Karnataka High Court Dismisses Petition Seeking Termination Of Arbitration Proceedings With Costs Of 25,000/- Citing Delay By Petitioner Itself

The bench of Justices S.G. Pandit and C.M. Poonacha held that the 12 months period for delivery of an arbitral award under Section 29A would begin from the date of completion of proceedings which would also include a sur-rejoinder statement if permitted.

The Court also held that the period during which there was a stay on arbitral proceedings due to admission of insolvency proceedings against the claimant would be excluded from computation of limitation.

Facts

Buoyant Technology Constellations Pvt. Ltd. ("Petitioner") and Manyata Infrastructure Developments Pvt. Ltd. and Manyata Realty ("Respondents") entered into a Memorandum of Understanding (MOU) and certain joint development agreements. Disputes arose between the parties regarding these agreements.

Disputes arose between the parties, accordingly, the parties invoked the Arbitration Clause. The On 05.12.2022, the Respondents filed their claim statement. The proceedings continued with the filing of objections and counterclaims by the parties.

The Petitioner sought an extension of time to file surrejoinder. The Arbitral Tribunal rejected this request, leading the Petitioner to file W.P.No.10091/2023 seeking relief.

The Court disposed of W.P.No.10091/2023 with liberty for the Petitioner to file its surrejoinder by 20.05.2023, without seeking any further extension. The Petitioner filed its surrejoinder on the said date, completing the pleadings.

Meanwhile, proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 were initiated against the Petitioner before the National Company Law Tribunal (NCLT). On 20.12.2023, the Court stayed both the NCLT and Arbitral Proceedings. The stay was in force until 06.03.2024, when the NCLT proceedings were disposed of.

Thereafter, the petitioner approached the Court seeking termination of the mandate of the arbitrator.

Submissions by the Parties

The petitioner made the following submissions:

• That the timeline for making the award should commence from 25.02.2023, the date on which the respondents filed their objection to the counterclaim and rejoinder.
• The arbitrator has failed to deliver an award within 12 months from the date of completion of proceedings.
• Sur-rejoinder would not extend the date for making of the award.
• That the period of stay in the arbitral proceedings, due to the NCLT proceedings, should not be excluded from the timeline for making the award.

The respondent made the following counter-submissions:

• The timeline for making the award should commence from 20.05.2023, the date on which the petitioner filed its surrejoinder as per the court's permission.
• The period of stay in the arbitral proceedings, due to the NCLT proceedings, should be excluded from the timeline for making the award.

Analysis by the Court

The Court examined the provisions of Section 29A, which mandates that the award in matters other than international commercial arbitration shall be made within twelve months from the date of completion of pleadings under Section 23(4) of the Act.

The Court noted that the completion of pleadings under Section 23(4) includes the statement of claim, objections, counterclaim, and objections to counterclaim. It observed that the Petitioner's surrejoinder, filed with the permission of the Court, formed part of the pleadings.

The Court highlighted that its order in W.P.No.10091/2023 granting liberty to the Petitioner to file surrejoinder without seeking any further extension effectively extended the timeline for making the award. This was because the surrejoinder filed on 20.05.2023 was considered part of the pleadings, and the twelve-month period for making the award commenced from that date.

The Court also considered the period of stay in the arbitral proceedings due to the NCLT proceedings. It reiterated the principle that the period of stay granted by a court should be excluded from the calculation of the timeline for making the award.

The Court emphasized that the purpose of fixing timelines under Section 29A of the Act is to ensure speedy resolution of disputes and to achieve the objectives of the Arbitration and Conciliation Act, 1996.

The Court briefly addressed the issue of maintainability of the writ petition, noting that challenges to interim orders of the Arbitral Tribunal should be raised in Section 34 proceedings and not in a writ petition.

The Court concluded that the petitioner itself had sought many adjournments and extension of times. Accordingly, the Court dismissed the petition and imposed cost of Rs. 25,000/- on the petitioner.

Case Title: Buoyant Technology Constellations Pvt Ltd v. Manyata Infrastructure Developments Pvt Ltd, WP. 8654 of 2024

Citation No: 2024 LiveLaw (Kar) 183

Date: 08.04.2024

Counsel for the Petitioner: S BASAVARA, SR.ADV. FOR SRI ANISH ACHARYA, ADV

Counsel for the Respondent: OM PRAKASH, SR.ADV. FOR SRI N VISHWAS & R. MONESHAA, ADV

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