Analysing Jurisprudence On Extension Of Arbitrator's Mandate After Expiry Of Period U/S 29A Of A&C Act Before & After SC's Decision In Rohan Builders

Introduction

Section 29A was introduced into the Arbitration Act in 2015 to provide a clear-cut timeline within which an arbitral tribunal has to render an award. It provides that the mandate of the tribunal shall terminate if the award is not rendered within 12 months or a further extended period of 6 months as consented to by the parties. If the award is not rendered within that time period, the mandate of the tribunal is automatically terminated. Section 29A (4) further provides that an application can be filed before the court, either before or after the expiry of the mandate of the tribunal, to seek extension. The court can extend the mandate on sufficient cause being shown.

In this article, we will unpack this issue with the help of statutory provisions and case laws.

Background

The Arbitration Act was enacted in 1996. It provides an alternate mechanism for resolving the disputes outside the traditional court system. The Act did not contain any provisions like its predecessor with respect to the timeline within which the arbitral proceedings have to be completed. The Act has been criticised by the legal experts for the inordinate delay it was causing, in resolving the disputes. Responding to these criticisms, section 29A was introduced into the Arbitration Act which provided a timeline within which the arbitral tribunal has to render an award.

The insertion of section 29-A to the Act in 2016 is an intervention in the sense of mandating statutory timelines for making of the award. The earlier position in the form of section 28 of the Arbitration Act, 1940 provided the following:

 “28. (1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award. (2) Any provision in an arbitration agreement whereby the arbitrators or umpire may, except with the consent of all the parties to the agreement, enlarge the time for making .the award, shall be void and of no effect.”

The erstwhile position in law thus makes it clear that the Court was empowered to extend the mandate for making the award regardless of whether the time had expired for making the award.

Section 29-A changed all that and brought in not only strict time-limits for making of the award but also the concept of termination of the mandate if the award is not made within the prescribed statutory timelines.

The question arises whether the mandate of the tribunal, under the new act, can be extended by the court even if the application seeking extension is filed after the expiry of the mandate. The courts had taken divergent views thereby creating unnecessary confusion. This confusion was finally put to rest by the Supreme Court in Rohan Builders (India) Private Limited Versus Berger Paints India Limited which will be analyzed in the later part of this article.

Position Before Rohan Builders- Divergent Views of High Courts

Various High Courts had strictly stated that the application to extend the mandate of the tribunal was required to be made before the expiry of the mandate. In the case of South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited a Private Limited Company registered under the Companies Act, 1956^[1],  the Division Bench of the Patna High Court was of the view that even if the Court retains power to extend the mandate of the learned Arbitrator after expiry of the period so specified, an application or petition seeking such extension has to be made prior to expiry of the said extended period. 

Similarly, the Calcutta High Court followed the same path in Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd.^[2] wherein it was observed that the application under section 29A (4) of the Act cannot be filed once the time period has expired. They referred to the 176^th Law Commission Report which recommended the incorporation of section 29A into the Act. The court held as under:

“The words “extended period” read with “……. the mandate of the arbitrator(s) shall terminate….” in section 29-A(4) unerringly presumes that the mandate is a continuing one at the time of making the application for extension. If the application is not made within a continuing mandate, the mandate shall simply terminate.”

The court in the above case established that the mandate of the tribunal must not have expired when the application for seeking the mandate is filed. If the application is moved after the time period provided under section 29A (1) and (3) has expired, the court would then not be entitled to extend the mandate. The court interpreted the provision textually.

As opposed to this, a learned Single Judge of the Delhi High Court in the case of ATC Telecom Infrastructure (P) Ltd. v. BSNL^[3], in the context of Section 29A(4) and the power of the Court to extend the mandate, has observed as follows:

“16. The purport of Section 29A of the A&C Act was clearly not to tie the hands of the parties or the court, and prevent extension of time even where3 warranted, simply because the petition under Section 29A(4) of the A&C Act came to be filed a few days after expiration of the deadline contemplated under Section 29A(1) or Section 29A(3) of the A&C Act. Had it been intended by the legislature to provide for a blanket prohibition on extension of time after the expiration of the period contemplated under Section 29A(1) or Section 29A(3) of the A&C Act (unless a petition under Section 29A(4) of the A&C Act was filed prior to expiry of the said period), nothing would have been easier than to say so.”

Considering contrary positions, the Bombay High Court in the case of Nikhil H. Malkan v. Standard Chartered Investment & Loans (India)Ltd^[4] noted the language used in the section “either prior to or after the expiry of the period so specified” and observed that the provision does not limit the scope of the court just to those applications which are filed before the expiry of the mandate. The court further observed that if such an interpretation is given, it would defeat the purpose of section 29A.

Subsequently, the High Courts of Delhi and Kerala had also interpreted the provision to the effect that the application for seeking extension can be filed both before or after the expiry of the mandate.The Delhi High Court in Wadia Techno-Engineering Services Ltd. v. Director General of Married Accommodation Project^[5] observed that

“The provision clearly provides that the Court may extend the period even after its expiry. Indeed, the second proviso provides that the mandate of the tribunal would continue until the disposal of such a petition. I see no justification in the text of the statute, or on a purposive interpretation thereof, to hold that the power can only be exercised on an application filed prior to the expiry of the mandate.”

From the above observations, it becomes crystal clear that it does not matter whether the mandate of the tribunal has expired for the purpose of filing the application before the court, seeking extension.

The Kerala High Court also followed the same line of interpretation in Hiran Valiiyakkil Lal v. Vineeth M.V.^[6] wherein it was held as under:

“However, the sub-section (4) provides that the Court is empowered to extend the period for making the award either prior to or after the expiry of the said period. Sub-section (5) provides that such extension of period may be on the application of any of the parties and may be granted only for sufficient cause”

Position After Rohan Builders

A Special Leave Petition was filed before the Supreme Court challenging the decision of the Calcutta High Court. The court in the case of  Rohan Builders (India) Private Limited Versus Berger Paints India Limited, while perusing all the conflicting judgments rendered by the different high courts, agreed with the interpretation given by the Delhi High Court in Wadia (supra). First, the court observed that the words used in a statute must be given a contextual interpretation so as to discern the legislative intent behind the choice of a particular word. The court further noted that if the word suspend had been used in the provision, it would have led to the indefinite suspension of the arbitral proceedings without permanently closing the proceedings, if no application was filed by the parties to seek an extension. On the other hand, the word terminate indicates that the mandate of the tribunal will stand terminated once the time period specified expires if no application, either before or after the expiry of the time period, is filed by the parties to seek an extension. In this scenario, chapter of the arbitral proceedings shall stand permanently closed.

This interpretation aligns with the most basic principle of the Arbitration- party autonomy. If the parties want the mandate to be terminated, they would not file any application, seeking an extension; therefore, their choice must be respected, and the proceedings should be terminated accordingly. The court further observed that:

“The word “terminate” in the contextual form does not reflect termination as if the proceedings have come to a legal and final end, and cannot continue even on filing of an application for extension of time. Therefore, termination under Section 29A(4) is not set in stone or absolutistic in character.”

From the above observation, it is clearly established that the termination will be effective from the date of the expiry of the time period specified under section 29A and would continue until the application seeking extension is filed by the parties.

The court concluded that:

“we hold that an application for extension of the time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) is maintainable even after the expiry of the twelve-month or the extended six-month period, as the case may be. The court while adjudicating such extension applications will be guided by the principle of sufficient cause.”

Conclusion

The Supreme Court has given much-needed clarity regarding the stage at which an application for seeking the extension of the mandate of the tribunal can be filed. The court has given a contextual interpretation to the language employed in the section, thereby reinforcing the principle of party autonomy which is central to Arbitration. This nuanced interpretation of an important provision would ensure that strict adherence to the timeline provided in the section does not create obstacles in the arbitral proceedings. 

1. Civil Writ Jurisdiction Case No.20350 of 2021 ↑

2. 2023 SCC Online Ker 5151 ↑

3. 2023 SCC OnLine Del 7135 ↑

4. 2023 SCC OnLine Bom 2575 ↑

5. 2023 SCC OnLine Del 2990. ↑

6. 2023 SCC Online Ker 5151 ↑