Author name: CBCL

Section 26 of the Arbitration (Amendment) Act, 2015 gets Retrospective and Prospective Application. [Fathima Nooh] The author is a third-year student at National University of Advanced Legal Studies, Kochi. She may be reached at vnfathima89@gmail.com. The Supreme Court has, in its latest judgment in the case of Board of Cricket Council of India v. Kochi Cricket Board, settled an important issue about the applicability of the 2015 amendments to the Arbitration and Conciliation Act, 1996. The Court was called upon to decide whether section 36 of the Act, as amended by the 2015 Amendment Act, was applicable to applications filed under section 34 before the commencement of the Amendment Act. The Court decided in the affirmative. The decision is welcome as it is in line with the pro-arbitration approach followed by the Supreme Court in its recent decisions. Section 26 of the 2015 Amendment Act, which deals with the applicability of the amendments, has been controversial ever since its introduction as it left unclear whether the amendments would apply to the court proceedings in relation to the arbitration proceedings commenced prior to the commencement of the Amendment Act. There have been several conflicting decisions by various High Courts in the country in this regard. The Case The case came before the Supreme Court as a civil appeal arising out of a Special Leave Petition of 2016. Seven other similar appeals were also considered along with this appeal.  Four of these appeals related to section 34 applications filed prior to the commencement of the Amendment Act and the remaining four appeals pertained to similar applications filed after the commencement of the Amendment Act. The issue involved in the case was whether the amended section 36 would apply to section 34 applications filed before the commencement of the Act i.e. the pending applications, and whether the same would apply to section 34 applications filed after the commencement of the Act, though the arbitration proceedings were commenced prior to the coming into force of the Amendment Act. Before discussing the decision of the Court, it is pertinent to have a look at section 36 of the Act in both the pre-amendment and the post-amendment versions. The pre-amendment version reads as follows: Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court. The post-amendment section 36, while providing that the arbitral award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court in case the time for making an application to set aside the award under section 34 has expired, subjects the same to its sub-section (2), which provides that: Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.  The Decision Section 26 of the Amendment Act lays down that the Amendment Act shall not apply to“the arbitral proceedings commenced, 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.” The Court observed that section 26 has two separate and discrete parts as indicated by the word “but” in between. The first part refers to the Amendment Act not applying to certain proceedings and the second refers to its applicability to certain proceedings. The first part undoubtedly applied to arbitration proceedings as evident from the wording of the section “…to arbitration proceedings…,” but the second part makes the interpretation of the section difficult by using the expression “in relation to arbitration proceedings.” The second part does not have any reference to section 21, which speaks of the arbitration proceedings commencing on the date on which the request for referral has been received by the respondent; therefore, it was concluded that the second part does not include arbitration proceedings but rather court proceedings in relation to arbitral proceedings. Thus, the Court found that it is the commencement of these court proceedings that is referred to in the second part of section 26. The Court thus noted:  “The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force.” While the position regarding the arbitration proceedings commenced after the coming into force of the Amendment Act was clear, the same was not true regarding section 34 applications filed before the commencement of the Amendment Act. In order to make the position clear, the Court equated “enforcement” (as found in section 36) with execution. Under section 36 of the principal Act, the arbitration award is a decree and thus is enforced as per the provisions of the Code of Civil Procedure, 1908. The decree can be enforced only through the execution process given in order XXI of the Code. The Court further observed that the old version of section 36 was only a clog in the right of the decree-holder, who cannot execute the award in his favour unless the conditions in the section are met. This does not mean that there is a corresponding right in the judgment debtor to stay the execution of the award.  Thus, since execution clearly pertains to the “realm of procedure,”  the new section 36 would also

The Arbitration and Conciliation (Amendment) Bill, 2018: Unclogging the Arbitral Logjam. [Soham Banerjee] The author is a fourth-year student at GLC Mumbai. He may be reached at sohambanerjee.glc@gmail.com. Ever since India moved into the top 100 in the World Bank’s Ease of Doing Business report, the general perception about our country steadily becoming investor-friendly has received a major fillip. The path to ensuring that India becomes a major industrial hub has been possible majorly through the sustained efforts of the government in policy reforms and formulations, something which was on display in full flow recently when the Union Cabinet approved the Arbitration and Conciliation (Amendment) Bill, 2018 (Bill). It is a foregone conclusion that the principal deterrence behind investors not perceiving India as a major investment hub is the protracted dispute resolution mechanism currently in operation in the country. The clogged up judicial system coupled with the ineffective Alternate Dispute Resolution (ADR) mechanisms makes the resolution of disputes arising out of investments in the country a costly and expensive affair. This is why the recent Bill approved by the Union Cabinet in bringing about amendments to the Arbitration and Conciliation Act, 1996 (Act) serves as a much-needed intervention in the ills that have plagued the arbitral regime in India. Proposed Amendments The object and intent of the Bill makes it evident that the government is keen on establishing India as a major hub of ADR. The amendments to the 1996 Act, it is said, would “facilitate achieving the goal of improving institutional arbitration by establishing an independent body to lay down standards, make arbitration process more party friendly, cost effective and ensure timely disposal of arbitration cases.” The following are the primary amendments sought to be introduced via the passing of this Bill: Establishment of the Arbitration Council of India (ACI), a statutory body tasked with promoting and upholding institutional arbitrations in the country; Amendment to section 29A of the Act; Introduction of sections 42A and 42B in the Act; and Introduction of section 87 in the Act. We shall deal with each of these amendments in greater detail hereon. The Arbitration Council of India The creation of the ACI is by far the most unique feature of this Bill. The Bill suggests the formation of a separate, independent and statutory body in the form of the ACI which shall be presided over by: a judge of the Supreme Court; or the Chief Justice or any other judge of the High Court; or any other eminent person, including an academician, apart from other government nominees. The primary functions of the ACI include inter alia: grading arbitral institutions and accrediting arbitrators by laying down prescribed norms; initiating measures to promote arbitration, mediation, conciliation and other ADR Mechanisms; evolving policy guidelines and regulations which shall lay down uniform standards for the practice and propagation of ADR mechanisms in India; facilitating quick appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court; clothing the Council with the function of maintaining an electronic depository of all arbitral awards rendered. Amendment to Section 29A of the Act Section 29A of the Act, introduced by the Arbitration and Conciliation (Amendment) Act, 2015, sought to impose a time limit of 12 months on the way arbitrations were to be conducted. The section mandated that an award should be passed within twelve months of the arbitrators entering reference.[1] The parties were, however, free by consent to extend the said time limit to 6 more months. The problem in the implementation of this section arose in the lapse of the mandate of the tribunal should the award not have been made within this 18-month period, subject to the court extending the said period before or after its lapse. Furthermore, the proviso to this section also empowered the courts to deduct the fee of the tribunal should the delay be attributable to the same and vested the courts with the power to substitute one or all the arbitrators on the tribunal. Therefore, merely in terms of broadening the scope of judicial interference in arbitral proceedings and destroying party autonomy, section 29A posed grave challenges to the independence of the arbitral regime in the country. However, the Bill makes an honest effort to do away with the incongruencies introduced by section 29A of the amended Act. The operation of section 29A had made it difficult for arbitral tribunals to conclude proceedings within the prescribed time limit as the stage of pleadings and recording of evidence (wherever necessary) often made the rendering of the award within the prescribed time limit nugatory. The Bill seeks to counter the imbalance inherent in section 29A through the following two ways: initiating the 12-month cut-off period from the date of conclusion of pleadings of the parties as opposed to the date of the arbitrators entering upon reference; and excluding international arbitrations from the limited timeline of making the arbitral award. Introduction of Sections 42A and 42B A novel addition to the arbitral regime, the proposed sections 42A and 42B, seek to redress the lacunae left unaddressed by the amendments to the Act in 1996 and 2015. Section 42A enjoins upon the arbitrators and the arbitral institutions the duty to ensure confidentiality of the arbitral proceedings, save the award. Section 42B thereafter absolves the arbitrators from any suit or legal proceeding initiated against them in respect of any action they undertake in good faith during the arbitral proceedings. The intent, therefore, behind the incorporation of these two sections is clear: ensuring a speedy and efficient arbitral process where the arbitrators are free from any extraneous consideration while conducting the proceeding or rendering the award; ensuring a transparent and equitable arbitral process, bereft of any unintended breaches of information or data; and encouraging and promoting investors to resort to arbitration for the settlement of their disputes in an efficacious and time-bound manner. Introduction of Section 87 Another significant change envisioned by the Bill is the removal of difficulties posed by the interpretation of section 26

Preserving the Quintessential Value of the Arbitration and Conciliation Act, 1996: Analysing the Supreme Court’s Decision in Sundaram Finance Limited v. Abdul Samad. [Megha Tiwari and Amrit Singh] The authors are fourth-year students of WBNUJS Kolkata. Arbitration has evolved as an efficacious alternative to litigation for settlement of disputes, and is now considered an important tool in promoting investment in Indian businesses. The recent amendments to the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) and the subsequent judicial pronouncements have strived to make dispute resolution swifter. In keeping with this philosophy, the Supreme Court delivered its judgment in the case of Sundaram Finance Limited v. Abdul Samad,[1] conclusively settling a matter dividing opinion between various high courts.  The issue in contention was whether the execution of an arbitral award could be done in the court in whose jurisdiction the assets are located without obtaining a transfer of decree from the court originally having jurisdiction, as provided for in the Code for Civil Procedure, 1908 (hereinafter referred to as “the Code”). Facts of the Case The Appellant had initiated arbitral proceedings against the Respondents for repayment of a loan granted for purchasing a vehicle. A notice was served upon the Respondents by publication, but the latter failed to appear for the arbitral proceedings. Hence, an ex-parte award was passed directing them to repay the loan amount to the Appellants, with post-judgment interest at the rate of 18%. Consequently, execution proceedings were filed in a trial court at Morena, Madhya Pradesh, where the assets of the respondents were located. However, the trial court returned the application for lack of jurisdiction, stating that since the award is to be executed in the manner of execution of a decree,[2] the Appellants would first have to obtain a transfer of decree from the court originally possessing jurisdiction. As the trial court’s order was in adherence to the view adopted by the Madhya Pradesh High Court in earlier decisions, the Appellants preferred an application directly to the Supreme Court by special leave. The Supreme Court discussed in detail the view adopted by the Madhya Pradesh and the Himachal Pradesh high courts on one side favouring the requirement of transfer of decree, and that of the Delhi, Kerala, Madras, Rajasthan, Allahabad, Haryana and Karnataka high courts on the other. The Opposing Views Transfer of decree must be obtained before filing for execution of an award In the case of Computer Sciences Corporation India Pvt. Ltd. v. Harishchandra Lodwal,[3] the Madhya Pradesh High Court explained that section 36 of the Act provides that an arbitral award must be enforced as a decree of the court under the Code. When a decree is sought to be enforced in a court where the assets are located, section 39 of the Code requires a transfer of decree from the court that passed the decree. The High Court opined that though an arbitral award is not passed by a court, the relevant court for arbitral proceedings is defined in section 42 of the Act read with section 2(e) thereof. Therefore, a transfer of decree must be obtained for the execution of the award in the court where the assets are located. In the case of Jasvinder Kaur v. Tata Motor Finance Limited,[4] the High Court of Himachal Pradesh came to the same conclusion by incorrectly relying on the decision of the Karnataka High Court in ICDS Ltd. v. Mangala Builders Pvt. Ltd.[5] to hold that a transfer of decree was required for execution of an arbitral award. In ICDS Ltd.,[6] the issue adjudicated upon was whether an arbitral award could be executed in a court lower than the principal civil court in a district, as required by section 2(e) of the Act. The court held that it could not, and ordered the respondents to file for execution in the principal civil court. Since the execution application was not filed in a court outside the jurisdiction of the court in section 2(e), the question of transfer of decree was not a matter of contention, and hence, not adjudicated upon. Transfer of decree must not be obtained for execution of an award In the case of Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd.,[7] the Delhi High Court reasoned that the transfer of decree is to be obtained from the court that passed the decree, but an arbitral award is passed by an arbitrator, and not a court. It was then argued that the concerned court would therefore be the court mentioned in section 42. However, negating this argument, the Delhi High Court held that the jurisdictional clause in section 42 of the Act would only apply to arbitral proceedings, and execution of an award is not an arbitral proceeding. Therefore, the award must be executed directly by the court without requiring a transfer of decree. The same view was later adopted by the Rajasthan High Court,[8] and the Punjab and Haryana High Court.[9] The Kerala High Court was of the opinion that since a decree is not required for the execution of an award, a transfer of decree could not be obtained, and execution should be done based on a certified copy of the award.[10] The Madras High Court, in its well-reasoned decision in the case of Kotak Mahindra Bank Ltd. v. Sivakama Sundari,[11] ruled that the provisions under the Act are different from those of the Arbitration and Conciliation Act, 1940, which required the district court to pass a decree to confirm the award. Since no confirmation of the award is required under the current Act, the award must be enforced directly. It also explained that the transfer of decree must be done by the court that passed the decree. However, in this case, there is no deeming provision anywhere in the Act stating that the court as defined in section 2(e) would be the court deemed to have passed the decree. Therefore, the award must be executed without requiring a transfer of the decree. The Allahabad High Court held that the arbitrator cannot

Two Indian Parties can Choose a Foreign Seat of Arbitration and a Non-Signatory to the Arbitration Agreement can be Made Party to the Arbitration Proceedings: Delhi High Court in GMR Energy. [Devina Srivastava] The author is a third-year student at Symbiosis Law School, Pune. She may be reached at devina.srivastava@symlaw.ac.in. The Delhi High Court delivered a important judgment on 14th November, 2017 in the case of GMR Energy Ltd. v. Doosan Power Systems India Pvt. Ltd.,[1] resolving the persistent ambiguity regarding two critical issues of arbitration law in India: 1) whether two Indian parties can choose a foreign seat of arbitration, and 2) whether a non-party to the arbitration agreement can be joined to the arbitration proceedings. Answering both questions in the affirmative, the court has adopted a pro-arbitration approach. Though the judgment does open doors for progressive judicial perspectives on arbitration, questions are rife about the reasoning used by the court to reach its decision. Facts of the Case GMR Chattisgarh Energy Ltd. (GCEL) entered into three agreements with Doosan India in 2010 (EPC Agreements). These agreements contained an arbitration clause that specified the rules of Singapore International Arbitration Centre (SIAC) as the rules governing the arbitration. In addition to this, a corporate guarantee was executed between GCEL, GMR Infrastructure Ltd. (GIL) and Doosan in 2013. Further, two MOUs were executed between Doosan and GMR Energy in 2015. All these documents became the subject matter of a dispute when Doosan India invoked arbitration proceedings against GIL, GMR Energy and GCEL. In response to this, GMR Energy filed a civil suit before the Delhi HC seeking a stay against Doosan from continuing arbitration proceedings against it on the ground that it was not a signatory to the arbitration agreement. Doosan, on the contrary, cited the EPC Agreements, the Corporate Guarantee, the two MOUs and factors such as family governance, transfer of shareholding, comingling of funds among GMR Energy and GCEL and GIL and contended that GMR Energy was the ‘alter ego’ of GCEL and GIL. Nevertheless, Delhi HC granted a stay in July, 2017. Doosan then filed an application under Section 45 of the Arbitration Act, 1996 (Act), asking the court to refer parties to arbitration. Issues for Consideration For the purpose of this article, we shall discuss the following issues that arose before the court for consideration: Whether the arbitration is a domestic arbitration, covered by Part I of the Act or an international commercial arbitration, covered by Part II of the Act. Whether GMR can be made a party to the arbitration proceedings. Whether the court should only form a prima facieopinion on the question of alter ego or should it return a finding on it. Contentions of the Parties and Findings of the Court Issue 1: Whether the arbitration is a domestic arbitration, covered by Part I of the Act or an international commercial arbitration, covered by Part II of the Act. GMR contended that the arbitration was a domestic one and was not governed by Part II of the Act and hence, Doosan’s application under Section 45 was not maintainable. The court rejected this contention citing Yograj Infrastructure Ltd. v. Sangyong Engineering & Construction Co. Ltd.[2], in which it was held that where the arbitration clause provides that the proceedings shall be in accordance with the SIAC Rules, it translates to Singapore being the seat of arbitration. GMR Energy raised another argument that as per the definition of ‘international commercial arbitration’,[3] at least one of the parties must be foreign for the arbitration to be an international commercial arbitration. The court rejected this contention and held that as per the decision in Sasan Power Ltd. v. North American Coal Corporation[4], two Indian parties were free to arbitrate outside India and the same would constitute a foreign award. A question that arose was whether the choice of a foreign seat was in contravention of Section 28 of the Indian Contract Act, 1872 as it would constitute an agreement in restraint of legal proceedings. The court answered this question in the negative as the arbitration clause forms a separate and independent substantive contract in itself.[5] Further, it could not be said that choosing a foreign seat amounted to derogation of Indian substantive law as under Section 45; the question only relates to whether the agreement is “null and void, inoperative or incapable of being performed” and it cannot be held to be illegal or void. Issue 2: Whether GMR can be made a party to the arbitration proceedings. This issue arose because GMR was not a signatory to any of the agreements containing the arbitration clause or to the corporate guarantee. Further, the two MOUs had been terminated by Doosan. GMR relied on the judgment given in Chloro Controls v. Seven Trent Water Purification Inc.[6], in which a word of caution against subjecting non-party to arbitration agreement to arbitration proceedings was iterated by the Supreme Court. However, in the same judgment, the court also recognized guarantee, apparent authority, piercing the corporate veil and implied consent as the basis to bind a non-signatory. Further, Doosan drew the court’s attention to a decision of the Singapore High Court inJiang Haiying v. Tan Lim Hui & Anr.[7], in which it was held that the privity rule, though strict, is not absolute and can be bent in situations where it may be imperative to pierce the corporate veil, such as in the case of an alter ego. In consonance with this, the court read Clause 17.1 of the Corporate Guarantee to reach the conclusion that in the present case, the intent of the parties was to consolidate all disputes relating to the project and, hence, GMR could be made a party to the arbitration proceedings. It was especially so because the companies did not observe separate corporate formalities and comingled funds. Resultantly, another question that arose was whether the arbitral tribunal could pierce the corporate veil of the company or whether it is only the court that can exercise such a power. The attention of the court was drawn towards Integrated Sales Services Ltd. v.