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Himachal Pradesh High Court · body

2025 DIGILAW 645 (HP)

R. B. Enterprises v. Himachal Pradesh State Civil Supply Corporation Ltd.

2025-04-04

RANJAN SHARMA

body2025
JUDGMENT : Ranjan Sharma, J. 1. Petitioner [Avneet Goyal proprietor of M/s R.B. Enterprises], has come up, before this Court, seeking the following reliefs:- “The time limit for completing the Arbitration proceedings in Arbitration case titled M/s R.B. Enterprises vs. Himachal Pradesh State Civil Supplies Corporation being Arbitration Case No. 2 of 2022 pending before the learned Arbitrator Mr. Ankush Dass Sood, Senior Advocate, may kindly be extended for a further period of six months or any other orders or directions which this Ld. Court may deem fit be passed in the interest of justice.” FACTUAL MATRIX: 2. Case set up by Learned Counsel is that petitioner was awarded the work for supply of pulses as per Agreement dated 21.06.2016, entered inter se the petitioner and Respondent-Corporation. The agreement provided for arbitration, in case of any difference, inter se the petitioner and Respondent- Corporation. Since an inter se dispute arose, the petitioner filed an application before this Court i.e. Arbitration Case No.176 of 2022, whereby the Arbitrator was appointed on 04.11.2022 [Annexure P-1]. The Arbitrator commenced the arbitral proceedings on 23.12.2022 and the parties completed the pleadings on 05.04.2023. After completion of pleadings, the arbitral award was required to be passed within a period of 12 months which was further extended with the consent of parties for another 6 months. Despite the total period of 18 months having lapsed, the arbitral proceedings did not conclude. It is the case of petitioner that about 53 sittings were held by the Arbitrator in around a period of 2 years, but still the arbitral proceedings could not be completed. It is further averred that Respondent- Corporation had taken adjournments time and again and had been filing one application after the other, when the matter had reached the stage of arguments, which has resulted in delaying the conclusion of arbitral proceedings. However, on 17.12.2024 [Annexure P-2], the Arbitrator passed an order that his mandate had expired on 01.09.2024 and even after the expiry of his mandate, though the parties had appeared before him, but in the backdrop of the provisions of law, the Arbitrator terminated the arbitral proceedings till the same were revived by either of the parties in accordance with law. 3. Upon listing of this case, learned counsel for Respondent-Corporation, Ms. Parul Negi, Advocate, on instructions, does not seriously opposes the prayer of the petitioner in instant petition. 4. Heard, Ms. 3. Upon listing of this case, learned counsel for Respondent-Corporation, Ms. Parul Negi, Advocate, on instructions, does not seriously opposes the prayer of the petitioner in instant petition. 4. Heard, Ms. Seema K. Guleria, Learned Counsel for the petitioner, Ms. Parul Negi, Learned Counsel for respondent and have gone through the material on record. STATUTORY PROVISIONS: 5. In order to appreciate the claim of the parties herein, it is necessary to have a recap of the statutory provision of Section 29A of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as ‘Act’] which reads as under:- “ 29A. Time limit for arbitral award — (1) 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. (2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. (4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period: Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay. Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced. for each month of such delay. Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced. (5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court (6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material. (7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5)shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.” ANALYSIS 6. Taking into account the entirety of the facts and circumstances, this Court is of the considered view that the Order dated 17.12.2024 [Annexure P-2], passed by Learned Arbitrator in terminating his mandate and the claim of the petitioner for enlargement of time for concluding the arbitral proceedings needs to be accepted , for the following reasons:- (i) Object of the arbitral proceedings is consensual entrustment of parties to an Arbitrator, who is bound to complete the arbitral proceedings within a period of 12 months under Section 29A(1) and extendable period of 06 months under Section 29(A)(3) of the Act. Meaning thereby that arbitral proceeding are to be completed by an Arbitrator within a period of 18 months in totality.Though, the arbitral proceedings under Section 29A(1) and Section 29A(3) are to be completed within a period of 18 months yet in case due to unforeseen eventualities, the arbitral proceedings are not completed within 18 months, then the law-makers were conscious enough by prescribing a remedy under Section 29A(5), for extending the period of arbitral proceedings, only for sufficient cause and on such terms and conditions, as may be imposed by the Court. SUFFICIENT CAUSE FOR EXTENSION (ii) Factual matrix and material on record in instant case, indisputably indicate that the arbitral proceedings could not be completed within maximum stipulated period of 18 months by the Arbitrator due to non-performance of obligations by Respondent, despite several opportunities; and by filing one application after the other; and the fact that parties to arbitral proceedings could not be made to suffer without any fault attributable to petitioner; and even the petitioner and respondent have participated in the arbitral proceedings without any objection beyond the period of 18 months; and in order to prevent any prejudice to petitioner, who had been litigating from the date of passing of Award in the year December 2022 till the passing of Order by the Learned Arbitrator terminating its mandate. Thus, the circumstances detailed herein above, indicate sufficient cause, which appears to be bona fide and unintentional and therefore, the Order dated 17.12.2024 [Annexure P-2] passed by Learned Arbitrator in terminating its mandate, deserves to be set aside with directions to Learned Arbitrator to complete the arbitral proceedings within a reasonable period. PETITIONER CAN NOT BE MADE TO SUFFER DUE TO ABRUPT TERMINATION OF MANDATE (iii) Once the parties to arbitral proceedings have consensually participated in arbitral proceedings since December 2022 then, the Order terminating the mandate of Arbitrator and keeping the arbitral proceedings in abeyance has certainly prejudiced the parties to arbitral proceedings, which cannot be permitted to operate, resulting in prejudice to the parties herein. (iv) As per the mandate of the Hon’ble Supreme Court in TATA Sons Pvt. Ltd. (Formerly TATA Sons Ltd.) vs. Siva Industries and Holdings Ltd. and others, 2023 (1) SCALE 793 , the mandate of an Arbitrator is liable to be extended by the Court, under Section 29A(4) and 29A(5) of the Act, in the following terms:- “24 The provisions of Section 29A, as originally introduced into the statute, mandated that all awards shall be made within a period of twelve months from the date on which the arbitral tribunal enters upon the reference. The explanation clarified when the arbitral tribunal would be deemed to have entered upon the reference, namely, the date on which the arbitrator has received written notice of the appointment. The mandatory nature of the provisions of Section 29A(1) and their application to all arbitrations conducted under the Act, domestic or international commercial, was evident from the use of the word “shall.” In terms of Section 29A(4), in case the arbitral award was not rendered within the twelve or eighteen month period as the case may be, the mandate of the arbitrator(s) would stand terminated, unless on an application made by any of the parties, the court extended time on sufficient cause being shown. xxxx. xxx… xxx.. 26. Sub-Section (3) of Section 29A empowers parties, by consent, to extend the period specified in sub-section (1) for making the award by a further period not exceeding six months. Thereafter, if the award is not made within the period which is specified in sub-section (1) or the extended period specified in sub-section (3), the mandate of the arbitrator shall terminate unless the court has extended the period either prior to or after the expiry of the period so specified. In other words, the timeline of twelve months for making the award (in matters other than international commercial arbitration), is qualified by the consensual entrustment to the parties under sub-section (3) to extend the period by six months after which the court is empowered in terms of sub-section (4) to extend the period for making the award. The submission of the second respondent is that the provisions of sub-section (3) and sub-section (4) must also apply to an international commercial arbitration. This would merit close scrutiny. The legislature has not expressly excluded the applicability of sub-sections (3) and (4) of Section 29A to an international commercial arbitration. The submission of the second respondent is that the provisions of sub-section (3) and sub-section (4) must also apply to an international commercial arbitration. This would merit close scrutiny. The legislature has not expressly excluded the applicability of sub-sections (3) and (4) of Section 29A to an international commercial arbitration. But, at the same time, it must be noticed that the rationale underlying sub-section (3) is to ensure that despite the stipulation of twelve months for the making of an arbitral award in the domestic context, parties may by consent agree to an extension of time by a further period of six months. Such an extension of six months is envisaged in the case of a domestic arbitration since there is a mandate that the award shall be made within a period of twelve months. A further extension has, however, been entrusted to the court in terms of sub-section (4) of Section 29A However, insofar as an international commercial arbitration is concerned, the statutory regime is clear by the substantive part of sub-section 1 of Section 29A in terms of which the timeline of twelve months for making an arbitral award is not applicable to it. In an international commercial arbitration, the legislature has only indicated that the award should be made as expeditiously as possible and that an endeavour may be made to dispose of the matter within a period of twelve months from the completion of pleadings.” (Underlining Ours) (v) While dealing with a similar situation, the Hon’ble Supreme Court, in Civil Appeal No. 10620 of 2024 [Arising out of Special Leave Petition (Civil) No. 23320 of 2023] titled as Rohan Builders (India) Private Limited vs. Berger Paints India Limited decided on 12.09.2024, has reiterated that the mandate of an Arbitrator is liable to be extended in view of sufficient cause to the satisfaction of the Court, in the following terms:- “15. Rohan Builders (India) Pvt. Ltd. (supra)highlights that an interpretation allowing an extension application post the expiry period would encourage rogue litigants and render the timeline for making the award inconsequential. However, it is apposite to note that under Section 29A(5), the power of the court to extend the time is to be exercised only in cases where there is sufficient cause for such extension. However, it is apposite to note that under Section 29A(5), the power of the court to extend the time is to be exercised only in cases where there is sufficient cause for such extension. Such extension is not granted mechanically on filing of the application The judicial discretion of the court in terms of the enactment acts as a deterrent against any party abusing the process of law or espousing a frivolous or vexatious application. Further, the court can impose terms and conditions while granting an extension. Delay, even on the part of the arbitral tribunal, is not countenanced.28 The first proviso to Section 29A(4) permits a fee reduction of up to five percent for each month of delay attributable to the arbitral tribunal. 16. Lastly, Section 29A(6) does not support the narrow interpretation of the expression “terminate”. It states that the court – while deciding an extension application under Section 29A(4) – may substitute one or all the arbitrators. Section 29A(7) states that if a new arbitrator(s) is appointed, the reconstituted arbitral tribunal shall be deemed to be in continuation of the previously appointed arbitral tribunal. This obliterates the need to file a fresh application under Section 11 of the A & C Act for the appointment of an arbitrator. In the event of substitution of arbitrator(s), the arbitral proceedings will commence from the stage already reached. Evidence or material already on record is deemed to be received by the newly constituted tribunal.The aforesaid deeming provisions underscore the legislative intent to effectuate efficiency and expediency in the arbitral process. This intent is also demonstrated in Sections 29A(8) and 29A(9). The court in terms of Section 29A(8) has the power to impose actual or exemplary costs upon the parties. Lastly, Section 29A(9) stipulates that an application for extension under sub-section (5) must be disposed of expeditiously, with the endeavour of doing so within sixty days from the date of filing. 17. As per the second proviso to Section 29A(4), the mandate of the arbitral tribunal continues where an application under sub- section (5) is pending. However, an application for extension of period of the arbitral tribunal is to be decided by the court in terms of sub-section (5), and sub-sections (6) to (8) may be invoked. The power to extend time period for making of the award vests with the court, and not with the arbitral tribunal. However, an application for extension of period of the arbitral tribunal is to be decided by the court in terms of sub-section (5), and sub-sections (6) to (8) may be invoked. The power to extend time period for making of the award vests with the court, and not with the arbitral tribunal. Therefore, the arbitral tribunal may not pronounce the award till an application under Section 29A(5) of the A & C Act is sub-judice before the court. In a given case, where an award is pronounced during the pendency of an application for extension of period of the arbitral tribunal, the court must still decide the application under sub-section (5), and may even, where an award has been pronounced, invoke, when required and justified, sub-sections (6) to (8), or the first and third proviso to Section 29A(4) of the A & C Act. 18. While interpreting a statute, we must strive to give meaningful life to an enactment or rule and avoid cadaveric consequences that result in unworkable or impracticable scenarios. An interpretation which produces an unreasonable result is not to be imputed to a statute if there is some other equally possible construction which is acceptable, practical and pragmatic.” PETITIONER CAN NOT SUFFER DUE TO PENDENCY OF PROCEEDINGS: 7. In instant case, the arbitral proceedings continued since December 2022 in which the petitioner and respondents participated without any objection. These proceedings stretched over for almost three years. Once the Learned Arbitrator permitted the parties to participate in the arbitral proceedings beyond permissible period of 18 months, then, the Arbitrator cannot keep the arbitral proceedings in abeyance by treating his mandate to have been terminated, certainly amounts to prejudicing the petitioner due to an act Arbitrator herein which defeats the principle of “ Actus Curiae Neminem Gravabit ” CONCLUSION: 8. Perusal of factual matrix which is borne out from the orders dated 17.12.2024 [Annexure P-2], passed by Learned Arbitrator, indicates that arbitral proceedings commenced on 23.12.2022 and the parties completed the pleadings on 05.04.2023. Thereafter, arbitral proceedings were to be completed within 12 months and thereafter, with the consent of parties within 6 months of extendable period. Accordingly, the proceedings were to be completed within 18 months after completion of pleadings commencing from 05.04.2023 i.e. upto 04.10.2024. Thereafter, arbitral proceedings were to be completed within 12 months and thereafter, with the consent of parties within 6 months of extendable period. Accordingly, the proceedings were to be completed within 18 months after completion of pleadings commencing from 05.04.2023 i.e. upto 04.10.2024. Perusal of order dated 17.12.2024, indicates that matter was listed for arguments on 07.05.2024 and after hearing the parties, the same was adjourned, when on 01.07.2024, an application was filed by Respondent-Corporation to place on record some additional documents and application was accordingly decided thereafter. It is further borne out from the material on record that on 09.09.2024, another application was filed by the respondent for examining other witnesses and for recalling of complainant for cross-examination and this application was also decided on 05.11.2024 and thereafter, the main matter was listed on 12.11.2024. It is further borne out that on 20.11.2024, the Respondent-Corporation again prayed for adjournment. It is further borne out that though the period of 18 months had expired on 26.07.2024, yet, the parties to the arbitral proceedings participated without any objection to the continuation of arbitral proceedings even thereafter. However, on 17.12.2024, the Arbitrator passed an order that the arbitral proceedings were terminated till the same were revived by either of the parties in accordance with law. Perusal of the order dated 17.12.2024, suggests that even after expiry of 18 months period, the arbitral proceedings were delayed at the instance of respondent, who filed one application after the other. The procedural delays, if any, due to filing of applications, in itself is a sufficient cause for permitting extension as the rights of parties to arbitral proceedings have to be efficaciously tested in a practical and pragmatic manner. Thus, the delay which had occurred due to pendency of applications before the Arbitrator, is in itself a ground for granting the extension in arbitral proceedings, when the parties have not objected to continuance of arbitral proceedings before the Arbitrator and have also not objected to the grant of extension in arbitral proceedings even before this Court. Thus, the delay which had occurred due to pendency of applications before the Arbitrator, is in itself a ground for granting the extension in arbitral proceedings, when the parties have not objected to continuance of arbitral proceedings before the Arbitrator and have also not objected to the grant of extension in arbitral proceedings even before this Court. Be that as it may, the intent and object of arbitral proceedings cannot be defeated by mere technicalities, when, the parties have participated in the proceedings without any demur or objection even after the lapse of 18 months period, only with the intent to give effect to the object and intent of parties to settle their disputes by alternative resolution, in an effective, efficient and expedient manner by arbitration. In these circumstances, the cause for enlargement of time in concluding the arbitral proceedings is made out, in facts of instant case. DIRECTIONS: 9. In view of the above discussion and for the reasons recorded hereinabove, petition is allowed , in the following terms:- (i) As jointly agreed by Learned Counsels, the order dated 17.12.2024 [Annexure P-2], terminating the arbitral proceedings is set aside. (ii) Learned Arbitrator is mandated to complete the arbitral proceedings and to pass the Award in accordance with law within six months from date of receipt of copy of this judgment. (iii) Costs made easy for respective parties. 10. In aforesaid terms, instant petition(s) and all pending application(s), if any, shall stand disposed of.