Sikkim High Court
Union Of India vs M/S Mk Infrastructure (P) Ltd on 8 May, 2025
Author: Bhaskar Raj Pradhan
Bench: Chief Justice, Bhaskar Raj Pradhan
THE HIGH COURT OF SIKKIM:GANGTOK
(Civil Appellate Jurisdiction)
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DIVISION BENCH: THE HON'BLE MR. JUSTICE BISWANATH SOMADDER, CHIEF JUSTICE
THE HON'BLE MR. JUSTICE BHASKAR RAJ PRADHAN, JUDGE
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Arb. A. No. 04 of 2024
Union of India,
Represented by Chief Engineer,
Project Swastik,
C/O 99 A.P.O.,
Pin - 931717. ..... Appellant
versus
M/s M.K. Infrastructure (P) Ltd.,
Represented by Director Smt. Lalita Kandoi,
Resident of 4 Agrasen Road,
Siliguri, West Bengal,
PIN - 734005. ..... Respondent
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Appeal under section 37(1) of the Arbitration and
Conciliation Act, 1996
[against the judgment dated 05.12.2023 passed by the learned Commercial Court,
Gangtok, in Commercial (Arbitration) Case No. 02 of 2023 in M/s M.K. Infrastructure
(P) Ltd. vs. Union of India]
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Appearance:
Ms Sangita Pradhan, Deputy Solicitor General of India assisted by Ms
Natasha Pradhan and Ms Sittal Balmiki, Advocates for the Appellant.
Mr. Amit Lal Chakravorti, Advocate and Mr. Gourav Mandal, Advocate
for the Respondent.
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JUDGMENT
( 8th May, 2025 )
Bhaskar Raj Pradhan, J.
The process of arbitration is initiated on a consensus
of the parties when they desire to resolve their disputes
arising out of the agreement through the process of
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
arbitration instead of following the normal process of courts.
The effort of the legislature in enacting the Arbitration and
Conciliation Act, 1996 (in short, the Arbitration Act) is to
ensure that this process is fair, efficient and capable of
meeting the needs of the specific arbitration and to minimise
the supervisory role of courts in the arbitral process. It is
precisely for this reason that section 19 provides that the
arbitral tribunal shall not be bound by the Code of Civil
Procedure, 1908 or the Indian Evidence Act, 1872. It further
provides that the parties are free to agree on the procedure
to be followed by the arbitral tribunal in conducting its
proceedings. Failing any agreement, the arbitral tribunal
may conduct the proceedings in the manner it considers
appropriate. The power of the arbitral tribunal while
conducting the proceedings in the manner it considers
appropriate, includes the power to determine the
admissibility, relevance, materiality and weight of any
evidence.
2. The ambit and scope of section 34 of the
Arbitration Act is no longer res integra. Interference in an
arbitration dispute for setting aside an arbitral award is
limited to sub-section (2) and sub-section (3) of section 34.
section 34 has been interpreted by the Hon'ble Supreme
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
Court with sufficient clarity. It is the settled legal position
that in an application under section 34, the Court is not
expected to act as an Appellate Court and re-appreciate the
evidence. Interference would be warranted when the award
is in violation of "public policy of India", which has been held
to mean "the fundamental policy of Indian law". It would be
impermissible to interfere on the merits of the award. An
award could also be interfered with on the ground that it is
in conflict with justice or morality which is now understood
as a conflict with "most basic notions of morality or justice". It
is only such arbitral award that shocks the conscience of the
Court that can be set aside on the ground of patent illegality
appearing on the face of the award and goes to the root of
the matter. Mere erroneous application of law would not be
a ground for interference. A perverse decision would amount
to patent illegality.
3. In Punjab State Civil Supplies Ltd. vs. Sanman Rice
Mills1, the Hon'ble Supreme Court held as under:
"Conclusion:
20. In view of the above position in law on the subject, the
scope of the intervention of the court in arbitral matters is
virtually prohibited, if not absolutely barred and that the
interference is confined only to the extent envisaged under
Section 34 of the Act. The appellate power of Section 37 of the
Act is limited within the domain of Section 34 of the Act. It is
exercisable only to find out if the court, exercising power under
2024 INSC 742
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
Section 34 of the Act, has acted within its limits as prescribed
thereunder or has exceeded or failed to exercise the power so
conferred. The Appellate Court has no authority of law to
consider the matter in dispute before the arbitral tribunal on
merits so as to find out as to whether the decision of the
arbitral tribunal is right or wrong upon reappraisal of evidence
as if it is sitting in an ordinary court of appeal. It is only where
the court exercising power under Section 34 has failed to
exercise its jurisdiction vested in it by Section 34 or has
travelled beyond its jurisdiction that the appellate court can
step in and set aside the order passed under Section 34 of the
Act. Its power is more akin to that superintendence as is
vested in civil courts while exercising revisionary powers. The
arbitral award is not liable to be interfered unless a case for
interference as set out in the earlier part of the decision, is
made out. It cannot be disturbed only for the reason that
instead of the view taken by the arbitral tribunal, the other
view which is also a possible view is a better view according
to the appellate court.
21. It must also be remembered that proceedings under
Section 34 of the Act are summary in nature and are not like a
full-fledged regular civil suit. Therefore, the scope of Section 37
of the Act is much more summary in nature and not like an
ordinary civil appeal. The award as such cannot be touched
unless it is contrary to the substantive provision of law; any
provision of the Act or the terms of the agreement."
4. The records reveal that the parties had entered
into a contract for construction of living shelters, structures,
sheds on Jawaharlal Nehru Marg in the State of Sikkim. The
contract had an arbitration clause. When dispute arose
between the parties, the respondent invoked the arbitration
clause and approached the appellant for appointment of an
Arbitrator. On 02.01.2019, Col. S. Gopikrishnan was
appointed as the sole Arbitrator. Subsequently, Col. Anil
Kothiyal replaced Col. S. Gopikrishnan for adjudication of
the dispute. Pleadings were thereafter exchanged. The
respondent filed its statement of claims on 15.01.2022. On
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
24.02.2022, statement of defence was filed by the appellant.
The respondent thereafter filed a rejoinder on 06.05.2022
which was followed by a reply to the rejoinder by the
appellant on 22.06.2022. Thereafter, on 16.07.2022, the
appellant filed paragraph wise reply to the claims filed by
the respondent. It was only, thereafter, that the sole
Arbitrator passed the arbitral award on 27.12.2022.
5. The arbitral award dealt with all the claims made
by the respondent. It was held that the appellant did not
cancel the contract in the initial stages giving sufficient time
to the respondent to complete the subject work. The
respondent could not complete the work on time and sought
for extension at various occasions which was granted. The
site was handed over to the respondent on 04.04.2009, after
which, several diligence notices were issued to accelerate the
progress of the work but the respondent failed to mobilize
resources resulting in delay in completion of work. When the
respondent did not resume the work, final notice was issued
on 24.10.2015. Inspite of the final notice, respondent did
not commence work which led to the cancellation of the
contract according to the terms of condition-54 of the
General Conditions of Contract. Accordingly, the sole
Arbitrator rejected all the claims of the respondents and
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
awarded the claim of the appellant for balance amount to be
recovered from the respondent and the cost thereof; cost of
reference to arbitration; and interest at the rate of 12% after
three months from the date of award of the judgment till
date of receipt of payment.
6. The respondent preferred an application under
section 34 of the Arbitration Act for setting aside the arbitral
award. The challenge to the arbitral award was substantially
on the merits of the dispute between the parties.
7. Before the learned Commercial Court, the
respondent contended that the arbitral award ought to have
been passed on or before 01.01.2020, i.e., within 12 months
from the date of entering upon reference as per the
Arbitration and Conciliation (Amendment) Act, 2015 (for short,
the 2015 Amendment). It was further contended that the
subsequent sole Arbitrator who was appointed on
30.06.2021, should have passed the award on 29.06.2022,
but it was passed on 27.12.2022, with a delay of five months
and twenty-nine days. It was contended by the respondent
that there was no extension of time either by the parties or
by the Court and as such, the award was passed beyond the
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
timeframe envisaged under section 29-A of the Arbitration
Act.
8. The learned Commercial Court was in agreement
with the submissions made by the respondent and vide
judgment dated 05.12.2023, allowed the section 34
application on the ground that the sole Arbitrator, who
passed the impugned arbitral award, had become functus
officio on 01.10.2020 and the arbitral award passed on
27.12.2022 was non-est. It was held that the arbitral award
was passed on 27.12.2022 which was beyond the stipulated
time under section 29-A(1) and (3) of the Arbitration Act as
amended by the 2015 Amendment. It was further held that
there was nothing on record to show that prior to or after
the expiry of the prescribed period, the Court had made any
extension as prescribed under section 29-A(4). Accordingly,
it set aside the arbitral award.
9. The learned Commercial Court did not examine
anything else. The learned Commercial Court did not
examine the scope of section 34. The learned Commercial
Court did not find that the arbitral award was against the
public policy of India or the fundamental policy of Indian law
or in conflict with the most basic notions of morality and
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
justice. The arbitral award was also not held to be against
any substantive provision of law or Act. More importantly,
the learned Commercial Court did not examine whether the
issue of non-compliance of section 29-A(1) as amended by
the 2015 Amendment was only an erroneous application of
law and therefore, not a ground for interference.
10. The moot question for this Court to examine in
this appeal under section 37 of the Arbitration Act is,
whether the ground on which the learned Commercial Court
set aside the reasoned arbitral award is a valid ground for
setting aside an award under section 34 of the Arbitration
Act?
11. The effect of the impugned judgment is, therefore,
to set aside the final award passed at the behest of the
losing party after the sole Arbitrator had completed the
process of arbitration invoked by the respondent. This is not
what was envisaged by the legislature when it provided
specific grounds for challenge under section 34 of the
Arbitration Act. Whether the sole Arbitrator failed to pass the
arbitral award within the timeframe set by section 29-A(1)
and (3) of the Arbitration Act (as amended by the 2015
Amendment) would not fall under any of the specific grounds
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
provided in sub-sections (2) and (3) of section 34 in the facts
of the present case. The arbitral award, to a very limited
extent, may be open to challenge if it is passed after
inordinate and unexplained delay. That would render it in
conflict with the public policy of India or patent illegality
that shocks the conscience of the Court. This is so as we
cannot lose sight of the fact that one of the objective of
alternative dispute resolution by the process of arbitration is
to have expeditious and effective disposal of disputes
through a private forum of party's choice. This was not,
however, what was argued and evident in the facts of the
case.
12. Section 29-A(1) is a procedure for the arbitrator to
follow and does not confer any right or impose any
obligation on the parties. This would be true both under the
2015 Amendment as well as the Arbitration and Conciliation
(Amendment) Act, 2019 (for short, the 2019 Amendment).
Further, sub-section (3), even under the 2015 Amendment of
section 29-A, makes it evident that the timeline set for the
Arbitrator under sub-section (1) was not sacrosanct as the
said provision provides that the timeline could be extended
for a further period of six months by consent of the parties.
Even thereafter, by virtue of the provision of sub-section (4)
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
thereof, the Court could further extend the period for
making the award by six months.
13. The rules of procedure are essentially intended to
subserve the cause of justice - being the handmaidens of
justice - and not for punishing the parties in the conduct of
the proceedings.
14. In Narinder Singh & Sons vs. Union of India2, the
Hon'ble Supreme Court observed that the newly enacted
section 29-A emphasises on quick and prompt adjudication.
Idioms carping "delay" and "hurry" in adjudication highlight
the importance of both speedy disposal and reasonable
opportunity, as both are essential for an even-handed and
correct decision. Neither should be sacrificed nor inflated as
to prolong or trample a just and fair adjudication. A
pragmatic and common-sense approach would invariably
check any discord between the desire of expeditious disposal
and adequacy of opportunity to establish one's case.
15. As per record, the reference was made on
02.01.2019 and when the 2019 Amendment came into force
2021 INSC 747
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
on 30.08.2019, the arbitration proceeding was pending as
the award was passed only on 27.12.2022.
16. The learned Commercial Court was of the view
that section 29-A of the Arbitration Act (as it stood during the
time when the first Arbitrator was appointed), brought into
force by the 2015 Amendment on 23.10.2015, would be the
applicable law. As such, the learned Commercial Court
considered the date of reference as the starting point for the
period provided therein. The learned Commercial Court
examined section 29-A post 2015 Amendment, w.e.f.,
23.10.2015 which remained in force till it was further
substituted by section 29-A, w.e.f., 30.8.2019. It noted the
requirement under sub-section (1) of passing the award
"within a period of twelve months from the date the arbitral
tribunal enters upon reference." It noted that under sub-
section (3), the parties may, by consent, extend the period
specified in sub-section (1) for making an award for a
further period not exceeding six months. It also noted that
sub-section (4) provided "If the award is not made within the
period specified under sub-section (1) or the extended period
specified under sub-section (3), 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
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
period." Reading the said provision in its entirety, the
learned Commercial Court opined that the arbitrator was
required to pass an award within a period of twelve months
from the date the arbitral tribunal enters upon reference.
The learned Commercial Court observed that there was
nothing on record to show that the parties consented to
extend the period for making the arbitral award by another
six months and even if such consent is presumed, the final
award ought to have been made on or about 1.10.2020.
17. Insofar as the question sought to be raised by the
learned Deputy Solicitor General of India before this Court is
concerned, the learned Commercial Court noted the
submission that the time limit for passing the award within
a period of twelve months would begin from the date of
completion of pleadings and since the pleadings were
completed on 16.7.2022 and the arbitral award was passed
on 27.12.2022, the impugned order was well within the
prescribed time. However, the learned Commercial Court did
not examine in detail whether the 2015 Amendment or the
2019 Amendment was applicable, as it opined that since the
2015 Amendment was effective from 23.10.2015 until it was
further substituted on 30.8.2019 by the 2019 Amendment,
the 2015 Amendment would be the applicable law.
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
18. The appellant challenges this opinion of the
learned Commercial Court and contends that section 29-A
as amended by the 2019 Amendment would be the
applicable law and therefore, the starting point of the twelve
months period would be the date of completion of pleadings
under sub-section (4) of section 23.
19. The learned Deputy Solicitor General of India
relying upon the judgment of the Hon'ble Supreme Court in
Tata Sons Pvt. Ltd. vs. Siva Industries and Holdings Ltd.3
submitted that the 2019 Amendment would be applicable in
the present case and as the award was passed within twelve
months from the date of completion of pleadings as required
under section 29-A(1), sub-section (7) of section 29-A would
have no relevance.
20. The learned counsel for the respondent counters
this argument by submitting that since the first sole
Arbitrator Col. S. Gopikrishan was appointed on
02.01.2019, the arbitration proceeding is to be governed by
the 2015 Amendment as it remained in force till 30.08.2019
from when the 2019 Amendment came into force.
2023 INSC 13
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
21. In Tata Sons (supra), the Hon'ble Supreme Court
was deciding a lis relating to an international commercial
arbitration. However, it arrived at some findings of facts that
would be relevant for the present case. It was held that the
provision of section 29-A was introduced into the Arbitration
Act, w.e.f., 23.10.2015 by Act 3 of 2016, i.e., the 2015
Amendment and further section 29-A was substituted by Act
33 of 2019; i.e., the 2019 Amendment, w.e.f., 30.8.2019. It
also held that whereas the 2015 Amendment in terms of
section 26 of Act 3 of 2016 was prospective in nature, the
2019 Amendment did not contain any provision equivalent to
section 26 of Act 3 of 2016 evincing a legislative intent
making the application of the amended provision
prospective.
22. These findings of the Hon'ble Supreme Court in
Tata Sons (supra) would be applicable even for cases relating
to domestic arbitrations. The Hon'ble Supreme Court also
concluded that the 2019 Amendment is remedial in nature
insofar as international commercial arbitration is concerned,
in that, it carves out international commercial arbitrations
from the rigour of the timeline of six months. Viewed in this
light, we notice that the 2019 Amendment of section 29-A
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
also changes the timeline for passing of a domestic award
within twelve months from the date the arbitral tribunal
"enters upon the reference", to twelve months from the date
of "completion of the pleadings" under sub-section (4) of
section 23. In such view of the matter, therefore, we are of
the considered opinion that even for domestic arbitrations
the 2019 Amendment to section 29-A would be remedial in
nature. As such, the change in the starting point of the
twelve months to the date of completion of pleadings instead
of date of reference for the arbitrator to make an award does
not confer any rights or obligation on any party. We are,
therefore, of the view that section 29-A(1), as a mandate,
being remedial in nature even for domestic arbitration, it
should be applicable to all pending arbitral proceedings as
on the effective date, i.e., 30.8.2019, from which date the
2019 Amendment came into effect. It is not in dispute that in
the present case the arbitral proceedings between the two
parties were pending as on 30.8.2019.
23. If we, therefore, consider the 2019 Amendment of
section 29-A is the applicable procedural law, the arbitral
award passed on 27.12.2022 was well within the time frame
of twelve months envisaged in section 29-A(1) of the
Arbitration Act from the date of completion of pleadings.
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
24. There is nothing on record to suggest that the
respondent protested on the jurisdiction of the sole
Arbitrator beyond the period of twelve months under sub-
section (1) as being functus officio beyond the period before
the arbitral award. The protest came only when the arbitral
award rendered by the sole Arbitrator was against the
respondent in the form of section 34 application.
25. Infact, the arbitral award records that the
respondent requested for granting time up till 15.01.2022 to
submit his statement of claims and he submitted his claim
vide letter dated 15.01.2022, which was received on
01.02.2022. Therefore, it would be unthinkable that the
respondent desired the award to be made even before he
would submit his statement of claims. The appellant,
according to the arbitral award, submitted his statement of
defence on 24.02.2022. The arbitral award also records that
the respondent submitted his rejoinder to the statement of
defence on 06.05.2022, after making a request to allow them
time up to 30.04.2022. It further records that time and
again the respondent had sought time for pleadings and
hearing till 05.09.2022. These facts establish that the
extension of time was at the behest of the respondent.
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
26. We also take judicial notice of the fact that during
the period of arbitration, COVID-19 pandemic had set in and
the Hon'ble Supreme Court in Suo Moto Writ Petition (C) No.
3/2020 in Re: Cognizance for extension of limitation, had
directed that the period between 15.03.2020 till 28.02.2022
shall stand excluded in computing the period prescribed
under sections 23(4) and section 29-A of the Arbitration Act.
Therefore, not only did the parties got extended period for
completion of pleadings under section 23(4), but the sole
Arbitrator also got an extension of the period envisaged in
section 29-A for passing the award within timelines
prescribed therein. If the learned Commercial Court had
examined the issue raised by the respondent regarding the
timeline the Arbitrator had to follow as narrated in
paragraph 7 above in light of the orders passed by the
Hon'ble Supreme Court in Suo Moto Writ Petition (C) No.
3/2020 in Re: Cognizance for extension of limitation,
exempting the period of 15.03.2020 till 28.02.2022, it would
have noticed that almost the entire period was directed to be
excluded due to the Covid-19 pandemic.
27. We summarize our findings as under:
i) The learned Commercial Court had failed to
consider the limited jurisdiction it had while examining
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
the challenge to the arbitral award under section 34 of
the Arbitration Act.
ii) The ambit and scope of section 34 of the
Arbitration Act is limited to the extent provided in sub-
sections (2) and (3), thereof. An appeal under section
34 is not a regular appeal.
iii) In the facts of the present case, the learned
Commercial Court exceeded its jurisdiction under
section 34 of the Arbitration Act.
iv) Section 29-A(1) of the Arbitration Act is a
procedure to be followed by the arbitral tribunal and
does not confer any right or impose any obligation on
the parties. It is also remedial in nature.
v) Section 29-A(1) does not lay down any sacrosanct
timeline as sub-section (3) permits further extension of
six months by consent of parties. Even thereafter, sub-
section (4) gives the power to the Court to extend the
period further by six months.
vi) Section 29-A(1) as amended by the 2019
Amendment and not the 2015 Amendment would
govern the procedure to be followed by the Arbitrator as
the arbitration was pending when the 2019 Amendment
was brought into force on 30.08.2019.
Union of India vs. M/s M.K. Infrastructure (P) Ltd.
28. We are, therefore, of the opinion that the
impugned judgment dated 05.12.2023, setting aside the
arbitral award passed by the sole Arbitrator, was
unwarranted. We, therefore, set it aside.
29. Arbitration Appeal is allowed and stands disposed
of, accordingly.
(Bhaskar Raj Pradhan) (Biswanath Somadder)
Judge Chief Justice
Approved for reporting : Yes
Internet: Yes
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