Part One Of A Three-Part Series On International Commercial Arbitration In India: The 2019 Amendment And The Applicability Of Sections 9 / 27 / 37 Of The 1996 Act To Foreign-Seated Arbitrations

• Published date: 11 June 2020
• Author: Mr Ravitej Chilumuri, Anchit Oswal and Rajeswari Mukherjee
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Khaitan & Co

Over the past three years, Indian jurisprudence on international commercial arbitration ("ICA(s)") has advanced by leaps and bounds, only to be matched by major legislative developments on the same front. India has seen increased instances of the enforcement of foreign awards. Further, some interesting questions of law have also arisen in connection with ICAs, seated in India.

Our previous article on the subject, which may be accessed here, has analysed the legislative and judicial developments pertaining to the Indian Arbitration and Conciliation Act, 1996 ("Act") and ICA, after the equally lauded and criticised amendment to the Act in 2015 ("2015 Amendment"), and has extensively covered the Indian judiciary's attitude towards the enforcement of foreign awards, as well as its views on the applicability of Part I of the Act ("Part I") to ICAs. This three-part update shall attempt to chart the progress made on these frontiers starting from the second half of 2017, as well as trace the recent developments in other contentious issues in ICA in India over the past three years. (I) The first part of our series will cover two topics: (a) flagging out the portions of the recent amendment made to the Act in August 2019 ("2019 Amendment"), in so far as they relate to ICA; and (b) an analysis of the trends in Indian courts in determining the applicability of Part I to ICAs, and the exceptions to the rule, as introduced in the 2015 Amendment. (II) The second part of this series will discuss the ongoing debate between the concept of 'seat', 'venue' and 'place' of arbitration, as expounded in a recent spurt of rulings by the Supreme Court of India ("SC"). (III) Lastly, the third part of this series shall trace the progress in the law pertaining to the enforcement of foreign awards, with emphasis on some grey areas which have arisen due to recent conflicting judicial precedents.

The 2019 Amendment

Before we delve into any other judicial trends or analyses, it is necessary to flag out that the Act was significantly overhauled vide the 2019 Amendment. Many sections thereof were notified, and many significant provisions such as the setting up of the Arbitration Council of India are yet to be notified. The most significant notified provisions of the 2019 Amendment, in so far as they pertain to ICA are as follows:

• Revised timeline for the submission of pleadings: Section 23 of the Act, which dealt with the submission of pleadings by the parties to an arbitration (including an ICA), was revised to include a specific timeline, i.e., the claimant must file its statement of claim, and the respondent must file its statement of defence within 6 months of the date on which the arbitral tribunal is notified of its appointment.
• Revised timeline for passing of an arbitral award: Before the 2019 Amendment, arbitral tribunals were required to deliver the arbitral award within 12 months of the date on which the tribunal was appointed. This timeline has been extended, such that the clock starts running from the date on which the pleadings of the parties are completed, with the option of a 6-month extension. However, in case of an ICA, this timeline is not applicable, and the arbitral tribunal need only to "endeavour" to adhere to the same. Therefore, the 2019 Amendment has relaxed this procedural requirement for ICAs, which is probably in light of the greater complexity of the issues and pleadings therein, and a corresponding increase in the difficulty of a tribunal's mandate.
• Confidentiality and Protection of Arbitrators: Sections 42A and 42B of the Act, as inserted by the 2019 Amendment provide for the confidentiality of arbitration proceedings / the resultant arbitral award for all arbitrations, and the protection of arbitrators from suits and proceedings for acts and omissions committed by them over the course of arbitration proceedings respectively. These issues have always been a concern in the global arbitration community and India's codification of these protections is one more step towards the goal of aligning India's arbitration regime with globally accepted best practices.
• Applicability of the 2015 Amendment: In an effort to put an end to the debate regarding the retrospective applicability of the 2015 Amendment, the newly inserted Section 87 of the Act clarified that the 2015 Amendment would only be applicable to: (a) arbitrations proceedings which commenced after the date of notification of the 2015 Amendment; and (b) court proceedings in relation to arbitrations which commenced following the 2015 Amendment, and not court proceedings which were in relation to pre-2015 Amendment arbitration proceedings, but which were themselves commenced after the 2015 Amendment. This caused a major hue and cry in the legal community with respect to various issues.

Prior to the 2015 Amendment, one of the key issues concerning ICAs was with respect to the applicability of Part I to foreign-seated arbitrations. While BALCO¹ ruled that Part I of the Act will not apply to arbitrations seated outside India, parties to ICAs seated outside India faced challenges in approaching Indian Courts, especially for interim protection, if required. The said gap was answered in the 2015 Amendment, which allowed foreign-seated ICAs to move Indian courts under Sections 9 (interim measures by courts), 27 (the court's assistance in taking evidence), 37(1) (appeals against certain orders of the court), and 37(c) (barring of second appeals). At the same time, the 2015 Amendment gave an option to parties to foreign-seated ICAs to opt out of applicability of Part I completely, by agreeing otherwise.

Thereafter, as stated hereinabove, Section 87, introduced in the 2019 Amendment, sought to clarify that the provisions of the 2015 Amendment will not be applicable to: (a) arbitration proceedings commenced before the 2015 Amendment; and (b) court proceedings in relation to such pre-2015 Amendment arbitration proceedings, irrespective of whether they were initiated before or after the 2015 Amendment. In effect, any proceedings initiated under Sections 9 / 27 / 37 which pertained to foreign-seated arbitration proceedings and had commenced prior to the 2015 Amendment would become invalid. Further, this un-did the progress of the 2015 Amendment which deleted the clause in Section 34 (applicable to India-seated ICAs and domestic arbitrations) that allowed for an automatic stay on the operation of an arbitral award if an application was made for setting aside the same, and was consequently responsible for huge delays in the arbitration process.

However, this controversy was effectively put to rest by the SC in the case of HCC,² which struck down Section 87 of the Act as unconstitutional on grounds of manifest arbitrariness, and clarified that status quo prior to the 2019 Amendment (as reinforced in the BCCI case³) would prevail.

Applicability of Part I of the Act to Foreign-Seated Arbitrations

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