Whether Section 34 Amendments are Retrospective?: Ssangyong v NHAI

The decision of Ssangyong Engineering & Construction Co. Ltd. V. NHAI [Civil Appeal No. 4779/2019 dt. 8 May 2019] is important in the history of Indian arbitration. It not only clarifies the scope of the ground of public policy for setting aside an arbitral award post the 2015 amendment but also decides the vexed question regarding the applicability of these amendments to petitions for setting aside awards that were passed in arbitrations commenced prior to 23 October 2015. In doing so, it impliedly overrules decisions of several High Courts which applied the amended provisions retrospectively to S 34 petitions that were filed much before 23 October. After BCCI v. Kochi Cricket (P) Ltd. [(2018) 6 SCC 287], most High Courts and District Courts began applying the amended Section 34 to petitions that were filed even prior to 23 October 2015. This decision clarifies that the amendments did not apply to Section 34 petitions filed before that date and is in the right direction.   

There are several aspects to the decision that would be the subject of many posts in this blog. This post, however, looks at the limited aspect of retrospective applicability of the amended Section 34. Before embarking on this exercise, it would do well to recap what the Supreme Court stated in BCCI v. Kochi Cricket (P) Ltd. [(2018) 6 SCC 287].

In Para 39 of the Supreme Court's decision in BCCI v Kochi, it held that "where the Section 34 petition is filed after the commencement of the Amendment Act, and an application for stay having been made under Section 36 therein, will be governed by Section 34 as amended and Section 36 as substituted." In order to make the amended Section 36 apply to even pending Section 34 applications, the Supreme Court used the procedure-substance dichotomy and held that the 2015 amendments applied to procedural provisions retrospectively. The consequence of this reasoning was that Section 36 as amended applied even to pending S. 34 petitions.

In para 54 of the decision, the Supreme Court noted the argument of Sr. Counsel Mr. KV Viswanathan that although the amendments to Section 34(2) regarding public policy were styled as clarificatory, they were substantive in nature and that since these amendments did away with at least two precedents, ONGC v. SAW Pipes (2003) and ONGC v. Western Geco (2015) on setting aside arbitral awards on the ground of public policy the amendments could only be prospective. [Readers may kindly note that para 54 of the decision is cited in Ssangyong as para 75, probably referring to the numbering in the SCC report.]. 

But the court in Kochi Cricket held that it was not expressing any final opinion on the issue: "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."

In Ssangyong, the court had to deal with the issue. The court agreed that the amendments were clarificatory in its language. However, the court viewed that the effect of these provisions was that it substantively changed the law and held: "Therefore, even in cases where, for avoidance of doubt, something is clarified by way of an amendment, such clarification cannot be retrospective if the earlier law has been changed substantively." In support of its conclusion, the Supreme Court cited Sedco Forex International v CIT (2005) 12 SCC 717, which was cited by Sr. Counsel Mr. KV Viswanathan in Kochi Cricket.

The court held that since fundamental changes were made in the ground of public policy, it cannot be retrospective and would apply only to Section 34 applications that were filed on or after 23 October 2015 (para 12).

It must be borne in mind that retrospectivity for the purposes of Section 34 is not the date of signing the arbitration agreement or the date of the dispute but the date when the Section 34 petition was filed. If an agreement (with arbitration clause) is signed on 01.01.2012 and a dispute arose on 01.01.2015 and the award is passed on 01.10.2015, the unamended law would apply if the application is filed on  22.10.2015 but the amended law would apply if the application is filed on 23.10.2015.