Section 29A of the Indian Arbitration & Conciliation Act to have a Retrospective effect: Clarifies the Delhi HC – By Rahul Kumar

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Rahul Kumar
B.A.LL.B.(H), 7th semester Law College Dehradun Faculty of Uttaranchal University

Section 29A of the Indian Arbitration & Conciliation Act to have a Retrospective effect: Clarifies the Delhi HC

Introduction:

The Hon’ble Delhi High Court on 21st July 2020, clarified the position of application of section 29A(1) of the Indian Arbitration and Conciliation Act, 1996. The court while deciding the issue of application of section 29A(1) in the matter of ONGC Petro Additions Ltd. v. Ferns Construction Co. Inc. [2020] ibclaw.in 24 HC  [1] held that section 29A(1) of the Arbitration and Conciliation Act, as amended in 2019 shall have the retrospective application.

Therefore, the additional period of six months which the 2019 Amendment had provided  for the completion of all pleadings of a domestic arbitration to the existing period of 12 months shall be applicable in all the pending domestic arbitrations as on 30th August 2019 and commenced after 23rd October 2015.

Facts of the Case:

Disputes arose between the parties Pursuant to an agreement between ONGC Petro Additions Limited (“Petitioner”) and FERNAS India Private Ltd (Indian Subsidiary of Ferns Construction Co. Inc. (“Respondent”). The petitioner invoked the arbitration clause and an Arbitral Tribunal was constituted to adjudicate the disputes. It is important to note that the Respondent had earlier filed an anti-arbitration injunction against the Petitioner contending that it is not bound by the arbitration clause, which was rejected by the Delhi High Court in April 2019; the Delhi High Court, however, granted the Respondent a liberty to raise this issue before the Arbitral Tribunal. The issue of Respondent being a proper party is currently pending for determination before the Arbitral Tribunal.

While the Arbitration was going on, the Petitioner approached the Delhi High Court seeking extension of time limit under Section 29A of the Act. The Hon’ble Single Judge, in his order dated 25 September 2019 extended the time for the Arbitral Tribunal to complete the proceedings and render the award by 18 months, effective from 24 June, 2019. However, during the pendency of the proceedings, Section 29A of the Act was amended by the 2019 Amendment. Considering the point that the Respondent is a company incorporated under the laws of Turkey, the current arbitration is in the nature of an International Commercial Arbitration under the Act. In light of the 2019 Amendment, the Arbitral Tribunal asked the parties to seek clarifications from the court on its order dated 25 September 2019.

Therefore, the issues before the court was regarding the clarity on the application of section 29A(1) of the Act. Considering the fact that the International Commercial Arbitration is excluded from the ambit of section 29A(1) and the Respondent being a foreign party, the question before the Hon’ble court was if the proceedings amounted to International Commercial Arbitration and if so, whether the time limit fixed by the earlier order shall be applicable here or not.

Contention of the Parties:

The petitioner has relied on the Judgment of Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power Limited[2],where the court has held that the effect of amendment to Section 29A as per Amendment Act of 2019 to be retrospective in operation. To this decision there appeared a conflicting decision in the case of MBL Infrastructures Ltd. v. Rites Ltd.[3], where this amendment was held to be prospective in nature.

Drawing the contention on these two views, the petitioners submitted that in such a case of conflicting decision, the earlier decision should be followed as the later would be per incuriam

Further the reliance was also placed on the apex court Judgment in BCCI v. Kochi Cricket (P) Ltd.[4], to contend that the Apex Court has classified Section 29A of the Act as procedural law and that the retrospective operation of the same was not given effect to due the presence of Section 26 of the Amendment Act of 2015,which made the operation of section 29A prospective.

It also stated that, the procedural laws are always retrospective in nature and had relied on Sudhir G. Angur and Ors. v. M. Sanjeev and Ors.[5], , wherein it was held that all procedural laws and amendments to procedural laws, are retrospective in nature, unless the statute expressly states to the contrary.

It is also to be noted that all the contention made by the petitioners on the application of 2019 amendment to section 29A(1) was supported by the Respondents in the instant case.

Decision of the Court:

The court while deciding the case also favored the view taken by the petition. The court also referred to the earlier decisions of Shapoorji and MBL and found that the latter one passed in MBL as per incuriam.

The court placed a strong reliance on the coordinate bench decision in Shapoorji where the court had held that amendment being procedural in nature shall be applicable to all pending arbitrations on the date of the Amendment is correct in law.

The Court has also heavily relied on the decision of BCCI v. Kochi and has held that the nature of section 29A is procedural in nature as it does not create any rights and liberties.

 Conclusion:

The Delhi High Court concluded that Section 29A (1) is applicable to all pending arbitrations seated in India as on 30 August 2019 and commenced after 23 October 2015. For the present case, it was clarified that if the arbitration is adjudicated to be an international commercial arbitration, the arbitral tribunal would not be bound by the time line prescribed vide order of the court dated 25 September 2019. But the domestic position stands clarified on the application of the said amendment of 2019.

 

Reference

[1] OMP(MISC) (COMM) 256/2019, I.A. 4989/2020 Reported [2020] ibclaw.in 24 HC

[2] O.M.P.(MISC.) (COMM.) 512/2019

[3] O.M.P.(MISC)(COMM) 56/2020

[4] (2018) 6 SCC 287

[5] (2006) 1 SCC 141

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