India: Indian-Seated International Commercial Arbitration Not Bound By Statutory Time Limit

In view of the Arbitration and Conciliation (Amendment) Act, 2019¹, the Hon'ble Supreme Court ("Supreme Court") clarified that International Commercial Arbitrations ("ICA") shall not be governed by the time limit prescribed under Section 29-A² of the Arbitration and Conciliation Act, 1996 ("the Act").³

Facts

In the present case, the petitioner, i.e., Tata Sons Pvt. Ltd., the first respondent, i.e., Siva Industries & Holdings Ltd. and Tata Tele Services Ltd. ("TTSL"), in the year 2006, entered into a share subscription agreement for issuance and allotment of shares of TTSL to Siva Industries. Subsequently in 2008, a share subscription agreement was entered into between NTT Docomo Inc. ("Docomo"), a Japanese telecom company, the petitioner and TTSL whereby Docomo sought to acquire 26% of TTSL equity share holding.

Several contracts were entered between the parties. One such contract between TTSL and Siva Industries mandated the respondents to purchase the TTSL shares on a pro-rata basis in the event Docomo exercised its sale option. Further, the second respondent (a resident of Seychelles), as promoter of the first respondent company, had agreed to be liable to the petitioner in the event that the first respondent failed in its obligation.

Docomo addressed a sale notice to the petitioner as a consequence of which the respondents ought to have paid or bought back TTSL shares. The petitioner called upon the first respondent to perform its part of the agreement but in vain. The petitioner issued arbitration notice and a sole arbitrator came to be appointed by the Supreme Court⁴. This was an ICA as one of the parties was foreign albeit the seat of arbitration was domestic⁵.

As the original period of one year and the extension of six months which was agreed upon by the parties came to an end, the petitioner by way of an application, approached the Supreme Court for an extension.

Contentions of the Parties

The Petitioner contended that the amended Section 29-A of the Act, wherein a time-limit is prescribed for completion of arbitral proceedings, shall not be applicable to an ICA. Hence, it was urged that the amendment being of a procedural nature, it would apply to the present arbitral proceeding. Alternatively, the petitioner also submitted that if the Court were to hold that the amended provisions of Section 29-A are inapplicable to the arbitration, a further extension of time may be granted to complete the arbitral proceedings.

The second respondent, on the other hand argued that the 2019 amendment of Section 29A would not lead to the conclusion that an ICA lies outside the purview of the provision. It was submitted the if the petitioner's interpretation of Section 29-A were to be adopted, there would be no timeline under the statute for an ICA. The second respondent submitted that it was not the intention of the legislature that in a case which is not governed by an arbitral institution, the court would have no control over the time taken in the course of the arbitral proceedings, leaving the matter entirely within the discretion of the arbitral forum.

Findings Of The Supreme Court:

On an analysis of the position of Section 29-A before and after the 2019 amendment, the Supreme Court firstly noted that after the amendment, Section 29A(1) stipulates that the award "in matters other than international commercial arbitration" shall be made by the arbitral tribunal within a period of twelve months from the date of the completion of the pleadings. It found that this made it abundantly clear that the amended timeline under Section 29A(1) does not apply to ICA.

The Supreme Court further observed that the expression in the proviso to Section 29-A "as expeditiously as possible" coupled with the expression "endeavour may be made" demonstrated the intent of the legislature that the said period of twelve months for making the award is not mandatory in the case of an ICA. In an ICA, the arbitral tribunal is required to endeavour to render the award within the said period or in a timely manner. However, in a domestic arbitration, Section 29A(1) stipulates a mandatory period of twelve months for the arbitrator to render the arbitral award.

The Supreme Court remarked that, post amendment, the twelve-month period is only directory in nature for an ICA. It was observed that the timeline of twelve months for making the award (in matters other than international commercial arbitration), is qualified by the consensual entrustment to the parties under Section 29-A(3) to extend the period by six months after which the court is empowered in terms of Section 29-A(4) to extend the period for making the award.

The Supreme Court went on to observe that the legislature has not expressly excluded the applicability of sub-sections (3) and (4) of Section 29A to an ICA. However, the rationale underlying sub-section (3) is to ensure that despite the stipulation of twelve months for the making of an arbitral award in the domestic context, parties may by consent agree to an extension of time by a further period of six months. Such an extension of six months is envisaged in the case of a domestic arbitration since there is a mandate that the award shall be made within a period of twelve months. The court found that a further extension has been entrusted to the court in terms of sub-section (4) of Section 29A.

Insofar as an ICA is concerned, the Supreme Court noted that the statutory regime is clear by the substantive part of subsection (1) of Section 29A in terms of which the timeline of twelve months for making an arbitral award is not applicable to it. In an ICA, the legislature only indicated that the award should be made as expeditiously as possible and that endeavour may be made to dispose of the matter within a period of twelve months from the completion of pleadings.

In this regard, the Supreme Court noted that in the report dated July 30, 2017 issued by the high-level committee chaired by Hon'ble (Retd.) BN Srikrishna, J., it was ascertained that ICAs had criticised the setting of timelines and the interference of courts, and were of the opinion that ICAs should have their own machinery. It was thus recommended by the committee that a new sub-section may be inserted in Section 29A, limiting the applicability of the Section to ICAs.

With respect to the retrospective applicability of this position of law, the Supreme Court noted that in the case of Board of Control for Cricket in India v. Kochi Cricket Pvt.,⁶ it was held that Section 29-A created new obligations in respect of a proceeding which had already commenced since it laid down a strict timeline for rendering an arbitral award for the first time in the framework of the Act. In this regard, the Supreme Court noted the following:

1. that the amended provisions of Section 29-A are remedial in nature. The amended provision has excepted ICAs from the mandate of the twelve-month timeline which governs domestic arbitrations;
2. that the amendment is intended to meet the criticism over the timeline in its application to ICAs;
3. that the amendment is remedial in that it carves out ICAs from the rigour of the timeline of six months;
4. that this lies within the domain of the arbitrator and is outside the purview of judicial intervention;
5. that the removal of the mandatory time limit for making an arbitral award in the case of an ICA does not confer any rights or liabilities on any party.

Thus, the Supreme Court found that since the amended Section 29A(1) is remedial in nature, it should be applicable to all pending arbitral proceedings as on the effective date i.e., August 30, 2019.

Conclusion:

Therefore, in light of the above observations, the Supreme Court held that the sole arbitrator in the case at hand had the jurisdiction to decide upon any further extension of time beyond what was originally stipulated.

Footnotes

1. Act 33 of 2019 with effect from August 30, 2019.

2. Time-limit for arbitral award.

3. Tata Sons (P) Ltd. v. Siva Industries & Holdings Ltd., 2023 SCC OnLine SC 23.

4. Section 11(6) of the Act - Appointment of arbitrators.

5. Section 2(1)(f) of the Act - "international commercial arbitration".

6. (2018) 6 SCC 287.

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.