Prospectivity, Retrospectivity & the Arbitration & Conciliation (Amendment) Bill, 2018

This blog had several posts on the topic of the retrospective application of the 2015 amendments to the arbitration law. The posts are given below:

• Is the New Arbitration and Conciliation (Amendment) Ordinance, 2015 Prospective or Retrospective?
• Applicability of the 2015 Arbitration Amendment Act to Arbitration Related Court Proceedings: Part I
• Part II: Applicability of the 2015 Arbitration Amendment Act to Arbitration Related Court Proceedings
• Part III: Applicability of the 2015 Arbitration Amendment Act to Arbitration Related Court Proceedings: The Lok Sabha Debates
• Supreme Court Settles (?) the Debate on Applicability of the 2015 Amendments to Arbitration Related Court Proceedings
• Retrospective Applicability of the 2015 Amendments to Indian Arbitration Law

The issue was finally but partially settled by the Supreme Court in the case of BCCI v. Kochi Cricket (2018).  The purpose of this post is two-fold: one, to look at the 2018 amendment Bill and see if the criticisms of the Bill by the Supreme Court in BCCI v. Kochi Cricket are in order. The second and the more important purpose is to examine if the proposal of the Government in the form of S 87 as provided in the 2018 Bill is in order.

The 2018 Bill and its History

The 2018 Bill in its present form was pursuant to the recommendations of the High Level Committee which was formed to look into, among other things, the recent amendments to arbitration law and suggest measures to improve arbitration in India.

The Statement of Objects and Reasons to the 2018 Amendment Bill lists out the purposes of the Bill, which includes, among other things, “to clarify that section 26 of the Arbitration and Conciliation (Amendment) Act, 2015, is applicable only to the arbitral proceedings which commenced on or after 23rd October, 2015 and to such court proceedings which emanate from such arbitral proceedings, to address the divergent views given by various Courts.”

Section 15 of the Bill seeks states: “Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 shall be omitted and shall be deemed to have been omitted with effect from the 23rd October, 2015.” Thus, Section 26 of the 2015 Act is sought to be retrospectively omitted. This is sought to be replaced, in effect, with Section 13 of the Bill, which seeks to introduce Section 87 to the 1996 Act. Section 87 reads:

"87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall—

(a) not apply to—

(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;

(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings."

These amendments are pursuant to recommendations made by the High Level Committee, which stated: “Section 26 of the 2015 Amendment Act may be amended with retrospective effect to provide that unless parties agree otherwise, the 2015 Amendment Act shall apply only to arbitral proceedings commenced on or after the commencement of the 2015 Amendment Act and to court proceedings arising out of or in relation to such arbitral proceedings.”

The Committee gave the following justifications for its recommendation:

• The continuing confusion regarding the prospective applicability of the 2015 amendments were creating a negative investment climate.
• Applying the 2015 amendments to court proceedings relating to arbitrations which commenced prior to 23.10.2015 would result in uncertainty and prejudice to the parties, and would lead to inconsistencies.

However, the Supreme Court inBCCI v. Kochi Cricket criticised the said amendment proposal and stated:

• The Government should keep the objectives of the 2015 amendments in mind before bringing in a proposal to insert Section 87.
•  The effect of Section 87 would be to put the various amendments to the 1996 law in the back-burner, especially as regards S. 28 and 34. If so, the old law would continue to apply resulting in delay and increased court interference in the proceedings. 
• In fact, the Law Commission had proposed an amendment similar to Section 26.

Comment

Now, two things are striking when one reads the aforesaid summary. The Supreme Court has indirectly chided itself in derailing the 1996 Act by observing that if Section 87 in its present form is enacted, it “would mean that in all matters which are in the pipeline, despite the fact that Section 34 proceedings have been initiated only after 23rd October, 2015, yet, the old law would continue to apply resulting in delay of disposal of arbitration proceedings by increased interference of Courts, which ultimately defeats the object of the 1996 Act.” (Para 57, BCCI v Kochi Cricket).

The Supreme Court’s decision that the 2015 amendments are prospective does not comport with its foot note 4 in the judgement where it cites with approval HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited (Formerly Gas Authority of India Ltd.) 2017 SCC Online 1024.

The 2015 amendments, especially as regards narrowing grounds under Section 34, cannot be applied to arbitral awards passed before 23.10.2015. Take a situation where an arbitral award is rendered by an arbitral tribunal on 25.07.2015 dismissing both the claims and the counter-claims filed. The claimant challenges the award by filing an application challenging under Section 34 on, say, 31.07.2015 questioning the dismissal of claims, and the counter-claimant files the application under Section 34 on, say 21.10.2015, challenging the dismissal of counter-claims. Assume that the court decided the Section 34 application of the claimant by 22.10.2015 itself and sets aside the award. but the counter-claimant's application is still pending Would this mean that in respect of the claimant’s Section 34 application the pre-2015 position would apply (wider grounds) and in respect of the counter-claimant’s Section 34 application the post-2015 position would apply (narrower grounds)?

While the Supreme Court’s intent is good, applying the 2015 amendments to pending court proceedings would lead to a lot confusion, which India will do well to avoid.

Perhaps, the best way forward is for the legislature is to re-draft Section 87:

• to save certain provisions in the 2015 Act which expressly provides for retrospectivity [such as S. 8(ii)]
• to generally provide that the 2015 amendments will not apply retrospectively to arbitrations commenced prior to 23.10.2015, except in those limited cases as contemplated above.
• to apply certain provisions to pending arbitration related court-proceedings or such proceedings filed after 23.10.2015 in respect of arbitrations commenced prior to 23.10.2015, such as S 2(I)(A) which has to read with S. 42 of the 1996 Act, S 2(I)(B), 4(i) and (ii), S 6(i), (ii) and (iii) (since the law as it stood before 23.10.2015 was the same), S 6(v), (vi), (vii), (viii)(ix)(because the 60 day limit is not going to affect anyone adversely from a substantive point of view and such 60 days in pending applications should commence from 23.10.2015 or the date of filing or from the date of bringing into force of the altered Section 87), S 19 (in view of the objects),
• to apply certain provisions to pending arbitration related court-proceedings only prospectively such as Section 18, S 9, etc

The above classification would do a great deal in balancing the interests that both the SC and the High Level Committee sought to protect.