In this blog post, Isha Singh,  a student pursuing her LL.B (5th year) Hons. from Rajiv Gandhi National University of Law, Patiala, Punjab and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the prescription of a time limit for rendering of an Arbitral Award.

Introduction

The Arbitration Act was enacted in the year 1996, with the objective of sharing the burden with courts for dispute resolution through less-stringent methods of arbitration and conciliation. However, it has not been a smooth journey for the earlier legal regime, taking note of which the Law Commission of India submitted its 246th Report in the year 2014 recommending several changes to the arbitration law. On 23rd October 2015, the President of India promulgated the Arbitration Ordinance helping some recommendations be realised into amendments, which ultimately yielded to the Arbitration and Conciliation (Amendment) Act’2015 introducing several changes to the 1996 Act.

Apart from other glaring changes made, the Amendment Act has prescribed time limit for rendering of an arbitral award under Section 29A and fast track procedure under Section 29B. While this is a welcome move and complements the very idea of speedy justice, yet it might also be counter-productive. Let’s see how that works, in the following paragraphs.

Section 29A: Time limit for Arbitral Award

The Clause (1) stipulates that the award shall be made within a period of 12 months from the date on which the arbitral tribunal enters into reference, i.e., the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. The parties may extend this period of 12 months by way of consent, but not more than a period exceeding 6 months. However, if the award is made within 6 months only out of the 12-month timeframe allowed, then the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. But, if the award is not made within the time frame of 12 months or the extended period of 6 months taken together, the mandate of the arbitrator shall terminate unless the court has extended the period, either prior to or after the expiry of the prescribed period; conditioned on the fact that if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then it will order for the reduction of their fees by at most 5% for each month of delay.

The criteria for extension of time period is the pleading of a “sufficient cause” by way of an application by any one of the parties, based on such terms and conditions as the Court may impose. Such an application shall be expeditiously disposed off and endeavour be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. Moreover, at the time of granting extension, it is Court’s autonomy to substitute one or all of the arbitrators, and in that case, the arbitral proceedings shall continue from the stage reached and on the basis of evidence and material on record. Whereas, if arbitrators are appointed in this section, the reconstituted arbitral tribunal shall be deemed to be a continuation of the hitherto appointed tribunal.

Section 29B: Fast Track Procedure

“Fast Track Procedure” is one where the parties agree on a dispute resolution regime that would consist of a sole arbitrator chosen by the parties. While there are more striking features about this procedure that does away with oral hearings and bases its award purely on written pleadings, documents and submissions filed by the parties, but the prime feature is that the award be made within 6 months of entering into reference. This stipulation triggers Section 29A and its rigorous time-abiding provisions.

Could it be counter-productive?!

Section 29A in its sweeping effect might create more problems than it seeks to solve. While the whole purpose of entering into an arbitration agreement is the maintenance of the party autonomy and their inter se decision to extend the arbitration proceedings until whenever they want, the stipulation of time limit just runs opposite to this, in the following manner:

By granting autonomy to the Court in the event the dispute remains undecided for 18 months, the Act has taken away party autonomy and restricted them from deciding between themselves the nature of the arbitration, as per their needs and more importantly per the dispute.

When the parties appear before the Court, they shall have to state on record the status of the arbitration and make public some facts, which might have hitherto been unknown keeping in consonance with their confidentially agreements.

The Section also stipulates that in the event the delay is attributable to the arbitral tribunal, the Court shall order reduction in their fee. However, the principles of natural justice would mandate that the relevant party be heard before any action could be taken against them, which would be the arbitral tribunal in this case. Therefore, a proceeding involving the tribunal would be problematic.

The expression “sufficient cause” in the application for grant of extension of time is nowhere been defined, coupled with the fact that the word “may” in the same letter of law would give the Court, a discretionary power, immensely wide in amplitude, which might result in lengthy proceedings ensuing as the parties lead large evidences, contend arguments to satiate the Court’s discretion in their favour. Nevertheless, such decisions being judicial decisions would be open to appeal and will further be a reason to sanction delay in the arbitration proceedings.