The Supreme Court has settled the issue of whether an extension of a mandate application under section 29A of the Arbitration and Conciliation Act, 1996, can be entertained after an arbitral award period has expired.
This issue has produced contradictory views from high courts around the country. Calcutta High Court ruled that applications must be filed before the expiry of an arbitral tribunal’s mandate. However, high courts in New Delhi, Mumbai, Kerala and Chennai adopted an alternative stance, allowing such applications post-expiry.
Key findings
Calcutta High Court formed its view in Rohan Builders (India) Pvt Ltd v Berger Paints India Ltd (2024), holding that such an application could not be entertained after the expiry of the arbitral tribunal’s mandate.
However, the petitioners lodged a special leave petition before the Supreme Court. This was then converted into a civil appeal. The Supreme Court referred to the conflicting views and accepted the reasoning of the high courts that supported a broader interpretation of section 29A.
The Supreme Court clarified that:
• Section 29A(4) empowers a court to extend the time for making an arbitral award, even if the application is filed after the expiration of the original or extended mandate.
• The term “terminate” should not be interpreted strictly, as it would lead to impractical consequences. Instead, courts should interpret the word in a conditional sense, making it dependent on whether or not an extension application has been filed.
• A court’s discretion to extend time, as provided by section 29A(5), is based on the existence of sufficient cause, ensuring that frivolous or vexatious applications are not entertained.
Conclusion
Tracing the legislative history of section 29A, the apex court noted that the introduction of time limits for arbitral awards were aimed at curbing delays in arbitration. However, the time limits also have safeguards that allowing a court to prevent the termination of proceedings when there is sufficient cause for delay.
Reference was also placed on the Law Commission of India’s 176th Report, which recommended an arbitral tribunal’s mandate be suspended rather than terminated in such situations.
The Supreme Court noted the Calcutta High Court’s judgment highlighted that an extended application after the expiry period would encourage rogue litigants and render the timeline for making the award inconsequential. The court noted that, under section 29A(5), the power of a court to extend time is to be exercised only in cases where there is sufficient cause for such extension. Such extension is not to be granted mechanically on filing of an application.
The judicial discretion of the court acts as a deterrent against any party abusing the process of law or espousing a frivolous or vexatious application. Further, a court can impose terms and conditions while granting an extension. Delay, even on the part of the arbitral tribunal, is not countenanced. The first proviso to section 29A(4) permits a fee reduction of up to 5% for each month of delay attributable to the arbitral tribunal.
The Supreme Court concluded that an application for extension of time for passing an arbitral award under section 29A(4), read with section 29A(5), is maintainable even after 12 months, or the extended six-month period, as the case may be. The court said that such extensions should be guided by the principle of sufficient cause and other parameters, which it outlined in its judgment.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
