Decoding Section 29A (4): The Intricacies Of Arbitrator Mandate Expiry

Decoding Section 29A (4): The Intricacies Of Arbitrator Mandate Expiry

INTRODUCTION

One of the main objectives of the Arbitration and Conciliation Act, 1996 was to provide litigants with an efficacious remedy to the generic litigation route and resolve disputes in a time-bound manner. To crystallize this objective, the legislative inserted Section 29A which imposes time limit on the mandate of the Arbitral Tribunal within which it is required to make the award.¹ The schematic framework of the provision provides for the initial time-limit of 12 (twelve) months for the Arbitral Tribunal to make the award from the date of completion of pleadings². Furthermore, the said time-limit can be consensually extended for additional period of 6 (six) months³. After expiry of the said period i.e. either 12 months or 18 months after extension, the mandate of the Arbitral Tribunal expires⁴, unless Court has either prior to or after the expiry of the period, extended the period.

In the context of promoting expeditious settlement of disputes while minimizing judicial intervention, Section 29A and its subsequent amendments endeavours to expedite the arbitration process. Nonetheless, this topic has faced challenges related to interpretation, particularly concerning the termination of an arbitrator's mandate. This article will first explore the core of the issue and the relevant judicial trends, followed by a critical analysis of a recent Supreme Court ruling that clarifies the law on this matter.

WHY THE CONUNDRUM?

The conundrum in this provision is centred around the interpretation of Section 29A (4) which stated that if the award is not within the specified period of 12 or 18 months, the mandate of the Tribunal shall terminate. However, the mandate does not terminate if the Court has extended the period, either before or after the expiry of initial period. The interpretative gap that exists here is that the Section does not specify whether applications for extension can be submitted after the 12 or 18-month period has elapsed. This raises the question of what happens to an arbitration when the parties request an extension under Section 29(4) after the designated period has expired. There is a divergence of opinion among various High Courts regarding whether such an application for extension can be filed after the expiration of the arbitral tribunal’s mandate.

CONFLICTING OPINIONS OF VARIOUS HIGH COURTS

Delhi High Court:

• Wadia Techno-Engineering Services Ltd. v. Director General of Married Accommodation Project⁵: Given that the case had already advanced to the point of final arguments, the Delhi High Court granted a request for an extension that had been made after the tribunal's mandate had expired. The Court held that the Arbitrator had proceeded with caution in terms of the timeline, however it was the Respondent who had sought multiple extensions, thus causing undue delay.
• Barasat Krishnagar Expressways Ltd. v. NHAI⁶: This was a notable case where the extension of mandate was being contested by other party which was also seeking substitution of the Arbitrator. Here, Delhi High Court took a positive interpretation while allowing an application filed after the expiry of the specified period and extended the mandate of the Tribunal. It was noted that the pleadings submitted by both parties were quite extensive, and significant effort was put in by both the parties and the Arbitral Tribunal to bring the arbitration process to a conclusion. Hence, if the Arbitral Tribunal were to be replaced at this point, it would undermine all that effort.
• ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar Nigam Ltd.⁷: In this case, the application for extension was filed a few days after expiration of time-period contemplated under Section 29A (1) and 29A (3). While allowing the extension sought, the Court opined that Section 29A of the A&C Act was not intended to restrict the parties or the court from extending deadlines when necessary. It stated that rejecting an application filed after the deadline would undermine the effectiveness of the arbitration process as well as infringe the principle of party autonomy.⁸

Bombay High Court:

• Nikhil H. Malkan & Ors. v. Standard Chartered Investment and Loans (India) Limited⁹: In this case, the mandate of the Tribunal as per the consensually extended period expired, after which the application for extending was filed by the Petitioner. The Respondent argued that once the mandate has automatically expired, the Court cannot consider a request to extend it, since it has already been terminated by the operation of law. The Court disagreed with Respondent’s contentions and held that interpretation of the words “either prior to or after the expiry of the period so specified” would indicate that Court is not rendered powerless in situation where the application for extension is filed after termination of arbitrator’s mandate.

Kerala High Court:

• Hiran Valiiyakkil Lal and Others v. Vineeth M.V. and Ors¹⁰: While allowing an application for extending the time-limit which was filed after expiry of arbitrator’s mandate, the Court interpreted the use of conjunction “or” in the sub-clause to apply in cases where mandate of the Tribunal has expired and then the application is filed, Here, such application may be granted if the party is able to show sufficient cause for the extension sought.

Madras High Court:

• G.N. Pandian v. S. Vasudevan¹¹: The Court allowed the application which was filed post the extended period of 6 months while holding that the 2019 Amendment to the Section makes it clear that mandate of the Tribunal can be extended either before or after the expiry of the original mandate.

Patna High Court:

• South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited¹²: The Court took a differential vie while holding that as per the sub-clause (4), even if the Court retains power to extend the mandate of the Arbitrator after expiry of the period specified, an application or petition seeking such extension has to be made prior to expiry of the said extended period.

Calcutta High Court:

• Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited: The Court determined that the mandate of the arbitral tribunal will be terminated if an application for extension is not submitted before the deadline. It contrasted the language of section 29A(4), which states that the tribunal's mandate is terminated "unless the Court has either prior to or after the expiry of the period so specified, extended the period," with the recommendations from the 176th Law Commission Report. The Report suggested that the mandate should only be suspended "until an application for extension is made to the Court by any party to the arbitration." The Court observed that the legislature opted to move away from the Law Commission's recommendation, choosing instead to provide for termination of proceedings when an application for extension is not filed before the mandate expires. Additionally, the Court highlighted that the term "extend" in section 29A (4) implies that the issue of extending the mandate only arises while the mandate is still in effect.
• Ashok Kumar Gupta v. M.D. Creations & Ors.¹³: One of the main issues addressed by the Court here was whether the Court’s powers to extend the mandate of Tribunal is taken away if the application for extension is filed after mandate is terminated. The Court expressed that the wording of sub-clause (4) is clear, indicating that the extension of the mandate is at the Court’s discretion and not contingent on time of filing of an application. According to the Court’s interpretation, the termination of the mandate—whether after twelve months or an extended six-month period—is not automatic or set in stone such that it cannot be altered by Court. Therefore, the termination is not fixed or absolute and can be modified through the Court's intervention.

LAW SETTLED: SUPREME COURT’S TIE-BREAKING RULING

The ambiguity over the issue as to whether an application for extending the mandate of Arbitral Tribunal is maintainable after expiry of the term has been settled by the Supreme Court in the recent judgment of Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited¹⁴. The SLP arises out of the Calcutta High Court judgement discussed in the preceding section.

Issue before the Supreme Court:

Can an application for an extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 be filed after the deadline for passing the arbitral award has lapsed?

Analysis and Reasoning:

The Supreme Court overruled the Calcutta High Court judgement which held that such application cannot be filed after expiry of the time-limit prescribed under Section 29A. It was observed by the Court that on purposive interpretation of the statute and on understanding the objective of the Section as well as the holistic purpose of the Act, it can be culled out that the Legislature intended that the hands of the Courts should not be tied if applicant arrives to the Court after the expiry of the time-limit.

The following points were noted by the Apex Court:

• The Court clarified that the phrase “either prior to or after the expiry of the period so specified” is clear and unambiguous. It determined that the court could extend the time for making an award, even if the application is filed after the original or extended deadline. The Court has the authority to grant an extension at any time before or after the specified period.
• Upon interpreting Sections 29A(5) and 29A(4), the Court noted that the second proviso to Section 29A(4) explicitly allows arbitration proceedings to continue while an extension application under Section 29A(5) is pending. Furthermore, extensions are granted only for ‘sufficient cause’ and subject to any terms the Court may impose. The Court considered the High Court's reasoning that once the mandate is terminated, the arbitral tribunal cannot function. Therefore, a party must request an extension before the initial twelve-month or the additional six-month period ends.
• The Court found the reasoning of High Court flawed, opining that "terminate" in Section 29A(4) should be interpreted within the context of that provision. The use of "terminate" over "suspend" is significant, as using "suspend" could create confusion if no extension application is filed. The term “terminate” indicates that the arbitral tribunal is functus officio, but not entirely inactive.
• The Court pointed out that the absence of a full stop after “terminate” is noteworthy, as it is followed by “unless,” which connects the two parts of the provision: the tribunal's termination and the possibility of the Court extending the period. This phrase emphasizes the Court’s power to grant extensions.
• The Court concluded that Section 29A aims to ensure timely arbitration while allowing courts the flexibility to grant extensions when justified. A strict limitation period should not be enforced unless explicitly stated, as it can have severe consequences. A narrow interpretation of Section 29A could create unnecessary complications, forcing parties to approach the Court even before the twelve-month mandate has elapsed, despite the potential for a six-month consensual extension under Section 29A(3).
• Additionally, under Section 29A(5), the Court's power to extend time is contingent on sufficient cause, and such extensions are not automatically granted upon application. The Court can set terms and conditions for any extension.

In conclusion, the Court stated that as long as an extension application is pending under sub-clause (5), the arbitral tribunal's mandate continues. However, the Court will decide on the extension request, and sub-clause (6) to (8) may also apply. Ultimately, the authority to extend the time for issuing an award lies with the Court, not the arbitral tribunal, which cannot issue an award while the Section 29A(5) application is under consideration.

CONCLUSION

The Supreme Court’s judgement offers essential clarity and consistency regarding the extension of arbitral tribunals’ mandates in domestic arbitration cases. As a result, parties in Indian domestic arbitration are less likely to engage in disputes over missed statutory deadlines for issuing awards.

However, while the decision appears to favor litigants, a grey area may arise when the statutory timeline for issuing an award has expired, but no extension application has been filed for an extended period. The Act and the Supreme Court’s ruling do not specify a time limit for submitting these applications, which allows the possibility for parties to continue the mandate indefinitely. Therefore, it is crucial for the court reviewing an extension application to consider the conduct of the parties when exercising its authority under Section 29A, ensuring that the timeline for making an award is not disregarded.

Disclaimer: This article was first published in the S&A Law Offices - 'Indian Legal Impetus' newsletter in September 2024.