Extension Of Mandate Of Arbitral Tribunals - A Guide On The Appropriate Stage Of Filing An Application Under Section 29A Of The Arbitration & Conciliation Act, 1996

Extension Of Mandate Of Arbitral Tribunals - A Guide On The Appropriate Stage Of Filing An Application Under Section 29A Of The Arbitration & Conciliation Act, 1996

Introduction

Section 29A of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Arbitration Act’) stipulates the provisions on the time limit for passing of an arbitral award. For domestic arbitrations, the provision sets out that the award shall be made by the Arbitral Tribunal within a period of twelve (12) months from the date of completion of pleadings under Section 23(4) of the Arbitration Act. Further, parties may, by mutual consent extend the time period specified for making the award for a further period of six months. In terms of Section 29A(4) of the Arbitration Act, the mandate of the Arbitral Tribunal terminates in case the award is not made within the period specified in Section 29A(1) or the extended period unless the Court extends such period either prior to or after the expiry of the period so specified. An application for extension of period of mandate of the tribunal is to be preferred under Section 29A(5) of the Arbitration Act which provides that the same may be granted only for sufficient cause shown, and on such terms and conditions as may be imposed by the Court. The proviso to the section clarifies that where an application under Section 29A(5) is pending, the mandate of the arbitral tribunal shall continue till the disposal of the application.

Pertinently, whether an Application under Section 29A(5) of the Arbitration Act can be filed after the termination of mandate of the Tribunal tends to be a major bone of contention in commercial disputes. In this background, this article aims to analyse the recent judicial decisions which shed light on the appropriate stage of filing an application for extension of mandate of an arbitral tribunal.

Calcutta High Court’s decision in Rohan Builders Case

In Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd¹. the Hon’ble Calcutta High Court held that the timelines stipulated in Section 29A of the Arbitration Act, are mandatory and the extension must be applied during continuation of mandate and not thereafter². The Bench further observed that once the mandate terminates, the Arbitral Tribunal becomes de jure unable to perform its functions. The Court refused to extend the mandate on the ground that the applications for extension were filed after the mandate terminated. Presently, an SLP against this decision is pending before the Hon’ble Supreme Court³ which will define the contours of timelines stipulated in Section 29A.

Recent Decisions on stage of filing Section 29A Applications

Pertinently, the judgment passed in Rohan Builders (Supra) has been distinguished by the Hon’ble Delhi High Court in ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar Nigam Ltd.⁴ wherein it has been observed that an application for extension may be filed either before expiry of the period referred to under Section 29A(1) or Section 29A(3) of the of the Arbitration Act or even thereafter⁵. This view was further concurred by the Hon’ble Bombay High Court in Nikhil H. Malkhan and Ors. v. Standard Chartered Investment and Loans (India) Ltd.⁶, wherein it was observed that Section 29A of the Arbitration Act enables the courts to pass appropriate orders in order to ensure the arbitral proceedings reach logical conclusion and “no purpose would be served in holding that if such an application or petition for extension of mandate of the learned Arbitrator is filed after the expiry of the mandate, the Court would be in no position to entertain the same.”⁷ The petition for extension was allowed by observing that the final hearings before the Tribunal were at the stage of culmination and therefore, sufficient grounds had been made out.

Recently, the Hon’ble Delhi High Court in PSA Protech and Infralogistics Pvt. Ltd. v. Food Corporation of India⁸ has held that Section 29A of the Arbitration Act does not bar applications to be submitted after expiry of the mandate of the Arbitral Tribunal. PSA Protech approached the Hon’ble High Court seeking extension of time for the completion of arbitral proceedings. Pertinently, the parties had continued with the proceedings even after the expiration of the period of 6 months extension of the mandate. The Bench observed that both the parties as well as the Tribunal were under a mistaken belief that the mandate had not expired and the proceedings were continued till 30.04.2023. Even thereafter, the Tribunal had granted a date of 18.02.2024. The Bench relied on the coordinate bench decision of the Hon’ble Delhi High Court in ATS Infrastructure Ltd. and Anr. v. Rasbehari Traders⁹ wherein it was held that the application under Section 29A of the Arbitration Act can be allowed even after the expiry of the mandate of the Arbitral Tribunal. The Bench noted that it is inclined to allow the petition as the observations made in ATS Infrastructure have not been stayed by the Hon’ble Apex Court and based on the following reasons the Bench allowed 3 months’ time to the Arbitral Tribunal to conclude the proceedings and held as under:

i. Section 29A of Arbitration and Conciliation Act does not bar applications to be submitted after expiry of the mandate of the Arbitral Tribunal.

ii. The Arbitral Tribunal even after expiry of the mandate conducted arbitral proceedings till 30.04.2023 wherein both the petitioner and the respondent actively participated, made submissions and proceeded with the arbitration.

iii. The entire share of fee of the respondent has been paid and only some portion is outstanding from the side of the petitioner to the Arbitral Tribunal.¹¹

PSA Protech has been further relied upon recently by the Hon’ble Delhi High Court in KMP Expressways Ltd. v. IDBI Bank Limited¹². In this case, the mandate expired on 11.12.2022 and thereafter, the petitioner had sought the Respondent’s consent for extension of the Tribunal’s mandate for 6 months in terms of Section 29A(3) vide an email which was not responded to. Thereafter, on 30.09.2023 the Petitioner filed an Application under Section 29A before the Hon’ble Delhi High Court. The Court relied upon ATS Infrastructure and PSA Protech to observe that the mandate of an Arbitral Tribunal is extendable even after expiry of the mandate and while extending the mandate, the Court is required to only see if a sufficient cause has been made out. The Court adopted the purposive interpretation principle to hold that the language of Section 29A has to be interpreted keeping in mind the purpose that it seeks to achieve, which is speedy resolution and disposal of arbitral proceedings. The Court observed further that sufficient reasons had been shown as the parties had spent more than 12 months in the arbitration proceedings, the Respondent moved two Section 16 applications which consumed considerable time and the petitioner also paid a fee towards the Respondent’s share of the arbitral fee. In view of the same, the Court extended the time for concluding and making the award for a period of one year.

In National Skill Development Corporation v. Best First Step Education Pvt. Ltd. and Ors¹³ the Hon’ble Delhi High Court has dealt with the question whether the mandate of the Tribunal can be extended even after the award of has been made. In this case the petition for extension of mandate was filed prior to the award but after the mandate of the Tribunal had expired. The Court held that “where a petition is filed prior to the award having been delivered, and the award is delivered during the pendency of the petition, the petition would be maintainable. However, a petition filed after the award is delivered and proceedings for setting aside have been instituted, is not maintainable. This distinction is justifiable on principle also - a party cannot choose whether or not to seek extension of the mandate after becoming aware of its fate in the arbitration proceedings, and facing a challenge to the award on this ground¹⁴.” The Court relied upon ATC Telecom to observe that a petition under Section 29A of the Arbitration Act can be filed even after the mandate has expired and allowed the petition extending the mandate of the Tribunal until the date of the award.

Conclusion

In view of the aforementioned decisions, the legal position is clear that an application under Section 29A of the Arbitration Act can be filed even after the expiry of the mandate of the Arbitral Tribunal when sufficient grounds are shown by the parties. While the statutory timelines prescribed in the Arbitration Act have been intended to make arbitration speedy and expeditious dispute resolution mechanism, Section 29A paves way for Courts for extending such timelines on sufficient grounds being met. In this regard, the upcoming decision of the Hon’ble Apex Court in Rohan Builders case will define the boundaries of the statutory timelines of Section 29A of the Arbitration Act.