Libertatem Magazine

Section 29A, Arbitration and Conciliation (Amendment) Ordinance, 2015 – An Overzealous Effort to Fast Track Arbitration in India

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“Justice delayed is justice denied but justice hurried is justice buried”

In the developing world, India would probably be one of the first countries to have installed a fixed time limit on the completion of an arbitration proceeding. Section 29A of the Arbitration and Conciliation Act, 1996 as inserted by the Arbitration Ordinance, has surely stirred more than a few souls by setting a specific time limit of 12 months, plus 6 months extension with the permission of the court, to render an arbitral award.

In India, the arbitrators are mostly retired judges who treat the arbitration proceedings just as they would treat judicial proceedings, says Indu Malhotra(‘Fast Track Arbitration’, ICA Arbitration Quarterly, ICA, 2006, vol. XLI/No.1 at p 8). Thus arbitration hearings do not take place on a day-to-day basis in addition to there being no fixed time for recording evidence, conducting cross examination as well as the omnipresent problem of adjournment without justifiable cause which brings the plague of delay from the judiciary into the arbitration mechanism as well. It is not uncommon to see an arbitration proceeding in India running for 4 – 5 years and thereby frustrating the parties. With the arbitration culture in India still in its nascent stage, problems such as these seem to be an extraordinary roadblock in developing arbitration in the country as such procedures in other countries are a lot faster and parties tend to prefer those countries over India.

The legislature (The president in his legislative capacity under Article 123 of the Constitution of India can promulgate an ordinance when the parliament is not in session; however, the same has to approved by the parliament within 6 months of its next sitting) seems to have answered the problem through the insertion of Section 29A by the Arbitration Ordinance 2015 which provides for a 12-month time frame to render an arbitral award. The ordinance included the time limit to make India an arbitration hub by ensuring speedy procedure however the time frame of 12 months seems to be overzealous and falls short of being practical.

Furthermore, the provision allows for an extension of 6 months with the permission of the court, which would be subject to conditions such as reduction of the arbitrator’s fee, changing the arbitrator, imposing cost (including exemplary cost) on the responsible party, etc. – bringing the whole arbitration procedure under close judicial scrutiny. Therefore, the sacrosanctity of arbitration, which was its exclusion from judicial intervention, is effectively destroyed as completing any complex arbitration within a period of 12 months is a herculean task and more often than not, the arbitrators would need to approach the court for an extension. This is harmful on two fronts: firstly, it effectively increases judicial intervention into the arbitral process; secondly, the judiciary which is already overburdened with litigation would further be additionally burdened. Thus, speedy remedy which is one of the main purposes of arbitration, would be defeated.

Albeit this provision in the act was intended to have a far reaching impact in establishing a healthy arbitration culture in India, its effect might turn out to be quite the opposite. When the arbitration is not completed in an expedited time frame, it will have to tread through the gentle pace of the judiciary and thereafter, get an extension of 6 months. If this culminates into a trend, then the purpose of having this provision which was to convert India into an arbitration hub, would be completely dismantled, as parties would be encouraged to have their seat of arbitration outside India.

It is a well-accepted proposition that arbitration in India is much slower than the expected standard. However, it is a matter of debate whether having this restrictive time frame is the answer to this conundrum or whether the existing provisions are sufficient for this purpose.

Another major issue with the ordinance is that while the Law Commission had clarified which provisions will apply retrospectively and which ones will apply prospectively, the Ordinance seems to have skipped that aspect. Therefore, now the litigious question arises as to whether the provision, Section 29A, will be applicable to pending arbitration proceedings as well or only to future proceedings. On a fair reading and literal interpretation of the provision it might appear to be applicable to the pending litigation. However, the point is contentious since the pending proceedings which have crossed the 18-month time line would come to a virtual stand-still if the Ordinance is allowed to apply retrospectively.

The provision makes for further outrageousness by stating that if the arbitrators finish the proceeding within 6 months then they would be given additional fees. This is equivalent to a situation where judges are paid additional fees for the expedited delivery of judgments. Drawing on this analogy, one shudders to think what might have been the consequences had the Hon’ble judges The matters that come to arbitration are often very complex and when an arbitrator is incentivized to hurriedly conclude the proceedings, he would more often than not, take a peripheral view on the matter at hand rather than delve into its depth. The delivery of an improper verdict only defeats the purpose of arbitration in the first place.

Now the question which arises is that if the fixing of a time frame is not feasible then what could be a possible solution to the culture of delay persisting in the arbitral culture of India. The answer to this is simple. The present Arbitration Ordinance has provisions such as Section 24, which provides for holding day-to-day hearings and refuses the granting of adjournments without any sufficient cause; or the amendment to Section 9 which states that the arbitration must commence within 90 days of the interim order and thereby stopping the practice of parties obtaining interim order and not commencing arbitration for a long time. Essentially, these are provisions which indirectly set a timeline for arbitration proceedings to run without much delay. Hence, one can say that these would serve the purpose of improving the situation of arbitration in India. Further the criticism to Section 29A does not necessarily imply that the time frame is a patently bad idea. However it would have been a much better provision had the timings been a bit more relaxed and realistic. Hence, as of now section 29A seems to be an opportunity lost rather than a constructive measure in the right direction.

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