Introduction
Section 29A(4) of the Arbitration and Conciliation Act, 1996 (for brevity "the Act") stipulates that the mandate of the arbitral tribunal shall be terminated if the arbitral award is not made within the time prescribed under sub-section (1) or (3) of Section 29A. The statutory time frame for rendering the arbitral award may be extended where the award has not been delivered within 12 months from the completion of pleadings, or within the additional 6-month period under Section 29A(3). Such an extension under Section 29A(4) can be sanctioned by the 'Court' basis on an application under Section 29A(5) by either party, where the application is demonstrative of sufficient cause.
The question of what is 'Court' under Section 29A has been the subject of debate but was believed to be settled by the Hon'ble Supreme Court in a recent decision in Chief Engineer (NH) PWD (Roads) v. BSC & C & C JV.1 In Chief Engineer (Supra), the Hon'ble Supreme Court held that the power to extend the time under Section 29A(4) vests with the Court as defined in Section 2(1)(e) of the Act. However, Chief Engineer (Supra) was delivered in specific context of an arbitration where the arbitral tribunal was mutually appointed by the parties. Distinguishing Chief Engineer (Supra) on that front, the Bombay High Court, in Sheela Chowgule v. Vijay V. Chowgule2 did not treat the judgment as binding precedent for cases where the arbitrator was appointed pursuant to Section 11 of the Act. However, the Hon'ble Calcutta High Court refused to treat an arbitral tribunal setup under Section 11(6) any differently and held that 'Court' should be interpreted having regard to Section 2(1)(e) in the dictionary clause.3
Thus, the ostensibly settled interpretation of the ruling in Chief Engineer (Supra) has again been diluted by the divergent views reintroducing ambiguity regarding the construction of 'Court' under Section 29A. This divergence in interpreting Chief Engineer (Supra) compels us to confront an important question: Whether the invocation of Section 11 in an arbitration and appointment of an arbitrator by the High Court would change the meaning ascribed to 'Court' for an application under Section 29A?
This article purposively anatomizes the judgment of the Hon'ble Bombay High Court and argues against the differed contextual interpretation of 'Court' under Section 29A. Additionally, the article posits that Section 29A applications should not be heard by the High Courts for want of jurisdictional competence.
Jurisdictional Competence of a High Court under Section 29A
a. The Judgment in Chief Engineer and Prior Rulings
Section 2(1)(e) of the Act defines 'Court' for domestic arbitrations as the principal Civil Court of original jurisdiction in a district including the High Court in exercise of its ordinary original civil jurisdiction. Following the literal interpretation of the definition, the Hon'ble Supreme Court in Chief Engineer (Supra) affirmed the Hon'ble Meghalaya High Court's ruling which relegated the Section 29A application to the Commercial Court, East Khasi Hills for want of original civil jurisdiction.
Before Chief Engineer (Supra), multiple High Courts had ruled that if the arbitrator is appointed under Section 11(6), it would only be apposite for the High Courts to perceive an application under Section 29A, and not the Civil Court under Section 2(1)(e).4 This apprehension against allowing Civil Courts to screen applications under Section 29A seeks to obviate an irreconcilable conflict5 that would arise if the Civil Courts are allowed to substitute an arbitrator nominated by the High Courts. However, such an approach overlooks that the High Courts lack the relevant jurisdictional competence to hear Section 29A applications in the first place.
b. Scope of Assuming Jurisdiction
Apart from the High Courts of Delhi, Bombay, Madras, Calcutta and Himachal Pradesh which possess the ordinary original civil jurisdiction, applications under Section 29A, for other States, would lie before the territorial principal Civil Courts. Notably, the Hon'ble Supreme Court in State of Jharkhand v. Hindustan Construction Co. Ltd.6 held that a Court cannot assume original jurisdiction because of control over the proceedings and conferment of jurisdiction on a Court can only flow from a law.7
It is trite law that jurisdictional competency is a necessary concomitant to hear and decide cases. In Hindustan Construction Co. (Supra), the Hon'ble Supreme Court held that only because a Court has appointed the arbitrator, it cannot be regarded as the Court of first instance, and any such assumption would be in teeth of the definition of the phrase. The Hon'ble Supreme Court reiterated that original jurisdiction must be vested in law and proscribed against assuming any jurisdiction which is not expressly conferred. Even though the said ruling was given in context of the 1940 Act, the underlying principles apropos jurisdictional competence are relevant to the analysis of the present issue with Section 29A. Therefore, in our view, the decisions where High Courts have assumed jurisdiction over Section 29A applications, in their capacity as the authority appointing the arbitrators, are misguided cases in judicial exercise.
The Need for a Contextual Interpretation under Section 29A?
Certain High Courts have ruled that assuming jurisdiction over Section 29A applications is warranted due to the necessity of a contextual interpretation of 'Court' under Section 29A. This is based on the belief that it would denude the High Court if an arbitrator appointed by it were to be replaced by the Civil Court, which would be militant against judicial hierarchy.8 However, this notion is misplaced.
The Hon'ble Supreme Court in State of W.B. v. Associated Contractors,9 reasoned that even when the Supreme Court appoints an arbitrator, it does not retain seisin over the proceedings. Accordingly, the Supreme Court would not be construed as 'Court' under Section 2(1)(e) of the Act. This ruling was based on two important considerations. First, Section 2(1)(e) only provides for High Courts having ordinary original civil jurisdiction and principal Civil Court to be construed as 'Court'. Second, if an application is preferred before the Supreme Court directly, the remedy of appeal would not be available to the party.
Similarly, in Garhwal Mandal Vikas Nigam Ltd. v. Krishna Travel Agency,10 the Hon'ble Supreme Court cautioned against filing an application under Section 34 before the Supreme Court merely on the basis that the arbitrator was appointed by the Supreme Court. The Hon'ble Supreme Court proffered that only on the basis of the Court appointing the arbitrator, the expression of 'Court' would not be altered, or the Court become competent to assume the jurisdiction ordinarily vested with the principal Civil Court of Original Jurisdiction.
The Hon'ble Supreme Court, therefore, reasoned that even if the appointment of the arbitrator is made by the High Court under Section 11(6), the principal Civil Court of Original Jurisdiction would retain the meaning of 'Court' for the purposes of Section 34.11 In Garhwal Mandal (Supra), the Hon'ble Supreme Court circumscribed any extraneous interpretation of 'Court' based on the appointment of arbitrators. In our humble opinion, the reasoning employed in Associated Contractors (Supra) and Garhwal Mandal (Supra) would similarly apply to the issue surrounding Section 29A. Thus, there is simply no occasion which advocates a need for contextual interpretation to Section 29A; and the meaning ascribed to 'Court' under Section 2(1)(e) would not change, simply based on the arbitrator being appointed under Section 11(6).
In their attempt to contextually interpret Section 29A, a line of judgments has sought to interpret 'Court' differently, based on the manner of appointment of arbitrator. These decisions contrast situations where parties mutually agree on an arbitrator with situations where the arbitrator is appointed by the High Court under Section 11. As per these decisions, in the former case, 'Court' would be the principal Civil Court, while in the latter, it would be the High Court.
In our opinion, such a view is untenable as there is no known rule of interpretation of law by which a word or group of words, in one provision, can have two different meanings. The Hon'ble Supreme Court in Supriyo v. Union of India12 has categorically held that the Court cannot look at a text containing words with two optional meanings in the same provision. Therefore, the meaning of 'Court' under Section 29A of the Act should be read as principal Civil Court having original jurisdiction as per Section 2(1)(e) of the Act. Irrespective of how the arbitral tribunal has been set up, there is no occasion for the metamorphosis of the definition of 'Court'.
Analogy with Section 14 & 15 of the Arbitration Act
At this juncture, it is imperative to analogize Section 29A with Sections 14 and 15 of the Act. Section 14 of the Act provides for termination of mandate of an arbitrator occasioned due to failure or impossibility to act. As per Section 14(2) a controverting party can apply to the 'Court' to decide on the termination of mandate.
Section 15(2) of the Act provides for substitution of an arbitrator when an arbitrator is terminated under Section 13 or 14. In this respect, the power to terminate the mandate under Section 14 and the consequent substitution of the arbitrator by another arbitrator, is a function that is akin to the powers prescribed under Section 29A. Therefore, a simple question which begs consideration: Can the power under Section 14(2) only be the exercised by the Supreme Court or High Court, and not by a Civil Court?
The analogy between these provisions was briefly considered in Lots Shipping Company Limited v. Cochin Port Trust13 and Cabra Instalaciones Y. Servicios v. Maharashtra State Electricity Distribution Company.14 Herein, the Courts held that the powers conferred under Section 29A for permitting extension with respect to proceedings of arbitration, is akin to the powers conferred under Section 14 and 15 of the Act, and can only be exercised by the High Court, like Section 11(6) of the Act.
However, the abovementioned judgments have failed to appreciate the ruling of the Hon'ble Supreme Court in Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal15, whereby it was held that if there is a dispute on the mandate of the arbitrator being terminated on any of the ground mentioned in Section 14(1)(a), it must be raised before the 'Court' as defined under Section 2(1)(e) of the Act. The Hon'ble Delhi High Court in NHAI v. Third Rock Consultants16 followed Swadesh Agarwal (Supra) and ruled that the power of substitution under Section 14 and 15 can be exercised not by the Supreme Court or High Court but by the principal Civil Court having original jurisdiction.
The abovementioned issue can also be traced back to the judgment of the Hon'ble Supreme Court in Nimet Resources Inc. v. Essar Steels Ltd.,17 wherein it was held that an application under Section 14(2) would be maintainable only before the 'Court' as defined under Section 2(1)(e) of the Act i.e. the principal Civil Court or a High Court having original jurisdiction. Interestingly the Hon'ble Supreme Court in Nimet Resources Inc. (Supra) also held that once an arbitrator is appointed under Section 11, the Court does not retain any jurisdiction with the arbitral proceedings and becomes functus officio having no further authority.
Concluding Remarks
The expectation that the deft ruling in Chief Engineer (Supra) would settle the issue which caused beleaguer to Section 29A applications, was, unfortunately, short-lived. The Hon'ble Bombay High Court in Seema Chowgule (Supra) declined to consider Chief Engineer (Supra) as binding precedent, noting that it had not addressed a case where the arbitrator's appointment was made under Section 11. Contrastingly, the Hon'ble Calcutta High Court in Nandita Mistry (Supra) following strict stead from Chief Engineer (Supra) ruled that any application under Section 29A must lie before the Court as defined in Section 2(1)(e) even if the arbitrator were appointed under Section 11(6).
Because a Court after making a reference under Section 11(6) of the Act becomes functus officio, the question of seeking an extension in terms of Section 29A from the High Courts or the Supreme Court, is irrelevant except where the High Court is vested with original jurisdiction. Accordingly, the mode of the appointment of the arbitrator is an extraneous consideration for deciding jurisdiction under Section 29A, and that contextual reading of the provisions is prodigal and violates the scheme of the Arbitration Act. Thus, in our view Seema Chowgule (Supra) is an improvident ruling and the exercise in attempting to distinguish Chief Engineer (Supra) was dispensable and fallacious.
The Hon'ble Supreme Court in Chief Engineer (Supra) determined that the power under Section 29A(6) relating to substitution of an arbitrator is only a "consequential" power; and should be vested with the same Court which is empowered to extend the time under Section 29A(4). Therefore, it follows that the power to extend the mandate of the tribunal or substitute an arbitrator should vest with principal Civil Court even in cases where the appointment was made under Section 11(6) of the Act. In this respect, it is latent that Chief Engineer (Supra) also squarely covers the events where the arbitral tribunal has been constituted under Section 11(6), and an application under Section 29A(4) would thus lie before the principal Civil Court.
Disclaimer: This article was first published in the S&A Law Offices - 'Indian Legal Impetus' newsletter in September 2024.
Footnotes
1. 2024 SCC OnLine SC 1801.
2. 2024 SCC OnLine Bom 102.
3. Nandita Mistry v. Sanjay Saha and Anr, Calcutta High Court, AP/96/2024, Order dated 02.09.2024.
4. See Lots Shipping Company v. Cochin Port Trust, 2020 SCC OnLine Ker 21443, Amit Kumar Gupta v. Dipak Prasad, 2021 SCC OnLine Cal 2174, Magnum Opus IT Consulting Private Limited v. Artcad Systems, 2022 SCC OnLine Bom 2861, Cabra Instalaciones Y Servicios, S.A. v. Maharashtra State Electricity Distribution Co. Ltd, 2019 SCC OnLine Bom 1437; DDA v. Tara Chand Sumit Construction Co, 2020 SCC OnLine Del 2501, Indicus Software Pvt Ltd v. Infinite Uptime India Pvt Ltd, Arbitration Petition No. 179/2022 dated 13.04.2023, Shapoorji Pallonji & Company Private Limited v. Lily Realty Private Limited, Orders on IA Nos 1 & 2 of 2023 in CMP No.357/2018 before the Karnataka HC, K.V. Ramana Reddy v. Rashtriya Ispat Nigam Limited and Ors. (04.01.2023- APHC) I.A. No. 2 of 2022 in Arbitration Application No. 50 of 2018, Indian Farmers Fertilizers Coop. Ltd., v. Manish Engineering Enterprises, 2022 SCC OnLine All 150.
5. Nilesh Ramanbhai Patel v. Bhanubhai Ramanbhai Patel, 2018 SCC OnLine Guj 5017.
6. (2018) 2 SCC 602.
7. A.R. Antulay v. R.S. Nayak, (1988) 2 SCC 602.
8. Jaypee Infratech Ltd. v. EHBH Services (P) Ltd., 2024 SCC OnLine All 444.
9. (2015) 1 SCC 32.
10. (2008) 6 SCC 741.
11. The Hon'ble Supreme Court based its ruling on precedents in National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., (2004) 1 SCC 540, and State of Goa v. Western Builders, (2006) 6 SCC 239.
12. Supriyo v. Union of India, 2023 SCC OnLine SC 1348.
13. Lots Shipping Company Limited v. Cochin Port Trust, AIR 2020 KERALA 169.
14. Cabra Instalaciones Y. Servicios v. Maharashtra State Electricity Distribution Company, 2019 SCC OnLine Bom 1437.
15. Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal, 2022 SCC OnLine SC 556.
16. NHAI v. Third Rock Consultants, 2023 SCC OnLine Del 444.
17. Nimet Resources Inc. v. Essar Steels Ltd., (2009) 17 SCC 313.
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