HC Rules: 2019 Amendment to Sec- 29A of the A&C Act is procedural in nature, will apply retrospectively to pending Arbitrations, Read Judgement

The Delhi High Court has ruled that the 2019 Amendment to Section 29A of the Arbitration & Conciliation Act is procedural in nature and would apply retrospectively to all arbitrations that were pending when it came into force. 

The single-judge bench of Justice Anup Jairam Bhambhani in this view extended the time period for rendering an arbitration award after considering facts such as the death of two arbitrators, recusal by the third arbitrator, and the delay caused by the Covid-19 pandemic.

Brief Facts of the Case

The genesis of the disputes between the parties was a registered Lease Deed dated 05.07.2016. Arbitral proceedings arose from certain defaults committed by the respondents in payment of rental amounts; as a consequence of which the petitioner terminated the lease deed on 17.04.2017. Subsequent to the termination of tenancy, the parties signed a Settlement Agreement dated 08.06.2017, despite which settlement however, the respondents continued to default in payment of the rental amounts, which lead the petitioner to issue another termination notice dated 14.03.2018, directing the respondents to hand back possession of the subject premises within 15 days of the notice i.e., by 31.03.2018. The respondents however failed to hand back possession of the subject premises, which were also sealed by the Municipal Corporation of Delhi on 30.05.2018.

Thereafter, on 14.12.2018, upon the petitioner‟s "Request for Arbitration‟ filed before the DIAC. Hon'ble Mr. Justice J.K. Mehra, former Judge of the Delhi High Court was appointed as the learned sole arbitrator to adjudicate upon the disputes that had arisen between the parties.

On 26.03.2019 the petitioner filed his statement of claim; whereupon respondent No.3 filed his reply and statement of defence on 22.05.2019; and respondents Nos. 1 and 2 filed their joint reply and statement of counter-claims on 23.05.2019. However, Justice Mehra passed away and was substituted by Justice Anil Kumar on 06.09.2019.

In the meantime, sometime in July 2019 the petitioner filed his rejoinder to the respondents‟ statement of defence and reply to the counter-claims; and the respondents then filed their rejoinder to the petitioner‟s reply. Pleadings are stated to have been completed as of 29.08.2019.

He passed an interim order directing respondent No.1 to clear all arrears of rent/charges for use and occupation of the subject premises as well as arrears of damages that were due to the petitioner but soon after that, unfortunately, he too passed away. He was substituted by Justice Rajiv Bhalla, former Judge of the Punjab & Haryana High Court on 02.07.2021.

However, on 17.08.2021 Justice Bhalla withdrew from the arbitral proceedings. Consequently, on 16.09.2021 the DIAC appointed Hon'ble Dr. Justice Mukundakam Sharma, former Judge of the Supreme Court as the learned sole arbitrator, who proceeded with the matter thereafter.

Contentions of the Parties 

The Counsel for the petitioner contended that as per section 29A(1) of the A&C Act, as amended by the 2019 Amendment Act, in arbitrations other than international commercial arbitrations, an award is to be made by an arbitral tribunal within 12 months from the date of completion of pleadings.

She cited ONGC Petro Additions Limited vs. Ferns Constructions Co. Inc. 1 and Shapoorji Pallonji and Co. Pvt. Ltd. vs. Jindal India Thermal Power Limited to submit that the 2019 amendments to section 29A(1) are procedural in nature and would therefore be applicable to all pending arbitration proceedings „seated‟ in India as on 30.08.2019.

Furthermore, it was submitted that vide order dated 10.01.2022 made in In Re: Cognizance for Extension of Limitation3 the Supreme Court has issued the following directions for determining the period of limitation for completion of arbitral proceedings under section 29A of the A&C Act.

The Counsel pointed out that pleadings in the arbitral proceedings in the present case were completed on 29.08.2019; from which date 12 months were available for completing the arbitral proceedings, that is to say, arbitral proceedings were to be completed by or before 29.08.2020. It is submitted that the period from 30.08.2019 (i.e. the day next after completion of pleadings) till 15.03.2020 (both days included) comes to 197 days. Since, in view of the directions of the Supreme Court as referred to above, the period from 15.03.2020 till 28.02.2022 is to be excluded for purposes of calculating the 12-month time period available for completion of arbitral proceedings, the remaining time period of 168 days (i.e., 365 - 197) would be reckoned from 01.03.2022 onwards. This would mean that the mandate of the learned arbitrator to complete the arbitral proceedings would have expired on 16.08.2022.

It was thus submitted that the present petition which was filed on 21.12.2021 is within the time period specified in section 29A(4) of the A&C Act and was argued that in view of the exceptionally unfortunate circumstances that arose in the course of arbitral proceedings, namely that two learned sole arbitrators appointed in the matter passed away, and the third learned arbitrator withdrew from the proceedings, the ground for seeking extension of the mandate of the fourth learned arbitrator is valid and fully justified.

It was also pointed out that as per an e-mail dated 30.08.2022 received from the DIAC, the arbitrator had in fact delivered the award on 30.08.2022; which award has been forwarded to DIAC in "sealed cover‟ only for the reason that there was delay on the part of the respondents in paying arbitration fee and costs.

On the other hand, Counsel for respondents vociferously opposed the grant of any extension of the mandate of the learned arbitrator, arguing that the petitioner is raising a substantive question of law, viz. whether the 2019 Amendment Act is prospective or retrospective in nature. He submitted, that the 2019 Amendment Act is prospective in nature by reason of the clear wording of section 1 of the Amendment Act viz. that the Amendment Act will come into force on such date as the Central Government may notify, which notification happened on 30.08.2019.

Furthermore, it wss submitted that section 6 of the General Clauses Act 1897, which deals with the effect of a repeal, says that a repeal will not affect any pending legal proceedings which existed prior to the repealing statute being passed. In view thereof counsel argued, that section 29A(1) as originally inserted by the 2015 Amendment Act w.e.f. 23.10.2015 mandated that an arbitral award was to be rendered within 12 months from the date the arbitral tribunal enters upon reference. It was pointed-out, that as per the Explanation to section 29A(1) as originally inserted, an arbitral tribunal is deemed to have entered upon reference on the date on which the arbitrator (or all the arbitrators) receive a notice in writing in regard to their appointment, which notice in the present case is stated to have been served upon the learned sole arbitrator on 08.01.2019. Counsel also argues, that as per Rule 4.1 of the DIAC (Arbitration Proceeding) Rules 2018, arbitration commences on the date that a request for arbitration is made, which in the present case was on 14.12.2018. Counsel therefore submitted, that in accordance with section 29A(1) as originally inserted by the 2015 Amendment Act, the arbitrator must be deemed to have entered upon reference on 08.01.2019; and his 12-month mandate to render an award expired on 08.01.2020.

It was further submitted that under section 29A(1) of the A&C Act (as amended by the 2015 Amendment Act), in arbitrations other than international commercial arbitrations, the arbitral award is required to be rendered within 12 months from the date of “completion of pleadings” under section 23(4) of the A&C Act (as inserted by the 2019 Amendment Act). The argument accordingly was, that the “date of completion of pleadings” as contemplated in section 29A(1) read with section 23(4) of the A&C Act refers only to the filing of the statement of claim and statement of defence and does not include the time taken for filing any rejoinder to the statement of defence.

It was accordingly contended, that the 06- month period contemplated in section 23(4) and the 12-month period contemplated in section 29A(1)of the A&C Act must be reckoned from the date of filing of the statement of defence and not from the date of filing of rejoinder. It was stated that in the present case, the petitioner filed his reply to the counter-claim and rejoinder to the statement of defence on 14.08.2019, which was in any case beyond the 06-month period contemplated in section 23(4). Though the argument formulated on behalf of respondents Nos.1 and 2 is ambiguous and somewhat convoluted, it appeared that the thrust of the argument is that pleadings in the arbitral proceedings were not completed within the time stipulated under the statute. It was argued that the petitioner cannot be permitted to cherry-pick only some aspects of the 2019 Amendment Act and apply only such amendments as are convenient to its case. It was argued that such stance would create inconsistency, whereby only part of the amended provision would apply. The Counsel cited Hitendra Vishnu Thakur Vs. State of Maharashtra, 1994 Latest Caselaw 353 SC to argue that an inconsistent reading of the statute is impermissible and that the whole of the 2019 Amendment Act is prospective in nature

High Court's Observation 

The Cout after taking into consideration the peculiar facts of the case reiterated that the 2019 Amendment to Section 29A of the Arbitration & Conciliation Act is procedural in nature and would apply retrospectively to all arbitrations that were pending when it came into force. 

"Though it has been argued on behalf of respondents Nos. 1 and 2 that the 12-month timeline set-down in section 29A of the A&C Act is to be reckoned from the date that the learned arbitrator received a notice in-writing regarding his appointment i.e., to say in accordance with the unamended section 29A, it is seen that Co-ordinate Benches of this court have already taken the view that the 2019 amendment to section 29A(1) are procedural in nature and are therefore applicable to all arbitration proceedings seated in India as on 30.08.2019 i.e. the date on which the 2019 amendment came into force. In the present case, there is no dispute that by reason of the chequered history of the matter, arbitral proceedings were pending as on 30.08.2019. In any event, in the exceptional circumstances that prevailed in this matter, if the fourth learned arbitrator came to be seized of the matter only on 16.09.2021 (since two earlier arbitrators had passed-away and the third had withdrawn from the proceedings), the question of applying section 29A as it existed prior to the 2019 amendment would not arise." the court said.

Besides, from the record it appears that pleadings in the matter were completed on 29.08.2019, which would mean that arbitral proceedings were required to be completed by or before 01 year from that date i.e. 29.08.2020, the court added.

"Applying the mandate of the Supreme Court vide its order dated 10.01.2022 referred to above, for computing time period under section 29A of the A&C Act the period that commenced on 29.08.2019 must be deemed to have stopped running as on 14.03.2020 and thereafter to have re-commenced on 01.03.2022, for completing the arbitral proceedings. Since 197 days had elapsed prior to when the time stopped running, 168 days were available to the learned arbitrator starting 01.03.2022 to complete the arbitral proceedings, which 168 days ended on 15.08.2022. The present petition seeking extension of mandate was filed on 21.12.2021, that is during the period that time had stopped running. During the pendency of the present petition, this court is informed that the learned arbitrator has already rendered his award on 30.08.2022 i.e., only 14 days beyond the stipulated time and has forwarded the same to DIAC vide e-mail dated 30.08.2022"

The Court thus deemed no reason to delve any further into the hyper-technical legal objections raised on behalf of respondents Nos. 1 and 2 as to whether the phrase „completion of pleadings‟ as contained in section 29A of the A&C Act is to include or exclude the time for filing of rejoinders, based on the wording of section 23(4) of the A&C Act which refers to filing only of the statement of claim and statement of defence.

"This court is constrained to note that regrettably, the conduct of respondents Nos. 1 and 2 betrays an effort to nullify arbitral proceedings that have now finally come to fruition with the arbitral award having been rendered," the court remarked.

Case Title: Harkirat Singh Sodhi vs. Oram Foods Pvt. Ltd. & Ors.
Case Details: O.M.P. (MISC). (COMM.) 186/2021
Coram: Hon'ble Mr. Justice Anup Jairam Bhambhani
Advocates for Petitioner: Ms. Chaand Chopra with Mr. Siddharth Shekhar and Mr. Adwaith Sreekumar, Advocates with petitioner in-person.
Advocates for Respondent: Ms. Ripu Adlakha, Advocate for R1 and 2, Ms. Deepti Kathpalia & Ms. Aksa Thomas, Advocates for R3.

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