Madras High Court: In an appeal filed under Section 37(a) of the Arbitration and Conciliation Act, 1996, to set aside the order passed by the Principal District Court, wherein the Court set aside the award on the sole ground that the award has been passed beyond a period of 12 months in violation of Section 29-A of the Arbitration and Conciliation Act and allowed the arbitration petition, R. Vijayakumar, J. after construing that Section 29-A of the Act is procedural one and discretion is given to the parties to extend the arbitration period for a further period of 6 months, the Court held that the respondents by not raising any objection before passing of the award, have not only given their implied consent but also waived their rights to raise any objection with regard to the non-passing of the award within a period of 12 months.
Further, the Court held that the award having been passed, within a period of 18 months from the date of entering upon the reference by the Sole Arbitrator, with the implied consent of the respondents after having waived their right to object, is valid in the eye of law. Thus, the Court set aside the impugned order and remitted for fresh consideration.
Background:
The respondents had filed a suit against the appellant for declaration that they are entitled to participate in the administration of Hotel Arunagiri and for a consequential injunction. Thereafter, the appellant moved an application under Section 8 of the Arbitration and Conciliation Act, 1996 relying upon the arbitration clause in the partnership deed. Section 8 application was dismissed by the Trial Court. Thereafter, the Supreme Court appointed a Sole Arbitrator by order, who passed an arbitration award.
After that, Respondent 3 had filed an application under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the arbitration award, as it has not been passed by the Arbitrator within a period of 12 months from the date on which the Arbitral Tribunal had entered upon the reference. Therefore, the period of 12 months mandates the Arbitrator gets terminated, and the Arbitrator becomes functus-officio. Further, the award passed beyond the statutorily laid time limit is null and void.
The District Judge set aside the award on the sole ground that the award has been passed beyond a period of 12 months in violation of Section 29-A of the Arbitration and Conciliation Act and allowed the arbitration petition. Challenging the said order of the District Judge, the present appeal has been filed by the appellant.
Issue: Whether the award was passed beyond a period of 12 months from the date on which the Arbitral Tribunal had entered upon the reference and if so, whether there was any consent of the parties to extend the period of arbitration?
Analysis and Decision:
The Court took note of amended Section 29-A of the Arbitration and Conciliation Act, 1996 and noted that the arbitration award has to be made within a period of 12 months from the date on which the arbitral tribunal entered upon the reference. In case the award is not made within the period, the mandate of the Arbitrator shall terminate. However, this proposition is subject to the following exceptions:
(a) The parties by consent can extend the period for making the award for a further period of not exceeding 6 months.
(b) The Court has got power to extend the period of arbitration either prior to or after expiry of either 12 months period or the extended 18 months period.
The Court noted that as per explanation to Section 29-A of the Act, the Arbitral Tribunal is deemed to have entered upon the reference on the date on which the Arbitrator or all the Arbitrators, as the case may be, have received notice, in writing of their appointment.
However, in the present case, the Court noted that the sole Arbitrator was not appointed by the parties but has been appointed by the Supreme Court. Therefore, the Court said that the explanation to Section 29-A(1) of the Arbitration and Conciliation Act, 1996 is not helpful in deciding the issue.
The Court noted that neither of the parties knew the date on which the Arbitral Tribunal had entered upon the reference.
The Court said that the District Judge has taken into consideration the date on which the Sole Arbitrator had addressed a letter to the parties, namely on 03-11-2016 as the date on which the Sole Arbitrator had entered upon the reference. The District Judge held that since the award has not been passed on or before 02-11-2017, the award violates Section 29-A of the Arbitration and Conciliation Act, 1996 and allows the arbitration petition.
The Court clarified that the date on which the Sole Arbitrator had received the certified copy of the order of the Supreme Court is not made available. The parties have also not chosen to find the said date. Therefore, the Court opined that the date on which the Sole Arbitrator had entered upon the reference could be safely fixed as 03-11-2016.
Thus, the Court said that since the date of entering the reference was decided as 03-11-2016, the Arbitration Award should have been passed on or before 02-11-2017. Both parties submitted their written arguments on 12-10-2017, and the order was reserved by the Sole Arbitrator on the same date. The award was passed only on 28.-3-2018. Therefore, the Court concluded that the award was not passed within 12 months from the date the Arbitral Tribunal entered upon the reference.
The Court noted that the appellant had filed an application before this Court on 24-06-2024 under Section 29-A (4) of the Arbitration to extend the time to pass the final award in the arbitration proceedings. This application was resisted by the respondents contending that the present application is not maintainable because already Arbitration Award has been passed. The respondents further contended that no such application was filed during the pendency of the arbitration proceedings or the appeal.
The Court took note of Chief Engineer (NH) PWD (Roads) v. BSC & C & C JV, 2024 SCC OnLine SC 1801, wherein it was held that when the High Court does not have an ordinary original civil jurisdiction, the High Court cannot exercise powers under Section 29-A(4) of the Arbitration and Conciliation Act. Thus, the Court said that as the Madras High Court does not have ordinary original civil jurisdiction, the said application is not maintainable. That apart, Section 29-A(4) of the Act empowers the Court to extend the period, only prior to or after the expiry of the period of 12/18 months and not after passing of the award. Therefore, the said application is not maintainable.
The Court said that the respondents are aware that Section 29-A (1) of the Act provides for an outer limit of 12 months for passing of an award from the date on which the Arbitrator had entered upon the reference. They are also aware that if the Arbitrator has not passed the award within the said period, the mandate of the Arbitrator shall be terminated unless it is extended by consent of the parties or by an order of the Court. Having knowledge about the said legal mandate, the respondents have not raised any objection regarding non passing of the award and waited till an award was passed by the Sole Arbitrator. Therefore, the Court concluded that the respondents have given their implied consent for passing the award and waived their rights to object to the passing of the award beyond 12 months.
After perusing the impugned order, the Court said that the order has been passed on the preliminary issue, without going into the merits of the case, solely based upon the fact that the award has not been passed within a period of 12 months.
[Ayyasamy v. A Shanmugavel, 2024 SCC OnLine Mad 4338, decided on 27-08-2024]
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