India: Section 29A Of The Amended Indian Arbitration And Conciliation Act, 1996

Last Updated: 10 May 2017
Article by Ruchika Darira

Most Read Contributor in India, July 2017

The Arbitration and Conciliation (Amendment) Act, 2015 was notified on 1st January 2016 and is deemed to have come into force on 23rd October 2015. The (amendment) Act, 2015 has introduced a new provision of concluding the arbitration proceeding within a specified time limit by adding Section 29A.

The said provision requires that an arbitral award has to be passed within a period of 12 months from the date the arbitral tribunal enters upon the reference1. The said period can be extended further by another six months with the consent of both the parties. 2 Therefore, Section 29A provides a total time frame of 18 months (12+6 months) to complete the arbitral proceedings and to pass an award. If the arbitral award is not passed by the arbitrator within the time frame of 18 months, the provision stipulates that the mandate of the arbitrators shall be terminated, unless a court of competent jurisdiction grants a further extension.3

This said provision stipulated under Section 29A is only applicable to arbitral proceedings (both domestic and international arbitrations) commenced on or after 23rd October, 2015 wherein the place of arbitration is in India.

COMPARISON WITH THE ARBITRATION ACT, 1940:

That even under the Arbitration Act, 1940, there was a provision which specified the time frame to conclude the Arbitration proceedings. Rule 3 of the First Schedule of the 1940 Act provided that the arbitrator shall pass the arbitral award within a time limit of four months after entering upon reference. Rule 3 of the First Schedule of the 1940 reads as under:

"Rule 3: The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow."

Further, Section 28(1) of the 1940 Act provided the Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time, the time for making the award.

However, the said provisions of the 1940 Act were not retained in the Arbitration and Conciliation Act, 1996 which inter alia repealed the 1940 Act.

INTERPRETATION OF SECTION 29A

First and Foremost, the scheme of the Arbitration and Conciliation Act is to minimize judicial intervention as much as possible. Section 5 of the 1996 Act reads as under:

"Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."4

However, section 29(4) forces the parties to the arbitration proceedings to approach the Competent Court in order to extend the time limit beyond the time frame of 18 months, even if the parties mutually agree to such an extension. Such a conduct by the parties foists judicial intervention upon them which is complete contradiction to the scheme and purpose of arbitration specified under the 1996 Act. In fact such a judicial intervention is likely to cause more delay in the resolution of the dispute. The Amendment Act, 2015 provides that an application for extension shall be disposed of as expeditiously as possible and endeavour shall be made by the Court to dispose of the said application within a period of sixty days from the date of service of notice on the opposite party5. Given the overburdened state of the Indian judiciary however, this solution may be overly simplistic and optimistic.

Secondly, Section 29A of the 1996 Act provides that an arbitral award must be passed within a time limit of 12 months from the date of entering upon the reference (which is the effective day on which the tribunal is constituted). It is pertinent to mention that Section 29A(3) grants the parties to the arbitration, by consent/ agreement, to extend this period of 12 months by another 6 months. The UNCITRAL Model Law provides that the parties to an arbitration agreement are free to agree on the procedure to be followed by the arbitral tribunal in conducting the arbitral proceedings6. The purpose of the said provision under the UNCITRAL Model Law is to provide freedom and party autonomy and to allow the parties to the arbitration to structure composition of the tribunal, proceedings and procedure keeping in mind the magnitude and complexity of the nature of the dispute. Section 29A of the 1996 Act indirectly forces the parties to the arbitration to approach the court in the event that a dispute could not be resolved by arbitration within a time frame of 18 months. By adding the said provision, the parties have been restricted from deciding between themselves the nature of the arbitration, as per their needs and more importantly per the dispute.

Thirdly, there is a substantial possibility that in many disputes the fact that arbitration proceedings are ongoing may be protected by an agreement of confidentiality between the parties. In situations wherein the parties to the arbitration agreement are forced to appear before a Competent Court and place on record the state of the arbitration, they might have to violate their own confidentiality agreements.

Fourth, Section 29A(4) provides that, if the Court finds that the reason of the delay is attributable to the arbitral tribunal, it may order a reduction in the fees of the arbitrators. As per the principles of natural justice and audi alterm paterm it is important that the relevant party be heard, which in present scenario would be the arbitral tribunal itself. In the event that the application is decided in favour of the arbitral tribunal and against a party wherein the party had urged for costs to be imposed on the Arbitral tribunal, then such a party might even seek the arbitral tribunal's recusal based on the perception of bias on the tribunal's part.

Thus, Section 29A has been introduced to fix the issue of lengthy arbitral proceedings but the said provision can give rise to more problems than it seeks to solve. One of the solution to resolve the said problem which has been created by adding Section 29A would be to ensure that party autonomy is still maintained and that parties to the arbitration have the freedom to decide to extend the arbitration proceedings till whenever is required (i.e. not just for the six months allowed by the Section) keeping in mind the nature and complexity of the matter. The Court should interfere only in the event when the parties to the arbitration cannot come to a common consensus agree on whether the time frame should be extended or not.

Moreover, the courts must take into account due care while dealing with the issue of imposition of costs on the Arbitral Tribunal. The Courts must take into consideration certain amount of finesse and with great care so as not to disrupt the arbitration proceedings unnecessarily.

In its present form, the Section 29A is only likely to further lengthen proceedings and allow parties to prolong the arbitration proceedings which are ongoing when they believe that the arbitral tribunal is unlikely to rule in their favor.

Footnotes

1 Section 29A(1) of the Arbitration and Conciliation (Amendment) Act, 2015

2 Section 29A(3) of the Arbitration and Conciliation (Amendment) Act, 2015

3 Section 29A(4) of the Arbitration and Conciliation (Amendment) Act, 2015

4 Section 5 of the Arbitration and Conciliation Act, 1996

5 Section 29A(9) ) of the Arbitration and Conciliation (Amendment) Act, 2015

6 Article 19 of the UNCITRAL Model Law

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