As we complete a decade since the 2015 amendment to the Arbitration and Conciliation Act, 1996 (Arbitration Act), the amendment that was supposed to catapult India into becoming a global hub for international arbitration, it is time to confront an uncomfortable truth: why are we still not there?
Despite the lofty vision of establishing a time-bound and efficient arbitration at par with international standards, the 2015 amendment introducing Section 29A, which set a maximum timeline of 18 months for the completion of arbitral proceedings and the 2019 amendment inserting Section 23(4), which sought to ensure that pleadings are completed within six months, were supposed to position India as a credible seat for global arbitration. Yet nearly a decade later, the promise has largely fizzled out.
One of the main reasons is that Section 29A (1) starts its 12-month clock only after the completion of pleadings under Section 23(4). While Section 23(4) mandates that statements of claim and defense be completed within six months of the arbitrator(s) receiving notice of their appointment, it fails to provide any consequence if this timeline is missed. The legislature leaves this issue to judicial discretion. In practice, many parties exploit this loophole, delaying the filing of pleadings by years. With no statutory remedy to address such delays, the 18-month timeline under Section 29A effectively loses its meaning.
Therefore, Indian parties, particularly when entering into contracts with foreign counterparts, continue to prefer London, Singapore, and Paris, the holy trinity of arbitration seats, leaving India’s “18 month dream” looking more like a mirage.
What was meant to be an escape from the courtroom has, in practice, begun to resemble it in pace and process. Parties routinely file Section 29A applications for extensions of the tribunal’s mandate, which are almost always allowed by the courts. This lack of confidence in time-bound ad hoc arbitration has eroded trust in India as a reliable seat for international arbitration.
This article seeks to address questions that are often avoided but cannot be ignored. Are the 2015 and 2019 amendments introducing Section 29A and 23(4) a complete failure when it comes to defining enforceable timelines for arbitration? If so, how can this be remedied? Is the six-month period for completion of pleadings under Section 23(4) truly mandatory, or merely directory, leaving parties with no recourse if pleadings are delayed? What is preventing the judiciary and legislature from making the timeline under Section 23(4) mandatory? Could it be a fear of a surge of Section 29A (5) applications to an already overburdened judiciary?
- When Does the 18-Month Clock Start Ticking?
The timeline under Section 29A(1) cannot be read in isolation from Section 23(4). The statutory framework is deliberate. The twelve-month period for making an award under Section 29A(1) begins only after pleadings are completed under Section 23(4). If the six-month period prescribed for pleadings is treated as merely directory, the twelve-month period for rendering the award loses its sanctity, rendering the 18 month framework hollow and defeating the very objective of the 2015 amendment, which sought to ensure expeditious arbitration.
The introduction of Section 23(4) to the Arbitration Act was guided by the recommendations of the High-Level Committee chaired by retired Supreme Court Justice B.N. Srikrishna. The B. N. Srikrishna Committee Report of 2017 identified delays at the pleading stage as a critical bottleneck and recommended a bifurcated timeline: a fixed period of six months for pleadings under Section 23(4), followed by a separate period of twelve months for rendering the award under Section 29A(1), extendable by up to six months under Section 29A(3) with the parties’ consent.
This legislative intent is further reflected in the Statement of Objects and Reasons of the Arbitration and Conciliation (Amendment) Bill, 2019, which emphasized that the amendment sought to make arbitration “cost-effective and speedy” and to position India as a hub for domestic and international arbitration.
While the statutory language uses “shall” in Section 23(4), the absence of an explicit penalty for non-compliance has lead to a judicial debate on whether the six-month timeline is mandatory or merely directory.
- Understanding the Legislative Intent: Is the Six-Month Timeline under Section 23(4) Mandatory or Directory?
The legislative intent behind Section 23(4) is unambiguous. The Justice B.N. Srikrishna Committee Report, dated 30 July 2017, had recommended that a period of six months “may” be provided for completion of pleadings. However, when enacting the 2019 amendment, the legislature consciously replaced the word “may” with “shall”. This linguistic shift is crucial, it reflects the intent to make the provision mandatory and not merely directory.
Further, it is pertinent to note that Sections 23(4) and 29A(1) were simultaneously introduced in 2019. A plain reading of these provisions shows that the award in domestic arbitrations must be made within twelve months from the date of completion of pleadings, which, in turn, must occur within six months of the arbitrator’s appointment. The statutory scheme therefore contemplates a maximum of eighteen months from appointment to award, with extensions available only under limited circumstances.
The legislative intent is further supported by the absence of any provision permitting the extension of time for completion of pleadings under Section 23(4). Unlike Section 29A(4), which empowers courts to extend the arbitrator’s mandate, Section 23(4) contains no such mechanism. This silence is deliberate. It underscores the legislature’s intention that the six-month timeline be treated as mandatory.
Despite the apparent clarity of legislative intent, the judicial interpretation of Section 23(4) has been far from uniform. Courts across jurisdictions have adopted divergent views on whether the six-month period prescribed for the completion of pleadings is mandatory or merely directory, leading to considerable uncertainty in practice.
The Delhi High Court in Raj Chawla and Co. Stock and Share Brokers v. Nine Media and Information Services Ltd., 2023 SCC OnLine Del 1921, held that the arbitral tribunal must necessarily render the award within twelve months from the date on which the pleadings are completed. The Court further implied that the six-month period for completing pleadings under Section 23(4) is mandatory, with consequences for non-compliance provided under Section 25(3) of the Act. This decision was challenged before the Supreme Court by way of a special leave petition, which was dismissed, thereby leaving the legal position unsettled.
In contrast, the Calcutta High Court, in Yashovardhan Sinha HUF & Anr v. Satyatej Vyapaar Pvt. Ltd. 2024 SCC OnLine Cal 1292, held that Section 23(4) is directory in nature. The Court reasoned that since the legislature had not prescribed any explicit consequences for failure to comply with the six-month period, nor made Sections 23(1) and 25 expressly subject to Section 23(4), it could not be construed as mandatory. The Court observed that the purpose of Section 23(4) is to ensure expedition in arbitral proceedings, not to invalidate proceedings on account of procedural delay. It emphasised that if the legislature had intended to make the timeline binding, it would have included penal or procedural consequences within the provision. This judgment, too, was challenged before the Supreme Court by way of a special leave petition, which was dismissed without entering into the merits of the matter.
Interestingly, the Supreme Court itself appears to have hinted that Section 23(4) carries a mandatory flavour. In its order dated 10 January 2022 in Re: Cognizance for Extension of Limitation, the Court specifically excluded the COVID-19 period from computation of limitation under both Section 23(4) and Section 29A of the Arbitration Act.
If Section 23(4) were merely directory, such exclusion would have been unnecessary. The Court did not extend timelines for other procedural provisions, such as Section 12A of the Commercial Courts Act or Section 138 of the Negotiable Instruments Act. The very act of expressly excluding Section 23(4) from the limitation period indicates the mandatory nature of the provision.
- Silence of the Legislature & Judiciary: Why Has the Issue Been Left Unresolved?
It is intriguing that despite extensive debate and conflicting judicial pronouncements, neither the legislature nor the judiciary has conclusively resolved the question of whether the six-month timeline under Section 23(4) is mandatory or merely directory. While the Supreme Court has declined to entertain special leave petitions arising from both Yashovardhan Sinha (Supra) and Raj Chawla (Supra), the legislature too has chosen to sidestep the issue in the Draft Arbitration and Conciliation (Amendment) Bill, 2024 (Bill). This omission is particularly striking given that the T.K. Vishwanathan Committee Report, published on 7 February 2024, had directly addressed this issue.
The Committee had recommended substituting Section 23(4) to provide that pleadings shall be completed “expeditiously and, in any event, not later than a period of six months.” The proposed language sought to remove ambiguity and make clear that six months constitutes the outer limit for completing pleadings. Yet, this recommendation was not incorporated into the draft Bill, leaving the controversy unresolved.
This issue has been left unresolved, possibly because of the impact that would follow if the six-month timeline under Section 23(4) were made mandatory and its consequences linked to Sections 29A(4) and 25(a). Non-compliance would, by implication, terminate the arbitral tribunal’s mandate under Section 29A(4), unless an extension of mandate were sought and granted by the court. Further, if the consequences of Section 23(4) were tied to Section 25(a) arbitral proceedings could stand terminated if the statement of claim were not filed within six months which would cause widespread procedural disruption.
Thousands of ongoing arbitrations in which pleadings have been delayed beyond six months would suddenly be at risk. Courts would inevitably be overburdened with applications seeking extensions of mandate and substitution of arbitrator, thereby overburdening the judicial system with procedural petitions. Parties seeking to substitute arbitrators might misuse the six-month limit as a tactical device deliberately delaying the completion of pleadings to trigger termination of the tribunal’s mandate.
However, the cost of not bringing clarity to Section 23(4) may be far greater. The absence of a definitive interpretation leaves a gaping loophole in the carefully constructed 12–18 month framework under Section 29A. This allows parties to indefinitely delay the completion of pleadings, defeating the very purpose of time-bound arbitration. Such uncertainty undermines the efficiency and credibility of India’s arbitral regime and risks eroding confidence in India as a preferred seat of arbitration. Without a clear legislative or judicial stance, the promise of expeditious and effective arbitration in India remains aspirational rather than real.
- Judiciary and Legislature Must End the Section 23(4) Deadlock & Restore India’s Credibility as a Seat
India’s reputation as a seat of arbitration is teetering on the edge. As it stands, parties can stall the filing of pleadings indefinitely, while the Courts, even arbitral tribunals remain powerless spectators. Until pleadings are filed, the 18 month clock for awards doesn’t even start ticking.
In countless cases, tribunals fail to set a timetable for pleadings within six months of appointment, as seen in Yashovardhan Sinha (Supra). The current scheme of the Arbitration Act, instead of enforcing discipline, rewards procrastination. To restore international confidence in India as a seat for arbitration, the Judiciary and Legislature must act decisively to settle the timelines for the filing of pleadings.
A legislative amendment is urgently required, in line with the recommendations of the TK Vishwanathan Committee Report, to make Section 23(4) mandatory by expressly requiring pleadings to be filed “expeditiously and, in any event, not later than six months.” Critically, the consequences of non-compliance under Section 23(4) must be directly linked to Section 29A (4), such that the mandate of the arbitral tribunal terminates automatically if no directions are issued for filing of pleadings within six months of its appointment. Moreover, should directions be issued but parties fail to comply, remedy should be available under Sections 25(a) & (b), as recognised in Raj Chawla (Supra), to impose tangible consequences.
Internationally, speed is considered as credibility. Under the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), and Mumbai Center of International Arbitration (MCIA)rules, awards are routinely rendered within six months from tribunal appointment. For India to compete as a credible seat, we need hard deadlines, not polite suggestions. Hard stops on pleadings are non-negotiable.
Until the necessary amendments to Section 23(4) are enacted, parties cannot afford to remain passive spectators. They must take the initiative by opting for institutional arbitration under rules that guarantee expedited pleadings and awards. Tribunals should be urged to issue strict procedural orders, set firm deadlines for the submission of pleadings, and enforce them rigorously, with explicit consequences for non-compliance. In short, while the law evolves, only self-imposed rigor and disciplined institutional processes will ensure that arbitration in India remains timely, credible, and internationally respected.
Authors:
Nusrat Hassan, Managing Partner
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