Alerts & Updates 17th Apr 2023

The Conundrum of Procedure: Extension of the mandate of the Arbitral Tribunal. Who has jurisdiction?

Authors

Ashishchandra Rao Partner | Mumbai
Atharva Diwe Associate | Mumbai

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  • Introduction

    It is an emerging trait in new-age contracts to include arbitration and/or mediation clauses hoping that the institution of such clauses would provide for a cost and time efficient mechanism for resolution of disputes. However, this has seldom been the case. It is only after commencing arbitration that the parties realize that timelines are rarely followed, and extensions are astonishingly common. It is at this juncture, the parties wonder about the forums and criteria to seek such extensions.

    These questions consequently prompted this article to delve deeper and understand the process of extending timelines for ongoing arbitrations in India. The provision for extension of ongoing arbitrations can be found in Chapter VI of the Arbitration and Conciliation Act, 1996 (“the Act”) under the caption of “Making of arbitral award and termination of proceedings”. Section 29A was introduced vide the Amending Act 3 of 2016 and came into effect on 23 October 2015. On a bare reading of Section 29A, it is amply clear that the section provides for an entire procedure vis-à-vis extension/ substitution of the arbitral tribunal.

    For obtaining extension of arbitration proceedings under Section 29A of the Act, one must satisfy two criteria in court: (i) the application has been filed before the correct forum; and (ii) there is sufficient cause for extension. Whilst the extension of arbitration proceedings on the basis of sufficient cause depends solely on the facts of the case, it is imperative that one first identifies the correct forum for seeking such an extension.

    Largely, there have been two schools of contrasting interpretation that have been discussed in multiple cases by various High Courts. While one school interprets the definition of “court” in the literal sense wherein Section 2(1)(e) is strictly construed to say that the District Court is also empowered to direct extensions and substitutions under Section 29A; the other insists that only the High Courts and the Supreme Court are empowered to direct extensions and substitutions under Sections 11, 14, 15 and 29A.

  • Literal Interpretation of “court”

    The Kerala High Court[1]Bombay High Court[2] and the Orissa High Court[3] interpreted the term “court” strictly and literally as defined under Section 2(1)(e). All these High Courts held that in cases where the High Courts were unable to exercise their ordinary original civil jurisdiction, the District Courts being the principal Civil Courts would have the jurisdiction to extend/ substitute the mandate of arbitral tribunals under Section 29A. .

    The Gauhati High Court[4]Kerala High Court[5] and the Bombay High Court[6] addressed these questions and held that where the parties mutually appoint the arbitral tribunal, then the procedures of Section 11, 14 and 15 become distinguishable.  Therefore, under Section 29A of the Act, the term “court” should be interpreted in the literal sense, hence, empowering the District Courts to substitute/ extend the mandate of the tribunal. The said High Courts seek to make a classification and division of powers on the basis of the method in which the arbitral tribunal was initially appointed. However, on a plain and simple reading of the section itself, such a distinction or a classification is not available in Section 29A. Having arrived at the conclusion that the jurisdiction to extend the mandate of the Tribunal under Section 29A, would be with the High Court in the case where the initial appointment was under Section 11, no other contrary conclusion could have been arrived at, even in the case of mutual appointment of arbitrator.

  • Purposive Interpretation of “Court”

    A strict and literal interpretation of the term “court”- with reference to the jurisdiction of courts under Section 29A – is erroneous and fails to consider the intention of the legislature in empowering courts to substitute/ extend the mandate of the tribunal, after the expiry of the statutory period provided in Section 29A(1) and (3). In Shailesh Dhairyawan v Mohan Balakrishna Lulla[7], as also in various other judgments, the Supreme Court has emphasized that ‘purposive interpretation’ or ‘purposive construction’ is necessary in order to attach meaning to the provisions which will serve the “purpose” behind the provision. Therefore, to avoid any inconsistencies within the Act, Section 2(1) begins with a caveat, “in this Part, unless the context otherwise requires…” suggesting that the definitions provided herein should not be result in situations which would defeat the intention of the legislature. The Andhra Pradesh High Court[8], Allahabad High Court[9], Kerala High Court[10]Delhi High Court[11] and Calcutta High Court[12] held that the term “court” under Section 29A has to be read along with Sections 11, 14 and 15 to realize the true intent of the legislature. Since Section 29A also empowers the court to substitute and/or extend the mandate of the arbitrator(s), it is pertinent to compare this authority of the court with the jurisdiction of the High Court under Sections 11, 14 and 15. Section 11(6) read with Section 11(12) unambiguously states that the appointment of arbitrator(s) in cases other than international commercial arbitration shall be the exclusive jurisdiction of High Courts. Under Section 29A(6) of the Act, the “court” is granted the power to substitute the arbitral tribunal thereby bestowing the power to appoint new arbitrators as is provided for under Section 11 of the Act. This would imply that the “court” under Section 11 and “court” under Section 29A would necessarily need to be the same “court”, i.e. the High Court. Therefore, it is unlikely that the legislature would envisage a situation where the arbitrator(s) is appointed by the High Court or the Supreme Court and a reference is made to the District Court for extension and/ or substitution under Section 29A. Furthermore, it would be in the teeth of the provisions of Section 11 of the Act if any other court other than the High Court, was empowered to substitute the appointments made by the High Court itself.

    Interestingly, in the case of Indian Farmers[13]Lots Shipping[14] and Ekk and Co.[15], various High Courts have expressly recognized the extent of jurisdiction of the principal Civil Courts to be restricted to petitions under Sections 9 and 34 and do not extend to petitions under Sections 11, 14, 15 or 29A.

  • The Conundrum

    The Bombay High Court in the case of Cabra Instalaciones Y Servicios, S. A[16] and the Gujarat High Court in the case of Nilesh Ramanbhai Patel & Ors.[17] have provided well-reasoned judgments on the interpretation of the term “court” under the Act and held that only the High Courts will have jurisdiction to try and entertain applications under Section 29A. However, there still exist varied interpretations of the term “court” as interpreted by various High Courts. In fact, the Bombay High Court, in a later judgment, of a coordinate bench in the case of Magnum Opus IT Consulting Private Limited[18]  has, in fact, held to the contrary and proceeded to make a distinction between the jurisdiction of the High Court and the District Court under Section 29A of the Act, on the basis of initial appointment of the arbitral tribunal. The Kerala High Court in the case of Ekk and Co. [19](Single Judge) has distinguished the proposition of law laid down by the division bench of the Kerala High Court in Lots Shipping[20], to state that in the case of Lots Shipping, the initial appointment of the arbitrator was under Section 11 of the Act and therefore, where there initial appointment of the arbitral tribunal was by mutual consent of parties, the application under Section 29A could be made to the District Court.

  • Conclusion

    The Arbitration and Conciliation Act being a central legislation always intended to uniformly regulate the practice and procedure of arbitration proceedings throughout the territory of India. It would indeed be incongruent to the intention and purpose of the Act where different High Courts interpret the provisions of the Act differently, especially with regard to procedure for appointment and/or substation of arbitrator(s) as well as extension of the mandate of a tribunal under Section 29A of the Act. Certain High Courts, while interpreting the term “court” provided in Section 29A to mean “court” as defined in Section 2(1)(e), in our opinion, have lost sight of the intention of the legislature, which very specifically provides to confer jurisdiction on the High Court to appoint arbitrator(s) and/or substitute them under Section 11, 14 or 15. To interpret “court” as provided in Section 29A of the Act to mean the definition provided under Section 2(1)(e) would lead to a complete absurdity. The jurisdiction under Section 29A of “court” has to necessarily partake the character of the jurisdiction of the High Court to appoint arbitrator(s) under Section 11 of the Act.

    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:

    Ashishchandra Rao, Counsel – Email – ashishchandrarao@elp-in.com
    Atharva Diwe, Advocate – Email – atharvadiwe@elp-in.com

  • References:

    [1] M/s. URC Construction Private Limited v M.s BEML Limited 2017 (4) KER LT 1140
    [2] Chief Engineer v Devdatta P. Shirodkar 2018 SCC OnLine Bom 368
    [3] Liladitya Deb v Tara Ranjan Pattanaik 2021 SCC OnLine Ori 928
    [4] Aplus Projects and Technology (P.) Limited v Oil India Limited (2020) 1 Gauhati Law Reports 99
    [5] Ekk and Co. v State of Kerala 2020 SCC OnLine Ker 23002
    [6] Magnum Opus IT Consulting Private Limited v Artcad Systems Civil Writ Petition No. 1090 of 2021
    [7] (2016) 3 SCC 619
    [8] K. V. Ramana Reddy v Rashtriya Ispat Nigam Limited 2023 SCC OnLine AP 398
    [9] Indian Farmers Fertilizers Cooperative Limited v Manish Engineering Enterprises 2022 SCC OnLine All 150
    [10] Lots Shipping Company Limited v Cochin Port Trust AIR 2020 KER 169; 2020 SCC OnLine Ker 21443
    [11] DDA v Tara Chand Sumit Construction Co. O.M.P. (Misc.) (Comm.) 236/2019
    [12] Amit Kumar Gupta v Dipak Prasad 2021 SCC OnLine Cal 2174
    [13] Supra note 10
    [14] Supra note 11
    [15] Supra note 6
    [16] 2019 SCC OnLine Bom 1437
    [17] (2019) 2 GLR 1537
    [18] Supra note 7
    [19] Supra note 6
    [20] Supra note 11

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein