The hallmarks of Arbitration and Conciliation Act, 1996 (“Arbitration Act”) are – (i) party autonomy; (ii) minimum judicial intervention; and (iii) expeditious disposal of cases.

It is of relevance that arbitration is an alternate (dispute resolution mechanism) to litigation. Accordingly, it aims at providing an expeditious remedy to the parties who enter into an arbitration agreement, which otherwise would take substantial time before civil courts. On this premise, the amendment to the Arbitration Act in 2015 (“2015 Amendment”) introduced checks and balances to an arbitral tribunal’s powers to pass an arbitral award. Prior to the 2015 Amendment, there was no time limit prescribed under the Arbitration Act for passing of an arbitral award. With the said 2015 Amendment, Section 29A was introduced to the Arbitration Act providing that a domestic arbitral award must be made within 12 (twelve) months from the date of completion of pleadings. In the event an arbitral award is not made within 18 (eighteen) months (i.e., 12 months + 6 months of extension by the parties itself), the mandate of an arbitral tribunal shall be terminated unless the court grants a further extension. Moreover, it empowered the court to substitute all or one of the arbitrators in such an application if the court is of the view that the delay is attributable to the arbitrator(s).

In this regard, controversy arose with respect to the “court” which is empowered to extend the mandate of the arbitral tribunal and consequently, substitute the arbitrator(s) on sufficient cause being shown.

The Supreme Court of India (“Supreme Court”) in Chief Engineer (NH) PWD (Roads) v. BSC & C and C JV (“Chief Engineer”) held that “court” under Section 29A of the Arbitration Act means the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction (“Civil Court”). However, recently the Delhi High Court in Ovington Finance Pvt. Ltd. v. Bindiya Nagar took a contrasting view and held that the “court” under Section 29A of the Arbitration Act will be the court that appointed the arbitrator in the first instance. Leading to an anomalous situation, we analyse the current position and express our views on the same.

EARLIER DECISIONS ON ‘COURT’ UNDER SECTION 29A OF THE ARBITRATION ACT

The controversy with respect to the proper court under Section 29A of the Arbitration Act finds its genesis in the fact that while Section 2(1)(e) of the Arbitration Act defines court as Civil Court, there may be two instances when such a court does not appoint the arbitrator in the first instance, such as:

  1. Under Section 11 of the Arbitration Act: When the parties are not mutually agreeable to the appointment of an arbitrator, the court under Section 11(6) of the Arbitration Act i.e., the Supreme Court in case of international commercial arbitrations and a High Court in case of all other arbitrations is empowered to appoint an arbitrator.
  2. The parties mutually agree: In cases where the parties mutually agree to appoint an arbitrator, no judicial authority is involved for the purpose of appointment.

In (i) above, the High Court or the Supreme Court is empowered to appoint an arbitrator. Whereas, as per Section 2(1)(e) of the Arbitration Act, court is defined as Civil Court. In this situation, if the court under Section 29A of the Arbitration Act refers to the Civil Court, then even a lower court being the Civil Court in a concerned jurisdiction may substitute an arbitrator appointed by the High Court or the Supreme Court.

In this regard, the Delhi High Court in DDA v. Tara Chand Sumit Construction Co. in 2020 opined that a conflict arises between the power of superior courts to appoint arbitrators and those Civil Courts which can substitute the arbitrator. The Delhi High Court held that this would be in teeth of the Section 11 of the Arbitration Act which confers exclusive powers on the High Court and the Supreme Court to appoint arbitrators. Accordingly, the resolution is that the court to substitute an arbitrator under Section 29A of the Arbitration Act should be the court which has the power to appoint an arbitrator under Section 11 of the Arbitration Act to exclude the possibility of a lower court substituting the arbitrator.

Similarly, the Bombay High Court in Cabra Instalaciones Y. Servicios, S.A. v. Maharashtra State Electricity Distribution Company Ltd. opined that when the Supreme Court appointed an arbitrator in reference to an international commercial arbitration, the High Court cannot make an order for appointment to substitute such an arbitrator.

Thereafter, in May 2024, the Supreme Court in Chief Engineer was posed with a similar question. In Chief Engineer, the controversy was whether the Commercial Court at Shillong (being the Civil Court) will be empowered to decide an application for extension of mandate under Section 29A of the Arbitration Act. The Supreme Court in agreement with the Meghalaya High Court clarified that the Meghalaya High Court not being the Civil Court under Section 2(1)(e) of the Arbitration Act, the Commercial Court at Shillong will be empowered to decide an application seeking extension of mandate of an arbitrator. The Supreme Court was of the view that substitution of an arbitrator is a consequential power of court under Section 29A of the Arbitration Act. Accordingly, no anomaly will be caused if the Civil Court is empowered to extend the mandate of an arbitrator and if required, consequently, substitute the arbitrator.

AFTERMATH OF CHIEF ENGINEER JUDGEMENT

While it appears that the Supreme Court’s decision in Chief Engineers resolved the controversy, the Bombay High Court in August 2024, in Sheela Chowgule v. Vijay V. Chowgule & Ors. (“Sheela Chowgule”) differentiated from Chief Engineers. The Bombay High Court observed that in Chief Engineers, the Meghalaya High Court did not appoint an arbitrator under Section 11 of the Arbitration Act. Since the parties mutually agreed to appoint an arbitrator, substitution by Commercial Court at Shillong did not cause an anomaly. However, in a situation where a High Court or Supreme Court appoints an arbitrator under Section 11 of the Arbitration Act, conflict still exists with respect to powers of superior courts appointing an arbitrator, and the Civil Court appointing a substitute to such an arbitrator.

The Bombay High Court opined that Chief Engineer cannot be treated as a binding precedent and decided the controversy afresh. It was held that Section 2(1)(e) of the Arbitration Act cannot be read in isolation and should be understood in accordance with the specific circumstances. The Bombay High Court relied on the expression at the beginning of Section 2 of the Arbitration Act that states “In this part, unless the context otherwise requires […].” The Court observed that despite the definition of court under Section 2(1)(e) of the Arbitration Act, if the context requires otherwise, the term should be understood in that context. Accordingly, in the context of substitution of arbitrator under Section 29A of the Arbitration Act, and to avoid any conflict of powers of superior court that appointed the arbitrator at the initial stage under Section 11 of the Arbitration Act, the Bombay High Court observed:

  1. In the event the mandate of an arbitral tribunal appointed by the High Court or Supreme Court under Section 11 of the Arbitration Act is to be extended, the application will lie before the Court which appointed the arbitral tribunal.
  2. In the event the mandate of an arbitral tribunal which is appointed mutually by the parties is to be extended, the application for extension will lie before the Civil Court of original jurisdiction i.e., Civil Court as per Section 2(1)(e) of the Arbitration Act.

However, in a contrasting view, the Andhra Pradesh High Court in Dr. V. V. Subbarao v. Dr. Appa Rao Mukkamala & Ors. opined that powers of the High Court or the Supreme Court under Section 11 of the Arbitration Act is exclusively for appointment of arbitral tribunal when the parties fail to do so, mutually. However, Section 29A of the Arbitration Act relates to the powers of the court to extend the mandate, reduce the fee or substitute the arbitrator, thereby being completely different in nature. Therefore, the power of a Civil Court for the purpose of Section 29A of the Arbitration Act does not impinge upon the powers of the High Courts or the Supreme Court under Section 11 of the Arbitration Act and is exercisable at a completely different stage.

Recently in November 2024, the Delhi High Court in Ovington Finance Pvt. Ltd. v. Bindiya Nagar (“Ovington Finance”) differed from the view taken by the Andhra Pradesh High Court in Dr. V. V. Subbarao v. Dr. Appa Rao Mukkamala & Ors. The Delhi High Court acceded to its 2020 decision in DDA v. Tara Chand Sumit Construction Co. Further, it observed that if the interpretation of Andhra Pradesh High Court is accepted, then it will give the power to the Civil Court which may be a lower court to substitute, and also to appoint arbitrators under Sections 14 and 15 of the Arbitration Act who in fact can be appointed only by the High Courts or the Supreme Court. Therefore, for the purposes of Section 29A of the Arbitration Act, the term “court” must mean only that court which has appointed the arbitrator. Consequently, the court to extend the time or substitute the arbitrator would only be the court which has appointed the arbitrator and no other court.

CONCLUSION AND PRACTICAL IMPLICATIONS

The contrasting precedents by various High Courts have left the litigants in pre-Chief Engineer era. It is pertinent to note that while the Bombay High Court in Sheela Chowgule considers the ruling of the Supreme Court in Chief Engineer and provides reasons to distinguish, the same finds no mention in Ovington Finance. Moreover, the Andhra Pradesh High Court’s decision in Dr. V. V. Subbarao v. Dr. Appa Rao Mukkamala & Ors., provides a different and fresh analysis to state that the court under Section 2(1)(e) of the Arbitration Act i.e., Civil Court of original jurisdiction will be the proper court under Section 29A of the Arbitration Act.

It is of relevance that the Bombay High Court in Sheela Chowgule empowers two different courts under Section 29A of the Arbitration Act. The same is based on two different stipulations i.e.,

  1. in case the arbitrator is mutually appointed by the parties, the substitution will be by the Civil Courts;
  2. in case the arbitrator is appointed by a High Court or the Supreme Court under Section 11 of the Arbitration Act, only such a High Court or the Supreme Court will substitute the arbitrator.

However, it remains to be seen whether two different interpretations of proper “court” under the same provision is sustainable under the Arbitration Act. Moreover, while the Delhi High Court in Ovington Finance agrees with the stipulation in (ii), it does not refer to the decision in Sheela Chowgule nor provides a similar view. Accordingly, the current position remains unclear.

In these circumstances, there is a possibility that seemingly loosing parties may indulge in dilatory tactics on such grounds at the Section 29A stage. While the hallmarks of arbitration remain to be party autonomy with minimum judicial intervention, differential views defeat the very objectives. Further, with India’s objective to become a pro-arbitration jurisdiction, it is essential that litigants are not held up before courts due to procedural inconsistencies. In this situation, it is essential that the Supreme Court’s view is forthcoming.