The Supreme Court of India in its recent ruling has settled the question on the interpretation of the term “court” possessing the jurisdiction to determine and decide an application under Section 29A of the Arbitration and Conciliation Act, 1996 (A&C Act). In the case of Chief Engineer (NH) PWD (Roads) v/s. M/S BSC & C And C JV, the Supreme Court held that the Principal Civil Court would have the jurisdiction to adjudicate applications under Section 29A of the A&C Act.
The case before the Supreme Court preliminarily revolved around the issue of appointment of an arbitrator under Section 11 of the A&C Act, a power vested with the High Court and the Supreme Court in Domestic and International Arbitrations respectively.
Section 2(1)(e) of the A&C Act defines “court” as the Principal Civil Court of original jurisdiction in a district, including the High Court in exercise of its ordinary original civil jurisdiction, to have jurisdiction of matters outside international commercial arbitration. For international commercial arbitrations, the jurisdiction is specifically with the High Court in exercise of its ordinary original civil jurisdiction.
However, various High courts across the country have passed contrasting precedents while substituting arbitrators under Section 29A (6) of the A&C Act and held that the High Court would possess the jurisdiction to decide an application under Section 29A of the A&C Act and the substitution of arbitrator(s) thereunder, since the appointment of the arbitrator is the sole domain of the High Court or the Supreme court as per section 11 of the A&C Act.
Clearing this issue, the Supreme Court has settled that for domestic arbitrations, the Principal Civil Court would not only have the jurisdiction to decide applications under Section 29(A) of the A&C Act but would also have the power to substitute an arbitrator if the Principal Civil Court concludes that the delay in concluding an arbitration was attributable to such arbitrator(s).
Analysing The Chequered History
In the case of DDA v. Tara Chand Sumit Construction Co., the Delhi High Court held that if the Principal Civil Court is called upon under Section 29A of A&C Act to exercise the power of substituting the Arbitrator, it will lead to a conflict against the power of superior courts to appoint arbitrators under Section 11 of the A&C Act, where the Supreme Court or High Court has already appointed the arbitrator. So, to resolve the conflict the term “Court” should be interpreted in the context of Section 29A of the act, to be a court which has the power to appoint an Arbitrator under Section 11 of the Act.
In the case of K.I.P.L. Vistacore Infra Projects J.V. v. Municipal Corpn. of the city of Ichalkarnji, a dispute arose between the parties and the Bombay High Court had appointed an arbitrator under Section 11 of the Act. Thereafter, an application for extension of the mandate of an arbitral tribunal under Section 29A was filed before the High Court wherein the respondent objected to the maintainability of the petition. The High Court, while discussing the provisions of Section 29A in respect of domestic arbitration, observed that the Court as defined in Section 2(1)(e) is the High Court which may extend the arbitrator's mandate and substitute the arbitrator.
In this case, the Bombay High Court had observed that Section 2 opens with the words, “In this Part, unless the context otherwise requires,” therefore the term court can be interpreted differently in the context of Section 29A of the A&C Act. Thus, the Bombay High Court held that if the meaning assigned to the term ‘court' in Section 2(1)(e) of the A&C Act is introduced in Section 29A of the A&C Act, it would run contrary to the intention of the legislation and defeat the purpose of the provision by permitting a ‘court' as defined under Section 2(1)(e) of the A&C Act to partake the power vested in the High Court to extend the mandate of the Arbitrator and substitute the Arbitrator or Arbitral Tribunal itself.
In the case of Cabra Instalaciones Y. Servicios, S.A. vs. Maharashtra State Electricity Distribution Company Limited, the Bombay High Court discussed the scope of Section 29A of the A&C Act with reference to international commercial arbitration wherein the arbitral tribunal was constituted by an order passed by the Supreme Court. The Bombay High Court held that the High Court in exercising power under Section 29A of the A&C Act cannot make an order of appointment to substitute the arbitral tribunal or any member of the arbitral tribunal as it would be the exclusive power of the Supreme Court.
Present Case of Chief Engineer (NH) PWD (Roads) Before The Supreme Court
An extension of the mandate under section 29A of the A&C Act was sought before the Commercial Court, East Khasi Hills, Shillong, due to the arbitral tribunal's failure to render an award within the prescribed time and subsequent extensions, in which the jurisdiction of the Shillong Commercial Court to entertain an application under Section 29A of the A&C Act was contested.
The District Judge of the Commercial Court, through an Order dated 16th February 2024, upheld the Shillong Commercial Court's jurisdiction to entertain an application for the extension of the mandate of the Arbitral Tribunal under Section 29A of the A&C Act. This order was challenged before the Meghalaya High Court, which upheld the, Shillong Commercial Court's jurisdiction, being the Principal Court of Original jurisdiction under Section 2(1)(e) of the A&C Act.
The order of the High Court of Meghalaya was further appealed before the Supreme Court. The Supreme Court while dismissing the appeal, observed that “…the power under sub-section (4) of Section 29A of the Arbitration Act vests in the court as defined in Section 2(1)(e) of the Arbitration Act. It is the principal Civil Court of original jurisdiction in a district which includes a High Court provided the High Court has ordinary original civil jurisdiction.
Further, the apex court observed that “…the power under sub-section (6) of Section 29A is only a consequential power vesting in the court which is empowered to extend the time. If the court finds that the cause of delay is one or all of the arbitrators, while extending the time, the court has the power to replace and substitute the Arbitrator(s). The said power has to be exercised by the Court which is empowered to extend the time as provided in sub-Section (4) of Section 29A of the A&C Act.”
Conclusion: The Way Forward
The Supreme Court's ruling in Chief Engineer (NH) PWD (Roads) (supra) has shed light on the jurisdiction of the court when substituting the arbitral tribunal under section 29A (6) of the A&C Act. However, the manner in which the Principal Civil Courts decide to substitute arbitrators appointed by the superior courts, without undermining powers of the superior courts to appoint arbitrator(s), is yet to be seen. The door remains open for potential conflict in such scenarios.
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