Extending Arbitral Mandates Beyond Statutory Time Limits: The Velusamy Decision

[Haren is a student at NALSAR University of Law.]

Section 29A was introduced in the Arbitration and Conciliation (Amendment) Act 2015, in the recommendations of the 246th Law Commission Report, which pointed out unreasonable delays in arbitral proceedings. It was introduced to promote time-bound dispute resolution and improve confidence in arbitration. Parliament prescribed a 12-month timeline with a 6-month extension period. The 2019 amendment to the Arbitration and Conciliation Act 1996 (Act) further refined the section by linking timelines to the completion of pleadings.

The central question is whether the court can extend time after the statutory 18-month period has expired, even after an arbitral award has been rendered. This was answered in the recent judgment of C Velusamy v K Indhera (Velusamy) by the division bench of the Supreme Court (SC) while hearing a Section 34 petition. This article argues that while the Velusamy case strengthens the arbitral process, the decision weakens the statutory discipline of Section 29A. The article will analyse the judgment, highlight its strengths and drawbacks, and provide suggestions at the end.

Section 29A Interpretation

An arbitral award must be made within 12 months, according to Section 29A(1), and an additional six-month extension under Section 29A(3). Under Section 29A(4), the mandate automatically expires unless the court steps in if the award is not made within the specified time. Section 29A establishes a deadline, but Section 29A(4) of the Act permits the court to extend it at its discretion. 

An award made by the tribunal after the mandate has expired is seen as void under Section 34(2)(a)(v) on the grounds that the tribunal is not legally authorised to make the award. Section 34 limits run from the date of the award rendered. Once the period under Section 29A expires, arbitrators become de jure unable to perform their duty under Section 14(1)(a) of the Act.

Courts interpret Section 29A in two different ways:

First is the discipline-based interpretation, where the court holds an award rendered after the expiry of the arbitral tribunal's mandate void under Section 34 of the Act, and in some cases does not extend time after the expiry of 18 months. Cases like Roop Singh Bhatty v. M/S. Shriram City Union Finance Limited, where the Telangana High Court held that arbitral awards passed after the expiry of the statutory period are null and void ab initio, and Suryadev Alloys and Power Private Limited v. Govindaraja Textiles Private Limited (Suryadev Alloys) where the Madras High Court held that there is no provision to extend time once the award is void and challenged under Section 34. 

Second is the justice-oriented interpretation, where the court liberally interprets Section 29A. For example, in the case of RKEC Projects Limited v. The Cochin Port Trust, the Kerala High Court held that the mandate of the arbitral tribunal can be extended even after the expiry as per law and even if the award has been rendered. 

Judicial interpretation of Section 29A conflicts with different reasoning by high courts; thus, a question arises whether Section 29A is a judicial limitation or a procedural discipline. In the Velusamy case, the Madras HC took a disciplined approach in interpreting Section 29A, whereas SC overruled the High Court’s decision and adopted a liberal approach.

Supreme Court Reasoning in the Velusamy Case

The SC in the Velusamy case did not merely decide whether time could be extended after the period of 18 months, even when the award had been rendered, but also determined the legal reasoning for courts to determine the termination of the mandate. 

SC adopted an efficiency-oriented interpretation of Section 29A rather than treating the mandate as null due to formal legal rules, which was also seen in the case of Rohan Builders Private Limited v. Berger Paints India Limited. Where the SC said that the court has the power to extend the arbitral mandate, which they think is fit, even after the period of 18 months expires. SC viewed Section 29A as preserving the judicial discretion to extend the time mandate even after the statutory period had lapsed and even if the award had been rendered by the tribunal. SC also relied on the decision in the case of Ajay Protech Private Limited v. General Manager, where the court said it is the duty of the court to preserve the efficiency and improve the process of the arbitration.

SC treated the delayed award as non est unless the mandate is extended.  The award lacks legal validity unless the mandate is extended. If the court grants an extension, the award stands retrospectively validated. The judgment helps reduce misuse under Sections 34 and 36 of the Act to set aside an arbitral award by a party on the ground that the award came after the expiry of the statutory period, which was done in the Velusamy case, which the Madras High Court accepted. The judgment made the arbitration process more justice-oriented rather than a procedural process. 

The SC also relied on the judgments of Oakland Metal Company Limited v. D Benaim & Company Limited, where the English court said the expiry of a contractual time limit does not automatically extinguish the court's jurisdiction to enlarge time, and Ting Kang Chung John v. Teo Hee Lai Building Constructions Pte Ltd where the Singapore court noted that the extension would be granted only to prevent substantive injustice and where there are good reasons to justify the delay.

The court further drew support for its judgment from Section 28(1) of the Arbitration Act 1940, under which the court possessed authority to extend the time for the mandate even after its expiry. The court argued that despite the introduction of Section 29A (time-bound mandate), it didn’t intend to eliminate judicial power to extend time where substantive justice is required. The reasoning also aligned with the UNCITRAL Model Law of international commercial arbitration, which prioritises efficiency, though unlike Article 33's strict 30-day alteration period, Velusamy expands post-award judicial intervention.

The court's reasoning aligns with a pro-arbitration philosophy that prioritises efficiency in the process over formalising it. The court ensured that by preserving this judicial power to extend time, the arbitration process would become more effective, and the resources of the parties would not be squandered due to the lapse of time. This interpretation transforms Section 29A from a rigid discipline mechanism into a judicially governed mechanism.

Drawbacks in Judgment

While the ruling intends to strengthen the arbitration process and prevent the awards from being void purely on legal grounds, several concerns remain. 

First, the decision weakens the intent of establishing Section 29A. The 2015 Amendment aimed to set strict timelines and remove unreasonable delays that affected the arbitration process, as stated by the Madras High Court in the Suryadev Alloys case. If the court extends the mandate, the time limit requirement may lose its intent. These risks convert a strict legal framework into a flexible system where courts decide the time of the mandate. This would go against the amendment's original intent.

Second, the question of functus officio comes up. The doctrine provides that once the arbitral award has been delivered by the arbitrators, they complete their function and lose jurisdiction over the proceedings. In the recent Velusamy case, the arbitrators delivered the award after the expiry of the mandate. This decision conflicts with the judgment of Juggilal Kamlapat v. General Fibre Dealers Limited, where the SC held arbitrators become functus officio upon rendering the final award.

Finally, the ruling raises concerns about arbitrators' discipline. While the court in Velusamy judgement imposes actions on delays like substitution of arbitrator, penalties and costs, the court described the arbitrator’s conduct in issuing late awards as a dereliction of duty. If these indiscretions are often accepted through the court’s extensions, arbitrators may feel less motivated to stick to statutory deadlines. The court did not lay down structural guidelines to extend time. Section 29A(6) already empowers courts to reduce fees or replace arbitrators, suggesting legislative preference for discipline over extension. The amendment of Section 29A also intends to reduce these indiscretions by the arbitrators. Over time, this could weaken the process of arbitration, which Section 29A wanted to reduce. 

Conclusion

The SC intended to make the arbitration process more efficient and effective, and the Act also supports it. The Velusamy case seeks efficiency but undermines Section 29A discipline. The court should define “sufficient causes”. Sufficient cause can be defined by the court as a reason that can grant an extension where the arbitrator or party can prove delay occurred due to unavoidable circumstances (force majeure events), which can help to reduce misuse of this judicial power.

Section 29A should be enforced more strictly by increasing penalties for arbitrators (from the current 5% fee penalty) due to their unnecessary delays, so that the process of arbitration can be completed smoothly. While Singapore completes its arbitration within a median duration of 12 months, India's 75,000-case backlog suggests that Section 29A discipline remains crucial. A practical time limit, as in Section 29A, is also a requirement so that arbitration can be completed on time without any delay, which will make the process of arbitration efficient and effective, and the intention of the 246^th law commission report can also be fulfilled. Without clear judicial rules for extension, Section 29A risks evolving from statutory discipline into judicial discretion.