Delhi High Court on Application of Time-Line under Section 29A under Arbitration & Conciliation Act!
Updated: Aug 9, 2020
In a significant judgement the Delhi High Court clarified the dilemma as to the applicability of timeline of completion of arbitral proceedings laid down under Section 29A(1) of the Arbitration and Conciliation Act, 1996, as inserted vide 2019 amendment. In the case of ONGC Petro Additions Ltd. v. Ferns Construction Co. Ltd. (dated July 21, 2020) Justice V. Kameswar Rao held that Section 29A of the Arbitration and Conciliation Act, 1996 shall be applicable to all pending arbitrations in India which commenced after October 23, 2015 except international commercial arbitrations.
Section 29A was inserted by 2015 Amendment in order to speed up the process of alternate dispute resolution. However, owing to a wide ranging defects, the legislature introduced changes in Section 29A by introducing the 2019 Amendment. Amended Section 29A states that other than International Commercial Arbitration, the arbitral award shall be passed within a period of 12 months from the date of completion of pleadings and not from the date of commencement of proceedings. Intention of the legislature behind this amendment was to extend the time period for completion of proceedings in order to make the time period more attainable and reduce the number of cases seeking extension. Since the introduction of this Section it has been a long standing question as to whether Section 29A could be applied retrospectively or prospectively.
Issue before the court in this case was, since International Commercial Arbitration is an exception of Section 29A(1) and the respondent is a foreign party, then if the proceeding is an International Commercial Arbitration, whether time limit laid down under Section 29A(1) vide 2019 Amendment shall be applicable. Contention of the petitioner was that Section 29A(1) will have retrospective effect from October 23, 2015 i.e., from the date of enforcement of Arbitration and Conciliation (Amendment) Act, 2015.
In this case attention of the court was drawn to two previous conflicting orders of the Delhi High Court. In the earlier case of Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power Limited, decided on January 23, 2020 the Court held that the amended Section 23(4) and Section 29A(1) of the Arbitration and Conciliation Act, 1996 are procedural in nature and hence will be retrospectively applicable to all arbitral proceedings pending as on August 30, 2019 and commenced after October 23, 2015. In a later judgement in the case of MBL Infrastructures Ltd. v. Rites Ltd., decided on February10, 2020, the court held that Section 29A is prospective in nature. When faced with conflicting judgements, the petitioner contended that the earlier decision ought to be followed as the later decision would be per incuriam. The court accepted the contention of the petitioner and laid down that decision of a Coordinate Bench in Shapoorji Pallonji case wherein the Court held that Section 29A being procedural in nature, shall be applicable to all the arbitrations pending on the date of amendment except International Commercial Arbitrations, stands correct.
This judgement of the Delhi High Court settled the long-standing confusion over the applicability of Section 29A as to timeline for completion of arbitral proceedings. The Delhi High Court has made it clear that International Commercial Arbitrations are outside the scope of Section 29A and there is no need to approach the Court for extension of timelines in the matters of ICA anymore.