Alerts & Updates 14th Jun 2022

Supreme Court sets timer for disposal of pending applications under Section 11 of the Arbitration Act

Ria Dalwani Principal Associate | Mumbai

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SUPREME COURT SETS THE TIMER FOR DISPOSAL OF PENDING APPLICATIONS UNDER SECTION 11 OF THE ARBITRATION ACT : IF APPLICATIONS UNDER SECTION 11(5) AND 11(6) OF THE ARBTIRATION ACT HAVE BEEN PENDING FOR MORE THAN ONE YEAR, THE HIGH COURTS ARE TO ENSURE THAT SUCH APPLICATIONS ARE DECIDED WITHIN SIX MONTHS.

SHREE VISHNU CONSTRUCTIONS V. THE ENGINEER IN CHIEF MILITARY ENGINEERING SERVICE & ORS. [1]

  • Background

    In Shree Vishnu Constructions, the Supreme Court observed that the impugned judgement was passed by the High Court for the State of Telangana (High Court) in an application under section 11[2] of the Arbitration and Conciliation Act, 1996 (the Act) after a period of 4 years from the date of filing[3].

    Recognizing the delay in disposal of applications under section 11 of the Act, by an order dated April 1, 2022 the Supreme Court directed the registry of the High Court to submit a report listing the number of applications pending under section 11 of the Act and the year from which such applications have been pending.

    Upon receiving the report, the Supreme Court identified that applications under Section 11 of the Act were pending since 2006. The Supreme Court observed that if the applications under Section 11(6) of the Arbitration Act were not decided within reasonable time, more particularly within one year from the date of filing, the objective of the Act would be frustrated.  In the circumstances, by an order dated April 21, 2022, the Supreme Court directed the registry of all the High Courts to submit a report of the pending applications under Section 11(6) of the Act.

  • Observation by the Supreme Court

    Upon receiving the reports, through an Order dated May 19, 2022, the Supreme Court expressed its concern over applications under Sections 11(5) and 11(6) of the Act that remained pending for more than four to five years before many High Courts. The Supreme Court inter alia observed that:

    • If the arbitrators are not appointed at the earliest and applications under Sections 11(5) and 11(6) of the Act are kept pending for a number of years, the purpose of the enactment would stand defeated and the objective of effective Alternative Dispute Resolution Mechanism would be diluted.
    • If commercial disputes are not resolved at the earliest, not only it would affect the commercial relations between the parties, but it would also affect the economy and the ease of doing business in the country.
    • As per the amended Act, the award shall be made within a period of one year.[4]
    • Therefore, the applications under Sections 11(5) and 11(6) of the Arbitration Act and other applications, either for substitution and/or change of the arbitrator must be decided at the earliest.

    In these circumstances, the Supreme Court requested all the Chief Justices of the respective High Courts to ensure that all pending applications under Sections   11(5)   and   11(6)   of   the   Act   and/or   any   other applications   either   for   substitution   of   arbitrator   and/or   change   of arbitrator, which are pending for more than one year from the date of filing, be decided within six months from the date of the order i.e., May 19, 2022. The Supreme Court directed the registrar general(s) of the respective High Courts to submit compliance reports on the completion of six months from the date of the order.

    Further, the apex court observed that an endeavor shall be made by the respective High Courts to decide and dispose of applications under Sections 11(5) and 11(6) of the Act and/or any other like application at the earliest, preferably within a period of six months from the date of filing of the applications.

  • ELP Comments

    The recognition of prolonged delay in disposal of applications under section 11 of the Act, coupled with the directions to accelerate speedy disposal, is a welcome move for applicants who have sought court assistance for appointment of the tribunal. Given the backlog of cases before the courts due to the difficulties arising during the covid-19 pandemic, these directions vis-à-vis applications under Section 11 (5) and 11 (6) are likely to bring much needed relief.

    We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com  or write to our authors:

    Ria Dalwani, Principal Associate– Email – RiaDalwani@elp-in.com

  • References

    [1] Order dated 19.05.2022 passed by the Supreme Court in SLP (C) No. 5306 of 2022.
    [2] Section 11 of the Act, Appointment of arbitrators
    [3] Order dated 01.04.2022 passed by the Supreme Court in SLP (C) No. 5306 of 2022.
    [4] Section 29-A. “Time-limit