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Friday, August 16, 2019

Amendment Conundrum

The President of India recently gave his assent to the Arbitration and Conciliation (Amendment) Bill, 2019 which was passed by the Rajya Sabha on July 18, 2019 and the Lok Sabha on August 01, 2019.

Though the amendment seeks to implement sweeping changes to the existing enactment (“1996 Act”), the most controversial insertion is Section 87, which reads as under;
87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall— (a) not apply to–– (i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015; (ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015; (b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings.”.
The aforesaid provision seeks to nullify the effect of the judgment rendered by the Hon’ble Supreme Court in the matter of Board of Control for Cricket in India v. Kochi Cricket P. Ltd. & Ors. [C.A. No. 2879-2880 of 2018] (“BCCI Judgment”) and restore the position of law as decided by a Division Bench of the Delhi High Court in Ardee Infrastructure P. Ltd. v. Ms. Anuradha Bhatia [FAO (OS) No. 221/2016] (“Ardee”).

The central issue concerning the Court in Ardee (supra) was the interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 which provided that “nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”. 

While interpreting the said provision, the Hon’ble Division Bench categorically ruled that the Arbitration and Conciliation (Amendment) Act, 2015 would not apply to arbitration and court proceedings, if the invocation of arbitration in terms of Section 21 of the 1996 Act was done prior to October 23, 2015 i.e. the date of coming into force of the Arbitration and Conciliation (Amendment) Act, 2015. As a result, in relation to awards passed in such arbitrations, there would be an automatic stay on the enforceability of an award once objections under S. 34 of the 1996 Act were filed.

The Hon’ble Supreme Court however in BCCI (supra) reversed the position and held that the Arbitration and Conciliation (Amendment) Act, 2015 would apply retrospectively insofar as court proceedings are concerned, and hence there would be no automatic stay of an award upon mere filing of objections under S. 34 of the 1996 Act.

On the basis of the above position, various courts in the country have retrospectively applied the provisions of the Arbitration and Conciliation (Amendment) Act, 2015 and directed parties to deposit monies awarded under arbitral awards whilst seeking stay of the operation of an award. 

With the present amendment, the legislature has once again hit the ‘reset’ button and taken us back to the position of law as prevailing at the time Ardee (supra) was pronounced. As a result of the amendments brought about by the Arbitration and Conciliation (Amendment) Bill, 2019, any arbitration invoked prior to October 23, 2015 shall be governed by the unamended 1996 Act and would mean that upon filing of objections under S. 34 of the unamended 1996 Act, the award passed would be rendered unenforceable. 

But the question remains, what would happen to cases where the parties have been directed to deposit monies or where such monies have been released to award holders under orders of the court in terms of BCCI. Are such judgment debtors now entitled to move courts for reconsideration of the orders passed? 

The Hon’ble Supreme Court had ‘advised’ the legislature to refrain from bringing the proposed amendment in the form of S. 87 on the ground that it would put all important amendments made by the Arbitration and Conciliation (Amendment) Act, 2015 on the ‘back burner’ and would defeat the object and purpose of the Arbitration and Conciliation (Amendment) Act, 2015.

The legislature has obviously not paid heed to the observations of the Hon’ble Supreme Court and it would be interesting to see how the Hon’ble Supreme Court deals with a constitutional or vires challenge, if so mounted in the future.

The legislature ought to have put in more thought into the amendment, and ought to have harmonized the findings of the Hon’ble Supreme Court in BCCI (supra) while passing the bill into law. The legislature has ensured that Courts in this country will now be flooded with fresh round(s) of litigation in relation to the amendment, in an attempt to ‘unscramble the scrambled egg’. 


Saurabh Seth, the Author, is a practicing advocate in the Delhi High Court and specialises in commercial dispute resolution.



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