INTRODUCTION
Section 29A of the Arbitration and Conciliation Act, 1996 (“Act”), inserted vide theAmending Act of 2015 (w.e.f. 23.10.2015), was meant to introduce time limit for completion of arbitration proceedings. It prescribed a statutory period of 12 (twelve) months from the date the arbitral tribunal enters upon reference. Thereafter, vide the Amending Act of 2019 (w.e.f. 30.08.2019), the prescribed time limit was modified, and the Act required arbitration proceedings to be completed within 12 (twelve) months from the date of completion of pleadings. Further, sub-section (3) of Section 29A of the Act allows an extension of 6 (six) months by mutual consent of the parties for passing the award. Similarly, sub-section (4) of Section 29A of the Act provides that in the event the award is not passed in terms of Section 29A(1) or within the extended period of Section 29A(3), the parties can make an application to the court for extension of mandate of the arbitral tribunal.
Section 29A(4) of the Act provides that “the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period…”. While the provision clearly states that the mandate of the tribunal can be extended even after the expiry of the specified period under Section 29A, it does not clarify whether such applications for extension can be made after the expiry of the specified period under Section 29A. This lacuna has recently become evident considering the divergence of opinion by different High Courts while adjudicating extension applications, which were filed after the expiry of the specified period under Section 29A.
This blog post attempts to review such line of judgments where applications under Section 29A (4) were made after the expiry of the timelines specified under Sections 29A(1) and (3) of the Act.
DIVERGENCE OF OPINION BY HIGH COURTS
At the outset, it is pertinent to note that sub-section (5) of Section 29A of the Act requires the party making an application under sub-section (4) to show ‘sufficient cause’ for seeking an extension of mandate of the arbitral tribunal and thus, Section 29A provides for a safeguard against misuse by parties that intentionally, and without cause, belatedly file an application for extension of mandate of the tribunal. Further, sub-section (5) of Section 29A also allows the court to impose terms and conditions while allowing an extension. Thus, courts have the option of prescribing specific timelines for conduct of arbitration proceedings or other conditions upon parties in cases where the application for extension is made after the expiry of specified time[1]. In fact, courts also have the power under Section 29A(8) to impose costs on either of the parties while granting an extension of mandate of the tribunal.
The Hon’ble High Courts of Delhi, Bombay and Madhya Pradesh have allowed applications under Section 29A(4) of the Act after considering two important factors viz., the cause of delay and the stage of the arbitration proceedings. It was observed in one of the judgments that where the party making an application under Section 29A(4) is able to explain that the delay so caused is not attributable to it and provides ‘sufficient cause’ for the same, not allowing such an application would amount to stifling the rights of such party, particularly the petitioner i.e., claimant in the arbitration[2].
However, in the recent case of Rohan Builders (India) Private Limited v Berger Paints India Limited[3] (“Rohan Builders”), the Hon’ble Calcutta High Court took a contrary view and noted that Section 29A(4) must be given a strict interpretation in light of the words used in the provision and the intention of the legislature. The Ld. Single Judge placed reliance on the 176th Report of the Law Commission of India, which had suggested the phrase “suspension of arbitral proceedings” (instead of the word ‘terminate’) while recommending the introduction of time limit for completion of arbitration proceedings. The Ld. Single Judge noted that despite the foregoing, the legislature in its wisdom had used the word ‘terminate’, implying that it was used consciously, keeping in mind the objective of expediency in the conduct of arbitration proceedings and to ensure that once all timelines were exhausted and no application for extension was made by either of the parties, the mandate of the tribunal would inevitably terminate and not remain in suspension. Notably, a Special Leave Petition/ SLP[4] has been filed against Rohan Builders and is pending before the Hon’ble Supreme Court.
Subsequently, in Vrindavan Advisory Services L.L.P. v. Deep Shambhulal Bhanushali[5](“Vrindavan Advisory”), too, the Hon’ble High Court of Calcutta followed the judgment in Rohan Builders to disallow the extension application filed after the specified period under Section 29A. Notably, an SLP[6] was preferred against Vrindavan Advisory before the Hon’ble Supreme Court, which stayed the Hon’ble Calcutta High Court judgment (granted vide order dated November 06, 2023).
AN OVERVIEW OF CASES THAT ALLOWED EXTENSION APPLICATIONS FILED AFTER EXPIRY OF MANDATE
Recently, the Hon’ble Delhi High Court in Wadia Techno-Engineering Services Ltd. v. Director General of Married Accommodation Project[7] gave a purposive interpretation to Section 29A(4) and allowed an application for extension, filed after the expiry of the mandate of the tribunal, in view of the fact that the proceedings had already reached the stage of final arguments. The learned arbitrator had proceeded with due expedition and it was the respondent who had sought multiple extensions, ultimately causing delay.
In Barasat Krishnagar Expressways Ltd. v. NHAI[8], the Hon’ble Delhi High Court while extending the mandate of the tribunal, had observed that since the parties had filed about 60 volumes of pleadings/ documents and 30 volumes of convenience compilations, it was apparent that both the tribunal as well as the parties had already expended considerable effort in bringing the proceedings to a culmination, all of which could not be negated at the stage of pronouncement of the award by the arbitral tribunal. It is interesting to note that this was a case where the extension of the tribunal’s mandate under Section 29A(4) was being contested by another party that was additionally seeking the substitution of the arbitrator under Section 29A(6).
Further, the Hon’ble High Court of Madhya Pradesh in Rajesh Kaila V. Union Of India And Ors[9], had extended the mandate of the tribunal for a period of four months when such application was made after the expiry of specified period under Section 29A, for two reasons. First, the delay was on account of the Covid-19 pandemic and not attributable to the parties and, second, the arbitration proceedings were already at the stage of final arguments and thus warranted an extension by the court.
Similarly, there may be other situations where delay is caused due to factors that are outside the control of the parties. Also, there may be situations that may arise in the ordinary course of proceedings due to the nature of dispute between the parties, substitution of arbitrator after pleadings are complete, non-cooperation of the opposite party, delay attributable to the tribunal, etc.
On November 30, 2023, the Hon’ble High Court of Bombay in Nikhil H. Malkhan & Ors. v. Standard Chartered Investment and Loans (India) Limited[10], while deciding an application under Section 29A disagreed with the rationale of Rohan Builders. It was observed that Section 29A empowers the courts to pass appropriate orders to ensure that arbitration proceedings reach their logical conclusion. The High Court also stated that the purpose of the phrase “either prior to or after the expiry of the period so specified” under Section 29A would stand defeated if it was held that the court could exercise its power of extension of mandate only if the application was made prior to the expiry of mandate of the arbitral tribunal and as such, the court cannot be rendered powerless merely on the ground that the application under Section 29A was moved after the expiry of the mandate.
Pertinently, while Rohan Builders was a case where the non-applicant was contesting the application for extension of mandate under Section 29A(4), there may be situations where – (a) the application under Section 29A(4) is filed jointly by both the parties and accordingly there is no opposition to the same; and (b) the tribunal itself suggests that the parties seek an extension of the mandate of the tribunal after the expiry of the specified period. The SLP filed against Rohan Builders may clarify the possible eventualities which may render an equitable consideration basis such factual differences of each case.
CONCLUSION
In light of the pending SLP against Rohan Builders, it is imperative to not miss the deadline for filing an extension application under Section 29A. The case of Rohan Builders gave primacy to the object of expediency under the Act. However, arbitration being a party driven process, the intention of the parties to successfully resolve a dispute is an equally important objective under the Act. It will be interesting to see how the Hon’ble Supreme Court will balance the two in deciding the SLP against Rohan Builders.
For further information, please contact:
Kapil Arora, Partner, Cyril Amarchand Mangaldas
kapil.arora@cyrilshroff.com
[1] FCA India Automobiles (P) Ltd. v. Torque Motor Cars Pvt. Ltd. 2018 SCC OnLine Bom 4371
[2] Dinesh Kumar v. Land Acquisition Officer and Another 2023 SCC OnLine HP 767.
[3] 2023 SCC OnLine Cal 2645
[4] SLP (C) No. 23320/ 2023
[5] 2016 SCC OnLine Cal 6075
[6] SLP (C) No. 24489 of 2023
[7] 2023 SCC Online Del 2990
[8] 2023 SCC OnLine Del 243
[9] Misc. Civil Case No. 2855 of 2022
[10] Arbitration Petition (Lodging) No. 28255 Of 2023
