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TIME LIMITATION IN ARBITRATION IN THE WAKE OF COVID - 19

Updated: Jun 16

WRITTEN BY: AAKANSHA LATALA & ISHIKA AGARWAL, Manipal University, School of Law

INTRODUCTION

The COVID -19 pandemic has brought a lot of uncertainty to the entire working of country be it like government sector business, educational institutions including judicial work ( except matters of extreme emergency ) many areas of our lives. In fact the catastrophe ramification resulting from the virus made the prime minister declare complete lockdown of country . The court system has undertaken a palpable effort to quickly react and adapt to what now what seems to be a state of transition , and could possibly transform the legal norm into a new one . Every turning point in the history has brought institutional reform , and most of the time for the better . Interesting , the world of arbitration is quickly adapting to COVID – 19 ,this is because arbitration adapts to its user needs , allowing for flexible options , and remaining open to creative solutions .Courts are currently gasping for fresh air in to ensure that the legal system upholds one of our most fundamental rights , access to justice .

Though impossibility of performance is totally different arena governed by section – 56 of the contract act , 1872 but surely the same would also definitely impact the timelines within which the arbitral proceeding are to be completed by making the arbitral award .


SECTION – 29 a- A OF THE ARBITRATION AND CONCILIATION ACT , 1996 was introduced by virtue of the arbitration and conciliation ( amendment ) act , 2015 w.e.f. 23 - 10 – 2015 providing for time – limit foe arbitral award . This section further modified by the virtue of 2019 amendment act w.e.f. 9-08-2019 . Under the 2015 amendment , section 29 -B was also introduced which provides for conducting an arbitral under fast – track procedure . The said provision are as under –


29-A TIME – LIMIT FOR ARBITAL AWARD[1] (1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleading under sub – section(4) of section – 23 .

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

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

(4) If the award is not made with the period specified in sub – section (1) or the extended period specified in the sun – section (3) , the mandate of the arbitrator (s) shall terminate unless the court has , either prior to or after the expiry to the period specified , extended the period :

Provided that while extending the period under sub – section , if the court finds that the proceeding have been delayed fir the reasons attributed to the arbitral tribunal , then it may order reduction of fees of arbitrator (s) by not exceeding five percent for each month of such delay :

[2][ Provided further that where an application under sub – section ( 5) is pending , the mandate of the arbitrator shall continue till the disposal of then said application .

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced .]

(5) The extension of period refereed to in sub – section (4) may be on application of any of the parties and may be granted only for sufficient cause and on such terms and condition as may be imposed by the court .

(6) While exceeding the period refereed in sub – section (4) it shall be open to the court to substitute one or all of the arbitrators and if one and all of the arbitrators are substituted , the arbitral proceeding shall be continue from the stage already reached and on the basis of the evidence and material already on record , and the arbitrator (s) appointed under the section shall be deemed to have received the said evidence and material .

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

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

(9) An application filed under sub – section (5) shall be disposed of by the court as expeditiously as possible and endeavor 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 .


SECTION – 29 B FAST TRACK PROCEDURE

(1) Notwithstanding anything contained in this act , the parties to the arbitration agreement , may at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub – section (3) .

(2) The parties to the arbitration agreement while agreeing for resolution of dispute by fast track procedure may agree that arbitral tribunal shall consist of sole arbitrator who shall be chosen by the parties .

(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceeding under sub – section (1) :

(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings , documents and submission filed by the parties without any oral hearing ,

(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them ,

(c) An oral hearing may be hold only , if all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarification of certain issues ,

(d) The arbitral tribunal may dispense with any technical formalities , if an oral hearing is held , and adopt such procedure as deemed appropriate for expeditious disposal of the case .

(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference .

(5) If the award is not is not made within the period specified in sub – section(4) the provision of sub – section (3) to (9) of section of section 29 – A shall apply to the proceedings

(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties .

The purpose behind of the foresaid provision was to make arbitrators hear and decide matters expeditiously and within a reasonable period of time .

The scheme of section – 29 is that the arbitrator is bound to render an award within 12 months , which can be extended by 6 months i.e. up to 18 months with the consent of the periods .

However , if the award is not delivered even in the extended time , the mandate of the tribunal stands terminated .

However the courts are empowered to extend the time- limit either prior to after the expiry of the extended period . But the courts are to be given justification and proof of sufficient cause for such delay .

In case , the courts finds the proceeding have been delayed for the reasons attributed to the arbitrator , it may order for the reduction of the fees of the arbitrators and may also substitute arbitrators (s) by terminating the mandate of the previous arbitrator(S) . Thus it has become imperative for all that arbitration proceedings are culminated in a time – bound manner .


HOW COVID – 19 AFFECT THE ARBITRATION ?

However , because of COVID -19 pandemic the supreme court suo motu took up the issue of extension of limitation vide order dated [3] 23-03-2020 directing as under on the account of COVID -19 VIRUS and difficulties faced by litigants it is hereby ordered that a period of limitation in all such proceeding , irrespective of the limitation prescribed under the general law or special laws whether condonable or shall extended till further order passed .The apex court re-staring the period of limitation must be excluded for the purpose of section 29-A and 29 –B of the arbitration and conciliation act , 1996 as well .

No , doubt discussion regarding online dispute resolution , have initiated all over the world in this difficult time of lockdown ,and there are avenues of video conferencing / teleconferencing already available which is being resorted , therefore till the online system for conducting the arbitration evolved and adopted by all concerned , an order of suspension of arbitration proceeding akin to an order passed by the supreme court is required to be passed by the respective arbitrators .

Conclusion

As long as the COVID -19 lockdown prevent the regular conduct of arbitral final hearings , participation in non – traditional, virtual hearings must be closely considered and if certain conditions are met implemented to outweigh the costly disadvantages of postponement. And the time limitation should be increased for the arbitral award . However, indeed in the post corona period, the burden of pending cases will be increased upon the courts , in a situation like this where many urgent and serious issues are yet to be addressed the further time limit should be made flexible by the judiciary. After acknowledging the current pandemic circumstances around the globe.


References [1] Substituted by act 33 of 2019 , section – 6 (a) [2] Inserted by act 33 of 2019 , SECTION – 6 (a) [3] In re , cognizance for extension of limitation .

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