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Introduction

The Arbitration and Conciliation Act of 1996, as it was originally


drafted, didn’t contain any provision imposing a hard time limit upon
the mandate of the Arbitral Tribunal. This limitation, along with
other provisions of Sec 29A, were inserted into the principal Act by
way of the 2016 Amendment Act.1 The Act of 1940, in s. 28, also
contained provisions whereby the court could extend the time for
making an award. It should be noted, however, that the 1940 Act did
not contain any mandatory statutory limits upon the time available
to the Arbitrators. However, there was an “implied time limit”
condition of four months.2 Parties were free to impose such limits by
contractual agreement. Further, it was open to the parties to extend
the time by way of mutual consent3.4 But the omission of the
provision for extension of time and therefore the absence of any time
limit has given rise to another problem, namely, that awards are
getting delayed before the arbitral tribunal even under the 1996 Act.

1
Sec 15 of the 2016 Amendment act.
2
See section 3 read with the First Schedule of the Arbitration Act, 1940.
Section 3- Provisions implied in arbitration agreement- An arbitration agreement, unless a
different intention is expressed therein, shall be deemed to include the provisions set out in the
First Schedule in so far as they are applicable to the reference.
Rule 3, First Schedule- The arbitrators shall make their award within four months after entering
on the reference or after having been called upon to act by notice in writing from any party to the
arbitration agreement or within such extended time as the Court may allow.
3
Shyam Telecom Ltd. vs Arm Ltd, 2 004 (3) ARBLR 146 Delhi, 2004 (77) DRJ 91 Para 17- “It is
true that 1996 Act does not prescribe any time limit for making and publishing the Award but
that does not mean that parties cannot by mutual agreement provide for a time limit for making
the Award by the Arbitrator and if so prescribed it would run contra to the provisions of the Act.
This view appears to be more plausible and acceptable having regard to the object of having
Arbitration as the alternate mode for settlement of disputes/differences between the parties.”
4
28. Power to Court only to enlarge time for making award.
(1) The Court may, if it thinks fit, whether the time for making the award has expired or not and
whether the award has been made or not, enlarge from time to time the time for making the award.
(2) Any provisions in an arbitration agreement whereby the arbitrators or umpire may, except with
the consent of all the parties to the agreement, enlarge the time for making the award, shall be void
and of no effect.
One view is that this is on account of the absence of a provision as to
time limit for passing an award.5

This said provision stipulated under Section 29A is only applicable to


arbitral proceedings (both domestic and international arbitrations)
commenced on or after 23rd October, 2015 wherein the place of
arbitration is in India. Thus, it is prospective in nature.

5
176th Law Commission Report, Page 122
Section. 29 A (1)

The first subsection of section 29A states-

1. “The award shall be made within a period of twelve months from


the date the arbitral tribunal enters upon the reference.
Explanation.—For the purpose of this sub-section, an arbitral
tribunal shall be 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.”6

The award in question, would also include an interim award.7


However, as per Sec. 32, Arbitral proceedings are terminated upon
the delivery of a final award and not an interim award. 8This time

6
The Arbitration Amendment Bill, 2018 proposes the following substitution to s. 29A (1)-
"(1) The award in matters other than international commercial arbitration shall be made within a
period of twelve months from the date of completion of pleadings under sub-section (4) of section
23."; Thus, the time period shall begin to run from the point when parties have completed their
pleadings. Thus, it seems that the legislature wishes to give a years’ time to the Arbitral Tribunal
to deliberate and decide upon the issues, as opposed to quickly wrap up the proceedings. This
proposed amendment requires to be reconsidered. The term “completion of pleading” is vague.
Further, parties are free, with the leave of the Tribunal, to amend their pleadings. As such, it
would be open for unscrupulous litigators to employ dilatory tactics and keep extending their
pleadings indefinitely. The Act does not specifically authorize the Arbitrator to compel a Party to
quickly wrap up its pleadings.
7
S 2. (C), Arbitration Act, 1996 “arbitral award” includes an interim award; whereas the
old Act specified that ‘“award” means an arbitration award”
8
Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the
arbitral tribunal under sub-section (2).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings
where—
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral
tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) The arbitral tribunal finds that the continuation of the proceedings has for any other reason
become unnecessary or impossible.
limit also applies to International Commercial Arbitrations seated
in India. The Arbitration and Conciliation (Amendment) Bill of
2018 will exempt International Commercial Arbitrations from any
time limits.9

The procedure for the appointment of arbitrators is laid out under


section 11 of the Act. It is worth noting that the time limit begins
from the date of the “appointment” of the Arbitrator(s), as
opposed to “commencement of arbitral proceedings”. It is worth
nothing that in the 1940 Act, “reference” was defined as “reference
to arbitration”, which, in turn, meant when the Respondent
received notice of Arbitration proceedings. The UNCITRAL Model
Law is also on similar lines.10 This appointment may be challenged
in accordance with S. 13, based on the grounds noted in s. 12. It is
for the Tribunal to decide upon the validity of the challenge. The
appointment must be according to the rules of the Arbitration
Agreement and the procedure agreed to by the parties, or
according to the directions of the Chief Justice (or his designee). If
the appointment made is not proper, then the award may be

(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal
shall terminate with the termination of the arbitral proceedings.
9
Section 6 of the Arbitration and Conciliation (Amendment) Bill, 2018-
“In section 29A of the principal Act,—
(a) for sub-section (1), the following sub-section shall be substituted, namely:—
"(1) the award in matters other than international commercial arbitration shall be made within a
period of twelve months from the date of completion of pleadings under sub-section (4) of section
23.”
10
Article 21. Commencement of arbitral proceedings- Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular dispute commence on the date on which a request
for that dispute to be referred to arbitration is received by the respondent.
rendered void.1112 If the challenge fails, then the date of
appointment stands.13 However, if the challenge succeeds and a
new arbitrator is appointed, then s. 15 (4) comes into effect, which
states-
“Unless otherwise agreed by the parties, an order or ruling of
the arbitral tribunal made prior to the replacement of an
arbitrator under this section shall not be invalid solely because
there has been a change in the composition of the arbitral
tribunal.”
Further, s. 15 (3) states-
“(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any hearings
previously held may be repeated at the discretion of the arbitral
tribunal.”
Thus, if an Arbitrator is substituted, then the previous proceedings
are not held to be void.

Under Article 12 (3) of the UNCITRAL Arbitration Rules (as revised in


2010), if a party’s challenge to the appointment of an Arbitrator fails,

11
Jimmy Construction Pvt. Ltd. V UoI, 2008 (2) Arb LR 591 (Bom)
12
Haresh Chinnubhai Shah v Rajesh Prabhakar Jhaveri, 2004 (1) Arb LR 536 (Bom)
13
The Observations of the Delhi High Court in Newton Engineering and Chemicals v IOL 2006
(4) Arb LR 257 (para 24) -
“To conclude, I have no hesitation in holding that there is no provision in the Act
empowering this Court to terminate the mandate of the Arbitrator who has entered upon the
reference and/or to substitute the same with an Arbitrator appointed by this Court. The necessary
corollary is that the challenge to the appointment of the Arbitrator must be raised by the
petitioner before the Arbitral Tribunal itself. If such challenge succeeds, the petitioner shall have
no cause for grievance left. If, however, the petitioner is unable to succeed before the Arbitral
Tribunal, it shall have no option except to participate in the arbitral proceedings and if aggrieved
by the arbitral award, to challenge the same in accordance with the provisions of Section 34 of
the Act.”
he could proceed to the Court at that stage, instead of waiting for a
final award. However, s. 13 (4), (5) of the Arbitration Act make a
distinct departure from the same. The Parliament, with a view to
prevent the dilatory tactics of an unsuccessful party, has compelled
it to await an award.1415 The inclusion of this provision is also a
departure by the legislature from the old Act of 1940, where the Court
was empowered to remove arbitrators or umpire.16

The International Chambers of Commerce has similar provision in its


2017 Arbitration rules, where Article 31 Provides for the time limit
for the final award.17 It should be noted that the ICC clearly refers to
the Final award, thus removing the ambiguity present in the 1996
Indian Act.

14
Harike Rice Mills v State of Punjab, 1997 (Sup) Arb LR 342
15
Assam Urban Water Supply and Sewerage Scheme v Subhash Projects and Marketing Ltd. AIR
2003 Gau 146
16
See S 11, Arbitration Act, 1940-
11. Power of Court to remove arbitrators or umpire in certain circumstances.
(1) The Court may, on the application of any party to reference, remove an arbitrator or umpire
who fails to use all reasonable dispatch in entering on and proceeding with the reference and
making an award.
(2) The Court may remove an arbitrator or umpire who has misconduct himself or the
Proceedings.
(3) Where an arbitrator or umpire is removed under this section, he shall not be entitled to
receive any remuneration in respect of his services.
(4) For the purposes of this section the expression “proceeding with the reference” includes, in
a case where reference to the umpire becomes necessary, giving notice of that fact to the parties
and to the umpire.

17
Article 31 Time Limit for the Final Award
1. The time limit within which the arbitral tribunal must render its final award is six
months. Such time limit shall start to run from the date of the last signature by the
arbitral tribunal or by the parties of the Terms of Reference or, in the case of application
of Article 23(3), the date of the notification to the arbitral tribunal by the Secretariat of
the approval of the Terms of Reference by the Court. The Court may fix a different time
limit based upon the procedural timetable established pursuant to Article 24(2).
2. The Court may extend the time limit pursuant to a reasoned request from the arbitral
tribunal or on its own initiative if it decides it is necessary to do so.
https://cdn.iccwbo.org/content/uploads/sites/3/2017/01/ICC-2017-Arbitration-and-2014-
Mediation-Rules-english-version.pdf.pdf
In case the first time period of one year runs out and one or both
parties do not consent to the extension of the proceedings, the
Arbitrator / Tribunal shall terminate the proceedings. This
termination cannot be challenged in anyway except by a petition
under section 34 of the Act. 1819

18
In The India Trading Company vs. Hindustan Petroleum Corporation Ltd. 2016 SCC Online Cal
479, a Division Bench of the Calcutta HC has held-
"13. There is a difference between a decision which puts an end to the arbitral proceedings and
a decision whereby the arbitrator withdraws from the proceedings. Where the arbitrator
withdraws from the proceedings, a substitute arbitrator may appointed in accordance with the
procedure, applicable to the appointment of the arbitrator who is replaced, but where the
arbitrator puts an end to the arbitral proceedings, the claimant cannot pursue his claim.
14. The decision of the arbitral tribunal to put an end to the proceedings is a final award which
can only be challenged by way of an application for settling aside under Section 34 Sub-section
(2) of the 1996 Act. Once the arbitral proceedings are terminated, the claimant cannot re-agitate
the same claim by initiation of fresh proceedings since the claim would be hit by principles of
constructive res judicata.”
19
Angelique International Limited vs SSJV Projects Private Limited & Anr, O.M.P. (T) (COMM.)
91/2017 & I.A. Nos.13595/2017, 14086/2017
Section. 29A (2)

The second subsection of section 29A states-


“If the award is made within a period of six months from the date
the arbitral tribunal enters upon the reference, the arbitral
tribunal shall be entitled to receive such amount of additional
fees as the parties may agree.”

The language used here is, “as the parties may agree” and not “as the
parties have agreed”. This implies that there need be no prior
agreement of the parties to the Arbitration with regard to the fee
payable to the arbitrators if the award is made within 6 months. The
parties are thus bound to, in concert, agree to the additional fee
payable.20

The Fourth Schedule to the Arbitration and Conciliation Act of 1996


may be of some benefit in determining the appropriate fee. S. 11 (13)
and (14) are relevant in this regard. They are as follows-

(13) An application made under this section for appointment of


an arbitrator or arbitrators shall be disposed of by the Supreme
Court or the High Court or the person or institution designated

20
The Arbitration (Amendment) Bill, 2018 proposes an amendment in sec. 11-
“(14) The arbitral institutions shall determine the fees of the arbitral tribunal and the manner of
its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule.”
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply
to international commercial arbitration and in arbitrations (other than international commercial
arbitration) where parties have agreed for determination of fees as per the rules of an arbitral
institution.’
by such Court, as the case may be, as expeditiously as possible
and an endeavour shall be made to dispose of the matter within
a period of sixty days from the date of service of notice on the
opposite party.
(14) For the purpose of determination of the fees of the arbitral
tribunal and them manner of its payment to the arbitral
tribunal, the High Court may frame such rules as may be
necessary, after taking into consideration the rates specified in
the Fourth Schedule.

Further, the Court has a certain amount of discretion with regard to


the costs of arbitration.21

The Legislature has proposed an amendment to the current scheme


by way of Section 3 of the Arbitration and Conciliation
(Amendment) Bill of 2018. It seeks to amend section 11 of the
Principal (1996) Act. After the amendment, the fees of the
Arbitrators shall be decided by the Arbitral Institutions subject to
the rates specified in the Fourth Schedule. Further, the amendment
removes International Commercial Arbitrations from the vice of the
Fourth Schedule. It also exempts parties that have agreed for
determination of fees as per the rules of an arbitral institution. 22

21
Section 39 (4)
“The Court may make such orders as it thinks fit respecting the costs of the arbitration where any
question arises respecting such costs and the arbitral award contains no sufficient provision
concerning them”.
22
S. 11 (14) as proposed in the 2018 Amendment bill-
“The arbitral institutions shall determine the fees of the arbitral tribunal and the manner of its
payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply
to international commercial arbitration and in arbitrations (other than international commercial
arbitration) where parties have agreed for determination of fees as per the rules of an arbitral
institution.”
[THE FOURTH SCHEDULE]23

Sum in dispute Model fee


Up to Rs. 5,00,000 Rs. 45,000
Above Rs. 5,00,000 and up to Rs. Rs. 45,000 plus 3.5 per cent. of
20,00,000 the claim amount over and
above Rs. 5,00,000
Above Rs. 20,00,000 and up to Rs. 97,500 plus 3 per cent. of the
Rs. 1,00,00,000 claim amount over and above Rs.
20,00,000
Above Rs. 1,00,00,000 and up to Rs. 3, 37,500 plus 1 per cent. of
Rs. 10,00,00,000 the claim amount over and
above Rs. 1,00,00,000
Above Rs. 10,00,00,000 and up Rs. 12, 37,500 plus 0.75 per cent.
to of the claim
Rs. 20,00,00,000 amount over and above Rs.
1,00,00,000
Above Rs. 20,00,00,000 Rs. 19, 87,500 plus 0.5 per cent.
of the claim amount over and

23

246thLaw Commission Report, Page 19, para 11, 12-


11.The model schedule of fees are based on the fee schedule set by the Delhi High Court
International Arbitration Centre, which are over 5 years old, and which have been suitably
revised. The schedule of fees would require regular updating, and must be reviewed every 3-4
years to ensure that they continue to stay realistic.
12. The Commission notes that International Commercial arbitrations involve foreign parties who
might have different values and standards for fees for arbitrators; similarly, institutional rules
might have their own schedule of fees; and in both cases greater deference must be accorded to
party autonomy. The Commission has, therefore, expressly restricted its recommendations in the
context of purely domestic, ad hoc, arbitrations.
above Rs. 20,00,00,000 with a
ceiling of Rs. 30,00,000
Section. 29A (3)

The third subsection of section 29A states-


“The parties may, by consent, extend the period specified in
sub-section (1) for making award for a further period not
exceeding six months.”

This sub-section implies that the parties need to reach a new


agreement in order to extend the time period for further Arbitration.
The use of the words “may, by consent, extend” implies the need for
a new agreement. Thus, there may not be a prior agreement, whether
by way of the main contract, or by way of the Arbitration Agreement.

This seems to be based on the proposal of the 176th Law Commission


Report.24

24
Proposed Section 29A (7)-
“The parties cannot by consent, extend the period beyond the period specified in sub-section
(1) and the maximum period referred to in sub-section (2) and save as otherwise provided
in the said sub-sections, any provision in an arbitration agreement whereby the arbitral
tribunal may further extend the time for making the award, shall be void and of no effect.”
Section. 29A (4)

The fourth subsection of section 29A states-


“(4) If the award is not made within the period specified in sub-
section (1) or the extended period specified under sub-section (3),
the mandate of the arbitrator(s) shall terminate unless the Court
has, either prior to or after the expiry of the period so specified,
extended the period:

Provided that while extending the period under this sub-section,


if the Court finds that the proceedings have been delayed for the
reasons attributable to the arbitral tribunal, then, it may order
reduction of fees of arbitrator(s) by not exceeding five per cent
for each month of such delay. 25”

It should be noted that the phrase used in this sub-section is “the


mandate of the arbitrator(s) shall terminate”. This does not mean
that the arbitration proceedings shall terminate. As has been
discussed above, there is a distinction between the termination of an
Arbitrator’s mandate and the termination of proceedings. The later
may only be done by an “order passed by the arbitrator” in terms of
s. 32 of the 1996 Act. If the mandate of the arbitrator terminates as

25
The Arbitration Amendment Bill, 2018 proposes the following amendment to s. 29A (4)
“in sub-section (4), after the proviso, the following provisos shall be inserted, namely:—
"Provided further that where an application under sub-section (5) is pending, the mandate of the
arbitrator shall continue till the disposal of the said application:
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is
reduced."
provided in the main provision of s. 29A (4), then it may be open to
the court to appoint new arbitrators. It is implied that the
Arbitrator(s) shall be substituted by the court if it is found that the
Arbitrator(s) has/have failed to act and adjudicate without undue
delay. This becomes amply clear upon an examination of sub-section
6 of section 29A.26
It should be noted that once an arbitrator’s mandate has been
terminated, he may be appointed again. There is no specific authority
for this proposition, however, the Supreme Court has decided a case
where one of the Parties challenged the appointment of the Arbitrator
on the ground that he had decided a previous dispute in a prior
Arbitration proceeding arising out of the same Contract, involving
identical issues. The ground taken by the Party, among others, was
that the Arbitrator has had “The arbitrator has previous involvement
27
in the case.” This is one of the grounds for challenging the
appointment of an Arbitrator.28 It is also a ground which “gives rise
to justifiable doubts as to the independence or impartiality of
arbitrators.”29 Another ground taken was that if arbitrator has been
appointed as an arbitrator on more than one occasion by a party, such
appointment falls afoul of Clauses 22 and 24 of the Fifth Schedule and

26
“(6) While extending the period referred to in sub-section (4), it shall be open to the Court to
substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the
arbitral proceedings shall continue from the stage already reached and on the basis of the evidence
and material already on record, and the arbitrator(s) appointed under this section shall be deemed
to have received the said evidence and material.”
27
Arbitration and Conciliation Act, 1996, Seventh Schedule, Clause 16
28
Section 12 (5) Notwithstanding any prior agreement to the contrary, any person whose
relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the
categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the
applicability of this sub-section by an express agreement in writing.]
29
See Clause 16, The Fifth Schedule, 1996 Act
therefore it is justified to doubt his impartiality. It is worth noting
that while the Fifth Schedule lays down certain situations where an
Arbitrator’s appointment may be challenged, it is not an absolute
rule. The Seventh Schedule, however, lays down grounds that render
a person “ineligible to be appointed as an arbitrator”.30 This must be
interpreted in light of Explanation 3 to the Seventh Schedule which
says-

“For the removal of doubts, it is clarified that it may be the


practice in certain specific kinds of arbitration, such as maritime
or commodities arbitration, to draw arbitrators from a small,
specialised pool. If in such fields it is the custom and practice for
parties frequently to appoint the same arbitrator in different
cases, this is a relevant fact to be taken into account while
applying the rules set out above.”
The Court drew a distinction between independence and
impartiality and held that a person may not be independent, but
may yet be impartial. The observations of the Supreme Court,
as made by Nariman J, in this regard are as follows-
“……………..every arbitrator shall be impartial and
independent of the parties at the time of accepting his/her
appointment. Doubts as to the above are only justifiable if
a reasonable third person having knowledge of the relevant
facts and circumstances would reach the conclusion that
there is a likelihood that the arbitrator may be influenced

30
See ibid, 22
by factors other than the merits of the case in reaching his
or her decision. This test requires taking a broad common-
sensical approach to the items stated in the Fifth and
Seventh Schedules. This approach would, therefore, require
a fair construction of the words used therein, neither
tending to enlarge or restrict them unduly……….”31

“…………In this context, it is important to refer to the IBA


Guidelines, which are the genesis of the items contained in
the Seventh Schedule. Under the waivable Red List of the
IBA Guidelines, para 2.1.2 states:
“The Arbitrator had a prior involvement in the
dispute.”
24. On reading the aforesaid guideline and reading the
heading which appears with Item 16, namely “Relationship
of the arbitrator to the dispute”, it is obvious that the
arbitrator has to have a previous involvement in the very
dispute contained in the present arbitration.”32
“It has also been argued by learned counsel appearing on behalf
of the respondent that the expression “the arbitrator” in Item 16
cannot possibly mean “the arbitrator” acting as an arbitrator,
but must mean that the proposed arbitrator is a person who has
had previous involvement in the case in some other avatar.
According to us, this is a sound argument as “the arbitrator”

31
HRD Corporation v GAIL India Ltd. (Civil Appeal no 11127 of 2017),
32
Ibid, Para 23, 24
refers to the proposed arbitrator. This becomes clear, when
contrasted with Items 22 and 24, where the arbitrator must have
served “as arbitrator” before he can be disqualified. Obviously,
Item 16 refers to previous involvement in an advisory or other
capacity in the very dispute, but not as arbitrator. 33

The words “termination of mandate” have been used elsewhere in the


1996 Act. The provisions of Section 15 are relevant here. It reads as
follows-
“15. Termination of mandate and substitution of arbitrator.—
(1) In addition to the circumstances referred to in section
13 or section 14, the mandate of an arbitrator shall
terminate—
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed according to the
rules that were applicable to the appointment of the
arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any hearings
previously held may be repeated at the discretion of the
arbitral tribunal.

33
Ibid, Para 16
(4) Unless otherwise agreed by the parties, an order or
ruling of the arbitral tribunal made prior to the
replacement of an arbitrator under this section shall not be
invalid solely because there has been a change in the
composition of the arbitral tribunal”

A combined reading of Sections 15(2) and 29A (4) tells us that if the
mandate of the Arbitrators terminates, then the rules applicable to
the appointment of the initial arbitrator shall be applicable. This, in
turn, means that if the Parties had decided upon the selection
criteria34 and procedure for Arbitrators, such rules and procedures
shall be followed here again. If there is no prior agreement, or the
parties do not agree again as to the procedure, then –

1. In an arbitration with three arbitrators, each party shall


appoint one arbitrator, and the two appointed arbitrators shall
appoint the third arbitrator who shall act as the presiding
arbitrator.35

2. If the above appointment procedure applies and—


a. a party fails to appoint an arbitrator within thirty days from
the receipt of a request to do so from the other party; or

34
Section 11 (2) Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator or arbitrators.
35
Section 11 (3)
b. the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date of their
appointment,
the appointment shall be made, upon request of a party, by
[the Supreme Court or, as the case may be, the High Court or
any person or institution designated by such Court];36

3. Failing any agreement referred to (1), in an arbitration with a


sole arbitrator, if the parties fail to agree on the arbitrator
within thirty days from receipt of a request by one party from
the other party to so agree the appointment shall be made, upon
request of a party, by [the Supreme Court or, as the case may
be, the High Court or any person or institution designated by
such Court].

4. Where, under an appointment procedure agreed upon by the


parties,—

a. a party fails to act as required under that procedure; or


b. the parties, or the two appointed arbitrators, fail to reach
an agreement expected of them under that procedure; or

c. a person, including an institution, fails to perform any


function entrusted to him or it under that procedure,

36
Section 11 (4)
a party may request [the Supreme Court or, as the case may be,
the High Court or any person or institution designated by such
Court] to take the necessary measure, unless the agreement on
the appointment procedure provides other means for securing
the appointment.

The power of the Court to substitute Arbitrators is in addition to, and


not in derogation of, its power to deduct fees. The power of the Court
to deduct fee can be quite severe. Although there is a limit of 5% for
every month, there can be situations where the delay is for multiple
months. For example, the maximum deduction allowed for a delay of
6 months is 30% of the total fee. In such a case, the cumulative
deductions can be quite great. It is also worth observing that the fee
paid to an Arbitrator may be on more than one basis. It may be fixed,
per month, or per session. The imposition of a high deduction can be
especially severe and harsh where the Arbitrator has agreed to a fixed
fee. In such a situation, it is in his interest to make an award as
quickly as possible. It is hoped that the Court, while imposing a
deduction, shall both give a hearing to the Arbitrator as to the
quantum of deduction, as well as consider the basis upon which his
fee is paid. This is certainly the current position of the law, which has
also been made clear by the Legislature. The 2018 Bill includes an
amendment which will add a Proviso to Section 29A (4) which
specifies the right of the Arbitrator to be heard by the court before
his fee is reduced.37

There is, however, a likely and unusual contingency which might


arise. The Fourth Schedule specifies the Arbitrator’s fee based upon
the “sum in dispute”. This term is vague. Often times, the exact
amount in dispute is in question. It can be a tedious and complicated
task, for example, to determine the amount of loss of future profits
suffered. The determination of interest (the rate, as well as the
quantum) is also very commonly an issue in commercial Arbitrations.
Parties also usually claim the costs of Arbitration and/or any
associated litigation and other legal expenses. Further, in
commercial Arbitrations, for every claim, there is almost always a
counter claim. Thus, even if we assume that the Legislature intended
“sum in dispute” to mean the amount claimed by the party, then what
happens when the Respondent files a counter-claim? Do we take the
“sum in dispute” to mean the sum total monetary value of both the
claim, as well as the counter-claim?

It is worth noting that this provision empowers the court to deduct


fees, and fees only. Black’s Law Dictionary (9th Edn.) defines fee as

37
Section 6, Arbitration and Conciliation (Amendment) Bill, 2018-
“In section 29A of the principal Act,—
………………………..
(b) in sub-section (4), after the proviso, the following provisos shall be inserted,
namely:—
…………………………..
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is
reduced.”
“A charge for labor or services, esp. professional services”38. This view
is supported by the fact that section 31 (8) of the 1996 Act uses the
words “costs”, as well as the word “fees”. Costs of Arbitration
includes the Arbitrator’s fees.39 Article 40, Clause 2 also defines fees
as a sub-set of “costs”.40The Court cannot impose such a deduction,
that it also eats away at the Arbitrators out of pocket expenses and
costs. For example, if the Arbitration is conducted by an Institutional
Arbitrator which also charges rent to let out the office of the
Arbitrators, the court cannot deduct such amount. There are many
expenses associated with Arbitration apart from the fee simpliciter
given to the arbitrator. The Indian Institute of Arbitration and
Mediation has published its Fee Schedule and this may be referenced
here.
Before the deduction of fee, the Court must follow the Principles of
Natural Justice. One of the principles is the rule of audi alterm

38
Page 718
39
Section 31 (8), 1996 Act-
“The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.]
Explanation.—For the purpose of clause (a), “costs” means reasonable costs relating to—
(I) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the arbitration, and
(iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral
award.”
40
Article 40 (2), UNCITRAL Arbitration Rules, 2010-
2. The term “costs” includes only:
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by
the tribunal itself in accordance with article 41;
(b) The reasonable travel and other expenses incurred by the arbitrators;
(c) The reasonable costs of expert advice and of other assistance required by the arbitral tribunal;
(d) The reasonable travel and other expenses of witnesses to the extent such expenses are approved
by the arbitral tribunal;
(e) The legal and other costs incurred by the parties in relation to the arbitration to the extent that
the arbitral tribunal determines that the amount of such costs is reasonable;
(f) Any fees and expenses of the appointing authority as well as the fees and expenses of the
Secretary-General of the PCA.
paterm, which means “hear the other side”. The Court is bound to
give a hearing to the Arbitrator before passing any adverse order
against him, whether for the deduction of fee, or his substitution.
This adds to the amount of time consumed by the judicial
intervention.

It is noteworthy that most Arbitrators, especially those appointed by


the Court, are retired Judges, who are well versed with the law. If
necessary, the Court may also appoint subject matter experts.
Further, the 1996 Act allows the parties to decide the criteria for the
appointment of Arbitrators. This power also includes the ability to
specify the qualifications of the Arbitrators.41 As such, Arbitrators are
not likely to be incompetent. Thus, the penalties by way of deduction
of fee and/or substation hangs upon an Arbitrator’s head like the
sword of Damocles. While the 1996 Act, by virtue of the 2015
Amendment Act does contain such provisions for penalties and time
restrictions, it did not contain any such provisions when it was
originally enacted. This was a departure from the 1940 Act which, by
virtue of an “implied term” included a time limit of four months from
the date of reference. It seems that the Legislature regretted its
decision to give Arbitrators and Parties a free hand and in its wisdom,
imposed these provisions. Perhaps the Legislature was of the view
that Arbitrations were concluded in a much more rapid manner under

141 Section 11 (8) The Supreme Court or, as the case may be, the High Court or the person or
institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in
writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due
regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties;
the 1940 Act. It may be true that Arbitrations may have been wrapped
up faster in earlier times, but correlation does not equate to
causation. Arbitrations today are far more common that Court
litigations, especially in Commercial Contracts where complex trade
deals are involved. In such deals, the Contracts alone often run into
hundreds, if not thousands of pages. This is a clear indicator of the
increase in complexity of today’s commercial disputes. When such
complicated matters are to be adjudicated, it is only natural for the
proceedings to take their time. In order to do complete justice, the
Arbitrators must pay attention to all the materials and arguments
advanced by the parties. It is not reasonable to assume that the
Arbitrators are not working expeditiously, the relevant
circumstances must be taken into context.

The 1996 Act remains silent as to what happens when the time has
run out while an application for extension is pending with the court.
The 176th Law Commission in its Report, suggested that in such a
situation, Arbitration proceedings should be allowed to continue.4243
Further, the Commission was of the opinion that if the proceedings
have not been concluded even after an extension by the Court, they
should be allowed to continue.44

42
Page 124., Para 2.21.3
43
Proposed Section 29A (4)-
“Pending consideration of the application for extension of time before the Court under sub section
(3), the arbitration proceedings shall continue before the arbitral tribunal and the Court shall not
grant any stay of the arbitral proceeding”
44
176th Report, page 125, Para 2.21.5- there is no point in terminating the arbitration
proceedings. We propose it as they should be continued till award is passed. Such a termination
may indeed result in waste of time and money for the parties after lot of evidence is led. In fact,
if the proceedings were to terminate and the claimant is to file a separate suit, it will even become
necessary to exclude the period spent in arbitration proceedings, if he was not at fault, by
It is not explicitly stated in the Act what would happen if no party
applies to the court to extend time. The 176th Commission’s view was
that In order that there is no further delay, after the period of initial
one year and the further period agreed to by the is over, the
arbitration proceedings will stand suspended and will get revived as
soon as any party to the proceedings files an application in the Court
for extension of time. In case none of the parties files an application,
even then the arbitral tribunal may seek an extension from the
Court.45 The Arbitration and Conciliation (Amendment) Bill of 2018
makes a very welcome improvement to the existing law by stating
that while the application for an extension is pending decision by the
Court, the Arbitration proceedings shall continue till the application
is disposed of by the Court.46

amending sec. 43(5) to cover such a situation. But the Commission is of the view that there is a
better solution to the problem
45
This suggestion was formulated by the Commission in its proposed version of s. 29A (3)-
“If the award is not made within the period specified in sub-section (1) and the period
agreed to by the parties under sub-section (2), the arbitral proceedings shall, subject to the
provisions of sub-sections (4) to (6), stand suspended until an application for extension is
made to the Court by any party to the arbitration, or where none of the parties makes an
application as foresaid, until such an application is made by the arbitral tribunal.
46 Section 6 of the Arbitration and Conciliation (Amendment) Bill, 2018-
“In section 29A of the principal Act,—
……………………..
(b) in sub-section (4), after the proviso, the following provisos shall be inserted,
namely:—
"Provided further that where an application under sub-section (5) is pending, the mandate of the
arbitrator shall continue till the disposal of the said application:”
Section. 29A (5)

The fifth subsection of section 29A states-


“(5) The extension of period referred to in sub-section (4) may be
on the application of any of the parties and may be granted only
for sufficient cause and on such terms and conditions as may be
imposed by the Court.”

Looking at the provision, it seems clear that the party applying for
extension must show that an extension of time should be granted.
The burden of proof is upon the applicant. “Party” has been defined
in the Act as “party” means a party to an arbitration agreement.
Therefore, the right to apply to a Court for the extension of time is
available only to the parties to the disputes, and not the Arbitrators.
It should be noted that the Law Commission, in its 176th Report stated
that “if the parties do not apply, the arbitrators can also apply for the
same.”47

It should be noted that the phrases “may be granted” and “only for
sufficient cause” has also been used here. “Sufficient cause” has also
been used in section 5 of the Limitation Act.48 Thus, this provision

47
Page 17, 176th Law Commission Report
48
5. Extension of prescribed period in certain cases.—Any appeal or any application, other than
an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of
1908), may be admitted after the prescribed period if the appellant or the applicant satisfies the
court that he had sufficient cause for not preferring the appeal or making the application within
such period.
gives the Court a wide amount of discretion and places a heavy
burden upon the applicant. The use of the word “only” ensures that
the court can grant an extension under a limited set of circumstances.
It is possible that lengthy proceedings in courts may ensue in order
to convince the Court of the validity and existence of “sufficient
cause”. The parties may be faced with the need to lead a large amount
of evidence and arguments in order to get an extension. As with other
previously discussed provisions in the Act which necessitate judicial
intervention, there is a specific requirement given in this sub-section
for the courts to decide the application in an expeditious manner, as
well as a recommended disposal time (60 days from the date of
service of notice on the opposite party).

This requirement for a Court’s approval seems rather contrary to the


objectives and purpose of the Arbitration and Conciliation Act. The
entire point of this Act was to provide for an alternative dispute
resolution mechanism whereby the parties had access to fast and
effective remedies and the over-burdened dockets of the courts could
be reduced. The Law Commission in its 76th Report, which
recommended certain amendments, including a proviso to be
inserted in section 28 of the Act of 1940 forbidding, an extension
beyond one year, in respect of the time for making the award except
for special and adequate reasons to be recorded.

Explanation.—The fact that the appellant or the applicant was missed by any order, practice or
judgment of the High Court in ascertaining or computing the prescribed period may be sufficient
cause within the meaning of this section.
There is also an unintended consequence of this sub-section. In order
to adjudicate upon the sufficiency of cause for extension of time, one
of the most common reasons may be the inherent complexity of the
dispute or the technical nature of the underlying contract, or even the
time taken by an expert to make his observations and give his
evidence. All of these reasons ensure that the parties must place on
the Court’s record a lot of material which may otherwise be highly
confidential. For example, a lot of joint-ventures or technology
transfer agreements involve intellectual property and trade secrets
which need to be protected. The confidentiality inherent in
Arbitration proceedings is not present in courts.

It is worth noting that the above provision does not specify the
amount of additional time the Court can grant to the Arbitrator. As
such, it is entirely up to the Courts discretion. While the76th report of
the Law Commission recommended for fixing maxim period for the
court to extend time, the 176th Commission wanted to leave it to the
Court’s discretion. Further, the Court has the ability to impose terms
and conditions. It is very easy to foresee that the court may order an
extension by a relatively short amount of time, say, one month, and
then force the parties to come back to it. Thus, the Court will have a
sort of supervisory jurisdiction over and above the kind envisioned
by the 1996 Act. This is quite clearly against the intention of the
Legislature, as evidenced under section 5 of the Act (for which, there
is no analogous provision in the 1940 Act).
Art.24 (1) of the International Chambers of Commerce Rules, 1998
fixed a period of six months from the date of signature or approval
by the International Court of Arbitration of the terms of reference.
However, the International Court of Arbitration may “pursuant to a
reasoned request from the arbitrator or if need be on its own
initiative, extend the time limit if it decides, it is necessary to do so
(Art. 24(2). Where an excessive delay is attributable to the
arbitrators, the International Court of Arbitration may resort to the
provisions of the Rules concerning the replacement of arbitrators,
which apply where the arbitrators fail to perform their duties within
the stipulated time limits.49

The corresponding provision in the English Arbitration Act is as


section 50 which states-
“Extension of time for making award.
(1) Where the time for making an award is limited by or in
pursuance of the arbitration agreement, then, unless otherwise
agreed by the parties, the court may in accordance with the
following provisions by order extend that time.
(2) An application for an order under this section may be
made—
(a) by the tribunal (upon notice to the parties), or
(b) by any party to the proceedings (upon notice to the
tribunal and the other parties), but only after exhausting
any available arbitral process for obtaining an extension
of time.

49
See Art. 12 (2) of the ICC Rules, 1998
(3) The court shall only make an order if satisfied that a
substantial injustice would otherwise be done.
(4) The court may extend the time for such period and on such
terms as it thinks fit, and may do so whether or not the time
previously fixed (by or under the agreement or by a previous
order) has expired.
(5) The leave of the court is required for any appeal from a
decision of the court under this section”

Section 79 of the English Act is also relevant in this regard.50

The 176th Law Commission Report laid down the following


things to take into account while deciding upon the issue of
time extension-
(a) the extent of work already done;
(b) the reasons for delay;
(c) the conduct of the parties or of any person representing the
parties;

50
79 Power of court to extend time limits relating to arbitral proceedings.
(1) Unless the parties otherwise agree, the court may by order extend any time limit agreed
by them in relation to any matter relating to the arbitral proceedings or specified in any
provision of this Part having effect in default of such agreement. This section does not
apply to a time limit to which section 12 applies (power of court to extend time for
beginning arbitral proceedings, &c.).
(2) An application for an order may be made—
a. by any party to the arbitral proceedings (upon notice to the other parties and to
the tribunal), or
b. by the arbitral tribunal (upon notice to the parties).
(3) The court shall not exercise its power to extend a time limit unless it is satisfied—
a. that any available recourse to the tribunal, or to any arbitral or other institution
or person vested by the parties with power in that regard, has first been
exhausted, and
b. that a substantial injustice would otherwise be done.
(4) The court’s power under this section may be exercised whether or not the time has
already expired.
(5) An order under this section may be made on such terms as the court thinks fit.
(6) The leave of the court is required for any appeal from a decision of the court under this
section.
(d) the manner in which proceedings were conducted by the
arbitral tribunal;
(e) the further work involved;
(f) the amount of money already spent by the parties towards
fee and expenses of arbitration;
(g) any other relevant circumstances,
Section. 29A (6)

The sixth subsection of section 29A states-


“(6) While extending the period referred to in sub-section (4), it
shall be open to the Court to substitute one or all of the
arbitrators and if one or all of the arbitrators are substituted, the
arbitral proceedings shall continue from the stage already
reached and on the basis of the evidence and material already on
record, and the arbitrator(s) appointed under this section shall
be deemed to have received the said evidence and material.”

As noted earlier, in addition to sanctions by way of fee deduction,


the supervising court can substitute the Arbitrator(s). However,
this can cause additional delays. While the Legislature has urged the
Courts not to dawdle while appointing substitutes, it will not be
instantaneous. The Courts must appoint substitute Arbitrators
within 60 days “from the date of service of notice to the opposite
party.” 51 The duration is similar to when the Arbitrator is first
appointed.52 It is worth noting that while the initial appointment
may be done only by the Supreme Court/High Court, a substitute
may be appointed by the Court having supervisory jurisdiction. As
such, depending upon which court has jurisdiction, the parties may
be able to approach a district court/Principal Civil Court or Court of

51
Section 29A (9)-
“An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as
possible and endeavour shall be made to dispose of the matter within a period of sixty days from
the date of service of notice on the opposite party.”
52
Section. 11 (13)-” An application made under this section for appointment of an arbitrator or
arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution
designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall
be made to dispose of the matter within a period of sixty days from the date of service of notice on
the opposite party.”
Small Causes as well, which may result in a faster appointment. 53
This seems to be a trend since the 1996 Act, as it was originally
drafted, only empowered the Chief Justice of the High Court /
Supreme Court (or his Designee) to make an initial appointment.

It is worth noting that the Act of 1940 also empowered the Court to
substitute Arbitrators when they were the cause of undue delay.
This was to be done upon an application made by a party. Thus, a
Party could initiate subsequent substitution of an Arbitrator, even if
the appointment was valid. Under section 11 (1) of the 1940 Act, it
was stated-
“The Court may, on the application of any party to a reference,
remove an arbitrator or umpire who fails to use all reasonable
dispatch in entering on and proceeding with the reference and
making an award.”
Further, if the arbitrator was removed, he would not have been
entitled to any remuneration.54 Upon such removal, any party could
apply to have the vacant Arbitrator’s post filled.55

53
Section 2 (e)-
“Court” means—
(I) in the case of an arbitration other than international commercial arbitration, the principal Civil
Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of
the arbitration if the same had been the subject-matter of a suit, but does not include any Civil
Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of
the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court
having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]
54
Section 11 (3) “Where an arbitrator or umpire is removed under this section, he shall not be
entitled to receive any remuneration in respect of his services”
55
Section 12 (1) Where the Court removes an umpire who has not entered on the reference or one
or more arbitrators (not being all the arbitrators), the Court may, on the application of any party
to the arbitration agreement, appoint persons to fill the vacancies.
(2) Where the authority of an arbitrator or arbitrators or an umpire is revoked by leave of the
Court, or where the Court removes an umpire who has entered on the reference or a sole arbitrator
or all the arbitrators, the Court may, on the application of any party to the arbitration agreement,
either-
(a) appoint a person to act as sole arbitrator in the place of the person or persons displaced, or
(b) order that the arbitration agreement shall cease to have effect with respect to the difference
referred.
Section. 29A (7)

The seventh subsection of section 29A states-


“(7) In the event of arbitrator(s) being appointed under this
section, the arbitral tribunal thus reconstituted shall be deemed
to be in continuation of the previously appointed arbitral
tribunal.”

This provision ensures that no additional time is wasted by restarting


the proceedings de novo. This is in contradistinction to section 15 (3)
of the 1996 Act which stated “(3) Unless otherwise agreed by the
parties, where an arbitrator is replaced under sub-section (2), any
hearings previously held may be repeated at the discretion of the
arbitral tribunal.” The fact that the reconstituted tribunal is deemed
to be in continuation of the previously appointed tribunal means that
any orders passed by the previous tribunal are not rendered
ineffective due to their substitution.56 This shall hold even if the
parties agree otherwise.

According to Section 27 (4) of the English Arbitration Act, 1996,”The


tribunal (when reconstituted) shall determine whether and if so to
what extent the previous proceedings should stand. This does not

56
This is similar to Section 15 (4) –“Unless otherwise agreed by the parties, an order or ruling of
the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be
invalid solely because there has been a change in the composition of the arbitral tribunal.”
affect any right of a party to challenge those proceedings on any
ground which had arisen before the arbitrator ceased to hold office “
Section. 29A (8)

The eighth subsection of section 29A states-


“(8) It shall be open to the Court to impose actual or exemplary
costs upon any of the parties under this section.“

This sub-section is incorporated to deter unscrupulous parties,


especially those who are only interested in delaying the cause of
justice. The use of the phrase “any of the parties under this section”
is ambiguous. Since this section also refers to Arbitrators, they may
be included in the ambit of this penal provision. As stated earlier,
the principles of Natural Justice in general, and the rule of audi
alterem patrm are to be followed and before imposing any costs, the
Court must give a hearing to the party likely to be effected.
Section. 29A (9)

The ninth subsection of section 29A states-


“(9) An application filed under sub-section (5) shall be disposed
of by the Court as expeditiously as possible and endeavour shall
be made to dispose of the matter within a period of sixty days
from the date of service of notice on the opposite party.”

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