INTRODUCTION
Arbitration, as an alternative dispute resolution mechanism, has gained prominence in India, particularly after the enactment of Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act”). One of the primary goals of the Act is to promote the expeditious settlement of disputes while minimizing judicial intervention. In this context, Section 29A was introduced by the 2015 amendment act to impose a time-limit on the Arbitral Tribunal for making an award. However, this provision has raised numerous questions, especially pertaining to the extension of time for making an award and the termination of the mandate of the Arbitrator.
The Supreme Court of India, in one of its recent judgment dated 12.09.2024 in the matter of Rohan Builders (India) Private Limited v. Berger Paints India Limited, dealt with these critical issues. The court clarified whether an application for an extension of time under Section 29A(4) can be filed after the expiration of the prescribed period. This article explores the implications of this judgment and its impact on the application of Section 29A of the Act.
BACKGROUND OF SECTION 29A
Section 29A, introduced by the Arbitration and Conciliation (Amendment) Act, 2015, it was aimed at ensuring proceedings are completed in a time-bound manner. According to Section 29A(1), an arbitral award must be made within 12 months from the completion of pleadings. The parties can, by consent, extend this period for a further Six months under Section 29A(3). If the award is not made within the specified period, the mandate of the Arbitrator(s) terminates under Section 29A(4), unless the court extends the period either before or after the expiry of the said period.
FACTS OF THE CASE
In the case in hand, Rohan Builders (India) Pvt. Ltd. (the Appellant) and Berger Paints India Ltd. (the Respondent) were parties to the Arbitration. The Arbitral Tribunal failed to render an award within the statutory period of 12 months, and the extended period of 6 months expired without the Award being made. Subsequently, an application was filed before the High Court of Calcutta seeking an extension of time under Section 29A(4) of the Act, however, the High Court dismissed the application, holding that such an application could not be entertained post the expiry of the time period.
Thereafter, the Appellant challenged the decision of the High Court before the Hon'ble Supreme Court, raising the critical issue of whether an application for extension of time can be filed after the expiration of the mandate of the Arbitral Tribunal.
JUDGMENT OF THE HON'BLE SUPREME COURT
The Supreme Court in its judgment, reversed the decision of the High Court of Calcutta and held that an application under Section 29A(4) for the extension of the timeline can be filed even after the expiration of the statutory period for making the award. The reasoning was primarily based on the interpretation of the language of Section 29A(4) of the Act, which allows for the extension of time “either prior to or after expiration of the period so specified.”
KEY OBSERVATIONS OF THE COURT
- Purpose and context of Section 29A:
The Court noted that Section 29A was introduced to promote timely completion of the arbitration proceedings. However, the legislative intent was not to create an absolute bar against the applications for an extension of time after the expiration of the period. The provision explicitly permits the court to extend the time even after the expiration of the mandate.
- Interpretation of the Word
“Terminate”:
The central issue in the matter was the interpretation of the term “terminate” as used in Section 29A(4) of the Act. The Hon'ble High Court construed the provision to imply that the mandate of the Arbitral Tribunal automatically ceases upon the expiration of the stipulated time period, with no possibility of extension. However, the Hon'ble Supreme Court, rejecting this restrictive interpretation, held that the term “terminate” was deliberately employed by the Legislature to indicate that arbitral proceedings do not conclude in an absolute or final sense. The Supreme Court further clarified that the mandate of the Arbitral Tribunal is conditionally terminated, subject to the discretion of the Court to grant an extension of time.
- Judicial Discretion and Sufficient Cause:
The Court emphasized that the extension of time under Section 29A(4) is not automatic. It is subject to the judicial discretion of the Court, which is guided by the “principle of sufficient cause.” That the Court can impose terms and conditions, including costs, while granting an extension. Moreover, the Court may reduce the fees of arbitrators for delays attributable to the Arbitral Tribunal in terms of the first Proviso as mentioned under Section 29A(4) of the Act, thereby ensuring accountability.
- Continuation of Proceedings:
That the Second Proviso to Section 29A(4) provides that the mandate of the Arbitrators continues if an application for an extension is pending. This allows the Tribunal to continue its proceedings during the pendency of the application, thus preventing unnecessary delays.
- Avoiding Rigid Interpretations:
The Supreme Court cautioned against a rigid interpretation of the provision that would lead to impractical outcomes. If courts were to insist that applications for an extension must be filed before the expiration of the prescribed period, parties would be forced to rush to the courts even when the arbitration proceedings are progressing smoothly. Such an interpretation would be counterproductive to the legislative goal of promoting arbitration as an efficient and cost-effective dispute resolution mechanism.
- Impact on Future Arbitral Proceedings:
The Supreme Court further clarified that, notwithstanding the expiration of the mandate of the Arbitral Tribunal, the Court retains the discretion to extend the time for making an award. Such an extension allows the Arbitral Proceedings to continue from the point where they left from, without necessitating the reconstitution of the Tribunal or the recommencement of proceedings, thereby preserving the efforts and resources already expended in the Arbitration process.
IMPLICATIONS OF THE JUDGMENT
- Clarity on Section 29A(4):
The ruling of the Supreme Court in the matter of Rohan Builders (Supra) is a significant development in Indian arbitration law. It resolves the ambiguity surrounding Section 29A and provides clarity on the timeline for delivering arbitral awards. The judgment reaffirms the Role of Courts in facilitating, rather than obstructing, the arbitral process and aligns with the broader objective of the Act to promote arbitration as an efficient and effective alternate dispute resolution mechanism.
- Encouraging Efficient Arbitration:
The Supreme Court reasserted the “Principle of Party Autonomy” in the Arbitration Proceedings, emphasizing that the parties have considerable freedom to manage their proceedings, including extending the timeline for rendering an award by mutual consent. The Supreme Court further noted that this autonomy allows parties to make procedural decisions in their dispute resolution process, aligning arbitration with their preferences and reducing judicial intervention, except where necessary for efficiency and fairness.
CONCLUSION
The ruling of the Supreme Court in Rohan Builders (Supra) is a landmark decision that provides clarity on the interpretation of Section 29A of the Arbitration and Conciliation Act, 1996. The judgment strikes a balance between the need for timely arbitration and the flexibility required to accommodate practical difficulties in complex arbitration proceedings. By allowing “Courts” to extend the time for making an award after the expiration of the mandate of the Arbitral Tribunal, the Supreme Court has ensured that arbitration remains an effective and efficient means of dispute resolution. This decision will likely have a positive impact on the arbitration landscape in India by reducing procedural hurdles and promoting the expeditious conclusion of the Arbitration proceedings.
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