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SECTION 29 A (1) ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2019: RETROSPECTIVE OR PROSPECTIVE APPLICATION

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Date | VersionAugust 10, 2020 | 1.0
Keywords‘Arbitration and Conciliation Act, 1996’ ‘Arbitration and Conciliation (Amendment) Act, 2015 ‘Arbitration and Conciliation (Amendment) Act, 2019 ‘Section 29A’ ‘BCCI v Kochi Cricket’ ‘MBL Infrastructure’ ‘Shapoorji Pallonji’ ‘MBL Infrastructure’ ‘Delhi High Court’ ‘ ONGC Petro’ ‘retrospective applicability’ ‘conflicting views’ ‘procedural law’
List of Legislations ReferredArbitration and Conciliation Act, 1996
JurisdictionIndia

Section 29A was introduced in the Arbitration and Conciliation Act, 1996 by the Amending Act of 2015 (“2015 Act”). The said Section was further amended by the Amending Act of 2019 (“2019 Act”). The issue whether the provisions of Section 29A of the 2019 Act will be applicable retrospectively or prospectively has been in debate right since the amendment of 2019.

Section 23(4) was inserted by the 2019 Act to provide a timeline for the completion of pleadings within six months from the date on which the Tribunal receives notice of its appointment. Section 29A which puts a time cap for rendering of an arbitral award within twelve months from the date the Tribunal enters upon the reference was also subsequently amended to accommodate the changes made by the insertion of Section 23(4).

Section 29A(1) Before 2019 Act

The award shall be made within a period of twelve months from the date the Arbitral Tribunal enters upon the reference.

Section 29A(1) After 2019 Act

The award in matters other than international commercial arbitration shall be made by the Arbitral Tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:

The difference between the provisions of Section 29A (1) of the 2015 Act and 2019 Act are with respect to the date from which the time period of 12 months for the making of the award is to be calculated. In the 2015 Act, the date from which the period starts is the date when the Arbitral Tribunal enters upon reference.[i] Whereas, the 2019 Act changed it to the date of completion of pleadings as per the newly inserted Section 23(4).

The issue whether the provisions of Section 29A as amended by the 2019 Act will apply prospectively or retrospectively was agitated before two separate benches in January and February 2020. However the two coordinate benches delivered conflicting judgments.

Conflicting views of the Delhi High Court

In Shapoorji Pallonji v. Jindal India Thermal Power Limited[i], the parties had entered reference on 26.05.2018 and the time for the conclusion of the arbitration proceedings had expired. While dealing with a petition for further extension, the High Court held that the newly added/amended Sections 23(4) and 29A(1) would apply to pending arbitrations as on the date of the amendment because they were procedural in law, making its effect retrospective.

In MBL Infrastructures Ltd. vs. Rites Limited[ii], the parties had entered into reference on 14.03.2018 and after expiry of the 12-month period, time was further extended with the consent of the parties by an additional 6 six months by the order of the Tribunal. The petitioner had approached the Court for further extension of time. The High Court in this case held that the Notification which notified the sections amended in the 2019 Act to come into force from 30.08.2019 does not anywhere state that the applicability of the said provision is retrospective in nature. The High Court further held that since the Tribunal entered into reference before the Act was notified, the un-amended Section 29A would be applicable and the date of Tribunal entering into reference was to be taken to calculate the 12-month period.

Clarity on the interpretation of Section 29A(1)

This conflict was recently highlighted in the case ONGC Petro Additions v. Ferns Construction Co Inc[iii] before a Co-ordinate Bench of the Delhi High Court. The Court took note of the conflicting cases and observed that in Shapoorji, the Court held that the amended Section 29 was retrospective in nature while in MBL Infrastructure, the Court held that the provision was prospective. The Court observed that since the order in MBL Infrastructure was after the order in Shapoorji and it did not take note of the order in Shapoorji, it would be per incuriam to that extent. The Court also held that the provision of Section 29A(1) will be applicable to all pending arbitrations seated in India as on August 30, 2019 (date of 2019 Act coming into force).

Key issues in this debate

  1. Section 26 of the 2015 Act having a prospective effect
  • Delhi High Court in ONGC Petro (supra) also took note of the Supreme Court ruling in BCCI v Kochi Cricket Pvt. Ltd[i]. which referred to Section 26 which was inserted by the 2015 Act. The Apex Court had observed the principles of interpretation of such a provision. It was highlighted that the first part of Section 26 states that the 2015 Act is not applicable to the arbitral proceeding already commenced as on 23.10.2015 (date on which 2015 Act came into force) unless parties otherwise agree, therefore explicitly giving the provisions of the 2015 Act a prospective effect.
  • Since there is an explicit provision given under the 2015 Act to construe Section 29A prospectively, it flows that Section 29A is only applicable to arbitrations already in reference as on 23.10.2015 and onwards.
  1. Procedural v Substantive effect
  • The Delhi High Court in ONGC Petro(supra) relied on precedent laying down the difference between substantive law and procedural law. While the former kind of law refers to a body of rules that creates, defines and regulates rights and liabilities, the latter establishes a mechanism for determining those rights and liabilities and machinery for enforcing them. Any change/amendment to substantive laws affecting the rights and liabilities of a party or imposing a disability thereof will be prospective in nature and any change/amendment to the provisions of statute dealing merely with matters of procedure or procedural laws will be retrospective in nature, unless there exists a contrary intention of the legislature.
  • The High Court therefore concluded that since Section 29 A (1) is a provision dealing with limitation is procedural in nature, it has retrospective applicability.
  1. Cut-off date for the 2019 Act – retrospectively
  • Section 26 of the 2015 Act explicitly states that the 2015 Act will not apply to arbitral proceedings commenced in accordance with Section 21 of the principal act, before the commencement of the 2015 Act, unless the parties agree otherwise. This provision is to be seen as a clear intention of the legislature to provide a prospective application to the 2015 Act. A similar provision mandating only a prospective application is missing in the 2019 Act.
  • It can therefore be concluded that Section 29A(1) will be applicable to pending arbitrations as on 30.08.2019 (date of 2019 Act coming into force) and commenced after 23.10.2015 (date of 2015 Act coming into force).
  1. Previous order of MBL v Rites was held to be per incuriam
  • A decision is ‘per incuriam’ when a court of record has acted in ignorance of any previous decision of its own, or a subordinate court has acted in ignorance of a decision of the court of record. The High Court in ONGC Petro held that the order passed in MBL Infrastructure was per incuriam since the attention of the Court was not drawn to the earlier order passed in Shapoorji. The Court addressed the precedent set by Shapoorji and agreed with the view taken in
  • The Delhi High Court in ONGCPetro held the MBL Infrastructure order to be per incuriam because it cannot be said that the Court in that case had laid the law, when the relevant law was not given due consideration by the Court in its decision. The Court also relied on the decisions of the Supreme Court in National Insurance v. Pranay Sethi[ii] and Sundeep Kumar Bafna v. State of Maharashtra[iii]. The law regarding the principle is set that an earlier decision of co-equal Bench binds the Bench of same strength.
  • Since the bench in the ONGCPetro was of equal strength to the bench in MBL and Shapoorji, it can only express an opinion as to the correctness of the view taken by the co-ordinate courts.

Conclusion
The provisions of Section 29 A (1) as amended by the 2019 Act are retrospective in nature. The tug of war in the interpretation of Section 29 A as amended by the 2019 Act seems to be over unless it is over ruled in appeal.

[i] Proviso to Section 29A (1) provides that the Arbitral Tribunal shall be deemed to have entered upon reference on the date on which the Tribunal receives notice of appointment.

[ii] O.M.P. (MISC.) (COMM.) 512/2019, decided on January 23, 2020

[iii] O.M.P.(MISC.)(COMM.) 56/2020, decided on 10.02.2020

[iv] OMP(MISC) (COMM) 256/2019, I.A. 4989/2020, decided on 21.07.2020

[v] (2018) 6 SCC 287

[vi] (2017) 16 SCC 680

[vii] (2014) 16 SCC 623

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