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Supreme Court Settles the Applicability of the 2015 Amendments Bringing Much Awaited Clarity to Arbitration
With the introduction of the Arbitration and Conciliation Act, 1996 arbitration became an increasingly popular method of Alternate Dispute Resolution in India but there were still flaws in the Act, as pointed out by the Law Commission in one of its reports. Therefore, as an attempt to make arbitration a preferred mode of settlement of commercial disputes and to make India a hub of international commercial arbitration, the President of India, on 23rd October 2015, promulgated an Ordinance - Arbitration and Conciliation (Amendment) Ordinance, 2015, amending the Arbitration and Conciliation Act, 1996[1]. The Amendments made by the Act to the Arbitration and Conciliation Act, 1996 were done with the intention of making arbitration a speedy and expeditious process which would reduce costs and wastage of time. The amendments also solidify the impartiality and independence of an arbitrator and makes him responsible for any delay in the arbitration proceedings in an attempt to imbibe in them characteristics of self-discipline and accountability[2]. However, arbitration law in India was still in need of reform and as an answer to this, the Arbitration and Conciliation (Amendment) Bill, 2019 was introduced in Parliament and came into force on 9th August. The 2019 Amendment introduced further changes to the system of arbitration in India, the most significant being the establishment of the Arbitration Council of India (ACI) and the change made to the commencement of the timeline, in computing the limitation period, to “12 months from the date of completion of pleadings” with the exemption of international commercial arbitration from this 12-month limit[3]. Since the two latest amendments were so close to each other in time but significantly varied in method and conduct of arbitral proceedings, a question arose as to the applicability of the 2015 amendment. Section 87 of the 2019 Amendment sought to clarify this question by stating that unless the parties agree, the changes made by the Arbitration and Conciliation (Amendment) Act, 2015 will not be applicable to arbitral proceedings which have commenced before 23rd October 2015[4]. This meant that the 2015 Amendment would apply prospectively to all arbitral and court proceedings that commenced after 23rd October 2015 and not otherwise. The applicability of the 2015 amendment was important especially considering its provisions regarding disallowing the “automatic stay’ of an arbitral order unless a separate application was made for such stay and granted by the court.
Since legislation created this confusion and was unable to clarify it, the Supreme Court had to step in and in the case of Hindustan Construction Company v. Union of India[5] ruled that Section 87 was unconstitutional for being arbitrary and revived Section 36 of the 2015 Amendment instead. The court’s rationale behind this decision was based on the view that Section 87 subverted the purpose of the 2015 amendment and was contrary to public interest as it revived a process that caused un unnecessary delay in the resolution of disputes and disposal of arbitral proceedings[6]. The court summarized the applicability of the 2015 amendment and clarified the question with one statement saying that the salutary amendments made by the 2015 Amendment Act will be applicable to all proceedings initiated after 23rd October 2015 and in doing so, the court reiterated and expanded the judgment made in BCCI v. Kochi[7]. With respect to the automatic stay on awards, since Section 36 of the 2015 Amendment Act has been made applicable again, the courts will now have to interpret the section to mean that no automatic stay can operate.
After the filing of many petitions the Supreme Court of India has finally put to rest the questions regarding the applicability of the 2015 Amendment Act but only time will tell how it will play out in practice and if the judgement will stand the test of inquiries. However, it has been a welcomed decision so far.
[1] Vikas Goel, Highlights of Amendment to the Arbitration and Conciliation Act, 1996 via the Arbitration Ordinance 2015, Mondaq, (Dec. 2, 2015, 3:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/448666/highlights-of-amendment-to-the-arbitration-and-conciliation-act-1996-via-arbitration-ordinance-2015.
[2] R.V Prabhat, Highlights of Amendment to the Arbitration and Conciliation Act, 1996, Manupatrafast, (Apr. 12, 2020, 12:48 PM), https://www.manupatrafast.in/NewsletterArchives/listing/ILU%20RSP/2015/Dec/Highlights%20of%20Amendment%20to%20the%20Arbitration%20and%20Conciliation%20Act%201996%20via%20Arbitration%20Ordinance%202015.pdf.
[3] Maneck Mulla, Salient Features of the Arbitration and Conciliation (Amendment) Bill, 2019, Mondaq, (Sep. 18, 2019, 9:07 PM), https://www.mondaq.com/india/Litigation-Mediation-Arbitration/845782/Salient-Features-Of-The-Arbitration-And-Conciliation-Amendment-Bill-2019.
[4] Arbitration and Conciliation (Amendment) Act, 2019, No. 33, Acts of Parliament, 2019.
[5] Hindustan Construction Company v. Union of India, Writ Petition (Civil) No. 1074 of 2019, Supreme Court, Nov. 27, 2019.
[6] Shaneen Parikh, End Game – The Supreme Court Settles the Applicability of the 2015 Amendments, CyrilAmarchand, (Dec. 2, 2019, 2:09 PM), https://corporate.cyrilamarchandblogs.com/2019/12/supreme-court-settles-applicability-2015-amendments-arbitration-conciliation-act-1996/#more-3210.
[7] BCCI v. Kochi, (2018) 6 SCC 287.
- Arbitration
- Supreme Court
- Arbitration and Conciliation (Amendment) Act, 2015
