In its recent decision in Chief Engineer (NH) PWD v. M/s BSC & C and C JV1, the Supreme Court has held that the power under sub-section (4) of S.29A of the Arbitration & Conciliation Act, 1996 ("Act") for the extension of mandate of an Arbitral Tribunal vests solely in the Court as defined u/S.2(1)(e) of the Act, i.e., the principal civil court of original jurisdiction in a district. The Supreme Court also recognises that such principal civil court of original jurisdiction can include a High Court, provided the High Court has ordinary civil jurisdiction.
Brief Facts
In pending arbitration proceedings between the Chief Engineer ("Petitioner") and M/s BSC & C and C JV ("Respondent"), the Respondent preferred an application for extension of mandate of the arbitral tribunal under Section 29A(4) of the Act before the Commercial Court at Shillong (Commercial Court").
The Petitioner thereafter filed an Interlocutory Application challenging the jurisdiction of the Commercial Court to entertain the application under Section 29A(4) of the Act ("IA"). The Commercial Court rejected the IA filed by the Petitioner and held that it had the jurisdiction to decide and dispose of the application for extension of mandate u/S.29A(4) of the Act.
Aggrieved by the decision of the Commercial Court, the Petitioner preferred a Revision Application before the High Court of Meghalaya, where the issue in consideration was whether the term 'Court', as provided for in sub-sections (4), (5), & (6) of Section 29(A) of the Act would mean the High Court, or the Principal Civil Court in a District.
The Meghalaya High Court while dismissing the Revision Application2 made note of the fact that a plain reading of Section 2(1)(e) of the Act makes it clear that 'Court' is to mean the Principal Civil Court of original jurisdiction in a District, as appearing in the text of the provision.
The Meghalaya High Court relied on the decision passed by the Allahabad High Court in A'Xykno Capital Services Private Limited & Ors. v. State of U.P. & Ors.3 which held that the concept of 'Court' as envisaged under Section 29A read with Section 2(1)(e) of the Act of 1996 does not include a High Court not having original civil jurisdiction as in the case of the Allahabad High Court, and an application under Section 29A of the Act of 1996 would be maintainable only in the Principal Civil Court of original jurisdiction in a district4. (emphasis supplied).
Aggrieved by the findings of the Meghalaya High Court, the Petitioner challenged the same before the Supreme Court.
Observations of the Supreme Court:
The Supreme Court, while dismissing the Special Leave Petition at the stage of Admission categorically stated that the power as found under Section 29A(4) of the Act vests in the Court as defined in Section 2(1)(e) of the Act, i.e., the principal Civil Court of original jurisdiction in a district. The Supreme Court has further stated that this may include a High Court provided the High Court has ordinary original civil jurisdiction (emphasis supplied).
The Supreme Court, thereafter holds that the powers under Section 29A(6) of the Act, insofar as they relate to substitution of arbitrators is only a consequential power that vests in the Court empowered to extend the time (emphasis supplied). As such, the Court holds that the power of substitution has to be exercised by the Court which is empowered to extend the time as provided in sub-section (4) of Section 29A of the Arbitration Act.
Analysis and Key Takeaways:
Given that some High Courts have recently taken contrasting views while interpreting the term 'Court' for the purposes of Section 29A(4) of the Act5, the decision of the Supreme Court is welcome as it conclusively settle this question.
The High Courts which came to the conclusion that 'Court' for the purposes of Section 29A(4) of the Act would mean the jurisdictional High Court or Supreme Court, as opposed to the 'Court' prescribed under the Act, had proceeded on the following basis:
- Section 29A of the Act stands on a similar footing to Section 11 of the Act, and as such the use of the word 'Court' in Section 29A takes on the character of the appointing authority, as is prescribed under Section 11 of the Act. As the powers of appointment under Section 11 of the Act vest with the jurisdictional High Court or the Supreme Court, the power to substitute an arbitrator under Section 29A would consequentially rest only with such courts6.
- By relying on the scheme of the Act, and by adopting a contextual interpretation to the term 'Court', it was held that Section 29A of the Act contemplates the termination of the mandate of an arbitrator, which is akin to the powers of termination of mandate as found in Chapter III of the Act. As such, the High Court notes that the expression 'Court' as appearing in Section 29A of the Act must necessarily be understood in the context provided by Chapter III of the Act7.
By holding that the power to substitute one or more members of the Arbitral Tribunal as found under Section 29A(6) of the Act is solely a consequential power, the Supreme Court effectively holds that the exercise of jurisdiction under Section 29A(6) cannot be read in isolation; that a Court can look into the question of substitution and pass appropriate orders only in cases where it is considering a prayer for extension of mandate made under Section 29A(4) of the Act.
With an increasing number of parties opting for arbitration as their preferred mode of dispute resolution, and in line with the attempts to promote India as an arbitration hub, such procedural clarifications are timely and important in reinforcing predictability and faith in the arbitral process.
While this decision provides much needed clarity to parties moving forward, the fate of parties who have obtained an extension of mandate in pending arbitral proceedings from High Courts which are not courts of original jurisdiction under Section 2(1)(e) of the Act remains tenuous, with the mandate of such an Arbitral Tribunal now being up for debate.
Footnotes
1 Chief Engineer (NH) PWD v. M/s BSC & C and C JV, Special Leave to Appeal (C) No.10544/2024, decided on 13.05.2024.
2 Chief Engineer (NH) PWD (Roads), Govt. of Meghalaya v. BSC & C and C JV, 2024 SCC OnLine Megh 284.
3 A'Xykno Capital Services Private Limited & Ors. v. State of U.P. & Ors, and connected matters, Neutral Citation No. 2023:AHC-LKO:37194.
4 Ibid, at Paragraph 69.
5 see Cabra Instalaciones Y Servicios, S.A. v. Maharashtra State Electricity Distribution Co. Ltd, 2019 SCC OnLine Bom 1437; DDA v. Tara Chand Sumit Construction Co, 2020 SCC OnLine Del 2501; Shapoorji Pallonji & Company Private Limited v. Lily Realty Private Limited, Orders on IA Nos 1 & 2 of 2023 in CMP No.357/2018 before the Karnataka High Court.
6 DDA v. Tara Chand Sumit Construction Co, 2020 SCC OnLine Del 2501, at paragraph 29.
7 Shapoorji Pallonji & Company Private Limited v. Lily Realty Private Limited, Orders on IA Nos 1 & 2 of 2023 in CMP No.357/2018 before the Karnataka High Court, at paragraph 11.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.