Literal or liberal interpretation in extending arbitration

By Sudeshna Guha Roy and Ayush Chaturvedi, Bharucha and Partners
0
313
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

In 2015, section 29A was added to the Arbitration and Conciliation Act, 1996 (act), to provide that the arbitral tribunal must make an award within 12 months of the close of pleadings. This period may be extended by six months with the consent of the parties. Under section 29A(4) of the act, the tribunal’s mandate will automatically terminate on the expiry of 12 or 18 months, as applicable. However, the court may on the application of a party under section 29A(5), extend the tribunal’s mandate where it believes there is sufficient cause.

Various high courts have come to different decisions as to when an extension application may be made. In September 2023, the Calcutta High Court (CALHC) in Rohan Builders (India) Pvt Ltd v Berger Paints India Limited, held that while a court may extend the tribunal’s mandate after the expiry of the mandate, an application can only be made before termination. The Patna High Court has followed the same principle in South Bihar Power Distribution Company Limited v Bhagalpur Electricity Distribution Company Private Limited.

Sudeshna Guha Roy, Bharucha and Partners
Sudeshna Guha Roy
Partner
Bharucha and Partners

Conversely, Delhi High Court (DHC), in ATC Telecom Infrastructure Private Limited v Bharat Sanchar Nigam Limited expressly disagreed with the decision in Rohan Builders and held that an extension application can be made even after termination. The DHC relied on section 29A(5), which permits the court to extend the mandate “either prior to or after the expiry”. It held that section 29A affords flexibility to both the contracting parties and the court for an extension of time in appropriate cases. The court also relied on the fact that an extension of the mandate following termination was not expressly prohibited. The DHC further held that section 29A was not intended to prevent an extension which may have been warranted simply because the extension application was filed after the termination of the mandate.

Recently, the Bombay High Court (BHC), in Nikhil H. Malkan and Ors v Standard Chartered Investment and Loans (India) Limited agreed with the view taken by the DHC in ATC Telecom.

The CALHC has, however, interpreted the phrase “either prior to or after the expiry” as merely empowering the court to extend the mandate where an application was filed before expiry, but the order of the court was delivered only after termination. The CALHC was also of the view that “extension” presupposes that the mandate which is to be extended continues to exist. An application filed after the mandate’s expiry would be an application for revival and not an extension application. The CALHC noted that the Law Commission had originally proposed that section 29A suspend the tribunal’s mandate rather than terminating it. The use of “terminate” clearly indicates the legislative intent to ensure that parties could not seek the revival of a terminated mandate.

The interpretation of section 29A by the DHC and the BHC creates an anomalous situation where applications are not time-barred. This is antithetical to the objective of a speedy resolution for which section 29A was introduced and runs contrary to the effect of termination. On “termination”, the tribunal becomes functus officio, that is its authority comes to an end. The reasoning in ATC Telecom essentially permits the revival of the tribunal after becoming functus officio, rendering the concept of termination meaningless.

It may be argued that section 29A(4) uses the phrase “either prior to or after the expiry” only to ensure that the court is not legally barred from allowing an application by virtue of the tribunal having become functus officio after the application was submitted. However, this does not of itself imply that the parties can apply under section 29A(5) without time limit. A party’s right to apply for relief cannot be assumed to be on the same footing as the court’s power to provide that relief. This accords with the principle that the law assists only those who are vigilant, and section 29A(5) must be interpreted in this way.

The question of whether an application for extension can be filed after termination is currently pending before the Supreme Court in Vrindavan Advisory Services LLP v Deep Shambulal Bhanushali. It will be interesting to see how the Supreme Court balances the overarching objective of speedy resolution under section 29A with the differing interpretations of the various high courts.

Sudeshna Guha Roy is a partner and Ayush Chaturvedi is an associate at Bharucha and Partners

supreme courtBharucha & Partners
13th Floor, Free Press House
Free Press JournalMarg Nariman Point,
Mumbai 400 021.
India

Contact details:
T: +91 22 2289 9300
E: sr.partner@bharucha.in

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link