Andhra Pradesh High Court – Amravati
The Oriental Insurance Company Ltd., vs M/S. Sri Lakshmi Srinivasa Jute Mills P … on 23 December, 2024
Author: Ninala Jayasurya
Bench: Ninala Jayasurya
APHC010412242024
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3494]
(Special Original Jurisdiction)
MONDAY, THE TWENTY THIRD DAY OF DECEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
THE HONOURABLE SMT JUSTICE SUMATHI JAGADAM
COMCA No.26 of 2024
Between:
The Oriental Insurance Company Ltd.,
rep. by its Branch Head/Authorized
Signatory, Regional Office,
Visakhapatnam. ... Appellant/Respondent
AND
1) M/s. Sri Lakshmi Srinivasa Jute Mills
(P) Limited, rep. by its Director,
Registered Office at Rajam, Srikakulam
District, A.P. ... Respondent / Petitioner
2) NSR Chandra Prasad, Sole Arbitrator,
Kukatpally, Hyderabad. ... Respondent/Respondent
Counsel for petitioner : Mr. C. Raghu, Senior Counsel
Mr. B. Sai Sampath Kumar
Counsel for 1st respondent : Mr. Joydeep Sen, Senior Counsel
Ms. Sridevi Jampani
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This Court made the following:
ORDER:
(Per Hon’ble Smt. Justice Sumathi Jagadam)
This Appeal is filed under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as “the Act”) seeking to
challenge the order dated 19.07.2024 passed by the learned Special
Judge for Trial and Disposal of Commercial Disputes, Visakhapatnam
vide CAOP No. 23 of 2024 whereby the application moved by the 1st
respondent herein under Sections 29A (4) and (5) of the Act has been
allowed by extending the mandate of the Tribunal by eight months from
the date of the order.
2. The facts of the case, which can be culled out from the
pleadings available on record and the submissions made by the learned
counsel for the respective parties, are that the disputes relating to a
monetary claim arising out of an Insurance Contract between the
appellant and the 1st respondent are pending adjudication before the
Sole Arbitrator, who is respondent No.2 herein.
(a) The petitioner is a Company incorporated under the
Companies Act, 1956. The petitioner has been manufacturing jute
products since 2009 and has a registered office at Rajam, Srikakulam.
(b) The petitioner and the 1st respondent are parties in the
arbitration proceedings before the Arbitration Tribunal comprised of the
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COMCA No.26 of 2024Hon’ble NSR Chandra Prasad as the Sole Arbitrator by mutual
consensus on 10.02.2021 for a dispute relating to a monetary claim
arising out of an insurance contract between the parties embodied in
insurance vide insurance policy No.461300/11/2014/122.
(c) The petitioner has concluded his part and made an
application seeking the assistance of the Arbitral Tribunal to take
evidence of the Insurance Surveyor from whose assessment of loss
sustained by the petitioner due to the HUDHUD cyclone.
(d) Sufficient time was granted to the respondent to contest the
matter, which was Awarded and allowed by the Tribunal on 18.08.2023.
some confusion cropped up about the demise of the Surveyor, but it was
clarified that he was ready to appear before the Arbitral Tribunal after
20.09.2023.
(e) The petitioner and the respondent sent emails on
29.01.2023 and 21.02.2023 giving consent for an extension of the
mandate for 8 months, which expires on 31.08.2023. I.A. is filed
seeking an extension of the mandate of the Hon’ble Arbitral Tribunal to
complete the arbitration proceedings and publish the final award.
3. The contentions of the appellant are that the petitioner is a public
sector general insurance company of India from whom the 1st
respondent purchases insurance policies for insuring its plant,
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machinery, and stock in various forms for four (4) units and further
contending that the lower court erred in holding that since a reading of
Section 29A(4) of the Act stipulates that the court can extend this period
even after the expiry of the period, the application is maintainable.
4. The application under Section 29A(4) of the Act has been fled with
a prayer to extend the Tribunal’s mandate for at least eight months from
the date of disposal of the application for making the final award.
5. The proceedings in the Arbitration commenced on 10.02.2021.
However, within the time limit of 12 months, the arbitration proceedings
and publication of the award was not complete due to COVID-19 and
even the extended period by virtue of the orders of the Hon’ble Supreme
Court in re had expired on 28.02.2023. Under the said circumstances, n
terms of Sub-section 3 of Section 29-A of the Act which provides that if
the award is not made within 12 months, the parties may mutually agree
to extend the time for a further 6 months, both the parties consented for
extension of period of 6 months and that the proceedings were to
conclude on or before 31.08.2023. However, the arbitral proceedings
could not be concluded and the 1st respondent filed CAOP No.23 of
2024 seeking further extension as per the provisions of the Act. The
appellant Insurance company opposed the said application contending
that the power under Section 29A94) of the Act cannot be exercised on
an application made after the expiry of the mandate of the arbitral
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Tribunal. The learned Commercial Court, by a reasoned order allowed
the said petition, rejecting contentions made of the appellant. Hence,
the present appeal.
6. Heard the learned Senor Counsel for the appellant, who did not
dispute the legal position in Rohan Builders (India) Pvt. Ltd., v Berger
Paints India Ltd.1 Also heard the learned counsel for respondent No.1,
who made submissions with reference to the said decision and that the
delay in conclusion of the proceedings is bona fide and is not
attributable to any of the parties or the learned Arbitrator. The parties
and the learned Arbitrator have tried to conclude the proceedings in
time, that if the proceedings are terminated due to non-extension of
time, the arbitration agreement would be frustrated and the 1st
respondent will suffer serious prejudice and circumstances, the
application seeking extension of time is maintainable and rightly allowed
by the Commercial Court with cogent reasons, the learned counsel
adds.
7. Considered the submissions made and perused the material on
record. Section 29-A of the Act deals with “Time limit for arbitral award”.
A perusal of the Section would clearly indicate the time limits prescribed
for completion of the arbitral proceedings and provisions for extension of
time, who can extend such time, under what circumstances and
1
2024 SCC OnLine SC 2494
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COMCA No.26 of 2024
conditions etc. It also provides that if the award is not passed within the
initial or extended period, the mandate of the Arbitrator will terminate.
Section 29-A of the Act, which is extracted hereunder, is thus a
complete Code by itself.
29A. Time limit for arbitral award.-2[(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.
3[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:
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COMCA No.26 of 2024Provided 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.
8. The issue with reference to the Section29-A of the Act and as to
whether the application for extension of time under Section 29A(4) &
29A(5) of the Act can only be entertained, if filed before the expiry of the
mandate of the arbitral Tribunal fell for consideration before the Hon’ble
Supreme Court. Dealing with divergent views of the different High
Courts and approving the view of the High Courts of Delhi, J&K and
Ladakh, Bombay, Kerala, Madras and Calcutta that such an application
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for extension of time limit for arbitral award can be filed by a party even
after the expiry of the term of 12 months or extended period six months.
In Rohan Builders (India) Private Limited case (1 supra), the Hon’ble
Supreme Court, inter alia, held as follows:
“14. In our opinion, a restrictive interpretation would lead to
rigour, impediments and complexities. A party would have to
rush to the court even when the period of arbitral mandate of
twelve months has not expired, notwithstanding the possibility
of a consent-based extension of six months under Section
29A(3). Narrow interpretation presents an additional
challenge by relegating a faultless party to a fresh reference
or appointment of an arbitrator under the A & C Act thereby
impeding arbitration rather than facilitating it. The legislature
vide the 2015 Amendment envisions arbitration as a litigant-
centric process by expediting disposal of cases and reducing
the cost of litigation. A narrow interpretation will be
counterproductive.
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. 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. 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.
xxxx xxxxx xxxxx xxxxx xxxxx xxxx xxxx xxx
xxxx xxxxx xxxxx xxxxx xxxxx xxxx xxxx xxx
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19. In view of the above discussion, we hold that an
application for extension of the time period for passing an
arbitral award under Section 29A(4) read with Section 29A(5)
is maintainable even after the expiry of the twelve-month or
the extended six-month period, as the case may be. The
court while adjudicating such extension applications will be
guided by the principle of sufficient cause and our
observations in paragraph 15 of the judgment.”
9. In the light of the decision of the Hon’ble Supreme Court, the
application filed by the respondent No.1 is maintainable and well
considered order of the learned Commercial Court allowing the said
application with supporting reasons is sustainable. This Court,
therefore, see no grounds to interfere with the order under challenge.
The Appeal is accordingly dismissed. No costs.
10. Due to pendency of the present Appeal since 19.09.2024, a
period of 96 days was lost, therefore, the said period shall be excluded
for reckoning eight (08) months time as extended by the learned
Commercial Court.
____________________
NINALA JAYASURYA, J
____________________
SUMATHI JAGADAM, J
23rd December, 2024
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COMCA No.26 of 2024
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
THE HONOURABLE SMT. JUSTICE SUMATHI JAGADAM
COMCA No.26 of 2024
23rd December, 2024
Cbs