The Supreme Court Clarifies Extension of Time for Arbitral Awards under Section 29A Of The Arbitration And Conciliation Act,1996

Summary

The recent ruling by The Supreme Court of India in Rohan Builders (India) Private Limited v. Berger Paints India Limited, wherein The Apex Court reversed the Calcutta High Court’s decision, holding that an application for an extension of time under Section 29A(4) is maintainable even after the expiration of the prescribed period. The Supreme Court emphasized that the provision allows for extensions “either prior to or after the expiry of the period,” thereby affirming judicial discretion in granting such extensions based on sufficient cause. The Court clarified that the term “terminate” indicates a conditional cessation of the Arbitral Tribunal’s mandate, allowing for potential extensions rather than an absolute termination.

Case Timeline

• 2015: Introduction of Section 29A in the Arbitration and Conciliation (Amendment) Act 2015, imposing time limits on arbitral awards.
• September 2023: High Court of Calcutta dismissed Rohan Builders’ application for extension.
• September 12, 2024: Supreme Court heard the case and issued the judgment.

Background

In the case of Rohan Builders (India) Private Limited v. Berger Paints India Limited[1] Rohan Builders initiated arbitration against Berger Paints. However, the Arbitral Tribunal failed to deliver an award within the 12-month period, and the subsequent six-month extension also lapsed without an award being issued. Rohan Builders approached the High Court of Calcutta for an extension under Section 29A(4). The High Court dismissed the application, ruling that it could only be considered if filed before the expiration of the time limit. This decision highlighted a significant divergence in judicial interpretations across various High Courts in India. The High Courts of Calcutta[2] and Patna[3] took the position that once the mandate of the arbitral tribunal expired, the courts lacked the authority to extend the timeline for making an award under Section 29A(4). In contrast, the High Courts of Bombay[4], Kerala[5], Delhi[6], Madras[7], and Jammu and Kashmir and Ladakh[8] adopted a more permissive stance, allowing parties to apply for extensions even after the statutory time limits had lapsed. Rohan Builders then appealed to the Supreme Court, raising critical questions about the applicability and interpretation of Section 29A, particularly concerning the possibility of extending the timeline for making an award after the expiration of the mandated periods.

Issue Raised

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 making an arbitral award?

The Supreme Court’s Ruling

• The Supreme Court reversed the High Court’s decision, holding that an application for an extension of time under Section 29A(4) is maintainable even after the expiration of the specified period.
• The Court emphasized that the provision allows the extension of time “either prior to or after the expiry” of the period, thus providing judicial discretion to grant extensions based on sufficient cause.
• The ruling clarified that the term “terminate” in Section 29A(4) indicates a conditional cessation of the Arbitral Tribunal’s mandate, allowing for potential extensions rather than an absolute termination.

Key Observations by the Court

• Legislative Intent: The purpose of Section 29A is to ensure timely completion of arbitration proceedings, without creating an absolute bar against post-expiration applications for extension.
• Interpretation of “Terminate”: The Court clarified that the mandate of the Arbitral Tribunal is not conclusively terminated upon the expiration of the time period, but is conditionally so, allowing for judicial discretion in extending the timeline.
• Judicial Discretion: The extension of time is not automatic; it requires sufficient cause and may come with terms and conditions imposed by the Court.
• Continuation of Proceedings: If an application for extension is pending, the Arbitral Tribunal may continue its proceedings, thus preventing unnecessary delays.
• Practical Implications: The ruling avoids a rigid interpretation that would force parties to rush to the courts, countering the objective of efficient and effective dispute resolution through arbitration.

Analysis

The Supreme Court’s ruling clarified the interpretation of Section 29A and reinforced the flexibility and efficiency of arbitration in India. judgment fostered an environment conducive to efficient dispute resolution. By allowing for extensions even after the prescribed period, the Court has ensured that the arbitral process remains effective and responsive to the needs of the parties involved. This judgment not only resolves the immediate case but also sets a precedent that will likely influence future arbitration proceedings and related judicial interpretations.

[1] Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd., 2024 SCC OnLine SC 2494

[2] Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd., 2023 SCC OnLine Cal 2645

[3]https://patnahighcourt.gov.in/viewjudgment/MTUjMjAzNTAjMjAyMSMxI04=-YHtoCZoS8Hw=

[4] Nikhil H. Malkan v. Standard Chartered Investment & Loans (India) Ltd., 2023 SCC OnLine Bom 2575

[5] Hiran Valiiyakkil Lal v. Vineeth M.V., 2023 SCC OnLine Ker 5151

[6] ATC Telecom Infrastructure (P) Ltd. v. BSNL, 2023 SCC OnLine Del 7135

[7] G.N. Pandian v. S. Vasudevan, 2020 SCC OnLine Mad 737

[8] H.P. Singh v. G.M. Northern Railways, 2023 SCC OnLine J&K 1255