INTRODUCTION

Section 29A of the Arbitration and Conciliation Act, 1996 (“Act”), provides for time limit of twelve months from the date of completion of pleadings for rendering an arbitral award.[1] This period can be further extended by six months with consent of the parties.[2] If the award is not made within the extended period, the mandate of the arbitral tribunal will terminate unless the ‘Court’ grants a further extension.

The key issue in such a situation is to determine which ‘Court’ the parties should approach to seek such an extension of the arbitral tribunal’s mandate. This article examines the conundrum regarding which ‘Court’ can entertain an application under Section 29A (4) of the Act and the divergent views taken by different High Courts in this regard. This issue is important because arbitration proceedings are often well underway by the time the period of twelve months expires and if an extension is not sought in a timely manner, the arbitration proceedings could be delayed significantly, defeating the purpose of the Act, which is to provide a fast and efficient way to resolve disputes.

THE GENERAL RULE

As per Section 2(1)(e) of the Act, the term "Court" is defined as the Principal Civil Court of original jurisdiction in a district. This definition also includes the High Courts that have ordinary original civil jurisdiction.

Several High Courts such as Andhra Pradesh High Court[3], Allahabad High Court[4], Orissa High Court[5] and Guwahati High Court[6] have interpreted the term “Court” in accordance with its definition. These Hon’ble High Courts have held that in cases where the High Courts are not empowered to exercise 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 of the Act.

DEVIATION FROM THE GENERAL RULE

However, a different view is taken by Delhi High Court[7], Bombay High Court[8], Calcutta High Court[9], Kerala High Court[10] and Gujarat High Court[11]. These High Courts have held that a rigid and literal meaning of the term ‘Court’ is incorrect and undermines the legislature’s intent of providing courts the power to substitute or extend the mandate of the arbitral tribunal. The term ‘Court’ under Section 29A has to be read along with Section 11 of the Act to realize the true intent of the legislature, and thus High Court shall have the power to extend mandates of the arbitral tribunals under Section 29A of the Act.

These High Courts have interpreted the term ‘Court’ contextually on the basis of the following reasoning:

  • The definition of ‘Court’ in Section 2(1)(e) of the Act is a general definition. It is not intended to be exhaustive.
  • Section 29A(4) requires a contextual interpretation of the term "Court". This is because the section gives the court the power to substitute an arbitrator. If the term "Court" is interpreted literally, as the Principal Civil Court of original jurisdiction, then the court that appointed the arbitrator would also have the power to substitute the arbitrator. This would lead to conflict of powers.
  • This conflict of powers can be avoided by interpreting the term "Court" contextually to mean the High Court or Supreme Court, whichever court appointed the arbitral tribunal. This interpretation is consistent with the purpose of Section 29A(4), which is to ensure that arbitral awards are rendered within a reasonable time.

The High Court of Gujarat in the case of Nilesh Ramanbhai Patel and Ors. v. Bhanubhai Ramanbhai Patel and Ors.[12] (“Nilesh Patel’s case”) has held that in arbitrations where the arbitral tribunal is appointed by a High Court or the Supreme Court under Section 11 of the Act, the ‘Court’ for the purposes of Section 29A of the Act would be the appointing court itself, and not the Principal Civil Court. The reasoning behind the same is that Section 29A(6) of the Act gives the Court the power to substitute an arbitral tribunal. If the Principal Civil Court is taken to be the ‘Court’ for the purposes of Section 29A, it would lead to absurd situation, since a subordinate court will then have the power to substitute an arbitral tribunal appointed by a superior court. This would then amount to encroaching on the power of appointment of the superior court by a subordinate court.

The Gujarat High Court has particularly observed that such contextual interpretation is inherent in Section 2 of the Act, which starts with the phrase "unless the context otherwise requires...". However, such deviation from the definition clause is to be made only under exceptional circumstances and not in a routine manner.

The Supreme Court has also held that deviation from the definitions provided in Section 2 of the Act is justified only if such definitions, when applied, lead to anomalous and absurd results.[13] However, the Supreme Court has still left the question of law in relation to the interpretation of the term ‘Court’ under Section 29A of the Act open, when the judgment in Nilesh Patel’s case (supra) was under challenge before it.[14]

Indeed, this would mean that the said question of law has to be interpreted and answered as per facts of each case. The ratio in Nilesh Patel’s case (supra) will not apply in a case where the arbitral tribunal has been appointed by the parties or where the disputes are referred to a statutorily appointed arbitral tribunal.

In this context, judgment of the Bombay High Court in Magnum Opus IT Consulting Private Limited v. Artcad Systems[15]  is an important one. In this case, the arbitral tribunal was appointed by the Micro, Small and Medium Enterprises Facilitation Council and not under Section 11 of the Act. The Bombay High Court held that the term ‘Court’ in Section 29A(4) should be interpreted as the Principal Civil Court of original jurisdiction, in cases where the arbitral tribunal is not appointed under Section 11 of the Act. The Court reasoned that there is no conflict of powers in such cases, and that the normal rule of giving effect to the meaning of the term ‘Court’ as defined in the Act should be followed. Hence, there is no scope to depart from the normal rule of giving effect to the meaning of the term ‘Court’ as defined in the Act.

RESOLVING THE QUANDARY OF ‘COURT’ UNDER SECTION 29A

The Supreme Court, while interpreting the term ‘Court’ under Section 29A(4) of the Arbitration and Conciliation Act, 1996, in the case of Chief Engineer (NH) PWD (Roads) v. M/s BSC&C and C JV[16], observed that the term should generally be understood as referring to the Principal Civil Court of original jurisdiction in a district, as per Section 2(1)(e). This includes the High Court only if it exercises ordinary original civil jurisdiction. However, in cases where the High Court does not have original civil jurisdiction, the Commercial Court or Principal Civil Court has the authority to extend the mandate of the arbitral tribunal.

ANOMALY IN VIEW OF SECTION 42 OF THE ACT

The issue becomes more intricate in view of Section 42 of the Act. According to Section 42, where any application under Part I of the Act has been made in a court with respect to an arbitration agreement, that court alone has the jurisdiction over the arbitration proceedings and all subsequent applications arising out of that agreement and the arbitration proceedings must be made in that court alone.

Accordingly, if an Application under section 29A of the Act is filed and admitted by any High Court which does not have original jurisdiction, in that case by virtue of Section 42 of the Act, it would mean that every other application would have to mandatorily be filed before the said High Court, be it application under Section 34 of the Act for setting aside of the award or a post award application under Section 9 of the Act or an application for execution of the award under Section 36 of the Act. However, such a corollary will be completely ultra vires to the Act.

The Supreme Court in the case of State of West Bengal vs. Associated Contractors[17] (“Associated Contractor’s case”) has categorically held that Section 2(1)(e) of the Act contains an exhaustive definition marking out only the Principal Civil Court of original jurisdiction in a district and no other court as “Court” for the purpose of Part I of the Act (except a High Court having ordinary original civil jurisdiction in the State). The Supreme Court carved out certain applications that do not fall within the ambit of Section 42 of the Act i.e., applications under Sections 8 and 11 of the Act, where the Act specifically lays down the judicial authorities before which such applications are to be filed.

An application under Section 29A of the Act is not one of the exceptions and hence is within the ambit of Section 42 of the Act. Accordingly, the same can be preferred only before the ‘Court’ as defined under Section 2(1)(e) of the Act. If the legislature intended for applications under Section 29A of the Act to go before the High Court, then like Sections 8 and 11 of the Act, it would have specifically stipulated so. Hence, any interpretation of the term ‘Court’ mentioned in Section 29A of the Act other than that mentioned in Section 2(1)(e) of the Act would be in a teeth of Associated Contractor’s case (supra); which has been reaffirmed in the decision by the Constitution Bench of the Hon’ble Supreme Court in the case of State of Jharkhand v. Hindustan Constructions Co. Ltd.[18]

CONCLUSION

The disparate interpretation of the term ‘Court’ under Section 29A by various High Courts has engendered considerable uncertainty in arbitration proceedings. However, the Supreme Court’s definitive ruling in Chief Engineer (supra) has effectively resolved the quandary.

However, Section 42 remains crucial, as it mandates applications under Part 1 of the Act to be filed in the same Court where any application at the first instance is filed. In view thereof, would it mean that in cases where an arbitrator is appointed by a High Court under Section 11, and an application under Section 29A has also been filed before the High Court, then all consequent applications including challenge proceedings under Section 34 would also go to the High Court?

In view of the above quandary, it is imperative that interpretation of ‘Court’ in Section 29A is applied uniformly, to bring clarity and consistency to the process of seeking extensions for arbitral tribunals.