The Supreme Court has resolved the debate on filing for an extension of time period under Section 29A of the Arbitration and Conciliation Act, 1996 (the “Act”), after the period for rendering an arbitral award has expired. This judgment was rendered in Rohan Builders (India) Private Limited v. Berger Paints India Private Limited, SLP (C) No. 23320 of 2023 (“Rohan Builders”) on September 12, 2024. Given that several months have passed since the judgment, this blog takes a bird’s eye view on disputes under Section 29A of the Act and how the courts have dealt with them post Rohan Builders.
Interestingly, in Rohan Builders, the Supreme Court categorically stated that though the court can entertain applications for time-period extension, post the expiry of the specified period, such an extension should not be granted mechanically on filing of application. The court can exercise such power to extend the time period only if there is ‘sufficient cause’ for such extension. Further, it can impose terms and conditions while granting such extension. Since the Act does not define ‘sufficient cause’, courts while adjudicating on such matters should be guided by the principles of judicial discretion, thereby deterring any party trying to abuse the process of law or espousing a vexatious or frivolous application.[1]
Examination of Factors Constituting ‘Sufficient Cause’
Prior to Rohan Builders
Prior to the Rohan Builders judgment, courts had considered factors such as arbitrator substitution,[2] time spent on applications before courts,[3] the stage of arbitral proceedings (particularly when only the award was left to be rendered),[4] and amount of time spent on lengthy cross-examinations,[5] to determine the existence of sufficient cause and grant extensions.
Post Rohan Builders
A few courts have relied on Rohan Builders and elaborated on factors that may be considered while examining ‘sufficient cause’. In Ajay Protech Pvt. Ltd. v.General Manager,[6] the Supreme Court stated that ‘sufficient cause’ should be interpreted as aiming to facilitate effective dispute resolution, and in lieu of the primary objective of arbitration, i.e., to resolve disputes through the agreed dispute resolution mechanism. The Court proceeded to note that (1) there was a pause on the limitation period due to the pandemic, and (2) parties had already agreed to file an application for time-period extension. Therefore, it concluded that there was sufficient cause to permit the extension of time. In HMT Limited, Pinjore v.S.K.V. Agro Distributors,[7] the Punjab and Haryana High Court held that the deteriorating health of the arbitrator was the reason for delay, which constituted sufficient cause for extending the time period.
Furthermore, in RCC Infrastructures Ltd. v. DMI Finance Pvt. Ltd.,[8] the application for time-period extension was filed four and a half months of the termination of the mandate of the arbitrator. The Delhi High Court herein noted that the termination of the arbitral tribunal’s mandate results in waste of time, resources and parties’ money. The essence of the Act being a litigant-centric process to expedite the disposal of cases and reduce litigation costs, the Court opined that there was no inordinate delay in the filing of the application. Moreover, the Court also considered that (1) the pleadings were completed, (2) evidence had started to be adduced, and (3) the complete arbitral fee had been paid by the applicant, and hence proceeded to allow the application and extend the mandate of the arbitrator. Recently, in Oriental Insurance Company v. Sri Lakshmi Srinivasa Jute Mills,[9] the Andhra Pradesh High Court, noting the findings in Rohan Builders, also extended the mandate of the arbitrator since the delay was not attributable to either of the parties.
Keeping in line with the above approach of the courts, some areas that could become relevant for the courts to consider while entertaining such applications, beyond the specified period, have been identified. Firstly, while examining sufficient cause, courts may consider the conduct of parties and the arbitral tribunal to ensure that there is no deliberate delay or that there is no negligence or dilatory tactics employed by them. Secondly, the stage of the arbitration proceedings at which the extension is sought, such as conclusion of hearings, cross-examination, etc., could become relevant for the aforesaid determination, as such an application cannot be allowed after inordinate delay in the conduct of the arbitral proceedings/ filing of such application, as it could make the Act’s purpose and timelines otiose.
Generally, the courts have adopted a rather liberal approach in construing “sufficient cause’ under the Limitation Act, 1963, to subserve the ends of justice. For instance, in relation to the interpretation of ‘sufficient cause’ under Section 29A of the Act, in Reliance Infrastructure Ltd. v. Madhyanchal Vidyut Vitran Nigam Ltd.,[10] the Delhi High Court stated that the proceedings were at the stage of recording of evidence and there is no lack of diligence or promptness on part of the arbitrator, hence, the Court found no impediment to granting an extension. Similarly, in ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar Nigam Ltd,[11] and Nikhil H. Malkan v. Standard Chartered Investment and Loans (India) Ltd,[12]the Delhi and the Bombay High Courts, respectively, observed that the proceedings were at advanced stages of cross-examination/ final hearings, and thereby granted the extension. The justification of advanced stage (final hearing), along with the COVID-19 pandemic and various interlocutory orders filed by the parties, were also provided to grant extension in Hiran Valiiyakkil Lal and others v. Vineeth M. V.[13] Peculiarly, in Iqbal Singh v. Naresh Kumar,[14] the Delhi High Court even after noting that both the parties had consumed substantial time and filed a delayed petition, the arbitration proceedings being at the stage of adducing the claimant’s evidence extended the mandate of the arbitral tribunal.
However, interestingly, in a subsequent order dated October 23, 2024, in Rohan Builders, the Supreme Court, while deciding the matter on merits, declined to grant an extension in relation to Civil Appeal Nos. 10622/2024 and 10623/2024. The Court noted that an extension was not justified, as there was approximately a six-month period between the date on which the award had to be pronounced and the date when the mandate of the arbitrator ended. Yet, the arbitrator passed no award, thus showcasing lack of sufficient cause. Accordingly, the Court directed the High Court to appoint a new arbitrator.
Another conundrum arose from the Supreme Court observations, para 12 of the Rohan Builders judgment,wherein it noted that the“termination of the arbitral mandate is conditional upon the non-filing of an extension application and cannot be treated as termination stricto sensu”. This raises the question of whether filing an application under Section 29A can revive the Arbitral Tribunal’s mandate, even months after the expiry of the time period, as per proviso 2 to Clause (4)? This determination is crucial for the legal consequences of terminating the mandate stricto sensu. The Court opined that the consequences of such a termination would be the requirement for fresh reference to arbitration or appointment of an arbitrator.
Conclusion
The courts, while treading a fine line between delivering justice to a party and upholding the objectives of the Act, have generally advocated for a liberal approach in condoning delay for ‘sufficient cause’, based on the principle that ordinarily a litigant does not stand to benefit from late filings.[15] Hence, while parties can file for extension beyond the specified period, it would be wise to be cautious and file such applications in a diligent manner, both in terms of timing and content, since a large part of granting such an extension is based on the merits of the application itself, and the discretion of the courts.
For further information, please contact:
Anuradha Mukherjee, Partner, Cyril Amarchand Mangaldas
anuradha.mukherjee@cyrilshroff.com
[1] Rohan Builders (India) Private Limited v. Berger Paints India Private Limited, SLP (C) No. 23320 of 2023, Para 19.
[2] Indian Farmers Fertilizers Cooperative Ltd. v. Manish Engineering Enterprises, 2022 (4) ADJ 162.
[3] KMP Expressways Ltd. v. IDBI Bank Limited, O.M.P. (MISC.) (COMM.) 553/2023.
[4] Anay Kumar Gupta v. Jagmeet Singh Bhatia, O.M.P. (Misc.)(Comm.) 147/2023.
[5] Goel Construction Company v. Delhi Metro Rail Corporation Ltd., O.M.P.(Misc.)(Comm.) 628/2024.
[6] Special Leave Petition (Civil) No. 2272 of 2024).
[7] CR-726-2021.
[8] O.M.P. (MISC.) (COMM.) 41/2024.
[9] COMCA 26 of 2024.
[10] 2023 SCC OnLine Del 4894.
[11] 2023 SCC OnLine Del 7135.
[12] 2023 SCC OnLine Bom 2575.
[13] 2023 SCC Online Ker 5151.
[14] 2023 SCC OnLine Del 7587.
[15] Collector, Land Acquistion, Anantnag v. Katiji, (1987) 2 SCC 107.
