Twelve-Month Period For Arbitral Award Begins From Completion Of Pleadings, Not Statement Of Defense: Delhi High Court

The Delhi High Court bench of Justice C. Hari Shankar has held that Section 29A(1) of the Arbitration and Conciliation Act, 1996, when read with Section 29A(4), implies that the mandate of the arbitral tribunal terminates if the tribunal does not issue the award within twelve months of completing the pleadings under Section 23(4). The bench held that the twelve-month period is to be calculated from the completion of pleadings, not from the date of filing the Statement of Defense (SOD). It held that the phrase “under sub-section (4) of Section 23” is included because Section 23(4) refers to the filing of the SOD, but it does not mean that the twelve-month period should start from the SOD filing date. It held that interpreting Section 29A(1) to require the award to be issued within twelve months from the SOD filing date would effectively rewrite the provision. Section 23(4) states that the statement of claim and the statement of defense shall be completed within six months from the date of the arbitrator receiving notice of his appointment, unless the parties agree otherwise. Section 29A(1) requires that the arbitral tribunal must make its award within twelve months from the date when the pleadings are completed. Section 29A(4) that if the arbitral tribunal does not make the award within the twelve-month period specified in Section 29A(1), the tribunal's mandate will terminate unless the Court extends it. Brief Facts: The dispute originated from two Purchase Orders issued by the Delhi Transco Limited (Respondent) to Emco Limited (Petitioner) which included a provision for resolving disputes through arbitration. When the parties could not agree on arbitration, the Petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking the appointment of an arbitrator. On 22 May 2018, the High Court referred the matter to the Delhi International Arbitration and Conciliation Centre (DIAC) to appoint an arbitrator. Almost a year later, on 7 May 2019, Justice M.K. Mittal, a former Judge of the Allahabad High Court, was appointed as the Arbitrator. During the interim period, the Petitioner filed a statement of claim and the Respondent responded with a statement of defence and counter claim. On 25 May 2019, during the first personal hearing, the Arbitrator allowed the petitioner time to file a rejoinder to the defence and a reply to the counter claims and to settle the pending arbitral fees. By 4 July 2019, the Arbitrator noted that the Petitioner had not filed the rejoinder as required. Despite the Petitioner's submission of financial constraints, the Arbitrator suspended the Petitioner's claim under Section 38(2) of the Arbitration Act and asked the Respondent whether it wished to proceed with its counter claims. On 22 July 2019, the petitioner entered into corporate insolvency proceedings before the National Company Law Tribunal (NCLT) in Mumbai. Consequently, the Petitioner was absent from the next hearing. The Arbitrator rescheduled the matter and again directed the Petitioner to file the rejoinder by the subsequent date. On 31 October 2019, the Arbitrator recorded that the hearing was adjourned sine die, with the liberty for the parties to apply for revival post the completion of the Corporate Insolvency Resolution Process (CIRP). The proceedings remained adjourned sine die until 10 June 2024. During this period, the Petitioner's insolvency was not revived leading to liquidation proceedings initiated on 9 August 2021. On 9 September 2022, the petitioner was acquired by Sherisha Powertech Pvt Ltd (SSPL) which undertook to continue all ongoing claims and receivables. Despite attempts to revive the proceedings, the DIAC erroneously informed the parties via email that the arbitral proceedings had been terminated and requested bank details for a refund of fees. On 10 June 2024, the Arbitrator revisited the matter and acknowledged the DIAC's erroneous email. The Petitioner argued that the time for passing the award had not expired as per Sections 29A(1) and 23(4) of the Arbitration Act, while the Respondent contended that the proceedings should be deemed terminated due to the prolonged inaction. The Arbitrator granted the Petitioner time to initiate appropriate proceedings under Section 29A which lead the Petitioner to approach the High Court for the extension of the arbitral mandate. Submissions of Ms. Bhargavi Kannan for the Petitioner Ms. Bhargavi Kannan, representing the Petitioner, argued that the petition for extending the mandate of the arbitral tribunal was filed out of an abundance of caution. She contended that, in reality, the mandate of the arbitral tribunal has not yet terminated because the rejoinder has not been filed and there has been no order from the Arbitrator closing the right to file it. According to Ms. Kannan, after the Arbitrator granted time to the...

Twelve-Month Period For Arbitral Award Begins From Completion Of Pleadings, Not Statement Of Defense: Delhi High Court

Rajesh Kumar

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