Part IV: Rules, Repeals, and the Section the Supreme Court Struck Down
Chapter Forty-Four
Syllabus topic rule 1.3 sweep of Part IV. MU names no topic here.
Pages 222 to 225 of 377
In one line
The last six sections of the Act make rules, repeal the old statutes, and include one provision that is printed in the Act and is not law.
In exam wording: Part IV of the Arbitration and Conciliation Act 1996 contains the supplementary provisions, sections 82 to 87, dealing with rule-making by the High Courts and the Central Government, the removal of difficulties, the repeal of the earlier arbitration statutes and of the 1996 Ordinance, and section 87.
Why a chapter on the housekeeping
Because one of the six sections is the clearest example a law student will meet of something that is printed in a statute and is not law, and because sections 85 and 86 are what date the whole subject.
Section 82: rules by the High Court
The High Court may make rules consistent with this Act as to all proceedings before the Court under this Act.
Short and practical. It is the source of the arbitration rules a High Court applies to section 9, 11, 34 and 37 matters: the form of applications, fees, and listing. Read with section 11(14), chapter 270, under which a High Court may frame rules for the fees of the tribunal having regard to the Fourth Schedule.
Section 83: removal of difficulties
Section 83(1): if any difficulty arises in giving effect to the Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the Act, as appear necessary for removing the difficulty, with a proviso that no such order be made after the expiry of two years from the commencement of the Act.
Section 83(2): every such order shall be laid before each House of Parliament as soon as may be after it is made.
The Act commenced on 22 August 1996, so the power expired on 22 August 1998 and section 83 is spent. Compare section 26 of the Legal Services Authorities Act 1987, chapter 180, which is spent for exactly the same reason. Clauses of this kind are always time-limited, because they let the executive alter the working of a statute.
Section 84: rules by the Central Government
Section 84(1): the Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of the Act.
Section 84(2): every rule made shall be laid before each House of Parliament, in the usual form, and is subject to modification or annulment.
Distinguish the three rule-making powers in this Act, which examiners like: section 82, a High Court, for proceedings before the Court; section 84, the Central Government, generally; and section 11(14), a High Court, for arbitrators' fees. Part IA adds the Council's power to make regulations under section 43L.
Part IV: Rules, Repeals, and the Section the Supreme Court Struck Down
Sections 85 and 86: the repeals that date the subject
Section 85(1): the Arbitration (Protocol and Convention) Act 1937, the Arbitration Act 1940 and the Foreign Awards (Recognition and Enforcement) Act 1961 are hereby repealed.
Section 85(2): notwithstanding that repeal:
- (a) the provisions of the repealed enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force, unless the parties otherwise agree, but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force; and
- (b) all rules made and notifications published under those enactments shall, so far as not repugnant to this Act, be deemed to have been made or issued under this Act.
Section 85 is the answer to a question of transition, and it uses the same technique the later amendments tried to use and got into trouble over: it draws the line at the commencement of the arbitral proceedings, which section 21 defines. Chapter 200 sets out what the three repealed statutes did.
Section 86(1): the Arbitration and Conciliation (Third) Ordinance 1996 is hereby repealed.
Section 86(2): notwithstanding the repeal, anything done or any action taken under the Ordinance is deemed to have been made, done or taken under the corresponding provisions of this Act.
The Ordinance is mentioned because the 1996 Act was preceded by three Ordinances that year. An Ordinance is temporary legislation promulgated when Parliament is not in session.
Section 87: a section that is printed and is not law
Section 87, inserted by Act 33 of 2019, section 13, headed "Effect of arbitral and related court proceedings commenced prior to 23rd October, 2015", provides that, unless the parties otherwise agree, the amendments made by the 2015 Amendment Act shall:
- (a) not apply to (i) arbitral proceedings commenced before the commencement of the 2015 Amendment Act, and (ii) court proceedings arising out of or in relation to such arbitral proceedings, irrespective of whether those court proceedings were commenced before or after the 2015 Amendment Act; and
- (b) apply only to arbitral proceedings commenced on or after that date and to court proceedings arising out of them.
And it is not law. In Hindustan Construction Company Ltd v. Union of India, decided 27 November 2019 by R.F. Nariman J with Surya Kant and V. Ramasubramanian JJ, the Supreme Court held:
the deletion of Section 26 of the 2015 Amendment Act, together with the insertion of Section 87 into the Arbitration Act, 1996 by the 2019 Amendment Act, is struck down as being manifestly arbitrary under Article 14 of the Constitution of India.
Part IV: Rules, Repeals, and the Section the Supreme Court Struck Down
Why it was struck down. The 2015 amendment had ended the automatic stay on enforcement, chapter 410. Section 87 restored the pre-2015 position for the large body of arbitrations begun before 23 October 2015, and so revived the automatic stay for them. Among the Court's reasons was that money was not reaching award-holders because of automatic stays, exposing such award-holders to the rigours of the Insolvency Code.
The lesson for a student is general and worth stating in any answer about reading a statute. The consolidated text prints section 87 with its footnote recording its insertion, because a court striking down a provision does not delete words from the statute book. A printed section is not necessarily a living one, and the same discipline that makes you check commencement, as chapters 440 and 620 do, makes you check whether a provision has survived challenge.
Manifestly arbitrary is the article 14 standard applied: a law is manifestly arbitrary where it is capricious or lacks an adequate determining principle.
A worked example
An arbitration commenced in March 2014 and the award was made in 2018. The losing party applied under section 34 in 2019 and asked for enforcement to be stayed automatically.
Which version of section 34 applies? On Ssangyong, chapter 400, section 34 as amended applies to section 34 applications made on or after 23 October 2015, whatever the date the arbitration began. The application here was made in 2019, so the amended section applies.
Would section 87 have changed that? Yes, that was its purpose: it would have disapplied the 2015 amendments to an arbitration commenced in March 2014 and to court proceedings arising out of it, whenever those court proceedings began.
Does it? No. Section 87 was struck down in Hindustan Construction as manifestly arbitrary under article 14, so the amended provisions apply and there is no automatic stay. The applicant must make a separate stay application under section 36(2) and (3).
And if the arbitration had commenced in 1995, before the Act itself? Then section 85(2)(a) answers it: the repealed enactments continue to apply to arbitral proceedings commenced before the 1996 Act came into force, unless the parties agree otherwise.
What beginners get wrong
Section 87 is printed but is not law. Do not state it as the transitional rule.
Section 83 is spent, the two years from 22 August 1996 having long expired.
Section 85 repealed three Acts, not one.
There are several rule-making powers, and they belong to different bodies: sections 82 and 11(14) to a High Court, section 84 to the Central Government, section 43L to the Council.
A repeal does not undo what was done under the repealed law. Sections 85(2) and 86(2) both say so.
Part IV: Rules, Repeals, and the Section the Supreme Court Struck Down
Quick revision
- 82: a High Court may make rules for proceedings before the Court under the Act.
- 83: removal of difficulties by the Central Government, spent two years after commencement on 22 August 1996; orders to be laid before Parliament.
- 84: the Central Government may make rules, to be laid before Parliament.
- 85: repeals the Arbitration (Protocol and Convention) Act 1937, the Arbitration Act 1940 and the Foreign Awards (Recognition and Enforcement) Act 1961; the old law governs arbitrations commenced before the Act came into force, and rules and notifications under them are deemed made under this Act.
- 86: repeals the Arbitration and Conciliation (Third) Ordinance 1996, saving anything done under it.
- 87: inserted by Act 33 of 2019 to disapply the 2015 amendments to pre-23 October 2015 arbitrations and related court proceedings, and struck down in Hindustan Construction (27 November 2019) as manifestly arbitrary under article 14.
Test yourself
1. Which statutes did section 85 repeal, and what happens to arbitrations begun under them? The Arbitration (Protocol and Convention) Act 1937, the Arbitration Act 1940 and the Foreign Awards (Recognition and Enforcement) Act 1961. Under section 85(2)(a) the repealed enactments continue to apply to arbitral proceedings commenced before the 1996 Act came into force, unless the parties otherwise agree, and this Act applies to those commenced on or after it.
2. Can the Central Government still issue an order under section 83 to remove a difficulty? No. The proviso bars such an order after two years from the commencement of the Act, which was 22 August 1996, so the power lapsed on 22 August 1998.
3. What did section 87 provide, and is it in force? It provided that, unless the parties otherwise agree, the 2015 amendments would not apply to arbitral proceedings commenced before 23 October 2015 or to court proceedings arising out of them whenever begun, and would apply only to arbitrations commenced on or after that date. It is not law: it was struck down in Hindustan Construction Company Ltd v. Union of India as manifestly arbitrary under article 14.
4. Why does the consolidated Act still print section 87? Because a court declaring a provision unconstitutional does not remove the words from the statute book. The section remains printed, with the footnote recording its insertion, while being of no legal effect, which is why a reader must check both commencement and any successful challenge.
5. Name the rule-making powers in the Act and who holds each. Section 82, a High Court, for proceedings before the Court; section 11(14), a High Court, for the fees of the arbitral tribunal having regard to the Fourth Schedule; section 84, the Central Government, generally; and section 43L, the Arbitration Council of India, for regulations.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself for the same subject.