Section 29A(1) of Arbitration and Conciliation Act - Prospective or Retrospective By Kush Shah and Devika Gadgil

ONGC Petro Additions Ltd. vs. Ferns Construction Co. Inc.

Decision date: 21.07.2020.

The question before the Hon’ble Delhi High Court was if the proceedings before the Arbitral Tribunal are in nature of an International Commercial Arbitration then whether the time limit as fixed by coordinate bench of Delhi High Court vide Order dated 25th September, 2019 shall be applicable or not; since the arbitration proceedings in the case in hand commenced before the amendment to Section 29A (1) of the Arbitration and Conciliation Act, 1996 (“Act”) as notified on 30th August, 2019.

The Court referred to the view taken by two coordinate benches of the Delhi High Court. In Shapoorji Pallonji and Co. Pvt. Ltd. vs. Jindal India Thermal Power Limited, 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 date of the amendment. Whereas the learned Single Judge in MBL Infrastructures Ltd. vs. Rites Ltd., by referring to the notification dated 30th August, 2019 held that, it does not have a retrospective effect. Apparently both the orders were at variance. The Court further noted that in MBL Infrastructures Ltd. supra, the attention of the Court was not drawn to the earlier order in Shapoorji Pallonji supra. Hence, the Court held that the order in MBL Infrastructures Ltd. supra is per incuriam.

The Court with an intend to carve out a distinction between 2015 and 2019 Amendment Act with regards to prospective and retrospective applicability of Section 29A and Section 29A (1) respectively,  relied upon the Supreme Court Judgment in BCCI vs. Kochi Cricket (P) Ltd. which held that Section 29A of the Act incorporated by way of amendment of 2015 is a procedural law, as it did not create any rights and liabilities, but held the amendment to be prospective in view of Section 26 of the amendment of 2015, which clearly stipulated that the said Amendment Act of 2015 shall apply in relation to arbitration proceedings commenced on or after the date of the commencement of the said Act. The Court noted that there is no such stipulation akin to Section 26 of Amendment Act of 2015 in the Amendment Act of 2019, hence retrospective. The Court further noted that deletion of Section 26 of Amendment Act of 2015 vide Amendment Act of 2019 has been set-aside by the Apex Court in Hindustan Construction Company Limited & Ors. vs. Union of India & Ors.

The Court thus held that the provisions of Section 29A (1) (as amended) shall be applicable to all pending arbitrations seated in India as on 30th August, 2019 and commenced after 23rd October, 2015. The Court 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. The Court clarified that the Arbitral Tribunal shall not be bound by the time line prescribed vide Order dated 25th September, 2019, if the proceedings are in the nature of an International Commercial Arbitration.

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