Legal Question in Business Law in India

01.02.2016

Dear Sir / Madam,

Sec 29 A deals with the time limit for issuing an arbitral award (an Award needs to be made in 12 months).

Sec 85A of the Law Commission Report reads as follows[1]:

Transitory provisions �

1. Unless otherwise provided in the Arbitration and Conciliation (Amending) Act, 2014, the provisions of the instant Act (as amended) shall be prospective in operation and shall apply only to fresh arbitrations and fresh applications, except in the following situations

a. the provisions of section 6-A shall apply to all pending proceedings and arbitrations. Explanation: It is clarified that where the issue of costs has already been decided by the court/tribunal, the same shall not be opened to that extent.

b. the provisions of section 16 sub-section (7) shall apply to all pending proceedings and arbitrations, except where the issue has been decided by the court/tribunal.

c. the provisions of second proviso to section 24 shall apply to all pending arbitrations.

2. For the purposes of the instant section,�

a. �fresh arbitrations� mean arbitrations where there has been no request for appointment of arbitral tribunal; or application for appointment of arbitral tribunal; or appointment of the arbitral tribunal, prior to the date of enforcement of the Arbitration and Conciliation (Amending) Act, 2014.

b. �fresh applications� mean applications to a court or arbitral tribunal made subsequent to the date of enforcement of the Arbitration and Conciliation (Amending) Act, 2014.

The above section makes it abundantly clear that ordinarily the provisions are meant to apply prospectively.

Regards,

Dear Sir

The insertion of New Section 29A in the Arbitration Act, is in relation to the time limit for the Arbitrator to make the award. The Un-Amended act did not provide any such time limit for the arbitrator to enter the reference, which is now sought to be introduced, by the amending Act, with a view to expedite the Arbitration Proceedings.

The newly inserted Section provides that, Arbitrator shall enter the award within a period of 12 months from the date of reference, and with the consent of the parties within future extended period of 6 months. And if the Arbitrator fails to pass the award within the stipulated time period, then such mandate of the Arbitrator shall be terminated.

PLEASE NOTE, THE AMENDING PROVISION, NO WERE REFERS TO THE VALIDITY OF THE ARBITRATION AGREEMENT.

Scope and Ambit of Section 29A is only to secure speedy proceedings, and not to adjudicate upon the validity and legality of any arbitration agreement. Section 29A is a procedural section and not a substantive provision itself. The section is in reference to the obligation of the Arbitrator. The Section provides that in the event arbitrator do not make award within stipulated time frame then his mandate is terminated, however, section do not make any reference regarding validity or legality of any agreement providing higher time limit for such arbitration. On the contrary, section future provides that parties can by consent extend the period of 12 months to another 6 months.

Any further extension beyond 6 months can at the most be said to be unauthorized or beyond the competency of parties. However, that per se cannot be effect the legally or validity of the Arbitration Agreement.

As per my opinion, though providing time limit higher then the one prescribed under Section 29A, do not in any manner effect the validity or the Arbitration Agreement per se, however, at the most the said provisions if found to be inconsistent with the provisions of the act, can be read down, as if no such time limit was ever prescribed in the Agreement.

Moreover, Section 29 A being a new section, its enforcement cannot be made retrospective, in as much as to, render an already existing agreement void.

Remember, in BALCON judgment, that persuaded the parliament to introduce this amendment, as the Judgment specifically effected the enforcement of international arbitration agreement, the Supreme Court specially observed that the Judgment though laying down the correct position of law, would be prospective and not retrospective and such would not affect any arbitration agreement executed prior to the Judgment.

In any case, it is trite law that validity and legality of the Agreement has to be adjudicated on the basis of the law prevailing on the date of its execution and not on the date of its enforcement, unless, by specific provisions, such agreement are expressly held to be void and unforciable.

So in any event, the agreement that you have executed is not void and it is perfectly enforciable. The new provisions do not in any way has to the effect of rending the agreement void or unenforciable.

The above conclusive is based solely on my core interpretation of statute and principle of law. It is only my OPINION.

Feel free to contact should you have any questions.

Vivek N Mapara

www.vnmlaws.com

[email protected]