Understanding Section 29A of the Arbitration and Conciliation Act, 1996
Arbitration is a widely favored method for resolving disputes outside of the traditional court system. It offers a more streamlined, efficient, and flexible process. However, the efficiency of arbitration can sometimes be undermined by prolonged proceedings. To address this concern, the Indian legislature introduced Section 29A to the Arbitration and Conciliation Act, 1996, through the Arbitration and Conciliation (Amendment) Act, 2015. This provision imposes strict timelines on the arbitration process, aiming to ensure that arbitral awards are delivered promptly.
The Provisions of Section 29A
Section 29A sets a clear timeline for the completion of arbitration proceedings:
- Time Limit for Arbitral Award: Section 29A mandates that an arbitral award must be made within twelve months from the date the arbitral tribunal enters upon the reference. This timeline is designed to prevent undue delays and ensure that parties receive a resolution in a reasonable timeframe.
- Extension by Parties' Consent: The initial twelve-month period can be extended by up to six months with the mutual consent of the parties involved. This extension recognizes that some complex cases may require additional time for a thorough resolution.
- Further Extensions by Court: If the award is not made within the extended period, parties may approach the court for a further extension. The court, while granting such an extension, can impose conditions and may even replace one or all of the arbitrators if it finds that the delay is attributable to them.
- Termination of Arbitrators' Mandate: Should the court not grant an extension, the mandate of the arbitrators terminates. This clause ensures that arbitrators are held accountable for adhering to the stipulated timelines.
Judicial Interpretation and Application
The judiciary has played a crucial role in interpreting Section 29A to balance the intent of the legislation with practical considerations. One landmark case is Miscellaneous Application No. 2680 of 2019 in Arbitration Case (Civil) No. 38 of 2017, TATA Sons Pvt Ltd vs. Siva Industries and Holdings Ltd & Ors. In this case, the Supreme Court clarified several aspects of Section 29A, emphasizing the importance of adhering to the prescribed timelines and the conditions under which extensions could be granted.
The Court also highlighted that in the event of an arbitrator's substitution, the new arbitrator is to continue from the point left by the predecessor, rather than starting anew. This interpretation aims to minimize delays and ensure continuity in the arbitration process.
1. ONGC Petro Additions Ltd. vs. Ferns Construction Co. Inc. (2018)
Citation: 2018 SCC OnLine SC 1747
Summary: In this case, the Supreme Court addressed the interpretation of the twelve-month period prescribed under Section 29A. The Court emphasized that the timeline begins from the date the arbitral tribunal enters upon the reference, which is defined as the date on which the arbitrators receive notice of their appointment. This judgment provided clarity on the starting point of the arbitration timeline.
2. M/s. Shapoorji Pallonji and Co. Pvt. Ltd. vs. Jindal India Thermal Power Ltd. (2019)
Citation: 2019 SCC OnLine Del 7909
Summary: The Delhi High Court in this case dealt with the issue of extending the arbitration timeline under Section 29A. The Court granted an extension of six months for the completion of arbitration proceedings, emphasizing that extensions should be granted based on the complexity of the case and the conduct of the parties. The judgment highlighted the court's discretion in granting extensions and the importance of ensuring that justice is not compromised by strict adherence to timelines.
3. Bharat Broadband Network Limited vs. United Telecoms Limited (2019)
Citation: (2019) 5 SCC 755
Summary: The Supreme Court in this case addressed the issue of substitution of arbitrators under Section 29A. It reiterated that a substituted arbitrator must continue from the point where the previous arbitrator left off, rather than starting the proceedings afresh. This interpretation was aimed at preventing unnecessary delays and ensuring the continuity of the arbitration process.
4. S.P. Singla Constructions Pvt. Ltd. vs. State of Himachal Pradesh (2019)
Citation: 2019 SCC OnLine SC 646
Summary: In this case, the Supreme Court dealt with the termination of the mandate of arbitrators under Section 29A. The Court held that if the arbitration award is not delivered within the stipulated timeline and no extension is granted, the mandate of the arbitrators terminates automatically. This judgment reinforced the binding nature of the timelines set forth in Section 29A and the importance of seeking timely extensions from the court.
5. Municipal Corporation of Greater Mumbai vs. Prestress Products (India) (2020)
Citation: 2020 SCC OnLine Bom 1510
Summary: The Bombay High Court in this case examined the conduct of the arbitrators in delaying the proceedings. The Court emphasized that while Section 29A aims to expedite the arbitration process, arbitrators must also ensure that the quality of the award is not compromised. The judgment balanced the need for timely awards with the necessity of thorough and fair adjudication.
6. Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. (2020)
Citation: 2020 SCC OnLine SC 32
Summary: The Supreme Court, while dealing with an issue of unilateral appointment of arbitrators, reiterated that the timelines under Section 29A must be adhered to strictly. The Court held that any delays caused due to improper constitution of the arbitral tribunal do not extend the prescribed timeline. This case underscored the importance of constituting the tribunal promptly to comply with Section 29A.
Impact and Criticism
The introduction of Section 29A has significantly impacted arbitration proceedings in India. By imposing strict timelines, the provision has pushed for a more disciplined and time-bound approach to arbitration. This has been particularly beneficial in reducing the backlog of pending arbitration cases and enhancing the efficiency of the arbitration process.
However, the provision has also faced criticism. Some argue that the rigid timelines may not be practical in complex cases that require more extensive deliberation and examination. Moreover, the pressure to meet deadlines might compromise the quality of the arbitral award. There is also concern that the need to approach the court for extensions could lead to further delays and additional legal costs.
Section 29A, added by the Arbitration and Conciliation (Amendment) Act, 2015, set a 12-month deadline for passing an arbitral award from the date the arbitral tribunal entered reference. The Arbitration and Conciliation (Amendment) Act, 2019 changed the start of this timeline to the date of completion of pleadings. This timeline can be extended in two stages: first by six months with parties' consent under section 29A(3), and second by court application under section 29A(4) if the award is not passed in 18 months. The court can extend this timeline "for sufficient cause" and may replace arbitrators while doing so under section 29A(6).
The Calcutta High Court, and now the Supreme Court, are considering the implications for an arbitration where the parties seek an extension under section 29(4) after 24 months from the completion of pleadings. The Act does not address the consequences of such a late application. The Calcutta High Court ruled that without an application for extension within 24 months, the arbitrator’s mandate ends.
The court’s reasoning focused on the language of section 29A(4), which contrasts with the 176th Law Commission Report's recommendation that provided only for suspension, not termination, of the mandate. The Calcutta High Court found that the legislature intended termination, not suspension, if the application for extension wasn’t filed in time.
Different High Courts have varied in their rulings on section 29A extensions. The Karnataka High Court, in a similar case, allowed the appointment of a substitute arbitrator under section 15(2), enabling the arbitration to continue. Conversely, the Delhi and Patna High Courts ruled that new arbitration proceedings must commence if the application for extension is filed late. The Bombay High Court took a stricter approach, foreclosing arbitration and leaving parties to other dispute resolution methods.
The Supreme Court's upcoming decision on the Calcutta High Court’s ruling will clarify whether substitute arbitrators can be appointed under section 15(2), whether new arbitration must start, or if arbitration is entirely foreclosed once the mandate ends under section 29A.
Conclusion
Section 29A of the Arbitration and Conciliation Act, 1996, represents a significant step towards making arbitration a more time-efficient dispute resolution mechanism in India. While it has introduced much-needed discipline in the arbitration process, its practical implementation requires a careful balance to ensure that the quality of arbitral awards is not compromised. As the judiciary continues to interpret and refine the application of this provision, it is hoped that a more effective and efficient arbitration framework will evolve, benefiting all stakeholders involved.
The judgments collectively emphasize the judiciary's commitment to enforcing the timelines prescribed under Section 29A of the Arbitration and Conciliation Act, 1996. They highlight the courts' role in granting extensions based on the specifics of each case while ensuring that the arbitration process remains efficient and effective. The interpretation and application of Section 29A continue to evolve, aiming to strike a balance between expeditious dispute resolution and the delivery of fair and just arbitral awards.
"Section 29A. Time limit for arbitral award.
(1). [29A.Time limit for arbitral award.--2[(1) 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 endeavor 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.
(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.
(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.
(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.
[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:
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.]
(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.
(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
Reference:-
[1] FCA India Automobiles (P) Ltd. v. Torque Motor Cars Pvt. Ltd. 2018 SCC OnLine Bom 4371
[2] Dinesh Kumar v. Land Acquisition Officer and Another 2023 SCC OnLine HP 767.
[3] 2023 SCC OnLine Cal 2645
[4] SLP (C) No. 23320/ 2023
[5] 2016 SCC OnLine Cal 6075
[6] SLP (C) No. 24489 of 2023
[7] 2023 SCC Online Del 2990
[8] 2023 SCC OnLine Del 243