Arbitration Amendment Act, 2015 Will not be applicable to Arbitral Awards passed in any proceedings which commenced prior to October 23, 2015

INTRODUCTION

A Division bench of High Court of Delhi (“the Court”) in Ardee Infrastructure Pvt. Ltd. v. Ms. Anuradha Bhatia & Ors1 while adjudicating upon the controversy with regard to application of the Arbitration and Conciliation (Amendment) Act, 2015 (“the Amending Act”) with effect from October 23, 2015, to Arbitration and Conciliation Act, 1996 (“the Act”) held that the right to have an award enforced or not is an accrued right and ‘the amended provisions would apply, if they are merely procedural and do not affect any Accrued right(s).

ISSUE(S)

The Court in the captioned matter was specifically dealing with the impact of the amendments brought to Section 34 and Section 36 of the Act, by the Amending Act. The Court in this matter was adjudicating upon the issue whether the Appellant would be entitled to an automatic stay of the Award dated October 13, 2015 in terms of Section 36 of the Act or Section 36 of the Amending Act, which would apply to the instant case.

BACKGROUND

The notice invoking arbitration was given by the Respondent on June 7, 2011. The statement of claim was filed in February, 2013 and an interim award was made on July 10, 2014. The final award was made by the arbitral tribunal on October 13, 2015.

The Petition under Section 34 objecting to the award was filed on January 4, 2016 (It is to be noted here that the amendments to Section 34 and 36 were introduced by the Amending Act with retrospective effect from October 23, 2015).

The Learned Single Judge in the impugned order dated May 31, 2016 directed the Petitioner (Appellant in the captioned matter) to deposit a sum of Rs. 2.70 Crores. The Learned Single Judge also directed that in case the amount was not deposit by the Petitioner/Appellant, the objections filed by them under Section 34 of the Act would be treated as dismissed.

Being aggrieved, the Petitioner preferred Appeal before the Division Bench of High Court of Delhi.

CONTENTIONS OF THE PARTIES

PETITIONER and/or APPELLANT

1) The Petition under Section 34 of the Act would be governed by the unamended provisions of Sections 34 and 36 and, therefore, it is entitled for an automatic stay on the filing of the Petitions under Section 34 of the Act.

2)  The order of Learned Single Judge, imposing condition upon the Petitioner, to deposit Rs. 2.70 Crores for issuing notice in its Petition under Section 34 of the Act is illegal.

3)  Section 6 of the General Clauses Act, 1897 which deals with effect of repeal explicitly states that a repeal of an enactment would not affect any right acquired or accrued under the repealed enactment, unless a different intention appears in the repealing act.

4) The amendments introduced to Section 34 and 36 of the Act, by the Amending Act, takes away its vested rights and therefore Section 6 of the General Clauses Act, 1897 would be applicable in the instant case.

5) Section 26 2 of the Amending Act does not express any intention of retrospective application prior to October 23, 2015 and therefore, it would operate prospectively and not to arbitrations commenced prior to October 23, 2015.

RESPONDENT

1)  Section 26 of the Amending Act needs to be compared with Section 85(2)(a)3 of the Act. From the comparison of the two provisions it was clear that the first part of Section 26 of the Amending Act uses the word “to the arbitral proceedings” instead of “in relation to arbitral proceedings” and the expression “in relation to” is used only in the second part, whereas under Section 85(2)(a) of the Act, the expression “in relation to” is used in both parts.

2)  The expression “in relation to” in the context of Section 85(2) (a) was examined by the Hon’ble Supreme Court in Thyssen Stahlunion Gmhb vs Steel Authority of India Limited4 and it was held by the Hon’ble Supreme Court that the phrase in relation to arbitral proceedings cannot be given a narrow meaning to mean only pendency of the Arbitration proceedings before the Arbitrator. It would cover not only proceedings pending before the Arbitrator but would also cover the proceedings before the Court and any proceedings which are required to be taken under old Act (Arbitration Act, 1940).

3)  Division Bench of the Calcutta High Court in Tufan Chatterjee v. Ranagan Dhar5 and the Madras High Court in New Tirupur Area Development Corporation Limited v. Hindustan Construction Company Ltd6, while interpreting Section 26 of the Amending Act have held that since Section 26 of the Amending Act uses the expression “to arbitral proceedings” instead of “in relation to arbitral proceedings”, the legislative intent was to limit its scope and, therefore, the said section 26 could not be extended to include post-arbitral proceedings.

4)  Aid to Section 6 of the General Clauses Act ought not to be resorted because of use of the restrictive phrase in Section 26 of the Amending Act.

5)  No vested right accrued in favour of the Appellant has been taken away by the Amending Act.

OBSERVATIONS AND CONCLUSION OF COURT

The Hon’ble High Court of Delhi observed that a logical interpretation of Section 26 of the Amending Act would be the one, which dealt with all types of cases, which would fall for consideration under the Act, after the amendments were introduced vide the Amending Act on October 23, 2015. The Court for illustrative purposes identified three categories of cases which would fall under the Act, after introduction of the amendments:-

1)  The first category being where the arbitral proceedings commenced prior to October 23, 2015 and were pending before an arbitral tribunal on October 23, 2015;

2)  The second category would be of those cases where arbitral proceedings commenced prior to October 23, 2015 and the award was also made prior to October 23, 2015, but the petition under Section 34 seeking the setting aside of the award was made after October 23, 2015;

3)  The third category of cases would comprise of those cases where not only the arbitral proceedings commenced prior to October 23, 2015 but also the awards were made prior to October 23, 2015, and the petition under Section 34 had also been instituted before court prior to October 23, 2015.

The Hon’ble High Court was of the view that if the interpretation sought to be given by Respondent to the expression “to the arbitral proceedings” is accepted it would lead to anomalies. However, if the expression “to the arbitral proceedings” used in first limb of Section 26 of the Amending Act is given the same expansive meaning as the expression “in relation to arbitration proceedings” as appearing in second part of Section 26, then it does not result in anomaly.

The Hon’ble High Court whilst differing with the judgments passed by High Courts of Calcutta and Madras, reached the following conclusions:

1)  If a narrow view of the expression “to the arbitral proceedings” occurring in Section 26 of the Amending Act is to be taken, then it is silent on those categories of cases where the arbitral proceedings commenced prior to October 23, 2015 and where even the award was made prior to October 23, 2015, but where either a petition under Section 34 was under contemplation or was already pending on October 23, 2015.

2)  The amended provisions pertaining to those categories would apply only if they were merely procedural and did not affect accrued right;

3)  In facts of the case, the amendment to Section 34 and 36, which pertain to the enforceability of an award, certainly affect the accrued rights of the parties.

4) As a result, the petitions filed by the appellants under Section 34 of the said Act would have to be considered under the unamended provisions of the Act and consequently, the appellants would be entitled to automatic stay of enforcement of the award till the disposal of the said petitions.

ANALYSIS AND OBSERVATIONS

The Hon’ble Court attention was not brought to the judgment of BCCI v. M/s Rendezvous Sports World and7 (ii) BCCI Vs. Kochi Cricket Private Ltd.8 cases wherein the Single Bench of High Court of Mumbai took a contrary view and held that the amended Section 36 will apply to the Section 34 petitions pending as on October 23, 2015.

The contradictory judgments passed by different High Courts would add to confusion and among the parties currently embroiled in enforcement proceedings post the amendments in the Act. In the view of these conflicting judgments, it is necessary that the confusion is clarified and/or settled by either the legislature or the Apex Court; otherwise, the ambiguity will continue to make both parties suffer. The unclear nature of this issue requires urgent consideration to provide uniformity to the law and for its effective implementation

However, the confusion may soon come to rest, as a judgment passed by High Court of Mumbai has been challenged in the Supreme Court of India and is coming up for hearing most likely in last week of January, 2017.

1 Judgment dated 06th January, 2017 in FAO (OS) No. 221 of 2016 alongwith connected matter being FAO(OS) No. 222 of 2016.

2 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.”

3 85(2) Notwithstanding such repeal, -(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force.

4 1999(9) SCC 334

5 AIR 2016 Cal 213

6 Application No. 7674/2015 in O.P. 931/2015

7 Execution Application(L) No. 2482 of 2015

8 Execution Application(L) No. 2748 of 2015

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