Appointing High Court Has Power To Extend Arbitrator's Mandate U/s 29A: Allahabad High Court Reiterates Settled Position Till Larger Bench Decides Issue

While acknowledging that the issue of the appropriate court for Section 29A applications was pending before a larger bench, the High Court held that the current position continued to be governed by previous judgments such as Indian Farmers Fertilizers Cooperative Ltd. v. Manish Engineering Enterprises.

Brief Facts:

M/s Geo Miller and Co. Pvt. Ltd. (“Petitioner”) and Uttar Pradesh Jal Nigam (“Respondent”) entered into a contract. Disputes and differences arose between the parties, which were then referred to arbitration. The Petitioner filed an application under Section 11 of the Arbitration Act for the appointment of an arbitrator before the High Court of Allahabad (“High Court”). The High Court appointed Mr Justice R.D. Khare as the sole arbitrator. The time limit for making an arbitral award, as provided under Section 29A of the Act, expired on February 29, 2024. The arbitrator was unable to publish his award within the statutory time limit and requested the parties to seek an extension of time according to the law. Consequently, the Petitioner filed a civil arbitration petition before the High Court to request for extension of time.

Contentions of the Petitioner:

The Applicant contended that even though the issue regarding Section 29A of the Arbitration Act is pending before a larger bench due to conflicting judgments of different coordinate benches, the High Court must not keep this matter pending until the reference to the larger bench is answered. Reliance was placed on Indian Farmers Fertilizers Cooperative Limited v. Manish Engineering Enterprises, where it was held that the Court which appoints the arbitrator under Section 11, has the exclusive jurisdiction to entertain Section 29A applications.

Observations by the High Court:

The High Court observed that judicial discipline is a fundamental principle in the legal system. It is crucial for maintaining the integrity, coherence, and predictability of judicial decisions. The doctrine of 'stare decisis', which means "to stand by things decided," plays a vital role in ensuring that courts follow their previous decisions when faced with similar legal issues.

The High Court further held that when a Coordinate Bench issues a judgment on a particular legal issue, that judgment becomes a binding precedent for subsequent cases involving a similar issue before another Coordinate Bench. This ensures that similar cases are decided consistently, regardless of the particular composition of the bench. Reliance was placed on the Supreme Court's reasoning in National Insurance Company Limited v. Pranay Sethi [(2017) 16 SCC 6805], where it was held that an earlier decision retains its binding effect on subsequent benches of coordinate jurisdiction, even if considered incorrect. The earlier decision must be followed until a larger bench's decision is returned, preserving the law's stability and continuity. Further, conflicting decisions of coequal benches should result in following the earlier decision as a binding precedent. When faced with conflicting judgments by benches of equal strength, High Courts must follow the earlier judgment.

The High Court observed that in the case of Lucknow Agencies LKO vs UP Awas Vikas Parishad and Ors. [AA No. 77 of 2018], a Coordinate Bench considered an application under Section 29A (4) and Section 29A (5) of the Arbitration Act. It was observed that the Allahabad High Court neither exercised its ordinary original civil jurisdiction nor appointed the arbitrator under Section 11 of the Arbitration Act. Therefore, it did not have the power to hear an application under Section 29A of the Arbitration Act. Instead, it was held that such an application must be made before the Court as defined under Section 2(1)(e) of the Arbitration Act. An appropriate commercial court or principal civil court of original jurisdiction was held to be suitable for such matters.

In contrast, the judgment in Indian Farmers Fertilizers Cooperative Limited vs Manish Engineering Enterprises [APPL. U/S 11(4) No. 5 of 2022], dealt with a situation where the arbitrator was appointed under Section 11 of the Arbitration Act. The Allahabad High Court held that in such cases, an application for the extension of the mandate of the arbitral tribunal under Section 29A would lie before the court which appointed the arbitrator. The judgment emphasized that Section 42 of the Arbitration Act, which typically governs the jurisdiction of courts in arbitration matters, would not be applicable in these circumstances. Therefore, it is the High Court, which appointed the arbitrator under Section 11, that has the authority to grant extensions under Section 29A.

After considering the aforementioned two cases, the High Court differentiated between their factual contexts. While Lucknow Agencies case dealt with arbitrators not appointed by the High Court, Indian Farmers Fertilizers case addressed cases where the High Court did make such appointments, leading to different jurisdictional conclusions.

However, it was observed that the case of M/s A'Xykno Capital Services Pvt. Ltd. vs State of U.P. [CMAA No. 15 of 2023] presented a divergent view. In this case, it was held that the judgment in Indian Farmers Fertilizers case was not a binding precedent and that regardless of who appointed the arbitrator, only the court as defined under Section 2(1)(e) of the Arbitration Act could entertain an application under Section 29A. This reasoning was based on the doctrine of 'per incuriam', which allows courts to depart from precedent if a decision was made without proper consideration of relevant laws.

Later, in M/s. Jaypee Infratech Limited vs Ehbh Services Pvt. Ltd. and Anr. [2024 LiveLaw (AB) 127], the flaws in A'Xykno Capital Services case were discussed. It was argued that its interpretation led to a conflict between Sections 11 and 29A of the Arbitration Act and undermined the principle of judicial hierarchy. The court emphasized that where arbitrators are appointed by the High Court under Section 11, the same court should have the authority to grant extensions under Section 29A to avoid conflicts and ensure coherent application of the law.

Considering these judgments, the High Court concluded that the judgments in Lucknow Agencies case and Indian Farmers Fertilizers case continue to govern the field of law concerning Section 29A applications before the High Court. The decision in A'Xykno Capital Services case does not hold precedential value. This position will remain until the larger bench provides further clarity on the issue.

Conclusively, the petition to extend the time for the award was allowed based on the fact that the High Court itself appointed the arbitrator to resolve the dispute between the Petitioner and the Respondent. The mandate of the arbitrator was extended for 8 months from the date of the judgment.

Case Title: M/s Geo Miller and Co. Pvt. Ltd. vs UP Jal Nigam and Others 2024 LiveLaw (AB) 330

Case citation: 2024 LiveLaw (AB) 330

Case No.: Civil Misc. Arbitration Application No. 5 of 2024

Advocate for the Applicants: Sri S.D. Singh with Sri Shadab Alam; Sri Sujeet Kumar with Ms Chhaya Gupta

Advocate for the Respondents: Sri Vimlesh Kumar Rai (For U.P. Jal Nigam) and Sri Anand Prakash Paul (For Kanpur Development Authority)

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