Legality Of Arbitrator's Appointment Can't Be Challenged In Petitions For Extension Of Arbitrator's Mandate: Delhi High Court

Brief Facts:

Apex Buildsys Ltd. (Petitioner) filed a petition under Section 29A(4) of the Arbitration and Conciliation Act, 1996 seeking an extension of the mandate of the arbitrator who was handling the dispute between the parties. The mandate of the arbitrator expired either on 21 January 2019, as contended by the Petitioner, or on 25 March 2019, as argued by Vadera Interiors and Exteriors (Respondent).

The Respondent pointed out that on 13 March 2019, the Respondent wrote to the Arbitrator noting that the proceedings scheduled for 13 February 2019 were not taken place and sought a response from the Arbitrator. However, the Arbitrator did not respond and the mandate of the Arbitrator expired on 25 March 2019. The Petitioner argued that due to the Petitioner's ongoing liquidation proceedings since 2020, there was an unavoidable delay in moving the court for an extension of the Arbitrator's mandate. Initially, the Petitioner mistakenly moved an application under Section 29A(4) before the District Judge (Commercial Courts) in Dwarka in September 2020. The application remained pending until 17 December 2022 when the Commercial Court held that it lacked the jurisdiction to extend the mandate of the Arbitrator, a power that rested only with the Court that appointed the Arbitrator under Section 11.

In May 2023, the Petitioner subsequently filed the petition before the High Court and sought the extension of the arbitrator's mandate. The Respondent opposed the petition and argued that the Arbitrator should be deemed to have abandoned the proceedings after 21 January 2019, given the lack of communication from the Arbitrator despite the Respondent's letter dated 13 March 2019. Additionally, the Respondent contended that there has been an inordinate delay by the Petitioner in seeking an extension of the mandate from the Court under Section 29A(4).

Observations by the High Court:

The High Court noted that the Respondent's contention regarding the timing of the petition was somewhat valid, as the Petitioner approached the Commercial Court approximately a year and a half after the Arbitrator's mandate was expired. However, the High Court held that the power to extend the mandate of an Arbitrator is not strictly limited by the expiration of the mandate. It held that this power can be exercised by the court even after the mandate has expired.

The High Court referred to the Supreme Court in Tata Sons Pvt Ltd v Siva Industries and Holdings Ltd. The Supreme Court held that under Section 29A(3) of the Arbitration Act parties may consensually extend the time for making an award by up to six months. If the award is not made within this period, the mandate of the Arbitrator terminates unless the Court extends it either before or after the expiry of the specified period. Thus, the twelve-month timeline for making the award is subject to an extension and the Court has the authority to grant such an extension under Section 29A(4).

Additionally, the High Court held that the Respondent's argument that the Arbitrator must be deemed to have abandoned the proceedings was not accepted. The High Court held that Section 14(1) outlines specific conditions under which an Arbitrator's mandate can be terminated and replaced by another Arbitrator. Clause (a) addresses scenarios where the Arbitrator is unable to perform their duties or fails to act without undue delay. The bench noted that the Arbitrator was actively handling the matter until 21 March 2019, just before the mandate ended, and thus cannot be considered to have failed in this regard.

Further, the High Court held that when considering an application under Section 29A, the court is limited to assessing whether the arbitrator has acted expeditiously. It held that issues related to the conduct of arbitration or arbitral fees are deemed irrelevant to Section 29A.

Therefore, the High Court decided to extend the mandate by six months from the date of the order.

Case Title: Apex Buildsys Ltd. Vs Vadera Interiors And Exteriors and connected matter

Citation: 2024 LiveLaw (Del) 956

Case Number: O.M.P.(MISC.)(COMM.) 227/2023 and IA 36911/2024

Advocate for the Petitioner: Mr. Suhail Sehgal, Mr. Achin Goel and Mr. Prashant D., Advocates

Advocate for the Respondent: Mr. Mritunjay K. Singh, Mr. Saikat Khatva, Mr. Ravi Shankar, Mr. Narsingh Narain Rai, Mr. Praant Sharma, Ms. Parul Sharma, Mr. Harsh Garg and Ms. Charvi Maurya, Advocates.

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