India Being the Fifth Largest Economy and Highest Population-Based Economies in the World.[1] With an estimated GDP of more than ₹293.90 lakh crore generated by a population of over 1 billion, India is expected to grow at 7.6.% in 2023-24, making its economic growth the fastest among major economies.[2] To make itself a compelling investment destination, India has made various efforts to ease the trade and business regime, including promoting a favorable business climate and improving infrastructure. Total FDI inflows in the country in FY 2023-24 stood at $971.521 billion (April 2000 to December 2023), and total FDI equity inflows were $666.477 billion (April 2000 to December 2023), according to the Department of Promotion of Industry and Internal Trade, Government of India.[3]
India which is making endeavors to make its economy vibrant by making itself an attractive business destination is sure to make dispute resolution efficient and expeditious. In order to ease the doing of business, India has been actively promoting arbitration as an effective means of dispute resolution. Arbitration offers several advantages that contribute to India's economic growth and make it an attractive investment destination. It acts as an alternative to the already overburdened court system of the country which might lead to delays and pendency in resolving disputes, something that business entities might prefer to avoid. Arbitration is already a widely recognized neutral and efficient method of resolving commercial disputes in international business transactions. Promoting arbitration, creates a favorable environment for foreign investors and multinational companies, thereby encouraging foreign direct investment (FDI) and economic growth. Another aspect that makes arbitration a preferred mode of dispute resolution is the enforceability of the awards. Arbitral awards are generally easier to enforce across jurisdictions compared to court judgments as they are backed by international conventions like the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards to which India is a party along with other 171 states. This enforceability aspect makes arbitration an attractive option for parties involved in cross-border transactions. Arbitration also provides liberty to the parties to choose arbitrators. Hence, they can choose arbitrators with specific expertise in the subject matter of the dispute, leading to more informed and specialized decision-making compared to traditional court proceedings. As a result of this, an emerging trait in new-age contracts can be witnessed wherein arbitration and/or mediation clauses are included to ensure cost and time-efficient mechanisms for the resolution of disputes.
Section 29A of the Arbitration and Conciliation Act, 1996 (“Act”) inserted via the Amendment Act of 2015 which came into effect on 23.10.2015, introduces a time limit for the completion of arbitration proceedings. It prescribes a statutory period of twelve months for the completion of proceedings from the date the arbitral tribunal enters upon reference.
Thereafter, this prescribed time limit was amended via the Amendment Act of 2019 which came into force on 30.08.2019 and the statutory limit was set as twelve months from the date of completion of pleadings with an option of another extension of six months by mutual consent of the parties.
However, another flexibility is provided under sub-section (4) wherein the parties can file an application to the court for an extension if the award is not passed in terms of Section 29A(1) or within the extended period.
Whether Section 29A and the provisions set out therein are applicable to international as well as domestic commercial arbitrations alike became a bone of contention. Another issue that emerged was whether the amended provision which came into effect on 30.08.2019 will be applied retrospectively or prospectively.
This issue is put to rest by the Supreme Court of India (“Supreme Court”) in its recent judgment in Tata Sons Pvt. Ltd. v. Siva Industries and Holding Ltd and Ors.[4] wherein the court held that the time limit of twelve months provided under the amended Section 29A (1) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for rendering an award is not applicable to ‘international commercial arbitrations’
Article 29A[5] in its true and original form sets out that…….”The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:
Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23
Tata Sons Private Limited ("Applicant"), Tata Tele Services Limited ("TTSL"), and NTT Docomo Inc. ("Docomo") entered into agreements wherein Docomo acquired equity shares of TTSL from Siva Industries and Holdings Ltd. ("Respondent No. 1"). The Applicant, TTSL, Docomo, and Respondent No. 1, along with C. Sivasankaran (promoter and guarantor of Respondent No. 1, "Respondent No. 2"), executed an inter se agreement according to which the Respondents can acquire TTSL's shares proportionately if Docomo exercised its sale option. Disputes arose between Docomo and the Applicant, leading to an arbitral award directing the Applicant to acquire Docomo's TTSL shareholding. Pursuant to this, the Applicant called upon the Respondents to acquire Docomo's shares under the inter se agreement. Disputes ensued between the Applicant and Respondents, resulting in the matter being referred to arbitration. The applicant issued a notice of arbitration to the first respondent and to the second respondent (a foreign party, being a resident of Seychelles) and nominated an arbitrator but the respondents did not appoint their nominee arbitrator despite the service of the arbitration notice.
The applicant filed a petition before the Supreme Court under Section 11(6) of the Arbitration and Conciliation Act[6] for the constitution of an arbitral tribunal in international commercial arbitration. The Supreme Court had exclusive jurisdiction to entertain the arbitration petition since the proposed arbitration between the applicant and the respondents, of whom the second respondent is a foreign party, was an international commercial arbitration in terms of Section 2(1)(f)[7] of the Arbitration Act. As Respondent No. 2 was a foreign party, the Supreme Court appointed Mr Justice S N Variava as a sole arbitrator.
The arbitrator entered upon the reference on 14 February 2018. On 21 March 2018, during a preliminary meeting, the parties agreed to a six-month extension for rendering the award, if the arbitral proceedings could not be completed within a period of twelve months commencing from the date the arbitral tribunal entered reference. Hence, the time to deliver the award stood extended until 14 August 2019.
During the pendency of the arbitral proceedings, IDBI Bank Ltd initiated insolvency proceedings against the first respondent under the Insolvency and Bankruptcy Code 2016. Hence, by an order of the National Company Law Tribunal, Chennai a moratorium was placed on all proceedings against the first respondent, including the arbitral ones. However, the moratorium was lifted on June 3, 2022. The extension of six months agreed upon by the parties expired on 14 August 2019.
Applicant filed an interlocutory application contending that as a result of the amendment of Section 29A of the Arbitration and Conciliation Act, 1996, with effect from 30 August 2019, the arbitration proceedings before the sole arbitrator should, be allowed to automatically continue in view of the amendment of the statute.
The Applicant was basically seeking the continuation of the arbitral proceedings, arguing that the amended Section 29A rendered the time limit for international commercial arbitrations inapplicable retrospectively.
Respondent No. 2 however contended that accepting the Applicant's arguments would imply the statutory time limits under Section 29A is entirely inapplicable to international commercial arbitrations.
The Supreme Court allowed the application and held that the time limit for passing an arbitral award under amended Section 29A of the Arbitration and Conciliation Act is not applicable to international commercial arbitrations.
Regarding the criticism of Section 29A of the Arbitration Act as it stood prior to its
amendment by the international arbitral institutions on the ground that the provision allowed intervention by the court for extending the limit for rendering an award in international commercial arbitrations, the court noted that the amendment of Section 29A of the Arbitration Act in 2019 is intended to meet the criticism. The amendment being remedial in nature should be applicable to all pending arbitral proceedings as on the effective date i.e., 30 August 2019. It carves out international commercial arbitrations from the rigour of the timeline of six months time limits envisaged in Section 29A of the Arbitration Act.
The expression “in matters other than an international commercial arbitration” makes it abundantly clear that the timeline of twelve months which is stipulated in the substantive part of Section 29A(1), as amended, does not apply to international commercial arbitrations. This is further reaffirmed in the proviso to Section 29A(1) which stipulates that the award in the matter of international commercial arbitration “may be made as expeditiously as possible” and that an “endeavor may be made to dispose of the matter within a period of 12 months” from the date of the completion of pleadings.
Hence, an international commercial arbitration, the arbitral tribunal is required to endeavour, that is, make an effort to render the arbitral award within a period of twelve months or in a timely manner.
In domestic arbitration, Section 29A(1) stipulates a mandatory period of twelve months for the arbitrator to render the arbitral award. In contrast, the substantive part of Section 29A(1) clarifies that the period of twelve months would not be mandatory for international commercial arbitration. Hence, post amendment, the time limit of twelve months as prescribed in Section 29A is applicable to only domestic arbitrations and the twelve-month period is only directory in nature for an international commercial arbitration.
To answer, whether the amended Section 29A would apply prospectively or retrospectively, the court placed reliance on the Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd,[8] and held that Section 29A was procedural in nature. Procedural law establishes a mechanism for determining the rights and liabilities of a party and a machinery for enforcing them.[9] Generally, procedural laws are presumed to be retrospective, unless there is a clear indication that such was not the intention of the legislature,[10] or the procedural law imposes new obligations qua transactions already concluded or creates new rights or liabilities.[11] Since the 2019 Amendment Act does not contain any provision evincing a legislative intent making the application of the amended provision perspective, the time limit prescribed under the amended Section 29A will apply retrospectively to all pending arbitral proceedings from its effective date i.e., August 30, 2019.
Consequently, the Supreme Court concluded that the sole arbitrator is empowered to pass appropriate procedural directions for extension of time while endeavoring to expeditiously conclude the arbitration.
As a consequence of this judgment, the long-debated confusion has been put to rest. It has been made clear by the Apex Court that the twelve-month time limit as prescribed in Section 29A is applicable only to domestic arbitrations and is a directory for international commercial arbitration.
[1] Clear tax, “World GDP Ranking 2024 List” (April 29 2024), available at https://cleartax.in/s/world-gdp-ranking-list
[2] MoSPI, “Second Advance Estimates Of National Income 2023-24, Quarterly Estimates Of Gross Domestic Product For The Third Quarter (October-December) Of 2023-24” (29 February 2024), available at https://www.mospi.gov.in/sites/default/files/press_release/PressNote_onGDP_SAE_Q3_FRE_SRE_TRE01032024.pdf
[3] Invest India, “Why India?” (May 08, 2024), available at https://www.investindia.gov.in/why-india
[4] Miscellaneous Application No 2680 of 2019 in Arbitration Case (Civil) No 38 of 2017
[5] Arbitration and Conciliation Act, 1996
[6] Arbitration and Conciliation Act 1996
[7] "international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—
(i) an individual who is a national of, or habitually resident in, any country other than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii)an association or a body of individuals whose central management and control is exercised in any country other than India; or
(iv) the Government of a foreign country;
[8] (2018) 6 SCC 287
[9] Thirumalai Chemicals Ltd v. Union of India (2011) 6 SCC 739
[10] Jose Da Costa and Anr. v. Bascora Sadasiva Sinai Narcornim, (1976) 2 SCC 917; Gurbachan Singh v.
Satpal Singh (1990) 1 SCC 445; Rajendra Kumar v. Kalyan (D) by Lrs, (2000) 8 SCC 99
[11] Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602