India: Section 29A Of The Indian Arbitration And Conciliation Act: Possibility Of Timebound Arbitration

Introduction

One of the most significant legal changes made by the Indian legislature in recent years has been the introduction of the Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act). The Amendment Act seeks to resolve issues that have traditionally afflicted the alternative dispute resolution framework in India, for example, protracted disputes , excessive judicial intervention, dearth of qualified and impartial arbitrators, and so on.

While most changes effected in the Arbitration and Conciliation Act (Act) by the Amendment Act are based on the recommendations of the 246th Law Commission Report, an important deviation from the said Law Commission Report is the incorporation of Section 29A into the Act. Not only does the concerned section not figure anywhere in the recommendations made by the 246th Law Commission Report, it also has very few parallels in other jurisdictions of the world. Needless to say, Section 29A has been one of the most talked about and controversial sections pursuant to the amendment of the Act raising doubts about its application and efficacy.

Section 29A seeks to impose a time limit of 12 months on the conduct of arbitrations. It mandates that an award shall be passed in a matter within 12 months of the arbitral tribunal entering upon the reference.i The parties may, by consent, extend the time for making an award by another six months . Interestingly, the section goes on to state that in the event that the award is not made within the stipulated 18 months, the mandate of the arbitral tribunal shall terminate, unless the court has either before or after the lapse of the 18-month period extended the time. Moreover, the proviso to the sub-section empowers the court to deduct fees of the tribunal if the court is of the view that the delay is attributable to the tribunal. Section 29A also empowers the court to substitute one or all arbitrators. As can be clearly seen, Section 29A is unprecedented in terms of what it empowers the courts to do.

Its incorporation in the Act is undoubtedly aimed at reducing inordinate delays that plague dispute resolution in India, but as will be seen in the sections that follow, effective implementation of the provision remains a question and most stakeholders believe that it will resurrect the same demons that the Amendment Act purports to slay.

Infirmities In The Section

1. Curtailment of party autonomy

One of the most prominent features of arbitration is party autonomy. Parties, by an agreement between themselves, agree to refer their current and future disputes to a private forum for resolution, and it is this agreement to refer to and be bound by the decision of such forum that confers upon the forum, i.e., the arbitral tribunal, the power to pass an award of binding nature. Parties also have the freedom to agree on the procedure of arbitration within the confines of law.

The principle of party autonomy is therefore one of the edifices on which the arbitration framework rests and explicitly figures in most statutes and institutional rules regarding arbitration. Even the Act recognizes the principle of party autonomy and states that subject to the provisions of law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in the course of arbitral proceedings.ii Parties, therefore, have very broad freedoms in selecting an arbitration regime and in prescribing the procedure to be followed, which are circumscribed only by mandatory provisions of law.

In view of the aforesaid points, Section 29A raises serious concerns about the curtailment of party autonomy. The section, as it stands now, allows the parties to extend the period for passing an award by another six months if the award is not passed within 12 months. However , if the award is not passed despite this extension of six months, the mandate of the tribunal automatically terminates and it is only the court, which on an application by one of the parties and upon being satisfied of sufficient cause, can extend the period for passing the award further. The parties, even if they mutually agree, cannot extend the mandate of the arbitral tribunal beyond the 18-month period allowed by Section 29A. This mandatory requirement to file an application before the court, an agreement between the parties notwithstanding, is antithetical to the idea of parties having the autonomy to set down time limits and procedures for the adjudication of disputes.

2. Increased judicial intervention and protracted disputes

As stated above, once the 18-month period allowed under Section 29A lapses, the parties no longer have the freedom to extend the mandate of the arbitral tribunal any further. The power to grant further extensions then vests in courts. It is only upon an application being made by one of the parties that courts can grant further extensions upon being shown sufficient cause and subject to certain terms and conditions if required.

It is common knowledge that the Act had to be brought in, in the year 1996, to bring the domestic arbitration law at par with the UNCITRAL Model Law. It, inter alia, sought to reduce the extent of judicial intervention that had been the hallmark of Indian arbitration till then. In fact, it expressly recognizes the principle of minimum judicial intervention in Section 5 that states that notwithstanding anything contained in any other law, no judicial authority shall intervene except as provided in the Act itself.

In light of objects of the Act and the express statutory provision mandating minimum judicial intervention, a bare reading of Section 29A suggests that it will not only have the effect of increasing judicial intervention in the arbitration process but will be counterproductive as in reality, it will have an effect of increasing the time involved in the adjudication of disputes through arbitration. While sub-section (9) of Section 29A states that a court shall make all endeavors to dispose of an application thereunder within 60 days, anyone who is acquainted with the pace at which court proceedings progress will be aware that the timeline is rather unrealistic in the Indian scenario wherein courts are overburdened and seldom manage to dispose of applications within 60 days. It is ironical that a section that seeks to ensure the speedy resolution of arbitral disputes may in all likelihood have the effect of substantially prolonging the process of adjudication. It is an inevitable consequence as a court will grant an extension only once it has been shown sufficient cause. Moreover, a court's decision under Section 29A will also be amenable to further challenge by an aggrieved party, thus significantly increasing the time involved in the entire process. While an order under Section 29A is not an appealable order under Section 37 of the Act, a person aggrieved by such an order may still challenge it before the Supreme Court by way of a Special Leave Petition. This leaves the process quite vulnerable to dilatory tactics by unscrupulous parties. Moreover, such a challenge can considerably increase the time involved in the adjudication of a dispute and is completely opposed to the object sought to be achieved by Section 29A, that is, the timely adjudication of disputes.

In fact, at this juncture, it is important to mention that the earlier statute governing domestic arbitration in India, i.e., Indian Arbitration Act, 1940, had a similar provision which mandated that all arbitral disputes be adjudicated within four months of entering upon reference. Past experience under the earlier 1940 Act has shown that it is extremely unlikely that a provision of this nature will have the desired effect. Under the 1940 Act, the disposal rate of arbitral disputes was abysmal and it can be said with certainty that adjudication within four months as envisaged by the older Act was an object that was rarely achieved. The fact that India has already experimented with timebound arbitration and has failed to achieve the desired results is a red flag as far as Section 29A is concerned. This has increased the scepticism and apprehension among stakeholders.

3. Reduction of arbitrators' fees

What renders the section even more opaque and uncertain is the sub-section that empowers courts to pass an order reducing the fees of arbitrators should it be of the view that the delay is attributable to the arbitrators.iii The principles of natural justice embedded in the Indian judicial system mandate that arbitrators be given an opportunity to be heard before an adverse order reducing their fees can be passed by courts. This presents a rather peculiar and possibly unforeseen situation wherein arbitrators themselves become parties to adversarial proceedings.

Another possible consequence is arbitrators' reluctance to adjudicate disputes that are very complicated or voluminous in nature such that their adjudication is likely to take more than 18 months. In such cases, knowing that their conduct shall be susceptible to judicial scrutiny and their fees can be reduced by courts if the delay is attributable to them, experienced arbitrators might distance themselves from complicated disputes that are likely to overshoot the 18-month period set down by Section 29A.

Similar Provisions In Other Jurisdictions And Institutions

A somewhat similar provision is Section 50 of the UK Arbitration Act, 1996, which states that in cases where the time for making an award is limited by an arbitration agreement and a tribunal fails to pass an award within that agreed upon period, then a court may extend the time upon an application being made by the tribunal or parties upon being satisfied that substantial injustice would be done otherwise.

While statutes setting down a time limit for arbitration are rare, such clauses appear fairly regularly in the rules of arbitration institutions . Prominent examples are Article 30 of the ICC Arbitration Rules and Article 37 of the Stockholm Chamber of Commerce Arbitration Rules, both of which lay down a time limit of six months for passing an award. Indian arbitration institutions also have similar rules laying down a time limit for conduct of arbitrations, for example, Rule 22 of the Nani Palkhivala Arbitration Centre Rules sets a time limit of 12 months for the completion of arbitration proceedings. It also, under exceptional circumstances, allows the arbitral tribunal to extend this period of 12 months by another six months. It is also added in the same rule that this power of the tribunal to extend the time period by six months is subject to the inherent power of the tribunal to extend the time period by 12 months in cases of extreme complexity.iv The Rules of the Court of Arbitration at the Indian Merchants' Chambers and the FICCI Tribunal of Arbitration Rules have similar rules with time limits ranging from six months to two years.v In fact, the introduction of Section 29A raises an additional issue of these institutional rules being at variance with the domestic law. As far as domestic arbitration is concerned, these institutions will have to amend their rules so as to bring them in consonance with Section 29A.

It must also be added that arbitration laws in most jurisdictions and rules governing procedure in various arbitration institutions routinely have provisions that allow parties to choose expedited procedure under which the arbitral tribunal must pass the award within a certain time period. These provisions are, however, clearly distinguishable from Section 29A since in the former case, it is an alternative available to the parties which can be chosen of their own volition and not a mandatory provision. Another major distinction between the rules laying down a time limit or providing for expedited hearing and Section 29A is that the former seldom mandate the automatic termination of the tribunal's mandate and subsequent referral of the issue of extension to courts.

Conclusion And Suggestions

It remains to be seen whether Section 29A manages to accomplish what it sets out to do, that is, ensure the timely disposal of disputes. If the criticism directed against the section by various stakeholders is any indication , the section appears to be set to further aggravate problems that afflict arbitration in India. There seems to be a consensus that the introduction of Section 29A will lead to more protracted disputes and increased judicial intervention and will make the arbitral process more amenable to dilatory tactics . Further, there remain grey areas with regard to ascertaining when the delay can be attributed to the arbitral tribunal necessitating a reduction in its fees. Another problem with the section is that it seems to incentivize arbitrators withdrawing themselves from voluminous disputes likely to stretch beyond 18 months and choosing more lucrative, simpler disputes instead.

In view of the abovementioned points, implementing a blanket rule where the time limit is set at 18 months without making any distinction as regards the nature of the dispute might not work in the Indian scenario. The government may consider exempting a certain class of disputes from the application of Section 29A, for example, disputes of subject matter higher than a certain amount may be exempted from the application of Section 29A. It is also extremely important that permanent benches be constituted in courts for dealing with disputes arising out of arbitration, including applications under Section 29A. Constituting permanent benches dedicated to adjudicating applications arising out of the Act will ensure that the applications made under Section 29A do in fact get disposed of within 60 days as envisaged by the statute . The government may also consider exempting arbitration institutions from the application of this rule and restrict it to ad-hoc arbitrations since they already have a robust system in place for the timely adjudication of disputes.

Footnotes

i As Per sub-section (2) of Section 29A, an arbitral tribunal is deemed to have entered upon reference on the date on which all the arbitrators have received notice in writing, of their appointment.

ii Section 19 of the Act.

iii Section 29A(4) of the Act.

iv Rule 22(c) of the Nani Palkhivala Arbitration Centre Rules.

v Rule 62 of the Rules of the Court of Arbitration of the Indian Merchants' Chamber and Rule 49 of the FICCI Tribunal of Arbitration Rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions