The Delhi High Court has recently ruled that a 4.5-month delay in filing a petition to extend the arbitrator's mandate under §29A of the Arbitration Act 1996, is not inordinate provided sufficient cause is shown.
Background
The Petitioners entered into a Memorandum of Understanding and Reconstitution Deed with the Respondents in January 2020 to address outstanding payments to vendors, including sub-contractors and suppliers. Disputes arose in relation to the Memorandum and Deed, and the matter was referred to arbitration by a sole arbitrator. Arbitration then proceeded and by the parties' agreement, the arbitrator's mandate was extended beyond the 12-month period to 31 August 2023. The Petitioners then approached the Delhi High Court under §29A of the Act after a 4.5-month delay from the expiry of the first extension, seeking a further extension to conclude proceedings.
Issue
The issue before the Delhi High Court was whether the Petitioners demonstrated sufficient cause for the delay in seeking the extension and whether the extension could be granted.
Decision
The Court relied on the recent decision of the Supreme Court in Rohan Builders Pvt Ltd v Berger Paints India Ltd1, where the Court said that the purpose of §29A is to ensure the timely completion of arbitral proceedings while allowing the courts the flexibility to grant an extension when warranted, and said that a restrictive interpretation would lead to rigor, impediments and complexities.
Reliance was also placed on the 176th Report of the Law Commission which noted that the termination of the arbitrator's mandate results in a waste of time, resources and money. The RCC Court relied on Rohan Builders and said that since the parties had already invested a lot of time and effort in the proceedings, the extension should be allowed.
Conclusion
The extension of the arbitrator's mandate by the Court can be allowed even after a delay of 4.5 months provided sufficient cause has been demonstrated.
Footnote
1 2024 SCC OnLine SC 2494
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