Application To Extend Time To Pass Arbitral Award Maintainable Even After Expiry Of Period Under S.29a(4)

Summary:

[1]A two judge bench consisting of Justice Sanjiv Khanna and Justice R. Mahadevan dealt with the present case. This judgment addresses the issue of whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the expiration of the period for delivering an arbitral award. The Supreme Court grants leave and decides in favor of accepting the contrary view held by several other High Courts, allowing for extensions beyond the stipulated deadlines. Section 29A establishes time limits for making an arbitral award, originally set at twelve months, which can be extended by six months through mutual consent. The term “terminate” used in Section 29A(4) means that the arbitral tribunal cannot perform its function, yet the mandate can be extended by the court, suggesting parties should not be penalized for delays. The intention of the legislature is to ensure timely arbitration resolutions while allowing flexibility in certain circumstances. Judicial discretion plays a vital role in determining whether an extension is warranted based on sufficient cause. The court underlines that extensions will be granted based on sufficient cause, ensuring the enforcing of arbitration timelines while reducing unnecessary legal obstacles.

Facts:

Rohan Builders (India) Private Limited and Berger Paints India Limited entered into a contractual agreement, which included a clause for resolving disputes through arbitration. This is a common practice in commercial contracts to ensure that conflicts can be resolved outside of the traditional court system. A dispute arose between the two parties regarding the execution of the contract, leading Rohan Builders to initiate arbitration proceedings against Berger Paints. The Arbitration was conducted as per the terms specified in their Contract, which would include appointing an Arbitral Tribunal to hear the case. According to Section 29A of the Arbitration and Conciliation Act, the Arbitral Tribunal is required to make its award within a specified time frame. Initially, the tribunal was set a timeline within which to conclude the arbitration proceedings and issue an award. As the arbitration process progressed, the time limit set for the arbitral tribunal to render its award expired. This raised a crucial legal question about whether the tribunal could still be granted an extension to make the award. After the expiry of the initial time period, Rohan Builders filed an application seeking an extension of time for the arbitral tribunal to continue its proceedings and ultimately deliver an award.

This application was made in light of the ongoing arbitration process and the complexities involved in resolving the dispute. The matter was brought before the High Court of Calcutta. The High Court held that applications for extension of time under Section 29A could only be filed before the expiry of the tribunal’s mandate. Once the mandate had expired, the court determined it lacked the authority to grant an extension. Other High Courts across India, including those in Delhi, Jammu and Kashmir, Bombay, Kerala, and Madras, had interpreted Section 29A differently. They allowed for applications for extension to be filed even after the expiration of the arbitral tribunal’s time limit, provided that there was sufficient cause for doing so. Given the conflicting views among the High Courts, the case was escalated to the Supreme Court of India for a definitive ruling on the matter. The Supreme Court’s involvement was crucial to establish a consistent legal framework for handling such applications across jurisdictions.

Issue:

1. Whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 19961 can be filed after the expiry of the period for making of the arbitral award.

Judgment:

The judgment emphasizes that an application for extending the time period to pass an arbitral award under Section 29A(4) of the Arbitration and Conciliation Act is maintainable even after the expiration of the initial twelve-month period or its extended six-month phase. It clarifies that the power to grant extensions lies solely with the court and that such extensions should only be granted for “sufficient cause.” Furthermore, it reinforces the legislative intent behind using the term “terminate,” signifying that the mandate of the arbitral tribunal ceases only if there is no application for an extension filed. This interpretation counters previous beliefs that failing to file an extension application results in an automatic termination of the proceedings. Instead, the judgment delineates that the arbitral tribunal remains operational even if the aforementioned periods expire, as long as an extension application is submitted to the court. Additionally, it asserts that the judicial discretion in handling extension applications acts as a safeguard against abuse of the arbitration process by litigants. The court is entitled to impose costs and set a timeline for future proceedings while ensuring that arbitration continues during the pendency of an extension application to prevent unnecessary delays. Ultimately, the ruling aims at ensuring that arbitral awards are rendered despite procedural delays, thereby reinforcing the efficacy and reliability of the arbitration process in India, which is designed to serve the interests of the parties involved in resolving disputes amicably and expeditiously.

Analysis:

The judgment regarding Section 29A of the Arbitration and Conciliation Act provides significant clarity on the interplay between arbitration timelines and court interventions, effectively enhancing the arbitration process. By emphasizing that the term “terminate” in Section 29A(4) does not equate to an absolute end of proceedings without the possibility of extension, the ruling affirms a more flexible interpretation that prioritizes the efficacy and continuity of arbitration. This interpretation mitigates the harsh consequences of rigid timelines, allowing parties to seek extensions without unnecessary haste, ultimately promoting party autonomy and reducing legal complexities. The court’s recognition that it can extend the arbitral timeline both before and after its expiration empowers parties to pursue their cases without the risk of premature closure. Furthermore, this decision aligns with the legislative intent behind Section 29A, which aims to ensure timely completion of arbitration while accommodating necessary delays. By clarifying that the arbitral tribunal’s mandate can continue during extension applications, the ruling strengthens the overall integrity of arbitration as a dispute resolution mechanism, helping to navigate the challenges posed by delays and enhancing the efficiency of the arbitral process. This judicial interpretation thereby supports a more practical and just approach to arbitration timelines.

[1] https://api.sci.gov.in/supremecourt/2023/41496/41496_2023_2_1501_55557_Judgement_12-Sep-2024.pdf

BEFORE THE HON’BLE SUPREME COURT OF INDIA

Rohan Builders (India) Private Limited v. Berger Paints India Limited

Civil Appeal a/o. SLP (C) No. 23320 of 2023 & Ors.

JUDGMENT DATED  12th SEPTEMBER 2024