Which Court Can Extend Arbitration Deadlines? Bombay High Court Provides Clarification

Further, the bench clarified that if the tribunal was constituted through an agreement between the parties, the application for extending time can be addressed by the principal civil court with original jurisdiction, which includes both the district court and the High Court.

The bench held that:

• “In the event an Arbitral Tribunal constituted by the High Court under Section 11(6) fails to complete the proceedings within the stipulated period/extended period, then an application under Section 29-A(4) would lie to the High Court in case of a domestic arbitration.
• In answer to the second question, we opine that in the event an Arbitral Tribunal consisting of three Arbitrators is constituted as per Section 11(2) i.e. with agreement and consent of the parties, fails to complete the proceedings within the stipulated period/extended period, the application under Section 29-A(4) would lie to the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original jurisdiction.”

Brief Facts:

The matter arose from a disagreement between two Single Judges of the High Court regarding the interpretation of Section 29-A of the Arbitration and Conciliation Act, 1996. One Single Judge in the case of Mormugao Port Trust vs. Ganesh Benzoplast Ltd took a particular view that was contrary to the decision of the Supreme Court in K.I.P.L. Vistacore Infra Projects J.V. Municipal Corporation of the City of Ichalkaranji. Another Single Judge, disagreeing with the view in Mormugao Port Trust, referred the matter to a larger bench for clarification on specific legal questions. These questions pertained to which court—whether the High Court or the Civil Court having original jurisdiction—should handle an application under Section 29-A(4) of the Arbitration Act when an Arbitral Tribunal fails to complete proceedings within the stipulated or extended period in a domestic arbitration.

Shri Parag Rao, counsel for the Respondents, argued that it was unnecessary to answer the reference due to the Supreme Court's decision in Chief Engineer (NH) PWD (Roads) vs. M/s. BSC & C and C JV. According to Shri Rao, this decision clarified that the Principal Civil Court of original jurisdiction, rather than the High Court, had the authority to extend the time under Section 29-A(4) in domestic arbitration cases. He pointed out that the Judge in Marcelina Fernandes & Ors. vs. Green Valley Realtors already applied this Supreme Court ruling to determine that the Court of Principal District Judge, South Goa, Margao, held jurisdiction.

Upon reviewing the Supreme Court's decision in Chief Engineer (NH) PWD (Roads), the referring bench initially believed that the reference could be resolved based on this ruling, as it appeared to address the issues raised directly. The Supreme Court clarified that the power under Section 29-A(4) of the Arbitration Act lies with the Principal Civil Court of original jurisdiction, unless the High Court has ordinary original civil jurisdiction. However, the bench was urged by Pawan Jhabakh, counsel for the Petitioners, to closely examine the facts of the case before the Supreme Court.

Observations by the High Court:

The High Court first examined Section 2(1)(a) of the Arbitration Act, which defines arbitration as any arbitration, whether or not administered by a permanent arbitral institution. This broad definition underscores the inclusion of various forms of arbitration under the Act. Section 2(1)(b) defines an arbitration agreement as an agreement referred to in Section 7.

The High Court then turned to Section 2(1)(e)(i) of the Arbitration Act, which defines the term "Court" as the Principal Civil Court of original jurisdiction in a district, including the High Court when exercising its ordinary original civil jurisdiction.

Moving on to Chapter III of the Arbitration Act, which deals with the composition of the arbitral tribunal, the High Court discussed Section 11 which provides the procedure for the appointment of arbitrators. Sub-section (2) of Section 11 allows parties to agree on the procedure for appointing arbitrators. Sub-section (3) addresses the situation where no agreement is reached and specifies that each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator, who will act as the presiding arbitrator. Sub-sections (4) and (5) outline the process when the appointment procedure fails and grants the High Court the power to appoint arbitrators in domestic arbitrations.

The High Court referred to Sub-section (4) of Section 29-A which specifies that if the award is not made within the prescribed period, the mandate of the arbitrators shall terminate unless the court extends the period. This provision gives the court the authority to ensure that arbitrations do not drag on indefinitely. Sub-section (6) of Section 29-A further empowers the court to substitute one or all of the arbitrators if the extension is granted.

In interpreting these provisions, the High Court noted that a strictly textual interpretation of Section 2(e)(i) would suggest that the court with jurisdiction over the arbitration is the Principal Civil Court of original jurisdiction which includes the High Court. However, the High Court noted that there it is necessary for reading this provision in a contextual sense, especially when the arbitrator is appointed by the High Court under Section 11(6) of the Arbitration Act. It held that this contextual interpretation is necessary to avoid any inconsistencies and to ensure that the provisions of the Arbitration Act are applied harmoniously.

The High Court referred to the decision in Mormugao Port Trust where the Principal District Judge rejected a joint application by the parties for extending the time for the arbitral proceedings holding that the High Court had jurisdiction under Section 29-A. The High Court agreed with the reasoning in Mormugao Port Trust and held that the power to extend the arbitral period lies with the District Judge, not the High Court.

The High Court held that the Arbitration Act operates on two fundamental principles: party autonomy and minimal court intervention. Section 5 of the Arbitration Act reflects the intent to encourage the resolution of disputes through arbitration with minimal interference from the courts. This principle of party autonomy allows the parties to decide on various procedural aspects of arbitration including the appointment of arbitrators and the procedure for challenging them. The High Court noted that the provisions of the Arbitration Act aim to empower parties to control the arbitration process with the court intervening only when necessary to ensure the proper conduct of the proceedings.

The High Court then examined the implications of Section 29-A specially in the context of the appointment of arbitrators under Section 11(6). The High Court noted that the power to extend the period for making an arbitral award, and the power to substitute arbitrators, is vested in the court that is empowered to appoint arbitrators under Section 11(6). Given that the High Court is empowered to appoint arbitrators under this provision, the High Court found it logical that the High Court should also have the authority to extend the arbitral period and substitute arbitrators, if necessary.

The High Court noted that Section 29-A was designed to introduce time limits for the completion of arbitration and that the extension of time was not a mere formality but required the application of judicial mind.

Therefore, the High Court concluded that the term "Court" for the purposes of Section 29-A(4) refers to the same court that appointed the arbitrator under Section 11(6).

The High Court further clarified that this interpretation aligns with the purpose of the Arbitration Act which seeks to expedite arbitral proceedings while ensuring that the courts retain oversight to prevent unnecessary delays.

Case Title: Sheela Chowgule vs Vijay V. Chowgule and ors

Case Number: WRIT PETITION NO. 88 OF 2024

Mr. Pawan Jhabakh, Advocate with Mr. Gajendra Kanekar and

Mr. Aniket S. Kunde, Advocate for the Petitioners.

Mr. Parag Rao, Advocate with Ms. Sowmya Drago, Mr. Ajay Menon and Mr. Akhil Parrikar, Advocate for Respondent nos. 1, 14 to 16 and 18 to 33.

Mr. Pulkit Bandodkar, Advocate with Mr Rahul Mantri and Ms Angali Kumari, Advocate for the Respondent Nos. 2, 3, 4, 5, 7 and 8.

Mr. Shailesh Redkar, Advocate for the Respondent No. 9.

Date of Judgment: 7th AUGUST 2024

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