Short note on section 29A and section 23 of arbitration and conciliation act

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) 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:
[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
ANALYSIS
1) Whether retrospective / prospective in nature: The legislative intent was obviously not to
make the provisions of Section 29A of the Act retrospective in nature. Section 26 of the
Amendment Act is clear that the amendments apply prospectively, insofar as arbitral
proceedings are concerned.
2) When does initial period of 12 month commence: The aforesaid period is to be reckoned
from the date of reference (i.e. when notice of appointment is received by the arbitrator). The
period is calculated from the first reference.It is proposed in 2018 amendment bill that said
period shall be reckoned from the period of completion of the pleadings. Such period of 12
months can be further extended by the consent of both the parties for 6 months i.e. effectively
18 months (12+6).
3) Time period for moving to court for extension of time: In case the award is not made within
the period mentioned in point 1) then both parties (through joint application) or either of the
parties can file an application for extension of the time period for making/passing of award.
Such an application can be filed within reasonable period5 from either before or after the
expiry of 12 months (in case other party doesn't give consent for extension of the time period)
or 18 months.
4) Consequences of non delivery of award within 12 months/18 months: Although the said
provision provides that mandate of arbitrator shall terminate unless the period of delivery of
award is extended by the court if the party(ies) are able to show sufficient cause. Following
will be sufficient cause:
a. Documents/evidence in arbitration proceeding is voluminous
b. Parties/arbitral tribunal was diligent, and delay is not attributable to them
c. 29A filed for extension of time for filing amendment to SoC, because amendment if filed
will require further extension.
d. Invested enough time and money, no purpose in stalling arbitration9 , time and money
invested, and stage is evidence
e. Construction dispute, voluminous document has been filed
f. Delay due to certain applications being filed, AT given time to complete the proceedings
g. Arbitral tribunal is not at fault and has to consider the submissions of the parties
h. At the final stage, arguments have been over, to meet the ends of justice14
Following is not a sufficient grounds:
i. arbitrator has deliberately decided to postpone the award to prevent any inconsistent award
being passed if a similar arbitration proceeding is going on however the proceeding may be
distinct and will have no bearing on the awar
5) Power to substitute arbitrator: While extending the period under sub-section 4, it shall be
open to the court to substitute one or all of the arbitrators. The Courts have granted
substitution on the following ground:
a. Arbitral tribunal responsible for delay
b. if the conduct of arbitrator is contrary to basic principles of law like non re- cording of
evidence.
However, the court has generally refrained from granting substitution, categorically in the
following cases:
a) Order passed with the consent of the respondent, merely aggrieved by the order of arbitral
tribunal not a ground for setting aside the arbitrator. The issue of only expeditious disposal
can be considered no other
b) Mere statement by the partiers/bald allegations against the arbitrator - not prima facie
backed by materials.
c) Thus, there is no immediate termination of mandate of the arbitrator. Also, mere delay in
delivery of award is not a ground for substitution of arbitrator.
d) No fault of the arbitrator, rather the party(ies) are at fault
6) The Court can extend the period under Section 29A(4) subject to terms and conditions:
a. reduction in the fees of arbitrator.
b. substitution of arbitrator
c. imposition of actual or exemplary cost on either of the parties
d. direct parties to co-operate with each other
e. direct the arbitrator to not grant any unnecessary adjournment.
f. direct to record the conduct of the parties in minutes of the meeting of award
g. direct to pay the cost of Section 29A proceedings.
7) Length of extended period: It varies and depends on the discretion of the court. However,
the court has granted min. of 3 months to max. of 12 months. Below is the brief statistical
analysis of the extension(s) granted
8) Scope of enquiry under Section 29A: Enquiry under Section 29A is limited to examining
the issue of expeditious hearing of arbitration and nothing more. It cannot be use for Section
12, 13 or for challenging the impartiality of the Tribunal. 27 If the arbitrator made the award
within six months, then arbitrator is entitled to additional fees. The said provision also
provides for reduction in fees of arbitrator.
Thus, it is evident from above that courts have refrained from granting substitution of
arbitrator unless it finds that arbitral tribunal has contributed in the delay of proceedings.
Hon'ble Court(s) while restricting the scope of enquiry under Section 29A, has adopted a
liberal interpretation and granted extension without the imposition of 'harsh' conditions either
on the parties or on the Ld. Tribunal.
LATEST CASE LAWS
SC Applies Order Extending Limitation To Sec 29A & 23(4) Arbitration Act, Section
12A Commercial Courts Act
The Supreme Court has applied its suo moto order extending limitation for filing of cases to
Section 29A and 23(4) of the Arbitration and Conciliation Act, 1996 and Section 12A of the
Commercial Courts Act, 2015.
The order passed by a bench headed by Chief Justice of India on July 10 (but released on July
14) stated :
"Section 29A of the Arbitration and Conciliation Act, 1996 does not prescribe a period of
limitation but fixes a time to do certain acts, i.e. making an arbitral award within a
prescribed time. We, accordingly, direct that the aforesaid orders shall also apply for
extension of time limit for passing arbitral award under Section 29A of the said Act.
Similarly, Section 23(4) of the Arbitration and Conciliation Act, 1996 provides for a time
period of 6 months for the completion of the statement of claim and defence. We, accordingly,
direct that the aforesaid orders shall also apply for extension of the time limit prescribed
under Section 23(4) of the said Act".
As regards Section 12A of the Commercial Courts Act, the Court said :
"Under Section 12A of the Commercial Courts Act, 2015, time is prescribed for completing
the process of compulsory pre-litigation, mediation and settlement. The said time is also
liable to be extended. We, accordingly, direct that the said time shall stand extended from the
time when the lockdown is lifted plus 45 days thereafter. That is to say that if the above
period, i.e. the period of lockdown plus 45 days has expired, no further period shall be liable
to be excluded".
The order was passed in applications filed in the suo moto case.
E-service of notice allowed
The bench, also including Justices R Subhash Reddy and AS Bopanna, has also allowed the
use of electronic means such as e-mail, messenger services (like Whatsapp) for service of
notice.
"Service of notices, summons and pleadings etc. have not been possible during the period of
lockdown because this involves visits to post offices, courier companies or physical delivery
of notices, summons and pleadings. We, therefore, consider it appropriate to direct that such
services of all the above may be effected by e-mail, FAX, commonly used instant messaging
services, such as WhatsApp, Telegram, Signal etc. However, if a party intends to effect
service by means of said instant messaging services, we direct that in addition thereto, the
party must also effect service of the same document/documents by e-mail, simultaneously on
the same date".
The bench has however declined to pass orders extending the validity period of cheque,
saying that it was a matter for the Reserve Bank of India to decide by acting under Section
35A of the Banking Regulation Act.
It was on March 23 that the Supreme Court suo moto extended the limitation period for filing
of cases in Courts/Tribunals with effect from March 15 until further orders. This was done
taking note of the difficulties caused to lawyers and litigants by lockdown.
ONGC PETRO ADDITIONS LIMITED VS FERNS CONSTRUCTION CO. INC
Infusing clarity on the applicability of the amended Section 29A of the Arbitration and
Conciliation Act, 1996, ("the Act"), the Single Judge of the Delhi High Court ("Court") in
the case of ONGC PETRO ADDITIONS LIMITED vs. FERNS CONSTRUCTION CO.
INC, pronounced on 21 July 2020, has found that the amendments to Section 29A (1) in
2019, fixing the 12 month time frame from the completion of pleadings and excluding
international commercial arbitrations in India ("ICA") from its scope are "retrospectively
applicable to arbitration proceedings commenced after 23 October 2015."
Backdrop
After taking an order of extension in September 2019 under Section 29A to complete the
pleadings and render the award in eighteen months ("Earlier Order"), the Petitioner moved
the Court the second time to seek clarification that the timeline under Section 29A(1) is not
applicable to the pending arbitration proceeding (being an International Commercial
Arbitration) owing to the retrospective applicability of the amendments made to Section 29A
in 2019.
Parties' position
Relying upon the Supreme Court's decision in BCCI v. Kochi[2], the Petitioner contended that
Section 29A is procedural in nature and is prospective in operation w.e.f. 23 October 2015
owing to Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 ("2015
Amendment") being held as prospective.
On this basis, the Petitioner contended that changes brought about in Section 29A vide the
Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Amendment") will have
retrospective effect from 23 October 2015, i.e. the date from which Section 29A was
introduced into the Act as provision equivalent to Section 26 is not contained in the 2019
Amendment.
The Petitioner further drew the Court's attention to two conflicting orders of coordinate
benches- (i) Shapoorji Pallonji and Co. Pvt. Ltd v Jindal India Thermal Power
Limited decided on 23 January 2020, holding Section 29A as per 2019 Amendment to be
retrospective; and (ii) MBL Infrastructures Ltd. v. Rites Ltd. decided on 10 February 2020
holding Section 29A When faced with conflicting decisions of courts, the Petitioner contended
that the decision earlier in time ought to be followed since the later decision would be per incuriam.

The Respondent agreed to the Petitioner's position

Issue
Since International Commercial Arbitration is excluded from Section 29A(1) of the 2019
Amendment and with the respondent being a foreign party, the question before the Court was
if the proceedings before the Arbitral Tribunal is an ICA, then whether the time limit as fixed
by the Earlier Order shall be applicable.
Decision
To answer this question, Justice V Kameswar Rao first referred to the earlier two orders
in Shapoorji and MBL cases (supra) and found the latter order passed in MBL case as per
incuriam. Relying on the Apex Court's decisions and accepting the Petitioner's contention, it
held that conclusion of a Coordinate Bench in Shapoorji (supra) wherein the Court has held
that the amendment, being procedural in nature, shall be applicable to all pending arbitrations
as on the date of amendment, is correct.
The Court predicated this conclusion on the following reasons:
• BCCI (supra) has found Section 29A to be procedural in nature and there is no
stipulation akin to Section 26 of 2015 Amendment in the 2019 Amendment;
• In light of settled judicial precedents, Section 29A prescribing time limit is a
procedural law is it does not confer any rights or liabilities on a party. Rather, it
establishes a mechanism for the Arbitral Tribunal to render the award, which
determines rights and liabilities in 12 months
In view thereof, the Court held that Section 29A (1) shall be "applicable to all pending
arbitrations seated in India as on August 30, 2019 and commenced after October 23, 2015".
It further held that there is "no strict time line of 12 months prescribed to the proceedings
which are in nature of international commercial arbitration as defined under the Act, seated
in India."
Holding as above, the Court clarified that the Arbitral Tribunal shall not be bound by the
timeline prescribed by the Earlier Order, if the proceedings are in the nature of an ICA.
SECTION 23
Section 23 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ëthe Actí)
provides for the Statements of claim and defence.1 Sub ñ section (3) of Section 23 of the Act
provides for the amendment and supplementing of the statements of claim and defence
(hereinafter referred collectively as ëthe statementsí). On a bare perusal of the section, it is
clear that the arbitral tribunal has been given the discretion to allow or refuse an application
for amendment or supplementing only on the ground of the delay in making such an
application. However, other factors including the interest of the party, the materiality of the
amendment or supplementing cannot be ignored. In absence of any explicit mention of other
factors, the questions whether they should be considered and if considered, to what extent
they should be taken into account are open and the law on the point remains unclear. It is
common ground that the Act has adopted the UNCITRAL Model Law on International
Commercial Arbitration2 and Section 23 mirrors Article 23 of the UNCITRAL Model Law
on International Commercial Arbitration.
COMPARISON OF SECTION 23(3) WITH THE AMENDMENT OF PLAINT
UNDER CODE OF CIVIL PROCEDURE, 1908 UNDER ORDER VI CIVIL
PROCEDURE, 1908 UNDER ORDER VI RULE 17 CODE
It has also been argued by some scholars that in dealing with amendments generally the
arbitrator should follow the procedure adopted by the courts.19 However, the tenacity and
strength of the argument can be tested by comparing the requirements of Section 23 with the
requirements of the relevant provision under the Code of Civil Procedure, 1908. Under the
Code of Civil Procedure, Order 6, Rule 1720 provides for Amendment of Pleadings. On a
bare perusal of the two provisions mentioned above, it is clear that there is a fundamental
difference between the requirements there under. This fundamental difference is that of the
ground of ëdelayí ëdelayí under the Act. Further, the Supreme Court in Andhra Bank v. ABN
Amro Bank N.V. and Ors.21 , in relation to amendment of plaint under CPC, held that ìit is
well settled that delay is no ground for refusal of prayer for amendment and that delay in
filing the application for amendment of the written statement cannot stand in the way of
allowing the prayer for amendment of the written statement.î Regarding the amendment or
supplementing of written submissions under CPC, the Courts have been of the opinion that a
delay in making an application may be ground for genuineness of the acknowledgement, but
not good ground for refusing the application.22 However, in light of the specific statutory
condition of ëdelayí under the Act, delay cannot be accepted in an arbitration proceeding,
however, the conclusion that ìdelay in making an application may be ground for genuineness
of the acknowledgementî would apply to arbitration proceeding as well and in fact this
presumption would be stronger in an arbitration proceeding owing to the above mentioned
statutory condition. The Supreme Court in Revajeetu Builders and Developers Vs.
Narayanaswamy and Sons and Ors.23 laid down various factors to be looked into, to decide
on an application to amend or supplement the submissions under the CPC:
(1)the amendment sought is imperative for proper and effective adjudication of the case?

(2) Whether the application for amendment is bona fide or mala fide?
(3) The amendment should not cause such prejudice to the other side which cannot be
compensated adequately in terms of money;
(4) Refusing amendment would in fact lead to injustice or lead to multiple litigation;
(5) Whether the proposed amendment constitutionally or fundamentally changes the nature
and character of the case? and
(6) As a general rule, the court should decline amendments if a fresh suit on the amended
claims would be barred by limitation on the date of application.
Since the Supreme Court did not incorporate delay as a factor, it can be stated that under the
CPC, delay cannot be a ground for rejection of such an application.
CASE LAW
Arbitrator Can’t Issue Further Directions In An Award Based On Settlement Without Proper
‘Adjudication’: Delhi HC
Such directions could be passed only by the process of adjudication after having concluded
the mediation proceedings, the court said.
An arbitrator cannot issue further ‘directions’ in an award based on settlement, without
hearing both the parties in a process of adjudication, the Delhi High Court has held
in Surinder Kumar Beri vs. Deepak Beri.
In this case, during the course of arbitration, parties settled the disputes and entered into a
Memorandum of Understanding, Settlement and Deed of Arrangement. The arbitrator
recorded these settlements in the form of an award.
In the award, certain ‘directions’, which were not in the agreement between the parties, were
issued by the arbitrator. The ‘directions’ included the appointment of a team to examine the
stock and other records and also for auditing financial statements.
“These directions may be an attempt to implement and put into effect the terms and
conditions of the settlement but certainly cannot said to be a part of the settlement
agreement,” Justice Jayant Nath said while hearing the petition challenging the award
The court observed that the provisions of Section 23 of the Arbitration Act that filing of a
statement of claim and a statement of defence would normally be a mandatory procedure to
be followed unless otherwise agreed upon by the parties. The court also noted that no such
statement of claim/defence was sought for by the arbitrator. The bench further held that
documents filed before the arbitrator and the emails sent to him cannot be the basis for
adjudication of the dispute between the parties and passing of directions unless such a
procedure is specifically agreed by the parties.
The bench further said: “It is clear that the directions which are passed by the learned
Arbitrator are not contained in the agreement between the parties. No doubt these directions
can be said to be an attempt by the learned Arbitrator to try and execute/implement the terms
and conditions agreed upon by the parties. However, such directions could be passed only by
the process of adjudication after having concluded the mediation proceedings. It appears that
the learned arbitrator has mixed up the mediation process and the adjudicatory process
based on the hearings which have been conducted and the exchange of emails by the parties.
He has recorded a settlement, passed an award based on the settlement and has also passed
further directions which could only have been passed pursuant to adjudication.”
Holding that such directions are contrary to the fundamental policy of Indian Law, the bench
set those aside. However, the part of the award recording the settlement agreement was
upheld.