14. Suryadev Alloys and Power Private Limited v. Shri Govindraja Textiles Private Limited, O.P.

Nos. 955 of 2019 and 15 of 2020 (Madras High Court). Decided on May 8, 2020.

A question arose for consideration before the court with regard to the validity of an arbitral award
which was passed a year after the period fixed by the court had lapsed.

The court after undertaking a comparative analysis of Section 28(1) under the erstwhile Arbitration
Act, 1940 and the Section 29A of the Arbitration Act, held that unlike the provision of Section 28(1)
of the Arbitration Act, 1940 which gave wide powers to the court to enlarge the time for making an
award even after the expiry of the time for making the award or even after the award has been
made; the Arbitration Act has curtailed these powers and restricted the extension only within the
provisions of Section 29A(3) and 29A(4). Thus, as per the court a similar power has not been
incorporated under Section 29A of the Arbitration Act unlike Section 28(1) of the Arbitration Act,
1940. Hence, the Madras High Court held that it is only the court that can extend the period for
making of the award after the expiry of the 1 (one) year period under Section 29A(1) or the extended
period under Section 29A(3). Thus, the Madras High Court held that, even the court cannot ratify an
award ex post facto by extending the period in a petition filed under Section 34 of the Arbitration
Act by an aggrieved party. Further, the court also enumerated that the language of Section 29A(4) of
the Arbitration Act clearly stipulates that if the award is not made within the stipulated period or the
extended period then the mandate of the arbitrator stands terminated unless extended by court.

15. DDA v. Tara Chand Sumit Construction Company, OMP(MISC.)(COMM) 236 of 2019 (Delhi
High Court). Decided on May 12, 2020.

The Delhi High Court in the instant case, interpreted the term "court" enumerated under Section
29A(4) of Arbitration Act.

The court observed that in case a petition under Section 29A of the Arbitration Act is filed before the
Principal Civil Court for extension of mandate and the occasion for substitution arises, then the
Principal Civil Court will be called upon to exercise the power of substituting the arbitrator and thus,
the same would lead to a situation where a conflict would arise between the power of superior
courts to appoint arbitrators under Section 11 of the Arbitration Act and those of the civil court to
substitute those arbitrators under Section 29A of the Arbitration Act, since, the provisions of Section
11 of the Arbitration Act, confers power of appointment of arbitrators only on the High Court or the
Supreme Court, as the case may be.

The court held that an application under Section 29A of the Arbitration Act seeking extension of
mandate of the arbitrator would lie only before the court which has the power to appoint an
arbitrator under Section 11 of the Arbitration Act and not the civil courts.

16. ONGC Petro Additions Limited v. Ferns Constructions Company INC., OMP(MISC)(COMM)
256/2019 (Delhi High Court). Decided on July 21, 2020.

The petitioner in the instant case had filed an application claiming that the time limit for the arbitral
tribunal to pass an award under Section 29A of the Arbitration Act, does not apply to international
commercial arbitrations as defined under Section 2(1)(f) of the Arbitration Act owing to the
retrospective applicability of the amendment made to Section 29A vide the Arbitration and
Conciliation (Amendment) Act, 2019 ("Amendment Act, 2019") (with effect from August 30, 2019).

The Delhi High Court observed that there exists a dichotomy in the decisions rendered by two
Coordinate Benches of the Delhi High Court in the case of Shapoorji Pallonji and Company Private
Limited v. Jindal India Thermal Power Limited, O.M.P.(MISC.) (COMM.) 512/2019, and MBL
Infrastructures Limited v. Rites Limited, O.M.P.(MISC)(COMM) 56/2020, wherein in the case
of Shapoorji (supra), the court held that the amended Section 29A(1) of the Arbitration Act being a
procedural law would also apply to the pending arbitrations as on the date of the amendment
whereas, the court in the case of MBL Infrastructure (supra), by referring to the notification August
30, 2019 held that, from the perusal of the said notification it does not have a retrospective effect.
The Delhi High Court in the instant case also noted that in the case of MBL Infrastructure (supra), the
attention of the court was not drawn to the earlier order in Shapoorji (supra) and thus, held that, to
that extent the order in MBL Infrastructure (supra) is per incuriam.

The Delhi High Court thus, held that the provisions of Section 29A(1) of the Arbitration Act shall be
applicable to all pending arbitrations seated in India as on August 30, 2019 and commenced after
October 23, 2015.

Determining the issue with regard to international commercial arbitrations, the Delhi High Court
held that with the amendment to Section 29A(1) of the Arbitration Act vide the Amendment Act,
2019, the time period for making an arbitral award in international commercial arbitration has been
made inapplicable and thus, 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 Arbitration Act,
seated in India.

Recently, in Tecnimont SpA & Anr. v National Fertilizers Limited (MA No. 2743/2018 in Arbitration
Case (C) No. 24/2016)1), this issue also came up for consideration before the Supreme Court. As the
arbitral proceedings could not be completed within 18 months (1 year plus the extended 6 months),
the petitioners filed an application for extension of time before the Delhi High Court. However, as
the matter was an international commercial arbitration and the arbitrator had been appointed by
the Supreme Court, on seeking fresh advice in the matter, the petitioners approached the Supreme
Court for extension of time. The Delhi High Court was duly apprised of these developments and the
proceedings before the High Court were, accordingly, disposed of.

When the matter came up before the Supreme Court, it was argued by the petitioners that, since
Section 29A also carried with it the power to substitute the arbitral tribunal, it was imperative that
the application for extension of time also be heard by the Supreme Court. This request was opposed
by the respondents and it was argued that under the Act, the time limit for passing the award in the
case of international commercial arbitrations can only be extended by the High Court.

Eventually, however, the occasion for the Supreme Court to conclusively decide the question of law
did not arise as the application for extension of time was withdrawn by the petitioners with the
request that liberty may be granted to the petitioners to approach the Delhi High Court once again.
The request was accepted by the Supreme Court and the matter was restored to the file of the Delhi
High Court. The time limit for passing the arbitral award was extended by the Delhi High Court in
view of the order passed by the Supreme Court.
Supreme Court: In an important ruling, the bench of Indu Malhotra* and Ajay Rastogi, JJ has held
that the period of limitation for filing an application under Section 11 of the Arbitration and
Conciliation Act, 1996 would be governed by Article 137 of the First Schedule of the Limitation Act,
1963. Hence, the period of limitation will begin to run from the date when there is failure to appoint
the arbitrator. Further,iIn rare and exceptional cases, where the claims are ex facie timebarred, and
it is manifest that there is no subsisting dispute, the Court may refuse to make the reference.

The Court also suggested that,

“It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific
period of limitation within which a party may move the court for making an application for
appointment of the arbitration under Section 11 of the 1996 Act.”

This would be in consonance with the object of expeditious disposal of arbitration proceedings.

What would be the period of limitation for filing an application under Section 11 of the Arbitration
and Conciliation Act, 1996?

Section 11 does not prescribe any time period for filing an application under sub-section (6) for
appointment of an arbitrator. Since there is no provision in the 1996 Act specifying the period of
limitation for filing an application under Section 11, one would have to take recourse to the
Limitation Act, 1963, as per Section 43 of the Arbitration Act, which provides that the Limitation Act
shall apply to arbitrations, as it applies to proceedings in Court.

It is a settled law that the limitation for filing an application under Section 11 would arise upon the
failure to make the appointment of the arbitrator within a period of 30 days’ from issuance of the
notice invoking arbitration.

“… an application under Section 11 can be filed only after a notice of arbitration in respect of the
particular claim(s) / dispute(s) to be referred to arbitration [as contemplated by Section 21 of the
Act] is made, and there is failure to make the appointment.”

However,  the period of limitation for filing a petition seeking appointment of an arbitrator/s cannot
be confused or conflated with the period of limitation applicable to the substantive claims made in
the underlying commercial contract. The period of limitation for such claims is prescribed under
various Articles of the Limitation Act, 1963.

“The limitation for deciding the underlying substantive disputes is necessarily distinct from that of
filing an application for appointment of an arbitrator. This position was recognized even under
Section 20 of the Arbitration Act 1940.”

Given the vacuum in the law to provide a period of limitation under Section 11 of the Arbitration and
Conciliation 1996, the Courts have taken recourse to the position that since none of the Articles in
the Schedule to the Limitation Act, 1963 provide a time period for filing an application for
appointment of an arbitrator under Section 11, it would be covered by the residual provision Article
137 of the Limitation Act, 1963 which provides a period of 3 years from the date when the right to
apply accrues.

However, this is an unduly long period for filing an application u/S. 11, since it would defeat the very
object of the Act, which provides for expeditious resolution of commercial disputes within a time
bound period.
“The 1996 Act has been amended twice over in 2015 and 2019, to provide for further time limits to
ensure that the arbitration proceedings are conducted and concluded expeditiously. Section 29A
mandates that the arbitral tribunal will conclude the proceedings within a period of 18 months. In
view of the legislative intent, the period of 3 years for filing an application under Section 11 would
run contrary to the scheme of the Act.”

Hence, the period of limitation for filing an application under Section 11 would be governed by
Article 137 of the First Schedule of the Limitation Act, 1963. The period of limitation will begin to run
from the date when there is failure to appoint the arbitrator. This position will hold field till the
Legislature comes up with an amendment to Section 11 of the 1996 Act to provide a period of
limitation for filing an application under this provision, which is in consonance with the object of
expeditious disposal of arbitration proceedings.

Whether the Court while exercising jurisdiction under Section 11 is obligated to appoint an
arbitrator even in a case where the claims are ex facie time-barred?

In view of the legislative mandate contained in the amended Section 11(6A), the Court is now
required only to examine the existence of the arbitration agreement. All other preliminary or
threshold issues are left to be decided by the arbitrator under Section 16, which enshrines
the kompetenz-komptenz principle.

“The doctrine of kompetenz-komptenz implies that the arbitral tribunal is empowered and has the
competence to rule on its own jurisdiction, including determination of all jurisdictional issues. This
was intended to minimise judicial intervention at the pre-reference stage, so that the arbitral
process is not thwarted at the threshold when a preliminary objection is raised by the parties.”

In a recent judgment delivered by a three-judge bench in Vidya Drolia v. Durga Trading

Corporation, (2021) 2 SCC 1, on the scope of power under Sections 8 and 11, it has been held that
the Court must undertake a primary first review to weed out “manifestly ex facie non-existent and
invalid arbitration agreements, or non-arbitrable disputes.”

“The prima facie review at the reference stage is to cut the deadwood, where dismissal is bare
faced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only
when the Court is certain that no valid arbitration agreement exists, or that the subject matter is
not arbitrable, that reference may be refused.”

While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima
facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited
jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the
referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time
barred and dead, or there is no subsisting dispute.

“It is only in the very limited category of cases, where there is not even a vestige of doubt that the
claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to
make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes
to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by
the tribunal.”

[BSNL v. Nortel Network India Pvt. Ltd., 2021 SCC OnLine SC 207, decided on 10.03.2021]
The Respondent appeared before the Arbitrator and after the award was passed, chose not to file
any objection to the award immediately. On the contrary, the Respondent filed an application under
Section 11 of Act, 1996 before the High Court for appointment of an Arbitrator.

The Respondent had participated in the arbitral proceeding and was aware of passing of the award.
He, may be, by design, invoked the jurisdiction of the High Court for appointment of an Arbitrator.
Liberal interpretation should be placed on Section 14 of the Act, but if the fact situation exposits
absence of good faith of great magnitude, law should not come to the rescue of such a litigant. The
Respondent instead of participating in the arbitration proceedings, could have immediately taken
steps for appointment of arbitrator as he thought appropriate or he could have filed his objections
under Section 34(2) of the Act, 1996 within permissible parameters but he chose a way, an
innovative path, possibly harbouring the thought that he could contrive the way where he could
alone rule. The High Court had fallen into grave error by concurring with the opinion expressed by
the Additional District Judge and, therefore, both the orders deserve to be lancinated.