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APPLICABILITY OF SECTION 29A: PROSPECTIVE OR RETROSPECTIVE?

Bhavana Chandak, Associate, Kachwaha & Partners & Adv. Shaurya Dhoundiyal


Introduction

Section 29A of the Arbitration and Conciliation Act 1996 (“the Act”) provides for the time limit for passing arbitral awards in arbitration proceedings. This provision was inserted in the Act through the 2015 Amendment which provided that in cases relating to both, domestic as well as international commercial arbitrations, the time limit for passing arbitral awards shall be twelve months (extendable by six months with the consent of the parties) from the date of appointment of the Arbitral Tribunal. Pursuant to the 2019 Amendment to the Act, Section 29A provides for the time limit of one year (extendable by six months with the consent of the parties) for passing arbitral awards in domestic arbitration from the date of completion of proceedings, determined as per Section 23(4) of the Act. On the other hand, the 2019 Amendment excluded international commercial arbitrations from the purview of statutory time limits enshrined in Section 29A of the Act.

Post the 2019 Amendment, the question regarding the applicability of the amended Section 29A of the Act on arbitration proceedings that were pending on the date of enactment of the 2019 Amendment (30th August 2019) was raised before the Delhi High Court on multiple occasions and different opinions were given by the Court in this regard. This blog analyses these opinions given by the Delhi High Court and examines the settled law laid down by the latest judgment on this issue.


I. Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal Thermal Power Ltd. (“Shapoorji”)

In January 2020, the Delhi High Court for the first time, dealt with the issue regarding the applicability of Section 29A of the Act post the 2019 Amendment. While answering this issue, a single judge bench of the Delhi High Court held that the amended Section 29A of the Act, being a procedural law, will be retrospectively applicable to the arbitration proceedings commenced prior to the date of enactment of the 2019 Amendment. Therefore, this judgment made it very clear that in cases relating to domestic arbitrations, Section 29A as amended by the 2019 Amendment, will be applicable on all pending arbitration proceedings as on 30th August 2019. Furthermore, by establishing the retrospective applicability of the amended Section 29A, the Court impliedly indicated that in international commercial arbitrations pending as on 30th August 2019, the Arbitral Tribunal will not be bound by any time limit to pass the award.


Justice J.R Midha highlighted another important point in this judgment while stating that the time limit for the Arbitral Tribunal to pass the award in domestic arbitrations has been increased through the 2019 Amendment. When Section 29A was introduced through the 2015 Amendment, the Arbitral Tribunal was required to pass an arbitral award within 12 months from the date of appointment of the arbitral tribunal. With the consent of the parties, this time limit could be extended by 6 months. Thus, as per the earlier provision, the Arbitral Tribunal was required to pass the award within 18 months from the date its appointment. On the other hand, post the 2019 Amendment, the Arbitral Tribunal has 24 months to pass the arbitral award from that date of appointment of the Arbitral Tribunal. The amended Section 29A provides that in domestic arbitrations, the award shall be passed within one year from the date of completion of proceedings. Section 23(4) of the Act provides that that arbitration proceedings shall be completed within 6 months from the date of appointment of the Arbitral Tribunal. Hence, in comparison to the old provision, the amended provision provides 6 additional months to the Arbitral Tribunal to pass the award.


II. MBL Infrastructure Ltd. v. Rites Ltd. (“MBL Infrastructure”)

In February 2020, the question regarding the applicability of Section 29A of the Act post the 2019 Amendment was raised again before a single judge bench of the Delhi High Court. In this case, Justice Jyoti Singh observed that a bare perusal of the notification dated 30th August 2019 (notification for the enactment of the 2019 Amendment) evidently shows that it does not have a retrospective application. On this basis, it was held that the amended Section 29A will not be applicable to the arbitration proceedings that were pending as on 30th August 2019. The previous judgment given in the Shapoorji case was not taken into consideration in this case. It is for this reason that the Court gave a completely opposite finding within a matter of one month on the same question of law. As a consequence of this judgment, the third opinion of the Court on this issue became inevitable.


III. ONGC Petro Additions Ltd. v. Ferns Construction Co. Inc. (“ONGC”)

In July 2020, the Delhi High Court settled the position of law regarding this issue while delivering its judgment in the ONGC case. In this case, while answering the question regarding the applicability of the amended Section 29A of the Act, the Court affirmed the findings of the Court in the Shapoorji case and negated the judgment in the MBL Infrastructure case. The MBL Infrastructure judgment was negated on the grounds of being per incuriam as it was delivered in ignorance of another decision of a co-ordinate bench (equal strength of judges) on the same question of law and thereby, is not a binding precedent.


On the other hand, while affirming the Shapoorji judgment, the Court took reference from the Supreme Court’s judgment in BCCI v. Kochi Cricket (“BCCI”) and observed that by the virtue of being a procedural law, the amended Section 29A of the Act is retrospective in nature and will be applicable on all pending arbitration proceedings commenced after 23rd October 2015. In order to substantiate on this point, the Court also referred to the judgment reported as Sudhir G. Angur and Ors. v. M Sanjeev and Ors. wherein the Apex Court observed that all procedural laws and amendments to procedural laws are retrospective in nature, unless the statue expressly states the contrary. On the basis of the aforesaid precedents and the fact that there was nothing in the notification dated 30th August 2019 or in the Act to suggest that the amended Section 29A has a prospective application, the Court held that the amended Section 29A shall have a retrospective application. In other words, the Court held that the amended Section 29A will retrospectively be applicable on all pending arbitration proceedings as on 30th August 2019 and commenced after 23rd October 2015, except international commercial arbitrations.

Analysis

It is a well settled postion in law that substantive laws, i.e, laws that determine the rights and obligations of the parties, have a prospective application whereas procedural laws are retrospectively applied. As stated by the Apex Court in the BCCI judgment, Section 29A of the Act provides for a procedural requirement that must have retrospective applcability. The retrospective applicability of procedural laws can only be prevented when the Statute by itself, expressly states that the porvision of the Statute must be prospectively applied. For instance, Section 26 of the 2015 Amendment Act provided that the provisions of the 2015 Amendment Act shall have a prospective application. It is for this reason that the time limt for the completion of arbitration proceedings enshrined in Section 29A, introduced through the 2015 Amendment, was not applicable to the arbitration proceedings that commenced prior to 23rd October 2015 (the date of enactment of the 2015 Amendment Act). On the other hand, the 2019 Amendment to the Act contains no provision which indicates that the provisions amended through the 2019 Amendment should have a prospective application.


By taking the aforesaid factors into account, it would be reasonable to say that the judgment of the Delhi High Court in the ONGC case has has settled the position regarding the applicabiliblty of amneded Section 29A and has laid down the accurate standard regarding the applicability of the amended Section 29A of the Act.


Concluding Remarks

The judgment in the ONGC case provided the much-needed clarity regarding the applicability of the amended Section 29A post the confusion created through the different opinions of the Court in the previous judgments. The ONGC judgment can also act as the guiding precedent for other High Courts in the country while dealing with the question regarding the applicability of the amended Section 29A of the Act.






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