Treesa Ann Benny
Dispute Resolution

An Analysis of The Time Limit for Making The Arbitral Award

Contents hide

1 Introduction

1.1 Section 29A

2 Section 29A and certain red flags

2.1 Secondly,

3 Effect of 2019 Amendment

4 Judicial interpretation of the Time Limit

4.1 the arbitral tribunal becomes functus officio and any agreement rendered by him would be invalid.

5 COVID-19 and the Time Limit

6 Conclusion

6.1 Those would pave the way for battles of prominence between the principles

7 Reference

7.1 Related

Introduction

An Analysis of The Time Limit for Making The Arbitral Award –

Arbitration, as a form of dispute resolution that substitutes for traditional litigation, has various attractions, one of which is the ease with which the process is carry out and the short span of time within which a matter is settle. In order to uphold and maintain this hallmark of arbitration and to prevent hardship being cause to the parties by undue delays in the settlement, statutory time-limits have been prescribed for almost every step of the arbitral process, including the making of the arbitral award.

The Arbitration and Conciliation Act of 1996 as it was originally enact did not contain any provision containing a time limit for making the arbitral award. It was subject entirely to the agreement between the parties. The 2015 Amendment of the Arbitration and Conciliation Act, 1996 introduced

Section 29A

Section 29A which mandated that an arbitral award should be made within 12 months of the arbitrators’ entry upon reference.^[i] This period is extendable by the agreement of parties by an additional 6 months. So the maximum time available for making an award is 18 months under the scheme of the Act. Failure to do so would result in the termination of the mandate of the arbitrator or the arbitral panel.

However, courts have been vest with the power to extend the time-limit beyond 18 months. This provision raises a pertinent question to whether the power granted to the courts with respect to extension of the time for

arbitral award is usurpation on ‘party autonomy’-the most celebrated feature of arbitration.

Section 29A and certain red flags

Firstly, the discretion of parties in determining a time period for making the award extends only to agreeing on a time limit shorter than 12 months. Statutory prescription of a time limit that is not extendable by the consent of the parties beyond 6 months raises red flags. Having a statutorily prescribed time-limit serves the purpose of preventing undue prolongation of the process and

ensures that one party does not cause delay to the prejudice of the other.

This is desirable. However, this has not been made subject to agreement between the parties. So, even in a situation where both the parties, due to unforeseen circumstances or factors beyond their control, desire

the extension of the time limit by more than 6 months are not permit to do so. This goes against the very premise of party autonomy.

Secondly,

on application by either party, whether before or after the expiry of the period prescribed, courts have been authorised to extend the time limit on sufficient cause for the delay being shown. Additionally, courts have also been empowered to subject the extension of time to the terms and conditions as they deem fit.^[ii] If such extension is not granted by the courts and the prescribed time-limit expires without

an arbitral award having been made, the mandate of that arbitral tribunal terminates and the tribunal ceases to exist.

^[iii] A provision for reduction of fees of the arbitrators has also been incorporate under the provision if the delay in making the arbitral award is found attributable to them by the court. The only consolation here is that the Act has prescribed a ceiling on the amount of fees that can be reduced

by stating that such reduction shall not exceed five percent. for each month of such delay.

Thirdly, courts have also been gives the authority to remove certain or

of the arbitrators in the tribunal and appoint new ones in their place.^[iv] Further, parties are also subject to courts’ power to impose actual or exemplary costs.^[v] These are indicators of judicial dominance over party autonomy and authority of the arbitral tribunal.

Effect of 2019 Amendment

An Analysis of The Time Limit for Making The Arbitral Award -The Amendment Act of 2019 amended Section 29A and brought in four major changes^[vi]:

The period of twelve months for making the award is to begin from the date of completion of pleadings under sub-section (4) of section 23 as opposed to the date of entry upon reference.
International Commercial Arbitrations have been exempt from the mandate of twelve months for making the arbitral award. The Section only directs that it be make expeditiously and within 12 months whenever possible.
The mandate of the arbitral tribunal does not automatically terminate on the expiry of the prescribed time if an application for extension is pending in a court. The arbitral tribunal is to continue its functions until the disposal of the application.
With respect to reduction of the fees of the arbitrator for delay attributable to him, the impug arbitrator has to be give an opportunity of being hear before such a decision is make.

Judicial interpretation of the Time Limit

Courts have had the opportunity to expound the law relating to the time limit in numerous cases.

In 2010, before the introduction of Section 29A, the Supreme Court in the case of NBCC Ltd. v. J.G. Engineering Private Ltd.^{^[vii]} dealt with the question of whether courts have the authority to extend the time fixed by the parties for making the arbitral award. The Court answered this in the negative and stated that the Courts does not have the power to do so and

that the mandate of the arbitrator or the arbitral tribunal terminates once the period agreed by the parties expires. However, the effect of this decision has been water down by the introduction of Section 29A.

Another important judgment was render by the Supreme Court in the case of Jayesh H. Pandya & Anr. v. Subhtex India Ltd. & Ors^{^[viii]}. The issue was whether an award render after the time period prescribe by the parties in the agreement is valid. The agreement was enter into before the enactment of Section 29A and hence the judgment was make on the basis of the unamend Act. The court held that the agreement between the parties is final and binding on the parties as well as the arbitrator and once the period prescribe under the agreement expires, and one of the parties objects to the extension of time or making the award, the arbitrator or

the arbitral tribunal becomes functus officio and any agreement rendered by him would be invalid.

In the case of Suryadev Alloys and Power Pvt. Ltd. v. Shri Govindaraja Textiles Pvt. Ltd^{^[ix]}, the Madras high court was presented with an award that was passed by an arbitrator after his mandate had expired due to expiry of the prescribed time period. The Court held that the power of the courts under Section 29A is to grant extension of time before or after expiry of the time limit prescribed, but

before the making of the award and not after. The mandate of the arbitrator expires immediately on expiry of the time limit. Such an arbitrator cannot render a void award unless the time limit has been extend by the court. Ex post facto ratification is not permissible.

This ruling seems to be contrary to an earlier judgment rendered by a single bench of the Delhi High Court in Chandok Machineries v. N Sunderson & Co.^[x] and upheld by the Division Bench^[xi] wherein it was held that even if the award made post the prescribed time limit, as long as the courts have the authority to grant extension under S.29A(4) and no objection is raised against it, every act done by the arbitral tribunal even after the expiry would stand validated. The position with respect to this needs to be clarified in light of the contradictory High Court decisions.

COVID-19 and the Time Limit

An Analysis of The Time Limit for Making The Arbitral Award – The unprecedented situation caused by the pandemic raised serious questions regarding the limitation period prescribed for every legal process, including the arbitral process. Parties as well as the tribunal were put in a dilemma as it became impossible to conduct arbitrations. S.29A posed a particular problem with the pandemic situation extending unresolved for about

6 months-almost half of the statutorily prescribed time-limit for making arbitral awards.

The timely intervention of the Supreme Court has however eased the situation, The Supreme Court took suo moto cognizance of the situation and made an order[xii] in the exercise of the power under Article 142 read with Article 141 of the Constitution of India directing that the period of limitation, whether condonable or not shall be extended with effect from 15.03.2020 until further orders. The order was declare to be binding on all courts, tribunals, and authorities. It came as a solace in the context of an otherwise rigid rule under S.29A.

Conclusion

An Analysis of The Time Limit for Making The Arbitral Award -The Arbitration Act, 1940 had empowered courts to grant an extension of time for making the arbitral award beyond the period prescribe by parties, However, this is not retaine in the 1996 Act and

complete autonomy was the grant to the parties regarding the time limit for making the award. Judicial decisions based on the unamended 1996 Act also reflect strict and strong adherence to the principle of party autonomy.

When Section 29A was introduce, powers of the courts in this regard were reinstate. However, it is fel that the section seems to raise issue surrounding party autonomy and

promote judicial intervention in the arbitral process. It is a relief that the 2019 Amendment has exempted International Commercial Arbitrations from the strict mandates of this provision. Otherwise, it would have had the effect of saying out loud to the international community that the Indian legal regime is hostile to arbitration.

The decision in the Jayesh H. Pandya case also presents pertinent questions in the background of the introduction of S.29A. With the introduction of a statutorily prescribed time limit. And the power of courts to grant an extension of the same, complications are bound to arise in cases where the party

by agreement prescribe a shorter time period for making the award and proscribe any extension of the time.

Those would pave the way for battles of prominence between the principles

of party autonomy and statutory regulation in the context of arbitration.

Covid-19 is a pointer towards the need for more flexibility in Section 29A. Every unforeseen circumstance may not be as universal or widespread as a pandemic. They could be very personal or case specific yet severe and

sufficient enough to deprive the parties the opportunity to promptly proceed with the arbitral process.

It is fell that it is high time that we rethought. Whether to subject such situations to the judicial process for the extension of time. Especially since the time period prescribed for the disposal of extension applications by the courts-two months-itself is significantly large. It is suggest that the Section be make more flexible. By permitting parties to extend the period themselves over 6 months. In case of such unanticipated circumstances. While the process of arbitration mustn’t be permit to disrupt. By undue delays and extensions, this should ensure without compromising on party autonomy. Or placing an unnecessary burden on the parties.