Ever since the evolution of the Alternative Dispute Resolution mechanisms, Arbitration has become a favoured mode to settle commercial disputes around the globe. In 2015, in order to make India an investor-friendly country, the Government of India decided to amend the Arbitration and Conciliation Act, 1996. In this background, the Arbitration and Conciliation (Amendment) Act, 2015 was introduced.
The Arbitration and Conciliation (Amendment) Act, 2015: Prospective or Retrospective Applicability?
The 2015 Act was deemed to be effective from October 23rd 2015. This however, has been marred with uncertainty as to applicability of the amended Act on pending arbitral and arbitration related court proceedings. Section 26 of the Amendment Act governs its applicability and provides that:
“Section 26: Act not to apply to pending arbitration proceedings: 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”.
Section 21 provides that the provisions of the Amended Act shall not apply on the arbitral proceedings which were commenced under Section 21 of the principal Act. Section 21 of the Principal Act states:
“Section 21: Commencement of Arbitral Proceedings: Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”
BCCI v. Kochi Cricket Board (2018)
The judgment was pronounced by a division bench of the Supreme Court holding that the 2015 Amendment Act is prospective in nature and is applicable on “arbitral proceedings” as well as“court proceedings in relation to arbitral proceedings” initiated on or after the commencement of the Amendment Act. Section 36, however, shall have retrospective applicability. The Court was faced with the question of applicability of the 2015 Act, and that of Section 36 of the Act.
Bifurcation of Section 26 of the Amendment Act and Application of Expressio Unius
The expression expressio unisus means “mention of one or more things of a class may be regarded as silently excluding all other members of the class”, meaning thereby, where specific words are not followed by general words, the things not covered specifically are not covered by the Act. With respect to this expression, the Court dissected Section 26 into two distinct parts. The Court noted that the first part of Section 26 is couched in negative terms and its non-applicability to certain proceedings. The second part has been couched in positive terms and applies to proceedings “in relation to” arbitral proceedings. The phrase used in Part I of Section 26 is “apply to the arbitral proceedings”. Contrastingly, the phrase used in the Part II of the Section provides “in relation to the arbitral proceedings”.
Decision of the Court
The Court noted that the expression “the arbitral proceedings” in Part I of Section 26 refers to proceedings before an arbitral tribunal and not before the court. In this regard, Court the maxim “Expressio Unius”. Chapter V of the Principal Act (1996 Act) is titled as “Conduct of Arbitral Proceedings”. This implies that the provisions in Chapter V relate to arbitral proceedings only and impliedly excludes the application of provisions in Chapter V on court proceedings. The first part of Section 26 only covers the arbitral proceedings. The absence of reference to Section 21 in Part II of the Section 21 reflects that it is not controlled by Section 21. Therefore, Section 21 is applicable only to court proceedings “in relation to” arbitral proceedings.
Nature of Amendment Act
Post bifurcating Section 26, the Court concluded that on placing reliance on the meaning of Section 26 and scheme of the Act (Chapter V), the Amendment Act shall be prospectively applicable on court proceedings which have begun after the commencement of Act. With relation to the arbitral proceedings, it may or may not be applicable on them prospectively.
Exception to the Prospective Applicability of the Amendment Act: Section 36
After considering the applicability of the Amendment Act, the Court adjudicated on the applicability of the Section 36 on the provision of Section 34 of the Act. Post 2015 Amendment, the courts were faced with the issue pertaining to the applicability of the Section 36 on the provisions of Section 34 of the Act. Section 36(2) provides that an application under Section 34 to set aside the arbitral award shall not automatically render the award unenforceable. Instead, the party seeking setting aside the arbitral award shall have to file an application to the court to stay the enforceability of the arbitral award under Section 36. Court has been granted to discretion to either dismiss or accept such application. Before 2015, the situation was different. Whenever an application was filed to set aside an arbitral award under Section 34, the enforceability of the arbitral award under Section 36 was automatically stayed. The Court held that the “execution” and “enforcement” are two different concepts, the former being procedural, and the latter being substantive in nature. Section 36 provides for execution of an award as if it were a decree of the Court. In addition to this, the Court held that before 2015, automatic stay was unfair and defeated the purpose of International Commercial Arbitration. Therefore, Section 36 was held to be retrospectively applicable. By clearing the smoke on the applicability of the Amendment Act, the Court has saved the scope of plethora of litigation. In addition to this, by providing the applicability of Section 36 to be retrospective, the Court has brought it in conformity with the principle of the International Commercial Arbitration. However, the Court did not adjudicate on the retrospective applicability of any other provisions of the Act, so either it can be assumed that the Court has only carved out Section 36 to be an exception to the applicability to the 2015 Amendment Act, or it can be assumed that the question of applicability of few other provisions remains open to litigation.