Applicability of the Arbitration and Conciliation (Amendment) Act, 2015 – An Unsettling Position?

[The following post is contributed by Nirmit Agrawal, who is a III Year, B.A., LL.B (Hons.) student at
the West Bengal National University of Juridical Sciences, Kolkata]
In the case of Wind
World Ltd v. Enercon Gmbh
decided in March, a single judge of the
Bombay High Court was faced with the much contentious issue of the applicability
of the Arbitration and Conciliation Amendment Act, 2015 (the “Amendment Act”).
This case related to the applicability of the amendment in case of section 34
applications (for setting aside arbitral awards) where arbitral proceedings have
commenced before the amendment came into force.
Previously, various other High
Courts have had the opportunity of deciding the applicability of the Amendment Act.
The Calcutta High Court (in Electrosteel Casting Limited v.
Reacon Engineers
) and the Himachal Pradesh High Court (in Pragat Akshay Urja v. State of
MP
) have taken the view that such proceedings will not attract the
applicability of the Amendment Act whereas the Madras High Court (in New Tirupur Area Development v. Hindustan
Construction Co. Ltd.
)[1]
and the Bombay High Court (in Rendezvous
Sports World v. BCCI
) have upheld the applicability of the Amendment Act
to all court proceedings pending on the date of the amendment. There has been
an inconsistency in the views taken by the courts and the Supreme Court has not
yet settled the question. With the case of Wind
World
, the position of the courts seems to become clearer as it shows the
trend amongst the courts of giving a wider applicability to the Amendment Act.
Section 26 of the Amendment Act reads:
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
.
Following the amendment, section 26
is drafted in a way that it can be broken into two parts where the first part
provides that the Act shall not apply “to arbitral proceedings” commenced
before the amendment and the second part provides that the amendment shall
apply in “relation to arbitral proceedings” commenced on or after the
amendment.
In the present case, the judge
relied heavily on the difference between the phrases used in the section, and
held that the phrase “to arbitral proceedings” and the phrase “in
relation to
arbitral proceedings” should not be given the same meaning. The
difference in the phrases should be noted, as the legislature’s intentional use
of “distinctly different phrases” points towards a clear conflict, where the
former should be given a narrower interpretation and the latter should be given
a wider one. A closer look at the provision will point out that when the prefix
“to” is used compared to “in relation to”, the former can be said to be of a
limited nature, limited only to arbitral proceedings whereas the latter may
include all other proceedings which might be even remotely “related” to an
arbitral proceedings, such as proceedings for enforcement or setting aside of
an award.
The major focus of the judgment was
on the case of Rendezvous
Sports World v. Board of Control for Cricket in India
, where the single
judge, faced with the question of retrospective applicability of the Amendment Act,
held that the amendment will apply to applications pending under section 34 on
the date of the amendment, and as such would be giving it a prospective effect
and not a retrospective one. The current judgment and even Rendezvous Sports relied on Thyssen Stahlunion GmbH v. Steel
Authority of India
,
where the repeal clause of Arbitration &
Conciliation Act, 1985, i.e., section 85 was under question. Section 85 used
the phrase “in relation to arbitral proceedings” and the Court held that “in relation
to arbitral proceedings” would include not only arbitral proceedings, but also
proceedings in relation to setting aside an award, and if it were the
legislature’s intention to give the phrase a narrow meaning, the word “to”
could have sufficed.
Following the understanding of Thyssen, the Court held that the second
part of section 26 should be given a broad meaning and should be differentiated
from the first part. The judge reasoned that the amendment came long after the
case of Thyssen, and if such an
amendment used the varying language then legislature would have sure been aware
of these phrases and intended to give them a separate meaning. Although the
court is following a position of law that has been adopted by other High Courts
as well, the Court in this case failed to look into the case of Board of Trustees of Port of
Mumbai v. Afcons Infrastructure Ltd.
, where it has been held that where
the notice for invoking arbitration was issued prior to the amendment, section 34
applications will not follow the amendment. In this case, the Court also did
not find any assistance from the case of Rendezvous
Sports
, which the Court in the present case has heavily relied upon. The Court
relied upon Rendezvous Sports as a
binding precedent because the Bombay High Court passed the order, but it failed
to notice that even the case of Afcons
infra
was an order passed by the Bombay High Court.
Applying provisions of the
amendment to cases, which have commenced prior to the amendment, will lead to
grave implications on pending applications before the court. Section 26 can be
considered as a non-exhaustive savings provision, which does not cover the aspect
of post-award proceedings and the reasoning put forward by the judge of
differentiating between the two phrases feels like an attempt to portray the
section as an exhaustive savings clause instead. If the legislature intended to
apply the amendment to proceedings pending or filed before the amendment came
into force, it would have been provided for by the legislature expressly. Due
to the fact that various High Courts have taken various different stances, it
is ultimately left to the Supreme Court to settle the dispute once in for all.
– Nirmit Agrawal



[1] Application No. 7674 of 2015 in O.P. No. 931
of 2015.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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