"The penalty for exceeding the time limit is the forfeiture of the game." – Howard Staunton.
i. Introduction
The proposal to have a time limit for pronouncing an Arbitral Award has its origins in the 176th Law Commission Report dated September 12, 2001, wherein it was proposed that there should be a specified time period for completing arbitral proceedings.
Based on the 176th Law Commission Report, dated August 4, 2005, the Arbitration and Conciliation (Amendment) Bill, 2003, was laid on the table of both the Houses of the Parliament.
However, in 2005, the mandatory time limit was not incorporated as the legislative wisdom was that such mandatory time limits may not yield positive results.
Finally, Section 29-A of the Arbitration & Conciliation Act, 1996, was introduced by virtue of the Arbitration and Conciliation (Amendment) Act, 2015 w.e.f. October 23, 2015 providing a ' time-limit for arbitral award' as there had been growing demands to bring forward this amendment on account of delay in proceedings, and to ensure that these proceedings are conducted within a specified period to ensure that India becomes a hub for both domestic and international arbitrations.
ii. Objective of a Time Bound Arbitration
One of the objectives of the Amendment Act 3 of 2016 (2015 Amendment Act), was to make India's arbitration regime suitable for expeditious disposal of cases.
To execute this, the Arbitration Act was incorporated with timelines to delineate the duration of various stages of the arbitral process. In addition to the timelines introduced for proceedings before the Tribunal, certain time limits were also prescribed for the disposal of litigations arising out of and in relation to arbitration matters before Courts. Time limits were also imposed on the parties for approaching courts seeking extension of any prescribed time limit and any grant of extension was subject to imposition of conditions set by the Court. The purpose of having a fixed time frame and speedy disposal of matters was to facilitate India in becoming a major centre for international commercial arbitration.
iii. Time Limit under section 29A of the Indian Arbitration Act, 1996
The year 2015: -
Section 29A was introduced to the Arbitration and Conciliation Act, 1996 by the Amendment Act 3 of 2016, which came into force on October 23, 2015. According to the section, a Tribunal was to conclude the Arbitral Proceedings and pass its award within a period of twelve months from the date on which the Tribunal entered reference.
"(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Explanation. —For the purpose of this sub-section, an 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."
This duration for the completion of proceedings could be further extended by a period of six months upon consent by both the parties.
"(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months."
However, upon cessation of eighteen months, i.e., six months in addition to the twelve months, the mandate of the Tribunal stood terminated unless extended by a Civil Court. Any delay at the behest of the Tribunal would entail a reduction in the fees of the Tribunal. (As a result, prospective Arbitrators began refusing to take up voluminous arbitrations.)
"(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay"
The year 2019:-
To counter the above said issues, vide Amendment Act 33 of 2019, i.e., the Arbitration and Conciliation (Amendment) Act, 2019, Section 29A was amended, considerably. .
Per Section 6 of the 2019 Amendment Act, the amended section 29A provides for the completion of proceedings within twelve months from the completion of pleadings as opposed to the earlier timeline of twelve months that began running from the stage of commencement of proceedings- as envisaged under section 23(4) of the Act. This period of twelve months is extendable by a further period of six months upon consent of the parties.
Furthermore, International Commercial Arbitrations have been exempted from the applicability of stringent timeline under section 29A. In case of International Commercial Arbitrations, the award is to be made expeditiously with an endeavour to conclude the proceedings within twelve months.
Sub Section (1) was substituted as follows-
"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 completion of pleadings under sub-section (4) of Section 23:
Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23."
As opposed to the earlier regime where the mandate of the tribunal ceased upon expiry of the prescribed time limit, the 2019 Amendment by virtue of the proviso under sub-section (5) of section 29A states: -
"Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application"
iv. Pleadings under the Arbitration & Conciliation Act
Section 5 of the 2019 Amendment Act 33 (August 30, 2019 ) supplemented section 23 with a sub-clause (4). By the advent of 23(4), the parties are under an obligation to file their respective statement of claim and statement of defence within a period of six months from the date of appointment of the Tribunal. Therefore, a conjoint reading of section 29A with section 23 leads to the conclusion that the 'completion of pleadings' means and includes 'completion of the statement of claim and statement of defence'.
"23 (4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing of their appointment."
As discussed above, the period of twelve months (for completion of arbitral proceedings); whose definition has been a major point of debate; is extendable by another six months if the parties consent. However, if the proceedings still remain incomplete even after the extended six months period, then the mandate of the Tribunal stands terminated, unless it is extended yet again, by a court.
v. 'Court' under Section 29A of the Arbitration & Conciliation Act
A major point of debate has been the definition of 'Court' as used under section 29A.
By way of its judgment in DDA v Tara Chand Sumit Construction Co. 2020(269) DLT 373, the Hon'ble High Court of Delhi has dealt with the meaning of "Court" under section 29A of the Act. The court adjudicated two issues pertaining to the meaning of "Court"
Issue 1- Whether District Court falls under the definition of Court under Section 29A?
It was held that, Section 29A enables the "Court" adjudicating the application for extension has the power to substitute the arbitrator. Therefore, if the appointment of the Tribunal was done by the High Court, it would be the High Court which would be competent to substitute the Arbitrator and not the District Court. Similarly in case of International Commercial Arbitrations, such a power would be vested with the Supreme Court.
Relying on the Judgment of the Hon'ble Gujarat High Court in Nilesh Ramanbhai Patel and Ors. v. Bhanubhai Ramanbhai Patel and Ors.1 and of the Hon'ble Bombay High Court in Cabra Instalaciones Y Servicios, S.A. v. Maharashtra State Electricity Distribution Company Ltd.2, the Hon'ble Delhi High Court held that only a court which has the power to appoint an arbitrator under section 11 of the Act, has jurisdiction to adjudicate an application under section 29A seeking extension of the mandate of the Tribunal.
Issue 2- Can a section 29A Petition be instituted before a Court which does not otherwise exercise pecuniary jurisdiction over the subject matter?
Extending the above principle, the Hon'ble Court opined that a Section 11 Petition for appointment of Arbitrator is unaffected by pecuniary jurisdiction. Similarly, pecuniary jurisdiction will not interfere while choosing the forum for moving an application under section 29A.
vi. Applicability- Retrospective/ Prospective
The 2019 Amendment Act is silent as to the applicability of section 29A. As a result, it was unclear if the amended section 29A would apply to arbitration proceedings pending prior to the date when the Amendment came into force, which is August 30, 2019.
InONGC Petro Additions Ltd. v. Ferns Construction Co. Inc3, placing reliance on the judgement in Workmen v. Firestone Tyre & Rubber Co. of India (P) Ltd4, the Hon'ble Delhi High Court held that while substantive laws are prospective in their applicability, procedural laws have a retrospective application. Section 29 A of the Act does not alter the right and liabilities of the parties and therefore cannot said to be substantive in nature. Therefore, section 29A of the Act was held to be procedural in nature. While observing that the judgment in MBL Infrastructures Ltd. v. Rites Ltd5 per incuriam (per which section 29A was held to have prospective application) and upholding the decision in Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power Limited6 the Delhi High Court held that Section 29A would apply to all pending domestic arbitrations commenced after October 23, 2015. This interpretation would extend to all the subsequent amendments, thereby making the amended section 29A (amended by way of Amendment act of 2019) applicable to all arbitrations that may have commenced after October 23, 2015, but were pending as on August 9, 2019.
vii. Challenges/Hurdles :-,
- Date of commencement of twelve months period for completion of proceedings in cases where time for completion of pleadings was extended beyond the stipulated period of six months.
In certain complex and voluminous matters, the period for completion of pleadings exceeds the duration of six months. Section 29A states the commencement date for the purpose of calculating twelve months as the date on which pleadings are completed, as given under section 23(4) [which stipulates six months for completion of pleadings]. Therefore, it remains unclear if twelve months are to be calculated from the completion of pleadings or after six months of commencement of proceedings.
In other words, if an extension of time is granted for completion of pleadings, is such an extension of time to be reduced from the 12 months in which remainder of the proceedings are to be completed?
- A prescribed time limit takes away from 'party autonomy'
Party autonomy is arguably the soul of arbitration. In light of the principle of 'party autonomy' it has been argued that parties should be free to decide on the timeline of the process they are wilfully subscribing to (possibly a stringent timeline), especially when all else is governed by the will of the parties, including the governing law, composition of the adjudicating body and other procedures in relation to arbitration proceedings.
- Greater judicial intervention
Arbitration being an alternate dispute resolution mechanism aims to achieve minimal court intervention. With a provision in the Act which requires parties to seek extension of time from court even in the absence of any dissenting party, making the process of going to Court redundant and avoidable.
- Amendment to pleadings
On the one hand, Section 29A delineates the timeline for completion of arbitral proceedings within a period of twelve months commencing the completion of pleadings, however on the other hand, there is no provision governing the amendment of pleadings, meaning , parties are free to amend the pleadings at any stage, but it would in no manner alter the timeline for conclusion of proceedings, making the procedure very counter-intuitive.
- Deviation from UNCITRAL Model Laws
Indian Law of Arbitration is largely based on the UNCITRAL Model Laws which provide for a framework on which states can develop their own national laws on arbitration therein encompassing the needs of international commercial arbitration. However, the Indian Law deviates from this in as much as, under the Model Law, all time limits are decided by the Tribunal on a case-to-case basis. Even in certain cases where a fixed number of days are prescribed, it can be extended by the Tribunal without any judicial intervention. The legislature could possibly contemplate judicial intervention in a scenario where one of the parties feels that the arbitral process is proceeding particularly slowly and is dramatically off the prescribed timeline.
viii Conclusion
The introduction of Section 29-A is no doubt a laudatory step and it has contributed in the expeditious disposal of arbitration proceedings. The fixation of time limit for pronouncing an arbitral award shall discourage parties from taking unnecessary adjournments, which will eventually benefit the litigants who have consciously chosen an alternate dispute resolution mechanism.
However, as stated above, there may be exceptional cases, where the time limit may have to be relaxed and liberal extension of time under Section 29(4) from the Court may be warranted such as in cases with voluminous records or where subsequent events have necessitated amendment of pleadings or where it is imperative to conduct lengthy trials i.e. long drawn out cross examination of witnesses.
To sum it up, it can be safely discerned that introduction of Section 29A is a welcome step and it shall only contribute to the growing popularity of the alternate dispute resolution mechanism.
Footnotes
1(2019)2GLR1537
22019 SCC OnLine Bom 1437
3[2020(4)ARBLR495(Delhi)]
4AIR1973SC 1227
5O.M.P.(MISC)(COMM) 56/2020
6(2021) 2 Arb LR 326
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