Allahabad High Court Affirms High Court's Jurisdiction Over Section 29A Applications When Appointing Arbitrator Under Section 11 A&C Act

Allahabad High Court Affirms High Court's Jurisdiction Over Section 29A Applications When Appointing Arbitrator Under Section 11 A&C Act

Justice Shekhar B. Saraf of the Allahabad High Court has determined that if the High Court appoints an arbitrator pursuant to Section 11 of the Arbitration Act, it possesses jurisdiction to consider applications under Section 29A for extending the arbitrator's mandate.

While recognizing that the matter of the suitable court for Section 29A applications was awaiting consideration by a larger bench, the High Court affirmed that the existing stance remained guided by past judgments, including Indian Farmers Fertilizers Cooperative Ltd. v. Manish Engineering Enterprises.

M/s Geo Miller and Co. Pvt. Ltd. ("Petitioner") and Uttar Pradesh Jal Nigam ("Respondent") entered into a contract, which led to disputes and differences between them. These issues were subsequently referred to arbitration. The petitioner filed an application under Section 11 of the Arbitration Act before the High Court of Allahabad ("High Court") for the appointment of an arbitrator. Mr. Justice R.D. Khare was appointed by the High Court as the sole arbitrator. The statutory time limit for issuing an arbitral award, as per Section 29A of the Act, lapsed on February 29, 2024. The arbitrator was unable to render the award within this prescribed timeframe and thus requested that the parties seek an extension of time in accordance with the law. Subsequently, the petitioner filed a civil arbitration petition before the High Court to request an extension of time.

The applicant argued that despite the pending issue regarding Section 29A of the Arbitration Act before a larger bench due to conflicting judgments from different coordinate benches, the High Court should not defer consideration of this matter until the larger bench provides clarification. Reference was made to the case of Indian Farmers Fertilizers Cooperative Limited v. Manish Engineering Enterprises, wherein it was established that the Court appointing the arbitrator under Section 11 possesses exclusive jurisdiction to hear Section 29A applications.

The High Court also affirmed that when a Coordinate Bench issues a judgment on a specific legal matter, that judgment establishes a binding precedent for subsequent cases involving a similar issue before another Coordinate Bench. This ensures consistent adjudication of similar cases, irrespective of the particular composition of the bench. The reliance was placed on the Supreme Court's rationale in National Insurance Company Limited v. Pranay Sethi, wherein it was emphasized that an earlier decision maintains its binding authority on subsequent benches of coordinate jurisdiction, even if deemed incorrect.

Until a decision by a larger bench is rendered, the earlier decision must be adhered to, thereby preserving the stability and continuity of the law. Furthermore, in instances of conflicting judgments from coequal benches, the earlier decision should be followed as a binding precedent. High Courts are obligated to uphold the earlier judgment when confronted with conflicting rulings by benches of equal strength.

The High Court noted the case of Lucknow Agencies LKO v. UP Awas Vikas Parishad and Ors., where a Coordinate Bench considered an application under Section 29A(4) and Section 29A(5) of the Arbitration Act. It was observed that the Allahabad High Court neither exercised its ordinary original civil jurisdiction nor appointed the arbitrator under Section 11 of the Arbitration Act. Hence, it lacked the authority to entertain an application under Section 29A of the Arbitration Act. Instead, it was ruled that such an application must be filed before the Court as defined under Section 2(1)(e) of the Arbitration Act. It was deemed appropriate for such matters to be brought before the relevant commercial court or the principal civil court of original jurisdiction.

Conversely, the ruling in Indian Farmers Fertilizers Cooperative Limited v. Manish Engineering Enterprises addressed a scenario where the arbitrator was designated under Section 11 of the Arbitration Act. The Allahabad High Court determined that in such instances, an application for extending the mandate of the arbitral tribunal under Section 29A should be directed to the court responsible for appointing the arbitrator. The judgment underscored that Section 42 of the Arbitration Act, which typically governs court jurisdiction in arbitration matters, would not be applicable in these circumstances. Consequently, it is the High Court, which appointed the arbitrator under Section 11, that holds the authority to grant extensions pursuant to Section 29A.

After reviewing the aforementioned cases, the High Court distinguished between their factual contexts. The Lucknow Agencies case pertained to arbitrators not appointed by the High Court, whereas the Indian Farmers Fertilizers case involved situations where the High Court did make such appointments. This distinction led to differing jurisdictional determinations.

However, the case of M/s A'Xykno Capital Services Pvt. Ltd. v. State of U.P. introduced a divergent perspective. In this instance, it was concluded that the judgment in the Indian Farmers Fertilizers case did not establish a binding precedent. It was asserted that irrespective of who appointed the arbitrator, only the court, as defined under Section 2(1)(e) of the Arbitration Act, could entertain an application under Section 29A. This rationale was grounded in the doctrine of 'per incuriam', which permits courts to depart from precedent if a decision was rendered without due consideration of relevant laws.

In the subsequent case of M/s. Jaypee Infratech Limited v. Ehbh Services Pvt. Ltd. and Anr., the deficiencies in the A'Xykno Capital Services case were addressed. It was contended that its interpretation resulted in a conflict between Sections 11 and 29A of the Arbitration Act and compromised the principle of judicial hierarchy. The court stressed that when arbitrators are appointed by the High Court under Section 11, the same court should possess the authority to grant extensions under Section 29A. This approach aims to prevent conflicts and ensure consistent application of the law.

In light of these rulings, the High Court determined that the judgments in the Lucknow Agencies case and the Indian Farmers Fertilizers case retain authority over matters concerning Section 29A applications before the High Court. Consequently, the decision in the A'Xykno Capital Services case is deemed not to have precedential value. This stance will persist until a larger bench offers additional clarification on the matter.

Conclusively, the petition to extend the time for the award was allowed based on the fact that the High Court itself appointed the arbitrator to resolve the dispute between the petitioner and the respondent. The mandate of the arbitrator was extended for 8 months from the date of the judgment.