner company  

(as on 30.09.2019), which detailed, inter alia, (i) the value of the  

contract between the Petitioner company and the Respondent PSU;  

(ii) the amount already paid by the Respondent PSU to the  

Petitioner under the said contract; (iii) the Petitioner’s principal claim  

against the Respondent PSU in the arbitration; (iv) the amount  

awarded in favour of the Petitioner in the arbitration; (v) the amounts  

paid/deposited by the Respondent PSU by which the competent  

Court had granted stay; (vi) the balance amount due to the  

Petitioner; and (vii) whether stay orders were granted by competent  

Courts in respect of the arbitral awards. On the basis of these  

charts, the Union of India contended that the Petitioner company  

had deliberately suppressed the fact that these Respondent PSUs

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had stay orders in their favour in respect of some of these arbitral  

awards, and that these PSUs had already paid/deposited a  

substantial amount (approximately 83.30%) payable by them under  

the arbitral awards, after which stay orders in respect of these  

arbitral awards were granted. The figures mentioned in the charts  

were succinctly summarised in a table in the Counter Affidavit, which  

is reproduced below:  

NAME OF THE PSU TOTAL AMOUNT OF  

AWARDS IN  

FAVOUR OF THE  

PETITIONER  

TOTAL AMOUNT  

PAID/DEPOSITED BY  

THE PSU PENDING  

THE STATUTORY  

CHALLENGE OF THE  

AWARD  

NHPC 1063.82 932.03  

NHAI 2343.23 2025.62  

IRCON 268.10 119.06  

NTPC 116.15 81.70

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TOTAL 3791.30 3158.41 [83.30%]  

         (Figures in INR Crores)  

75. Pertinently, the Union of India alleged that none of the stay  

orders obtained by the Respondent PSUs in respect of these arbitral  

awards were under the automatic-stay mode, or under Section 87 of  

the 2019 Amendment Act. Instead, it was contended that the said  

stay orders were granted by the competent Court on an application  

filed by the Respondent PSUs, a hearing of the said application on  

merits, and upon the condition that portions of the arbitral awards be  

paid/deposited in the Court.  

76. The Union of India also strongly denied the Petitioner  

company’s contention that it was in financial distress due to the non-

payment of contractual dues owed to it by the Respondent PSUs,  

which allegedly left it susceptible to being proceeded against under  

the Code by its various creditors. The Union of India alleged that the  

Petitioner has been paid the amount of the contract, even with  

escalation, in almost all cases. In fact, it was contended in the  

Counter Affidavit that the Petitioner company had been paid more

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than the initial contract value by the Respondent PSUs  

(approximately 117%). The Union of India further contended that  

most of the claims raised by the Petitioner company against the  

Respondent PSUs are outside the scope of the basic contract value  

- such as ‘loss of profit’ etc. - which would in any event not have any  

impact on the financial health of the company. This, the Union of  

India alleged, demonstrated that it was ‘absolutely false’ that the  

Petitioner company had been relegated to insolvency due to the  

non-payment of dues by the Respondent PSUs.  

77. The Petitioner company then filed an Additional Affidavit  

dated 04.11.2019 before this Court, wherein it admitted that, as on  

31.08.2019, the Petitioner company, while due a sum of INR  

6373.82 crores from the Respondent PSUs, had already received  

INR 951.51 crores through court orders, and INR 1530.89 crores  

through the NITI Aayog Scheme (totalling INR 2482.4 crores). The  

Petitioner company then itself challenged as incorrect some of the  

figures and statements placed on record by the Union of India in its  

Counter Affidavit, particularly those on the status of Court

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proceedings in relation to arbitral-awards in favour of the Petitioner  

company.   

78. A perusal of the rival contentions makes it clear that there is a  

factual dispute between the parties relating to: (I) the exact quantum  

of the arbitral-awards in favour of the Petitioner company due from  

the Respondent PSUs; (II) the amounts which may have already  

been paid and/or deposited by the Respondent PSUs in favour of  

the Petitioner company under the said arbitral awards; and (III)  

whether stay orders of competent Courts were passed in respect of  

these arbitral awards, and if so, whether they were under the  

automatic-stay mode or not.  

79. It is settled law that when exercising its jurisdiction under  

Article 32 of the Constitution, this Court cannot embark on a detailed  

investigation of disputed facts. A five-Judge bench of this Court in  

Gulabdas & Co. v. Asstt. Collector of Customs AIR 1957 SC 733,  

was seized of a batch of Writ Petitions filed under Article 32, wherein  

the petitioners (who were Indian importers of stationary articles)  

alleged that the Central Board of Revenue had acted erroneously by

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imposing tax upon ‘crayons’ imported by them, which were not  

taxable, incorrectly assuming them to be ‘colour pencils’. Dismissing  

these Writ Petitions, this Court held as follows:  

“15. The contention that the impugned orders  are manifestly erroneous, because “Crayons”  have been treated as ‘coloured pencils’ is not  a contention which can be gone into on an  application under Article 32 of the Constitution.  It has no bearing on the question of the  enforcement of a fundamental right, nor can  the question be decided without first  determining what constitutes the distinction  between a ‘coloured pencil’ and a ‘crayon’, a  distinction which must require an investigation  into disputed facts and materials. This was a  matter for the Customs authorities to decide,  and it is obvious that this Court cannot, on an  application under Article 32 of the Constitution,  embark on such an investigation.”  

(emphasis supplied)     

80. To similar effect is the decision in Surendra Prasad Khugsal  

v. Chairman, MMTC. 1994 Supp. (1) SCC 87, where this Court  

held:  

“6. We have heard both the parties in all the  petitions at some length. The petitioners in all  the petitions place their reliance on the  decision in the M.M.R. Khan case [1990 Supp  SCC 191 : 1990 SCC (L&S) 632 : (1991) 16  ATC 541] . However, we find that the said  case which admittedly concerned the canteen

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workers both in the statutory canteens and  recognised non-statutory canteens was  decided on the facts in those cases including  the provisions of the Railway Manual, the  notifications and circulars issued by the  Railway Board from time to time and other  documents which pertained to the workers  employed in the said canteens. None of the  material which was taken into consideration  there has relevance to the workers concerned  in the present canteens. On the other hand,  there are disputed facts in the present case  which cannot be resolved in a writ petition  under Article 32. We, therefore, find that this  Court is not the proper forum to decide the  present disputes.”  

(emphasis supplied)    

81. More recently, this Court in Sumedha Nagpal v. State of  

Delhi (2000) 9 SCC 745 held:  

“2. Both parties do recognise that the question  of custody of the child will have to be  ultimately decided in proceedings arising  under Section 25 of the Guardians & Wards  Act read with Section 6 of the Act and while  deciding such a question, welfare of the minor  child is of primary consideration. Allegations  and counter-allegations have been made in  this case by the petitioner and Respondent 2  against each other narrating circumstances as  to how the estrangement took place and how  each one of them is entitled to the custody of  the child. Since these are disputed facts,  unless the pleadings raised by the parties are  examined with reference to evidence by an

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appropriate forum, a proper decision in the  matter cannot be taken and such a course is  impossible in a summary proceeding such as  writ petition under Article 32 of the  Constitution.”  

(emphasis supplied)    

82. This Court cannot, therefore, in exercise of its jurisdiction  

under Article 32 of the Constitution undertake a detailed  

investigation to determine the status of monies paid/deposited  

pursuant to arbitral-awards in favour of the Petitioner company.  

Consequently, no directions in respect thereof can be made in the  

present proceedings.   

 83. Dr. Singhvi then argued that the NITI Aayog Office’s  

Memorandum dated 05.09.2016, which contained a scheme by  

which contractors were able to retrieve 75% of awarded amounts  

together with interest thereon - referred to as “pay-out amount” - is  

arbitrary only to a limited extent. He had no quarrel with the fact that  

a bank guarantee should be given under the scheme to secure the  

pay-out amount, but argued that an additional bank guarantee of  

10% per year on the pay-out amount, which is then compounded  

annually, is arbitrary and should be struck down under Article 14.  

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This being severable, he contended that the scheme can remain,  

with the requirement of a ‘top-up’ bank guarantee of 10% per annum  

being struck down. A look at the circular dated 05.09.2016 shows  

that the scheme is in order that the hardship felt by the construction  

sector, thanks to the automatic-stay regime under Section 36 as  

originally enacted, be mitigated. It can thus be seen that the scheme  

is so that the construction sector can get the fruits of arbitral awards  

in their favour, which otherwise was not available at the time under  

the law. Dr. Singhvi’s client was free to avail of the circular on its  

terms, or not to avail of the said circular. Having availed of the  

benefit contained in the circular, it is not possible for his client to now  

turn around and state, years after availing this benefit, that one part  

of the circular is onerous and should be struck down. Even  

otherwise, we find nothing arbitrary in requiring a 10% additional  

bank guarantee per annum so that the scheme be availed. Had the  

scheme not been open-ended, and had it ended within one year,  

there would have been no need for this 10% additional bank  

guarantee. It is only because the bank guarantee may be renewed  

for 75% of the pay-out amount that has been disbursed to

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contractors, that this condition is said to be onerous. We find that in  

point of fact the 10% extra bank guarantee is only to ensure that the  

further interest component per annum also gets covered, so that the  

Government/Government bodies are able to claim these amounts in  

case the bank guarantees have to be encashed. We, therefore, find  

no substance in this plea and reject it.  

84. All the Writ Petitions are disposed of in the light of this  

judgment.  

 85. Accordingly, M.A. Nos. 2140-2144 of 2019 in C.A. Nos.2621-

2625 of 2019 are allowed in terms of prayer (a) therein.  

……………………………J.          (R.F. Nariman)  

……………………………J.          (Surya Kant)  

……………………………J.                                                                          (V. Ramasubramanian)  

 New Delhi;  November 27, 2019