TATA Sons Pvt. Ltd. (Formerly TATA Sons Ltd) v. Siva Industries and Holdings Ltd & Ors (2023)Whether the time limit for passing an award as per the amended Section 29A of Arbitration Act is applicable to ‘international commercial arbitration’?

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HON’BLE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

BENCH: Dr Dhananjaya Y Chandrachud, CJI; Pamidighantam Sri Narasimha, J.

Case Number: Miscellaneous Application No 2680 of 2019 In Arbitration Case (Civil) No 38 of 2017

Case Title: TATA Sons Pvt. Ltd. (Formerly TATA Sons Ltd) v. Siva Industries and Holdings Ltd & Ors (2023)

Case Details: 

Disputes arose between the Applicant and Respondents and the notice of arbitration was issued by the Applicant in 2017. Therefore, the Applicant filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Act) before the Supreme Court (SC) seeking constitution of an arbitral tribunal.

Facts: 

• In 2006, TATA Sons Pvt Ltd (Applicant), Siva Industries and Holdings Ltd (Respondent No. 1) and Tata Tele Services Ltd (TTSL) executed a Share Subscription Agreement for the issuance and allotment of shares of TTSL to the First Respondent.
• Subsequently, the Applicant, TTSL and NTT Docomo Inc (Docomo) executed a share purchase agreement, whereby Docomo acquired certain equity shares of TTSL from Respondent No. 1. The rights, obligations, and duties of Docomo’s ownership of TTSL’s shares were recorded in a Shareholders’ Agreement (SHA) executed between the three parties.
• The Respondents then entered into an Inter se Agreement with the Applicant and TTSL, which placed an obligation over the Respondents to purchase the TTSL shares on a pro-rata basis if Docomo exercises its sale option under the SHA.
• Thereafter, arbitration proceedings were initiated by Docomo to resolve the dispute between the parties. Pursuant to the decision of the Arbitrator, the Applicant was directed to acquire Docomo’s shareholding in TTSL and make the necessary payments for the same to Docomo.
• As per the Inter se Agreement, a foreign resident, Mr. C. Sivasankaran (Respondent No. 2) being the promoter of Respondent No. 1, was liable to the Applicant in the instances where Respondent No. 1 failed to fulfil its obligation and pertaining to the said Agreement, the Respondents were asked to acquire back its shareholdings in TTSL and proportionately pay Docomo.
• Disputes arose between the Applicant and Respondents and the notice of arbitration was issued by the Applicant in 2017. The Respondents failed to appoint their nominee arbitrator. As Respondent No. 2 was a foreign citizen, the Applicant filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (Act) before the Supreme Court (SC) seeking constitution of an arbitral tribunal.
• Vide Order dated January 17, 2018, SC appointed a Sole Arbitrator i.e., (Retd.) Mr. Justice S.N. Variava, who granted extension of six months for delivering the arbitral award, till August 14, 2019, on mutual consent.
• During the pendency of the arbitration proceedings, insolvency proceedings were initiated by the IDBI Bank Ltd against Respondent No. 1. Vide Order dated July 05, 2019, NCLT initiated CIRP under the IBC and a moratorium was placed on all the proceedings, including the arbitral proceedings against Respondent No. 1.
• Vide Order dated June 03, 2022 passed by the SC, Respondent No. 1 was freed from the CIRP, and the moratorium was lifted. In the meantime, Section 29A was amended by the Arbitration and Conciliation (Amendment) Act, 2019, w.e.f August 30, 2019.
• In view of the above, the Applicant filed the present Application before the SC seeking to allow the Sole Arbitrator to continue the proceedings without the need of extension of time, on the grounds that the time limit stated in Section 29A (1) of Act would not be applicable to international commercial arbitrations.

Issue Aroused-

• Whether the time limit for passing an award as per the amended Section 29A of Arbitration Act is applicable to ‘international commercial arbitration’?
• Whether the amended Section 29A of Arbitration Act applies retrospectively?

Court observed:

• At the outset, the SC extensively analysed the difference in the wording of Section 29A in the 2015 and 2019 Amendment Act, relying upon the intent of the legislature in making the said change. The SC held that the expressions ‘as expeditiously as possible’ and ‘endeavour may be made‘ indicate that the legislature intends to exclude international commercial arbitrations from the mandatory nature of the Section. The Section implies that the arbitral tribunal shall make an effort to render the arbitral award within a period of 12 months in international commercial arbitration, whereas for domestic commercial arbitration, it is mandatory to render arbitral award within 12 months.
• The SC observed that the need for the relaxation of the said time period for international commercial arbitration stems from the report of the High-Level Committee dated July 30, 2017, chaired by Justice B N Srikrishna, which stated that Section 29A of the 2015 Act was heavily criticized by international arbitral institutions for setting timelines for completion of the international arbitration proceedings, which contended that the conduct of the arbitral proceedings should be monitored by the arbitral institutions and the Courts’ intervention is not required as these institutions have their own machinery for case management.
• With regards to sub-Sections 3 and 4 of the Section 29A, SC observed that the rationale behind the extension for 6 months is envisaged for domestic arbitrations where it is mandatory that award shall be granted within 12 months. SC thus held that as the mandate is already absent for international arbitrations, the sub-Sections become inapplicable.
• While dealing with the issue relating to retrospective application of the 2019 Act, the SC applied the parameters set out by previous decisions of the SC and other High Courts. In Thirumalai Chemicals Ltd v Union of India, Jose Da Costa & Anr v. Bascora Sadasiva Sinai Narcomim and Hintendra Vishnu Thakur v. State of Maharashtra, it was held that the procedural laws are generally retrospective, provided there is a clear indication that the legislature did not intend the same, or if the procedural law creates new rights, liabilities or obligations.
• The SC was of the view that the amended Section of 29A does not create any new rights or liabilities on the parties, and on the contrary, the amendment was remedial in nature, as the international commercial arbitration was brought outside the purview of judicial intervention and within the domain of the arbitrator. Further, regarding the intention of legislature for retrospective application, the SC observed that the 2019 Amendment Act does not contain any provision equivalent to Section 26 of the 2016 Act which explicitly indicated the prospective nature of the said Amendment of 2016.
• The decision of the Delhi High Court in the case ONGC Petro Additions Ltd v. Ferns Construction Co Inc, was highlighted, wherein it was held that Section 29A of 2019 Act was applicable to all the pending arbitrations in India as of August 30, 2019.

Held By Court: 

• Hence, it was held by the Hon’ble Supreme Court of India that Section being remedial in nature and having no express bar in retrospective application by the legislature, hereafter that the Section 29A (1) of the Arbitration Act, 2019 is applicable retrospectively.
• On the basis of the abovementioned observations, the SC allowed the present application and held that the Sole Arbitrator, acting within his domain and jurisdiction, was to decide upon whether further extension was to be given to the parties and the arbitrator is expected to endeavour expeditious conclusion of the arbitration. 

Written by Divyanshi Aggarwal 10^th Semester student of  Institute of Management Education (IME), Chaudhary Charan Singh University, Meerut

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