Talks Of Settlement Between Parties After Arbitrator Enters Upon Reference, Would Not Stop Limitation For Passing Award: Delhi High Court

Section 29A (1) of A&C Act, as amended by the 2019 Amendment Act, w.e.f. 30.8.2019, provides that an arbitral award must be rendered within 12 months from the date of completion of pleadings before the Arbitral Tribunal as per Section 24 (3).

The bench of Justice Yashwant Varma remarked that talks of settlement between the parties once the Arbitrator enters upon reference, would not stop the limitation period prescribed under Section 29A for passing an arbitral award.

The petitioner, M/s Raj Chawla & Co., filed a petition under Section 15 of the A&C Act before the Delhi High Court, seeking appointment of a substitute arbitrator in respect of the disputes between the petitioner and the respondent, M/s Nine Media & Information Services, under a Memorandum of Understanding (MoU), after the Sole Arbitrator recused herself from the arbitral proceedings.

The High Court held that the question of substitution of the Sole Arbitrator would not arise in light of the provisions contained in Section 23(4) read with Section 29A of the A&C Act, since the mandate of the Arbitral Tribunal had already come to an end.

Referring to the relevant provisions of the A&C Act, the Court took note that Section 23(4) provides that the statement of claim and defence before the Arbitral Tribunal shall be completed within a period of 6 months from the date the arbitrator received notice in writing of its appointment. Further, as per Section 25(a), if the claimant fails to communicate his statement of claim within the time prescribed by Section 23(4), the arbitral tribunal shall terminate the proceeding.

The bench referred to Section 29A of the A&C Act, which was inserted by the A&C (Amendment) Act, 2015 with retrospective effect from 23^rd October, 2015. Section 29A, as it originally stood, provided that the arbitral award shall be made within a period of 12 months from the date the arbitral tribunal enters upon the reference.

Assuming that the arbitral tribunal entered upon reference on 2^nd September, 2018, the Court reckoned that if provisions of Section 29A, as it originally stood, were applied to the case, the statutory period of 12 months for passing an award had undoubtedly expired.

Referring to the facts of the case, the Court held, “The period of twelve months when computed from 02 September 2018 would, undoubtedly, have expired on or about 01 September 2019.”

The bench further held, “If the validity of proceedings were to be viewed on the anvil of Section 29 A as it exists presently, the award would have had to be rendered within a period of twelve months from the date of completion of pleadings as per Section 24 (3).” The Court added: “Insofar as the present case is concerned, that period of six months would have to be necessarily computed from 02 September 2018. That period too expired long before the sole arbitrator chose to withdraw from the proceedings and the present petition came to be preferred,” the Court said.

Further, the Court observed, “The petitioner forwarded a statement of claim for the first time on 16 September 2021. No effective proceedings were shown to have been drawn by the Arbitral Tribunal prior thereto.”

The petitioner, M/s Raj Chawla & Co., submitted before the Court that proceedings before the Tribunal before the said date (16 September, 2021) were not pursued since parties were exploring the possibility of arriving at a settlement.

To this, the Court held that talks of settlement cannot stop the limitation period prescribed by the statute. “...the Court is of the considered view that talks of settlement could not have stopped the march of limitation prescribed by statute. It must be observed that the Act does not envisage proceedings in arbitration remaining in abeyance or a state of latency. Holding otherwise would clearly be contrary to the spirit of the Act and the expeditious dispute resolution process which stands visualised thereunder,” it said.

The bench reckoned that the parties may, by consent, extend the period of 12 months by a further period of 6 months under Section 29A (3). However, if the award is not made within the 12 months period or the extended 6 months period, the mandate of the arbitrator shall terminate unless the Court has, either prior to or after the expiry of the specified period, extended the period.

“The recordal of facts above would indubitably establish that the mandate of the Arbitral Tribunal was never extended within the period prescribed in sub-sections (1) and (2) of Section 29 A. The parties have also not petitioned the court for extension of the mandate of the Arbitral Tribunal even thereafter and in accordance with Section 29 A (4). Viewed in light of the above, it is manifest that the question of a substitute arbitrator being appointed really does not arise. This since not only had the mandate of the Arbitral Tribunal come to an end, in the fitness of things, the proceedings should have been terminated in accordance with the mandatory provisions of the Act,” the Court said.

The petitioner, M/s Raj Chawla & Co., argued that the amended provisions of Section 29A which connect the mandate of the Arbitral Tribunal to render an award with reference to Section 23(4), would not apply. Rejecting the contention of the petitioner, the Court ruled that Section 25(3) of the A&C Act existed on the statute book since inception. It further ruled that since the amended provisions of Section 29A (1) are essentially procedural in character, they would apply even to pending arbitrations.

The bench referred to the decision of the Delhi High Court in ONGC Petro Additions Limited v. Ferns Construction Co. Inc. (2020), where it was held that the provisions of Section 29A (1) shall be applicable to all arbitrations seated in India, which are pending as on August 30, 2019 and commenced after October 23, 2015.

The Court thus dismissed the petition.

Case Title: M/s Raj Chawla and Co. Stock & Share Brokers versus M/s Nine Media & Information Services Ltd. & Anr.

Citation: 2023 LiveLaw (Del) 105

Dated: 30.01.2023

Counsel for the Petitioner: Mr. Mohit Chaudhary, Mr. Kunal Sachdeva, Ms. Sanyukta Gupta, Advs.

Counsel for the Respondent: Mr. Vinayak Bhandari, Mr. Bhavninder Singh, Advs.

Click  Here To Read/Download the Order