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The Arbitration and Conciliation Amendment Ordinance, promulgated barely a month ago, is already the subject matter of litigation. In a petition before the Madras High Court, questions are being raised about the retrospective applicability of the Ordinance vis-a-vis Section 29A of the Act.
In Delphi TVS Systems Ltd, the Madras High Court has directed an arbitral tribunal to continue with arbitration proceedings after the tribunal held that the continuance of proceedings was barred by the Ordinance.
Specifically, the tribunal held that since the amended Arbitration Act (under the newly inserted S.29A) prescribes a maximum time limit of 18 months for the conclusion of an arbitral proceedings, and that the proceedings had extended beyond 18 months, the proceedings could no longer continue.
In effect, the arbitral tribunal has held that the amendments made by the Ordinance apply retrospectively i.e. even to proceedings that were pending before the promulgation of the Ordinance.
This may be found to be an incorrect interpretation, one that has coincidentally been made by a number of different arbitral tribunals in the country.
Anirudh Krishnan, who represented the petitioners in the High Court, says that the 18-month timeline provided in the Ordinance is “well intentioned” but “not practical”.
In India, most arbitrations with complicated evidence take a minimum of 2 years in my experience. The consequences of Section 29A are very drastic and if parties are forced to go back before court for an extension, it is against the object of the Act (one of the objects is to reduce judicial intervention).
And with the Madras High Court questioning the retrospective application of the Ordinance, the potential impact of this case cannot be underestimated. In fact, not only has the High Court sought a clarification from the Union govt on retrospective applicability, but has also asked whether the Law Commission of India’s opinion was sought before the introduction of S.29A.
This is especially significant since the LCI had recommended the insertion of S.85A in the Arbitration Act, a provision that specified the scope of the amendments. In the 246th Report, the Law Commission had held that,
“As a general rule, the amendments will operate prospectively, except in certain cases as set out in section 85-A or otherwise set out in the amendment itself.”
Krishnan says that the failure to insert S.85A in the Ordinance could possibly be an “inadvertent lapse” albeit one that has resulted in a significant increase in litigation.
“Whether, and how, the amendments will affect arbitration agreements entered into prior to 23 October 2015, arbitral proceedings and court actions is a crucial area which has been left substantially unaddressed by the Arbitration Ordinance.”
For now, all eyes are on the proceedings before the Madras High Court, and the stance taken by the Union of India.
Read the complete orders of the Madras High Court below.