12 Month timeline for Completion of Arbitrations under 2015 Ordinance, whether applicable to pending arbitrations; Madras HC asks Centre to clarify [Read Order]

A Division Bench of Madras High Court has asked the Centre to clarify whether Section 29A of the Arbitration and Conciliation (Amendment) Ordinance, 2015 would apply to pending arbitrations. Section 29A provides for a mandatory 12 month timeline for arbitrations to be completed (with an optional extension by 6 months subject to consent of parties) failing which parties have to approach Court and get an extension Order.

The Bench, comprising the Chief Justice Sanjay Kishan Kaul and Justice Pushpa Sathyanarayana also directed the Centre to examine the issue of pending arbitration proceedings as the provision was not the one which was recommended by the Law Commission of India in this form.

“There would be huge litigations unnecessarily generated in respect of the pending arbitrations and the provision being procedural in nature fixing the time limit, it can be clarified that it would be either not applicable to the pending arbitrations or if it is applicable to the pending arbitrations, the time period specified therein would commence from the date of the Ordinance, to obviate such unnecessary litigations,” the Bench observed.

Representing the petitioners, Advocate Anirudh Krishnan also pointed out that another issue which has given rise to considerable litigation already is the non-introduction of the proposed Section 85A by the Law Commission, which dealt with the aspect as to which provision would apply prospectively and which would apply retrospectively.

Speaking to LiveLaw Mr. Anirudh Krishnan said “Though the Amendments are well intentioned, inclusion of some provisions like Section 29A, which sets out a stringent timeline of 12 months for completion of the arbitration and exclusion of provisions like Section 85A contained in the Law Commission Report which deals with prospectivity/ retrospectivity of each of the provisions in the Act, are likely to lead to litigation. The Madras HC has clarified that pending arbitrations which have been going on for a period longer than what is stated in Section 29A will not automatically stand terminated".

The Bench hence sought clarification as to whether prior to the issuance of the Ordinance, the opinion of the Law Commission was obtained with regard to the introduction of Section 29A of the Arbitration and Conciliation (Amendment) Act, 1996 and if so, what was the opinion.

The petitions have been directed to the listed on January 25.

The Court was hearing several petitions filed after pending arbitrations which had extended beyond 18 months were suspended by the Arbitral Tribunal with a direction that the mandate of the Arbitrators stood terminated pursuant to Section 29A. The petitioners then challenged the constitutionality of the provision and sought an interim order that it will not apply to pending arbitrations. The prayer was granted by the Chief Justice.

The Law Commission of India had earlier recommended various amendments to the Act in its 176^th Report on the ‘Arbitration and Conciliation (Amendment) Bill, 2001’, after which the Government decided to accept almost all such recommendations and accordingly, introduced the ‘Arbitration and Conciliation (Amendment) Bill, 2003’ in the Rajya Sabha on 22nd December, 2003.

In order to re-look into the provisions of the Act, the Ministry of Law and Justice issued a consultation paper on 08th April, 2010 inviting suggestions from eminent lawyers, judges, industry members, institutions and various other stakeholders.

The move to amend the law came amid the government’s move to promote ‘ease of doing business’ in India, which is being highlighted by Prime Minister Narendra Modi.

You may read: The missing elements in Arbitration and Conciliation Act 1996

The Commission had then submitted a report on Arbitration law in August 2014 but it submitted a fresh report in February this year, suggesting changes that should be made in Arbitration and Conciliation Act, 1996.

The President then promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2015 on October 23, 2015. The Ordinance amends the Arbitration and Conciliation Act, 1996. It introduced a provision that requires an arbitral tribunal to make its award within 12 months. This may be extended by a six month period. You may access full text of the Ordinance here.

Read the order here.