Extension of Arbitrator's Mandate Lies Exclusively With Court Which Appointed Arbitrator: Bombay High Court

Brief Facts:

The Municipal Corporation of Ichalkarnji (“Respondent”) proposed the construction of two decentralized Sewage Treatment Plants (STP) under the Urban Infrastructure Development Scheme for Small and Medium Towns (“UIDSSMT”) Mission launched by the Government of India. The project received funding from the Government of India and the State of Maharashtra based on the Detailed Project Report (DPR) submitted by the Respondent. K.I.P.L. Vistacore Infra Projects J.V. (“Petitioner”), having submitted the lowest bid, was awarded the contract for the project in March 2021. However, there were delays in the project due to the Respondent's belated provision of land possession and STP drawings, resulting in only 55% of the work being completed by 2019.

Subsequently, the Petitioner was blacklisted by the Respondent, leading to a series of legal actions. Initially, the Petitioner approached the Bombay High Court (“High Court”) with a Writ Petition, which was withdrawn after the Respondent extended the project completion time by six months. However, when this extension was nullified by subsequent resolutions, the Petitioner's contract was terminated. The Petitioner filed another Writ Petition challenging this termination. Following these legal actions, the Respondent proposed resolving the disputes through arbitration. The Petitioner agreed to withdraw pending proceedings. Consequently, an arbitrator, a retired District Judge, was appointed by the Division Bench of the High Court to adjudicate the disputes. The arbitration proceedings began but were significantly affected by the COVID-19 pandemic. Despite an extension granted by consent of both parties, the arbitration mandate expired. Feeling aggrieved the Petitioner filed an application under Section 29-A of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) in the High Court, seeking further extension of the arbitrator's mandate.

The contentions of the parties centred around the interpretation of the term "Court" as used in Section 29-A of the Arbitration Act. The Respondent argued that the Appellant division High Court doesn't have the authority to grant an extension since the term “Court” should be interpreted narrowly to refer only to the Principal Civil Court of Original Jurisdiction in a district or a High Court with original civil jurisdiction in the State.

In contrast, the Petitioner argued for a broader interpretation of the term "Court" in Section 29-A. He contended that the context of the Arbitration Act necessitates a flexible interpretation, considering the scheme of the entire statute. It asserted that the power to extend the mandate of an arbitrator or substitute arbitrators under Section 29-A should not be limited to specific courts but should be understood within the framework of the Arbitration Act as a whole.

Observations by the High Court:

The High Court noted that Sub-Section (4) of Section 29A stats that if an award is not issued within the specified timeframe or its extension, the arbitrator's mandate terminates unless the “Court”, either before or after the expiry of the prescribed period, extends it. This hinges on the definition of 'Court' as delineated in Section 2(1)(e) of the Arbitration Act.

According to the definition, in the context of domestic arbitration, 'Court' refers to the Principal Civil Court of Original Jurisdiction in a district, inclusive of the High Court exercising its ordinary original civil jurisdiction. Conversely, in the case of international commercial arbitration, the 'Court' is either the Supreme Court or a High Court with appellate jurisdiction over the lower courts.

The High Court noted that the definition in Section 2 is prefaced by the phrase “In this Part, unless the context otherwise requires,” indicating its applicability within the Arbitration Act's framework.

The High Court refuted the Respondent's contention that the appropriate jurisdiction for mandate extension was of the Principal Civil Court in Pune. The High Court noted that despite the Respondent's indication of arbitration in a Writ Petition, it was the High Court that intervened and appointed an arbitrator. Therefore, the High Court held that the extension of the mandate should logically rest with the appointing authority, i.e., the High Court, rather than reverting to a district-level Court.

The High Court referred to its decision in Cabra Instalaciones Y. Services vs. Maharashtra State Electricity Distribution Company Limited, where the arbitral tribunal was constituted by an order from the Supreme Court under Section 11(5) of the Act. The judgment specifically held that the High Court, exercising power under Section 29A, does not possess the authority to appoint a substitute arbitral tribunal or any member thereof. Further, it emphasized that in the context of international commercial arbitration, such powers exclusively belong to the Supreme Court. Furthermore, the judgment pointed out that the jurisdiction conferred upon the “Court” by Section 29A precludes other courts from exercising similar powers.

Therefore, the High Court held that the term 'Court' in Section 29A must be interpreted in a manner consistent with the Court's power to appoint arbitrators under Section 11. The High Court noted that allowing subordinate courts to substitute arbitrators appointed by higher courts would lead to legal complications and conflict with the Arbitration Act's provisions.

Consequently, the High Court allowed the petition and extended the mandate of the arbitral tribunal by a further period of six months.

Case Title: K.I.P.L. Vistacore Infra Projects J.V vs Municipal Corporation of the city of Ichalkarnji

Case Number: Commercial Arbitration Petition No.181 OF 2023

Advocate for the Petitioner: Mr Akshay Patil with Mr Akshay Kamble, Ms Eesha Karnik, Ms Devika Madekar, Ms Neha Patil and Ms Rina Ram i/b Viveka Partners for the Petitioner.

Advocate for the Respondent: Mr.Girish Godbole, Senior Advocate i/b Mr.Akshay Shinde for the Respondents Nos.2 and 3.

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