Introduction and background
- The Arbitration and Conciliation Act, 1996
("Act") envisages a limited role for
courts as facilitators and overseers of the arbitration process,
through specific provisions which provide for their intervention at
various stages. To this end, the Act expressly defines the term
"Court" in section 2(1)(e) as:
"2. Definitions:- In this Part, unless the context otherwise requires.
- the principal civil court of original jurisdiction in a district and includes the High Court exercising its ordinary original jurisdiction."
- In this Part, unless the context otherwise requires.
- It merits mention in this regard that only the High Courts of
Delhi, Bombay, Madras and Calcutta are vested with ordinary
original jurisdiction. However, there are specific powers vested
only upon High Courts and the Supreme Court under the Act, one of
such power being the power of appointment of an arbitrator under
Section 11 of the Act. This gives rise to an anomalous situation
where in certain cases, the definition of the term
"Court" contained in Section 2(1)(e) of the Act is
materially different from the term "Court" used in is
applicable, other provisions such as sections 29-A of the Act. This
also causes an ambiguity in determining the appropriate Court
having jurisdiction to entertain applications arising out of
arbitration agreements as per section 42 of the Act.
- One specific anomaly that may arise is with respect to the
powers vested with courts for appointment of arbitrators, and for
extension of mandate of the arbitrator under Sections 11 and 29-A
of the Act respectively. Under Section 11 (2) of the Act, the
parties to an arbitration are free to agree upon a procedure for
appointment of an arbitrator. This is subject to Section 11(6) of
the Act, which provides that where such a procedure decided between
the parties fails, the parties shall be entitled to approach the
High Court, or the Supreme Court or an institution designated by
such High Court or Supreme Court in order to appoint an
arbitrator.
- Section 29-A of the Act which was inserted with effect from
23.10.2015 under the Arbitration & Conciliation Amendment Act,
2015 provides for the period within which the arbitration
proceedings are to be completed. As per sub-section (1) of Section
29-A, for all domestic commercial arbitrations, this period is 12
months from the date of completion of pleadings. Under sub-section
(3) of Section 29-A, this period of 12 months may be further
extended by 6 months by the parties through mutual consent.
However, if the award is not passed even within this extended
period, the parties shall have to approach the court under
sub-section (4) of Section 29-A in order to seek a further
extension of time for completion of the arbitral proceedings. While
passing an order for extension of the arbitrator's mandate
under Section 29-A, the court is also empowered to
replace/substitute an arbitrator, impose costs on one or both
parties for the delay, and adjust/reduce the fee of the arbitrator
if it finds that the proceedings have been delayed by the arbitral
tribunal.
- Keeping the substantive scope of powers under Section 29-A in
mind, it becomes relevant to examine as to which court which has
the power to entertain and dispose off petitions under Section 29-A
of the Act. Since the provision refers only to "court"
and does not specify the exact definition, it stands to reason that
the same refers to the term as defined under the Act itself i.e.
Section 2(1)(e) of the Act. It merits mention in this regard, that
Section 11(6) of the Act, expressly refers to the High Court and
the Supreme Court while providing for Courts having jurisdiction to
appoint arbitrators under the Act. Whereas, this reference is
absent in Section 29-A, thereby giving rise to the question as to
whether an application for extension of mandate of an arbitrator
may be filed before any Court as defined under Section 2(1)(e)
which is the principal civil court having jurisdiction in a
district, and not only the High Court or the Supreme Court. This
could present an anomalous situation, whereby an application
seeking extension of mandate of an arbitrator appointed by a High
Court or a Supreme Court, could come to be filed before a court
satisfying the definition under Section 2(1)(e) of the Act. This
poses an interesting question regarding whether the drafting of the
Act contemplates such a situation and invites an examination of how
various courts have interpreted Section 2(1)(e) of the Act.
This article attempts to examine how various Courts have interpreted the word "Court" used in Section 29-A of the Act as opposed to other provisions in Part-I of the Act.
- Section 29-A of the Act came to be inserted by the Amending Act
3 of 2016 and was further thereafter amended again by way of
Amendment Act 33 of 2019. Pursuant to the amendments, the
implication is that after the expiry of the time granted under the
Act to the tribunal to conclude proceedings, parties would have to
approach the court for seeking an extension of the mandate of the
tribunal.
- Section 29-A (4) of Act reads as follows:
"(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
[Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced."
Interpretation of the term 'Court'
- In terms of Section 2(1)(e) of the Act, court, not in the case
of international arbitration, means the principal civil court of
original jurisdiction in a district, and includes High Court
exercising ordinary original jurisdiction. Further, section 11(5)
and 11(6) of the Act relate to the appointment of the arbitrators
by the High Court or the Supreme Court, as the case may be. Unlike
the remaining Sections of the Act that use the word
"court", Section 11 specifically uses the words
"High Court" or "Supreme Court" as the case
maybe.
- Section 29-A of the Act provides the power to extend the
mandate of the arbitrator, which has expired or to substitute an
arbitrator. From the reading of Section
2(1)(e)of the Act, it is clear that in case of an arbitration
other than international commercial arbitration, the principal
Civil Court of original jurisdiction or the High Court, which
exercises its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter of
the arbitration, shall be the court. Ordinarily, the term defined
in Section 2(1)(e) of the Act in the context of the power to extend
the mandate of the arbitrator under Section 29-A(4) of the Act
would be with the principal civil court. However, the Courts have
consistently interpreted the term 'Court' in Section 29-A
to mean the various High Courts or the Supreme Court.
- The definition in Section 2 of the Act, like most other
definition starts with a qualification 'in this part, unless
otherwise requires'. As such, if the context, otherwise
requires that the said term should be understood differently, so
much joint in the play by the statute is not taken away. Under
Section29-A of the Act, the Court has the power to extend the
period of the arbitrator. While doing so, the Court could also
choose to substitute one or all the arbitrators and this is where
the definition of 'Court' contained in 2(1)(e) of the Act
does not fit. It is conceivable that the legislature would vest the
power in the Principal Civil Judge to substitute an arbitrator who
may have been appointed by the High Court or the Supreme Court.
1
- The Bombay High Court in Cabra Instalaciones Y. Servicios,
SA v. Maharastra State Electricity Distribution Company
Limited2, observed that for seeking extension of
the mandate of an arbitral tribunal, there are substantive powers
which conferred on the Court and more particularly when the Court
has to substitute one or all the arbitrators, which is in fact a
power to make appointment of a new/substitute arbitrator or any
member of the arbitral tribunal. Thus, the Bombay High Court
concluded that once the arbitral tribunal was appointed by the
Supreme Court exercising powers under section 11(5) read with
section 11(9) of the Act, it would only be the jurisdiction of the
Supreme Court to pass orders on application under Section 29-A of
the Act.
- In DDA v. Tara Chand Sumit Construction Co3, the
Delhi High Court has categorically held that filing of a petition
under section 29-A of the Act before the principal civil court for
substitution of an arbitrator who had been appointed by the Supreme
Court or the High Court would lead to a situation where the
conflict would arise between the power of superior Courts to
appoint arbitrators under Section 11of the Act and those of the Civil
Court to substitute those arbitrators under Section 29-A of the Act. The Delhi High Court
has thus interpreted the term "Court" in the context of
Section 29-A of the Act, to be a court which
has the power to appoint an arbitrator under Section 11 of the Act.
- Similarly, in Nilesh Ramanbhai Patel and Ors. v. Bhanubhai
Ramanbhai Patel and Ors.4, the Gujarat High Court
had considered Section 29-A of the Act and held that since the
provisions of Section 29-A of the Act empowers the Court in seisin
of such proceedings to substitute an arbitrator, "court"
used in section 29-A of the Act should be understood to be the
Court appointing the arbitrator.
- The Delhi High Court referred to the judgments of Gujarat High
Court in the matter of Nilesh Ramanbhai Patel and Ors. v.
Bhanubhai Ramanbhai Patel and Ors.5 as well as of
the Bombay High Court in the case of Cabra Instalaciones Y
Servicios, S.A. v. Maharashtra State Electricity Distribution
Company Ltd.6, for concluding that an application
under Section 29A of the Act seeking extension of mandate of the
arbitrator would lie only before the Court which has power to
appoint the arbitrator under Section 11 of the Act and not with the
Civil Court.
- The Division Bench of Kerala High Court rendered in Lots
Shipping Company Limited vs. Cochin Port Trust Board of
Trustees7held that the term "court"
contained in section 29A(4) requires a contextual
interpretation apart from the meaning contained in section
2(1)(e)(i) of the Act. The Court asserted that the contextual
interpretation is clearly permissible in view of the rider
contained in sub-section (1) of Section (2), "unless the
context otherwise requires". Contextual interpretation is
required since the power conferred on the court under Section 29A, especially under sub-sections (4)
and (5), are more akin to the powers conferred on the Supreme Court
and the High Court, as the case may be, under Sections 11(6), 14
& 15 of the Act, for appointment, termination of
mandate and substitution of the arbitrator.
- The Allahabad High Court in Indian Farmers Fertilizers
Cooperative Limited v. Manish Engineering
Enterprise8, while agreeing with and citing the
above judgments in the context of arbitrations where the
arbitrators were appointed by the High Court or Supreme Court, has
differentiated a situation where an application for extension of
mandate is filed in respect of an arbitration where the arbitrator
was appointed by an authority other than the High Court or the
Supreme Court. The Allahabad High Court held that in such cases,
the principal district court having jurisdiction in terms of
Section 2(1)(e) will be entitled to entertain and decide
applications under Section 29-A as had been done in a coordinate
bench of the Allahabad High Court in Lucknow Agencies v. U.P
Avas Vikas Parishad9.
- Taking note of the principle enunciated herein above, the term
"court" used in Section 29-A(4)has to be given an contextual
and purposive interpretation, which may be in variance with the
meaning conferred to the said term under sub-section Section
2(1)(e)(i) of the Act.10
- In Amit Kumar Gupta v. Dipak Prasad11, the
arguments placed was since a petition under section 9 of the Act
had been filed and entertained by the District Court, the High
Court should not exercise jurisdiction under section 29-A of the
Act, in view of section 42 of the Act. The Court observed that the
word "court" used in section 29-A of the Act partakes the
character of the appointing authority as has been prescribed in
section 11 of the Act as the Court exercising jurisdiction under
section 29-A of the Act may be required to substitute the
arbitrator in the given case. The High Court of Calcutta confirmed
that the non obstante clause of section 42 will get attracted only
when the Courts are dealing with matters other than appointment and
removal of arbitrators under section 11 and section 29-A of the
Act.
- From the above judgment, it is clear that section 42of the Act will not be attracted and it is only the High Court which has the power to grant extension to the Arbitral Tribunal for making award.12
Conclusion
- The term "court" contained in section 29-A(4) of the Act has been provided a contextual interpretation apart from the meaning contained in Section 2(1)(e) of the Act. Section 42 of the Act only applies to application made under Part-I of the Act. It is clear from the mere reading of section 8 of the Act, where the application is made to judicial authorities and application under section 11 is made to Chief Justice or his designate, such applications would be outside the scope of section 42 of the Act. Applications under section 9 of the Act, being application made to Court and application under section 34 of the Act to set aside arbitral award are applications within section 42 of the Act. However, even though the word "Court" is used in section 29-A of the Act, various Courts have connoted different meaning to the word "Court" used in section 29-A of the Act and section 2(1)(e)(i)of the Act. The reasoning provided by the Courts is that the powers of substitution of an arbitrator are interpreted to be concomitant to the principal powers for granting an extension. Further, the absence of any provision for an appeal with respect to the exercise of power under Section 29-A of the Act, would indicate that such power is not to be exercised by the principal civil court of original jurisdiction.
- While Courts have through harmonious construction of Sections 2(e) and 29-A of the Act, provided a solution to the anomalous situation of overlap between the district courts and the High Courts in relation to exercise of powers under Section 2(e), 29-A and 42. There is still a need for the Act to be amended in order to bring in the same clarity into the statutory framework.
Footnotes
1. Nilesh Ramanbhai Patel & Ors. v. Bhanumahai Patel & Ors, Misc. Civil Application (O.J) No. 1 of 2018
2. 2019 SCC Online Bom 1437
3. 2020 SCC Online Del 2501
4. (2019)2 GLR 1537
5. supra
6. 2019 SCC Online Bom 1437
7. 2020 AIR (Kerala) 169
8. Indian Farmers Fertilizers Cooperative Ltd v. Manish Engineering Enterprises, 2022 SCCOnline All 150
9. 2019 ADJ Online 0169
10. Lots Shipping Company Limited v. Cochin Port Trust, 2020 SCC Online Ker 21443
11. 2021 SCC Online Cal 2174
12. Indian Farmers Fertilizers Cooperative Ltd v. Manish Engineering Enterprises, 2022 SCCOnline All 150
The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com