‘Court’ Under Section 29A Of The Arbitration Act: Is The Conundrum Settled?

Introduction

For quite some time now, Section 29A of the Arbitration & Conciliation Act, 1996 (hereinafter “the Act”) has been a much contentious & debated issue in the Indian Arbitration landscape. Inserted vide the Arbitration and Conciliation (Amendment) Act, 2015, Section 29A provides for the time limit for passing the arbitral award. Section 29A (4) makes provision for a situation where if the award is not made within the period specified under Section 29A, the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period. The interpretation of the term ‘Court’ as referred to under Section 29A (4) has been facing a major divergence of opinions amongst not only the different High Courts of the country but also among the different benches of the same court in some cases. In the instant article, we shall try to understand the conundrum surrounding the interpretation of the term ‘Court’ as referred to under Section 29A of the Act. We shall also analyze whether the recent judgement of the Hon’ble Supreme Court of India in the case of Chief Engineer (NH) PWD (Roads) Vs M/S BSC & C and C JV¹ has settled the controversy at hand.

Which court has the jurisdiction to extend the mandate of the arbitral tribunal has been the issue in contest for a long time now and there have been conflicting judgements across various High Courts of the country. The term ‘Court’ has been defined under section 2(1)(e) as the Principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction in cases apart from International Commercial Arbitration. In cases of International Commercial Arbitrations, it is the High Court having the ordinary original civil jurisdiction to adjudicate on the subject matter. A plain reading of Section 2(1)(e) & Section 29A (4) makes it clear that both the Principal Civil Court of original jurisdiction in a district and the High Court in exercise of its ordinary original civil jurisdiction would be the competent courts to extend the mandate of Arbitrator(s), however, the dispute arises when you would read sub-section (6) of Section 29A along with Section 29A (4) & Section 2(1)(e). Sub-section (6) of Section 29A empowers the court, which is approached to seek extension of mandate, to also substitute one or all of the arbitrators. This power of the ‘Court’ under Section 29A(6) has been the stimulant behind the long-standing conundrum as to which Court shall be competent to exercise jurisdiction under the said section. The power to substitute an arbitrator has been held to be analogous to the power to appoint an arbitrator. The power to appoint an arbitrator is a prerogative of the High Courts in cases other than International Commercial Arbitrations and of the Supreme Court in cases of Internation Commercial Arbitrations under Section 11 of the Act. Therefore, to interpret the term ‘Court’ under Section 29A as the Principal Civil Court of original jurisdiction in a district shall have the effect of bestowing upon them the power of substituting the arbitrators, which is a power analogous to the powers under Section 11 of the Act which have expressly been bestowed upon the High Courts and not the Principal Civil Courts. Thus, a conflict appears between the powers of ‘Court’ under Section 29A and under Section 11 of the Act.

Judicial interpretation of the term ‘Court’ under Section 29A

Under the Arbitration & Conciliation Act, 1996, the appointment of an arbitrator can either be through mutual consent of the parties or if the parties fail to mutually agree on the name of the Arbitrator, then the Courts step in and appoint the arbitrator under Section 11 of the Act. The rift between the power of ‘Court’ under Section 29A and under Section 11 of the Act intensifies and becomes a real concern in cases where an arbitrator has been appointed by the High Court under Section 11 of the Act and a petition under Section 29A of the Act is filed before the Principal Civil Court for substitution of the Arbitrator. In such cases, can the Principal Civil Court exercise jurisdiction and substitute an arbitrator appointed by the High Court has been the core of this controversy. In other cases, where the appointment has not been made by the High Court, there stands no rift between the powers of the High Court and that of the Principal Civil Court and therefore in such cases the Principal Civil Court may exercise power under Section 29A.

The Hon’ble Delhi High Court had the occasion to interpret the meaning of the term “Court” under Section 29A in the case of DDA vs. Tara Chand Sumit Construction Co², wherein the Hon’ble court noted that in case where the issue of substitution of an arbitrator arises where the arbitrator was appointed by the Supreme Court or High Court then conflict would arise between the power of superior courts to appoint Arbitrators under Section 11 of the Act and those of the Principal Civil Court to substitute those Arbitrators under Section 29A of the Act. This would be clearly in the teeth of the provisions of Section 11 of the Act, which confers the power of appointment of Arbitrators only on the High Court or the Supreme Court, as the case may be. Thus, the Hon’ble Court held that the only way this conflict can be resolved or reconciled will be by a contextual interpretation of the term ‘Court’ in the context of Section 29A of the Act, to be a court which has the power to appoint an Arbitrator under Section 11 of the Act.

A single judge bench of the Hon’ble Bombay High Court in the case of Cabra Instalaciones Y. Servicios v. Maharashtra State Electricity Distribution Co. Ltd.³, while dealing with an International Commercial Arbitration wherein the tribunal was appointed by the Supreme Court under Section 11, held that that while extending the period referred to in sub-section (4), it would be open to the Court to substitute one or all the arbitrators, which is in fact a power to make appointment of a new/substitute arbitrator or any member of the arbitral tribunal. Thus, certainly when the arbitration in question is an international commercial arbitration as defined under Section 2(1)(f) of the Act, the High Court exercising power under Section 29A, cannot make an appointment of a substitute arbitral tribunal or any member of the arbitral tribunal as prescribed under sub-section (6) of Section 29-A, as it would be the exclusive power and jurisdiction of the Supreme Court considering the provisions of Section 11 of the Act. Thus, the Hon’ble Court held that the power to substitute the arbitral tribunal, being analogous to the power to appoint an arbitrator, cannot be exercised under Section 29A and would have to be exercised by the Court that is empowered to appoint the arbitrator under Section 11. Another single judge bench of the Bombay High Court in the case of Magnum Opus IT consulting Private Limited vs. Artcad Systems, through its Proprietor Vinay Digambar Shende⁴, noted the previous judgement of the coordinate bench in the case Cabra Instalaciones (supra) and while it agreed with the contextual interpretation of the term “Court” as adopted in the Cabra Instalaciones judgement, however, created an exception for the case in hand as the arbitration in that case commenced under the MSMED Act and the arbitrator was not appointed under Section 11 of the Act. Therefore, there existed no conflict of powers in interpreting the term “Court” as the Principal Civil Court in the district and thus the Nashik District Court was empowered to exercise jurisdiction under Section 29A. Another recent ruling of the Hon’ble Bombay High Court in the case of K.I.P.L. Vistacore Infra Projects J.V. v. Municipal Corporation of the city of Ichalkarnji⁵, analyzed the position of law as already laid down by the previous judgements and further went on to conclude that if the meaning assigned to term ‘court’ in Section 2(1)(e) is introduced in Section 29A, it would run contrary to the intention of legislation as it would provide a ‘court’ as defined under Section 2(1)(e) to partake the power vested in the High Court to extend the mandate of the Arbitrator and substitute the Arbitrator.

We shall now analyze the interpretation as laid down by the Hon’ble Allahabad High Court. It would be important to note here that the issue of interpretation under Section 29A has been referred to the larger bench of the Hon’ble High Court and is pending adjudication in the case of M/s. Jaypee Infratech Limited -v- Ehbh Services Private Limited and Another⁶ vide order dated 26th of February 2024. However, we shall analyse the interpretation laid down by the Hon’ble Court as it stands, as of today. The Hon’ble Court, in its judgement in the case of Lucknow Agencies LKO v. UP Awas Vikas Parishad and Ors.⁷, was dealing with the factual scenario where the arbitrator was not appointed under Section 11 and thus went on to hold that the Principal Civil Court shall be the court having jurisdiction under Section 29A to extend the mandate of the arbitrator. In another judgement in the case of Indian Farmers Fertilizers Cooperative Limited v. Manish Engineering Enterprises⁸, where the arbitrator was appointed by the High Court in exercise of the power under Section 11 of the Act, the Hon’ble Court held that in such cases the application under Section 29A is maintainable before the High Court. Another judgment in line is of the coordinate bench of the Hon’ble Court in the case of M/S A'Xykno Capital Services Private Ltd. v. State Of U.P.⁹, wherein the court held that the judgment in Indian Farmers Fertilizers (supra) could not be considered as a binding precedent and held that since Allahabad High Court does not exercise the ordinary original civil jurisdiction therefore the Principal Civil Court shall only have jurisdiction under Section 29A. The most recent ruling of the Hon’ble Allahabad High Court on the issue is in the case of M/S Geo Miller Company Private Limited v. UP Jal Nigam and Ors.¹⁰, wherein the court held that the judgement in the case of A'Xykno Capital Services (supra) to be flawed and would not hold any precedential value. Further, the court held that the Lucknow Agencies (supra) & the Indian Farmers Fertilizers (supra) judgement to be good in law and complimentary to each other. Thus, in conclusion, in cases where the appointment is made under Section 11 of the Act, it would be the appointing High Court before which the application under Section 29A shall be filed.

In the backdrop of this conundrum and the divergence in interpretations, we shall now analyze the judgement of the Hon’ble Supreme Court of India in the case of Chief Engineer (NH) PWD (Roads) (supra). The Apex Court was called upon to decide the challenge to the judgement of the High Court of Meghalaya in appeal under SLP, wherein the question was as to which court would have jurisdiction under Section 29A. The Hon’ble Supreme Court relied upon the literal interpretation and held that it is the Principal Civil Court of original jurisdiction, and which includes the High Court, if having the ordinary original civil jurisdiction, to be the court under Section 29A. The Court further affirmed that Sub-section (6) of Section 29A, which provides the power to substitute the arbitrator, is only a consequential power vested by the same court, which is extending the mandate under Section 29A (4). While this judgement is being lauded as a significant ruling in settling the conundrum, the author believes that the Hon’ble Apex Court has missed out on certain critical discussions and, therefore, this judgement contributes only a little towards settling the conundrum.

Conclusion

In India, only five High Courts exercise ordinary original civil jurisdiction, namely, the High Courts of Delhi, Bombay, Calcutta, Madras, and Himachal Pradesh. The legislation, in its wisdom, has framed Section 29A so that it governs the two above-stated situations, i.e., where the High Court would have the ordinary original civil jurisdiction and where the High Court would not have the ordinary original civil jurisdiction. However, the judicial precedents across the High Courts have further created a bifurcation as to where the arbitrator has been appointed under Section 11 of the Act and where the arbitrator has not been appointed under Section 11. This bifurcation is alien to the essence of Section 29A as envisaged by the legislation and has resulted in the present conundrum. While this bifurcation created by the Hon’ble High Courts might not be a concern for those High Courts which exercise the ordinary original civil jurisdiction, the same shall cause serious contradictions for those High Courts which do not exercise the said jurisdiction. Section 2(1)(e), in express words, allows only the Principal Civil Court or the High Court having the ordinary original civil jurisdiction to be the competent court. So, interpreting the term Court in a way that includes the High Courts, which do not exercise the ordinary original civil jurisdiction, would be against the express terms of Section 2(1)(e).

The judgements of the Hon’ble High Courts of Delhi & Bombay might hold good considering that those courts exercise the ordinary original civil jurisdiction as prescribed under Section 2(1)(e), however, the Indian Farmers Fertilizers (supra) judgement of the Hon’ble Allahabad High Court has interpreted the term ‘Court’ in a way which runs contrary to the express provision under Section 2(1)(e) so far as it extends the power under Section 29A(4) to even such High Court which does not exercise the ordinary original civil jurisdiction. However, the subsequent judgement of the Hon’ble Allahabad High Court in the case of A'Xykno Capital Services (supra) differed from the ruling in case of Indian Farmers Fertilizers (supra) and held that there would be no conflict of powers in holding the Principal Civil Court to be the competent court under Section 29A. However, this judgement was overruled in the case of M/S Geo Miller Company (supra).

Finally, coming to the judgement of the Hon’ble Supreme Court in the case of Chief Engineer (NH) PWD (Roads) (supra). In the opinion of the author, the said judgement might not be of significant help in resolving the conundrum of Section 29A as the factual background of the case was such that the arbitrator was not appointed under Section 11 of the Act and therefore the Hon’ble High Court of Meghalaya held that the Principal Civil Court shall have the jurisdiction to grant relief under Section 29A. The Hon’ble Supreme Court in SLP upheld this judgement. There being no conflict between Section 11 and Section 29A of the Act in the case of Chief Engineer (NH) PWD (Roads), the Supreme Court had no occasion to deliberate over the issue and settle the debate. Thus, till the time the Hon’ble Supreme Court conclusively settles the interpretation of ‘Court’ under Section 29A of the Act, considering the apparent conflict between Section 11 & Section 29A of the Act and the issue of conflict of powers that has caused significant concern before the High Courts, the issue shall continue to remain as a topic for deliberation & discussion. Another way out of the current conundrum would be for the legislation to step in with an amendment in this regard. The legislation may either acknowledge the bifurcation created by the High Courts or clarify in express words which court would be the competent court for applications under Section 29A. An amendment to the effect that also considers the issue of any conflict of powers shall be a welcome step towards resolving the divergence of opinions.

Disclaimer: This article was first published in the S&A Law Offices - 'Indian Legal Impetus' newsletter in August 2024.