'Rohan Builders' Not Binding Precedent, Court Empowered To Extend Arbitrator's Mandate Even If Section 29-A Petition Filed After Termination: Calcutta High Court
The Calcutta High Court bench of Justice Sabyasachi Bhattacharyya has held that the court is empowered the court is empowered to extend an arbitrator's mandate even if a petition under Section 29-A of the Arbitration and Conciliation Act, 1996, is filed after the termination of the mandate. Justice Bhattacharyya clarified that the absence of negative expressions in Section 29-A,...
The Calcutta High Court bench of Justice Sabyasachi Bhattacharyya has held that the court is empowered the court is empowered to extend an arbitrator's mandate even if a petition under Section 29-A of the Arbitration and Conciliation Act, 1996, is filed after the termination of the mandate.
Justice Bhattacharyya clarified that the absence of negative expressions in Section 29-A, which are present in other statutes to enforce strict timelines, indicates legislative intent to allow judicial discretion in extending mandates.
The High Court examined whether the ratio in Rohan Builders (India) Pvt. Ltd. vs Berger Paints India Limited serves as a binding precedent.
In Rohan Builders, it was 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 High Court noted that the Supreme Court has stayed the operation of Rohan Builders. This stay does not annul the decision but puts it in abeyance. Therefore, the High Court held that the ratio in Rohan Builders is not currently operative which allows the Court to independently decide.
Despite Rohan Builders being otherwise binding unless referred to a larger Bench, the High Court considered two aspects. Firstly, the Supreme Court's stay has nullified its binding effect for now. Secondly, the same judge who decided Rohan Builders later diluted its view in Satnam Global's case. In Satnam Global, the Court clarified that the application for extension after the arbitrator's mandate termination did not involve a "Rogue Litigant," and there was no indication that the Limitation Act or the General Clauses Act would not apply under Section 29-A of the 1996 Act. Thus, the court extended the arbitrator's mandate.
In Rohan Builders, the High Court linked the ratio to the application for extension, not the court order extending the mandate. It also decided on the court's power to extend the arbitrator's mandate in the context of "rogue" litigants. Consequently, the High Court held that Rohan Builders does not operate as a binding precedent.
The High Court then addressed whether Section 29-A debars an application for extension after the termination of the arbitrator's mandate. Examining the language of Section 29-A, the High Court noted that it stipulates the time limit for making an arbitral award and allows for extensions by consent or court order. Sub-section (4) provides that if the award is not made within the specified period or its extension, the arbitrator's mandate shall terminate unless the court extends the period. The second proviso states that the mandate continues while an application under sub-section (5) is pending.
Sub-section (5) allows for an extension application by any party for sufficient cause, and the court can impose terms and conditions. The High Court noted that Section 29-A has two components: extending the mandate and substituting the arbitrator. The court can either extend the existing arbitrator's mandate or substitute the arbitrator, with the new tribunal continuing from where the previous one left off. The High Court held that this implies that the mandate can be revived even after termination.
The High Court reasoned that an absurd disparity would arise if a terminated mandate could be revived through substitution but not through a simple extension application filed beyond the timeline. Sub-section (5) does not specify that applications must be made before the mandate's termination. It held that had the Legislature intended such a restriction, it would have included it. Therefore, the High Court cannot impose a restriction not present in the statute. Consequently, the High Court held that Section 29-A does not bar an application for extension after the termination of the mandate.
The High Court noted that the language of subsection (4) of Section 29-A is clear and unambiguous. It indicates that the extension of the mandate is not linked to the timing of the application but is instead at the discretion of the court. The timelines for the completion of the mandate are provided in subsections (1) and (3) of Section 29-A.
Subsection (1) stipulates that arbitral proceedings should be concluded, and an award passed within 12 months from the date of completion of pleadings under Section 23(4) in domestic arbitrations. Subsection (3) allows the parties, by mutual consent, to extend this period for a further six months, thus making the outer limit for the completion of the proceedings eighteen months.
Subsection (4) contemplates a situation where the timeline for the delivery of the award, as stipulated in subsections (1) or (3), expires. It states that the mandate of the arbitrator "shall terminate," but this termination is qualified by the subsequent clause, "unless the court has, either prior to or after the expiry of the period so specified, extended the period." The High Court held that this implies that the termination of the mandate, whether after twelve months or the extended period of six months, is not automatic. It is subject to the court's extension of the period, and the termination is not absolute, as it can be modified by the court's intervention.
Furthermore, termination is not automatic upon the expiry of the timeline since subsection (3) allows the parties to extend the timeline for an additional six months by mutual consent. Subsection (4) grants the court the power, unfettered by any specific timeline, to extend the mandate upon being satisfied and providing reasons for doing so.
The High Court held that the termination contemplated in Section 29-A is not intended to hinder the arbitral proceedings, thereby frustrating the purpose of the statute. Since such termination is subject to extension by the court, either before or after the expiry of the mandate, the date of filing an application for extension is not the sole determinant of the court's power to extend the mandate.
Therefore, the High Court held that language of subsection (4) of Section 29-A clearly empowers the court to extend the arbitrator's mandate, regardless of when the application for extension is filed.
The High Court also considered the impact of the 176th Report of the Law Commission of India on the Arbitration and Conciliation (Amendment) Bill, 2001, which led to the introduction of Section 29-A by the Amending Act of 2016. The report recommended that arbitral proceedings "stand suspended" until an application for extension is made. However, the High Court noted that the actual amendment focuses on the court's order extending the mandate which can be made either before or after the expiry of the mandate. The second proviso to subsection (4) remains similar to the Law Commission's recommendation.
It held that the amendment converts "suspension" to "termination" upon the expiry of the timelines but allows for the revival of the mandate by a court order extending it.
The High Court also examined the analogy of other statutes to assess how the legislature approaches the interplay of extension and termination of mandates in different legal contexts. For instance, Section 7(2) of the West Bengal Premises Tenancy Act, 1997 requires tenants to deposit admitted rent within a specified time with an application. The statute explicitly states that extensions for such deposits can be granted only once and for no more than two months, clearly indicating the legislature's intent to make this timeline final and non-extendable.
Similarly, the proviso to Order VIII Rule I of the Code of Civil Procedure, as amended by the Commercial Courts Act, mandates that a written statement must be filed within 120 days from the date of service of summons, with no extensions allowed beyond this period. The bench held that the use of negative expressions such as "shall not" and "shall forfeit" emphasizes the legislature's intent to prevent any extensions and to ensure strict adherence to the timeline.
In contrast, the bench noted that Section 29-A does not contain such negative expressions. It held that the legislature did not aim to render the mandate's termination final and irrevocable without allowing for judicial discretion to extend the mandate in appropriate cases.
It held that a rigid interpretation would enable a party to frustrate the arbitration process by merely delaying the filing of an extension application until after the mandate's expiration. This could force parties out of arbitration and into prolonged civil litigation, defeating the purpose of choosing arbitration as a dispute resolution mechanism. The High Court held that Section 29-A should be read as providing a flexible timeline which should allow for judicial discretion to extend the mandate even after its termination.
Case Title: Ashok Kumar Gupta Vs M.D. Creations And Ors.
Case Number: AP/37/2024
Advocate for the Petitioner: Mr. Farhan Ghaffar, Adv. Ms. Antara Biswas, Adv
Advocate for the Respondent: Mr. Rahul Karmakar, Adv
Date of Judgment: 18.07.2024