DELHI HIGH COURT HOLDS THAT THE PROVISIONS OF (AMENDED) SECTION 29A (1) SHALL BE APPLICABLE TO ALL PENDING ARBITRATIONS SEATED IN INDIA AS ON AUGUST 30, 2019 AND COMMENCED AFTER OCTOBER 23, 2015.
ONGC Petro Additions Limited v. Fernas Construction Co. Inc.1
FACTUAL BACKGROUND
Vide an order dated September 25, 2019 (Order), the Delhi High Court (Court) disposed off the petition filed by ONGC Petro Additions Limited (Petitioner) against Fernas Construction Co. Inc. (Respondent) under Section 29A of the Arbitration and Conciliation Act 1996 (the Act) and allowed an extension of 18 months (effective from June 24, 2019) for the arbitral tribunal (Tribunal) to complete the proceedings and render an award.
Subsequently an issue arose before the Tribunal with respect to impleadment of the Respondent as a proper party to the arbitration proceedings. If impleaded, the proceedings would qualify as an international commercial arbitration (ICA) as defined under Section 2(1)(f) of the Act and therefore, the statutory limit to make an award under Section 29A of Act as amended2 by Arbitration and Conciliation (Amendment) Act 2019 (the 2019 Amendment Act) would be inapplicable. Considering the same, on March 23, 2020, the Tribunal passed an order directing the parties to seek appropriate clarification from the Court on its Order.
Thus, the present interlocutory application came to be filed by the Petitioner. During the proceedings, the prime question which arose before the Court was that in case the proceedings before the Tribunal were in the nature of an ICA, then whether the time limit as fixed by this Court vide the Order would be applicable. Effectively, the Court had to decide whether the amendments introduced to Section 29A by the 2019 Amendment Act would be retrospectively applicable to the present matter or not.
1 Order dated July 21, 2020 in OMP (MISC) (COMM) 256/2019 & I.A. 4989/2020.
2 Vide the 2019 Amendment Act, Section 29A (1) was amended to the effect that: (i) award in matters other than ICAs had to be made within 12 months from the date of completion of pleadings under Section 23(4) and (ii) awards in ICAs had to be only endeavoured to be made within a period of twelve months from the date of completion of pleadings under Section 23(4).
Pertinently, a similar issue had already arisen before two co-ordinate benches of the Court in Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal Power Limited3 (Shapoorji Pallonji) and in MBL Infrastructures Ltd. v. Rites Ltd.4 (MBL Infrastructure). In Shapoorji Pallonji, it was held that the amendments introduced to Section 29A by the 2019 Amendment Act were retrospective in nature. However, in the later judgement of MBL Infrastructures, by referring to the notification dated August 30, 20195, it was held that the 2019 Amendment Act would not have retrospective effect and the amended Section 29A would be prospective. It may be noted that the judgement in MBL Infrastructures had failed to consider Shapoorji Pallonji.
ARGUMENTS ADVANCED BY THE PARTIES
FINDINGS OF THE COURT
CONCLUSION AND ANALYSIS
The decision in Shapoorji Pallonji was welcomed by many for conclusively clarifying that the changes introduced to Section 29A by the 2019 Amendment Act would have a retrospective effect. However, with its subsequent contradicting decision in MBL Infrastructures, the Court had unknowingly revived the said debate. By upholding the findings of Shapoorji Pallonji over MBL Infrastructures, we believe that the Court has rightly interpreted the test of retrospectivity as elaborated by BCCI.
That being said, it must be remembered that except BCCI, there have been no material observations from the Supreme Court on this subject and thus it remains to be seen how the issue shall be dealt by it.
Disclaimer: The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.
SOURCE : http://elplaw.in/wp-content/uploads/2020/07/ELP-Arbitration-weekly-update-ONGC-Petro-Additions-Limited-v.-Fernas-Construction-Co.-Inc..pdf
ONGC Petro Additions Limited v. Fernas Construction Co. Inc.1
FACTUAL BACKGROUND
Vide an order dated September 25, 2019 (Order), the Delhi High Court (Court) disposed off the petition filed by ONGC Petro Additions Limited (Petitioner) against Fernas Construction Co. Inc. (Respondent) under Section 29A of the Arbitration and Conciliation Act 1996 (the Act) and allowed an extension of 18 months (effective from June 24, 2019) for the arbitral tribunal (Tribunal) to complete the proceedings and render an award.
Subsequently an issue arose before the Tribunal with respect to impleadment of the Respondent as a proper party to the arbitration proceedings. If impleaded, the proceedings would qualify as an international commercial arbitration (ICA) as defined under Section 2(1)(f) of the Act and therefore, the statutory limit to make an award under Section 29A of Act as amended2 by Arbitration and Conciliation (Amendment) Act 2019 (the 2019 Amendment Act) would be inapplicable. Considering the same, on March 23, 2020, the Tribunal passed an order directing the parties to seek appropriate clarification from the Court on its Order.
Thus, the present interlocutory application came to be filed by the Petitioner. During the proceedings, the prime question which arose before the Court was that in case the proceedings before the Tribunal were in the nature of an ICA, then whether the time limit as fixed by this Court vide the Order would be applicable. Effectively, the Court had to decide whether the amendments introduced to Section 29A by the 2019 Amendment Act would be retrospectively applicable to the present matter or not.
1 Order dated July 21, 2020 in OMP (MISC) (COMM) 256/2019 & I.A. 4989/2020.
2 Vide the 2019 Amendment Act, Section 29A (1) was amended to the effect that: (i) award in matters other than ICAs had to be made within 12 months from the date of completion of pleadings under Section 23(4) and (ii) awards in ICAs had to be only endeavoured to be made within a period of twelve months from the date of completion of pleadings under Section 23(4).
Pertinently, a similar issue had already arisen before two co-ordinate benches of the Court in Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal Power Limited3 (Shapoorji Pallonji) and in MBL Infrastructures Ltd. v. Rites Ltd.4 (MBL Infrastructure). In Shapoorji Pallonji, it was held that the amendments introduced to Section 29A by the 2019 Amendment Act were retrospective in nature. However, in the later judgement of MBL Infrastructures, by referring to the notification dated August 30, 20195, it was held that the 2019 Amendment Act would not have retrospective effect and the amended Section 29A would be prospective. It may be noted that the judgement in MBL Infrastructures had failed to consider Shapoorji Pallonji.
ARGUMENTS ADVANCED BY THE PARTIES
- On behalf of the Petitioner, the following contentions were raised:
- As a result of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment Act), Section 29A was introduced w.e.f. from October 23, 2015 to set out the statutory time limits for all India seated arbitrations commenced on or after this date. When the petition under Section 29A of the Act was filed on May 31, 2019 (later refiled on June 17, 2019), the time limits imposed under Section 29A were applicable to it. However, subsequent to the changes brought about to Section 29A by the 2019 Amendment Act6, the statutory time limit for making an award has become inapplicable to ICAs.
- Section 29A has been classified as a procedural law since its inception vide the 2015 Amendment Act and that it does not create any vested rights in the parties to the arbitration proceedings. In support of the said contentions the Petitioner relied upon the judgement in BCCI v. Kochi Cricket (P) Ltd.7 (BCCI). Reliance was also placed on the judgements in Thirumalai Chemicals Ltd. v. Union of India8 (Thirumalai Chemicals) and Rajendra Kumar v. Kalyan (D) by Lrs.9 to differentiate between substantive and procedural laws.
- Since the 2019 Amendment Act did not contain a provision akin to Section 26 of the 2015 Amendment Act and since the 2019 Amendment Act to Section 29A didn’t create any rights/liabilities, the changes brought about to Section 29A by the 2019 Amendment Act will have a retrospective effect. To support its contention, the Petitioner relied upon Sudhir G. Angur and Ors v. M.Sanjeev and Ors.10 (Sudhir G. Angur) which had held that all procedural laws and amendment to procedural laws to be retrospective in nature, unless the statute expressly stated to the contrary. The Petitioner also contended that the exceptions to the principle that procedural laws are retrospectively applicable as elaborated in Hitendra Vishnu Thakur and Ors. v. State of Maharashtra and Ors.11 were not applicable to the present case.
The Respondent too agreed to the stand taken by the Petitioner. However, without prejudice to the same, it relied upon the decision in State of Assam v. Ripa Sharma14, in which, the petitioner had relied upon a subsequent judgmentof the Supreme Court for contesting a law point as against the position of law settled by prior judgments. Therein, it was clarified by the court that the subsequent judgment relied upon by the petitioner was per incuriam
- By relying upon the judgement in National Insurance Co. Ltd. v. Pranay Sethi12 (National Insurance), the Petitioner argued that the Court would be well within its power to hold MBL Infrastructures as per incuriam since it was made contrary to and without considering the position laid down in Shapoorji Pallonji. The Petitioner also relied upon Sundeep Kumar Bafna v. State of Mahrashtra & Ors.13 (Sundeep Kumar Bafna), wherein it was held that even High Courts when faced with conflicting decision of the Supreme Court, should follow the decision earlier in time since the latter decision would be per incuriam.
FINDINGS OF THE COURT
- Agreeing, with the petitioner’s reliance on National Insurance and Sundeep Kumar Bafna, the Court held that decision in MBL Infrastructures was per incuriam
- BCCI had held that Section 29A of the Act (as incorporated by the 2015 Amendment Act) was procedural law, one which did not create new rights and liabilities but, the amendment was to be prospective in view of Section 26 of the 2015 Amendment Act, which provided that the 2015 Amendment Act shall apply in relation to arbitration proceedings commenced on or after the date of the commencement of the said Act. There exists no provision akin to Section 26 of the 2015 Amendment Act in the 2019 Amendment Act.15
- It is settled law that amendments to substantive laws affecting the rights and liabilities of a party or imposing a disability are prospective in nature whereas amendments to the provisions of statute dealing merely with matters of procedure or procedural laws are retrospective in nature, unless there exists a contrary intention of the legislature. The Court referred to the decisions in Workmen v. Firestone Tyre & Rubber Co. of India (P) Ltd.16, BCCI, Sudhir G. Angur, and Thirumalai Chemicals Ltd.
- The prescription of time limit by the 2015 Amendment Act had not conferred any rights or liabilities on a party, rather it was a procedural law establishing a mechanism for the Tribunal to render the award in twelve months and the removal thereof did not confer/affect rights of any party to be given effect prospectively.
- In view of the above, the Court held that the amended Section 29A (1) would be applicable to all pending arbitrations seated in India as on 30 August 2019 and commenced after October 23, 2015. The Court also clarified that there would be no strict timeline of 12 months in respect of ICAs seated in India. The Court thus held that the Tribunal would not be bound by the timeline prescribed vide the Order, in case the proceedings were found to qualify as an ICA.
CONCLUSION AND ANALYSIS
The decision in Shapoorji Pallonji was welcomed by many for conclusively clarifying that the changes introduced to Section 29A by the 2019 Amendment Act would have a retrospective effect. However, with its subsequent contradicting decision in MBL Infrastructures, the Court had unknowingly revived the said debate. By upholding the findings of Shapoorji Pallonji over MBL Infrastructures, we believe that the Court has rightly interpreted the test of retrospectivity as elaborated by BCCI.
That being said, it must be remembered that except BCCI, there have been no material observations from the Supreme Court on this subject and thus it remains to be seen how the issue shall be dealt by it.
Disclaimer: The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.
SOURCE : http://elplaw.in/wp-content/uploads/2020/07/ELP-Arbitration-weekly-update-ONGC-Petro-Additions-Limited-v.-Fernas-Construction-Co.-Inc..pdf
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