Applicability of Section 29A of the Arbitration Act on International Commercial Arbitration post 2019 Amendment
In one of the critical steps towards making arbitration an expeditious alternative dispute resolution process, it was in 2015 that the timelines for winding up arbitration proceedings, within a stipulated time period of 12 months from the date arbitral tribunal enters upon reference, was first introduced in Indian arbitration regime vide new Section 29 A of Arbitration and Conciliation Act, 1996 (“Arbitration Act”). While the timelines were made applicable to both domestic and international arbitrations in India in 2015, its applicability was limited to domestic arbitrations alone vide an Amendment Act in 2019. The issue, whether the 2019 amendment would apply to arbitrations pending when the Amendment Act 2019 came into effect, or in other words whether the amendment is retrospective in nature, arose in several disputes and since been addressed by various High Courts including Hon’ble Delhi High Court.
One such dispute has been recently decided by the Hon’ble Supreme Court in TATA Sons Pvt Ltd (Formerly TATA Sons Ltd) v. Siva Industries and Holdings Ltd & Ors [Miscellaneous Application No 2680 of 2019 in Arbitration Case (Civil) No 38 of 2017 decided on 05.01.2023]. In this matter, a sole arbitrator was appointed by the Supreme Court under section 11(6) of the Arbitration Act since one of the respondents was a foreign party and thus, it was an international commercial arbitration in terms of Section 2(1)(f) of the Arbitration Act. The arbitrator entered upon the reference on 14 February 2018. On 21 March 2018, a preliminary case management meeting was held between the parties and the arbitrator at which the parties agreed to a six months extension (expiring on 14 August 2019), if the arbitral proceedings could not be completed within a period of twelve months commencing from the date the arbitral tribunal entered reference.
During the pendency of the arbitral proceedings, the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 was initiated against the first respondent and consequently proceedings came to a suspended halt on account of moratorium. During the period of moratorium, the original period of one year and the extension of six months expired. Tata Sons, therefore, moved an application for further period of six months after the moratorium ceases to exist in the light of section 29A of the Arbitration Act as amended in 2019. CIRP came to an end on 3 June 2022. The application, therefore, sought that arbitration proceedings may be allowed to continue without any need for an extension of the term of the Ld. Sole Arbitrator or alternatively, if Hon’ble Court is of the opinion that the amended Section 29A (following the 2019 Amendment) is inapplicable to the arbitration proceedings, then allow the extension of the time limit within which arbitrator is to render an award in the arbitration proceedings between the parties by a period of 1 year.
The Court went into the analysis of Section 29A of the Arbitration Act and its evolution. When the section was introduced in 2015, it stipulated that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Post amendment in 2019 (w.e.f. 30.08.2019), the new section 29A(1) stipulated that “The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23: Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.”
Essentially the argument of the applicant was that as a result of the amendment of Section 29A, the period of 12 months prescribed for making an award from the date of completion of the pleadings has ceased to apply to an international commercial arbitration and the amendment being of a procedural nature, the amended provision would apply to the arbitral proceedings in the present case. The Court appreciated the mandatory nature of the provisions under Section 29A(1) prior to the amendment and their application to all arbitrations conducted under the Act, domestic or international commercial by underlining the importance of expression “shall”. The Court observed that after the amendment, the expression “in matters other than an international commercial arbitration” makes it abundantly clear that the timeline of twelve months which is stipulated in the substantive part of Section 29A(1), as amended, does not apply to international commercial arbitrations. The proviso further reaffirms that the award in the matter of an international commercial arbitration “may be made as expeditiously as possible” and that an “endeavour may be made to dispose of the matter within a period of 12 months” from the date of the completion of pleadings. Therefore while the mandate to deliver the arbitral award within the period of 12 months is mandatory for domestic arbitration, it is directory in case of international commercial arbitration.
The applicant had also argued that even if the court is of the opinion that section 29A excludes the mandate in case of international commercial arbitration, sub-section (3) and (4) were not excluded and the parties may mutually agree to extend the period by six months. In order to decide the issue, the Court went into the reasons why the report dated 30 July 2017 of the Committee chaired by Justice B N Srikrishna carries specific recommendation to the effect that international commercial arbitrations may be left outside the purview of the timelines provided in Section 29A. The Committee indicated that generally the international arbitration institutions, with their own machinery for case management, have in place the timelines for conducting international arbitrations and that they did not require the monitoring of timelines by the intervention of the court. The Committee further recorded that in other jurisdictions, timelines for arbitral proceedings are usually agreed by the parties themselves in accordance with the nature and complexity of the dispute.
On aspect of applicability of the 2019 amendments to Section 29A to the present case, the Court referred to section 26 of the 2015 Amendment Act which clarified that “[n]othing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”
The Court observed that no provision equivalent to section 26 of the 2015 Amendment Act with regard to the prospective application of the amendments was chalked under the Amendment Act of 2019. Further, the removal of the mandatory time limit for making an arbitral award in the case of an international commercial arbitration does not confer any rights or liabilities on any party and is remedial in nature (unlike original Section 29A which despite being procedural in nature created new obligations in respect of a proceeding which had already commenced since it laid down a strict timeline for rendering an arbitral award for the first time in the framework of the Arbitration Act [Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd[1]]). Accordingly, the Court held that Section 29A should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019. The Court agreed with the decision of Hon’ble Delhi High Court in the matter of ONGC Petro Additions Ltd. vs Ferns Construction Co. Inc.[OMP (Misc) (Comm) 256/2019] wherein it was held that there is no strict time line prescribed to the proceedings which are in nature of international commercial arbitration as defined under the Act, seated in India. The Court, accordingly, held that the sole arbitrator in the present case would be acting within his domain and jurisdiction to decide upon any further extension of time beyond what is originally stipulated in the case management meeting.
It is therefore, made clear beyond any doubt that the timelines stipulated under Section 29A of the Arbitration Act for concluding arbitration proceedings are not only inapplicable in case of international commercial arbitrations, the amendment in 2019 being procedural in nature is retrospective and shall be applicable to all the proceedings pending at the time the amendment came into effect.
[1] (2018) 6 SCC 287
