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Arbitration

Decoding Time Bound Arbitration in India: A Closer Look At Section 29A

By Ayush Mehta and Samkit Jain

Section 29A of the Arbitration and Conciliation Act, 1996 [“the Act”] lays down a time limit under which a tribunal is to render its award. In this article, the authors aim to discuss the problems which were present in the 2015 amendment and how effectively the 2019 amendment rectifies them. We will further discuss how local arbitration institutions ensure timely disposal of such proceedings. Finally, we will   critically analyse the amendment and will propose some changes which would go a long way in helping India become the arbitration hub it desires to be.

Introduction

The intent of the legislation for introducing Section 29A was to provide for an easy, time bound mechanism for dispute resolution which would avoid delays and continuous litigation. By the 2015 Amendment, Section 29A, was inserted into the Act.  The provision imposes a time limit on the duration of arbitral proceedings. The provision has undergone its fair share of changes since it was introduced with the aim of making India a hub for Arbitration in the world.

2015 Amendment: A legislative blunder

Section 29A mandated that all proceedings must be completed within a period of 12 months starting from the date when the arbitral tribunal enters upon reference. A further 6-month extension may be granted by the consent of the parties. However, after this period ends, the mandate of the tribunal stands cancelled unless extended by a civil court. Any delay in the conclusion of proceedings because of the tribunal attracted reduction in the fees of the arbitrator, due to which the arbitrators declined cases which they knew would not adhere to the timeline provided. The amendment had glaring flaws and therefore, a need for change was felt. The lack of party autonomy meant that parties would not be able to control the flow of their own arbitration which would hinder the arbitral proceedings.

2019 Amendment: A Glimmer of Hope?

The Parliament has made further amendments by enacting the The Arbitration and Conciliation (Amendment) Act, 2019. According to the amendment, all parties must file their statement of claim and statement of defence within a stipulated period of six months from the notice of appointment of arbitrators. The amendment stipulates that arbitration is required to be completed within 12 months from the filing of pleadings as opposed to 12 months from the beginning of the proceeds present in the previous act. A further 6-month extension may be sought from the court.[1] However, if the proceedings are not completed within 18 months from the date of completion of the pleadings, then, permission from the court is required to continue with the arbitration.

Earlier, after the time limit has expired, the mandate of the arbitrator ceded. Now, as per the 2019 Amendment, while the application for extension is present before the court, the mandate of the arbitrator continues.[2] The amendment also serves as a major relief for the arbitrators as they will now be given an opportunity to explain the reason for the delay before a reduction in their fees.[3] However, the provision does not apply to matters of International Commercial Arbitration, provided that the award in those matters is made as expeditiously as possible.[4]

Throwing Light on the 2019 Amendment

The changes brought in by the 2019 Amendment Act provide some relief and flexibility to the parties with respect to the time period of the arbitration. This serves two purposes; First, it appreciates the reasons for opting arbitration, i.e. foregoing a lengthy litigation and moving on to a speedy and flexible mechanism to resolve disputes. Second, the amendment does not disincentive/discourage the arbitrators from taking up any claims as they have the opportunity to be heard.

However, the legislature, while amending the time limit for filing of statement of claims, overlooked the procedural aspect that the timeline of six months for filing would compel the parties to file cases on jurisdiction and other preliminary issues. Parties would not have the opportunity to bifurcate proceedings into preliminary or jurisdictional issues and pleadings or substantive issues.  Therefore, this interferes with the parties’ flexibility and autonomy to file their pleadings.

A major flaw in the amendment is that, by excluding international Commercial Arbitrations from the ambit of the said timelines, some parties may be discouraged from choosing India as their preferred seat for international arbitration. The fact that there is no time bound limitation in International Commercial Arbitrations can prove to be detrimental for India’s conquest of being a hub for Commercial Arbitration, as parties want tribunals to resolve their disputes in a timely manner.

Conflict with Confidentiality

A constrained six-months’ time period may also endanger the confidentiality of the arbitration. This runs contrary to the very purpose of the Act. One of the reasons as to  why arbitration is preferred by parties is due to the fact that it allows for the confidentiality of proceedings, as opposed to litigation, wherein court records are public. It was under these circumstances that, Section 42 of the Act was introduced, which provided confidentiality in arbitral proceedings. However, there emerges a conflict between Section 29A and Section 42 wherein the time frame is not adhered to and the parties appear before the court thereby disclosing the confidential details of the case. The role of judiciary in arbitral proceedings should remain limited to support and not overtaking the role of arbitral institutions. There is a need to harmoniously reconstruct both the provisions so as to provide confidential proceedings benefitting the parties in an expeditious and time bound manner.

Comparative Analysis with Other Jurisdictions

The UNCITRAL Model Law provides autonomy to the parties to agree on the procedure to be followed by the tribunal in conducting the proceedings. Section 29A indirectly forces the parties to approach the courts. This judicial intervention restricts them from deciding the procedure as per their requirements and according to their dispute. Most of the jurisdictions that stipulate a statutory time limit for arbitral proceedings allow the parties to determine an extended time limit which best suits their requirements.

Article 21 of Arbitration Law of the Republic of China, 1998, (Taiwan) is comparable with Section 29A of the Act, wherein the provision permits the parties to proceed for civil litigation if the award is not given during the stipulated time frame and the mandate of the arbitrator ends once the suit is initiated. The difference between the two is that in Taiwan, the parties can choose to opt for civil litigation as well as choose to proceed with the arbitration proceedings, which protects party autonomy and flexibility.

In Italy, under Section 820 of The Civil Procedure Code, the parties themselves can determine a time limit suitable to them for rendering the award. In absence of any such agreement the award shall be issued within 180 days of the acceptance of the appointment of the arbitrators. However, under certain circumstances competent courts are empowered to extend this period further in light of any application of either parties or the arbitrators. Similar provisions of party having autonomy to decide time frame have been mentioned in Belgium. The Belgian Arbitration Act does not provide a time limit within which arbitral tribunals must make an award. In principle, the parties may determine a time-limit or the terms for setting a time-limit.[5] In the absence of an agreement, if the arbitral tribunal is late in making its award and a six-month period has elapsed between the date on which the last arbitrator was appointed, the president of the court of first instance may impose a time-limit on the arbitral tribunal, if so requested by one of the parties.

In comparison to these jurisdictions, there is lack of party autonomy in deciding time limit for the arbitration in India under Section 29A which does not provide the parties any autonomy in deciding the time frame of their proceedings or even for extension for the time limit.

Conclusion and the Way Forward

While the recent amendment is well intentioned and aims to bring positive changes in the existing provision, it still lacks clarity. India has long hoped to become an arbitration hub and providing time bound mechanisms for resolving disputes will certainly be a feather in the cap. However, judicial intervention and restrictions on the party autonomy may be detrimental. Moreover, no time bound mechanisms for International Commercial Arbitrations will dissuade/disincentive foreign parties to choose India as the seat for their arbitration disputes due to the fact that arbitration is preferred for its confidentiality and speedy dispute resolution.

Nevertheless, to counter the problem of mandatory judicial intervention, it is proposed that the parties mutually be allowed to determine the extension of the timeline if arbitration proceedings are not completed within the stipulated time period. Each dispute is of a different nature and requires to be resolved accordingly. Therefore, a strict mandatory timeline imposed for all kinds of disputes will only hinder the proceedings. Parties mutually agreeing upon the extension of timeline for arbitration proceedings in accordance to their requirements will uphold party autonomy and time bound arbitration. As the Act currently stands, the parties are notified by the arbitrator about the schedule of the arbitration.

However, this might lead to delay in proceedings. One measure which can be inculcated in the Act is to provide a preliminary meeting of the parties to decide the timeline to be followed for the arbitration proceedings, ensuring that the parties are well informed in advance about their availability or unavailability on the said dates of arbitration.

The authors are second year law students, pursuing their degree from the National Law University, Jodhpur.


[1] Section 29A (1) Arbitration and Conciliation (Amendment) Act, 2019.

[2] Section 29A (4), Arbitration and Conciliation (Amendment) Act, 2019.

[3] Id.

[4] Section 29A (1), Arbitration and Conciliation (Amendment) Act, 2019.

[5] Article 1713, Belgian Arbitration Act, 2013.

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