Delay In Resuming The Arbitration Proceedings Will Not Make The Claim Time Barred: Calcutta High Court

The Calcutta High Court has held that once the arbitral proceedings have been commenced pursuant to reference under Section 21 of the Act, any delay in the conclusion/resumption of the such proceedings would not wipe out the arbitral reference.

The bench of Justice Shekhar B. Saraf held that arbitral proceedings cannot be rendered inoperative for the reason that there was some delay in the conclusion of the proceedings or that the proceedings were stalled and its resumption took a long time.

The Court held that issue whether the claims would be barred by limitation due to the delay in the conduct of the arbitral proceedings cannot be decided by the Court exercising powers under Sections 14 & 15 r/w Section 11 of the A&C Act and it must be raised before and adjudicated by the arbitral tribunal.

The Court also held that Section 29A of the Act would not apply to arbitration proceedings that commenced before the 2015 amendment came into force as Section 26 of the Amendment Act specified that the amendment is to apply prospectively and the same has been affirmed by the Supreme Court in its judgment in BCCI v. Kochi Cricket Pvt. Ltd^[1].

Facts

The parties entered into an agreement dated 04.10.1993 for a period of 20 years for setting up crushing and processing plant and for sale of iron ore. However, certain disputes arose between the parties in the year 2006 and accordingly the petitioner invoked the arbitration clause and nominated its arbitrator.

The respondent also nominated its arbitrator and the two nominee arbitrators appointed the presiding arbitrator. However, during the pendency of the proceedings, the presiding arbitrator passed away. Accordingly, the presiding arbitrator was substituted.

During the pendency of Section 16 application, criminal proceedings were initiated against the petitioner in the year 2016 and there was no progress in the arbitral proceedings thereafter. Finally, the criminal proceedings against the petitioner culminated in the discharge of its director in the year 2021. However, in the meantime, the presiding arbitrator expired. Accordingly, the petitioner requested both the nominee arbitrators to again appoint the presiding arbitrator. However, there was no response to its request. Consequently, the petitioner approached the Court under Sections 14 & 15 of the Act for the termination of the mandate of the expired arbitrator and appointment of a substitute arbitrator.

Objections

The respondent objected to the maintainability of the petition on the following grounds:

• The arbitral proceedings commenced long back and were completely abandoned 7 years back, therefore, the claims have become time barred.
• Death of the arbitrator cannot be a ground to revive an arbitration as there were undue and unexplained delays on part of the petitioner who decided not to continue with the arbitral proceedings on the pretext of commencement of criminal proceedings against it.
• Section 29A of the Act mandates the award to be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings. Since the time has expired, the award cannot be made nor can any extensions be granted as per the provision. The said provision is applicable prospectively with effect from October 23, 2015 when the Amendment Act came into effect.
• The agreement between the parties provided that arbitration would be governed by any statutory modification, therefore, the parties agreed to be bound by the 2015 amendment also, consequently, Section 29A would apply.
• The 2015 Amendment was procedural in nature, thus, it must necessarily have retrospective application.

Analysis by the Court

The Court observed that the arbitration clause in the case was invoked on 15.12.2006 and in terms of Section 21 of the A&C Act, the arbitration commenced on that date only.

The Court relied on the its judgment in Subrata Mitra v. Shyamali Basu^[2] to hold that the issue whether a delay of 7 years in filing of a Section 14 & 15 application since the last sitting of arbitration would make the claims barred by limitation is an issue which has to be decided by the arbitrator. It held that issue whether the claims would be barred by limitation due to the delay in the conduct of the arbitral proceedings cannot be decided by the Court exercising powers under Sections 14 & 15 r/w Section 11 of the A&C Act and it must be raised before and adjudicated by the arbitral tribunal.

The Court further held that once the arbitral proceedings have been commenced pursuant to reference under Section 21 of the Act, any delay in the conclusion/resumption of the such proceedings would not wipe out the arbitral reference. It held that arbitral proceedings cannot be rendered inoperative for the reason that there was some delay in the conclusion of the proceedings or that the proceedings were stalled and its resumption took a long time.

The Court also held that Section 29A of the Act would not apply to arbitration proceedings that commenced before the 2015 amendment came into force as Section 26 of the Amendment Act specified that the amendment is to apply prospectively and the same has been affirmed by the Supreme Court in its judgment in BCCI v. Kochi Cricket Pvt. Ltd^[3].

Accordingly, the Court allowed the application and terminated the mandate of the arbitrator and appointed the substitute arbitrator.

Case Title: East India Minerals Limited v. The Orissa Mineral Development Company Limited, A.P. No. 677 of 2022

Date: 19.05.2023

Counsel for the Petitioner: Mr. Jishnu Chowdhury, Mr. Souradeep Banerjee and Ms. Sanjana Sinha

Counsel for the Respondent: Mr. Swarup Banerjee and Mr. H.C. Yadav

Click Here To Read/Download Judgment

1. (2018) 6 SCC 287 ↑

2. A.P. 67 of 2020 ↑

3. (2018) 6 SCC 287 ↑