S.29A Arbitration Act | Who Has Power To Hear Time Extension Application When Arbitrator Appointed By SC/HC/Parties? Allahabad HC Refers Question To Larger Bench

The Allahabad High Court has referred the question whether application under Section 29A of the Arbitration and Conciliation Act, 1996 for time extension can only be heard by the Supreme Court or the High Court where the appointment of such arbitrator has been made by the Supreme Court or the High Court, as the case may be.

Further, the Court has raised a query regarding the powers of the 'Court' as defined under Section 2(1)(e) of the Act to adjudicate on an application under Section 29A of the Act.

Section 29A of the Arbitration and Conciliation Act, 1996 provides that award must be passed within 12 months from the date on which the arbitral tribunal enters reference. Sub-section (4) of Section 29A provides that mandate of the arbitral tribunal shall end within 12 months or at the expiry of the extended period provided the 'Court' extends the said period. Sub-section (6) of Section 29A empowers the 'Court' to substitute arbitrators while extending the said period.

A Single Judge of the Allahabad High Court in Lucknow Agencies Lko. v. U.P. Avas Vikas Parishad and Others had held that since the Allahabad High Court does not exercise ordinary original civil jurisdiction, an application under Section 29A of the Act would not lie before this High Court. The Court held that 'Court' under Section 29A is the principal civil court of original jurisdiction i.e. the Court of District Judge.

A conflicting view was taken by another Single Judge bench of the Allahabad High Court in Indian Farmers Fertilisers Cooperative Ltd. v. Manish Engineering Enterprises, wherein the Court had held that the High Court had the power to adjudication upon an application under Section 29A of the Act when the appointment of arbitrator was made by the High Court.

The Court, in the case of the Japyee-Applicant, observed that “term “Court” in Section 29A of the Act must be interpreted in a manner that does not conflict with Section 11 of the Act.”

The Court was of the opinion that literal interpretation of the word 'Court' in Section 29A would lead to absurdity and anomalies as it would lead to High Court and Supreme Court being at the same footing under Section 2(1)(e) of the Act.

“If the legislature intended every occurrence of the term “Court” in all the sections of the Act to mean the same, the phrase “unless the context otherwise requires” used in Section 2(1)(e) of the Act would be rendered meaningless, ineffective and otiose. The very usage of the said phrase in Section 2(1)(e) is reflective of the legislative intent that the interpretation of term “Court” is subject to the context in which it has been used.”

The Court further highlighted the decision of a coordinate bench of the Allahabad High Court in A'Xykno Capital Services Private Limited v. State of U.P. where it was held that the term “Court” under Section 29A of the Act read with Section 2(1)(e) of the Act does not include a High Court not having original civil jurisdiction. Any application under Section 29A will be filed before the Principal Civil Court of original jurisdiction in a district. It was also held that the power to substitute an arbitrator under Section 29A (6) of the Act is not similar to the power of appointment of arbitrator under Section 11(6).

However, Justice Saraf observed that Section 29A cannot be read in isolation from Section 11. Accordingly, due to conflicting views of the Single Judge Benches of the Allahabad High Court, Justice Shekhar B. Saraf referred the following questions of law to a larger bench:

“1.Whether in a case where the appointment of the arbitrator(s) has been made by the Supreme Court or the High Court, it is only the Supreme Court or the High Court, respectively, that can hear an application under Section 29A of the Act?

2. Whether in a case where the appointment of the arbitrator(s) was made under the agreement contained between the parties (including statutory appointments under MSMED Act, NHAI Act, etc.) and not by the High Court or Supreme Court, the Court as defined under Section 2(1)(e) of the Act can exercise the powers under Section 29A of the Act, including the power of substitution contained in Section 29A(6) of the Act?”

Factual Background

Applicant entered into a rent agreement with M/S Ehbh Services Private Limited-Opposite Party No.1 for setting up such dhabas along the Yamuna Expressway. Disputes having arisen, notice was sent by the Applicant under Section 106 of the Transfer of Property Act, 1872 terminating the lease deed on expiry of the lease period. On failure of amicable settlement, Applicant invoked the arbitration clause in the rent agreement. Sole Arbitrator was appointed by the Applicant.

After reference was entered by the Arbitrator, Opposite Party No.1 expressed desire to enter negotiations, therefore, the arbitral proceedings were suspended till December 12, 2019.

Thereafter, Opposite Party filed an application under Section 12 and 13 of the Act challenging the mandate of the arbitrator which was rejected by the Sole Arbitrator. Another application was filed by the Opposite party under Section 16 of the Act regarding competence of arbitral tribunal to rule on its jurisdiction which was also rejected.

Thereafter various adjournments were given to the opposite party, however, when they were asked to file an affidavit regarding grant of time extension under Section 29A of the Act, they refused. Applicant approached the High Court for extension of time under Section 29A(4) of the Act.

Observation by the High Court

The Court observed that Section 29A of the Act was brought in to expedite arbitration proceedings in India which were being delayed for lack of any such provision. The Court observed that Section 29A streamlines the procedural aspects of arbitration while preserving autonomy of arbitrators.

Dealing with various case laws, the Court observed that the term “Court” as defined in Section 2(1)(e) of the Act must be interpreted widely for the purpose of Section 29A.

The Court observed that to avoid conflict between Section 11 and Section 29A of the Act, the term “Court” in Section 29A must mean “High Court” in the case of a domestic commercial arbitration where the appointment was made by the High Court, and “Supreme Court” in the case of an international commercial arbitration where the appointment was made by the Supreme Court. These observations have been made by various High Courts across the country.

“Legislature never intended to bestow the power of appointment of the arbitrator(s) to the Civil Courts/Commercial Courts, and giving the Civil Courts/Commercial Courts, the power to substitute an arbitrator under Section 29A(6) of the Act when the original appointment was made by the Supreme Court or the High Court would amount to defeating the intent of the legislature,” observed Justice Saraf.

The Court observed that power to substitute arbitrator(s) under Section 29A(6) of the Act is akin to the power of appointment of arbitrator(s) under Section 11 of the Act. The Court observed that where arbitrator(s) has been appointed by the High Court or Supreme Court, Civil Court/ Commercial Court exercising power under Section 29A would lead to “an anomalous situation wherein a Supreme Court/High Court appointee is subject to the supervision of a lower court”.

The Court held that the Civil Court/ Commercial Court would be “Court” under Section 29A where the appointment of arbitrator has not been made by the Supreme Court/High Court.

Accordingly, the Court referred the question of which Court has the power to exercise jurisdiction under Section 29A to a larger bench of the Allahabad High Court.

Case Title: M/s Jaypee Infratech Limited V. M/s Ehbh Services Private Limited And Another 2024 LiveLaw (AB) 127 [Civil Misc. Arbitration Application No.2 Of 2022]

Case Citation: 2024 LiveLaw (AB) 127

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