The Arbitration and Conciliation Act 1996 contains a provision for effective arbitration proceedings in India. To reduce delays in arbitration, Section 29A was brought in by the Arbitration and Conciliation (Amendment) Act of 2015, which imposed a time limit for making an arbitral award. Legislators updated the provision in 2019 to make arbitration more efficient and effective for dispute resolution purposes.
Detailed Breakdown of Section 29A of Arbitration and Conciliation Act
According to Section 29A, there are defined durations for arbitration proceedings to prevent arbitration from developing into a drawn-out legal process. Section 29A is applicable in domestic arbitrations but leaves scope for international commercial arbitration.
Sub-Section (1): Time Limit for Making an Arbitral Award
This sub-section sets the time limits for completing arbitration proceedings:
Domestic Arbitration (Non-International Commercial Arbitration)
The arbitral tribunal must make the award within 12 months from the completion of pleadings under Section 23(4).
This ensures that arbitration proceedings do not drag on indefinitely.
International Commercial Arbitration
No strict 12-month deadline is imposed.
However, the arbitral tribunal must try to make the award as expeditiously as possible.
The court has an obligation to extinguish cases within twelve months, starting from when all parties have submitted to court.
Sub-Section (2): Incentive for Faster Resolution
Where the tribunal makes the award within six months from the date it enters upon the reference, the tribunal is entitled to extra fees.
The extra charges should be agreed upon by the parties.
This clause serves as an incentive for arbitrators to finalize proceedings quickly.
Sub-Section (3): Extension by Consent of Parties
The twelve-month timeframe of subsection (1) extends through mutual consent between the parties.
The extension period can reach six months, which is its maximum duration.
A court must grant any additional period beyond the six-month extension.
Sub-Section (4): Termination of Arbitrator's Mandate if Time Expires
If the award is not made within the prescribed time (12 months + 6 months if extended by mutual consent), the arbitrator's mandate automatically terminates.
However, the court can extend the time period if an application is made.
If the delay is caused by the arbitrator, the court can reduce the arbitrator's fees by 5% per month.
The arbitrator must be given a chance to be heard before any fee reduction.
Sub-Section (5): Extension by Court
Any party can apply to the court to extend the time period.
The court will grant an extension only if there is a sufficient cause.
The court may impose conditions while granting an extension.
Sub-Section (6): Court's Power to Replace Arbitrators
Where the court extends the period under sub-section (5), it may substitute one or more of the arbitrators.
If a fresh arbitrator is appointed, the proceedings resume where they were stopped.
The new arbitrator is considered to have information about past evidence and documents.
Sub-Section (7): Continuation of Arbitral Tribunal
If an arbitrator is replaced, the new tribunal is considered a continuation of the previous one.
This avoids the need to restart proceedings from the beginning.
Sub-Section (8): Imposition of Costs for Delays
The court can levy actual or exemplary cost penalties when a party is responsible for delaying the proceedings.
Sub-Section (9): Expedited Disposal of Applications
Any request for an extension of time (under sub-section 5) should be dealt with expeditiously.
The court has to attempt to rule on the issue within 60 days of notice given to the other party.
Also, Learn How to Become an Arbitrator in India
Comparison of Arbitration Timelines Before and After Section 29A
Prior to the enactment of Section 29A, Indian arbitration proceedings used to get delayed indefinitely because there were no rigid timelines. The 2015 amendment improved arbitration through time limits, which helped speed up dispute resolution. The timeline changes in arbitration can be traced through the following sequence:
Before Section 29A
Arbitration could drag on for years without any time limit.
Courts had to intervene frequently to push proceedings forward.
After Section 29A
A strict 12-month deadline ensures faster resolution.
Delays are penalized, discouraging arbitrators from dragging proceedings.
Court supervision is structured with clear rules on extensions.
Amendments to Section 29A
The 2019 Amendment made significant reforms to Section 29A in order to bring arbitration timelines in accordance with international best practices. The major changes include:
1. International Commercial Arbitration Exempted
India now favors arbitration because international arbitrations are not subject to a 12-month deadline.
International disputes can be managed with greater flexibility due to the abolition of the 12-month deadline limit.
2. Timeline Begins from the Completion of Pleadings
Earlier, the countdown started from the appointment date of the arbitrators.
Subsequent to the amendment, the 12-month period starts on the date pleadings are filed, which offers a fairer period.
3. Court's Discretion to Impose Penalties on Arbitrators
If arbitrators delay unnecessarily, courts can deduct their fees when issuing an extension.
This helps ensure that arbitrators do not cause delays for pecuniary purposes.
Also, Get to Know How to Draft an Arbitration Agreement?
Case Laws related to Section 29A of Arbitration and Conciliation Act
Section 29A of Arbitration and Conciliation Act 1996 provided a statutory time limit for the finalization of arbitration proceedings in India. The provision has been subject to different judicial interpretations, especially about the extension of the mandate of the arbitral tribunal. Some of the key case laws that explain the operation and challenges of Section 29A are as follows:
1. Rohan Builders (India) Private Limited v. Berger Paints India Limited
Facts: The arbitration proceedings continued longer than the specified period according to Section 29A regulations. There was no request from the parties to extend the time period before their initial mandate ran out. Subsequently, an application was filed under Section 29A(4) to extend the tribunal's mandate after the prescribed period had lapsed.
Issues:
Whether an application for an extension of the arbitral tribunal's mandate under Section 29A(4) is maintainable after the specified period expires.
Judgment: The Calcutta High Court ruled that Section 29A(4) should be construed strictly. The court underscored that the word "terminate" signifies an absolute conclusion to the mandate of the tribunal in case the award is not made within the said or extended time. Therefore, the court expressed the view that extension applications submitted after the lapse of the mandate are not maintainable, emphasizing the legislative intention to provide for expedition in arbitration proceedings.
2. Wadia Techno-Engineering Services Ltd. v. Director General of Married Accommodation Project
Facts: The arbitration proceedings in this case had reached the stage of final arguments, but the tribunal's mandate had expired as per the time limits set in Section 29A. An application for extension was filed after the expiration of the mandate.
Issues:
Can the court grant an extension of the arbitral tribunal's mandate under Section 29A(4) after the original period has expired, especially when the proceedings are at an advanced stage?
Judgment: The Delhi High Court interpreted Section 29A(4) through its stated objectives to validate late extension requests. The court analyzed the far-progressed arbitration stage before it decided that rejecting the extension would result in duplicate work, which would create additional expenses. The court demonstrated a practical standpoint in its decision through careful judgment among pressing requirements for speediness and intricate arbitration processes occurring in reality.
Summing Up
Section 29A of Arbitration and Conciliation Act, 1996 acts as a major instrument to achieve quick arbitration dispute resolution in India. The provision creates a strict deadline system to block delay, yet it maintains flexibility when handling complicated or multinational arbitration cases. India's arbitration system improved its business attractiveness through the 2019 process simplifications, which expedited the arbitration process.
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Section 29A of Arbitration and Conciliation Act, 1996: FAQs
Q1. What is Section 29A of Arbitration and Conciliation Act, 1996, about?
Section 29A provides a time limit of 12 months for arbitral tribunals to make an award in domestic arbitration, which can be extended by 6 months with the consent of the parties.
Q2. Is there any time limit for international arbitration under Section 29A?
No, since the 2019 amendment, international commercial arbitration is not subject to the 12-month time limit, which gives room for flexibility.
Q3. What is the consequence of exceeding the time limit in arbitration?
If the award is not rendered within 18 months (12+6 months extension), a court order must be sought for further extension, and the mandate of the arbitrator may expire.
Q4. Can the courts extend the time limit for arbitration?
Yes, the courts can extend the period if warranted and can also lower arbitrators' fees in case of delay due to their inaction.
Q5. Why is Section 29A significant in arbitration?
The process helps resolve disputes expeditiously while boosting market stability through arbiter accountability to provide arbitration systems that perform efficiently in India.
