The Arbitration (Amendment) Act of 2015 (“Amendment Act”) was enacted to remove the lacunae in the Arbitration and Conciliation Act 1996 (“Arbitration Act”). However, it has created its own set of problems. The 246th Law Commission Report headed by Justice A.P. Shah recommended the introduction of section 85A, which defines the applicability of the Amendment Act. Section 85A provided that the Amendment Act will have a prospective effect and shall be applicable to “fresh arbitration” and “fresh application” with certain exceptions. This implies that new amendment will apply to all the new applications filed in court, irrespective of whether they are related to arbitrations conducted in the pre-amendment regime.
Tussle regarding the applicability of the Amendment Act
The legislature did not pay heed to the recommendation and enacted Section 26 that fails to clearly guide the applicability of the Amendment Act to “Court proceedings”, both pending and fresh. Due to lack of proper legislative guidance, the Indian Courts subscribed to three different opinions-
- Firstly, the Amendment Act has no applicability to “court proceedings” (fresh and pending), where the arbitral proceedings that have commenced before 23rd October 2015.[1]
- Secondly, sentence 2 has a wider implication as compared to sentence 1(sentence 1 and sentence 2 explained later). Thus, the Amendment Act will guide pending and fresh “court proceedings” in relation to arbitral proceedings commenced before 23rd October 2015.[2]
- Thirdly, the wording “arbitral proceedings” in Section 26 cannot be interpreted in a manner that includes “related court proceedings.” The Amendment Act will have its applicability to all arbitrations commenced on or after 23rdOctober 2015. As far as court proceedings are concerned, the Amendment Act will apply to all “court proceedings” from 23rdOctober 2015, pending or fresh pertaining to the arbitration commenced before, on or after 23rdOctober 2015.[3]
Attempt to resolve the tussle (Board Of Control For Cricket In India v. Kochi Cricket Pvt. Ltd)[4]
Section 26 of the Amendment Act reads as follows- “ Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21of the principal Act, before the commencement of this Act unless the parties otherwise agree (Sentence 1) but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act (Sentence2).”
The Hon’ble Court in BCCI v. Kochi bifurcated the above-mentioned provision into two parts –
- Sentence 1, which contains “to the arbitral proceedings” was interpreted in a manner that included only the” arbitral proceedings” and not the “court proceedings” pertaining to the same. The Court relied upon Section 21(mentioned in Sentence 1) and Chapter V titled as “Conduct of arbitral proceedings “of the Arbitration Act to show that Sentence 1 covers only arbitral proceedings.
- Sentence 2, which contains "in relation to arbitral proceedings", was construed in a manner that makes Amendment Act applies only to "court proceedings" "in relation to" to the "arbitral proceedings" because there is no reference to Section 21.
The judgment provided clarity and expressly held that “arbitral proceedings” and “court proceedings” will not be guided by the amended provision if they were commenced before the Amendment Act came into force. However, the Court did not hesitate to carve out an exception to the above rule.
A false hope (lacunae in BCCI v Kochi)
The judgement that apparently seems to resolve the conundrum, fails to do so when analyzed in depth. The court held that section 36,has to be applied retrospectively effect on the ground-“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 Supreme Court has rejected to decide the fate of different provisions, which are procedural in nature as they were separate inquiries.
For example, Section 17 empowers arbitral tribunal to provide an interim relief. The Amendment Act added section 17(2) that provides an interim relief to be enforced as if, an order of a court is enforced. Relying on BCCI v Kochi it can safely be concluded that Section 17(2) should have a retrospective effect, as the same is "procedural in nature" and is "in relation to arbitral proceedings." Further, section 8 and 34 is also procedural in nature and in absence of any clarity on the same provides an opportunity for a conniving party to delay the arbitration mechanism by having a litigation pertaining to the applicability of the same.
For example, Section 17 empowers arbitral tribunal to provide an interim relief. The Amendment Act added section 17(2) that provides an interim relief to be enforced as if, an order of a court is enforced. Relying on BCCI v Kochi it can safely be concluded that Section 17(2) should have a retrospective effect, as the same is "procedural in nature" and is "in relation to arbitral proceedings." Further, section 8 and 34 is also procedural in nature and in absence of any clarity on the same provides an opportunity for a conniving party to delay the arbitration mechanism by having a litigation pertaining to the applicability of the same.
Conclusion and Suggestion
It is a sad state of affair to know that until now, theapplicability of several provisionsof the Amendment Act is inanambiguous state. The Supreme Court was expected to clear the air but the same failed to do so. The author suggeststhatthesolution lies in the Arbitration and Conciliation (Amendment) Bill, 2018 which says that "arbitral proceeding" and "court proceedings" related to it, commenced after the Amendment Act will be guided by the amended provisions. "Arbitral proceedings" and "court proceedings" commenced before the Amendment Act will be guided by the unamended provision. It is pertinent to note that the Supreme Court had a look while deciding BCCI v. Kochi,but refused to abide by the same. It is suggested by the author, thateither the Court should settle the matter at once or should abide by the intention of the legislature behind the Arbitration and Conciliation (Amendment) Bill, 2018.
Authors: - Atif Ahmed & Rajvansh Singh, National Law University, Odisha
Contact: - 16ba111@nluo.ac.in; rajvansh.singh6@gmail.com
Authors: - Atif Ahmed & Rajvansh Singh, National Law University, Odisha
Contact: - 16ba111@nluo.ac.in; rajvansh.singh6@gmail.com
[1] Electrosteel Castings Limited v. Reacon Engineers (India) Private Limited, A.I.R. 2016 (NOC 764) 349; Pragat Akshay Urja Limited Company v. State of Madhya Pradesh (2016) 3 M.P L.J. 334.
[2] M/s Rendezvous Sports World v. The Board of Control for Cricket, (2016) SCC OnLine Bom. 6064.
[3] Tufan Chatterjee v. Rangan Dhar, (2016) SCC OnLine Cal. 483.
[4] Board Of Control For Cricket In India v. Kochi Cricket Pvt. Ltd, (2018) 6 SCC 287.
