Court Which Appointed Arbitrator Has Jurisdiction To Substitute Arbitrator Or Extend Time U/S 29 Of Arbitration Act: Delhi High Court

Additionally, the court held that Section 9 of the act deals with interim measures passed by a Court and therefore the term "Court" would have to take the meaning of the Court under Section 2(1)(e).

Brief Facts:

The dispute arose between the parties with respect to a Loan Agreement for the sum of Rs.20 lakhs. The loan agreement was terminated, and the respondent was liable to pay a sum of Rs. 17,58,186/-. Thereafter, the petitioner invoke arbitration and filed a petition under Section 11 of the Arbitration & Conciliation Act, 1996 seeking appointment of an arbitrator to adjudicate the dispute. When the arbitration proceeding was about to be adjourned, the claimant made a request to the Arbitral Tribunal to examine additional witnesses. However, the arbitrator terminated the proceedings because of the statutory time limit prescribed under Section 29A (1) of the act. Then, the petitioner filed a petition under Section 29A (5) for extending the mandate of the Arbitral Tribunal for a period of one year. The respondent contended that an arbitrator can be appointed only by a High Court in case of domestic arbitration or by the Hon'ble Supreme Court in case of international arbitration. However, subsequent to the appointment of an arbitrator, all other applications can be dealt with by the court of competent jurisdiction under Section 2(1)(e) of the act. Since, the claim is less than Rs. 2 crores, the petitioner has to approach the court having the pecuniary jurisdiction to entertain the dispute.

Observation of the court:

The court rejected the arguments raised by the respondent and held that if the argument of the respondent is accepted, then there are chances of conflict between the High Court and the concerned Civil Court of original jurisdiction wherein this Court would appoint an Arbitrator under Section 11 of the Arbitration & Conciliation Act, whereas the concerned Civil Court of original jurisdiction under Section 2(1)(e) will have jurisdiction to substitute an Arbitrator which will go against the scheme of the Act, a fact not considered by the Andhra Pradesh High Court in Dr. V V Subbarao v. Dr. Appa Rao Mukkamala & Ors. (2024).

Additionally, the court observed that such an interpretation will give the power to the Civil Court to substitute and also to appoint arbitrators under Sections 14 and 15 of the act who can be appointed only by the High Courts or the Supreme Court in case of domestic and international arbitration respectively.

The court held that the term "Court" under Section 29A must mean only to be the Court which has appointed the arbitrator and therefore the Court to extend the time or substitute the arbitrator would only be the Court which has appointed the arbitrator and no other Court.

Further, the court held that Section 9 of the act deals with interim measures passed by a Court and therefore the term "Court" would have to take the meaning of the Court under Section 2(1)(e). However, Section 29A(4) of the act deals with the power to terminate the mandate or extend the time limit for arbitral award and Section 29A(6) gives the power to the Court to substitute one or all Arbitrators which tantamount to appointment of Arbitrator which otherwise under the scheme of the Act is only with the High Court in case of domestic arbitration and the Supreme Court in case of international arbitration. The term "court" in Section 29A of the Act, therefore, has to be only the High Court in case of domestic arbitration.

Finally, the court extended the mandate of the Arbitral Tribunal for a period of one year.

Case Title: OVINGTON FINANCE PVT. LTD. versus BINDIYA NAGAR

Case Number: O.M.P.(MISC.)(COMM.) 695/2024

Counsel for the Petitioner: Mr. Aniket Rajput, Advocate

Counsel for the Respondent: Mr. Rahul Yadav, Advocate

Date of Judgment: 13.11.2024

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