Can Allahabad High Court hear Section 29A application to extend time for arbitration? Question referred to larger bench

The question of which is the appropriate “Court” to hear applications to extend the time limit for arbitration under Section 29A of the Arbitration Act, 1996 was recently referred by a single-judge of the Allahabad High Court to a larger bench of the Court [Jaypee Infratech Limited v. M/S Ehbh Services Private Limited and another].The reference was made by Justice Shekhar B Saraf who opined that the Allahabad High Court (and by extension, all High Courts) has the jurisdiction to hear such applications.However, he noted that in the 2023 decision in A’Xykno Capital Services Private Limited v. State of UP, another single-judge of the High Court (Justice Manish Mathur) had opined that the Allahabad High Court did not have the jurisdiction to directly entertain such applications under Section 29A of the Act, since the Allahabad High Court does not have “ordinary original civil jurisdiction.”It may be noted that only five High Courts in India have ordinary original civil jurisdiction - the High Courts of Bombay, Madras, Calcutta, Delhi and Himachal Pradesh..Conflict of opinion on meaning of "Court" in Section 29A Section 29A of the Act lays down the time limit to render an arbitral award. The same provision also allows the parties to apply for an extension of time to pass this award by consent. Alternatively, "Court" can also extend the arbitration period on an application by any party to the dispute. Moreover, while extending the period for arbitration, it is also open to the Court to substitute arbitrators by invoking Section 29A (6). However, a question emerged as to which court is empowered carry out these functions. Section 29A does not expressly refer to “court” as being a “civil court” or a “High Court” or a “Supreme Court.”Therefore, in the A’Xykno Capital Services case, Justice Mathur relied on the definition of “court” in Section 2 (1)(e) of the Act to decide on this aspect. The said definition clause lays down that a “court”, in domestic arbitrations, is the “the principal civil court of original jurisdiction in a district”, which includes a High Court having “ordinary original civil jurisdiction.” Since the Allahabad High Court does not have “ordinary original civil jurisdiction”, Justice Mathur concluded that the Allahabad High Court cannot entertain (directly) any application under Section 29A of the Arbitration Act..However, Justice Saraf has now disagreed with this viewpoint. Justice Saraf pointed out that Section 2 of the Act itself begins with the phrase “unless the context otherwise requires,” which lends some flexibility in interpreting the terms found in the Arbitration Act..Justice Saraf reasoned that this phrase (“unless the context otherwise requires”) would be rendered meaningless if there was no room to deviate from the literal interpretation of the definitions when the context demands otherwise.While so, Justice Saraf opined that it would lead to absurd results if the term “court” as it appears in Section 29A, is rigidly and literally interpreted in line with Section 2 (1)(e).“The context of Section 29A of the Act necessitates a broader interpretation of this term (“Court”),” the judge said..He reasoned that it would violate the hierarchy of courts as well as Section 11 of the Act (wherein High Courts and the Supreme Court are empowered to appoint arbitrators) if High Courts are excluded from having the authority to entertain applications under Section 29A. This is more so since Section 29A also empowers “courts” to substitute arbitrators, which Justice Saraf opined was akin to the power to “appoint” arbitrators..Justice Saraf's conclusionsAfter examining numerous High Court judgments and Supreme Court judgments, Justice Saraf arrived at the following conclusions:If the arbitrator is appointed by the High Court or Supreme Court, the term “court” in Section 29A must be read as “High Court” in the case of domestic arbitrations and “Supreme Court” in the case of international commercial arbitrations. This would avoid a conflict between Sections 11 and 29A of the Act and preserve judicial hierarchy. The legislature never meant to empower civil courts/ commercial courts the power to substitute arbitrators under Section 29A (6) when the original appointment of the arbitrator was made by the High Court or Supreme Court. If a civil court/commercial court exercises powers under Section 29A of the Act in a case where the High Court or Supreme Court appointed the arbitrator(s), the same would create an anomalous situation wherein a Supreme Court or High Court appointee is subject to the supervision of a lower court. However, if the arbitrator was not initially appointed by the High Court or Supreme Court, the “court” as defined under Section 2 (1)(e) or the concerned civil court or commercial court can exercise powers under Section 29A of the Act, including the substitution of arbitrators..Questions referred to the larger benchIn view of the conflict of opinion, Justice Saraf referred the following questions for a conclusive decision by a larger bench of the High Court:1. In a case where the appointment of the arbitrator(s) has been made by the Supreme Court or the High Court, is it only the Supreme Court or the High Court respectively, that can hear an application under Section 29A of the Act?2. In a case where the appointment of the arbitrator(s) on an agreement between the parties (including statutory appointments under MSMED Act, NHAI Act, etc.) and not by the High Court or Supreme Court, the “court” as defined under Section 2(1)(e) of the Act can exercise the powers under Section 29A of the Act, including the power of substitution contained in Section 29A(6) of the Act?.The registry of the Court was directed by Justice Saraf to place the matter before the Chief Justice for the constitution of a larger bench as per the Allahabad High Court Rules. The two arbitration matters before the judge, in which the legal questions arose, were adjourned indefinitely until the larger bench decides on the reference. Advocates Rohan Gupta and Kashif Zaidi appeared for the applicants. Advocate Sudhanshu Kumar represented the respondents..[Read Judgment]