The Supreme Court of India (Supreme Court) recently in the case of Rohan Builders (India) Private Limited vs. Berger Paints India Limited (Civil Appeal a/o. SLP (C) No. 23320 of 2023 & Ors dated September 12, 2024) held that, an application for extension of the time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) of the Arbitration and Conciliation Act, 1996 (the said Act) is maintainable even after the expiry of  twelve-month period or the extended six-month period, as the case may be, in cases where there is sufficient cause for allowing such extension.

Background:

Various High Courts had diverging views on the point of extension of time under Section 29A of the said Act after the expiry of the period for making of the arbitral award. Certain High Courts like the High Court at Calcutta in Rohan Builders (India) Private Limited v. Berger Paints India Limited and High Court of Judicature at Patna in South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited held that the application for extension of time under Section 29A(4) and Section 29A(5) of the said Act can only be entertained if the said application is filed before the expiry of the mandate of the arbitral tribunal. Contrary views were taken by other High Courts. The High Court of Delhi in ATC Telecom Infrastructure Private Limited v. Bharat Sanchar Nigam Limited, Wadia Techno-Engineering Services Limited v. Director General of Married Accommodation Project, and some other cases; the High Court of Judicature at Bombay in Nikhil H. Malkan v. Standard Chartered Investment and Loans (India) Limited ; the High Court of Kerala in Hiran Valiiyakkil Lal v. Vineeth M.V. ; the High Court of Madras in G.N.Pandian v. S. Vasudevan ; and the High Court of Jammu and Kashmir and Ladakh in H.P.Singh v. G.M. Northern Railways had held that an application for extension of time limit for arbitral award can be filed by a party even after the expiry of the term of twelve month period or the extended period of six months. The High Court at Calcutta in a subsequent decision in the case Ashok Kumar Gupta v. M.D. Creations had adopted the view that an application for extension of time limit for the arbitral award to be rendered can be filed by a party even after the expiry of the period for making of such arbitral award. Upon appeals being filed before the Supreme Court of India, the Court was pleased to issue notice and tag all appeals together for consideration. 

Issue:

Whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the expiry of the period for making of the arbitral award?

Findings:

Relying on Section 29A(4) of the said Act, the Supreme Court held that the provision empowers the court to extend the period for making of the arbitral award beyond a period of twelve months or eighteen months (extended six-month period). It was held that the expression “either prior to or after the expiry of the period so specified” in Section 29A(4) of the said Act implies that court has the power to extend the period for making an award at any time before or after the mandated period, provided that such extension of time is to be granted by the court only for ‘sufficient cause’ and on such terms and/or conditions as may be necessary to be imposed by the court.

Supreme Court also discussed the interpretation of the word “terminate” in Section 29A(4) of the said Act and stated that the same should not be read in isolation with a strict dictionary meaning, rather, the same should be read in conjunction with the surrounding words and expressions. Thus, the correct interpretation of the word “terminate” as stated in Section 29A(4) is that the same makes the arbitral tribunal functus officio, but not in absolute terms and the true purport of the word “terminate” must be understood in light of the syntax of the provision. The Court further noted that there is no full stop after the word “terminate” in Section 29A(4) and the same is followed by the connecting word “unless”, which qualifies the first part with the subsequent part of the section, i.e. “unless the court has, either prior to or after the expiry of the period so specified, extended the period.” Such expression “prior to or after the expiry of the period so specified” must be understood with reference to the power of the court to grant an extension of time before or after the mandated period.

Supreme Court also discussed the recommendation made in the 176th Report of the Law Commission of India which had suggested usage of the term “suspend” and stated that the legislative preference for the term “terminate” over “suspend” is apparent, because the word “suspend” could cause dissimilarity and a legal dilemma if no party files an application for an extension of time as in such a scenario, the arbitral proceedings would stand suspended ad infinitum. Thus, if neither party moves an application for an extension of time for making the award, the arbitration proceedings are terminated and although the same makes the arbitral tribunal functus officio, such termination of the arbitral mandate is conditional upon non-filing of an extension application and cannot be treated as termination strictly.

The Supreme Court making a reference to the decision of the High Court at Calcutta in Ashok Kumar Gupta v. M.D. Creations held that termination under Section 29A(4) is not authoritarian in character. It was also held that a narrow or restrictive interpretation of Section 29A(4) will add words to widen the scope of the legislation and will amount to modification or rewriting of the statute and the same would amount to complexities and would be contrary to the legislative intent. Also by relying on Section 29A(5) of the said Act, Supreme Court stated that such extension is not granted mechanically on filing of the an application for extension of time, rather such power of the court to extend the time is exercised only in cases where there is sufficient cause for such extension and the court has the liberty to impose terms and/or conditions while granting the extension.

Supreme Court also held that as under Section 29A(7), the reconstituted arbitral tribunal shall be deemed to be in continuation of the previously appointed arbitral tribunal and therefore, there is no need to file a fresh application under Section 11 of the said Act for appointment of an arbitrator. Lastly the court held that an interpretation which produces an unreasonable result is not to be imputed to a statute if there is some other equally possible construction which is acceptable as well as practical and held that an application for extension of the time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) is maintainable even after the expiry of the twelve-month period or the extended six-month period, as the case may be, provided there is sufficient cause to grant such extension.

Conclusion:

As per the Statement of Objects and Reasons of the Arbitration and Conciliation (Amendment) Bill, 2015 inserting Section 29A, the legislature foresee arbitration as a litigant-centric process by expediting the disposal of cases and by reducing the cost of litigation. By way of the present decision, the Supreme Court upheld the true purport of such amendment to the said Act. A narrow interpretation will be disadvantageous to the true purport of the amendment to the said Act.

Please find attached a copy of the judgement. 

This update has been contributed by Pooja Chakrabarti, Namitha Mathews (Partners) and Arti Bhattacharyya, Pulkit Malhotra (Senior Associates).

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