Section 12(5) Arbitration Act Inapplicable To Proceedings Commenced Before 2015 Amendment; Executing Court Can't Apply Neutrality Norms Retrospectively: Punjab & Haryana High Court

"Once the award has been passed by an Arbitrator who was eligible to pass the same in view of the law as it stood at the time of his appointment, the learned Executing Court at the time of execution of such an award cannot go behind the same to apply the provisions of the 2015 Amendment Act retrospectively and is bound to execute it as it is." Punjab and Haryana High Court, in a significant ruling, has clarified that the neutrality requirements for arbitrators introduced via Section 12(5) of the Arbitration and Conciliation Act by the 2015 Amendment are strictly prospective.

A bench of Justice Jasgurpreet Singh Puri observed that an award validly passed under the pre-amendment regime cannot be rendered unenforceable by an Executing Court by retrospectively applying the 2015 disqualification criteria.

The court was dealing with a bunch of seven revision petitions where various Executing Courts had dismissed execution applications of arbitral awards. The lower courts had held these awards to be "unenforceable" on the ground that the sole arbitrators were ineligible under Section 12(5) read with the Seventh Schedule of the Act, despite the arbitral proceedings having been initiated long before the 2015 Amendment came into effect.

"Primary Issue Before The High Court"

The primary question before the court was whether the execution of an arbitral award, in cases where the proceedings were initiated prior to the 2015 Amendment (which came into effect on October 23, 2015), is enforceable or not on the ground of being in conflict with Section 12(5) of the Arbitration Act.

"Executing Court Cannot Go Behind The Award"

The High Court observed that an Executing Court is generally bound to execute an award "as is" and cannot delve into the merits or the validity of the arbitrator's appointment unless there is an inherent lack of jurisdiction that makes the award a nullity. The bench noted that if an appointment was valid under the law as it stood at the time of commencement, it does not become void ab initio due to subsequent legislative changes.

The Court emphasized that the 2015 Amendment Act marked a clear departure from the earlier regime by transforming what was once a "reasonable apprehension of bias" into a matter of "statutory ineligibility." However, this stricter regime was intended by the Legislature to strengthen neutrality only for future proceedings, not to unsettle concluded or ongoing matters governed by the old law.

"The Core Legal Distinction Between Proceedings"

Referring to the landmark Supreme Court decision in Board of Control for Cricket in India versus Kochi Cricket Private Limited, the Court explained that Section 26 of the 2015 Amendment Act bifurcates proceedings into two categories: "arbitral proceedings" and "court proceedings." The first limb of Section 26 ensures that the Amendment does not apply to arbitral proceedings commenced before October 23, 2015, unless the parties otherwise agree.

"Section 12(5) Is A Substantive Disqualification, Not Merely Procedural"

The Bench noted that while procedural provisions might apply to court proceedings (like Section 34 or 36) instituted after the amendment, provisions that impose a "statutory ineligibility" such as Section 12(5) create substantive disqualifications. Therefore, such provisions operate only prospectively and do not revive or alter rights and obligations that crystallized upon the conclusion of proceedings under the unamended Act.

"Impact Of Striking Down Section 87 By Supreme Court"

The Court analyzed the impact of Hindustan Construction Company Limited versus Union of India, where the Supreme Court struck down Section 87 of the Arbitration Act as unconstitutional. Justice Puri noted that the effect of that judgment was to restore the position in Kochi Cricket, reaffirming that the 2015 Amendment applies to court proceedings initiated post-October 2015, but specifically excludes arbitral proceedings that commenced prior to that date.

The High Court further observed that the law regarding unilateral appointments, as developed in cases like Perkins Eastman and TRF Ltd., must be read alongside the prospective nature of the 2015 Amendment. The bench stated that if the arbitration was governed by the 1996 Act as it stood before the amendment, the fact that an arbitrator was an employee of one of the parties was not ipso facto a ground to presume bias.

"Distinguishing Ellora Paper Mills Ruling"

The respondents had heavily relied on the Supreme Court's ruling in Ellora Paper Mills Limited versus State of Madhya Pradesh to argue that Section 12(5) should apply even to old proceedings. However, Justice Puri distinguished this, noting that in Ellora Paper Mills, there was a stay on proceedings and the tribunal effectively commenced its actual function after the 2015 Amendment, which is not the case for concluded awards.

"Final Directions To Executing Courts"

The Court concluded that since the arbitral proceedings in the present cases had commenced prior to October 23, 2015, the awards were governed by the pre-amendment law. Consequently, the Executing Courts erred in holding the awards unenforceable by applying the 2015 neutrality standards retrospectively.

The High Court set aside the impugned orders passed by the various Executing Courts and remitted the matters back for further proceedings in accordance with the law. The bench directed that the execution applications be restored and proceeded with on their merits, as the awards do not fall within the ambit of Section 12(5) of the amended Act.

Date of Decision: 29 May 2026