Judicial Updates -
Supreme Court - International Commercial Arbitration Is Exempt From Section 29A Of The Arbitration And Conciliation Act, 1996, 12-month Time Limit.
In the matter of Tata Sons Pvt. Ltd. (Formerly Tata Sons Ltd) v. Siva Industries and Holdings Ltd & Ors. [Miscellaneous Application No. 2680 of 2019 in Arbitration Case (Civil) No. 38 of 2017], Tata Sons Pvt. Ltd., Siva Industries and Holdings Ltd., and Tata Tele Services Ltd. engaged in an arbitration proceeding initiated in 2017 due to a dispute between Respondent No. 1 and the Applicant. To establish an arbitral tribunal, the Applicant filed a petition before the Supreme Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("the Act"). However, due to the involvement of bankruptcy proceedings against IDBI Bank, which Respondent No. 1 was engaged in, the arbitration was postponed.
The arbitration proceedings were mutually agreed to be extended. Nevertheless, in 2022, when the insolvency moratorium was lifted, the Applicant raised concerns about the legality and retrospective application of the revised Section 29A of the Act in the context of setting international commercial arbitration. The understanding of the modified Section 29A of the Act, which made a distinction between domestic and foreign business arbitration, was at the heart of the argument. While commercial arbitration expected a result within a year, the change obliged the arbitral tribunals participating in international business arbitration to attempt to reach a conclusion within 12 months. The inclusion of words like “as expeditiously as possible” and “endeavour may be made” showed that international commercial arbitration was intended to be excluded from the mandatory character of the clause, the Supreme Court said after analysing the legislative meaning behind the change. The report of the High-Level Committee, chaired by Justice B N Srikrishna, emphasised concerns about placing hard timelines on international arbitration proceedings, which was supportive of this decision.
Additionally, the Supreme Court made it clear that because international arbitrations lack a mandate, the longer deadlines afforded to domestic arbitrations under sub-Sections 3 and 4 of Section 29A of the Act do not apply. According to the Court's ruling, international commercial arbitration processes were exempt from the amended clause's stricter deadline requirements.
The Court cited prior decisions that established the overall retrospective character of procedural law when addressing the amendment's applicability in the past. In order to emphasise that the revised provision primarily focused on remedial measures and didn't establish new rights or responsibilities, it highlighted cases like Thirumalai Chemicals Ltd v. Union of India [(2011) 6 SCC 739] and Hintendra Vishnu Thakur v. State of Maharashtra [(1994) 4 SCC 602]. The legislature may have intended for the 2019 Amendment Act to take effect retrospectively because no provision like Section 26 of the Act specifically identified upcoming modifications.
The consequences of this ruling are significant and have an effect on India's participation in international commercial arbitration. The Court recognised the difficulties of cross-border conflicts and complied with the High-Level Committee's suggestions for flexible case management by excluding international arbitrations from complying with the severe deadlines of the modified Section 29A. The amendment's capacity to be applied retroactively demonstrates the legislature's dedication to encouraging conflict resolution without overly intrusive court interference and enhancing arbitration's effectiveness and independence.
The present case, in conclusion, stresses the Indian judiciary's dedication to improving the arbitration structure to meet the demands of international commercial disputes. The ruling sets a precedent that reinforces India's standing as an arbitration-friendly nation in accordance with international best practices by protecting the independence of arbitral tribunals while guaranteeing effective conflict settlement.