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Talks of settlement would not affect the time limit set for arbitral award

Cause Title : M/s Raj Chawla And Co. Stock And Share Brokers vs M/s Nine Media And Information Services Ltd. & Anr., Delhi High Court, O.M.P. (T) (COMM.) 93/2022

Date of Judgment/Order : 30/1/2023

Corum : Yashwant Varma, J.

Citied: 

  1. Yashwith Constructions (P) Ltd. vs. Simplex Concrete Piles India Ltd.
  2. ONGC Petro Additions Limited vs. Ferns Construction Co. Inc.

Background

Due a dispute between the parties, an arbitration proceeding was commenced consequent to the issuance of a notice dated 04 March 2018 referable to Section 21 of the Arbitration Act. Based on the MOU between the parties, the Delhi High Court by an order dated 03.08.2018, constituted an Arbitral Tribunal by appointing a sole arbitrator which was to take effect after 01.09.2018 to give opportunity to the parties to arrive at a settlement. By an e mail of 25 .09.2021, the sole arbitrator taking cognizance of a statement of claim submitted by the petitioner, called upon parties to appear before it on 04.10.2021 for a preliminary hearing. The sole arbitrator cancelled the scheduled hearing and decided to convene on 21.10. 2021. The matter was adjourned and rescheduled for 22.11.2021. On 29.11.2021, the sole arbitrator chose to recuse herself from the proceedings. The present petition purporting to be under Section 15 of the Act thereafter came to be filed on or about 09 September 2022 seeking appointment of a substitute arbitrator.

Judgment

The High court observed that the learned counsels had contended that the date of 02.09.2018 may be viewed as the point of commencement of the arbitral proceedings. On that basis, the matter may be examined in light of Section 29A of the Arbitration Act as was originally introduced by virtue of Act 3 of 2016. In terms of the said provision, an award would have had to be pronounced within a period of twelve months from the date the Arbitral Tribunal had entered upon the reference. The period of twelve months when computed from 02 September 2018 would, undoubtedly, have expired on or about 01 September 2019. The petitioner forwarded a statement of claim for the first time on 16 September 2021. No effective proceedings were shown to have been drawn by the Arbitral Tribunal prior thereto. There has been obvious and significant delays.

The High Court held that that the question of substitution of an arbitrator would also not arise in light of the provisions contained in Section 23(4) read with Section 29A of the Act which came to be inserted in the Act by virtue of Act 3 of 2016 with retrospective effect from 23 October 2015, wherein it has been stipulated that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference

The High Court rejected the plea of the petitioner that proceedings before the sole arbitrator were not pursued since parties were exploring the possibility of arriving at a settlement.

The High Court was of the considered view that talks of settlement could not have stopped the march of limitation prescribed by statute. It must be observed that the Act does not envisage proceedings in arbitration remaining in abeyance or a state of latency. Holding otherwise would clearly be contrary to the spirit of the Act and the expeditious dispute resolution process which stands visualised
thereunder. 

The High Court further observed that the aforesaid provision was thereafter amended in terms of Act 33 of 2019 which was enforced from 30 August 2019. If the validity of proceedings were to be viewed on the anvil of Section 29 A as it exists presently, the award would have had to be rendered within a period of twelve months from the date of completion of pleadings as per Section 24 (3). 

Firstly as the petitioners failed to communicate his statement of claim within the time prescribed by Section 23(4), then as per Section 25(3), the Arbitral Tribunal shall terminate proceedings. Further, as the mandate of the Arbitral Tribunal was never extended within the period prescribed in sub-sections (1) and (2) of Section 29 A, and the parties have also not petitioned the court for extension of the mandate of the Arbitral Tribunal even thereafter and in accordance with Section 29 A (4), the question of a substitute arbitrator being appointed really does not arise. Therefore since not only had the mandate of the Arbitral Tribunal come to an end, in the fitness of things, the proceedings should have been terminated in accordance with the mandatory provisions of the Act.

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