Section 29 A was introduced in 20151 by way of Arbitration and Conciliation Act (Amendment) Act, 2015 ('Amendment Act 2015') which set out a timeline for the completion of arbitration proceedings commenced under the Arbitration & Conciliation Act, 1996 ('Arbitration Act'). The said provision provided for the mandate of making of an award by an arbitral tribunal ('Tribunal') within a period of 12 months from the date of the Tribunal entering the reference, which could be extended for a further period of 6 months by consent of the parties2. The Amendment Act 2015 also provided for further extension of the mandate of the Tribunal by the competent Court if the award could not be made within the extended period i.e. 12 months plus 6 months (18 months)3. This provision, as introduced in 2015, was applicable for domestic as well as international commercial arbitrations. It is pertinent that the provision setting out a time limit for the Tribunal to pass awards was not a recommendation made in the 246th Report of the Commission on 'Amendment to the Arbitration and Conciliation Act, 1996'4.
The Arbitration Act, once again, underwent a rampant change in 2019 by way of Arbitration and Conciliation (Amendment) Act 20195 ('Amendment Act 2019'). The Amendment Act 2019 was based on the recommendations made in the Report of the High Level Committee to Review the Institutionalization of Arbitration Mechanism in India6. Considering the one – size fit approach adopted by the legislature while introducing Section 29 A in the Arbitration Act in 2015, the recommendation7 was made to amend the provision suitably. Based on the recommendation, Section 29 A was amended by way of Amendment Act 20198. Post the amendment in 2019, the mandate of making of an award by the Tribunal is now, to be computed from the date of completion of the pleadings, as contemplated under Section 23 (4)9 of the Arbitration Act (as amended in 2019). The Amendment Act 2019 also restricted the applicability of the amended provision to 'matters other than international commercial arbitration' i.e. only to domestic arbitrations, seated in India and excluded the international commercial arbitrations10, seated in India.
The amended provision of Section 29 A was enforced with effect from 30 August 2019 (i.e. the 'Effective Date') by the Notification dated 30 August 201911 ('said Notification'). However, as is the case with most new enactments, there was ambiguity with regard to the applicability of the amended provision i.e., whether the same would be retrospective or prospective in nature.
2. DECISIONS PASSED BY THE DELHI HIGH COURT
Following the conundrum which the litigation in India has witnessed, more so qua the applicability of the amendments made in the Arbitration Act, there was ambiguity regarding application of the amended provision of Section 29 A (1) of the Arbitration Act as well.
The Hon'ble High Court of Delhi ('High Court'), in the matter of Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power Limited12 had the occasion to test the applicability of the said provision. The High Court, by its Order dated 23 January 2020, held that the amendments introduced to Section 29 A (1) and Section 23 (4) of the Arbitration Act will be applicable retrospectively. The High Court based its decision on the rationale that the amendments were procedural in nature and hence, the amended provision would apply to all the arbitration proceedings pending as on the Effective Date. The decision in the said case was strictly based on the said Notification, without much deliberation on any other aspect.
However, the High Court, while dealing with another case of MBL Infrastructures Ltd. v. Rites Ltd.13 held that, the applicability of the amended provision of Section 29 A (1) would be prospective in nature, since the said Notification did not contain anything which suggests otherwise. It is noteworthy that the decision in the MBL Infrastructures case did not consider the decision passed in the case of Shapoorji Pallonji case.
These two decisions created a stir, both the decisions having been passed by a Single Judge.
3. SETTLEMENT OF THE ISSUE
After a lapse of almost 7 months, the High Court was once again, faced with an opportunity to examine the nature of applicability of the amended provision of Section 29 A (1) of the Arbitration Act.
In the case of ONGC Petro Additions Limited v. Ferns Construction Co. Inc.14 , prima facie, the issue before the High Court was, if international commercial arbitration proceedings, seated in India be bound by the mandate of the timeline stipulated in Section 29 A (1) of the Act (as amended in 2015). In this case, the High Court had the occasion to examine whether amended provision of Section 29 A (1) would be prospective or retrospective in nature. Such determination was necessitated since Section 29 A (1) (as amended in 2019) excludes international commercial arbitrations from its purview.
The Hon'ble High Court considered the Orders passed in the cases of Shapoorji Pallonji and MBL Infrastructures, while arriving at the conclusion in the case in hand.
The High Court rightly proceeded to decide the case in hand, by firstly holding that the decision in the case of MBL Infrastructures was per incuriam, having been passed without considering or dealing with the Order passed in Shapoorji Pallonji case, being prior in time. In doing so, the Court placed reliance on the judgment passed in the case of National Insurance Co. Ltd. v. Pranay Sethi15 . The High Court reaffirmed its decision passed in the case of Shapoorji Pallonji, on the ground that the amended provision of Section 29 A (1) is procedural in nature.
The High Court also examined Section 26 of the Amendment Act 2015 and the judgment in the case of BCCI v. Kochi Cricket (P) Ltd.16. In the BCCI case, the Hon'ble Supreme Court ('Apex Court'), while taking a view that despite the then newly introduced provision of Section 29 A being procedural in nature, it would apply prospectively to the arbitration proceedings commenced on or after 23 October 2015. This view was taken by the Apex Court, due to the presence of Section 26 of the Amendment Act 2015. Section 26 explicitly stipulates prospective application of the amendments introduced in 2015 to arbitration proceedings commenced on or after 23 October 2015. Such qualification has not been incorporated in the Amendment Act 2019. Therefore, the abovementioned analysis stipulates that nothing contained in the Amendment Act 2019 bars the retrospective application of Section 29 A (1) of the Arbitration Act (as amended in 2019). Not to mention that the deletion of Section 26 of the Amendment Act 2015 vide Amendment Act 201917, was set aside by the Apex Court in the case of Hindustan Construction Company Limited and Ors. v. Union of India (UOI) and Ors.18.
A combined effect of the analysis mentioned above clearly contemplates that the amendment in Section 29 A (1) of the Arbitration Act, being procedural in nature, would apply retrospectively to all the domestic arbitration proceedings:
- seated in India
- pending as on the Effective Date
- commenced on or after 23 October 2015
In furtherance to the above findings, the High Court also held that the international commercial arbitration proceedings would not be bound by the mandatory timeline stipulated in Section 29 A (1) and hence, would fall outside the purview of Section 29 A (1) of the Arbitration Act.
4. INDUSLAW VIEW
The abovementioned decision is much of a greeting respite to the parties facing the conundrum of the applicability of the amended provisions. Needless to mention that the decision is in conformity with the jurisprudence and judicial precedents laid down from time to time that procedural law is retrospective in nature, unless there exists an intention contrary to the same in the legislation.
Further, the amendment and the decision of the High Court in the Hindustan Construction Company Limited and Ors. v. Union of India (UOI) and Ors is in aid of minimization of the judicial intervention i.e. the driving force behind the Arbitration Act, including the amendments brought into force. Not only has the decision put to rest a very significant question qua the applicability of amended provision of Section 29 A (1) but has also done away with ambiguity of amended provisions in the Arbitration Act to a great extent. However, such certainty would be arrived at only with the test of time, when the Courts are faced with peculiar situation, which is not a rarity in the current scenario
1 Notified on 1 January 2016, with effect from 23 October 2015
2 Section 29 – A (3) as inserted by Amendment Act 2015
3 Section 29 – A (4) and (5) as inserted by Amendment Act 2015
7 Para 4 at Page 63 of the Report
8 Section 6 of the Arbitration Act 2019
9 With effect from 30 August 2019
10 Section 2 (1) (f) of the Arbitration & Conciliation Act 1996
12 O.M.P.(MISC.) (COMM.) 512/2019, decided on 23 January 2020
13 O.M.P.(MISC)(COMM) 56/2020, decided on 10 February 2020
14 OMP(MISC) (COMM) 256/2019, decided on 21 July 2020
15 (2017) 16 SCC 680
16 (2018) 6 SCC 287
17 Section 87 introduced by Section 13 of the Amendment Act 2019
18 AIR 2020 SC 122
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.