The Hon’ble Calcutta High Court in Rohan Builders (India) Pvt. Ltd v Berger Paints India Limited 2023 SCC OnLine Cal 2645 recently deliberated on the issue of whether Courts can extend an arbitral tribunal’s mandate under Section 29A(4) of the Arbitration and Conciliation Act, 1996 (“the Act”), after the mandate of the arbitral tribunal has been terminated.
Having canvassed the objective behind inserting Section 29A of the Act and the construction of Section 29A itself, the Ld. Single Judge held that the application for extension must be made during the subsistence of the mandate of the arbitral tribunal and not thereafter.
Brief Background
Three identical applications were filed before the Hon’ble Calcutta High Court by the claimants/ petitioners seeking extension of the arbitral tribunal’s mandate in exercise of the Hon’ble Court’s power under Section 29A(4) of the Act. It is pertinent to note that the said applications were made after the expiry of the 12 months period for making the award under Section 29A(1) and were contested by the respondents.
The arguments put forth by the petitioners were as follows:
- Section 29A(4) empowers the jurisdictional court to extend the period of the arbitral tribunal’s mandate either before or after the expiry of the 18 month time period specified under Section 29A of the Act, i.e. further extension after the expiry of the initial time period of 12 months (prescribed under Section 29A(1) of the Act) and the extended period of six months (prescribed under Section 29A(3) of the Act).
- The legislative object behind the insertion of Section 29A of the Act was to expedite the arbitration process. The jurisdictional court is conferred with sufficient power to extend the mandate of an arbitral tribunal upon sufficient cause being shown. The petitioners placed reliance on the 176th Report of the Law Commission of India on The Arbitration and Conciliation (Amendment) Bill, 2001, as well as the 246th Report of the Law Commission and the Statements and Objects of the Arbitration and Conciliation (Amendment) Bill, 2015, to support their submissions.
Whereas, the respondents submitted as follows:
- The reliance placed on the 176th Report of the Law Commission is misplaced. While the 176th Report of the Law Commission on the Arbitration and Conciliation (Amendment) Bill, 2001, recommended that the mandate of the arbitral be suspended under Section 29A(4) of the Act till the same is extended by the jurisdictional court on application, the legislature did not find favour with the same and Section 29A(4) as it exists deliberately uses the word “terminate” instead of “suspend”.
Findings of the Hon’ble Calcutta High Court
The Hon’ble Calcutta High Court has determined the law on the subject as follows:
Section 29A not only brings in strict timelines for making of the award but also the concept of termination of the mandate
The Ld. Single Judge of the Hon’ble Calcutta High Court found that there has been a significant shift in the position of law, post the insertion of Section 29A to the Act. While the erstwhile Arbitration Act, 1940, in the form of Section 28 empowered the jurisdictional court to extend the arbitral tribunal’s mandate, regardless of whether the time period for making the award had expired or not, Section 29A clearly provides only two windows for extension of such mandate for making of an award.
The first window for extension is provided under Section 29-A(3) of the Act, where if the award is not made within the stipulated 12 months period (from the date of completion of pleadings) under Section 29-A(1) of the Act, the parties may consent to extend the same by a further period of six months. The second window presents itself in the form of Section 29A(4), read with Section 29A(5) of the Act. Where an award is not made within 18 months (from the date of completion of pleadings) i.e. 12 months plus six months, either party to the proceedings may make an application to Court, which may for sufficient cause grant such further extension.
Pertinently, the Ld. Single Judge noted that the 176th Report of the Law Commission envisaged “suspension of mandate” after the time period for making an award under Section 29A(1) and (3) of the Act expired and until an application for extension of the same was made under Section 29A(4) of the Act. However, the Ld. Single Judge after comparing the Law Commission’s recommendation and Section 29A of the Act concluded that such proposal was not accepted by the Legislature, which consciously used the word “termination” in Section 29A(4) instead of “suspension”. The inevitable intent behind the same being that “the mandate of the arbitral tribunal to make the award within 12 months after completion of pleadings [under Section 29-A(1)] or within the extended time of six months [under Section 29-A(3)] would stand terminated once the timelines are exhausted and the mandate would not remain in suspension till filing of the application for extension of the mandate under Section 29-A(4)”.
The mandate of the arbitral tribunal must be in existence or subsisting at the time of making an application for extension under Section 29A(4)
The Ld. Single Judge further reasoned that Section 29A(5) and Section 29A(6) speak of “extension” under Section 29-A(4) of the Act. Additionally, Section 29-A(4) also states that unless the mandate of the arbitral tribunal is “extended” by the jurisdictional court, the same will stand terminated upon the expiry of period prescribed under Section 29A(1) and (3) of the Act. Upon a plain construction of the sections and giving the words used in a statute their literal meaning, with due regard to their placement and the legislative intent to use the particular word, the Ld. Single Judge has conclusively determined that the application under Section 29A(4) of the Act must be made while the mandate of the arbitral tribunal is continuing, and not thereafter.
Further, relevance is drawn from the proviso to Section 29A(4), which states that “where an application under sub section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application”. Therefore, the language of Section 29A(4) requiring “the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified”, necessarily means that: (i) where the application for extension has been made while the mandate of the arbitral tribunal is subsisting, it will continue to subsist till the disposal of the application; and (ii) in such a situation, despite the time period for making the award having expired, the jurisdictional court may extend the mandate of the arbitral tribunal upon a requisite application having been made by either party.
Therefore, the Ld. Single Judge has held that the mandate can only continue if the application is filed prior to expiry of the mandate and not thereafter.
Such interpretation is in consonance with object of the Act and Section 29A i.e. to expedite the arbitration process.
The Hon’ble Calcutta High Court concluded with a word of caution that stakeholders in an arbitration process must also be vigilant and aid in expediting the arbitral process. The Ld. Single Judge held that to interpret Section 29A(4) in a manner that allows for extension despite the termination of the mandate of the arbitral tribunal would be “antithetical to not only the object for which Section 29-A was inserted into the Act in 2015, but also to the declared objective of the Amending Act 3 of 2016, which is settlement of disputes through alternative disputes mechanism in an expeditious manner”.
Resultantly, the Hon’ble Calcutta High Court, in view of the fact that the applications in the case at hand had been admittedly made after the termination of the arbitral tribunal’s mandate and in light of the fact that the court is statutorily precluded from extending the mandate, rejected the petitioners’ pleas for extension of time.
Proceedings before the Hon’ble Delhi High Court
Recently, the Hon’ble Delhi High Court also took cognizance of the question raised in Rohan Builders (supra) i.e. “whether an application ought to be moved by the parties under Section 29A(4) during the course of the mandate of the learned arbitrator or can be moved even later”. The Hon’ble Delhi High Court, while recording the reference made to the case of Rohan Builders (supra), in its order dated September 26, 2023, in ATS Infrastructure Ltd. and Anr. v Rasbehari Traders O.M.P (T)(COMM) 91/2023, has placed the matter for further consideration on October 30, 2023, while directing the arbitral tribunal in the matter not to proceed with the arbitral proceedings.
It remains to be seen if the detailed reasoning in Rohan Builders (Supra) will be accepted by the Hon’ble Delhi High Court.
For further information, please contact:
Raunak Dhillon, Partner, Cyril Amarchand Mangaldas
raunak.dhillon@cyrilshroff.com
