Conflict And Conundrum: Section 26 Of The Arbitration And Conciliation (Amendment) Act, 2015
Section 26 of Arbitration and Conciliation (Amendment) Act, 2015 was enshrined to give hiatus to the controversy of applicable provisions to the pending arbitral proceedings. Since then, the provision has been a cause of much speculation and myriad interpretations by various high courts across the country.
Section 26 provides as follows:
“26. 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.”
In order to finally decide the issue, recently the provision has been interpreted by the Supreme Court in BCCI v. Kochi Cricket Pvt. Ltd and Etc. (Civil Appeal Nos.2879-2880 of 2018) which states that Section 26 of the Amendment Act makes it clear that the Amendment Act as a whole is prospective in nature. The interpretation of the judgment may be summarized as follows:
- Arbitration proceeding commenced after the coming into force of the amending Act will be governed by the amended Act. Arbitration proceedings commenced prior to the coming into force of the amendment Act can be governed by the amended Act if the parties so agree;
- Court proceedings initiated after the coming into force of the amending Act will be governed by the amended Act, even if they relate to arbitrations that were commenced prior to the amended Act coming into force.
However, the judgment was cautious to note the intentions of the government expressed in the press release dated March 7, 2018, in enacting Section 87 to the Act having the effect of overshadowing the judgment. Justice RF Nariman accordingly voiced his concerns thus:
“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 7th March 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, which, as has been stated by the Statement of Objects and Reasons, “…have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act”, and will now not be applicable to Section 34 petitions filed after 23rd October, 2015, but will be applicable to Section 34 petitions filed in cases where arbitration proceedings have themselves commenced only after 23rd October 2015. This would mean that in all matters which are in the pipeline, despite the fact that Section 34 proceedings have been initiated only after 23rd October, 2015, yet, the old law would continue to apply resulting in delay of disposal of arbitration proceedings by increased interference of Courts, which ultimately defeats the object of the 1996 Act.”
Accordingly, it was directed that a copy of the judgment be sent to the Ministry of Law and Justice to absorb the findings of the judgment in the Arbitration and Conciliation (Amendment) Bill, 2018.
To many surprises, the Arbitration and Conciliation (Amendment) Bill, 2018, (released on 19.03.2018) despite the explicit directions provided in the judgment has provided for Section 87 in the following terms:
"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 Bill further provides that Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 shall be omitted and shall be deemed to have been omitted with effect from the 23rd October 2015.
While the aforesaid Section 87 renders the interpretation given in the much-awaited judgment in BCCI v. Kochi Cricket Pvt. Ltd and Etc. nugatory, we can only wait with nose pressed against the glass wall whether the suggestions in the judgment will be considered favourably in the Amendment Act or the conundrum continues.
Ranu Purohit is an Advocate at Supreme Court of India.
[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]