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A Case of Staggered Timelines Under The Arbitration and Conciliation Act, 1996

Vrinda Gaur*

 


Introduction


The Arbitration and Conciliation Act, 1996 (Act) was implemented with a foundational aim to transgress the normative court-facilitated resolution of disputes owing to the overburdened dockets of the benches and the overarching issue of adjournments sought either by the parties or granted by the courts. Through an adjudication by a mutually agreed group of experts, parties were bestowed with the privilege to settle their claims through a collaborative approach with a restricted role of the courts. However, the emergence of ambiguities and inefficiencies within the mechanism over time has led to no other alternative for the parties but to seek clarifications from the courts themselves.


One major ambiguity which has led parties to knock on the doors of the court pertains to missed timelines by parties to the proceedings. Alternatively, parties are aggrieved by the delays attributable to the lackadaisical disposal of applications by the judicial forum itself.


In light of this, the article delves into the plethora of factors which has caused arbitration as a mode of dispute resolution to be a time-staggering practice and further aims to prescribe a way forward to rectify the predicaments.

 

Factors Attributable to Delays

        

First, if we look at Part I of the Act, the most prominent provision facing the test of time is Section 8 of the Act, which gives a judicial authority the power to refer parties to arbitration.


However, looking at most arbitration agreements/clauses, it binds parties to arbitration as soon as disputes arise and parties can proceed to such an arrangement without any interference by the courts. To much of our[1][2]  disappointment, this practice of first initiating legal proceedings against the party for breach of contractual obligations and later awaiting the green signal of the court to refer parties to arbitration has unnecessarily caused delays. 


Considering the pendency rate at judicial forums[3][4]  and a lack of time constraints on courts to dispose of a Section 8 application, it further burdens the dockets of the judicial benches.


Second, concerning the issue of appointment of arbitrators under Section 11, if under circumstances, the parties fail to appoint an arbitrator mutually within a timeframe of 60 days, this onus is often shifted on a judicial authority to appoint the same. Apart from delays attributable to frequent adjournments sought by the parties, a complementary factor is the discretion granted to the courts concerning disposal timelines for authorising such appointments.


Further, there is no mechanism in place to ensure that Section 11 applications get heard on a priority basis as the listing of matters is still done through a date determined by computer-based software which has no options for preferential listing.


Third, a major factor leading to staggered timelines is a challenge to the appointment of arbitrators under Section 12 of the Act. If such a challenge is rejected by the tribunal at the initial stage, as per procedure the only opportunity a party has to challenge such an appointment is under Section 37 of the Act after the pronouncement of an award.


Hypothetically speaking, if such a challenge is admitted under a Section 37 application, two recourses would follow: (i) initial proceeding would be set aside and fresh proceedings would follow at the discretion of the parties, or (ii) a new arbitrator may be appointed to evaluate the award and traverse through the pleadings of the parties to affirm the award. Both of these alternatives may take a considerable amount of time if not 6 months as prescribed under the Act.

Considering the paramount role played by time in arbitration proceedings which necessitates the delivery of an award within one year after the completion of pleadings, a lack of discretion for parties to challenge the appointment after the arbitrator affirms his appointment under section 13 of the Act and before the appeal stage under Section 37 leads to unwarranted postponement of award enforcement and realisation of claims. This goes against the very design of the Act, which was to expedite outside court settlement by the mutual consent of the parties.


Fourth, Section 23 of the Act furnishes a 6 month period for the completion of pleadings before the arbitral tribunal. However, ambiguity prevails on whether this timeline is the maximum limit or just recommendatory considering most proceedings neglect this timeframe and often exceed this timeframe. Moreover, this procedural inefficiency is due to a lack of defined procedural guidelines for conducting ad hoc arbitral proceedings as opposed to institution-facilitated settlements.


Fifth, Section 37 of the Act provides for a provision of appeal to the award passed by the tribunal. Again, there is no prescribed timeline for allowing such an appeal before the courts. In practice, parties have been moving an appeal before the court, even after the expiry of the 90-day buffer under Section 36 of the Act, which prohibits an award recipient from moving for enforcement and allows the other party to challenge it on reasonable grounds before a court of law. Further, under the Commercial Courts Act 2015, a prescribed timeline for appeal is sanctioned at 60 days. Under this circumstance, there is no plausible explanation for a 90-day buffer under Section 36 of the Act.


Conclusively, after the landmark Amazon Investment Holding LLC vs Future Retail judgment, the Apex Court has given sanction to the idea of emergency arbitration even though there are no explicit provisions within the Act recognising the same. Though in practice, the entire process ideally takes a minimum of 30 days including the ideal 14 days timeline for pronouncement of award, however, owing to a lack of legislative sanctions concerning timelines for appointments of emergency arbitrators and grant of interim relief by such persons leaves a wide scope of discretion to either the appointing authority or the emergency arbitrator to set timelines as per their individualistic interest and preference.

 

Way Forward


The delays caused either by the parties to the proceedings or the judicial authorities have been actively recognised by practitioners and experts.[5] [6]  However, little process has been made to bridge this gap of missed timelines despite the courts having on numerous occasions called out parties to proceed with punctuality. The need for efficient timelines has further been discussed in the recent Expert Committee report released by the Ministry of Law and Justice.

In light of this, it is pertinent to take certain recourses to adequately address this issue.


Firstly, in light of the increasing burden on the courts, it is necessary to have a distinct bench/division overseeing appeals and fresh petitions. If not all, it would be prudent to refer high-stake and high-valuation prospective disputes to this special bench. Further, the fast-track procedure under Section 29B has become popular amongst stakeholders with parties having the discretion to refer to fast-track proceedings at two stages, namely, (a) before the appointment of an arbitral tribunal and (b) at the time of appointment of the arbitral tribunal. Though this procedure ensures delivery of an award within 6 months as against the allotment of a 1-year time frame for delivery of an award under the routine procedure, a need is felt to extend its scope post-pleading stage. There is no rationale to date to restrict its application only up to the stage of the constitution of the arbitral tribunal and not after. 




Conclusively it is pertinent to give legislative sanction to numerous judicial precedents pronounced over time that would further aid the mechanism in upholding punctuality indirectly. For instance, a legislative sanction of the recent landmark ruling of the Apex Court In Re: Interplay Judgement where the court upheld the validity of an unstamped arbitration agreement, would prevent frivolous appeals and similar issues from arising before the court for further consideration.


Hence, endorsing certain time constraints within the Act would make India an attractive destination for arbitration, both domestically and internationally.

 

*Vrinda Gaur, a 3rd Year Law Student from National Law University Lucknow.

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