Supreme Court on Section 29A of Arbitration Act: Analyzing the Scope of Post Expiry Extensions of the Arbitrator’s Mandate

[Sara is a student at Gujarat National Law University.]

Time is often viewed as the great equalizer – impartial, unyielding and pivotal to the concept of justice. Time is more than just a procedural constraint in arbitration; it is the scheme within which the promise of expeditious resolution thrives or dies. Section 29A of the Arbitration and Conciliation Act 1996 was introduced with this very noble aim of preventing arbitration from continuing indefinitely. By imposing a deadline which could be extendable with mutual consent, it sought to add a much needed sense of urgency into the arbitral process. 

However, despite the apparent clarity of the statutory language, much interpretative ambiguity arose - sparking considerable debate which ultimately centered on a fundamental question: Can the courts extend the arbitrator’s mandate even if the time has technically run out? 

The present article analyses this very conundrum at the core of Section 29A. In doing so, it traces the divergent approaches adopted by various High Courts and critically examines the Supreme Court’s verdict in Rohan Builders (India) Private Limited v. Berger Paints India Limited (Rohan Builders) which crystallized the position that courts have the power to extend such mandate even after its expiry. Ultimately, the article situates this approach within the broader framework of arbitration in India and argues for a more practically balanced approach – one that upholds both, the efficiency and sanctity of the arbitration process. 

Context 

Section 29A inserted by the 2015 amendment sets a time limit for the arbitrators to issue their award – 12 months starting from when the tribunal entered upon reference. This can be extended under Section 29A(3) for 6 months if both parties. Where the award is not made within the specified period of 12 or 18 months, the mandate of the arbitral tribunal will terminate. If another extension is to be sought, the parties need court approval under Section 29A(4). 

The legislation explicitly addresses the authority of courts to extend the arbitrator’s mandate, both preceding and following its expiration. However, it remains silent on the specific timing for parties involved in the proceedings to submit an extension request. 

Hence, the central legal quandary arising from this ambiguity is whether parties must adhere strictly to applying under sub-section 29A(4) before the arbitrator’s mandate expires, or if they retain the autonomy to do so even after its expiration. As a result, a clear divergence in the opinions of multiple High Courts was observed.

The Hon’ble High Courts of Delhi and Bombay High Court took a more purposive approach to allow the extension of mandate even after its expiry. In their judgements, the courts accounted for factors such as situations outside the control of parties elucidated in Wadia Techno-Engineering Services Limited and the COVID-19 pandemic as seen in Rajesh Kalia v. Union of India. In Barasat Krishnagar Expressways Limited v. NHAI the Hon’ble Delhi High Court also took into account the substantial amount of effort put in bringing the proceedings to culmination to arrive at its conclusion. In essence, two pertinent factors were considered while granting such extension -- the cause of delay and the stage of arbitration proceedings. 

The Calcutta High Court however, in Rohan Builders (India) Private Limited v. Berger Paints India Limited took a restrictive approach stating that the arbitrator’s mandate ends permanently if no extension is sought prior to expiry. The Hon’ble High Court of Calcutta stating legislative intent at the forefront of its decision, relied on the reasoning that 176th Report of the Law Commission of India had suggested the use of the expression suspension of arbitral proceedings instead of the word terminate. However the legislature had deliberately chosen to keep the word terminate to adduce finality to such expiry. The same approach was employed by the court in Vrindavan Advisory Services LLP v. Deep Shambhulal Bhanushali.

Supreme Court’s Judgement 

This contentious issue was raised before the Supreme Court vide a special leave petition in Rohan Builders. The court in its ruling has firmly established that courts possess the ability to extend the mandate of the arbitral tribunal even after the expiry of the 18 (12 + 6) month period. It elaborated that the phrase either prior to or after the expiry in the statute explicitly allows for such extensions. 

The court further interpreted the word terminate in Section 29A(4) to be a procedural consequence that can be countermanded via judicial intervention. It was to not imply a permanent disbanding of the tribunal but the mere suspension of its authority subject to the grant of an extension by the court. 

A caution was issued by the court against judicial legislature highlighting that if the legislature intended a strict limitation, an explicit cut off would have been interposed in the language of the statute and in the absence of such, imposing the contrary would create an artificial restriction. The same has been elaborated in another Supreme Court judgement of North Eastern Chemicals Industries (Private) Limited and Another v. Ashok Paper Mill (Assam) Limited and Another.

Expanding on the unconscionable consequences of such imposing such restriction, the court foresaw the result being an invalidation of multiple ongoing proceedings, a waste of time and resources and unfair termination of cases delayed due to situations beyond the control of the parties i.e. COVID–19 and so on.  Synchronously, the court also signaled that such extensions are not automatic in nature and it retains the discretion to award such extensions on a case to case basis to prevent misuse. Additionally it is pertinent to note that that Section 29A(5) requires the applying party to show sufficient cause for seeking such extensions and the court may also impose conditions and specific timelines as well as costs under Section 29A(8). 

Analysis 

This decision of the court further aligns with international practices of arbitration friendly jurisdictions like Singapore and the United Kingdom that favor a more flexible interpretation of procedure to retain the effectiveness of arbitration. 

However, such an interpretation is not without its potential drawbacks particularly in the context of judicial burden and tactical delays. Courts may now potentially face a higher volume of extension applications which could potentially defeat the ‘minimal judicial intervention’ aspect of arbitration. The ability to seek post expiry extensions could potentially also allow parties to employ a lackadaisical approach. This court in P Manohar Reddy and Brothers v. Maharashtra Krishna Valley Development Corporation recognized this very tendency and held that courts must be cautious of parties using procedural loopholes to frustrate the arbitration procedure. 

Moreover, the 176th Law Commission Report initially had proposed the use of the word suspension instead of the word terminate for the section. However, the legislature deliberately chose the word terminate reflecting its intent to adhere to stricter timelines to maintain the sanctity of the expeditious dispute resolution purpose of arbitration. This is in line with the 2015 and 2019 amendments which were made with the aim to inculcate discipline and finality in arbitration proceedings. 

By widely interpreting the term, the Supreme Court does to an extent create an artificial relaxation and deviates from the original legislative intent. This contravenes the court’s own approach wherein an emphasis was placed on interpretation that is in tandem with clear legislative intent. 

Conclusion 

Nonetheless, time and again the Supreme Court has also emphasized that procedural rigidity must not derail arbitration proceedings. Rightly so, this would defeat the purpose of arbitration which is ultimately - expeditious settlement. Therefore, moving forward, a balanced approach must be employed. Courts must look at granting post expiry extensions judiciously in exceptional cases and imposing relevant costs and conditions so as to provide an implicit direction and judicial nudge towards a more proactive approach of seeking extensions on a genuine need basis instead of paving the way for more dilatory tactics.