2015 Amendment To Section 12(5) Cannot Be Applied Retrospectively: Punjab & Haryana High Court

On 29 May, the Punjab and Haryana High Court held that executing courts cannot retrospectively apply the post-2015 neutrality regime under Section 12(5) of the Arbitration and Conciliation Act, 1996, to refuse enforcement of arbitral awards rendered under the law prevailing at the time of the arbitrator's appointment.

A Bench of Justice Jasgurpreet Singh Puri allowed the revision petitions, set aside seven executing court orders, and directed continuation of execution proceedings. It observed:

“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, it is well settled that 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.”

The disputes arose from paddy milling agreements executed between 2006 and 2012 between State procurement agencies, including Punjab State Civil Supplies Corporation Ltd., Punjab State Civil Warehousing Corporation, Punjab State Cooperative Supply and Marketing Federation Ltd., and Haryana State Warehousing Corporation, and private rice millers such as Ganesh Rice Mills, Evershine Rice Mills, and Border Rice Shellers.

Disputes emerged over alleged breaches of contractual obligations and recovery claims, and sole arbitrators passed awards in favour of the government corporations between 2012 and 2018.

Several rice millers challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996. After courts dismissed some objections, the State corporations initiated execution proceedings to enforce the awards.

The private rice millers resisted execution and argued that departmental or unilaterally appointed arbitrators lacked independence and became ineligible under Section 12(5), which bars arbitrators who fall within specified categories of relationship with parties, counsel, or the dispute.

Between July 2024 and September 2025, executing courts accepted this objection and dismissed the execution petitions, holding that Section 12(5) rendered the arbitrators ineligible and made the awards unenforceable.

The State procurement agencies approached the High Court under Article 227 of the Constitution and challenged the executing court orders, arguing that the 2015 amendment could not operate retrospectively to invalidate arbitrators appointed and proceedings commenced much earlier.

The rice millers, however, argued that the defect went to the root of jurisdiction because the arbitrators lacked the neutrality mandated under the amended statutory framework.

Examining the evolution of Section 12, the Court noted that before the 2015 amendment, the law required disclosure of circumstances that could give rise to justifiable doubts about independence or impartiality. The amended regime, however, introduced a statutory bar under Section 12(5) read with the Seventh Schedule and shifted the inquiry from perceived bias to legal ineligibility. It observed:

“The consequence of the amendment is that the test is no longer confined to examining whether there exists any circumstances which may give rise to justifiable doubts as to independence or impartiality of an already appointed arbitrator but instead whether the proposed arbitrator is by operation of law rendered ineligible to act as an Arbitrator as such.”

The Bench held that the law governing prospective application of the 2015 amendments falls into three categories: it excludes arbitral proceedings concluded before 23 October 2015; it does not automatically invalidate proceedings that commenced before the amendment but continued thereafter under Section 12(5) absent agreement; and it prevents executing courts from reopening awards validly rendered under the earlier regime.

It further noted that Section 87, introduced to clarify the legislative position, reinforces that the 2015 amendments do not operate retrospectively to unsettle pre-amendment arbitral proceedings or their consequences.

Accordingly, holding that all seven arbitrations commenced before the 2015 amendment regime, the High Court allowed the revision petitions, set aside the executing court orders, and remitted the matters to the executing courts for continuation of execution proceedings in accordance with law.

Appearances for petitioners: Advocates R.S. Kalra, Mona Yadav, A.P.S. Mann, Anil Sharma, Sharad Aggarwal, Manbir Singh Batth and H.S. Randhawa.

Appearances for respondents: Advocates Vikas Mohan Gupta, Hardik Ahluwalia, Angrej Singh, Puneet Kumar Bansal, Mukand Gupta and Abhishek Batta.

Senior Advocate Naresh Markanda appeared as Amicus Curiae with Advocate Rohan Markanda.