Extension of the Mandate of Arbitrator under Section 29A | Divergent views of High Courts

Section 29A of the Arbitration and Conciliation Act, 1996 [“The Act”] was inserted in the Act vide Arbitration and Conciliation (Amendment) Act 2015 [“the 2015 Amendment”] with the objective to facilitate speedy disposal of cases with least court intervention. Section 29A (1) of the Act mandates that the Award in arbitrations other than international commercial arbitration shall be made within a period of 12 months from the date of completion of pleadings as contemplated under sub-section 4 of Section 23 of the Act. If the parties are unable to reach conclusion of arbitration proceedings under the period of 12 months as envisaged under Section 29A (1) then in terms of Section 29A (3) the parties can, by consent, extend the period for another six months. If the award is not made within the above period of 18 months, then as per Section 29A (4) the mandate of the arbitrator stands terminated unless the court has, either prior to or after the expiry of the period so specified, extended the period upon an application filed by the parties under Section 29A (5). The proviso to Section 29A (4) clarifies that where an application under Section 29A (5) is pending then the mandate of the arbitrator shall continue till the disposal of application. Therefore, if the parties seek extension of time beyond the statutory period of 18 months, the parties must approach the court for such extension which may extend the period subject to a sufficient cause being shown. Which “Court” the parties may approach for seeking extension of the mandate of the arbitrator has been extensively dealt with herein.

ISSUE

The moot question, however, that arises for consideration is that whether the court has power to extend the mandate of the arbitrator even when the application for extension has been filed after the mandate of the arbitrator has terminated as per Section 29A (4). Admittedly, the statute nowhere contemplate a scenario wherein if an application has been filed after the mandate of the arbitrator is terminated, court would be denuded of any power to extend the mandate. The proviso to Section 29A (4) stipulates one condition viz. an application for extension should remain pending in the court and during such pendency of the application, the arbitration proceedings would continue. Therefore, mere pendency of application for extension would not impede the progress of arbitration proceedings which is also in consonance with the object and purpose of the 2015 Amendment viz. expeditious disposal of cases.

DIVERGENT VIEWS OF HIGH COURTS

The Calcutta High Court in the matter of Rohan Builder vs Berger Paints India Ltd.¹ had the occasion to deal with the aforementioned issue, wherein a petition was filed for extension of the mandate of the arbitrator after its mandate had terminated in terms of Section 29A (4). The findings of the court are briefly mentioned hereinbelow-

The court extrapolated from the recommendation of the Law Commission in the 176^th Report juxtaposed to what was finally inserted in the Act. In the 176^th report the Legislature had proposed “suspension” of the arbitral proceedings until an application for extension is made to the court and once the application of extension has been made to the court the “suspension” would stand revoked and the proceedings would continue till the disposal of application. However, the statute, as it stands today, viz. 29A(4), does not mention “suspension” of arbitral proceedings and contemplates “termination” of the mandate of arbitrator . Therefore, the court reasoned that the Legislature was in favour of termination of proceedings after consciously substituting the word “suspension” by “termination” in the statute.
The court read down the word “extension” appearing in Section 29A and reasoned that the usage of word “extension” in 29A (4) means that the mandate of the arbitral tribunal must be in existence or subsisting at the time of making the application for extension.
Proviso to Section 29A (4) envisages pendency of an application for extension as opposed to filing of an application. Therefore, the mandate can only continue if the application is filed prior to expiry of the mandate and not thereafter.
Words in Section 29A (4) “either prior to or after the expiry of the period so specified” is a deeming fiction which takes shape to ensure that the application is made during the continuance of the mandate.
There is a conscious omission of the word “renewal” or “revival” which means that the continuing mandate of the arbitrator must form the substratum for an application to be made for extension of that mandate.
If legislature intended that the application for extension could be made at any time after expiry of the mandate, then Section 29A (4) would not have used “terminate” but “revive” or “renew”.

Therefore, the Calcutta High Court declined to extend the mandate of the arbitrator when the application for the same was filed after the mandate had expired.

Similarly, the Patna High Court in South Bihar Power Distribution Company Ltd. vs Bhagalpur Electricity Distribution Company Pvt. Ltd. and Ors² was posed with the same issue when an application for extension was filed after the mandate of arbitrator was terminated. The Patna High Court also read down the word “extend” in Section 29A (4) of the Act and reasoned that the word “extension” means the existence of something to be extended. Therefore the court opined that mandate can only be extended when it is in “existence” at the time of filing of the Petition. Similarly, the Calcutta High Court in another judgment in the matter of Vrindavan Advisory Services LLP v. Deep Shambhulal Bhanushali³ declined to extend the mandate of the Arbitrator on an application filed after the mandate had expired.

It is pertinent to mention that all the aforementioned decisions of High Courts were challenged before Supreme Court by way of Special Leave Petitions and operation of the said judgments have been stayed by the Supreme Court, however, the Supreme Court has allowed the arbitration proceedings to continue but award cannot be passed so long the matter is sub judice before the Supreme Court.⁴

In contra distinction to the above, there are various High Courts judgments which have liberally interpreted Section 29A and held that an application for extension filed even after the termination of the mandate of the arbitrator, can be allowed by the court. A single judge bench of the Delhi High Court in the matter of ATC Telecom Infrastructure Pvt. Ltd vs Bharat Sanchar Nigam⁵ held as follows-

Section 29A of the Act itself makes it clear that it does not contemplate any inflexible outer deadline for completion of arbitral proceedings, and affords flexibility to the contracting parties.
The purport of Section 29A of the Act is not to tie the hands of the parties or the court and prevent extension of time even where warranted, simply because the petition under Section 29A(4) of the Act was filed after the termination of the mandate of arbitrator.
That the termination of the mandate of the arbitrator is subject to the decision of the court which may be “either prior or after the expiry” of the specified period.
A petition under Section 29A can be filed either before expiry of the term of the arbitrator or even thereafter.
When the court has been specifically empowered to grant the requisite extension even after the expiry of the specified period, it would not be apposite to read a proscription in the statutory provision to the effect that a petitioner under Section 29A (4) must be filed before the mandate of the arbitrator has expired.
The court disagreed with the dictum laid down in Rohan Builders (supra) and observed that such a decision can potentially thwart, rather than subserve the legislative intent.

Another single bench of the Delhi High Court in ATS Infrastructure Pvt. Ltd. & Anr. vs Rasbehari Traders⁶ relied upon ATC Telecom (supra) to extend the mandate of the arbitrator on an application filed after the mandate had expired. However, the said judgment of Delhi High Court was challenged before the Supreme Court which subsequently stayed the judgment⁷. The Bombay High Court in the matter of Nikhil H. Malkan and Ors. vs Standard Chartered Investment and Loans (India) Ltd.⁸ observed that the purpose for which Section 29A was introduced in the Act would be defeated, if it is to be held that the Court could exercise power to extend the mandate of the Arbitrator even after expiry of the extended period only if the application for the extension of mandate is filed prior to expiry of such mandate. The court disagreed with the views of the Calcutta and Patna High Courts in Rohan Builder and South Bihar Power Distribution Company (supra) and relied upon the reasoning given by the Delhi High Court in ATS Telecom before allowing the application for extension.

CAN MANDATE OF THE TRIBUNAL BE EXTENDED EVEN AFTER THE AWARD IS PASSED?

A single judge bench of the Delhi High Court in National Skills Development Corporation vs Best First Step Education Pvt. Ltd.⁹ was posed with another dimension of the growing dilemma. In facts and circumstances of the said case, the party had filed a Petition for extension of the mandate of the Arbitrator after the mandate had expired but prior to the Award being delivered and during the pendency of the Petition the Award was passed by the Arbitrator. The court held that where a petition for extension is filed prior to the award being 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 the award under section 34 have been instituted, is not maintainable. The court held that 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 challenge to the award on this ground. Therefore, the court relied upon ATC Telecom (supra) before allowing the Petition filed after the mandate of the arbitrator had expired. A co-ordinate bench of the Delhi High Court in Power Grid Corporation of India Ltd. vs SPML Infra Ltd.¹⁰ was posed with the a similar question when the Petition for extension of the mandate of the tribunal was filed after the Award was passed and only after an objection was raised by the Respondent in Section 34 Petition filed by him that the award has been passed after the mandate of the tribunal had expired. The court came to the conclusion that such a petition is not maintainable and declined to grant extension.

CONCLUSION

The aforementioned divergent views of the High Courts have given rise to ambiguity in the provision. Consequently, a trend has emerged wherein the Respondents in the arbitration proceedings are prying upon the ambiguity in the provision and using the same as a tool to oppose the extension petition filed by the Claimant before the court so as to impede the progress of the arbitration proceedings. The Arbitration and Conciliation Act 1996 was enacted with the object and purpose to minimise judicial intervention and provide a platform for speedy disposal of disputes. Section 29A was further incorporated in the Act by the 2015 Amendment to expeditiously conclude the arbitration proceedings in a time bound manner with a procedure laid down to approach the court for seeking extension of the mandate of the Arbitral Tribunal. However, the very provision which was inserted in the Act to give a lease of life to the arbitration proceedings has become the very reason for bringing the arbitration proceedings to a grinding halt owing to the ambiguity and divergent view of the High Courts which are a subject of challenge before the Supreme Court. An urgent redressal is necessary by the Supreme Court otherwise the very object and purpose of the Act would be defeated by parties regularly seeking judicial intervention for interpretation of Section 29A.

UPDATE 13.09.2024

The Supreme Court vide judgment dated 12.09.2024 in the matter of Rohan Builders Pvt. Ltd. vs Berger Paints India Ltd. ¹¹ clarified that an application for extension of time under Section 29A(4) of the Act can be filed even after expiry of the mandate of the Arbitral Tribunal. While doing so, the Court read down the ratio laid down in Rohan Builders (supra) by the Calcutta High Court and held that the reasoning given in Rohan Builders is fallacious. “Words can have various meanings and connotations; thus, an interpretive exercise must be conducted with careful consideration of both the text and the context of the provision. Therefore, sometimes the court eschews a literal construction if it produces manifest absurdity or unjust results.”

By Daksh Pandit