Arbitration In IndiaThe Statutory Time Frame Needs to be Adhered to in Arbitral Proceedings

The High Court of Delhi, in the case of Raj Chawla & Co. Stock & Share Brokers v. Nine Media & Information Services Ltd., [2023 SCC OnLine Del 520 decided on 30.01.2023] held that non-adherence of the statutory time limit prescribed under Section 29A of the A&C Act leads to termination of the arbitral proceedings and  the mandate of Section 15 of the A&C Act has to be followed before filing the petition for substitution of Arbitrator.

FACTS

M/s. Raj Chawla And Co. Stock and Share Brockers (hereinafter referred to as the “Petitioner”) and M/s. Nine Media and Information Services Ltd. (hereinafter referred to as the “Respondent”) entered into a Memorandum of Understanding (hereinafter referred to as the “MoU”) on 24.08.2016 for the transaction of purchase of 2200 shares of Hero Honda Motors.

As disputes arose between the parties,  a Notice for invoking Arbitration under Section 21 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) was served by the Petitioner on the Respondent on 04.03.2018. Further, a petition (Arb. P. 476/2018) under Section 11 of the A&C Act was filed before this Court and vide Order dated 03.08.2018, an Arbitral Tribunal was constituted.  The Delhi High Court appointed a sole Arbitrator and further directed to amicably settle the issue and only after 01.09.2018, the Arbitration could have been carried on by the Arbitral Tribunal.

The Sole Arbitrator took cognizance of Statement of Claims by an e-mail dated 25.09.2021 and further called the parties for personal hearing on 04.10.2021. The personal hearing was cancelled and re-scheduled at other dates and the Sole Arbitrator, eventually vide e-mail dated 29.10.2021, communicated her Inability to continue as a Sole Arbitrator and recused herself from the proceedings. Hence, the Petitioner had filed the present petition under Section 15 of the A&C Act for appointment of substitute Arbitrator.

ISSUES BEFORE THE DELHI HIGH COURT

1. Whether the present petition filed under Section 15 of the A&C Act for the appointment of a substitute Arbitrator is maintainable?
2. Whether the statutory time frame laid down in Section 29A of the A&C Act is mandatory to be adhered during Arbitral proceedings?

CONTENTIONS OF THE PARTIES

The Respondents submitted that the Arbitration was not invoked in accordance with the MoU signed between the parties. It was also argued that the present petition is not maintainable in accordance with Section 29A of the A&C Act.

DECISION AND FINDINGS

The Delhi High Court relied on Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. [(2006) 6 SCC 204] and observed that the Petitioner had not followed the mandate of Section 15(2) of the A&C Act before the filing of present Petition. It was further observed that the Arbitrator had to be substituted in accordance with the Rules.

The High Court further observed that the provisions of Section 23(4) read with Section 29A of the A&C Act have not been followed. The Court opined that the Arbitral Tribunal was commenced from 01.09.2018 and as the Award was not passed by 01.09.2019, the provisions of Section 29A of the A&C Act have not been followed. Moreover, when the Petitioner submitted the Statement of Claim, no effective arbitration proceedings were commenced by the Arbitral Tribunal.

The High Court further relied on ONGC Petro Additions Limited v. Ferns Construction Co. Inc. [2020 SCC OnLine Del 2582] and held that the mandates of Section 29A of A&C Act are not followed and hence, the present petition was dismissed.

AMLEGALS REMARKS

The Delhi High Court has upheld that the limitation period under Section 29A of the A&C Act has to be adhered during the Arbitral proceedings. The Court further held that the mandates of the provision of Section 15 of the A&C Act has to be followed before filing petition for substitution of an Arbitrator. An attempt of amicable settlement between parties after the arbitrator enters upon reference does not stop the statutory time of limitation for passing award. The mandate time prescribed under Section 29A of the Act cannot be overlooked while amicable settlement is under process. Also, a substitute arbitrator cannot be appointed if the parties do not abide by the rules of arbitration. It is also to be considered that Section 29A is procedural in nature and thus it would apply to all the pending arbitrations.

Thus, this judgement clears the true meaning of Section 29A enshrined under the Arbitration & Conciliation Act,1996. The importance of limitation in deciding cases is not to be overlooked as it will take away the essence of Arbitration in its true sense.

– Team AMLEGALS 

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