Effect of the Words used in the Terms of Contract on the Proceedings under Arbitration and Conciliation Act, 1996

Effect of the Words used in the Terms of Contract on the Proceedings under Arbitration and Conciliation Act, 1996

It was held that when the arbitration clause contains the phrase “any statutory modification or re-enactment thereof,” it reflects the parties’ understanding that all future amendments to the Act would be applicable to their arbitral relationship. Consequently, by contractual agreement, the amended provisions of the Arbitration and Conciliation Act, 1996 become applicable even to disputes arising before the amendment, unless explicitly excluded."

It was held that the word ‘modification’ which was used in the Article 29 of the contract on this case clearly indicate an understanding between the parties that the provisions of the A&C Act, 1996 as were to be amended / modified from time to were agreed to govern the arbitration proceedings that would commence between the parties.

When the parties had not agreed for payment of any interest and the A&C Act, 1996 contains the provision regarding payment of interest in the form of section 31 sub-section (7), clause (b), and particularly when there is no stipulation in the contract specifically stipulating that neither party would be entitled to claim any interest, a plain reading of this clause would clearly indicate that the parties had agreed to the applicability of the A&C Act, 1996 as was to be amended from time to time and it was not merely an understanding in respect of the procedural aspects at the arbitration proceedings. 

For further details refer M/s Skoda Auto Volkswagen India Pvt Ltd v. M/s Commercial Auto Products Private Limited [2022] GCtR 2002 (Bombay).