Section 29A Of The A&C Act Applies Prospectively Does Not Apply To Arbitration That Commenced Before The 2015 Amendment: Bombay High Court

The Bench of Justice G.S. Kulkarni held that provisions of Section 29A of the A&C Act, which was incorporated into the principal act via the 2015 Amendment Act, would not apply to an arbitration proceeding commenced on 3^rd Feb 2015 as in terms of Section 26 of the 2015 Amendment Act, the amendment came in to force on 23^rd October 2015.

Facts

The parties entered into an Employment Agreement dated 24.05.2012 whereby the petitioner was appointed as the 'Sales Director'. After serving in that capacity for more than 2 years, the petitioner intended to resign on 31.10.2014, however, on the same date it was served with a notice of termination of services.

Aggrieved by the termination of its services, the petitioner invoked the arbitration notice and accordingly, an arbitrator was appointed to adjudicate the dispute between the parties.

The petitioner filed its statement of claim before the arbitrator and claimed compensation on various counts. The respondent filed its statement of defence and the parties led evidence in support of their respective claims. Accordingly, 12 issues were framed by the arbitrator.

The arbitrator observed that the termination of the petitioner was based on a global reorganization strategy by that the post/position which the petitioner held was terminated and the respondent did not hire anyone else as well. The arbitrator was of the view that it was not appropriate for the arbitral tribunal to sit in judgment over the commercial wisdom of the reorganization of the respondent's business.

Aggrieved by the award, the petitioner filed the challenge petition.

The grounds of challenge

The petitioner challenged the arbitral award on the following grounds:

• The arbitral award is contrary to fundamental policy of Indian law
• The award is passed after a period of 14 months from the date of the final hearing, therefore, the provisions of Section 29A are violated and the award is liable to be set aside.
• The award is contrary to the provisions of Income Tax Act, Bombay Shops and Establishment Act and, Payment of Wages Act.
• The arbitrator erred in not appreciating the fact that the termination of the petitioner was illegal, therefore, the findings of the arbitrator are perverse.

Analysis by the Court

The Court held that in terms of Section 21 of the A&C Act the arbitration between the parties commenced on 3^rd February 2015 when the notice of arbitration was issued by the petitioner, however, Section 29A of the A&C Act which was incorporated by the 2015 Amendment Act would only apply to arbitration proceedings that commenced on or after 23^rd October 2015, therefore, the petitioner cannot rely on the provisions of this section to challenge the award.

The Court further observed that petitioner cannot place reliance on provisions of Income Tax Act, Bombay Shops and Establishment Act and Payment of Wages Act as no such plea was taken by the petitioner in its statement of claim before the arbitrator.

Accordingly, the Court rejected the petition.

Case Title: Meenanath Fatarpekar v. MicroStrategy India Pvt. Ltd. Commercial Arbitration Petition No. 53 of 2021

Date: 22.07.2022

Counsel for the Petitioner: Petitioner in Person

Counsel for the Respondent: Ms. Veena Venugopal with Mr. Sathosh Mishra.

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