Interpretation of the term “Court” in Section 29A(4) of the Act

Section 29A of the Arbitration and Conciliation Act, 1996 [“The Act”] was inserted in the Act vide Arbitration and Conciliation (Amendment) Act 2015 with the objective to facilitate expeditious disposal of cases with minimum court intervention. The machinery of Section 29A mandates that an Arbitral Award must be made within a period of 12 months from the date of completion of pleadings in terms of Section 23(4) of the Act. The parties can, by consent, extend the period by another six months by seeking recourse to Section 29A (3). However, for any extension required beyond the period of 18 months to conclude the arbitration proceedings, the parties must approach the court for such extension which shall be at liberty to extend the mandate of the Arbitrator or even substitute one or all the Arbitrators. In this regard, it is pertinent to expound upon the definition of “court” under the Act.

Section 2(1)(e) of the Act defines “Court” as

Principal Court of original jurisdiction in a district– In the case of arbitration other than international commercial arbitration.
High Court– In the case of international commercial arbitration.

Section 42 of the Act further provides that where an application has been made before a court with respect to an arbitration agreement, that court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that court and no other court.

A prima facie reading of the aforesaid Sections would indicate that an application under Section 29A of the Act for extension of time for passing arbitral award would lie before the Principal Court of original jurisdiction in a district or the High Court as the case may be. However, the difficulty arises when an arbitrator has been appointed by a High Court or the Supreme Court under powers conferred under Section 11 of the Act. Section 11(6) of the Act confers powers upon Supreme Court and the High Court to appoint arbitrators on an application made by the party as follows-

Supreme Court– In case of International Commercial Arbitration
High Court– In case of a domestic arbitration

Therefore, in a given fact situation pertaining to domestic arbitration, if an arbitrator has been appointed by the High Court under Section 11(6) of the Act, can a party to the said arbitration proceedings, apply to the principal court of original jurisdiction in a district for extension of time under Section 29A of the Act? The Delhi High Court in DDA vs Tara Chand Sumit Construction¹ [“Tara Chand”] had the occasion to delve into the issue. The court noted that if the definition of “court” provided under the Act is to be strictly construed then naturally an application for extension under Section 29A would lie before the Civil Court of the original jurisdiction. However, the court noted that the power to appoint an arbitrator has been conferred solely upon the High Court or the Supreme Court by the legislature under the Act. Therefore, a Civil Court, while exercising powers under Section 29A for extension cannot substitute an arbitrator which has been appointed by the High Court or the Supreme Court under Section 11 as that is solely in the realm of the Supreme Court or the High Court as the case may be. The court categorically held that that 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(6) of the Act and not with Civil Court. Therefore, in case arbitrator has been appointed by the High Court under Section 11(6) of the Act, then application for extension under Section 29A would lie before the High Court only. Similarly, if an arbitrator has been appointed by the Supreme Court under Section 11 of the Act, then an application for extension under Section 29A would lie before the Supreme Court.

A Division bench of the Kerala High Court in M/s Lots Shipping Company vs Cochin Port Trust² [“Lots Shipping”] echoed the ratio enunciated by the Delhi High Court in Tara Chand. The Court laid emphasis on the wordings of Section 2(1) of the Act viz. “unless the context otherwise requires” and held that the term “court” used in Section 29A(4) of the Act has to be given contextual and purposive interpretation which is to be in variance with the meaning conferred on the said term under Section 2(1)(e) of the Act. The ratio in Lots Shipping was followed by the Kerala High Court in Flemingo Duty Free Shop Pvt. Ltd. vs Airports Authority of India³. On contrary, a single judge bench of Kerala High Court in EKK and Co. and Ors. Vs State of Kerala and Ors⁴ [“EKK and Co”] distinguished the ratio in Lots Shipping. In facts of the said case the arbitrator was appointed by the parties themselves in accordance with the procedure laid down in the agreement. The Court held that the ratio in Lots Shipping is only to be applied when the arbitrator has been appointed by the High Court or the Supreme Court under Section 11 of the Act, unlike the facts of the said case wherein the arbitrator was appointed by the parties themselves. Therefore, the court held that, in the facts of the said case, an application for extension under Section 29A would lie before the principal civil court of original jurisdiction. In doing so, the court carved out an exception that the ratios in Tara Chand and Lots Shipping are inapplicable when the arbitrator has been appointed by the parties themselves and in that case, the “court” defined in section 2(1)(e) of the Act would have jurisdiction to entertain application u/s 29A of the Act.

The ratio in Lots Shipping and Tara Chand were followed by Allahabad High Court in Indian Farmer Fertilizers Cooperative Ltd. vs Manish Engineering Enterprises⁵ [“Manish Engineering”] wherein an Arbitrator was appointed by the High Court itself under Section 11 of the Act. The Court also held that Section 42 of the Act will cast no fetters upon the powers of High Court or the Supreme Court for exercising powers u/s 29A of the Act as powers u/s 29A pertains to extension or substitution of the arbitrator which is beyond the ambit of Section 42 of the Act.

The ratio in Manish Engineering was followed by a division bench of Patna High Court in South Bihar Power Distribution Company vs Bhagalpur Electricity Distribution Company Pvt. Ltd. and Ors.⁶ [“Bhagalpur Electricity”] wherein the Court held that the court which could grant extension of time could only be the court which has the power to appoint the arbitrator and not the Principal Civil Court. Interestingly, the arbitrators in the said case were appointed by the parties themselves and not under Section 11 of the Act and objection was raised that in facts of the said case that Principal Civil Court should have the jurisdiction. Answering in the negative, the court clarified that proceeding on the assumption that Principal Civil Court would have jurisdiction in case arbitrator is appointed by the parties themselves would give rise to a conflicting situation. Explicating with an example, the court observed that where one of the arbitrators has been appointed by one of the parties and second arbitrator by High Court and for substitution of either of them there could not be jurisdiction conferred upon both the Principal Civil Court and the High Court. It is pertinent to mention that this judgment is sub-silentio insofar the ratio laid down by Kerala High Court is concerned in EKK and Co (supra) which has held otherwise.

A single judge bench of the Patna High Court in Indian Power Corporation (Bodhgaya) Ltd. vs South Bihar Power distribution Company Ltd.⁷ followed the ratio laid down in Tara Chand, Lots Shipping and Bhagalpur Electricity (supra) and held in similar lines that that court which could grant extension of time could only be the court which has power to appoint the arbitrator. The Court also held that the fact that the parties have themselves appointed the arbitrator would not divest the High Court or the Supreme Court as the case may be from exercising their power u/s 29A for granting extension of time or substitution of arbitrator. Pertinently, this judgment is also sub-silentio insofar the ratio laid down by Kerala High Court is concerned in EKK and Co (supra) which has held otherwise.

The decision of Supreme Court in Chief Engineer (NH) PWD (Roads) vs M/s BSC & C JV⁸ added furthermore confusion to the contentious issue. In the aforesaid matter, a decision rendered by the High Court of Meghalaya was under challenge, wherein the High Court had inter alia observed that since the arbitrator was not appointed by the High Court under section 11(6) , then an application for extension of time under Section 29A would lie before the principal civil court of original jurisdiction and not the High Court. The Supreme Court upheld the aforesaid order passed by the High Court after observing, in categoric terms, that power under 29A(4) of the Act, to extend time, vests in the court as defined in Section 2(1)(e) of the Act, i.e. Principal Civil Court original jurisdiction in a district in case of domestic arbitration. This order of Supreme Court is devoid of any reference to the aforementioned authoritative decisions on the issue. Be that as it may, this decision of Supreme Court, as it was thought back then, finally put a quietus to the contentious issue, until a larger bench of the Bombay High Court had the occasion to throw light on the issue and distinguish the aforesaid order passed by the Supreme Court.

In Sheela Chowgule vs Vijay Chowgule & Ors.⁹ a larger bench of the Bombay High Court was formed when a Ld. Single Judge was not in agreement with a view taken by another single judge in the matter of Mormugao Port Trust vs Ganesh Bezoplat Ltd.¹⁰ wherein the Bombay High Court had inter alia observed that jurisdiction to entertain an application under Section 29A (4) would lie before the District Court when the arbitrator was not appointed by the High Court under Section 11(6) of the Act. The larger bench, after elaborating upon the principles related to ratio decidendi concluded that the decision of Supreme Court in Chief Engineer(supra) is rendered in light of the fact that the parties themselves, in the facts of that case, had appointed an arbitrator, and in that view, the Court held that the power to extend time would lie before the District Court, therefore, the said decision cannot have bearing on the facts before the larger bench wherein the arbitrator has been appointed by the High Court and question has arisen whether it is the District Court which would have the jurisdiction to extend the time under Section 29A of the Act.

The larger bench of the Bombay High Court then proceeded to analyse the Intent and import of Section 29A of the Act and after referring to various authoritative decisions, the Bombay High Court inter alia concluded as follows-

If an Arbitrator has been appointed by the High Court under Section 11(6) of the Act then an application under Section 29A, for extension of time, would lie before the High Court and not the District Court. (in case of domestic arbitration)
In case the Arbitral Tribunal has been constituted under Section 11(2) i.e. with the agreement and consent of the parties, then an application under Section 29A for extension of time would lie before the Principal Civil Court of original jurisdiction in a district which includes the High Court in exercise of its ordinary original jurisdiction.

The Bombay High Court therefore, found not infirmity with the decision of the Ld. Single Judge on the second issue, i.e. When parties themselves appoint an arbitrator, then District Court would have jurisdiction to extend time under Section 29A as also observed by the Supreme Court in Chief Engineering (supra). This observation is in line with the ratio laid down by the Kerala High Court in Ekk and Co (supra), although this decision was not referred in the judgment of the larger bench.

Although the larger bench of the Bombay High Court authoritatively held that it is only the High Court which would extend the time under Section 29A when the Arbitrator has been appointed under Section 11(6), it however, failed to completely adjudicate the issue and put a quietus to it as the controversy as to which court will have the jurisdiction to extend the time when it is the parties themselves who have appointed the arbitrator under Section 11(2), remains wide open in view of the contrary view taken by the Patna High Court on the issue. The Division Bench of the Patna High Court in Bhagalpur Electricity (supra) inter alia observed that the court which could grant extension of time could only be the court which has the power to appoint the arbitrator and not the Principal Civil Court. The Division Bench also flagged the anomaly and conflicting situation that would arise if it is held that Principal Civil Court would have jurisdiction to extend time if the parties themselves appoint the arbitrator under Section 11(2) of the Act. A single bench of the Patna High Court in Indian Power Corporation (supra) echoed the same principle.

Unfortunately the aforesaid two decisions of Patna High Court were not bought to the notice of the Larger Bench of the Bombay High Court.

As the law stood thus, the Telangana High Court int the matter of M/s ESI Corporation vs M/s Quality care India Ltd.¹¹ added more nuance to it. In the aforesaid matter the Trial Court granted extension of time under Section 29A of the Act for passing the Arbitral Award. The Petitioner challenged the aforesaid order of Trial Court before the High Court on the ground that since the Arbitrator was appointed by the High Court, only High Court could have granted extension of time and not the Principal Civil Court. Reliance was placed upon Sheela Chowgle (supra) amongst other decisions which upheld the aforesaid principle. The High Court, however, did not cede to the aforesaid argument and observed that the decisions relied upon by the Petitioner were rendered by High Court who simultaneously had Original Jurisdiction. Since Telangana High Court did not have original jurisdiction therefore, the Principal Civil Court would have jurisdiction to grant extension under Section 29A. This decision has added another layer to the already contentious issue.

What if Principal Civil Court and High Court, both have concurrent jurisdiction over the dispute?

Section 2(1)(e) of the Act defines “Court” as Principal Civil Court of original jurisdiction and High Court exercising ordinary original civil jurisdiction, therefore, giving rise to a situation wherein a Principal Civil Court as well as High Court, in exercise of its ordinary original civil jurisdiction, could have jurisdiction to entertain an arbitration dispute, in a particular area, as per Section 2(1)(e) of the Act. In State of Maharashtra through Executive Engineer vs Atlanta Ltd¹². one of the parties moved an application under Section 34 of the Act, before the Principal Civil Court, Thane, Mumbai and on the same day, the opposite party also moved an application under Section 34 of the Act challenging the Arbitral Award, before the Bombay High Court, exercising ordinary original civil jurisdiction in that area. The Supreme clarified that if a choice arises between the above two courts, then the parties must exercise the choice in favour of the High Court, being the superior court as per Section 2(1)(e) as follows-

“24.2…Undoubtedly, a “principal Civil Court of original jurisdiction in a district”, is the superior most court exercising original civil jurisdiction in the district over which its jurisdiction extends. It is clear, that Section 2(1)(e) of the Arbitration Act having vested jurisdiction in the “principal Civil Court of original jurisdiction in a district”, did not rest the choice of jurisdiction on courts subordinate to that of the District Judge. Likewise, “the High Court in exercise of its ordinary original jurisdiction”, is the superior most court exercising original civil jurisdiction, within the ambit of its original civil jurisdiction. On the same analogy and for the same reasons, the choice of jurisdiction, will clearly fall in the realm of the High Court, wherever a High Court exercises “ordinary original civil jurisdiction”.

33… Under the scheme of the provisions of the Arbitration Act therefore, if the choice is between the High Court (in exercise of its “ordinary original civil jurisdiction”) on the one hand, and the “principal civil court of original jurisdiction” in the District i.e. the District Judge on the other; Section 2(1)(e) of the Arbitration Act has made the choice in favour of the High Court. This in fact impliedly discloses a legislative intent. To our mind therefore, it makes no difference, if the “principal civil court of original jurisdiction”, is in the same district over which the High Court exercises original jurisdiction, or some other district. In case an option is to be exercised between a High Court (under its “ordinary original civil jurisdiction”) on the one hand, and a District Court (as “principal Civil Court of original jurisdiction”) on the other, the choice under the Arbitration Act has to be exercised in favour of the High Court.” (emphasis supplied)

Therefore, if a situation arises wherein a Principal Civil Court and High Court both have jurisdiction as per Section 2(1)(e) of the Act, the parties must approach the High Court, exercising its ordinary original civil jurisdiction.

Conclusion

From the conspectus of the aforementioned decisions it can be fairly discerned that the power to extend time under Section 29A of the Act rests with the High Court when the Arbitrator has been appointed by the High Court under Section 11(6) of the Act. However, when the Arbitrator has been appointed by the parties themselves under Section 11(2), then it is the Principal Court of original jurisdiction in a district that would have the jurisdiction to extend time under Section 29A (in case of domestic arbitration). The larger bench of the Bombay High Court had the opportunity to completely adjudicate the issue and shut the door on it completely, however, the conclusion reached by it has, perhaps left the door slightly ajar, leaving the controversy opened as to which court will have jurisdiction to appoint an arbitrator when the arbitrator has been appointed by the parties themselves under Section 11(2). This issue was addressed by the Division Bench of the Patna High Court in Bhagalpur electricity (supra), however, the said decision does not find mention in the larger bench judgment of the Bombay High Court.

Interpretation of the term “Court” in Section 29A(4) of the Act | Arbitration

By Daksh Pandit