Sanchayita Lahkar

The High Court of Sikkim at Gangtok, Division Bench comprising of Chief Justice Biswanath Somadder and Justice Bhaskar Raj Pradhan, delivered a significant judgment on 8th May 2025. In a decisive judgement, the Bench set aside the Commercial Court’s decision dated 5th December 2023, which had set aside an arbitral award. The High Court reaffirmed the principle that judicial interference in arbitral matters must remain within the narrow confines stipulated by Section 34 of the Arbitration and Conciliation Act, 1996. The Court categorically recorded that "Section 29-A (1) is a procedure for the arbitrator to follow and does not confer any right or impose any obligation on the parties."

The dispute arose from a contractual agreement between the Union of India, represented by the Chief Engineer, Project Swastik, and M/s M.K. Infrastructure (P) Ltd., represented by Director Smt. Lalita Kandoi. The contract pertained to the construction of living shelters and structures on Jawaharlal Nehru Marg in the State of Sikkim. The agreement contained an arbitration clause, which was invoked by the respondent following disputes over project execution.

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Initially, Col. S. Gopikrishnan was appointed as the sole Arbitrator on 2nd January 2019. He was subsequently replaced by Col. Anil Kothiyal. Following exchange of pleadings and proceedings, the sole Arbitrator delivered the arbitral award on 27th December 2022. The award rejected all claims of the respondent and upheld the appellant’s entitlement to recover the balance amount, cost of arbitration, and interest at 12% from three months post-award until realization.

The respondent challenged the award under Section 34 of the Arbitration Act before the Commercial Court, primarily on the ground that the arbitral award was passed beyond the timeframe stipulated under Section 29-A of the Act as amended by the Arbitration and Conciliation (Amendment) Act, 2015. The Commercial Court accepted this contention and held that the sole Arbitrator had become functus officio on 1st October 2020, rendering the award dated 27th December 2022 non-est in law.

The Union of India, aggrieved by this order, filed the present appeal under Section 37 of the Arbitration Act before the High Court.

The Division Bench examined the statutory framework governing arbitral timelines, particularly the applicability of the 2015 and 2019 Amendments to the Arbitration Act. The Court observed that "Section 29-A(1), as a mandate, being remedial in nature even for domestic arbitration, should be applicable to all pending arbitral proceedings as on the effective date, i.e., 30.8.2019."

The Bench held that the 2019 Amendment, which shifted the starting point for calculating the twelve-month period for award delivery from the date of reference to the date of completion of pleadings, applied to the present case. The Court noted that pleadings were completed on 16th July 2022, and the award was delivered on 27th December 2022, well within the statutory timeframe.

It was further recorded that "There is nothing on record to suggest that the respondent protested on the jurisdiction of the sole Arbitrator beyond the period of twelve months under sub-section (1) as being functus officio beyond the period before the arbitral award." The Court took judicial notice of the COVID-19 pandemic and referred to the Hon’ble Supreme Court’s directions in Suo Moto Writ Petition (C) No. 3/2020, excluding the period between 15th March 2020 and 28th February 2022 for the purpose of limitation calculations.

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The Bench summarized its conclusions stating:

1. The learned Commercial Court had failed to consider the limited jurisdiction it had while examining the challenge to the arbitral award under section 34 of the Arbitration Act.

2. The ambit and scope of section 34 of the Arbitration Act is limited to the extent provided in sub-sections (2) and (3), thereof. An appeal under section 34 is not a regular appeal.

3. In the facts of the present case, the learned Commercial Court exceeded its jurisdiction under section 34 of the Arbitration Act.

4. Section 29-A (1) of the Arbitration Act is a procedure to be followed by the arbitral tribunal and does not confer any right or impose any obligation on the parties. It is also remedial in nature.

5. Section 29-A (1) does not lay down any sacrosanct timeline as sub-section (3) permits further extension of six months by consent of parties. Even thereafter, sub-section (4) gives the power to the Court to extend the period further by six months.

6. Section 29-A (1) as amended by the 2019 Amendment and not the 2015 Amendment would govern the procedure to be followed by the Arbitrator as the arbitration was pending when the 2019 Amendment was brought into force on 30.08.2019.

Setting aside the Commercial Court’s judgment dated 5th December 2023, the Division Bench allowed the arbitration appeal, restoring the arbitral award passed on 27th December 2022. The judgment explicitly recorded that "We are, therefore, of the opinion that the impugned judgment dated 05.12.2023, setting aside the arbitral award passed by the sole Arbitrator, was unwarranted. We, therefore, set it aside."

The Arbitration Appeal stood allowed and disposed of accordingly.

Advocates Representing the Parties

For the Appellant: Ms. Sangita Pradhan, Deputy Solicitor General of India, assisted by Ms. Natasha Pradhan and Ms. Sittal Balmiki.

For the Respondent: Mr. Amit Lal Chakravorti and Mr. Gourav Mandal.

Case Title: Union of India vs. M/s M.K. Infrastructure (P) Ltd.

Case Number: Arb. A. No. 04 of 2024

Bench: Chief Justice Biswanath Somadder and Justice Bhaskar Raj Pradhan

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