Court rules that the appointment of an arbitrator prior to the 2015 Amendment Act stands valid, dismissing retrospective application claims.
In a significant ruling, the Delhi High Court has upheld the appointment of a sole arbitrator by the Delhi Metro Rail Corporation Ltd. (DMRC) in a case involving a parking site licence agreement, rejecting claims that the appointment was invalid under the Arbitration and Conciliation (Amendment) Act, 2015. The judgment, delivered by Justices Anil Kshetarpal and Bharat Parashar, emphasized that the amended provisions of the Act, particularly Section 12(5) and the Seventh Schedule, could not be applied retrospectively to invalidate an appointment made prior to the amendment.
The case centered around a dispute between DMRC and the late Pankaj, represented by his legal representatives, regarding a licence agreement for parking sites at Dwarka Metro Stations. The arbitration was invoked in June 2014, and the arbitrator, a DMRC employee, was appointed in March 2015, before the amendment came into force on October 23, 2015. The respondent challenged the appointment, arguing that it was invalid under the new amendment, which disqualifies arbitrators with specified relationships to the parties.
However, the Court observed that the arbitral proceedings had commenced before the amendment's enactment, and therefore, the legality of the arbitrator's appointment had to be tested under the pre-amendment law. The bench noted that the arbitration clause in the agreement allowed for the appointment of a DMRC employee as arbitrator, and the 2015 Amendment could not be retrospectively applied without an express agreement between the parties to do so.
The Court also differentiated the current case from later judgments that addressed the amended regime's requirements, noting that the contractual mechanism expressly provided for the appointment procedure, which was valid under the law at that time. Consequently, the decision of the District Judge to set aside the arbitral award on the grounds of ineligibility under the amended Act was deemed unsustainable.
This judgment reaffirms the principle that statutory changes do not automatically apply to prior proceedings unless explicitly agreed upon by the parties involved. The ruling also underscores the importance of adhering to the contractual terms agreed upon at the time of entering into an agreement, particularly concerning arbitration clauses.
Bottom Line :
Arbitration and Conciliation Act, 1996 Section 12(5) inserted by 2015 Amendment Act does not retrospectively invalidate appointment of sole arbitrator made before 23.10.2015 - Where arbitration was invoked in 2014 and sole arbitrator, though employee of DMRC, was appointed in March 2015 in terms of arbitration clause, validity of appointment had to be tested under pre-amendment law and not under amended regime - Clause stating Act would apply "as amended from time to time including provisions in force at the time the reference is made" did not amount to clear agreement under Section 26 to apply amended disqualification retrospectively.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 11, 12(5), 18, 26, 34, 37
