India: Analysing The Issue Of Jurisdiction With Respect To Section 29a Of The Arbitration And Conciliation Act, 1996

INTRODUCTION

Section 29A Arbitration and Conciliation Act, 1996 ("Act") was introduced by the amendment of 2015. It was further amended in the year 2019. The combined effect of both the amendments is that in the matter of arbitrations, other than International Commercial Arbitration, a time limit for the conclusion of arbitration proceedings was introduced by way of Section 29A. As per Section 29A (1) of the Act, in matters other than international commercial arbitration, an arbitral tribunal has to publish the award within a period of twelve months from the date of completion of pleadings under Section 23 (4). It is also provided under Section 29A (3) that parties by their consent, can extend the period of making the award for a further period not exceeding six months. If the award is not made within the period of one and half years, then the mandate of the arbitral tribunal shall terminate. However, power has been vested in the "Court" to extend the period.

ISSUE OF JURISDICTION WITH RESPECT TO SECTION 29A OF THE ACT

One interesting issue that arises regarding Section 29A concerns the jurisdiction of courts to entertain an application for extension of time under Section 29A, which has also been the subject of a few conflicting decisions by several High Courts in India. Section 29A (4) provides that in case the arbitral award is not made within twelve months (or within the extended me as the case may be), then the mandate of the arbitral tribunal shall terminate unless it is extended by the 'Court'.

The expression 'Court' has, in turn, been defined under Section 2(1)(e) of the Act to mean:

It is to be noted that in India, there are five High Courts, i.e.,. Bombay, Delhi, Madras, Calcutta and Himachal Pradesh that have ordinary original civil jurisdiction, i.e., the power to hear an original side matter, like Suit. All the other High Courts have appellate jurisdiction. So, the question that arises here is whether, in view of the above, the applications for extension of time for passing the award under Section 29A will lie only with the High Court in the case of international commercial arbitrations and with the principal Civil Court in the case of other arbitrations?

Further, it is also pertinent to note that under the provisions of Section 11 of the Act (which deals with the appointment of arbitrators), the competent Court to entertain applications for appointment of the arbitrator is the Supreme Court of India in the case of International Commercial Arbitrations, and the High Court in the case of any other arbitrations.

In addition to the extension of time, Section 29A also provides the power to substitute one or all the arbitrators, if required under sub-clause (6) of Section 29A. This is of importance here because if we consider the meaning of 'Court' as provided in Section 2(1)(e) of the Act, then in the case of an International Commercial Arbitration, an arbitral tribunal appointed under Section 11 of the Act by the Supreme Court can be substituted by the High Court. Similarly, an arbitral tribunal appointed by the High Court in the case of any other arbitrations may be substituted by a principal Civil Court. In the latter case, the situation will become even more extraordinary and peculiar since a principal Civil Court does not, in the first place, have the power to appoint an arbitrator in any circumstances.

CONFLICTING VIEWS TAKEN BY VARIOUS HIGH COURTS

The High Courts of India have had conflicting views on the point, as to before which Court the application for extension of time for passing the award under Section 29A will lie. In the case of Nilesh Ramanbhai Patel v. Bhanubhai Ramanbhai Patel¹, the High Court of Gujarat considered whether the expression 'Court' in the context of Section 29A can be understood as referred in Section 2(1)(e) of the Act.

In this case, the arbitrator was appointed by the Gujarat High Court. However, the proceedings could not be concluded within the prescribed time limit and accordingly, an application for extension was filed before the Gujarat High Court.

It was argued that the application for an extension of time would only lie before the principal Civil Court. After examining the scheme of Section 29A, the High Court of Gujarat questioned whether the legislature intended to vest the principal Civil Court with the power to make the appointment of arbitrators by substituting the arbitrators appointed by the High Court under Section 11 of the Act. The High Court of Gujarat also observed that the same situation would arise in the case of international commercial arbitrations, where the power to appoint the arbitrator rests exclusively with the Supreme Court. The High Court, thus, concluded that this conflict can be avoided only by understanding the expression "Court" for the purpose of Section 29A as the Court which appointed the arbitrator.

A similar view was taken by the Bombay High Court in the case of Cabra Instalaciones Y Servicios, S.A. v Maharashtra State Electricity Distribution Company Limited². Here, the petitioner had approached the High Court under Section 29A of the Act and sought an extension of six months for the conclusion of the arbitral proceedings and passing the award. It was a case of an International Commercial Arbitration and the arbitrator had been appointed by the Supreme Court under Section 11 of the Act. The High Court of Bombay considered whether it would have the jurisdiction, under Section 29A, to entertain the application for extension of time when the arbitrator had been appointed under Section 11 of the Act by the Supreme Court. The High Court concluded that in the case of International Commercial Arbitrations, it did not have the jurisdiction to pass any orders under Section 29A and such power would lie only with the Supreme Court. Noticing that Section 29A also provided under sub-clause (6) for the substitution of the arbitral tribunal by the concerned Court while considering an application for extension of time, the High Court opined that this would be the exclusive power and jurisdiction of the Supreme Court.

However, the Kerala High Court has taken a different view. In the case of M/s. URC Construction (Private) Ltd. v M/s. BEML Ltd.,³ the High Court of Kerala held that in view of Section 2(1)(e) of the Act, in the case of domestic arbitrations, the application for extension of time under Section 29A would lie to the principal Civil Court and not before the High Court of Kerala as it does not possess original civil jurisdiction.

LATEST POSITION

Recently, this question was answered by the Hon'ble High Court of Delhi in the case of DDA vs. M/s Tara Chand Sumit Construction Co.⁴ on May 12, 2020. The Hon'ble High Court held, after considering the relevant statutory provisions as well as the precedents cited by the parties, that the expression "Court" as used in Section 29A must be read in light of the context as provided in Section 2(1)(e) of the Act. It was observed that based on Section 29A (4), it is reasonable to assume that the ability to prolong the arbitrator's mandate would be vested in the principal Civil Court.

However, a closer examination reveals that such an interpretation would cause confusion and would be contrary to the "Court's" authority under Section 11 of the Act. The High Court of Delhi relied on judgments (discussed above) like Nilesh Ramanbhai Patel and Ors. v. Bhanubhai Ramanbhai Patel and Ors. and Cabra Instalaciones Y Servicios, S.A. v. Maharashtra State Electricity Distribution Company Ltd., to reach the conclusion that an application under Section 29A of the Act requesting an extension of the arbitrator's mandate should be filed with the Court that has the jurisdiction to appoint the arbitrator under Section 11 of the Act, and not the principal Civil Court.

The Hon'ble Delhi High Court decided that the principal Civil Court should not accept an application under Section 29A since the clause allows the court to extend the period and also for substituting the arbitrator. As a result, if the arbitrator was chosen by the High Court, then only the High Court, and not the district court, will have the authority to replace the arbitrator while exercising powers under Section 29A. The Hon'ble High Court opined that in International Commercial Arbitration, the power to appoint the arbitrator vests with the Supreme Court, and High Courts would therefore, not be competent to substitute an arbitrator appointed by the Supreme Court.

As a result, in conclusion, it was determined that an application under Section 29A would only be heard by the Court, which has the authority to appoint an arbitrator in the first place. The High Court of Delhi's decision establishes that an application under Section 29A cannot be brought before the principal Civil Court because it lacks the authority to appoint the arbitrator. Pertinently, the majority of High Courts have rendered their decisions in favour of this proposition.

Footnotes

1 (2019) 2 GLR 1537

2 MANU/MH/2097/2018

3 (2017) 4 WLT 1140

4 2020 (2) Ar LR 505 (Delhi)

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