Impact of COVID-19 on the time-limit for arbitral award 

COVID-19 pandemic has disrupted the entire working of the country be it the government sector, private sector, businesses, educational institutions including judicial work (except matters of extreme urgency).  In fact, the catastrophic ramifications resulting from this virus has made the Prime Minister declare complete lockdown of the country. This would definitely impact the performance of obligations of various parties in all sectors and can be said to make most of the obligations as impossible to perform. Though, impossibility of performance is a totally different arena governed by Section 56 of the Contract Act, 1872 but surely the same would also definitely impact the timelines within which the arbitral proceedings are to be completed by making the arbitral award.

Section 29-A of the Arbitration & Conciliation Act, 1996, was introduced by virtue of the Arbitration and Conciliation (Amendment) Act, 2015 w.e.f. 23-10-2015 providing for the ‘Time-limit for arbitral award’. This section has been further modified by virtue of the 2019 Amendment Act w.e.f. 9-08-2019. Under the 2015 Amendment, Section 29-B was also introduced which provides for conducting an arbitration under ‘fast-track procedure’.  The said provisions are as under:

 “29-A. Time-limit for arbitral award.— [1](1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23.]

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

 (4) If the award is not made within the period specified in 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 period:

Provided that while extending the period under this sub-section, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five percent for each month of such delay:

 [2][Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.]

(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the court.

(6) While extending the period referred to in sub-section (4), it shall be open to the court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8) It shall be open to the court to impose actual or exemplary costs upon any of the parties under this section.

(9) An application filed under sub-section (5) shall be disposed of by the court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

 29-B. Fast track procedure.—(1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.

(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):

(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;

(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;

(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

 (4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.(5) If the award is not made within the period specified in sub-section (4), the provisions of sub-sections (3) to (9) of Section 29-A shall apply to the proceedings.

(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.”

The purpose behind the introduction of the aforesaid provisions was to make the arbitrators hear and decide matters expeditiously, and within a reasonable period of time. The scheme of Section 29-A is that the arbitrator is bound to render an award within 12 months, which can be extended by 6 months i.e. up to 18 months with the consent of the parties. However, if the award is not delivered even in the extended time, the mandate of the tribunal stands terminated. However, the courts are empowered to extend the time-limit either prior to or after the expiry of the extended period. But the courts are to be given justification and proof of sufficient cause for such delay. In case, the court finds that the proceedings have been delayed for the reasons attributable to the arbitrator, it may order for a reduction of fees of the arbitrators and may also substitute arbitrator(s) by terminating the mandate of the previous arbitrator(s). Thus, it has become imperative for all that the arbitration proceedings are culminated in a time-bound manner.

However, COVID-19 pandemic has definitely dis-arrayed all the timelines and schedules in each and every arbitration all across the globe, especially the domestic arbitrations on account of the lockdown. None of the parties or the arbitrators could have foreseen this situation and it has led to an event of impossibility of conductance of arbitration proceedings. Keeping in view the number of arbitrations taking place all over the country, all the arbitrations where the arbitrators have entered the reference, the time period as specified under Section 29-A has commenced and need to be finished by the end of the specified time.

But taking a pragmatic and holistic view of the matter, this period lost in the lockdown on account of  COVID-19 virus is liable to be excluded being a period of impossibility of continuation of arbitration proceedings. In fact, taking note of this horrifying situation, wherein the parties and their lawyers would be incapacitated in taking legal steps for prosecuting their petitions/applications/appeals/suits/other proceedings,  the Supreme Court suo motu took up the issue of extension of limitation vide order dated 23-03-2020[3] directing as under:

       This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under special laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or special laws whether condonable or not shall stand extended w.e.f. 15-3-2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.

This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/Tribunals within their respective jurisdiction.

Issue notice to all the Registrars General of the High Courts, returnable in four weeks.”

Thus, the Apex Court taking note of this unprecedented situation has stopped the limitation to run w.e.f. 15-3-2020 till further orders. Taking support of the said order passed by the Court in the interest of justice, the period lost on account of corona virus pandemic i.e. at least from 15-03-2020 till further orders of the Apex Court re-starting the period of limitation, must be excluded for the purpose of Sections 29-A and 29-B of the Arbitration & Conciliation Act, 1996, as well.

No doubt, discussion regarding Online Dispute Resolution, have initiated all over the world in this difficult time of lockdown and there are avenues of videoconferencing/teleconferencing already available which are being resorted to, in some of the ongoing arbitrations but the same are being done only for a particular purpose like recording of witnesses, but to implement the same as a rule for conducting the entire arbitration proceedings, suitable orders would be required to be issued under Section 19 at the initial stage of commencement of arbitration proceedings.

Therefore, till the online system for conducting the arbitration system is evolved and adopted by all concerned, an order for suspension of arbitration proceedings akin to an order passed by the Supreme Court is required to be passed by the respective arbitrators.

*Puneet Taneja, Advocate on Record, Supreme Court of India, is a litigation lawyer practicing before Supreme Court of India, Delhi High Court and is also an arbitration lawyer.

[1] Substituted by Act 33 of 2019, S. 6(a), w.e.f. 30-8-2019.

[2] Inserted by Act 33 of 2019, S. 6(b), w.e.f. 30-8-2019.

[3] In re, Cognizance for Extension of Limitation, 2020 SCC OnLine SC 343.

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