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Arbitration

arbitration

Arbitration is an adjudicatory process in the nature of adversarial proceedings wherein parties submit their disputes to a neutral third party (arbitrator) for a decision. The proceedings, similar to litigation are however, faster, confidential and more flexible in procedure and application of rules of evidence. The parties have the independence to draw out the same in the agreement to arbitration.

Arbitral decisions are final and binding on the parties with very limited scope of objecting to them. Arbitration n is now the principal method of resolving international disputes involving states, individuals, and corporations. This is one of the consequences of the increased globalisation of world trade and investment. It has resulted in increasingly consistent arbitration practices by specialised international arbitration practitioners who speak a common procedural language. (Referred in ‘Redfern and Hunter on International Arbitration, USA 2015’).

The Arbitration & Conciliation (Amendment) Act, 2019(“the 2019 Amendment”), which amends the Indian Arbitration & Conciliation Act, 1996 (“the Act”), came into force with effect from 9 August 2019. It has been observed that the government intended to make India a hub of domestic and international arbitration by bringing in changes in law for faster resolution of commercial disputes as quoted by The Law Minister of India was  in one of the press releases.

Ever since the enactment of Arbitration and Conciliation Act 1996 (“Act”), Indian Legislature has been showing its intent to keep pace with the growing popularity of arbitration as preferred mode of dispute resolution in commercial matters. Two recent amendments in the Act bear testimony to India’s commitment to make India conducive for international and domestic arbitrations.  The latest amendment of 2019, received the assent of the President of India on 9th August, 2019, provides for important changes, crucial ones are discussed in this blog.

Time bound Arbitrations (with special emphasis on Section 29- A) The 2019 Arbitration Amendment Act has introduced noteworthy modifications to the Arbitration and Conciliation Act, 1996 while significantly tweaking some of the formulations introduced by impression of the Arbitration and Conciliation (Amendment) Act, 2015. Section 29A of the 2015 Amendment Act, which provided a 12-month timeline for completing an arbitration starting from the date the tribunal entered reference, was criticized because of its rigidity. The 2019 Amendment Act allows more flexibility by providing that the 12-month period must start from the date of completion of pleadings, exempting international commercial arbitration from this timeline. The purpose behind the introduction of the aforesaid provisions was to make the arbitrators hear and decide matters expeditiously, and within a reasonable period of time. However, if the award is not delivered even in the extended time, the mandate of the tribunal stands terminated. However, the courts are empowered to extend the time-limit either prior to or after the expiry of the extended period. But the courts are to be given justification and proof of sufficient cause for such delay. In case, the court finds that the proceedings have been delayed for the reasons attributable to the arbitrator, it may order for a reduction of fees of the arbitrators and may also substitute arbitrator(s) by terminating the mandate of the previous arbitrator(s). Thus, it has become imperative for all that the arbitration proceedings are culminated in a time-bound manner.

However, COVID-19 pandemic has definitely create chaos all the timelines and schedules in each and every arbitration all across the globe, especially the domestic arbitrations on account of the lockdown. None of the parties or the arbitrators could have foreseen this situation and it has led to an event of impossibility of conductance of arbitration proceedings. Keeping in view the number of arbitration proceedings taking place all over the country, all the arbitrations where the arbitrators have entered the reference, the time period as specified under Section 29-A has commenced and need to be finished by the end of the specified time. The amended Act introduces Section 23 (4), which provides that statement of claim and Statement of defense shall be completed within a period of six months from the date the arbitrator received notice of their appointment. Time period of one year for making of the award as provided under Section 29A(1) shall begin from the date of completion of pleadings (statement of claim and statement of defense) only. Therefore, six month is the maximum time permissible for completion of pleading and the time period of one year for making of award shall commence irrespective of non-completion of pleadings within the said period. Conversely, if the pleadings are completed before six months, the time period of one year for making of award shall commence forthwith the completion of the pleading. Notably, the time spent in filing of rejoinder or rejoinder to counter claim (in cases with counter claims) will not be considered as time spent in completion of pleading under Section 23 (4)].

The amendment also provides that during the period an application for enlargement of time for making of award is pending before the court under Section 29 (5), the mandate of the arbitrator shall continue till disposal of the application. This amendment will help the tribunal to continue the proceedings without waiting for court’s decision on enlargement of time for making of award under Section 29(5).

Prospective application of amendments introduced by Amendment Act of 2015In fact, taking note of this horrifying situation, wherein the parties and their lawyers would be incapacitated in taking legal steps for prosecuting their petitions/applications/appeals/suits/other proceedings,  the Supreme Court suo motu took up the issue of extension of limitation vide order dated 23-03-2020 directing as under:

“This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under special laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or special laws whether condonable or not shall stand extended w.e.f. 15-3-2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.

This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/Tribunals within their respective jurisdiction. Issue notice to all the Registrars General of the High Courts, returnable in four weeks.”

Thus, the Apex Court taking note of this unprecedented situation has stopped the limitation to run w.e.f. 15-3-2020 till further orders. Taking support of the said order passed by the Court in the interest of justice, the period lost on account of corona virus pandemic i.e. at least from 15-03-2020 till further orders of the Apex Court re-starting the period of limitation, must be excluded for the purpose of Sections 29-A and 29-B of the Arbitration & Conciliation Act, 1996, as well.

BY Pooja Dua

Advocate Delhi High Court