Solving the conundrum of Section 29A, Arbitration and Conciliation Act

Shreesh Chadha*

Abstract:

The unamended S. 29A (1) of The Arbitration and Conciliation Act, 1996 (Act) stated that the “The award shall be made within a period of 12 months from the date the arbitral tribunal enters upon the reference.” This period could be extended either by an agreement between the parties [i] or by an application made by one of the parties to the ‘Court’ provided there is a sufficient cause for the same.[ii]

As per The Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) , S. 29A (1) was amended to state that the period of 12 months will commence from the “date of completion of pleadings under sub-section (4) of section 23”. The amendment also excluded International Commercial Arbitrations from the mandate of S. 29A. However, the procedure to extend the time limit of arbitral proceedings remain unchanged, with a slight amendment allowing the continuation of the mandate of the arbitrator during the pendency of an application made to the ‘Court’.

The purpose of this article, is to ascertain the position vis-à-vis the applicability of the amended S. 29A to pending arbitration proceedings as on 30th August, 2019, and the procedure to apply for extension of time in Domestic Arbitrations as well as International Commercial Arbitrations.

APPLICABILITY OF 2019 AMENDMENT:

The reasoning provided by Supreme Court in Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India [iii](affirmed BCCI vs Kochi Cricket[iv]) can come to aid. In this case, the Supreme Court held that applications made under S. 34 after 23 October 2015 (date of enforcement of 2015 Amendment) would be governed by the amended Section, even if arbitral proceedings were commenced prior to 23 October 2015.

Although the Supreme Court is yet to consider the applicability of the 2019 Amendment to pending arbitral proceedings, the abovementioned reasoning can lead to the conclusion that the amended S. 29A will apply to applications made to the Courts by one of the parties after 30th August, 2019, even if the arbitration itself commenced before such date.

It was recently propounded by the Delhi High Court in Shapoorji Pallonji and Co. Pvt Ltd. v. Jindal India Thermal Power Ltd.[v] that the amendment in S. 29A (1) by the 2019 Amendment is procedural in nature and therefore retrospective. It was made clear that the amended S. 29A (1) applies to pending arbitrations as on the enforcement date of the 2019 Amendment- 30th August, 2019. The Delhi High Court did not explain the amendment to S. 29A with regards to exclusion of International Commercial Arbitrations. Thus, the understanding of application of procedural amendments has to be understood according to the law laid down by Ssangyong (above) for applications made during the pendency of arbitral proceedings, in which parties to a domestic arbitration agreement need to calculate the stipulated time period from the date of completion of pleadings, and parties to an international commercial arbitration agreement need not file an application under S. 29A as the provision merely directory for them.

In the absence of a conclusive decision by the Hon’ble Supreme Court, on the issue of application of the amended S. 29A to pending International Commercial Arbitrations, it is unclear whether or not the parties should apply for the extension of time limit under S. 29A, Act. In fact, the Hon’ble Supreme Court in Monnet Ispat & Energy Ltd. V. Union of Indian & Ors [vi]has propounded that there is an assumption of ‘prospective application’ of a provision in cases where the statute (2019 Amendment qua the Act) does not specifically provide for retrospective application of the same. Therefore, until the position has been made explicitly clear through a binding precedent of the Hon’ble Supreme Court of India, the parties to ongoing International Commercial Arbitrations, will not be able to avail of the benefit of a directory time limit under the 2019 Amendment.

WHICH ‘COURT’ WILL ENTERTAIN THE APPLICATION?

For domestic arbitrations, the answer is quite clear. S. 2 (1) (e) (i) of the Act clearly states that ‘Court’ as used in the Act shall mean the “Principal Civil Court or the High Court in its original civil jurisdiction, having jurisdiction”. This definition is also not problematic on account of S. 29A (6) of the Act which allows for substitution of the arbitrator(s) since it is the High Court only which exercises the power to appoint an Arbitrator in terms of S. 11 (4) of the Act. Therefore, it would be reasonable to conclude that it is the High Court itself that should be bestowed the power to substitute an Arbitrator under S. 29A if the need arises.

This however becomes complicated when it comes to international commercial arbitrations because there is a seeming conflict between S. 2(1) (e) (ii) of the Act and S. 11 (12) (a) of the Act. S. 2(1) (e) (ii) defines ‘Court’ in relation to international commercial arbitrations as the High Court(s) with original civil jurisdiction or otherwise and S. 11(12) states that for the purposes of appointment of arbitrator under S. 11, the Supreme Court will be the appropriate forum. This is a conflict by virtue of S. 29A (6), as mentioned above which allows for the appropriate court to substitute arbitrators. The question that arises is- How can a court which does not have jurisdiction to appoint an arbitrator, substitute an arbitrator?

This question was duly answered by the Gujarat High Court in Nilesh Ramanbhai Patel v. Bhanubhai Ramanbhai Patel [vii] wherein the issue before the court was- whether in a situation where the arbitrator is appointed by the High Court could be substituted on account of expiry of stipulated period by the Civil Court? The Gujarat High Court concluded in plain terms, that to avoid such a conflict wherein an action under S. 29A to substitute an arbitrator was to be taken by a court other than the one appointing the arbitrator, ‘Court’ shall exclusively mean the court that has appointed the arbitrator. This observation was also extended to international commercial arbitrations, wherein it was opined that a High Court cannot be the appropriate forum under S. 29A, as it cannot substitute an arbitrator appointed by the Supreme Court.

The Bombay High Court in Cabra Instalaciones Y Servicios, S.A. v. Maharashtra State Electricity Distribution Company Ltd.[viii] also held that the High Court did not have the jurisdiction to entertain an application under S. 29A and that the Supreme Court would be the appropriate forum in the case of an international commercial arbitration.

Although, the Nilesh Ramanbhai Patel case (above) went to the Supreme Court, and the judgement of the Gujarat High Court was upheld[ix], there has been no conclusive finding on which court can entertain an application under S. 29A by the Supreme Court of India. In fact, to the contrary, the Kerala High Court in M/s. URC Construction (Private) Ltd. v M/s. BEML Ltd[x] held that the word ‘Court’ as mentioned in S. 29A of the Act would mandatorily derive it’s meaning from S. 2 (1) (e) of the Act.Furthermore, in a different context, a constitutional bench of the Supreme Court in State of Jharkhand v. Hindustan Corporation Company Ltd.[xi] held that the Supreme Court could not be considered as a “court” within the meaning of S.2(1)(e) of the Act.

CONCLUSION:

There are pertinent issues which are required to be answered by the Supreme Court when it comes to the law on S. 29A of the Act. The first one is to conclusively decide whether parties to pending international commercial arbitrations would even be required to file an application for the extension of the stipulated period of 12 months. This is extremely relevant as S. 29A (4) allows the parties to get the stipulated period extended either prior to the expiry of such period or even after it. So, even if it is assumed that the reasoning developed by Ssangyong (above) and BCCI (above) is applicable for pending international commercial arbitrations, the same cannot be said for those international arbitral proceedings whose mandate has been terminated due to expiry of the stipulated period before the 2019 Amendment, and applications for extension were made subsequently.

Moreover, the applications for the latter case would have to be entertained by the appropriate forum which also needs to be adjudicated upon for good. There needs to be a clear declaration for the parties and practitioners alike, whether the logic employed by the Gujarat and Bombay High Courts, as explained above would hold good, as it might have larger implications on arbitration law in India.

* 5th Year, B.A. LL.B. (Hons.), Jindal Global Law School, Sonipat. The author can be contacted at shreeshchadha@gmail.com or 15jgls-schadha@jgu.edu.in.

[i] S 29A (3), Arbitration and Conciliation Act, 1996.

[ii] S. 29A (5), Arbitration and Conciliation Act, 1996.

[iii] 2019 (3) Arb. LR 152 (SC).

[iv] (2018) 6 SCC 287.

[v] (OMP)(MISC.) 512/2019.

[v] (OMP)(MISC.) 512/2019.

[vii] (Misc. Civil Application (OJ) No. 1 of 2018 in R/Petn. under Arbitration Act No. 56 of 2016).

[v] (OMP)(MISC.) 512/2019.

[v] (OMP)(MISC.) 512/2019.

[v] (OMP)(MISC.) 512/2019.

[v] (OMP)(MISC.) 512/2019.

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