Delhi High Court: 2019 Amendment to Section 29A of the A&C Act Being Procedural in Nature is Applicable to All Pending Arbitrations

Delhi High Court: 2019 Amendment to Section 29A of the A&C Act Being Procedural in Nature is Applicable to All Pending Arbitrations

The Delhi High Court while granting an extension of time for the completion of arbitral proceedings in a dispute between Harkirat Singh Sodhi vs. Oram Foods Pvt Limited & Others, has observed that the amendment made in 2019 to section 29A of the Arbitration and Conciliation Act, 1996 (A&C Act) is procedural in nature and would apply to all arbitrations that were pending on the date of its coming into force.

By way of the amendment, the time limit of 12 months for making an award by way of amendment shall be counted from the date of completion of the proceedings and not from the date when the arbitrator recorded the reference as provided under the unamended section.

The single judge Justice Anup Jairam Bhambhani extended the time period for award of arbitration after considering specific facts of the cases including the death of two arbitrators, the third arbitrator recusing himself and the delay caused by the COVID-19 pandemic.

The genesis of the dispute stemmed from a registered Lease Deed signed on 5 July 2016, whereby the petitioner leased the subject premises to the respondent. The agreement included an arbitration clause.

A dispute arose between the parties when the respondent defaulted on his obligation to pay the amount of rent. Accordingly, the petitioner issued the first termination notice, however, the parties entered into a settlement agreement on 8 June, 2017.

Despite the settlement agreement, the respondent continued to default on monthly rental payments, which led to the issue of the second termination letter. The petitioner directed the respondent to hand over the possession of the concerned premises, however, he failed to do the same, which led to the sealing of the premises by the MCD.

Thereafter, on 14 December, 2018, the petitioner invoked the arbitration clause and issued notice of arbitration and requested DIAC to initiate arbitration. DIAC appointed a former Delhi High Court judge as mediator, the parties filed their statements before the tribunal.

However, the arbitrator passed away on 21 May, 2019. Accordingly, the DIAC substituted the arbitrator. The litigation in the matter was completed on 29 August, 2019. Thereafter, before the award could be passed, the second arbitrator also passed away on 23 April, 2021.

Meanwhile, the A&C Act was amended in 2019, after which Section 29A of the Act was amended and the time limit of 12 months for making the award was set to be counted from the date of completion of the proceedings, and not from the date on which the reference to the arbitrator entered into force, as provided in the unamended section. Along with this, the Supreme Court had excluded the period from 15 March, 2020 to 28 February, 2022 from the purview of limitation.

Upon the death of the second arbitrator, the DIAC appointed a third arbitrator, who recused himself from continuing the proceedings.

Finally, on 16 September, 2021 the fourth arbitrator was appointed. On 21 December, 2021, the petitioner approached the Court for extension of time for award. Ultimately, the award was passed on 30 August, 2022, however, the same was not distributed to the parties due to non-payment of arbitrator fee by the respondents.

It was contended by the petitioner that arguments were completed by 29 August, 2019 and in view of the 2019 amendment to section 29A, the award was to be made within 12 months from the date of completion of arguments i.e., by 28 August, 2020.

However, in the meantime the COVID-19 pandemic struck and the Supreme Court excluded the period from 15 March, 2020 to 28 February, 2022 from the purview of limitation. Therefore, only 197 days had elapsed till 15 March, 2022 and the arbitrator still had 168 days to deliver the award.

It was highlighted by the petitioner that 168 days expired on 16 August, 2022, however, the award was passed only on 30 August, 2022. There has been a minor delay of only 14 days.

The delay was due to the unfortunate demise of two arbitrators and the separation of the third arbitrator. Further, the petition seeking extension of time was actually filed much before the expiry of the time period, therefore, the Court should extend the time till 30 August, 2022, i.e., the date on which the award was actually granted.

On the other hand, the respondent argued that the amendment to section 29A is prospective in nature and would apply only to those arbitrations which have commenced after the amendment came into force.

In terms of unamended section 29A, the award was to be made within 12 months from the date of filing the reference. Therefore, the period of 12 months expired on 8 January, 2020 and the benefit of exclusion of time period will not be available in the case due to COVID-19.

The Court on examination of the issue held that the application of the 2019 amendment to Section 29A of the Act, held that the 2019 amendment to Section 29A was only procedural in nature, therefore, it was to be applied retrospectively to all pending arbitrations.

The Court held that after the conclusion of the arguments on 29 August, 2019, the arbitrator was to deliver the award within 12 months from the date of completion of the arguments, as per amended section 29A.

The Court considered that the COVID-19 pandemic struck and the Supreme Court excluded the period from 15 March, 2020 to 28 February, 2022 from the purview of limitation, so the period of 12 months expired on 16 August, 2022.

The Court observed that the arbitrator made the award to the DIAC on 30 August, 2022 and there was a minor delay of 14 days in making the award, but this was due to some extraordinary circumstances in the form of unfortunate death of two arbitrators and refusal of the third arbitrator.

Further, the petitioner had filed the petition within the limitation period and had acted with due diligence, therefore, the Court allowed the petition and extended the limitation period till the date on which the award was made.