Effect of COVID-19 on Arbitration Timeline

The author, Ishika Sharma, is a 4th year BA-LLB student at Symbiosis Law School, Pune.

COVID-19 started as a health crisis, but has also resulted in shattered economies and societal breakdowns. The rapid increase in corona cases and continuous extension in the lockdown period increases demands for justice, from the employment crisis to potential concerns in liquidity to commercial disputes. There are continuous strains in the Indian justice system and access to justice have become a premium. Given COVID-19 induce anxiety among the masses, the legal response to this time must be rapid to avoid medical pandemic from turning into a humanitarian tragedy. In the current scenario, the arbitration mechanism could be a useful tool for dispute resolution. But due to various time limitations provided in the Arbitration and Conciliation Act, 1996, it has become a hindrance in expediting justice to the parties. This paper will highlight various timelines provided under the Indian arbitration act and elaborate on the measures taken by the Indian judiciary in response to the pandemic. It will further provide suggestions concerning the issues that arose due to the use of the traditional methodologies of arbitral proceedings in dispute resolution.

Introduction

In India with various national courts not fully operational, the use of arbitration in compelling circumstances has become more attractive to the public. But due to lockdown in the whole of India, approaching court for fulfilling various procedural requirements under the Indian Arbitration Act has become difficult. Due to travel and other constraints, many International Arbitration Institutions are using different modes to conduct hearings. For instance, participants have used Maxwell Chambers ADR Hearing Solutions, Zoom, and Microsoft Teams platforms for related virtual hearings.[1] Given the developing situation of COVID-19 in India, parties are turning towards virtual arbitral proceedings. Virtual hearing can be managed properly and applied in appropriate disputes, and can save considerable time and costs. But in India still, no proper guidelines have been provided to conduct virtual arbitral hearings. This article will light upon the need for virtual proceedings and proper guidelines by the judiciary to conduct the arbitral proceeding in the agonizing situation of COVID-19. The article will also provide the other recourses available to parties against adhering to various time limitations under the Indian Arbitration Act.

Time Limitations in the Indian Arbitration Act

There are several timelines enumerated under the Arbitration and Conciliation Act, 1996 wherein a court is mandated to be approached such as under Section 27, seeking court assistance for evidence or challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 specifically provides a limitation period of 3 months with a concession of 30 days delay on the establishment of sufficient reasons and not thereafter, to challenge an arbitral award.[2]The following are the various timelines provided in the Arbitration and Conciliation Act, 1996:

Understanding the 23rd March and 6th May Order

Supreme Court in line of the COVID 19 situation, suo moto took up the issue of extension of limitation vide order 23 March 2020[8] directing as under:

“…This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under special laws (both Central and/or State).

To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective courts/Tribunals across the country including this Court, it is hereby ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or special laws whether condonable or not shall stand extended w.e.f. 15-3-2020 till further order/s to be passed by this Court in present proceedings.

We are exercising this power under Article 142 read with Article 141 of the Constitution of India and declare that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.

This order may be brought to the notice of all High Courts for being communicated to all subordinate Courts/Tribunals within their respective jurisdiction.

Issue notice to all the Registrars General of the High Courts, returnable in four weeks…”

The 3 judge bench of SA Bobde, Deepak Gupta, and Hrishikesh Roy, JJ has directed extended the limitation prescribed under the Arbitration and Conciliation Act, 1996 and under section 138 of the Negotiable Instruments Act, 1881. The court directed that “..The limitation period under the said Acts, shall be extended with effect from 15.03.2020 till further orders to be passed by this court in the present proceedings…”[9]

The court passed these orders by exercising its inherent powers under Article 142 of the Constitution of India while passing the order. This order does not imply that there is a blanket moratorium on the period of limitation. It simply implies that the limitation period is presently suspended and would commence after lifting lockdown.[10] Further, the court specifies that the period of limitation stands suspended form 15th March 2020, therefore any proceedings filed prior in the time would not be protected. It can be deduced from the above orders that it is made applicable to day-to-day adjudication and does not apply to urgent matters. In regards to arbitration, Delhi High Court in the case of Rategain Travel Technologies v. Ujjawal Suri[11], relied upon the Mat 06 order for holding that the limitation under the Arbitration Act has been extended by the Hon’ble Supreme Court and directed that the parties in cases concerning arbitration law have a period of two weeks after the lockdown is lifted, to approach the court if required.

Recourse available against the suspension of proceedings

Extension of the timeline under Section 29A

The pending arbitration proceedings where the stipulated time period is expiring within the lockdown period as mandated by the Government of India may take recourse to Section 29A for extension of time upon reopening of the courts of law. In order to seek an extension of the statutory timeline for completion of arbitration proceedings, both the parties jointly or either of the parties individually can file an application before the concerned court within a reasonable period from either before or after the expiry of 12 months.

Virtual conduction of proceedings

The rules of the International Commercial Arbitration mandate that the Arbitral Tribunal has the power to conduct arbitration proceedings by the video conference, telephone, or any such other means of communication as may be feasible or deemed fit. Since the virtual conduct of proceedings is already an established norm in international commercial arbitration, domestic arbitration proceedings will do well taking a leaf out of their book and applying it to today’s pandemic situation.

New procedure to conduct the arbitration

Section 19 of the Arbitration and Conciliation Act, 1996 states that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 nor the Indian Evidence Act, 1872. The parties to the arbitration proceeding or the Arbitral Tribunal may decide on the procedure followed in the conduct of such arbitration proceedings. The Arbitral Tribunal can direct the parties to the arbitration proceedings to file pleadings through electronic mail and conduct proceedings through the means of video conferences aiding social distancing with minimal loss of productivity.

Conclusion

In the “new normal” of lockdown in India, there is an emerging consensus to better integrate the use of technology with dispute resolution. Arbitration is an informal means of dispute resolution between the parties and this is the reason, it will be much easier to transfer it to a virtual platform. A certain generations of lawyers will not feel ill at ease with new mechanism methodology. But that problem will continue whether one can do it in court or on arbitration platform. So there is an urgent need in wake of pandemic to get more familiar with the new platforms. The significant feature of any justice system is to achieve the rule of law, whether by a virtual or traditional method of dispute resolution. Rule of law will be achieved even with the virtual arbitral proceedings. Once this method of dispute resolution become part of Indian judicial system, it will continue to refine and enhance the use of technology for virtual hearings after unlock process starts in India.

[1] Chahat Chawla, International Arbitration during COVID-19: A Case Counsel’s Perspective, June 4, 2020, Kluwer Arbitration Blog, http://arbitrationblog.kluwerarbitration.com/2020/06/04/international-arbitration-during-covid-19-a-case-counsels-perspective/?doing_wp_cron=1595847911.6295859813690185546875 [2] M/s Simplex Infrastructure Ltd. v. Union of India, (2019) 2 SCC 455 [3] Golden Chariot Recreations Pvt. Ltd. v. Mukesh Panika & Anr. Arb. P. No. 143 of 2018 [4] Geo Miller & Co. Pvt. Ltd. v. Rajasthan Vidyut Utpadan Nigam Ltd, 2019 SCC OnLine SC 1137 [5] Where the respondent against whom a claim is made, had also made a claim against the claimant and sought arbitration by serving a notice to the claimant but subsequently raises that claim as a counter claim in the arbitration proceedings initiated by the claimant, instead of filing a separate application under section 11 of the Act, the limitation for such counter claim should be computed, as on the date of service of notice of such claim on the claimant and not on the date of filing of the counter claim.”- Voltas Limited v. Rolta India Limited MANU/SC/0099/2014 [6] Umesh Goel v. H.P. Coop. Group Housing Society (2016) 11 SCC 313 [7]M/s. N.V. International Vs. State of Assam & Ors, Civil Appeal No. 9244 of 2019 [8] IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION, order dated 23.03.2020, https://main.sci.gov.in/supremecourt/2020/10787/10787_2020_1_12_21570_Order_23-Mar-2020.pdf [9] IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION, 2020 SCC OnLine SC 434 , order dated 06.05.2020, https://elibrary.symlaw.ac.in:2062/Members/SearchResult.aspx [10] Daniel George, Impact Of The Supreme Court's Order Of March 23, 2020, 14 April 2020 https://www.mondaq.com/india/trials-appeals-compensation/916810/impact-of-the-supreme-court39s-order-of-march-23-2020 [11] Rategain Travel Technologies v Ujjwal Suri, O.M.P. No. 14 of 2020, decided on May 11, 2020