Arbitration | Application To Extend Time To Pass Arbitral Award Maintainable Even After Expiry Of Period Under S.29A(4) : Supreme Court

In an important ruling concerning the Arbitration and Conciliation Act, the Supreme Court today held that an application for extending the time for passing of an arbitral award can be filed even after the expiry of the twelve-month or the extended six-month period.

“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 bench comprising Justices Sanjiv Khanna and R. Mahadevan said.

As per Section 29A, arbitral awards should be made within twelve months of completing pleadings. This can be further extended by six months more with the consent of the parties. So, the upper limit is 18 months. Section 29A (4) adds that if the award is not passed within this timeframe, the arbitral mandate will stand terminated unless it is extended by a court order.

The decision of the Supreme Court came as a clarification on the largely contested issue in the domain of arbitration which is encountered by the litigants in routine fashion. Till now, there's no authoritative ruling of the Supreme Court on the aforementioned issue of “whether an application for extension of a time period for passing an arbitral award is maintainable under Section 29A (4) read with Section 29A (5) even after the expiry of the mandated period.” However, there were varied views of the High Courts on the aforesaid issue which required a clarification from the Top Court.

On one hand, the High Courts of Calcutta and Patna held that the application for extension of time under Sections 29A (4) and 29A (5) of the A & C Act can only be entertained if filed before the expiry of the mandate of the arbitral tribunal. The High Court at Calcutta held that once the mandate of the arbitral tribunal is terminated by afflux of time of twelve months, or when so consented to by the parties after a further six-month extension, the power of the court to extend time under Section 29A (4) cannot be invoked.

Whereas an opposite view was taken by the High Courts of Delhi, Bombay, Jammu & Kashmir, Kerala, and Madras. They have held that an application for an extension of the time limit for the arbitral award can be filed by a party even after the expiry of the term of twelve months or the extended period of six months. Recently, the Calcutta High Court in a subsequent decision of the single Judge in Ashok Kumar Gupta v. M.D. Creations and Others (2024) on elaborated examination, has concurred with this view.

'Termination' Of Arbitral Tribunal Upon Non-Filing Of Application For Extension Of Time Limit For Passing Of Award Wouldn't Mean 'Suspension' Of Arbitral Tribunal

It was contended that if the application for extension of the time period was not filed within the mandated period prescribed under Section 29A (4) of the Act than the courts could not extend the time period as the mandate of the arbitral tribunal was deemed to be terminated.

Rejecting such contention, the Court rather than doing a strict interpretation of the word 'terminate' mentioned under Section 29A (4) did the purposive interpretation.

“The word “terminate” in Section 29A (4) makes the arbitral tribunal functus officio, but not in absolute terms. The true purport of the word “terminate” must be understood in light of the syntax of the provision. The absence of a full stop after the word “terminate” is noteworthy. The word “terminate” is followed by the connecting word “unless”, which qualifies the first part with the subsequent limb of the section, i.e. “unless the court has, either prior to or after the expiry of the period so specified, extended the period.” The expression “prior to or after the expiry of the period so specified” has to be understood with reference to the power of the court to grant an extension of time.”, the Court observed.

According to the Court, the termination of the arbitral mandate is conditional upon the non-filing of an extension application and cannot be treated as termination stricto sensu.

“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.”, the Court added.

Essentially, the Court refrained from adopting narrow and restrictive meaning to Section 29A (4) because “a rigid interpretation would amount to legislating and prescribing a limitation period for filing an application under Section 29A, when the section does not conspicuously so state.”

The Court reasoned that “we must strive to give meaningful life to an enactment or rule and avoid cadaveric consequences that result in unworkable or impracticable scenarios.”

“Section 29A(4) is the provision which requires interpretation. It states that where the award is not made within the specified period of twelve or eighteen17 months, the mandate of the arbitral tribunal will terminate. However, this provision does not apply if the court has extended the period, either before or after the expiry of the initial or the extended term. In other words, Section 29A(4) empowers the court to extend the period for making of the arbitral award beyond a period of twelve months or eighteen months, as the case may be. The expression “either prior to or after the expiry of the period so specified” is unambiguous. It can be deduced by the language that the court can extend the time where an application is filed after the expiry of the period under subsection (1) or the extended period in terms of sub-section (3). The court has the power to extend the period for making an award at any time before or after the mandated period.”, the Court held.

Case Title: ROHAN BUILDERS (INDIA) PRIVATE LIMITED VERSUS BERGER PAINTS INDIA LIMITED, SLP(C) No. 023320 - / 2023

Citation : 2024 LiveLaw (SC) 693

Click here to read/download the judgment