Section 29-A: The elusive quest for expeditious dispute resolution

Parties should not be permitted to seek extension of time under Section 29-A (4) of the Act merely by ‘consent’ and the extension of time ought to be granted only for ‘sufficient cause.’
Arbitration and Conciliation Act 1996
Arbitration and Conciliation Act 1996

In response to the long-standing criticism surrounding prolonged arbitration proceedings in India, the introduction of Section 29-A in the Arbitration and Conciliation Act, 1996 marked a pivotal moment. Section 29-A seeks to address the persistent issue of delays plaguing the arbitral process by setting forth a specific time limit for rendering arbitral awards.

Tracing the legislative footsteps

The Arbitration Act, 1940, in its First Schedule, stipulated that arbitrators shall make their award within four months after the reference is entered or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the court may allow. Section 28 of the 1940 Act provides for extension of time for making of an award either by way of consent of parties, or by approaching the court and seeking extension of time. However, the 1940 Act was criticised for not being able to provide for expeditious disposal.

The Law Commission of India, under the Chairmanship of Justice HR Khanna recommended certain amendments for expeditious disposal in the 76th Law Commission Report. The Report cautioned against indefinite extension of time by Courts and suggested that no extension shall be granted so as to allow the making of the award more than one year after entering on the reference unless the court for special and adequate reasons to be recorded in writing is satisfied that such extension is necessary. However, no such proposed amendments were brought in the statute or implemented.

The 1940 Act faced substantial criticism and its inadequacies necessitated replacement. Strangely, the 1996 Act lacked a provision analogous to Section 28 of the 1940 Act, or for that matter, any provision on the lines of amendments proposed by the 76th Law Commission. Consequently, arbitral proceedings under the 1996 Act did not serve the objective of ‘expeditious disposal’ as there was no limitation of time in passing awards.

Implementation of time constraints

Introduction of Section 29-A by way of the Arbitration & Conciliation (Amendment) Act, 2015 was a direct response to the concerns underscored in the 246th Law Commission Report. Section 29-A significantly modifies the power to grant extension of time in arbitration compared to the 1940 Act. It mandated passing of the award within a period of twelve months from the date of reference and restricted extensions to a maximum of six months. Moreover, the court's authority to extend this period is contingent upon the demonstration of sufficient cause and is subject to terms deemed just and appropriate by the court as per sub-section (5) of Section 29-A of the Act.

In addition to the termination of the arbitrators mandate resulting from their failure to deliver a timely award, the proviso to Section 29-A (4) of the Act also provides measures to hold arbitrators accountable through reduction of fee of arbitrators for each month of such delay. Section 29-A (6) of the Act also empowers the court to substitute the arbitrator/s when granting an extension, and proceedings will continue from the current stage based on the existing record and evidence.

The 2019 Amendment Act, in its endeavour to expedite arbitration process, amended Section 23(4) of the Act, to constrain the parties from extending filing of pleadings beyond six months from the date of receipt of written notice by the arbitrator. Section 29-A (1) of the Act was also further amended to permit passing of an award within twelve months of completion of pleadings, as stipulated in Section 23 of the Act, with the exception of international arbitration. Section 29A(4) of the Act was also amended by way of a proviso that mandates that the arbitrator shall continue till disposal of application before the court.

Striving for timely resolution

The introduction of Section 29-A in the Act and its subsequent amendments were specifically aimed at achieving the timely disposal of arbitration proceedings. The legislature introduced a framework in the form of Section 29-A reflecting its clear intention to all stakeholders that the arbitration proceedings must culminate into an award in a total maximum period of eighteen months [one year under Section 29-A (1) + six months under Section 23(4)].

However, in practice, it appears that Section 29-A of the Act has not been able to effect expeditious disposal of arbitration proceedings. Some of the reasons, amongst others, are as follows:

Protraction of arbitration proceedings by parties

Since the award must be made within twelve months from completion of pleadings, it becomes necessary to take a step back and assess Section 23 of the Act. The legislature in its wisdom uses the word “shall” in sub-section (4) of Section 23 to grant an upper time limit of six months for filing of statement of claim and defence. In doing so, it takes away the discretion from the parties, under sub-section (1) to agree for a period beyond six months. However, the Act is silent on the consequences that would ensue if the above time limit were not adhered to. As a consequence, the time limit for completion of pleadings is not complied with in many cases.

Parties to arbitration not only endlessly move applications for seeking time to complete pleadings, but are also permitted to amend as well as supplement their claim or defence “during the course of arbitration proceedings” unless the arbitrators consider it “inappropriate.” Although the Act clearly states that the parties are free to agree on the procedure and are as such not bound by the Code of Civil Procedure, 1908 (CPC), the amendment to pleadings/supplementing claimw must be viewed seriously and with circumspection. The amendments/supplementing of claims during the course of arbitration can have the potential effect of derailing the entire arbitration process.

In order to achieve expeditious resolution, the legislature should actively consider constraining the delays caused by parties in filing pleadings and amendments till the final stage of proceedings. Mere insertion of Section 29-A without corresponding amendments to other provisions will not effectively meet the objectives delineated under the Act.

Extension of time by ‘consent’ of parties

The provision of extending the mandate by way of mutual consent is constrained to sub-section (3) and for a maximum period of six months. Any petition under sub-section (4) for seeking extension of time must be tested independently on the anvil of “sufficient cause” and extension must be “on such terms and conditions as may be imposed by the Court.

The test of sufficient cause must align with the object of Section 29-A of the Act. So far, the courts have considered voluminous pleadings, advanced stage of arguments, ongoing evidence/cross-examination, impending pronouncement of award as sufficient causes to allow extensions.

Generally, the courts have refrained from reprimanding parties or arbitrators for causing the delay. However, the Delhi High Court in Wadia Techno–Engineering Services Limited. v. Director General of Married Accommodation Project, while extending the mandate of the arbitral tribunal, imposed costs of ₹30,000 on the respondents for their egregious conduct during the arbitral proceedings.

The Delhi High Court in Barasat Krishnagar Expressways Limited vs National Highways Authority of India also substituted the presiding arbitrator on the basis that the arbitration proceedings have not made much progress despite the fact that almost eighteen months had passed.

The period of eighteen months ought to be generally considered as the outer limit for passing of award, unless some compelling circumstances warrant extension of time. In other words, the benefit of extension of time under Section 29-A of the Act ought not to be granted as a matter of course, and the responsibility of the party or parties or the arbitrator/s responsible for delaying the arbitration proceedings must be necessarily examined. Moreover, consequences under Section 29-A (4), (6) and/or (8) of the Act must follow if the requisite deadline of eighteen months is not adhered to. This will go a long way in reducing the time consumed in passing of arbitral awards.

Time consumed in passing the arbitral awards

Notably, several parties approach the courts seeking extension on the ground that the arbitral award has been reserved. In dealing with such petitions, the courts in many judgments have adopted a liberal approach of extending the mandate of arbitral tribunal, perhaps with the view that substituting an arbitrator or the tribunal at the belated stage would only prolong the arbitration proceedings.

However, in a long line of judgments, including but not limited to Director General, Central Reserve Police Force v. Fibroplast Marine Pvt Ltd; Department of Transport, GNCTD v. Star Bus Services; and Harji Engineering Works Pvt Ltd v. M/s Bharat Heavy Electricals, it has been held that inordinate delay in making the award after reserving the same is against public policy and a valid ground for setting aside of an award under Section 34 of the Act.

Therefore, a more stringent route ought to be adopted while allowing extensions in such cases where there is huge delay in passing of award. What constitutes huge delay is again a matter of debate, to be seen in the facts of each particular case.

Conclusion

The power of courts under Section 29-A of the Act is supervisory to a limited extent to ensure that the objective of timely and expeditious disposal of arbitration proceedings is achieved. The parties should not be permitted to seek extension of time under S. 29-A (4) of the Act merely by ‘consent’ and the extension of time ought to be granted only for ‘sufficient cause.’ In doing so, such terms and conditions can be imposed as deemed necessary by the courts to ensure expeditious disposal. The terms and conditions could possibly include directing parties not to take any adjournments, fixing timelines for parties to lead evidence, as well as timelines for concluding arguments, passing of award etc, all while keeping in mind the principle of minimum judicial interference. This will ensure that the extended timelines are positively met by all stakeholders.

Ankur Mittal is a Delhi-based Advocate. He was assisted by Advocates Abhay Gupta and Ikshita Parihar.

Views are strictly personal.

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