‘It is a settled principle of law that a statute which creates substantive rights and liabilities on the parties shall be construed to be prospective in operation’ : Calcutta HC

The bench of Justice Shekhar B. Saraf of the High Court of Calcutta in the case of West Bengal Housing Board v. Abhisek Construction (AP 189 of 2019),  held that the 2015 Amendment that added Section 12(5) to the A&C Act would not retrospectively apply to arbitration proceedings that commenced before the Amendment became operative.

Facts of the Case:

The parties reached an agreement on April 30, 2010, in which the respondent agreed to perform construction work for the petitioner. Clause 25 of the Agreement granted the petitioner the right to appoint the arbitrator unilaterally. After disagreements arose, the respondent wrote to the petitioner and requested that an arbitrator be appointed. As a result, the petitioner appointed the arbitrator, a retired PWD Engineer-in-Charge. The arbitrator ruled in favour of the respondent. Dissatisfied with the award, the petitioner challenged it, claiming that it was rendered null and void by a unilaterally appointed arbitrator.

Judgment Review:

The Court held that an arbitral award issued by a unilaterally appointed arbitrator in an arbitration proceeding that began prior to the 2015 Amendment would not be subject to challenge under Section 34 solely on the basis that such an appointment procedure had been rendered invalid by a subsequent amendment to the Act. The Court held that it is a well-established legal principle that a statute that confers substantive rights and liabilities on the parties must be construed to be prospective in nature. The Court also distinguished the Supreme Court’s decision in Ellora Paper Mills v. State of MP, (2023) 3 SCC 1, in which the Supreme Court applied Section 12(5) to arbitration that began before the 2015 amendment went into effect. 

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