A Division Bench of the Kerala High Court in the case of Lots Shipping Company Limited vs. Cochin Port Trust, interpreted the word “court” contained under sub-section (4) of Section 29A of the Arbitration and Conciliation Act, 1996 ('the Act'), as amended by the Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”).
Facts of the case:
The nominated sole arbitrator had entered upon reference on May 13, 2016. Upon expiry of the period of 1 (one) year stipulated under section 29A(1) of the Act, at the request of both the parties, the time was further extended for a period of 6 (six) months by the arbitrator. Since the facts and evidence involved in the proceedings were elaborate and highly technical in nature, evidence could not be completed within the extended period. Therefore, one of the parties had approached the court through an arbitration petition filed under section 29A(5), seeking extension of time, as provided under sub-section (4) of Section 29A. But in view of the decision in M/s. URC construction vs. M/s. BEML Ltd., Palakkad ILR 2018 (1) Ker. 440, the registry noted defect. Therefore, an original petition was filed invoking powers vested on the court under Article 227 of the Constitution of India. In substance and essence, the relief sought for in the original petition also was for extension of the time, to be granted by exercising powers vested under Section 29A(4) of the Act.
The issue before the court was whether the term "court" contained under section 29A(4) requires a contextual interpretation apart from the meaning contained in section 2(1)(e)(i) of the Act?
Decision by the court:
The court observed that contextual interpretation is required since the power conferred on the court under section 29A, especially under sub-sections (4) and (5), are more akin to the powers conferred on the Supreme Court and the High Court, as the case may be, under sections 11(6), 14 & 15 of the Act, for appointment, termination of mandate and substitution of the arbitrator. Moreover, as per the court, the Amendment Act has recognized the judgment of the Constitutional Bench of the Apex Court in SBP & Company vs. M/s. Patel Engineering Company Limited. and another (2005) 8 SCC 618 and conferred the power of appointment on the Supreme Court or the High Court.
The court however, noted that the amendment has not in any manner enhanced the power of the principal civil court, which continues only with respect to matters provided under sections 9 and 34 of the Act. It is significant to note that the orders passed by the principal civil court of original jurisdiction under sections 9 and 34 are made appealable under section 37 of the Act. So also, order if any passed refusing to refer the parties to arbitration under section 8 of the Act, was also made appealable under section 37(1)(a) of the Act.
While analysing section 29A of the Act, the court stated that in all respect, such power conferred under section 29A for permitting extension with respect to the proceedings of arbitration, is clearly akin to the powers conferred under sections 14 and 15 of the Act. The absence of any provision for an appeal with respect to the exercise of such power under section 29A, in the nature as mentioned above, would indicate that the power under section 29A is not to be exercised by the principal civil court of original jurisdiction. Otherwise, it will create anomalous situation of identical powers being exercised in a contrary manner, prejudicial to the hierarchy of the courts. Further, the court also enumerated that in a case where appointment of an arbitrator is made under section 11(6) of the Act by the High Court or the Supreme Court, as the case may be, it would be incongruous for the principal civil court of original jurisdiction to substitute such an arbitrator or to refuse extension of the time limit as provided under section 29A, or to make a reduction in the fees of the arbitrator and thus, a purposive interpretation becomes more inevitable.
The Kerala High Court, thus, while applying the principle of purposive interpretation, held that:
“11…..the term "court" used in Section 29(4) has to be given an contextual and purposive interpretation, which is to be in variance with the meaning conferred to the said term under subsection Section 2(1)(e)(i) of the Act. The term "court" contained in Section 29(4) has to be interpreted as the 'Supreme Court' in the case of international commercial arbitrations and as the 'High Court' in the case of domestic arbitrations. Hence it is held that, either of the party will be at liberty to file an arbitration petition before the High Court under Section 29A(5) of the Act, seeking extension of time for continuance of the arbitration proceedings in exercise of the power conferred under Section 29A(4) of the Act, in the case of any domestic arbitration. The reference is answered accordingly.” (emphasis supplied)
It is pertinent to mention that more recently, a similar issue also arose for consideration before the Delhi High Court in the case of DDA vs. M/s Tara Chand Sumit Construction Company, wherein the Delhi High Court observed that in case a petition under section 29A of the 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 Act and those of the Civil Court to substitute those arbitrators under section 29A of the Act since, the provisions of section 11 of the Act, confers power of appointment of arbitrators only on the High Court or the Supreme Court, as the case may be.
The Delhi High Court thus, went onto hold that:
“30…in the opinion of this Court, an application under Section 29A of the Act seeking extension of the mandate of the Arbitrator would lie only before the Court which has the power to appoint Arbitrator under Section 11 of the Act and not with the Civil Courts.” (emphasis supplied)
This update has been contributed by Arka Majumdar (Partner) and Kunal Dey (Associate).
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