Stay Period is to be Excluded for Calculation of Arbitration Timelines Under Section 29A

Petitioner: Buoyant Technology Constellations Pvt. Ltd.

Respondents: Manyata Infrastructure Developments Pvt. Ltd &  Manyata Realty

Court: Hon’ble High Court of Karnataka

Date: 05.04.2024

Coram: Hon’ble Mr. Justice S.G Pandit

                 Hon’ble Mr. Justice C.M Poonacha

Facts:

1. The petitioner and the respondents entered into an MoU and joint development agreements. However, they encountered disputes, leading to the invocation of arbitration proceedings to resolve these disputes.
2. The first proceeding of the Arbitral Tribunal was held on 07.11.2022. On 05.12.2022 respondents filed their claim statement and subsequent proceedings involved filing of objections, counterclaims and rejoinders.
3. The petitioner sought an extension to file a sur-rejoinder which was rejected by the Tribunal. A subsequent writ petition was filed challenging this rejection and the petitioner was directed to file a sur-rejoinder by 20.05.2023 which he complied with.
4. Furthermore, insolvency proceedings were initiated against the petitioner which led to a stay of both arbitration and insolvency proceedings by the court. This caused the petitioner to file memos before the Arbitral Tribunal to terminate proceedings under Section 29A(4) of the Arbitration and Conciliation Act, 1996.
5. These memos were rejected by the Tribunal given that the one-year timeline for the award had commenced from 20.05.2023 and the period of stay of proceedings should be excluded.
6. This decision was challenged by the petitioner through a writ petition.

Issues:

Whether the Arbitral Tribunal was justified in determining that the arbitration proceedings commenced on 20.05.2023 and that the period of stay should be excluded from the twelve-month timeline for completing the proceedings under Section 29A of the Arbitration and Conciliation Act, 1996.

Judgement:

1. The Court in its judgements underscored the pivotal role court orders play in shaping the arbitration process. The liberty granted by the court to filed additional pleadings such as the sur-rejoinder become integral parts of the proceedings. It emphasizes the need for parties to diligently follow the directives laid down by the court and ensure that procedural requirements are complied with. This decision was made with reference to Section 23 of the Arbitration and Conciliation Act, 1996 establishes the timeline for filing pleadings in arbitration proceedings.
2. Section 29A of the Act talks about the arbitral award being rendered within 12 months from the date of the completion of pleadings under Section 23(4). The court emphasizes the significant impact played by the stay orders based upon the calculation of the 12-month period specified in Section 29A. It clarified that any period during which the arbitration proceedings are stayed, whether by court order or otherwise, must be excluded from the calculation of the twelve-month timeline.
3. The objective of Section 29A is underlined in the judgement, that is, to ensure expeditious resolution of disputes through arbitration. Section 29A was made to facilitate speedy justice for the parties involved.
4. The conduct of the parties, particularly that of the respondent, was scrutinised by the court for taking multiple adjournments and filing numerous writ petitions challenging the orders. The court implied that such actions undermine the efficiency of the arbitration process, contrary to what Section 29A sought to achieve.
5. The court dismissed the writ petition and imposed costs on the petitioner to be paid to the Karnataka State Legal Service Authority.

Conclusion:

The judgment underscores that arbitration is designed to be swift and efficient, emphasizing the need to adhere to court orders and maintain the integrity of procedural timelines. By clarifying the interpretation of Section 29A, the court has reaffirmed the importance of excluding stay periods when calculating the arbitration timeline. This approach aims to prevent unnecessary delays while reinforcing the commitment to efficient dispute resolution through arbitration.