The Conundrum: Whether the Amendment to Arbitration and Conciliation act, 1996 is prospective or retrospective?


                The Arbitration and Conciliation Act, 1996 (“Act”) was amended on 31.12.2015 (“the Amendment”) with the laudable objective of making the arbitration process “more user-friendly, cost effective and lead to expeditious disposal of cases.” However, the Amendment has raised several red flags. The primary issue plaguing the litigants and Courts is the applicability of the Amendment Act, 2015 to pending proceedings initiated under Section 34 of the Act.

Under the earlier regime, an Award would be automatically stayed upon filing of an Application under Section 34 but the Amendment has taken away the right to an “automatic stay” of the Award and enabled the Courts to impose conditions at the time of staying the award. Thus, leading to the question, whether a separate application for stay has to be filed even in Section 34 Petitions filed prior to the introduction of the Amendment?

APPLICABLE LAW

To answer the question, Section 26 of the Amendment Act has to be considered which stipulates:

  1. Nothing contained in this Act shall apply to the arbitration proceedings commenced in accordance with the provisions of Section 21 of the principal Act before the commencement of the Act unless the parties otherwise agree.
  2. This Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.

At first blush, there seems to be no ambiguity in the Parliament’s intent to make the Amendment prospective. However, the words, “arbitration proceedings” in the first part and “in relation to” in the second part have led to a lot of ambiguity in the minds of the Court.  

DIVERGENT VIEWS OF HIGH COURTS

The Calcutta High Court in Electrosteel Castings Limited v. Reacon Engineers has held the amendment to be prospective and inapplicable to proceedings that were pending as on the date of introduction of the Amendment. However, a subsequent judgement of the division bench of the Calcutta High Court in Sri Tufan Chatterjee vs Sri Rangan Dhar has held the amendment to be retrospectively applicable to pending proceedings u/s. 34. Similarly, the Bombay High Court in Rendezous Sports World and Ors v. The Board of Control for Cricket in India and ORS (MANU/MH/2637/2016) has held that amendment to be prospective yet applicable to pending court proceedings u/s. 34.  The judgement of the Bombay High Court will be discussed in depth in this piece apart from the Apex Court’s judgement in BCCI as the Bombay High Court has considerd the issue in depth.

RENDEZVOUS SPORTS WORLD & ORS

In Rendezvous Sports, the Bombay High Court has held the Amendment to be prospective and yet applicable to pending court proceedings. The reasoning of the Bombay High Court is that the Amendment does not affect the right of appeal or the right to avail interim relief of the Applicant but only removes the disability faced by the award holder in getting the award executed. The High Court has taken great pains to point out that application of amended Section 36 to pending court proceedings would not amount to giving retrospective effect to the Amendment. The High Court has relied on the observation made by Bukley L.J. in West v. Gwynee to buttress its conclusion that the applicability of the amendment to pending court proceedings makes it prospective. The High Court observed:

“It is said that, retrospective operation is one matter and interference with existing rights is another. If an Act provides that as a past date the law shall be taken to have that which it is not, the Act would be retrospective. In that case, it is effective on a date prior to the date on which the Act is made applicable. When it is applied to the existing matters, it’s effect is necessarily prospective.”

Further, the Hon’ble Court also held that the Amendment does not even interfere with the ‘Right of Appeal’ but merely removes the ‘shadow over the right of the award-holder’ permitting the Judgement Debtor to seek any interim order/stay.

BEFORE THE SUPREME COURT

The judgement of the Bombay High Court is instructive and necessary to understand the conclusion reached by the Supreme Court in BCCI v. Kochi Cricket which adjudicated the same question on appeals from various High Courts including the Bombay High Court. Even though the conclusion arrived at by the Supreme Court is the same as that of the Bombay High Court, the reasoning is not as lucid and coherent.  

The first issue considered by the Supreme Court was interpretation of Section 26 of the Amendment Act. It interpreted ‘arbitration proceedings’ to mean proceedings before the arbitrator and ‘in relation to arbitration proceedings’ to mean only Court proceedings in contrast to earlier judgements of the Supreme Court which had interpreted the words, ‘in relation to’ to be all encompassing so as to include within its fold both arbitration and court proceedings. Nevertheless, the diversion from the precedent is justifiable in view of the peculiar drafting of Section 26 and object of the Act.

However, the reasoning of the Supreme Court falters when it considers the question of this ‘Prospective Amendment’ being applicable to pending court proceedings. The Supreme Court gave the following reasons for holding the “Prospective Amendment” to be applicable to pending court proceedings:

  1. Execution of Decree pertains to realm of procedure.
  2. There is no accrued right to resist execution.
  3. Hence, the Amendment being procedural in nature is applicable to pending proceedings.
  4. Alternatively, being a procedural provision, in the context of Section 36, the expression “has been” would refer to Section 34 petitions filed before the Amendment was introduced.

Thus, after discussing a slew of judgements, the Hon’ble Court held that:

“……execution of a decree pertains to the realm of procedure and that there is no substantive vested right in a judgement debtor to resist execution, Section 36, as substituted, would apply even to pending Section 34 application on the date of commencement of the Amendment Act.”

A CRITIQUE OF APEX COURT’S REASONING:

The question of looking into whether an amendment is procedural or substantive arises only when the amendment has to be applied retrospectively. Further, the discussion with respect to ‘accrued right/s’ being taken away also has to be considered only if the Amendment is being held to be retrospective or if Section 6 of the General Clauses Act is applicable. Perplexingly, the Supreme Court has held the Amendment to be prospective and Section 6 to be inapplicable and yet justifies the applicability of the Amendment to pending court proceedings on the ground that the Amendment is procedural in nature and that the Amendment does not affect any accrued right/s of Appellant. If the Amendment is only affecting ‘existing right’ as held by the Bombay High Court, there was no reason for the Supreme Court to decide if it takes away any accrued right or is procedural in nature. In fact, even the Bombay High Court has committed the same error in its reasoning.

Further, the Supreme Court has interpreted “has been” in Section 36 to mean Applications filed under Section 34 before the Amendment was enacted which interpretation renders Section 26 otiose. As Section 26 clearly stipulates the Amendment to be prospective and the Supreme Court having interpreted it to be so cannot turn around and interpret “has been” in Section 36 to mean Application filed before the commencement of the Amendment merely because it is a “procedural provision”.

Most importantly and unlike the Bombay High Court, the Supreme Court does not consider the question, if applying the Amendment to pending court proceedings would render it prospective or retrospective? The Bombay High Court has considered this question in detail and the Supreme Court in not addressing this question has skirted an important question.

THE END OR JUST THE BEGINNING?

All the hopes of the Supreme Court conclusively answering the question of the Amendment being prospective or retrospective has been betrayed as the Supreme Court has still left other concurrent issues open for consideration. For instance, it can be argued that the amendment to certain provisions like Section 34 is only procedural & clarificatory and hence, applicable to pending proceedings. In fact, the same argument was made before the Supreme Court but the Hon’ble Court refused to look into such matters and opined that:

“We do not express any opinion on the aforesaid contention since the amendments made to Section 34 are not directly before us. It is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature. Thereafter, whether certain provisions are clarificatory, declaratory or procedural and, therefore, retrospective, is a separate and independent enquiry, which we are not required to undertake in the facts of the present cases, except to the extent indicated above, namely, the effect of the substituted Section 36 of the Amendment Act.

Thus, once again the Supreme Court has left open scope for re-agitating the same question of law in the context of other provisions of the Act.

Published by Hemanth Rao

I am an Advocate practicing in the High Court of Karnataka at Bangalore.

2 thoughts on “The Conundrum: Whether the Amendment to Arbitration and Conciliation act, 1996 is prospective or retrospective?

  1. No ,not all, two different quasi judicial authorities,enactment under different central Acts , two parallel proceedings can be going on. there are several judgments we can go through up coming days,

    Like

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