India: Extension Of Time In Arbitration : Review Of Section 29A Of Arbitration & Conciliation Act (Amendment Act 2015)

Last Updated: 15 February 2019
Article by Tanuka De and Rajat Tiwari

Introduction

The rapid growth in commerce and industry has led parties to settle their disputes by resorting to the alternate dispute resolution procedure, more particularly to arbitration, and one of the prominent reasons for the parties to opt arbitration is to avoid delayed and protracted litigations. The enactment of Arbitration and Conciliation Act 1996 (hereinafter referred as Act) marked the onset of new era in dispute resolution procedure in the post liberalisation economy of the country. The intent of the legislature from the very inception of the draft of the Act was to provide for an easy, user-friendly and time bound procedural recourse to dispute resolution. But after the enactment of the Act in 1996 many lacunae and laches surfaced which were hindering the proper realization of the intent of the Act. In order to curb the same, the President of India promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2015, (hereinafter referred as Amendment) on October 23, 2015, with a view to amend the Arbitration and Conciliation Act, 1996 ("Act of 1996") in order to make arbitration in India user friendly, cost effective and a preferred method of dispute resolution along with facilitating speedy disposal of cases1.

One of the key developments in the Act after the amendment is the insertion of new Section 29A which has imposed strict time limits to conclude the arbitration process. However, strict compliance of the same has also given rise to different facets to it which are evident by the observations of different High Courts across the country and arbitral tribunals.

Time limits to an arbitration process Section 29A

Clause (1) of the section 29A2 mandates that all the arbitration proceedings must be completed within the 12-month time period starting from the date when arbitration tribunal enters upon the reference; the arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. Although if the arbitrator or arbitral tribunal, as the case may be, fails to deliver the award within the stipulated time as clause (1) of the section 29 A mandates, the parties to the dispute in consensus may extend the period of arbitration, but no more than 6 months according to clause (3) of Section 29 A. Also, if the arbitration tribunal fails to deliver award in the due period mentioned in clause (1) and extended period mentioned in clause (3), then the mandate of the arbitration tribunal stands terminated unless the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction3, either before or after the expiry of period mentioned in clauses (1) and (3) extends the period of arbitration and this provision is contained in clause (4) of Section 29A. It is also pertinent to mention here that as per clause (5) of Section 29A, an application for extension of time can be made by either of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.4

Scope and Application of Section 29A of the Act

  1. Section 29 A is applied prospectively

    The amendment came in to effect from 23.10.15, and so does Section 29A of the Act, hence it is applicable on the arbitration proceedings in which the reference has been made after the aforementioned date i.e. 23.10.15 and does not have any retrospective effect on the arbitration which have already commenced in this regard, the same was held in the judgment of Madras High Court M/s. Divya Dev Developers Pvt. Ltd. vs. M/s. G.S. Developers Pvt. Ltd.5 wherein the arbitrator has declared his office functus officio on conclusion of 12 months' period, and no response has been made by the parties to increase the time period by 6 months as per Section 29A (4) of the Act, the High Court ruled that since the proceedings of the arbitration commenced, when the notice for invoking the arbitral clause has been made by the applicant to the respondent as per section 21 of the Act which was much before the amendment came into existence therefore the Section 29A has no effect on arbitral proceedings.

    Also it was further observed by the court, that the amended act envisages in itself provision under Section 26 of the Act, wherein it is very explicitly mentioned that the application of amendment will not have retrospective affect on the arbitration proceedings commenced before the amendment. Also in the case of Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors.6 commenting on the scope of Amendment 2015, as per Section 26 the Hon'ble Supreme Court held that "The scheme of Section 26 is thus, clear that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to court proceedings which have commenced on or after the Amendment Act came into force." The same opinion is abided by the Delhi High Court, while deciding a mention in the appeal Republic of India through Ministry of Defence vs. Augusta Westland7.
  2. The appointment of new arbitrators does not vitiate the earlier arbitration proceedings

    Clause (6) of Section 29A, provide that the court while extending the period of arbitration as per Section 29A (4) can substitute all or any of the arbitrators and prescribed fee thereof and the proceedings shall commence from the stage where it was, the same has been duly applied by the Hon'ble Supreme Court of India in the case of IDBI vs. Haryana State Industrial and Infrastructure Development Corporation Ltd.8 Hence, it is evident that appointment of new arbitrators or constitution of new arbitral tribunal does not affect the observations and records of the previous arbitrator nor even invalidates the interim awards passed by the previous arbitrator.
  3. Calculation of time period of arbitration

    Clause (1) of Section 29A very categorically provides that the period of arbitration is to be calculated from the date when the arbitration tribunal enters upon the reference, which is deemed to be the date when the arbitrators have duly received notice of their appointment to the arbitration tribunal, but in exceptional circumstances the court decides the date for calculation of the period of arbitration process, as in the case of Manbhupinder Singh Atwal vs. Neeraj Kumarpal Shah and anr.9 wherein a new arbitrator had been appointed as the first nominee failed to assume office within the stipulated period. The Hon'ble Apex Court ordered that the calculation of period of arbitration process shall be calculated from the date of first sitting of the arbitration process.
  4. Illegality of award made after the stipulated time period of arbitration as per Section 29A

    The arbitral award made after the stipulated time provided in Section 29A (1), (3) and (4) will be patently illegal and the same has been opined by the Madras High Court in the case of M/s. Satyam Caterers Pvt. Ltd. vs. Asst. Commercial Manager, Southern Railways & Anr.10 Also, in the case of Union Of India vs. Advanced Polymer Technology11the parties agreed for extension of time after 12 months of the proceedings and hence the proceedings got extended for a further period of 6 months; before expiry of 6 months the parties approached the High Court for further extension of time, meanwhile the extended period of 6 months got expired, but arbitrator without the order of the court in this regard continued to organize arbitral meetings, the Court in consonance to the provisions contained in section 29 A extended the time but invalidated the arbitral proceedings held by the arbitrator between the expiry of 6 months period and order of the court.

Footnotes

1. Amendments to the Arbitration and Conciliation Bill, 2015, Press Information Bureau of India, August 26, 2015.

2. Section 29A of Arbitration and Conciliation Act 1996, Ins. by Act 3 of 2016, sec. 15 ( w.e.f. 23.10.2015)

3. Section 2 (e)(i) of the Arbitration and Conciliation Act, 1996, Subs. by Act 3 of 2016, sec. 2, for clause (e) ( w.e.f. 23.10.2015)

4. Supra. Note 2

5. AC No.41/18 & 38/18 passed by Madras High court, 30/07/2018

6. (2018) 6 SCC 287

7. CS(COMM) 9/2019, order dated 09/01/2019

8. Petition(s) for Special Leave to Appeal (C) No(s). 230-231/2018, order dated 7th May 2018.

9. M.A. NO. 1482 of 2017 in Arbitration Petition No. 14 OF 2017, order dated 4th December, 2017

10. O.P.No.592 of 2018, Madras High Court, Dated, 09.08.2018

11. OP(ICA).No. 5 of 2018, Kerala High Court, Dated, 03.12.18

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