S.29A Arbitration ‘Sufficient Cause’ To Extend Time For Award Should Be Interpreted To Facilitate Effective Dispute Resolution

Posted On - 30 December, 2024 • By - King Stubb & Kasiva

Summary:

[1]The Hon’ble Supreme Court allowed the Appellant’s appeal and extended the deadline for the Arbitral Tribunal to make its award until December 31, 2024. The Court held that the High Court erred in dismissing the Appellant’s application for extension of the mandate, as it found sufficient cause for the delay, particularly considering the impact of the COVID-19 pandemic. It was clarified that an extension under Section 29A(4) of the Arbitration and Conciliation Act can be sought even after the expiry of the statutory period.

Facts:

  • The Appellant entered into a works contract with the Respondent, leading to arbitration after disputes arose.
  • The arbitral proceedings commenced on 24.06.2019, and pleadings were completed by 09.10.2019.
  • The 12-month statutory period for the award expired on 08.10.2020, extendable by mutual consent till 09.04.2021.
  • Due to the COVID-19 pandemic, the proceedings were delayed, and an order by the Supreme Court excluded the period between 15.03.2020 and 28.02.2022 for limitation purposes.
  • The hearings resumed in 2022, and the Appellant filed an application for extension of time under Section 29A(4) on 01.08.2023.
  • The High Court rejected the extension application, holding that the mandate expired on 09.04.2021, and no application had been filed in time.
  • The Appellant approached the Hon’ble Supreme Court, arguing that the delay was due to the pandemic and other factors.

Issues:

  1. Whether an application for extension under Section 29A(4) can be filed after the expiry of the Arbitral Tribunal’s mandate?
  2. Whether there was sufficient cause to extend the period for making the award in this case?

Judgment:

  • Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. (2024):

The Supreme Court affirmed that under Section 29A(4), the Court can extend the time for making an arbitral award even after the expiration of the stipulated period. The language of the provision—“either prior to or after the expiry of the period”—is clear, empowering the Court to exercise its discretion for an extension at any stage. The termination of the arbitral tribunal’s mandate is not automatic if an application is made for an extension, even after the period has expired.

  • Court’s Discretion in Granting Extensions:

The Court highlighted that the discretion to extend the period under Section 29A(5) is not to be exercised mechanically, and a party seeking an extension must show sufficient cause. Further, it was found out that the Appellant had demonstrated sufficient cause, showing the ongoing pandemic, technical complexity, and the fact that the hearing was completed before the application was filed. Therefore, the Court decided to extend the time for making the award by the Arbitral Tribunal until December 31, 2024.

The Court also pointed out that any delay attributable to the arbitral tribunal itself could lead to a reduction of the tribunal’s fees. However, the delay in this case was not attributed to the tribunal but was due to factors beyond the parties’ control. Thus, the application for extension was granted, enabling the arbitral process to continue.

  • Analysis:

The Supreme Court’s judgment reinforces the flexibility and party autonomy in arbitration, especially in exceptional circumstances like the pandemic. It clarifies that courts have the power to extend the arbitral timeline even after the mandate has expired, provided there is sufficient cause. This ensures that arbitration, as an alternative dispute resolution mechanism, remains effective and does not get stalled due to procedural delays. The Court’s emphasis on the broader goal of dispute resolution reflects a pragmatic approach to ensuring fairness and justice, even when timelines are exceeded.

[1]https://api.sci.gov.in/supremecourt/2024/2434/2434_2024_13_1501_57434_Judgement_22-Nov-2024.pdf

BEFORE THE HON’BLE SUPREME COURT

M/S Ajay Protech Pvt. Ltd. v. General Manager & anr.

CIVIL APPEAL NO.________OF 2024 (ARISING OUT OF SLP (C) NO. 2272 OF 2024)

Judgement dated 22nd November 2024