The High Court of Delhi recently addressed an important issue regarding the interpretation and application of the 2019 Amendment to Section 29A of the Arbitration and Conciliation Act (A&C Act). The court held that the amendment, which changed the time limit for rendering an award, should be applied retroactively to all pending arbitrations. The ruling came in response to a case involving several unique circumstances, including the unfortunate deaths of two arbitrators and the disruptions caused by the Covid-19 pandemic.
The case centered around a dispute arising from a lease agreement that included an arbitration clause. The petitioner, who had leased out premises to the respondent, initiated arbitration proceedings due to the respondent’s failure to pay rent. Despite a settlement agreement, the respondent continued to default on its obligations, leading to the termination of the lease and subsequent legal actions.
The arbitration process began when the petitioner invoked the arbitration clause and appointed an arbitrator in December 2018. However, due to the unexpected demise of the arbitrator, a substitute arbitrator was appointed. The pleadings in the case were completed in August 2019, shortly before the 2019 amendment came into effect. Under the amended Section 29A, the time limit for rendering an award was calculated from the completion of proceedings, rather than the date of the arbitrator’s appointment.
Unfortunately, further delays occurred when the substitute arbitrator also passed away, followed by the recusal of a third arbitrator. Eventually, a fourth arbitrator was appointed, and the petitioner sought an extension of time for rendering the award. The award was finally passed on August 30, 2022, but its delivery to the parties was delayed due to non-payment of arbitral fees by the respondents.
The petitioner argued that the time limit for rendering the award should be extended based on the completion of pleadings in August 2019, taking into account the exclusion of time during the Covid-19 pandemic as ordered by the Supreme Court. They also cited the exceptional circumstances of the arbitrators’ deaths and recusal, as well as the timely filing of the extension petition.
The respondent, however, contended that the 2019 amendment should only apply to arbitrations initiated after its implementation. They maintained that the time limit had already expired in January 2020, and any award rendered afterward would be without jurisdiction.
In its analysis, the Delhi High Court clarified that the 2019 amendment was procedural in nature and should be applied retrospectively to pending arbitrations. The court noted that the completion of pleadings occurred in August 2019, triggering the 12-month period for rendering the award. Taking into account the exclusion of time due to the Covid-19 pandemic, the court determined that the arbitrator’s award, delivered on August 30, 2022, was only delayed by 14 days.
Considering the exceptional circumstances faced in the case and the petitioner’s timely filing of the extension petition, the court ruled in favor of the petitioner. It granted an extension of the time limit until the date on which the award was rendered.
This judgment by the Delhi High Court provides important guidance on the application of the 2019 amendment to Section 29A of the A&C Act. It reaffirms the retrospective nature of the amendment and highlights the court’s willingness to consider exceptional circumstances that may cause delays in the arbitration process. The ruling promotes fairness and flexibility in the administration of justice, ensuring that parties are not unduly prejudiced by unforeseen events.