Hindustan Construction Company Limited Vs. Union of India [Writ Petition (Civil) No. 1074 of 2019] - Synopsis
Team SoOLEGAL 25 Feb 2021

In this case, Hindustan Construction Company Limited Vs. Union of India [Writ Petition (Civil) No. 1074 of 2019], the Petitioner, that is Hindustan Construction Company Limited (HCC), is an infrastructure company engaged in large-scale infrastructure projects, and it has undertaken these projects as a contractor for various government bodies and government firms such as NHAI, NHPC, NTPC, IRCON International and various public works departments.
Owing to the nature of these ventures and the cost overruns involved, HCC ultimately had disagreements with these government agencies and government firms. In the arbitral hearings that followed, multiple awards were made in support of the HCC. These awards have been questioned pursuant to the rules of Section 34 of the Arbitration Act. Invariably, due to the newly inserted section 87, the award of the debtors (i.e. government corporations and government bodies) was effective in securing automatic stays for the execution of the arbitral awards. The primary point of HCC was that this would further prolong the arbitral award compliance process and establish additional obstacles for companies such as HCC.
Hence HCC had challenged the Constitutional validity of section 87 of the  Arbitration Act and also challenged the deletion of section 26 of 2015 amendment act. According to the petitioner, the Arbitration Act has come from UNCITRAL (United Nations Commission on International Trade Law) Model Law of International  Commercial  Arbitration. According to the UNCITRAL Model law if an application is filed for suspending of an arbitral award, then the other party would be required to provide security. According to the petitioner, it is incorrect on how Section 36 of the Arbitration Act has been interpreted as granting an automatic stay when an application is being filed for setting aside an arbitral award. According to the respondent, if the Parliament feels that the view expressed by the Supreme Court does not represent the original intention of the Parliament, it may correct the same and explain its original intention by means of an amendment and that is the only thing done in this particular case by deleting section 26 and inserting section 87.
The Supreme Court held that, inserting Section 87 by deleting Section 26 of  Arbitration Act  is purely unconstitutional and it’s violating Article 14 of the India Constitution.  The Court was of the view that, Section 87 was introduced in the act following to Justice Shri Krishna Committee Report. By the BCCI judgement of the Supreme Court, the contradictions with respect to the 2015 Amendment Act were all put to rest. According to the  Court, the implementation of Section 87 was completely unjustified and was counter to the aims of the  2015  Amendment Act. Hence Supreme Court had struck down Section 87  and restored Section 26 of 2015 amendments.


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