A Single Bench of the Delhi High Court on July 21, 2020 in the case of ONGC Petro Additions Limited (“Petitioner”) v. Ferns Constructions Company Incorporated (“Defendant”), decided upon the issue that whether the amendment to Section 29A (1) of the Arbitration and Conciliation Act, 1996 (“the Act”), vide Arbitration and Conciliation (Amendment) Act, 2019 (“2019 Amendment”), as notified on August 30, 2019, is retrospective in nature?

Brief facts of the case:

The Delhi High Court vide its order dated September 25, 2019 had disposed off the main petition of filed by the Petitioner under Section 29A of the Act, extending the time period for the arbitral tribunal to complete the proceedings and render the award by 18 months effective from June 24, 2019.

It is the case of the Petitioner that, initially when the petition under Section 29A of the Act was filed on May 31, 2019 (refiled on June 17, 2019), the said Section was applicable to all arbitration proceedings seated in India. However, Section 29A of the Act was amended vide the 2019 Amendment, to the effect that the time limit for the arbitral tribunal to pass the award does not apply to international commercial arbitration as defined under Section 2(1)(f) of the Act.

The Petitioner in the instant case thus claimed that Section 29A of the Act, does not apply to the arbitration proceedings between the parties on the date when the petition under Section 29A was filed, owing to the retrospective applicability of the amendment made to Section 29A.

Decision by the court:

The Delhi High Court observed that there exists a dichotomy in the decisions rendered by two Coordinate Benches of the Delhi High Court in the case of Shapoorji Pallonji and Company Private Limited v. Jindal India Thermal Power Limited, O.M.P.(MISC.) (COMM.) 512/2019, and MBL Infrastructures Limited v. Rites Limited, O.M.P.(MISC)(COMM) 56/2020, wherein in the case of Shapoorji (supra), the court held that the amended Section 29A(1) of the Act being a procedural law would also apply to the pending arbitrations as on the date of the amendment whereas, the court in the case of MBL Infrastructure (supra), by referring to the notification August 30, 2019 held that, from the perusal of the said notification it does not have a retrospective effect. The Delhi High Court in the instant also noted that in the case of MBL Infrastructure (supra), the attention of the court was not drawn to the earlier order in Shapoorji (supra) and thus, held that, to that extent the order in MBL Infra (supra) is per incuriam (refers to a judgment of a court which has been decided without reference to statutory provisions or earlier judgments which would have been relevant).

The Delhi High Court, in the instant case, thus, held that:-

“25. So, it follows that the conclusion of a Coordinate Bench in Shapoorji (supra) wherein the Court has held that the amendment being a procedural in nature shall be applicable to all pending arbitrations as on the date of amendment is correct…

……

26.….it must be held that the provisions of Section 29A (1) shall be applicable to all pending arbitrations seated in India as on August 30, 2019 and commenced after October 23, 2015.”                                                                   (emphasis supplied)

The court further noted that there is no such stipulation akin to Section 26 of Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”) in the 2019 Amendment that the amendment shall be applicable in relation to arbitration proceedings commenced on or after the date of the commencement of the Act. Further, as per the court, the prescription of time limit by the 2015 Amendment had not conferred any rights or liabilities on a party and rather it was only a procedural law establishing a mechanism for the arbitral tribunal to render the award, which determined the rights and liabilities of the parties in twelve months and surely, the removal thereof also does not confer/affect rights of any party to be given effect prospectively.

Moreover, the Delhi High Court also reiterated the position of law that any change or amendment to substantive laws affecting the rights and liabilities of a party or imposing a disability thereof will be prospective in nature and any change/amendment to the provisions of statute dealing merely with matters of procedure or procedural laws will be retrospective in nature, unless there exist a contrary intention of the legislature regarding the same.

Determining the issue with regard to international commercial arbitrations, the Delhi High Court noted that by the 2019 Amendment to Section 29A (1) of the Act, the time period for making an arbitral award in international commercial arbitration has been made inapplicable and thus, held that:

“27….there is no strict time line of 12 months prescribed to the proceedings which are in nature of international commercial arbitration as defined under the Act, seated in India.”

(emphasis supplied)

The Delhi High Court in the instant case therefore, clarified that the arbitral tribunal shall not be bound by the time line prescribed vide order dated September 25, 2019, if the proceedings are in the nature of an international commercial arbitration.

This update has been contributed by Arka Majumdar (Partner) and Kunal Dey (Associate).