This article has been written by Soumyadutta Shyam. This article analyses Section 29A of the Arbitration and Conciliation Act, 1996. It also discusses the applicability of this provision, the objectives of this provision, challenges in enforcing this provision, recent case laws and critical analysis of this provision. 

Introduction

One of the reasons arbitration is favoured over court proceedings is that it is faster. Besides, arbitral awards made by the arbitral tribunal are also binding upon the parties, which makes them suitable for settling disputes conclusively.

In business, time is of the essence and disputes arising out of business deals need to be resolved in a timely and efficient manner, thus ensuring that arbitral awards are pronounced in a timely manner Section 29A was incorporated into the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”)  in 2015. This provision was further amended in 2019. The objective of introducing this provision was to conclude the arbitral proceedings swiftly and within a reasonable timeframe.

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Section 29A prescribes a time interval of 12 months after the conclusion of pleadings within which an arbitral tribunal should deliver its award. However, this period has been relaxed in matters of international commercial arbitration.

Arbitration and arbitral awards

Arbitration is an alternative dispute resolution process in which the parties present their dispute to a third-party intermediary, i.e., an arbitrator or a panel of arbitrators, who examine all the evidence and then make a decision for the parties. The decision of the arbitrators is binding on the parties. Arbitration is more flexible than judicial proceedings. The parties to the dispute can choose their own arbitrator, who can be an expert on the subject matter in dispute.

An arbitral award is a decision delivered by the arbitral tribunal on the disputes or differences referred to it for arbitration by the parties. An arbitral award stands on the same footing as a decree of the court and therefore it is binding upon the parties. In order for an arbitral award to be valid, it must be final, certain, consistent, and decide the matters submitted to it conclusively.

What does Section 29A of Arbitration and Conciliation Act, 1966 say

Section 29A of the Arbitration and Conciliation Act, 1996, sets out the time limit for an arbitral award to be made. This Section provides as under:-

  1. The arbitral award, except in case of international commercial arbitration, should be delivered by the arbitral tribunal in an interval of 12 months from the date of conclusion of pleadings, as per sub-section (4) of Section 23. However, in the case of international commercial arbitration, the award should be delivered as quickly as practicable, and efforts shall be made to discharge the matter within 12 months after the conclusion of pleadings.
  2. If the award is delivered in six months from the date the arbitral tribunal starts examining the matter, the arbitral tribunal will be eligible to be paid extra fees as the parties might concur.
  3. The parties can agree to extend the term mentioned in sub-section (1) for delivering the award for a further term not surpassing six months.
  4. If the award is not delivered within the time stipulated in sub-section (1) or the extended period specified in sub-section (3), the decision of the arbitrators shall cease until the court has, before or subsequent to the expiry of the time mentioned, extended the period.

When extending the time under this sub-section, if the court notices that the proceedings were deferred for causes accountable to the arbitral tribunal, then it can order a deduction of fees of the arbitrators, not above five percent for each month of such delay.

Further, when an application under sub-section (5) is pending, the decision of the arbitrator shall remain in force till the disposal of the said application. The arbitrator shall also be afforded a chance to be heard before the fees is deducted.

  1. On filing an application by any of the parties to the disputes, an extension of the time mentioned in sub-section (4) may be allowed by the court. However, such extensions may be permitted only for “sufficient cause” and on certain terms and conditions set by the court.
  2. When extending the time mentioned in sub-section (4), it may be considered by the court whether to replace one or all of the arbitrators. In case, one or all of the arbitrators are replaced, the arbitral proceedings will resume from the stage already arrived at and will be based on the evidence and material already on record. The arbitrators nominated under this Section will be assumed to have acquired the above-mentioned evidence and material.
  3. In case, arbitrators are being nominated in accordance with this Section, the arbitral tribunal thus reorganised will be assumed to be in continuation of the formerly constituted arbitral tribunal.
  4. The court may levy actual or exemplary costs on any of the parties in accordance with this Section.
  5. An application submitted under Sub-Section (5) will be discharged by the court as quickly as practicable, and efforts shall be made to discharge the matter in an interval of sixty days from the date the notice is served to the opposite party.

This provision was incorporated in 2015. The purpose of this provision was to put forward a time limit for the conclusion of arbitration proceedings. It stipulated a statutory term of 12 months from the date the arbitral tribunal starts hearing the matter. After that, by the Amending Act of 2019, the stipulated timeframe was altered and the Act called for arbitration proceedings to be finished within 12 months from the date of the conclusion of pleadings.

It is important to remember that Sub-Section (5) of Section 29A of the Act stipulates that the party presenting an application as per Sub-Section (4) demonstrate “sufficient cause” for requesting an extension of the mandate of the arbitral tribunal and therefore, this Sub-Section affords protection against abuse of this provision by the parties.

Applicability of Section 29A of Arbitration and Conciliation Act, 1966

Section 29A applies to all disputes that have been submitted before an arbitral tribunal in consonance with the provisions of the Act. This provision applies to both domestic and international commercial arbitrations. It has been added so that the arbitral award is delivered by the arbitral tribunal within a reasonable time. What this provision mandates is that an arbitral tribunal is obligated to deliver an arbitral award in the interval of 12 months from the date on which the pleadings before the arbitral tribunal were concluded, conditional upon a further extension of a maximum period of 6 months by accord of the parties. On failure to deliver the arbitral award within the required period, the mandate of the arbitral tribunal would expire, and it would not be able to further progress with the issue regardless of the stage of proceedings.

Some of the cases dealing with the nature and application of Section 29A are as follows:-

In ATC Telecom Infrastructure v. Bharat Sanchar Nigam Ltd. (2023), petitions were submitted to the Delhi High Court under Section 29A (4) requesting an extension of time for completing the arbitral proceedings and delivering the arbitral award. In relation to the contract between the parties, an order was passed on 19.05.2021 and an order was passed on 27.05.2022 for adjudication of the additional disputes that arose among the parties by the arbitral tribunal. The arbitral proceedings conducted following the order on 27.05.2022 were a matter of consideration before the Court. The arbitral proceedings were at an advanced stage and the sole arbitrator acted in a timely manner. The application for an extension of proceedings was submitted with the accord of both parties. The Court found that, in regard to the circumstances, there was no restriction on granting a suitable extension of time for the conclusion of the arbitral proceedings and delivering the arbitral award. 

In ONGC Petro Additions Limited v. Fernas Construction Co. Inc (2020), the Delhi High Court said the Amendment of this Section on the advice of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India and by implementing the advice of the Committee, the legislature restricted the application of Section 29A to domestic arbitrations only and excepted international commercial arbitrations from the scope of the statutory time period provided in the provision. The Court ruled that the provisions of Section 29A(1) applied to all undecided arbitrations seated in India as of August 30, 2019, and started after October 23, 2015. The Court further elucidated that the arbitral tribunal shall not be restricted to time limit stipulated by the order dated 25.09.2019 if the proceedings are in the nature of international commercial arbitration. 

Objective of Section 29A of Arbitration and Conciliation Act, 1966

Section 29A is intended to make the parties aware of the need to conclude the arbitration proceedings within a reasonable time. It is not aimed at a party to ask for the replacement of an arbitrator just for the reason that the party has concerns about the conduct of the arbitration proceedings by the arbitrator. The sole reason for the dismissal of an arbitrator in this provision is that the arbitrator is unsuccessful in proceeding with the adjudication process expeditiously.

The purpose of this provision was to provide a “time-limit for the arbitral award” as there was growing exigency for ending the delay in proceedings, as well as to make sure that arbitration proceedings are conducted within a specified period to make sure that India becomes a hub for both domestic and international arbitrations.

However, many argue that this provision takes away party autonomy, which is central to arbitration. It is often contended that the parties should be free to ascertain the timeline of the arbitration process. Another concern is that this provision brings greater judicial intervention into the arbitration process.

Challenges of Section 29A of Arbitration and Conciliation Act, 1966

This Section also poses certain challenges when it comes to its interpretation and application:-

  1. In complicated and technical matters, the term of conclusion of pleadings may be above six months. Section 29A lays down the starting date for the purpose of calculating twelve months, which is the date on which the pleadings have ended, as provided under subsection (1) and subsection (3). The period that has been specified under subsection (1) and (3) of this Section may be considered too short since the arbitrators may deal with matters that may take time to decide. Highly complex and technical matters may require careful consideration and evaluation by the arbitral tribunal and this may take time. Therefore, the time limit that has been stipulated under this Section may be regarded as short in such matters of a complicated nature. 
  2. Party autonomy is key to arbitration. The parties should be able to decide the time limit of the arbitration proceedings. When other things, like the composition of the arbitral tribunal, governing law, etc., are decided by the parties, the time within which the arbitral award should be delivered should also be decided by the parties. 
  3. Like other means of alternative dispute resolution, arbitration is also favoured by the parties because it lacks court intervention. But, under this provision, the court has been vested with major powers, thus making court intervention inevitable.
  4. The issue as to which court shall have jurisdiction under the Section. This has been a major point of contention.  

Judicial approach

As regards which court has jurisdiction under this Section, two cases are important:-

In K.I.P.L. Vistacore Infra Projects J.V v. Municipal Corporation of the City of Ichalkarnji (2024), a disagreement arose amongst the parties and the arbitrator, whom the High Court nominated as per  Section 11 of the Act. Subsequently, an application for an extension of the mandate of an arbitral tribunal as per Section 29A of the Act was submitted to the court. An objection was raised on the validity of the petition. The Court said that in relation to Section 29A as far as domestic arbitrations are concerned, the “Court” mentioned in Section 2(1)(e) is the High Court that has the authority to extend the mandate of the arbitrator and replace the arbitrator. The word “Court” used in this provision must be construed in a contextual sense to conform with the objective of the legislature and to avoid conflict with Section 11.

In D.D.A v. Tara Chand Sumit Construction Co. (2020), the Court ruled that Section 29A empowers the “Court” to adjudicate the application for an extension to replace the arbitrator. Thus, if the appointment of the arbitral tribunal was made by the High Court, it would be the High Court that would be able to replace the arbitrator and not the District Court. As far as international commercial arbitrations are concerned, such authority is bestowed upon the Supreme Court.

Recent case laws

Tata Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd. (2023)

Facts

In this case, the Apex Court elaborated on the applicability of Section 29A. In 2006, the applicant, respondent no. 1, and Tata Teleservices Ltd. (TTSL) entered into a Share Subscription Agreement (SSA) for the issuance and allotment of shares of TTSL to respondent No. 1. Afterwards, through another SSA, NTT Docomo Inc. (Docomo) acquired 26% of the equity shareholding of TTSL through a mix of primary and secondary shares. In 2009, through a Secondary Share Purchase Agreement (SSPA), Docomo acquired 20.740 million shares of TTSL from respondent No.1. In this regard, an inter-se agreement documenting the understanding reached amongst the parties in the SSA and SSPA was signed. This agreement also stipulated for the purchase of shares by Respondent No. 1 in case of the sale of equity shares by Docomo. Docomo decided to sell off the equity shareholding. 

When conflict ensued between the applicant and Docomo, the latter decided to resort to arbitration according to the rules of the London Council of International Arbitration. In the arbitral proceedings, the award was made against the applicant, mandating them to pay Docomo and acquire shares put in by it. As determined among the parties, respondents No. 1 and 2 were asked to conform to the conditions stated in the agreement. On the respondents’ default to do so, arbitration as stipulated by the agreement was referred.

The parties in the initial meeting concurred on the extension of the arbitrator’s mandate for 6 months. But, because of some unforeseen circumstances, the proceedings were delayed and the applicant submitted an interim application for a necessary extension of the mandate because of the amendment in Section 29A.  

Issues

Is the amended Section 29A of the Act applicable prospectively or retrospectively?

Judgement

The provisions of Section 29A, added in 2015, were prospective in character on account of Section 26 of the 2015 Amendment Act. However, the Court said that Section 29A gave rise to new conditions in relation to a proceeding that had already begun because it laid down a stringent time limit for delivering the arbitral award. The amendment is remedial in character as it makes an exception for international commercial arbitrations from the restrictive timeline of 6 months. International commercial arbitrations may be excluded from the scope of time frames stipulated in Section 29A. However, the legislature has not explicitly excluded the applicability of subsection (3) and (4) of Section 29A to international commercial arbitration. The Supreme Court ruled that the amended Section 29A applies retrospectively to this case. The sole arbitrator may lay down suitable procedural instructions for an extension of time while trying to dissolve the dispute quickly. Further, the respondent’s contention that the amended Section 29A would not apply to international commercial arbitration was deemed invalid by the Supreme Court. The substantive portion of Section 29A(1) makes it clear that the period of twelve months is not compulsory for international commercial arbitration but is directory in nature.

Rohan Builders (India) Private Limited v. Berger Paints India Limited (2023)

Facts

In this case, the subject matter was whether the Court could extend the timeline of the arbitral proceeding under Section 29A(4) after the mandates had been terminated. In the present case, CIRP proceedings were commenced as per the Insolvency and Bankruptcy Code, 2016 against the petitioner. The petitioner tried to benefit from the order passed by the NCLT approving the resolution plan of the petitioner. The dates cited by the petitioner and the respondent clearly indicated that the mandate ceased prior to the order made by the NCLT. It was revealed that the Resolution Professional nominated under the IBC proceeded with the arbitration even during CIRP under the IBC.

Issues

Whether the Court can extend the decision of the arbitrators as per Section 29A(4) after the mandates have expired?

Judgement

The Supreme Court noted that the 176th Report of the Law Commission envisaged introducing the idea of “suspension of mandate” to the proposed Section 29A and being applied for the intervening period between “termination of mandate” and “filing of an application for the extension of the mandate.” The Law Commission therefore put forward that subsequent to the cessation of the arbitrator’s mandate to deliver an award as per Section 29A (1) or (3), the mandate would remain deferred till an application is presented for extension of the mandate under Section 29A (4). The “suspension of mandate” was, however, removed from the subsequent Law Commission Report and finally from the Section as amended on 23.10.2015. A simple interpretation of Sub-Sections (5) and (6), together with the use of the term “extend” in its various forms in Section 29A(4), means that the mandate of the arbitral tribunal should be in existence at the time of submitting the application for extension of the mandate under Section 29A(4). The terms applied in a statute should be interpreted in their literal sense, giving due consideration to the “contextual placement” as well as the legislative intent.

It was observed by the Court that Sub-Section (4) refers to the power of the court to extend the “period so specified” either before or subsequent to the expiry of the period, as stated in Sub-Section (1) or Sub-Section (3). There are two significant characteristics in Section 29A(4) :-

  • The phrase “unless the court has either prior to or after the expiry extended the period” is not in respect to any application presented for extending the arbitrator’s mandate.
  • The court can extend the term when the application for extension has been filed while the mandate of the arbitrator is still in force. This elucidation is in consonance with the second proviso to Section 29A (4).

The scheme of Section 29A of the Act increases the pace of the arbitration proceedings. The purpose of the Act in general and this Section is to expedite the arbitration proceedings and to ensure that the arbitral award is delivered in a timely manner. This provision contemplates the delivery of the arbitral awards within the stipulated statutory time limits. The time limits should be interpreted as compulsory limits and the arbitrators as well as the parties should be observant of the cut-off dates while applying for the extension of the mandate of the arbitral tribunal. The court can pass an order allowing extension only on sufficiency of cause. The Supreme Court held that the mandates, in this case, ceased prior to the applications for extension being presented. The Court is therefore precluded from extending the mandate.  

Wadia Techno-Engineering Services Ltd. v. Director General of Married Accommodation Project (2023)

Facts

In this case, three petitions were submitted under Section 29A for extension of the proceedings of arbitration by the arbitrator, who was deciding disputes between the parties under three contracts issued under separate letters of acceptance dated 22.05.2009. It was said that the mandate of the arbitrator expired on 20.03.2023 an extension was sought for a term of six months.

The arbitration proceedings started following a common order passed on 23.08.2021. The arbitrator increased the time for submitting a Statement of Defence (SOD) and Counter Claim (CC) by three weeks, that is, till 24.02.2022. After that, by an order dated 13.05.2022 in cases no. 1 and 3, the SOD and CC were removed from the record by the arbitrator because they had not been paid the required costs and fees. In all three cases, the arbitrator also gave orders for the payment of the required fees and allowed a period of six weeks before the CC would be considered.

Owing to the respondent’s reluctance to extend the mandate voluntarily, in terms of Section 29A(3) of the Act, the arbitrator left it up to the parties to take recourse available in law.

The reason for opposing the extension in the petitions was that further proceedings in arbitration would make the abovementioned petitions ineffective. The respondent also wanted a replacement of the arbitrator in case the mandate of the arbitration proceedings was extended. The respondents also requested that the Court consider their SOD and Counter-Claim which were removed from the record.

Issues

  1. Should the mandate of the arbitrator be extended?
  2. Was the respondent’s request for the replacement of the arbitrator, valid?

Judgement

The Court found that there was enough cause for the extension of the mandate of the arbitral tribunal. The respondent’s request for the replacement of the arbitrator was deemed unsustainable. The Court also imposed costs under Section 29A(8) on the respondent to be paid to the petitioner.

Critical analysis of Section 29A of Arbitration and Conciliation Act, 1966

Section 29A of the Act was added by the amendment of 2015. It was again amended in 2019. The impact of both of these amendments is that in matters of arbitration other than international commercial arbitration, a fixed timeline has been provided within which an arbitral award must be delivered. It is also laid down under Section 29A(3) that the parties can, with their consent, increase the time limit for delivering the award for an additional period not exceeding six months. If the award is not delivered within the timeline of one and a half years, then the mandate of the arbitral tribunal shall cease. The court can, in its discretion, extend the period.

Under subsection (5), an application can be presented by the parties seeking an extension of the arbitration proceedings. However, it must be kept in mind that such extensions shall be permitted only on “sufficient cause.” This means that any party to the arbitration proceedings cannot seek an extension of the statutory time limit on unreasonable grounds to render the decision in their favour or to vitiate or sabotage the proceedings. The time limits stipulated under this Section must be construed as mandatory limits. Both the parties and the arbitrators should intend to abide by these statutory limits while applying for an extension of time.

This provision also provides discretion for the court to contemplate whether to replace an arbitrator or all the arbitrators under Section 29A(6). The court may do so when extending the time mentioned under Sub-Section (4). In the event, that such replacement is made, the arbitral proceedings shall recommence from the stage arrived at so far and based on material already gathered. This provision allows the court to replace the arbitrator(s) if it considers them the reason behind the delay in declaring the arbitral award. This provision permits the arbitration proceedings to resume from the stage already reached and thus allows the court to replace the arbitrator(s) without hampering the proceedings. If arbitrators are appointed under this Section, the arbitral tribunal will be held to be in continuance of the formerly designated arbitral tribunal. 

Section 29A(9) says that an application submitted in accordance with Sub-Section (5) shall be discharged as swiftly as practicable. The court shall try to discharge the matter within a term of sixty days from the date the notice is served. Sub-Section (9) is in line with the general intention of the provision to ensure the conclusion of the arbitration proceedings and the pronouncement of the arbitral award within a reasonable time. 

However, there are some drawbacks to the scheme of this Section. Sometimes, disputes of very technical and complicated nature may be referred to arbitration. These disputes may take time to be resolved conclusively. Therefore, placing a statutory time limit on the arbitrator(s) may reduce the efficacy of the arbitration process, as it is likely that the arbitrators or the parties may try to conclude the proceeding in a hurry. Another concern is that this provision allows too much judicial intervention, thus defeating one of the main purposes of arbitration – to resolve disputes conclusively without going through the rigours of a court proceeding.

The aim of Section 29A of the Act is to prescribe and stipulate the timeframe for the completion of the arbitral proceedings. But, on analysing this provision, it becomes evident that it does not consider any rigid deadline for the conclusion of arbitral proceedings. It affords flexibility to the parties as well as the court for extension of the term in suitable cases. The substance of this provision is not to limit the ability of the parties to resolve the dispute or to prevent an extension of time even when necessary. The real intention behind the provision is not to set an outright prohibition on the extension of time. The court has the authority to provide an extension before the expiration of the mandate if there are valid reasons. The purpose of this provision is to prevent delays before the arbitral tribunal. If the award is not passed within a reasonable time, the parties can approach for an extension of time. However, a party is not allowed to present an application under Section 29A(4) for increasing the time period after the expiry of the mandate. The parties as well as the arbitral tribunal should be mindful of the statutory limit set out in the Section and try to resolve their disputes expeditiously and in an efficient manner.

Conclusion

Section 29A was added to the Arbitration and Conciliation Act, 1996, in 2015 to ensure that arbitral awards are delivered in a timely manner. One of the major issues that the Arbitration and Conciliation (Amendment) Act, 2015, sought to address was the problem of delayed adjudication that afflicted the majority of arbitration proceedings in India. To address the issue, certain time limits were prescribed by this amendment within which the arbitral tribunal may award. This provision was introduced so that arbitration proceedings could be completed expeditiously.

This provision stipulates a statutory period of 12 months during which an arbitral award must be pronounced. However, the parties may mutually accord to extend the term of making the award to an additional six months. In the event that the award is not made in the statutory period, the decision of the arbitrators shall expire. The parties may present an application to the court requesting an extension of the time-limit and the court shall permit such an extension if there is “sufficient cause” for extending the period of pronouncing the award in its view.

This Section also empowers the court to replace one or all of the arbitrators while considering an application for an extension of time. However, this provision contains certain measures to ensure that continuity is maintained even if an arbitrator is replaced. Subsection (9) also places an obligation upon the court to discharge an application made in accordance with this Section as quickly as possible.

This Section was introduced to make sure that arbitration remains a viable option for parties who want to resolve disputes in a fast and efficient manner. However, there are concerns about “party autonomy” and “judicial intervention” which need to be addressed. The power of the court to extend the time limit for delivering the arbitral award beyond the stipulated time under subsection (5) gives too much discretion to the court. It takes away the power of the parties to decide the timeline of the proceedings. This provision is, however, an important measure to make sure that there are no unnecessary delays or hold-ups in making the arbitral award.

Frequently Asked Questions (FAQs)

What is an arbitral award?

An arbitral award is the decision of an arbitral tribunal in relation to a dispute referred by the parties for declaring their respective rights, titles, or obligations under the arbitration agreement between them. It is binding upon the parties to the dispute.

What is the time limit for declaring an arbitral award under Section 29A?

Section 29A provides a time limit of twelve months from the conclusion of pleadings within which an arbitral award must be declared.

Is there any extension on the time limit available for delivering the arbitral award under Section 29A?

The parties can, with their mutual consent, agree to extend the time-limit for the pronouncement of the arbitral award for a term not exceeding six months under Section 29A(3). If an application is filed before the court under Section 29A(5), an extension of such time-limit may be permitted if there is sufficient cause. 

References

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