Summary
The Court struck down Section 87 and the 2019 repeal of the 2015 transitional provision as manifestly arbitrary, preserving BCCI’s approach to the arbitration amendments and rejecting automatic stay merely upon an award challenge. It rejected the separate insolvency-law challenge, declined to include NHAI within corporate insolvency, and refused disputed monetary recovery directions under Article 32. The challenge to additional bank guarantees under the NITI Aayog payout scheme also failed.
Issues
- Whether the 2019 transitional amendments restoring the earlier automatic-stay position were constitutionally valid.
- Whether the Insolvency Code required expansion or modification to protect award-holding contractors.
- Whether disputed payment directions or severance of the payout scheme’s additional security condition were warranted.
Provisions considered
- Sections 35 and 36, Arbitration and Conciliation Act, 1996Filing a Section 34 challenge did not itself create an automatic stay; the Court rejected the contrary reasoning in earlier decisions. (¶¶ 18, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32)
- Section 87; Section 26 of the 2015 Act; Sections 13 and 15 of the 2019 Act, Arbitration and Conciliation Act, 1996; Arbitration and Conciliation (Amendment) Acts, 2015 and 2019Insertion of Section 87 and deletion of Section 26 were struck down for manifest arbitrariness, leaving BCCI applicable. (¶¶ 34, 35, 36, 37, 38, 39, 40, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55)
- Sections 3(7), 3(8) and 3(23), Insolvency and Bankruptcy Code, 2016Government companies fell within corporate persons, but the Court refused to rewrite the definition to include NHAI. (¶¶ 56, 57, 58, 59, 60, 61, 62, 63)
Held
- The earlier decisions inferring automatic stay from Section 36 overlooked Sections 9, 35 and the enforcement provision’s purpose and were incorrect on that issue. Their distinct holdings identified in the judgment’s footnote remained unaffected. Amended Section 36 clarified that a separate judicial stay was required. (¶¶ 18, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32)
- The legislature could remove a judgment’s basis without expressly naming it, and retrospective deletion of Section 26 did remove a fundamental basis of BCCI. The challenge based solely on direct legislative overruling therefore failed. (¶¶ 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46)
- Nevertheless, reversing the beneficial amendments through Section 87 and deletion of Section 26 was manifestly arbitrary under Article 14. It resurrected automatic stays, increased interference and delay, and could expose unpaid award-holders to insolvency. BCCI continued to apply; other constitutional grounds were unnecessary to decide. (¶¶ 47, 48, 49, 50, 51, 52, 53, 54, 55)
- NHAI performed governmental functions as an extended limb of the Union and could not be subjected to private resolution or winding up in the proposed manner. Government companies were distinguishable. The Court would not rewrite the corporate-person definition. (¶¶ 56, 57, 58, 59, 60, 61, 62, 63)
- The Code concerned insolvency resolution rather than debt collection. A genuinely contested award reflected a continuing operational-debt dispute, and neither financial-position arguments nor a proposed third-party recovery mechanism established the asserted constitutional defect. (¶¶ 64, 65, 66, 67, 68, 69, 70, 71, 72)
- The Court declined monetary directions requiring resolution of disputed payment and stay facts under Article 32. The payout scheme’s additional annual bank guarantee was not arbitrary, covering further interest; its voluntary beneficiary could not selectively discard that condition. (¶¶ 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83)
Result
Section 87 and the 2019 deletion of Section 26 of the 2015 Amendment Act struck down under Article 14; BCCI framework preserved. Insolvency-law challenge and challenge to the payout scheme’s additional guarantee rejected. No disputed award-payment directions granted. Writ petitions disposed of; M.A. Nos. 2140–2144 of 2019 allowed in terms of prayer (a) therein.