Introduction

The Arbitration and Conciliation Act of 1996, as it was originally

drafted, didn’t contain any provision imposing a hard time limit
upon the mandate of the Arbitral Tribunaldid not have a time
limit upon the mandate of the Arbitrator.. This limitation, along
with other provisions of Sec 29A, were inserted into the
principal Act by way of the 2016 Amendment Act. 1 The Act of
1940, in s. 28, also contained provisions whereby the court
could extend the time for making an award. It should be noted,
hHowever, that the 1940 Act did not contain any mandatory
statutory limits upon the time available to the Arbitrators.
However, Tthere was an “implied time limit” condition of four
months.2 Parties were free to impose such limits by contractual
agreement. Further, it was open to the parties to extend the
time by way of mutual consent 3.4 But the omission of the
provision for extension of time and therefore the absence of
1 Sec 15 of the 2016 Amendment act.
2 See section 3 read with the First Schedule of the Arbitration Act, 1940.
Section 3- Provisions implied in arbitration agreement- An arbitration agreement, unless a different
intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as
they are applicable to the reference.
Rule 3, First Schedule- The arbitrators shall make their award within four months after entering on
the reference or after having been called upon to act by notice in writing from any party to the
arbitration agreement or within such extended time as the Court may allow.

3Shyam Telecom Ltd. vs Arm Ltd, 2 004 (3) ARBLR 146 Delhi, 2004 (77) DRJ 91 Para 17- “It is true
that 1996 Act does not prescribe any time limit for making and publishing the Award but that does not
mean that parties cannot by mutual agreement provide for a time limit for making the Award by the
Arbitrator and if so prescribed it would run contra to the provisions of the Act. This view appears to be
more plausible and acceptable having regard to the object of having Arbitration as the alternate mode
for settlement of disputes/differences between the parties.”
4 28. Power to Court only to enlarge time for making award.
(1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the
award has been made or not, enlarge from time to time the time for making the award.
(2) Any provisions in an arbitration agreement whereby the arbitrators or umpire may, except with the
consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of
no effect.
any time limit has given rise to another problem, namely, that
awards are getting delayed before the arbitral tribunal even
under the 1996 Act. One view is that this is on account of the
absence of a provision as to time limit for passing an award. 5

This said provision stipulated under Section 29A is only

applicable to arbitral proceedings (both domestic and
international arbitrations) commenced on or after 23rd October,
2015 wherein the place of arbitration is in India. Thus, it is
prospective in nature.

5 176th Law Commission Report, Page 122

Section. 29 A (1)

The first subsection of section 29A states-

1. “The award shall be made within a period of twelve months

from the date the arbitral tribunal enters upon the reference.
Explanation.—For the purpose of this sub-section, an arbitral
tribunal shall be deemed to have entered upon the reference on
the date on which the arbitrator or all the arbitrators, as
the case may be, have received notice, in writing, of their
appointment.”6

The award in question, would also include an interim award. 7

However, as per Sec. 32, Arbitral proceedings are terminated
upon the delivery of a final award and not an interim award.
8
This time limit also applies to International Commercial
6 The Arbitration Amendment Bill, 2018 proposes the following substitution to s. 29A (1)-
"(1) The award in matters other than international commercial arbitration shall be made within a
period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.";
Thus, the time period shall begin to run from the point when parties have completed their pleadings.
Thus, it seems that the legislature wishes to give a years’ time to the Arbitral Tribunal to deliberate and
decide upon the issues, as opposed to quickly wrap up the proceedings. This proposed amendment
requires to be reconsidered. The term “completion of pleading” is vague. Further, parties are free, with
the leave of the Tribunal, to amend their pleadings. As such, it would be open for unscrupulous
litigators to employ dilatory tactics and keep extending their pleadings indefinitely. The Act does not
specifically authorize the Arbitrator to compel a Party to quickly wrap up its pleadings.
7S 2. (C), Arbitration Act, 1996 “arbitral award” includes an interim award; whereas the old Act
specified that ‘“award” means an arbitration award”
8 Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal
under sub-section (2).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where—
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal
recognises a legitimate interest on his part in obtaining a final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) The arbitral tribunal finds that the continuation of the proceedings has for any other reason become
unnecessary or impossible.
 Arbitrations seated in India. The Arbitration and Conciliation
(Amendment) Bill of 2018 will exempt International
Commercial Arbitrations from any time limits. 9

The procedure for the appointment of arbitrators is laid out

under section 11 of the Act. It is worth noting that the time
limit begins from the date of the “appointment” of the
Arbitrator(s), as opposed to “commencement of arbitral
proceedings”. It is worth nothing that in the 1940 Act,
“reference” was defined as “reference to arbitration”, which,
in turn, meant when the Respondent received notice of
Arbitration proceedings. The UNCITRAL Model Law is also on
similar lines.10 This appointment may be challenged in
accordance with S. 13, based on the grounds noted in s. 12.
It is for the Tribunal to decide upon the validity of the
challenge. The appointment must be according to the rules
of the Arbitration Agreement and the procedure agreed to by
the parties, or according to the directions of the Chief Justice
(or his designee). If the appointment made is not proper,
then the award may be rendered void.1112 If the challenge

(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall
terminate with the termination of the arbitral proceedings.
9 Section 6 of the Arbitration and Conciliation (Amendment) Bill, 2018-
“In section 29A of the principal Act,—
(a) for sub-section (1), the following sub-section shall be substituted, namely:—
"(1) the award in matters other than international commercial arbitration shall be made within a
period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.”
10 Article 21. Commencement of arbitral proceedings- Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular dispute commence on the date on which a request for that
dispute to be referred to arbitration is received by the respondent.
11 Jimmy Construction Pvt. Ltd. V UoI, 2008 (2) Arb LR 591 (Bom)
12 Haresh Chinnubhai Shah v Rajesh Prabhakar Jhaveri, 2004 (1) Arb LR 536 (Bom)
 fails, then the date of appointment stands. 13 However, if the
challenge succeeds and a new arbitrator is appointed, then
s. 15 (4) comes into effect, which states-
“Unless otherwise agreed by the parties, an order or ruling of
the arbitral tribunal made prior to the replacement of an
arbitrator under this section shall not be invalid solely
because there has been a change in the composition of the
arbitral tribunal.”
Further, s. 15 (3) states-
“(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any hearings
previously held may be repeated at the discretion of the
arbitral tribunal.”
Thus, if an Arbitrator is substituted, then the previous
proceedings are not held to be void.

Under Article 12 (3) of the UNCITRAL Arbitration Rules (as

revised in 2010), if a party’s challenge to the appointment of an
Arbitrator fails, he could proceed to the Court at that stage,
instead of waiting for a final award. However, s. 13 (4), (5) of
the Arbitration Act make a distinct departure from the same.
The Parliament, with a view to prevent the dilatory tactics of an

13 The Observations of the Delhi High Court in Newton Engineering and Chemicals v IOL 2006 (4) Arb LR
257 (para 24) -
“To conclude, I have no hesitation in holding that there is no provision in the Act empowering this
Court to terminate the mandate of the Arbitrator who has entered upon the reference and/or to
substitute the same with an Arbitrator appointed by this Court. The necessary corollary is that the
challenge to the appointment of the Arbitrator must be raised by the petitioner before the Arbitral
Tribunal itself. If such challenge succeeds, the petitioner shall have no cause for grievance left. If,
however, the petitioner is unable to succeed before the Arbitral Tribunal, it shall have no option except
to participate in the arbitral proceedings and if aggrieved by the arbitral award, to challenge the same in
accordance with the provisions of Section 34 of the Act.”
unsuccessful party, has compelled it to await an award. 1415 The
inclusion of this provision is also a departure by the legislature
from the old Act of 1940, where the Court was empowered to
remove arbitrators or umpire.16

The International Chambers of Commerce has similar provision

in its 2017 Arbitration rules, where Article 31 Provides for the
time limit for the final award.17 It should be noted that the ICC
clearly refers to the Final award, thus removing the ambiguity
present in the 1996 Indian Act.

In case the first time period of one year runs out and one or
both parties do not consent to the extension of the
proceedings, the Arbitrator / Tribunal shall terminate the

14 Harike Rice Mills v State of Punjab, 1997 (Sup) Arb LR 342

15 Assam Urban Water Supply and Sewerage Scheme v Subhash Projects and Marketing Ltd. AIR
2003 Gau 146
16 See S 11, Arbitration Act, 1940-
11. Power of Court to remove arbitrators or umpire in certain circumstances.
(1) The Court may, on the application of any party to reference, remove an arbitrator or umpire who fails to use
all reasonable dispatch in entering on and proceeding with the reference and making an award.
(2) The Court may remove an arbitrator or umpire who has misconduct himself or the
Proceedings.
(3) Where an arbitrator or umpire is removed under this section, he shall not be entitled to receive any
remuneration in respect of his services.
(4) For the purposes of this section the expression “proceeding with the reference” includes, in a case where
reference to the umpire becomes necessary, giving notice of that fact to the parties and to the umpire.

17 Article 31 Time Limit for the Final Award

The time limit within which the arbitral tribunal must render its final award is six months. Such time limit shall
start to run from the date of the last signature by the arbitral tribunal or by the parties of the Terms of Reference
or, in the case of application of Article 23(3), the date of the notification to the arbitral tribunal by the Secretariat
of the approval of the Terms of Reference by the Court. The Court may fix a different time limit based upon the
procedural timetable established pursuant to Article 24(2).
The Court may extend the time limit pursuant to a reasoned request from the arbitral tribunal or on its own
initiative if it decides it is necessary to do so.
https://cdn.iccwbo.org/content/uploads/sites/3/2017/01/ICC-2017-Arbitration-and-2014-Mediation-
Rules-english-version.pdf.pdf
proceedings. This termination cannot be challenged in anyway
1819
except by a petition under section 34 of the Act.

18 In The India Trading Company vs. Hindustan Petroleum Corporation Ltd. 2016 SCC Online Cal 479, a
Division Bench of the Calcutta HC has held-
"13. There is a difference between a decision which puts an end to the arbitral proceedings and a decision
whereby the arbitrator withdraws from the proceedings. Where the arbitrator withdraws from the proceedings, a
substitute arbitrator may appointed in accordance with the procedure, applicable to the appointment of the
arbitrator who is replaced, but where the arbitrator puts an end to the arbitral proceedings, the claimant cannot
pursue his claim.
14. The decision of the arbitral tribunal to put an end to the proceedings is a final award which can only
be challenged by way of an application for settling aside under Section 34 Sub-section (2) of the 1996
Act. Once the arbitral proceedings are terminated, the claimant cannot re-agitate the same claim by
initiation of fresh proceedings since the claim would be hit by principles of constructive res judicata.”
19 Angelique International Limited vs SSJV Projects Private Limited & Anr, O.M.P. (T) (COMM.)
91/2017 & I.A. Nos.13595/2017, 14086/2017
Section. 29A (2)

The second subsection of section 29A states-

“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.”

The language used here is, “as the parties may agree” and not
“as the parties have agreed”. This implies that there need be
no prior agreement of the parties to the Arbitration with regard
to the fee payable to the arbitrators if the award is made within
6 months. The parties are thus bound to, in concert, agree to
the additional fee payable.20

The Fourth Schedule to the Arbitration and Conciliation Act of

1996 may be of some benefit in determining the appropriate
fee. S. 11 (13) and (14) are relevant in this regard. They are as
follows-

(13) An application made under this section for

appointment of an arbitrator or arbitrators shall be
disposed of by the Supreme Court or the High Court or the
person or institution designated by such Court, as the
20 The Arbitration (Amendment) Bill, 2018 proposes an amendment in sec. 11-
“(14) The arbitral institutions shall determine the fees of the arbitral tribunal and the manner of its payment to
the arbitral tribunal subject to the rates specified in the Fourth Schedule.”
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to
international commercial arbitration and in arbitrations (other than international commercial
arbitration) where parties have agreed for determination of fees as per the rules of an arbitral
institution.’
 case may be, as expeditiously as possible and an
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.
(14) For the purpose of determination of the fees of the
arbitral tribunal and them manner of its payment to the
arbitral tribunal, the High Court may frame such rules as
may be necessary, after taking into consideration the
rates specified in the Fourth Schedule.

Further, the Court has a certain amount of discretion with regard to the
costs of arbitration.21

The Legislature has proposed an amendment to the current scheme by

way of Section 3 of the Arbitration and Conciliation (Amendment) Bill of
2018. It seeks to amend section 11 of the Principal (1996) Act. After the
amendment, the fees of the Arbitrators shall be decided by the Arbitral
Institutions subject to the rates specified in the Fourth Schedule. Further,
the amendment removes International Commercial Arbitrations from the
vice of the Fourth Schedule. It also exempts parties that have agreed for
determination of fees as per the rules of an arbitral institution. 22

21 Section 39 (4)
“The Court may make such orders as it thinks fit respecting the costs of the arbitration where any
question arises respecting such costs and the arbitral award contains no sufficient provision
concerning them”.
22 S. 11 (14) as proposed in the 2018 Amendment bill-
“The arbitral institutions shall determine the fees of the arbitral tribunal and the manner of its payment to the
arbitral tribunal subject to the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to
international commercial arbitration and in arbitrations (other than international commercial
arbitration) where parties have agreed for determination of fees as per the rules of an arbitral
institution.”
 [THE FOURTH SCHEDULE]23

Sum in dispute Model fee

Up to Rs. 5,00,000 Rs. 45,000
Above Rs. 5,00,000 and up to Rs. Rs. 45,000 plus 3.5 per cent. of
20,00,000 the claim amount over and above
Rs. 5,00,000
Above Rs. 20,00,000 and up to Rs. 97,500 plus 3 per cent. of
Rs. 1,00,00,000 the claim amount over and above
Rs. 20,00,000
Above Rs. 1,00,00,000 and up to Rs. 3, 37,500 plus 1 per cent.
Rs. 10,00,00,000 of the claim amount over and
above Rs. 1,00,00,000
Above Rs. 10,00,00,000 and up to Rs. 12, 37,500 plus 0.75 per
Rs. 20,00,00,000 cent. of the claim
amount over and above Rs.
1,00,00,000
Above Rs. 20,00,00,000 Rs. 19, 87,500 plus 0.5 per
cent. of the claim amount over
and above Rs. 20,00,00,000 with
a ceiling of Rs. 30,00,000

23
246thLaw Commission Report, Page 19, para 11, 12-
11.The model schedule of fees are based on the fee schedule set by the Delhi High Court International
Arbitration Centre, which are over 5 years old, and which have been suitably revised. The schedule of fees
would require regular updating, and must be reviewed every 3-4 years to ensure that they continue to stay
realistic.
12. The Commission notes that International Commercial arbitrations involve foreign parties who might have
different values and standards for fees for arbitrators; similarly, institutional rules might have their own schedule
of fees; and in both cases greater deference must be accorded to party autonomy. The Commission has,
therefore, expressly restricted its recommendations in the context of purely domestic, ad hoc, arbitrations.
Section. 29A (3)

The third subsection of section 29A states-

“The parties may, by consent, extend the period specified in
sub-section (1) for making award for a further period not
exceeding six months.”

This sub-section implies that the parties need to reach a new

agreement in order to extend the time period for further
Arbitration. The use of the words “may, by consent, extend”
implies the need for a new agreement. Thus, there may not be
a prior agreement, whether by way of the main contract, or by
way of the Arbitration Agreement.

This seems to be based on the proposal of the 176 th Law

Commission Report.24

24 Proposed Section 29A (7)-

“The parties cannot by consent, extend the period beyond the period specified in sub-section (1) and
the maximum period referred to in sub-section (2) and save as otherwise provided in the said sub-
sections, any provision in an arbitration agreement whereby the arbitral tribunal may further extend
the time for making the award, shall be void and of no effect.”
Section. 29A (4)

The fourth subsection of section 29A states-

“(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. 25
”

It should be noted that the phrase used in this sub-section is “the

mandate of the arbitrator(s) shall terminate”. This does not mean
that the arbitration proceedings shall terminate. As has been
discussed above, there is a distinction between the termination of
an Arbitrator’s mandate and the termination of proceedings. The
later may only be done by an “order passed by the arbitrator” in
terms of s. 32 of the 1996 Act. If the mandate of the arbitrator
terminates as provided in the main provision of s. 29A (4), then it
may be open to the court to appoint new arbitrators. It is implied
that the Arbitrator(s) shall be substituted by the court if it is found
that the Arbitrator(s) has/have failed to act and adjudicate without

25 The Arbitration Amendment Bill, 2018 proposes the following amendment to s. 29A (4)
“in sub-section (4), after the proviso, the following provisos shall be inserted, namely:—
"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."
 undue delay. This becomes amply clear upon an examination of sub-
section 6 of section 29A.26
It should be noted that once an arbitrator’s mandate has been
terminated, he may be appointed again. There is no specific
authority for this proposition, however, the Supreme Court has
decided a case where one of the Parties challenged the appointment
of the Arbitrator on the ground that he had decided a previous
dispute in a prior Arbitration proceeding arising out of the same
Contract, involving identical issues. The ground taken by the Party,
among others, was that the Arbitrator has had “The arbitrator has
previous involvement in the case.” 27
This is one of the grounds for
challenging the appointment of an Arbitrator.28 It is also a ground
which “gives rise to justifiable doubts as to the independence or
impartiality of arbitrators.”29 Another ground taken was that if
arbitrator has been appointed as an arbitrator on more than one
occasion by a party, such appointment falls afoul of Clauses 22 and
24 of the Fifth Schedule and therefore it is justified to doubt his
impartiality. It is worth noting that while the Fifth Schedule lays
down certain situations where an Arbitrator’s appointment may be
challenged, it is not an absolute rule. The Seventh Schedule,
however, lays down grounds that render a person “ineligible to be

26 “(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.”
27Arbitration and Conciliation Act, 1996, Seventh Schedule, Clause 16
28 Section 12 (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the
parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability
of this sub-section by an express agreement in writing.]
29 See Clause 16, The Fifth Schedule, 1996 Act
appointed as an arbitrator”.30 This must be interpreted in light of
Explanation 3 to the Seventh Schedule which says-

“For the removal of doubts, it is clarified that it may be the

practice in certain specific kinds of arbitration, such as
maritime or commodities arbitration, to draw arbitrators from
a small, specialised pool. If in such fields it is the custom
and practice for parties frequently to appoint the same
arbitrator in different cases, this is a relevant fact to be
taken into account while applying the rules set out above.”
The Court drew a distinction between independence and impartiality
and held that a person may not be independent, but may yet be
impartial. The observations of the Supreme Court, as made by
Nariman J, in this regard are as follows-
“……………..every arbitrator shall be impartial and
independent of the parties at the time of accepting his/her
appointment. Doubts as to the above are only justifiable if a
reasonable third person having knowledge of the relevant
facts and circumstances would reach the conclusion that
there is a likelihood that the arbitrator may be influenced by
factors other than the merits of the case in reaching his or her
decision. This test requires taking a broad common-sensical
approach to the items stated in the Fifth and Seventh
Schedules. This approach would, therefore, require a fair
construction of the words used therein, neither tending to
enlarge or restrict them unduly……….”31

“…………In this context, it is important to refer to the IBA

Guidelines, which are the genesis of the items contained in
the Seventh Schedule. Under the waivable Red List of the IBA
Guidelines, para 2.1.2 states:

30 See ibid, 22
31 HRD Corporation v GAIL India Ltd. (Civil Appeal no 11127 of 2017),
 “The Arbitrator had a prior involvement in the dispute.”
24. On reading the aforesaid guideline and reading the
heading which appears with Item 16, namely “Relationship of
the arbitrator to the dispute”, it is obvious that the arbitrator
has to have a previous involvement in the very dispute
contained in the present arbitration.”32
“It has also been argued by learned counsel appearing on behalf of
the respondent that the expression “the arbitrator” in Item 16
cannot possibly mean “the arbitrator” acting as an arbitrator, but
must mean that the proposed arbitrator is a person who has had
previous involvement in the case in some other avatar. According to
us, this is a sound argument as “the arbitrator” refers to the
proposed arbitrator. This becomes clear, when contrasted with Items
22 and 24, where the arbitrator must have served “as arbitrator”
before he can be disqualified. Obviously, Item 16 refers to previous
involvement in an advisory or other capacity in the very dispute, but
not as arbitrator. 33

The words “termination of mandate” have been used elsewhere in

the 1996 Act. The provisions of Section 15 are relevant here. It
reads as follows-
“15. Termination of mandate and substitution of
arbitrator.—
(1) In addition to the circumstances referred to in
section 13 or section 14, the mandate of an arbitrator
shall terminate—
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed according to the

32 Ibid, Para 23, 24

33 Ibid, Para 16
 rules that were applicable to the appointment of the
arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an
arbitrator is replaced under sub-section (2), any
hearings previously held may be repeated at the
discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or
ruling of the arbitral tribunal made prior to the
replacement of an arbitrator under this section shall not
be invalid solely because there has been a change in the
composition of the arbitral tribunal”

A combined reading of Sections 15(2) and 29A (4) tells us that if the
mandate of the Arbitrators terminates, then the rules applicable to
the appointment of the initial arbitrator shall be applicable. This, in
turn, means that if the Parties had decided upon the selection
criteria34 and procedure for Arbitrators, such rules and procedures
shall be followed here again. If there is no prior agreement, or the
parties do not agree again as to the procedure, then –

1. In an arbitration with three arbitrators, each party shall

appoint one arbitrator, and the two appointed arbitrators shall
appoint the third arbitrator who shall act as the presiding
arbitrator.35

2. If the above appointment procedure applies and—

a. a party fails to appoint an arbitrator within thirty days from
the receipt of a request to do so from the other party; or
b. the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date of their appointment,

34 Section 11 (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing
the arbitrator or arbitrators.
35 Section 11 (3)
 the appointment shall be made, upon request of a party, by [the
Supreme Court or, as the case may be, the High Court or any
person or institution designated by such Court];36

3. Failing any agreement referred to (1), in an arbitration with a

sole arbitrator, if the parties fail to agree on the arbitrator within
thirty days from receipt of a request by one party from the other
party to so agree the appointment shall be made, upon request of a
party, by [the Supreme Court or, as the case may be, the High Court
or any person or institution designated by such Court].

4. Where, under an appointment procedure agreed upon by the

parties,—

a. a party fails to act as required under that procedure; or

b. the parties, or the two appointed arbitrators, fail to
reach an agreement expected of them under that procedure;
or

c. a person, including an institution, fails to perform any

function entrusted to him or it under that procedure,

a party may request [the Supreme Court or, as the case may be, the
High Court or any person or institution designated by such Court] to
take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the
appointment.

The power of the Court to substitute Arbitrators is in addition to, and

not in derogation of, its power to deduct fees. The power of the
Court to deduct fee can be quite severe. Although there is a limit of
5% for every month, there can be situations where the delay is for
multiple months. For example, the maximum deduction allowed for

36 Section 11 (4)
 a delay of 6 months is 30% of the total fee. In such a case, the
cumulative deductions can be quite great. It is also worth observing
that the fee paid to an Arbitrator may be on more than one basis. It
may be fixed, per month, or per session. The imposition of a high
deduction can be especially severe and harsh where the Arbitrator
has agreed to a fixed fee. In such a situation, it is in his interest to
make an award as quickly as possible. It is hoped that the Court,
while imposing a deduction, shall both give a hearing to the
Arbitrator as to the quantum of deduction, as well as consider the
basis upon which his fee is paid. This is certainly the current position
of the law, which has also been made clear by the Legislature. The
2018 Bill includes an amendment which will add a Proviso to Section
29A (4) which specifies the right of the Arbitrator to be heard by the
court before his fee is reduced.37

There is, however, a likely and unusual contingency which might

arise. The Fourth Schedule specifies the Arbitrator’s fee based upon
the “sum in dispute”. This term is vague. Often times, the exact
amount in dispute is in question. It can be a tedious and
complicated task, for example, to determine the amount of loss of
future profits suffered. The determination of interest (the rate, as
well as the quantum) is also very commonly an issue in commercial
Arbitrations. Parties also usually claim the costs of Arbitration and/or
any associated litigation and other legal expenses. Further, in
commercial Arbitrations, for every claim, there is almost always a
counter claim. Thus, even if we assume that the Legislature
intended “sum in dispute” to mean the amount claimed by the
party, then what happens when the Respondent files a counter-

37 Section 6, Arbitration and Conciliation (Amendment) Bill, 2018-

“In section 29A of the principal Act,—
………………………..
(b) in sub-section (4), after the proviso, the following provisos shall be inserted,
namely:—
…………………………..
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is
reduced.”
 claim? Do we take the “sum in dispute” to mean the sum total
monetary value of both the claim, as well as the counter-claim?

It is worth noting that this provision empowers the court to deduct

fees, and fees only. Black’s Law Dictionary (9 th Edn.) defines fee as
“A charge for labor or services, esp. professional services” 38. This
view is supported by the fact that section 31 (8) of the 1996 Act
uses the words “costs”, as well as the word “fees”. Costs of
Arbitration includes the Arbitrator’s fees.39 Article 40, Clause 2 also
defines fees as a sub-set of “costs”.40The Court cannot impose such
a deduction, that it also eats away at the Arbitrators out of pocket
expenses and costs. For example, if the Arbitration is conducted by
an Institutional Arbitrator which also charges rent to let out the
office of the Arbitrators, the court cannot deduct such amount.
There are many expenses associated with Arbitration apart from the
fee simpliciter given to the arbitrator. The Indian Institute of
Arbitration and Mediation has published its Fee Schedule and this
may be referenced here.
Before the deduction of fee, the Court must follow the Principles of
Natural Justice. One of the principles is the rule of audi alterm
paterm, which means “hear the other side”. The Court is bound to
38 Page 718
39 Section 31 (8), 1996 Act-
“The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.]
Explanation.—For the purpose of clause (a), “costs” means reasonable costs relating to—
(I) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the arbitration, and
(iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award.”
40 Article 40 (2), UNCITRAL Arbitration Rules, 2010-
2. The term “costs” includes only:
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal
itself in accordance with article 41;
(b) The reasonable travel and other expenses incurred by the arbitrators;
(c) The reasonable costs of expert advice and of other assistance required by the arbitral tribunal;
(d) The reasonable travel and other expenses of witnesses to the extent such expenses are approved by the
arbitral tribunal;
(e) The legal and other costs incurred by the parties in relation to the arbitration to the extent that the arbitral
tribunal determines that the amount of such costs is reasonable;
(f) Any fees and expenses of the appointing authority as well as the fees and expenses of the Secretary-
General of the PCA.
 give a hearing to the Arbitrator before passing any adverse order
against him, whether for the deduction of fee, or his substitution.
This adds to the amount of time consumed by the judicial
intervention.

It is noteworthy that most Arbitrators, especially those appointed by

the Court, are retired Judges, who are well versed with the law. If
necessary, the Court may also appoint subject matter experts.
Further, the 1996 Act allows the parties to decide the criteria for the
appointment of Arbitrators. This power also includes the ability to
specify the qualifications of the Arbitrators.41 As such, Arbitrators are
not likely to be incompetent. Thus, the penalties by way of
deduction of fee and/or substation hangs upon an Arbitrator’s head
like the sword of Damocles. While the 1996 Act, by virtue of the
2015 Amendment Act does contain such provisions for penalties and
time restrictions, it did not contain any such provisions when it was
originally enacted. This was a departure from the 1940 Act which,
by virtue of an “implied term” included a time limit of four months
from the date of reference. It seems that the Legislature regretted
its decision to give Arbitrators and Parties a free hand and in its
wisdom, imposed these provisions. Perhaps the Legislature was of
the view that Arbitrations were concluded in a much more rapid
manner under the 1940 Act. It may be true that Arbitrations may
have been wrapped up faster in earlier times, but correlation does
not equate to causation. Arbitrations today are far more common
that Court litigations, especially in Commercial Contracts where
complex trade deals are involved. In such deals, the Contracts alone
often run into hundreds, if not thousands of pages. This is a clear
indicator of the increase in complexity of today’s commercial
disputes. When such complicated matters are to be adjudicated, it is
only natural for the proceedings to take their time. In order to do
411 Section 11 (8) The Supreme Court or, as the case may be, the High Court or the person or institution
designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective
arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties;
 complete justice, the Arbitrators must pay attention to all the
materials and arguments advanced by the parties. It is not
reasonable to assume that the Arbitrators are not working
expeditiously, the relevant circumstances must be taken into
context.

The 1996 Act remains silent as to what happens when the time has
run out while an application for extension is pending with the court.
The 176th Law Commission in its Report, suggested that in such a
situation, Arbitration proceedings should be allowed to continue. 4243
Further, the Commission was of the opinion that if the proceedings
have not been concluded even after an extension by the Court, they
should be allowed to continue.44
It is not explicitly stated in the Act what would happen if no party
applies to the court to extend time. The 176th Commission’s view
was that In order that there is no further delay, after the period of
initial one year and the further period agreed to by the is over, the
arbitration proceedings will stand suspended and will get revived as
soon as any party to the proceedings files an application in the
Court for extension of time. In case none of the parties files an
application, even then the arbitral tribunal may seek an extension
from the Court.45 The Arbitration and Conciliation (Amendment) Bill
42 Page 124., Para 2.21.3
43 Proposed Section 29A (4)-
“Pending consideration of the application for extension of time before the Court under sub section (3),
the arbitration proceedings shall continue before the arbitral tribunal and the Court shall not grant
any stay of the arbitral proceeding”
44 176th Report, page 125, Para 2.21.5- there is no point in terminating the arbitration proceedings.
We propose it as they should be continued till award is passed. Such a termination may indeed result in
waste of time and money for the parties after lot of evidence is led. In fact, if the proceedings were to
terminate and the claimant is to file a separate suit, it will even become necessary to exclude the period
spent in arbitration proceedings, if he was not at fault, by amending sec. 43(5) to cover such a situation.
But the Commission is of the view that there is a better solution to the problem
45 This suggestion was formulated by the Commission in its proposed version of s. 29A (3)-
“If the award is not made within the period specified in sub-section (1) and the period agreed to by the
parties under sub-section (2), the arbitral proceedings shall, subject to the provisions of sub-sections (4)
 of 2018 makes a very welcome improvement to the existing law by
stating that while the application for an extension is pending
decision by the Court, the Arbitration proceedings shall continue till
the application is disposed of by the Court.46

to (6), stand suspended until an application for extension is made to the Court by any party to the
arbitration, or where none of the parties makes an application as foresaid, until such an application is
made by the arbitral tribunal.
46 Section 6 of the Arbitration and Conciliation (Amendment) Bill, 2018-
“In section 29A of the principal Act,—
……………………..
(b) in sub-section (4), after the proviso, the following provisos shall be inserted,
namely:—
"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:”
Section. 29A (5)

The fifth subsection of section 29A states-

“(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.”

Looking at the provision, it seems clear that the party applying for
extension must show that an extension of time should be granted.
The burden of proof is upon the applicant. “Party” has been defined
in the Act as “party” means a party to an arbitration agreement.
Therefore, the right to apply to a Court for the extension of time is
available only to the parties to the disputes, and not the Arbitrators.
It should be noted that the Law Commission, in its 176 th Report
stated that “if the parties do not apply, the arbitrators can also
apply for the same.”47

It should be noted that the phrases “may be granted” and “only for
sufficient cause” has also been used here. “Sufficient cause” has
also been used in section 5 of the Limitation Act.48 Thus, this
provision gives the Court a wide amount of discretion and places a
heavy burden upon the applicant. The use of the word “only”
ensures that the court can grant an extension under a limited set of
circumstances. It is possible that lengthy proceedings in courts may

47 Page 17, 176th Law Commission Report

48 5. Extension of prescribed period in certain cases.—Any appeal or any application, other than an
application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be
admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient
cause for not preferring the appeal or making the application within such period.
Explanation.—The fact that the appellant or the applicant was missed by any order, practice or
judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause
within the meaning of this section.
ensue in order to convince the Court of the validity and existence of
“sufficient cause”. The parties may be faced with the need to lead a
large amount of evidence and arguments in order to get an
extension. As with other previously discussed provisions in the Act
which necessitate judicial intervention, there is a specific
requirement given in this sub-section for the courts to decide the
application in an expeditious manner, as well as a recommended
disposal time (60 days from the date of service of notice on the
opposite party).

This requirement for a Court’s approval seems rather contrary to the

objectives and purpose of the Arbitration and Conciliation Act. The
entire point of this Act was to provide for an alternative dispute
resolution mechanism whereby the parties had access to fast and
effective remedies and the over-burdened dockets of the courts
could be reduced. The Law Commission in its 76th Report, which
recommended certain amendments, including a proviso to be
inserted in section 28 of the Act of 1940 forbidding, an extension
beyond one year, in respect of the time for making the award
except for special and adequate reasons to be recorded.

There is also an unintended consequence of this sub-section. In

order to adjudicate upon the sufficiency of cause for extension of
time, one of the most common reasons may be the inherent
complexity of the dispute or the technical nature of the underlying
contract, or even the time taken by an expert to make his
observations and give his evidence. All of these reasons ensure that
the parties must place on the Court’s record a lot of material which
may otherwise be highly confidential. For example, a lot of joint-
ventures or technology transfer agreements involve intellectual
property and trade secrets which need to be protected. The
confidentiality inherent in Arbitration proceedings is not present in
courts.
 It is worth noting that the above provision does not specify the
amount of additional time the Court can grant to the Arbitrator. As
such, it is entirely up to the Courts discretion. While the76 th report of
the Law Commission recommended for fixing maxim period for the
court to extend time, the 176th Commission wanted to leave it to the
Court’s discretion. Further, the Court has the ability to impose terms
and conditions. It is very easy to foresee that the court may order
an extension by a relatively short amount of time, say, one month,
and then force the parties to come back to it. Thus, the Court will
have a sort of supervisory jurisdiction over and above the kind
envisioned by the 1996 Act. This is quite clearly against the
intention of the Legislature, as evidenced under section 5 of the Act
(for which, there is no analogous provision in the 1940 Act).

Art.24 (1) of the International Chambers of Commerce Rules, 1998

fixed a period of six months from the date of signature or approval
by the International Court of Arbitration of the terms of reference.
However, the International Court of Arbitration may “pursuant to a
reasoned request from the arbitrator or if need be on its own
initiative, extend the time limit if it decides, it is necessary to do so
(Art. 24(2). Where an excessive delay is attributable to the
arbitrators, the International Court of Arbitration may resort to the
provisions of the Rules concerning the replacement of arbitrators,
which apply where the arbitrators fail to perform their duties within
the stipulated time limits.49

The corresponding provision in the English Arbitration Act is as section 50

which states-
“Extension of time for making award.
(1) Where the time for making an award is limited by or in
pursuance of the arbitration agreement, then, unless otherwise

49 See Art. 12 (2) of the ICC Rules, 1998

 agreed by the parties, the court may in accordance with the
following provisions by order extend that time.
(2) An application for an order under this section may be made
—
(a) by the tribunal (upon notice to the parties), or
(b) by any party to the proceedings (upon notice to the
tribunal and the other parties), but only after
exhausting any available arbitral process for obtaining
an extension of time.
(3) The court shall only make an order if satisfied that a
substantial injustice would otherwise be done.
(4) The court may extend the time for such period and on such
terms as it thinks fit, and may do so whether or not the time
previously fixed (by or under the agreement or by a previous
order) has expired.
(5) The leave of the court is required for any appeal from a
decision of the court under this section”

Section 79 of the English Act is also relevant in this regard.50

The 176th Law Commission Report laid down the following things to
take into account while deciding upon the issue of time extension-

(a) the extent of work already done;

(b) the reasons for delay;
(c) the conduct of the parties or of any person representing the
parties;

50 79 Power of court to extend time limits relating to arbitral proceedings.

Unless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to
any matter relating to the arbitral proceedings or specified in any provision of this Part having effect in default
of such agreement. This section does not apply to a time limit to which section 12 applies (power of court to
extend time for beginning arbitral proceedings, &c.).
An application for an order may be made—
by any party to the arbitral proceedings (upon notice to the other parties and to the tribunal), or
by the arbitral tribunal (upon notice to the parties).
The court shall not exercise its power to extend a time limit unless it is satisfied—
that any available recourse to the tribunal, or to any arbitral or other institution or person vested by the parties
with power in that regard, has first been exhausted, and
that a substantial injustice would otherwise be done.
The court’s power under this section may be exercised whether or not the time has already expired.
An order under this section may be made on such terms as the court thinks fit.
The leave of the court is required for any appeal from a decision of the court under this section.
(d) the manner in which proceedings were conducted by the arbitral
tribunal;
(e) the further work involved;
(f) the amount of money already spent by the parties towards fee
and expenses of arbitration;
(g) any other relevant circumstances,
Section. 29A (6)

The sixth subsection of section 29A states-

“(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.”

As noted earlier, in addition to sanctions by way of fee deduction, the

supervising court can substitute the Arbitrator(s). However, this can
cause additional delays. While the Legislature has urged the Courts not to
dawdle while appointing substitutes, it will not be instantaneous. The
Courts must appoint substitute Arbitrators within 60 days “from the date
of service of notice to the opposite party.” 51
The duration is similar to
when the Arbitrator is first appointed.52 It is worth noting that while the
initial appointment may be done only by the Supreme Court/High Court, a
substitute may be appointed by the Court having supervisory jurisdiction.
As such, depending upon which court has jurisdiction, the parties may be
able to approach a district court/Principal Civil Court or Court of Small

51 Section 29A (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.”
52 Section. 11 (13)-” An application made under this section for appointment of an arbitrator or
arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution
designated by such Court, as the case may be, as expeditiously as possible and an 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.”
Causes as well, which may result in a faster appointment. 53
This seems to
be a trend since the 1996 Act, as it was originally drafted, only
empowered the Chief Justice of the High Court / Supreme Court (or his
Designee) to make an initial appointment.

It is worth noting that the Act of 1940 also empowered the Court to
substitute Arbitrators when they were the cause of undue delay. This was
to be done upon an application made by a party. Thus, a Party could
initiate subsequent substitution of an Arbitrator, even if the appointment
was valid. Under section 11 (1) of the 1940 Act, it was stated-
“The Court may, on the application of any party to a
reference, remove an arbitrator or umpire who fails to use all
reasonable dispatch in entering on and proceeding with the
reference and making an award.”
Further, if the arbitrator was removed, he would not have been
entitled to any remuneration.54 Upon such removal, any party could
apply to have the vacant Arbitrator’s post filled.55

53 Section 2 (e)-
“Court” means—
(I) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of
original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same
had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal
Civil Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the
arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having
jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]
54 Section 11 (3) “Where an arbitrator or umpire is removed under this section, he shall not be
entitled to receive any remuneration in respect of his services”
55 Section 12 (1) Where the Court removes an umpire who has not entered on the reference or one or more
arbitrators (not being all the arbitrators), the Court may, on the application of any party to the arbitration
agreement, appoint persons to fill the vacancies.
(2) Where the authority of an arbitrator or arbitrators or an umpire is revoked by leave of the Court, or where the
Court removes an umpire who has entered on the reference or a sole arbitrator or all the arbitrators, the Court
may, on the application of any party to the arbitration agreement, either-
(a) appoint a person to act as sole arbitrator in the place of the person or persons displaced, or
(b) order that the arbitration agreement shall cease to have effect with respect to the difference referred.
Section. 29A (7)

The seventh subsection of section 29A states-

“(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.”

This provision ensures that no additional time is wasted by

restarting the proceedings de novo. This is in contradistinction to
section 15 (3) of the 1996 Act which stated “(3) Unless otherwise
agreed by the parties, where an arbitrator is replaced under sub-
section (2), any hearings previously held may be repeated at the
discretion of the arbitral tribunal.” The fact that the reconstituted
tribunal is deemed to be in continuation of the previously appointed
tribunal means that any orders passed by the previous tribunal are
not rendered ineffective due to their substitution. 56 This shall hold
even if the parties agree otherwise.

According to Section 27 (4) of the English Arbitration Act, 1996,”The

tribunal (when reconstituted) shall determine whether and if so to what
extent the previous proceedings should stand. This does not affect any
right of a party to challenge those proceedings on any ground which had
arisen before the arbitrator ceased to hold office “

56 This is similar to Section 15 (4) –“Unless otherwise agreed by the parties, an order or ruling of the
arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid
solely because there has been a change in the composition of the arbitral tribunal.”
Section. 29A (8)

The eighth subsection of section 29A states-

“(8) It shall be open to the Court to impose actual or
exemplary costs upon any of the parties under this section.“

This sub-section is incorporated to deter unscrupulous parties, especially

those who are only interested in delaying the cause of justice. The use of
the phrase “any of the parties under this section” is ambiguous. Since this
section also refers to Arbitrators, they may be included in the ambit of this
penal provision. As stated earlier, the principles of Natural Justice in
general, and the rule of audi alterem patrm are to be followed and before
imposing any costs, the Court must give a hearing to the party likely to be
effected.
Section. 29A (9)

The ninth subsection of section 29A states-

“(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.”