Friday, May 12, 2017

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.

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