Bombay High Court: Time Limit under Section 29A of Arbitration Act for Award Is Non-Derogable

Bombay High Court: Time Limit under Section 29A of Arbitration Act for Award Is Non-Derogable

The Bombay High Court has ruled that even though the parties had participated in the arbitral proceedings continued by the Arbitrator after his mandate had expired, the same could not amount to a waiver under Section 4 of the Arbitration and Conciliation Act, 1996 (A&C Act). The Court remarked that Section 29A of the A&C Act, which provided the time limit for passing the award, was a non-derogable provision and thus, Section 4 of the Act had no application.

Justice R.I. Chagla's bench rendered this observation during the hearing of a petition filed by the petitioner-claimant, Mahaveer Realities, seeking an extension of the time limit for award issuance.

The Court, in the process of appointing a new arbitrator, articulated that the arbitration process would persist from the point of expiration of the previous arbitrator's mandate.

Additionally, the Court underscored that actions undertaken by the previous arbitrator subsequent to the mandate expiration would not be taken into consideration by the replacement arbitrator.

The Bench rejected the argument asserting that the parties, by consciously proceeding before the Arbitrator following the mandate's expiration, had effectively relinquished their right to raise objections about the proceedings' continuation beyond the mandate period.

Recognising that waiver hinged on voluntary selection, the Court highlighted that the respondent/counter-claimant, Shirish J. Shah, was compelled to engage in the arbitration proceedings prolonged by the Arbitrator after the mandate's expiration. Hence, this participation could not be viewed as a voluntary decision to extend the Arbitrator's tenure. The Court determined that carrying on proceedings subsequent to the Arbitrator's mandate expiry would be inconsistent with the provisions of Section 29A of the A&C Act.

The appointment of the Arbitrator followed a court order dated September 19, 2018. Owing to the Joint Pursis submitted by both parties, the duration of the arbitration proceedings was extended by six months, until March 31, 2020.

The parties conveyed to the Court that considering the impact of the Covid-19 pandemic and the Supreme Court's order in Cognizance For Extension Of Limitation dated January 10, 2022, the additional six-month extension of the Arbitrator's authority concluded in May 2022.

In its application for an extension of the award issuance timeframe, the petitioner, Mahaveer Realities, contended that following the lapse of the initial six-month extension period, the Arbitrator persisted with the proceedings. On September 15, 2022, a preliminary award was issued in favour of Mahaveer Realities. The respondent contested this outcome and sought a stay of the preliminary award before the District Judge, but the application was dismissed.

The petitioner argued that given the parties' conscious participation before the Arbitrator beyond the expiry of the mandate, they should be considered as having voluntarily relinquished their right to raise objections regarding the continuation of the proceedings after the mandate expiry.

Citing the stipulations outlined in Section 29A of the A&C Act, the Court commented that the Arbitrator was obligated to issue the award within 12 months from the conclusion of pleadings. While the parties could mutually prolong this term for an additional period of no more than six months, the Court emphasised that there could be no subsequent extension of the arbitrator's authority beyond this point.

“Further, this provision is not derogable and hence Section 4 of the Arbitration Act has no application,” the Court added.

The Court referred to the Supreme Court's ruling in Jayesh H. Pandya & Anr. vs. Subhtex India Ltd. & Ors, (2020) 17 SCC 383, where it had determined that waiver necessitates a deliberate and intentional renouncement of a right.

The Apex Court had emphasised that the essence of waiver lay in a voluntary choice, and the waiver of substantial rights was precluded if the circumstances suggest that the actions taken were not voluntary in nature.

In light of this, the High Court affirmed that taking into account the Supreme Court's mentioned ruling, it was evident that the Respondent was compelled to engage in the ongoing arbitral proceedings under the guidance of the Arbitrator.

“Thus, this cannot be considered to be a voluntary choice of continuation of the mandate of the Arbitrator. The proceedings after expiry of termination of mandate would be contrary to Section 29A of the Act and though there has been a Preliminary Award as well as a challenge to the Preliminary Award in the District Court, Pune that cannot be taken into account or considered to be a waiver of the non-derogable statutory provision,” the Court stated.

Recognising that the Arbitrator's authority concluded in May 2022, the Court acknowledged that any subsequent extension of the mandate could only commence from June 2022. Consequently, the Court proceeded to designate a replacement arbitrator while extending the arbitration mandate.

“The time limit for final arguments and passing of the arbitral award as provided in Section 29 A (1), (2) read with the Section 29A (4) and (5) of the Arbitration Act is extended by a period of six months from the date of this Order,” the Court said.

The Court provided additional clarification that the proceedings would resume from the termination of the previous Arbitrator's mandate, specifically, from June 2022. Any actions undertaken by the former Arbitrator beyond the expiry of the mandate would not be taken into consideration by the Arbitrator appointed through this Order.