In Rohan Builders (India) Private Limited v Berger Paints India Limited[i], the Supreme Court of India held that an application to extend the time for making an arbitral award in domestic arbitration proceedings beyond the statutory mandate is maintainable even if the parties file such an extension application after the expiry of the mandate.
Background
It has been undisputed that, under Section 29A of India’s Arbitration and Conciliation Act 1996 (“Act”), a competent court has the power to extend the mandate of an arbitral tribunal if the tribunal fails to make an arbitral award within the statutory period prescribed under the Act. However, there has been a divergence of opinion regarding whether the application seeking such an extension can be filed after the expiry of the arbitral tribunal’s mandate.
The High Courts of Delhi[ii], Bombay[iii], Kerala[iv], Madras[v], Jammu and Kashmir and Ladakh[vi], and Calcutta[vii] have held that such an application can be filed after the expiry of the mandate. However, the Patna High Court and the Calcutta High Court in Rohan Builders (India) Pvt Ltd v Berger Paints India Limited[viii] (“Rohan Builders-I”) decided to the contrary.
Decision of the Calcutta High Court in Rohan Builders – I
The Hon’ble Calcutta High Court held that the legislative intent behind the use of the term 'terminate' in Section 29A (4) implied that the tribunal’s mandate to make the award finally ended once the period of 12-plus-six months expired. The Hon’ble Court was of the opinion that the mandate of the tribunal cannot remain ‘suspended’ after the end of the statutory period until an application to extend the same is filed. Therefore, once the mandate is terminated, the tribunal would, by law, become incapable of performing its function.
Therefore, the Hon’ble Court held that parties would have to apply to extend the tribunal’s statutory mandate before the mandate ‘terminated’, and allowing parties to file a time extension application after the mandate terminates would defeat the purpose of having a statutory timeline to make the award.
The Supreme Court's view
The Supreme Court did not conform to the Calcutta High Court’s reasoning in Rohan Builders-I. It observed that:
1. The term ‘terminate’ in Section 29A(4) of the Act must be interpreted in conjunction with the other provisions of the Section;
2. The termination of the arbitral tribunal’s mandate cannot be conditional upon the filing of an extension application. Such a restrictive intention would not be in consonance with the legislative intent and would result in prescription of a limitation period which is not expressed in the Act;
3. Arbitration is envisaged as a ‘litigant-centric’ process, and, therefore, a practical and a meaningful interpretation should be undertaken by the courts;
4. Therefore, an application under Section 29A of the Act to extend the time for making an arbitral award in domestic arbitral proceedings beyond the statutory mandate is maintainable even if the parties file the same after such mandate has expired;
5. However, such an application would not be granted mechanically and the safeguards provided in the Act shall be adhered to for preventing any misuse by a party not exercising due diligence in promptly filing an application for extension.
Our thoughts
The Supreme Court’s decision provides much needed clarity and uniformity concerning the extension of the arbitral tribunals’ mandate in domestic arbitration proceedings. Parties to Indian domestic arbitral references are no longer likely to find themselves litigating over missing the statutory deadline for making the arbitral award.
Although this decision is prima facie litigant friendly, there may be a grey area in the cases where the statutory timeline to make an arbitral award has expired but the parties have not filed an extension application for a considerable period of time. Neither the Act nor the Supreme Court’s ruling specifies a limitation period for filing the extension application. Therefore, it leaves open an option for the parties to continue with the mandate for an indefinite period of time. It is upon the court hearing an extension application to be cautious of the conduct of the parties while exercising its power under Section 29A to ensure that the timeline to make an award is not deemed irrelevant.
However, this decision does not affect international commercial arbitration (i.e., references where at least one of the parties is non-Indian[ix]), since, for such references, the Section 29A timelines for making an arbitral award are only directory.[x]
*This article is for information purposes only and should not be treated as legal advice.
Shiv Iyer
Managing Partner
Mumbai
Bodhisattwa Majumder
Senior Associate
Mumbai
Chinmay A. Deshpande
Junior Associate
Mumbai
[i] Rohan Builders (India) Private Limited v Berger Paints India Limited 2024 INSC 686 (Annexed).
[ii] ATC Telecom Infrastructure Pvt. Ltd. v Bharat Sanchar Nigam Ltd 2023:DHC:8078; Wadia Techno-Engineering Services Limited v Director General of Married Accommodation Project 2023 SCC OnLine Del 2990; ATS Infrastructure Ltd. and Another v. Rasbehari Traders 2023 SCC OnLine Del 8645; M/s Power Mech Projects Ltd v M/s Doosan Power Systems India Pvt. Ltd 2024:DHC:3769, KMP Expressways Ltd v. IDBI Bank Ltd 2024 SCC OnLine Del 2617; Reliance Infrastructure Limited v Madhyanchal Vidyut Vitran Nigam Limited 2023:DHC:5745.
[iii] Nikhil H. Malkan and Others v Standard Chartered Investment and Loans (India) Limited 2023:BHC-OS:14063.
[iv] Hiran Valiiyakkil Lal v Vineeth M.V. 2023 SCC OnLine Ker 5151.
[v] G.N. Pandian v S. Vasudevan 2020 SCC OnLine Mad 737.
[vi] H.P.Singh v G.M. Northern Railways 2023 SCC OnLine J&K 1255.
[vii] Ashok Kumar Gupta v M.D. Creations 2024 SCC OnLine Cal 6909.
[viii] Rohan Builders (India) Pvt Ltd v Berger Paints In-dia Limited AP/328/2023 (Calcutta High Court, 6 September 2023).
[ix] Section 2(1)(f) of the Act.
[x]TATA Sons Pvt. Ltd. (Formerly TATA Sons Ltd) v Siva Industries and Holdings Ltd 2023 INSC 13, [2023] 9 S.C.R. 1268.
Commentaires