Arbitration: 2019 Amendment To Section 29A Timeline Has Retrospective Effect From 23 October 2015, Holds Delhi HC [Read Judgment]

Infusing clarity on the applicability of the amended Section 29A of the Arbitration and Conciliation Act, 1996, ("the Act"), the Single Judge of the Delhi High Court ("Court") in the case of ONGC PETRO ADDITIONS LIMITED vs. FERNS CONSTRUCTION CO. INC, pronounced on 21 July 2020, has found that the amendments to Section 29A (1) in 2019, fixing the 12 month time frame from the completion of pleadings and excluding international commercial arbitrations in India ("ICA") from its scope are "retrospectively applicable to arbitration proceedings commenced after 23 October 2015."^[1]

Backdrop

After taking an order of extension in September 2019 under Section 29A to complete the pleadings and render the award in eighteen months ("Earlier Order"), the Petitioner moved the Court the second time to seek clarification that the timeline under Section 29A(1) is not applicable to the pending arbitration proceeding (being an International Commercial Arbitration) owing to the retrospective applicability of the amendments made to Section 29A in 2019.

Parties' position

Relying upon the Supreme Court's decision in BCCI v. Kochi^[2], the Petitioner contended that Section 29A is procedural in nature and is prospective in operation w.e.f. 23 October 2015 owing to Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment") being held as prospective.

On this basis, the Petitioner contended that changes brought about in Section 29A vide the Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Amendment") will have retrospective effect from 23 October 2015, i.e. the date from which Section 29A was introduced into the Act as provision equivalent to Section 26 is not contained in the 2019 Amendment.

The Petitioner further drew the Court's attention to two conflicting orders of coordinate benches- (i) Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power Limited^[3] decided on 23 January 2020, holding Section 29A as per 2019 Amendment to be retrospective; and (ii) MBL Infrastructures Ltd. v. Rites Ltd.^[4] decided on 10 February 2020 holding Section 29A as prospective.

When faced with conflicting decisions of courts, the Petitioner contended that the decision earlier in time ought to be followed since the later decision would be per incuriam.

The Respondent agreed to the Petitioner's position

Issue

Since International Commercial Arbitration is excluded from Section 29A(1) of the 2019 Amendment and with the respondent being a foreign party, the question before the Court was if the proceedings before the Arbitral Tribunal is an ICA, then whether the time limit as fixed by the Earlier Order shall be applicable.

Decision

To answer this question, Justice V Kameswar Rao first referred to the earlier two orders in Shapoorji and MBL cases (supra) and found the latter order passed in MBL case as per incuriam. Relying on the Apex Court's decisions and accepting the Petitioner's contention, it held that conclusion of a Coordinate Bench in Shapoorji (supra) wherein the Court has held that the amendment, being procedural in nature, shall be applicable to all pending arbitrations as on the date of amendment, is correct.

The Court predicated this conclusion on the following reasons:

• BCCI (supra) has found Section 29A to be procedural in nature and there is no stipulation akin to Section 26 of 2015 Amendment in the 2019 Amendment;

• In light of settled judicial precedents, Section 29A prescribing time limit is a procedural law is it does not confer any rights or liabilities on a party. Rather, it establishes a mechanism for the Arbitral Tribunal to render the award, which determines rights and liabilities in 12 months

In view thereof, the Court held that Section 29A (1) shall be "applicable to all pending arbitrations seated in India as on August 30, 2019 and commenced after October 23, 2015". It further held that 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."

Holding as above, the Court clarified that the Arbitral Tribunal shall not be bound by the timeline prescribed by the Earlier Order, if the proceedings are in the nature of an ICA.

Remarks

Hitherto, only the domestic arbitrations, which commenced on or after 30 August 2019, were being governed by the revised timelines under Section 29A(1). Now, this decision clarifies and extends the revised timelines to even the pending domestic arbitrations, initiated after 23 October 2015.

ICAs, initiated after 23 October 2015, are confirmedly outside Section 29A's ambit with no need to approach the Court for extension of timelines anymore.

(Rohan Batra is a Delhi-based advocate and may be reached at rohan.batra@rrchambers.com)