Amongst its other usages, the Merriam Webster Dictionary defines the word “amend” as “to change or modify (something) for the better”. Which begs the question whether with the proposed introduction of Section 87 in the Arbitration & Conciliation Act, 1996, the government is missing the bus?

In March 2018, the Union Cabinet approved the Arbitration and Conciliation Amendment Bill, 2018 for introduction in the Parliament. The press release issued by the Press and Information Bureau stated that the Bill was a “part of the efforts of the Government to encourage institutional arbitration for settlement of disputes and make India a centre of robust Alternative Dispute Resolution (ADR) mechanism.”

Advertisement

Less than a fortnight after the press release was issued, the Supreme Court of India delivered its judgment in the case of BCCI v. Kochi Cricket (P) Ltd.: (2018) 6 SCC 287.

The judgment, which drew some comment on its wide interpretation of Section 26 of the Arbitration and Conciliation Amendment Act, 2015, was nevertheless hailed as being a landmark one.

For one, it was a definitive pronouncement on the applicability of the amended Arbitration & Conciliation Act; a subject on which varied views had been taken by different High Courts around the country.

In the BCCI judgment, the Supreme Court held that as per Section 26 of the Amendment Act, the amended provisions would apply to all ‘arbitral proceedings’ commenced after 23 October 2015, as well as to all ‘court proceedings’ commenced after the said date, irrespective of the date of commencement of the underlying arbitration proceedings.

Effectively, in the context of Section 34 of the Act, this meant that there would be no automatic stay on the enforcement of an award, and the scope of challenge to the award would be more limited, notwithstanding the fact that the arbitration had commenced (and even concluded) prior to the date of the Amendment Act.

After reaching this conclusion, the BCCI judgment specifically noted the proposed introduction fo Section 87 into the Act. The Court, in paragraph 78 of the decision, gave the following caution:

“The Government will be well-advised in keeping the aforesaid Statement of Objects and Reasons in the forefront, if it proposes to enact Section 87 on the lines indicated in the Government’s Press Release dated 7-3-2018. The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular.”

Notwithstanding this caution, however, when the Arbitration and Conciliation (Amendment) Bill, 2018 was introduced in Lok Sabha by the Union Minister of State for Law and Justice, Mr. PP Chaudhary, on 18 July 2018, the proposed Section 87 was retained.

If the Bill is passed, the consequence would be that court proceedings in relation to arbitral proceedings that commenced prior to 23 October 2015, would continue to be governed by the unamended (i.e., pre-2015) law.

Most importantly, the provisions of the pre-2015 law in relation to automatic stay of an award upon filing of a challenge, would continue to be applicable. At the same time, the provisions of the amended Act, with respect to time limits for disposal of a challenge petition, will not apply.

As a consequence, money awards remaining unrealised for longer periods of time, is again becoming a very distinct possibility, particularly in view of the fact that there are still a large number of arbitrations pending which are governed by the unamended Act.

The 2018 Amendment Bill has many laudable aspects, which are stated as being aimed at increasing the efficacy of arbitration in India, and its attractiveness to parties, particularly foreign investors. At the same time, the proposed introduction of Section 87 appears to be counter-intuitive.

One also questions why the clarity that is now sought to be brought about vis a vis the applicability of the amended Act, did not find place in Section 26 of the 2015 Amendment Act, and why it took more than two years and multiple litigations before it was thought fit to bring about this clarity?

The writer is a Partner at J. Sagar Associates. The views expressed are personal.