Recently, the Supreme Court addressed whether an application under Section 29A(4) of the Arbitration and Conciliation Act, 1996, for extending the mandate of an arbitral tribunal, can be entertained after the expiry of the stipulated period. The Court held that such an extension is permissible and clarified the scope of “sufficient cause” under the provision. It also emphasised that the judiciary has discretionary power to extend the mandate even after its termination, promoting arbitration as a mechanism for dispute resolution.
Brief Facts:
The dispute originated from a contractual agreement between the appellant and the respondent, resulting in the initiation of arbitration proceedings in 2018. A sole arbitrator was appointed by the High Court in 2019, with pleadings being completed on October 9, 2019. This date marked the commencement of the twelve-month timeline stipulated under Section 29A(1), which was subsequently extended by mutual agreement until April 9, 2021, in accordance with Section 29A(3). The COVID-19 pandemic caused significant disruption to the proceedings, leading the Supreme Court to exclude the period from March 15, 2020, to February 28, 2022, from statutory time constraints. Arbitration proceedings resumed in 2022, culminating in the conclusion of hearings on May 5, 2023. Following this, the appellant submitted an application under Section 29A(4) in August 2023, requesting an extension of the tribunal’s mandate, which had lapsed. The Gujarat High Court dismissed the application, stating that it was filed two years after the mandate had expired.
Contentions of the Appellant:
The learned counsel appearing on behalf of the appellant that the exclusion of the pandemic period by the Supreme Court effectively extended the timeline for filing the application. It was also submitted that the respondent had agreed to seek an extension during the arbitral proceedings, as recorded in the minutes.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent countered that even accounting for the exclusion of the pandemic period, the mandate had expired on October 31, 2022. They contended that there was an unexplained delay of nine months in filing the application, and reliance was placed on Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd[1]., emphasizing that such applications must be filed before the tribunal’s mandate expires.
Observations of the Court:
The Court delved into the interpretation of Section 29A(4) of the Arbitration and Conciliation Act, emphasizing its intent and flexibility. Referring to its decision in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd., the Court reiterated that an application for an extension of time to conclude arbitration proceedings can be filed either before or after the expiry of the tribunal’s mandate. The Court observed, “The language of Section 29A(4) does not impose a rigid timeline; instead, it provides the parties with the autonomy to approach the court for an extension whenever necessary. Such flexibility is vital to ensure the smooth functioning of arbitration proceedings and respect for party autonomy”.
Interpreting Section 29A(5), the Court highlighted that the power to grant an extension rests on judicial discretion, contingent upon the existence of “Sufficient cause”. It noted that courts must exercise this discretion judiciously to prevent unnecessary delays while also safeguarding the efficiency of arbitration. The Court remarked, “A narrow or overly restrictive interpretation of Section 29A(5) would frustrate the purpose of arbitration. Forcing parties to restart the arbitration process due to minor procedural delays would be counterproductive and undermine the principles of alternative dispute resolution”.
The Court took cognizance of the extraordinary challenges posed by the COVID-19 pandemic, recognizing it as a valid justification for procedural delays. It acknowledges that the appellant had demonstrated sufficient cause for the delay in filing the application for an extension. The Court further noted the respondent’s prior consent to seek an extension, which bolstered the appellant’s position. Addressing the unique circumstances, the Court observed, “The pandemic created unforeseen disruptions in judicial and arbitral proceedings. In such exceptional situations, it is imperative to adopt a pragmatic approach rather than penalize parties for delays caused by factors beyond their control”.
The decision of the Court:
The Top Court allowed the appeal, holding that the application under Section 29A(4) was maintainable even after the expiry of the tribunal’s mandate. It extended the time for the arbitral award to be made until December 31, 2024, facilitating the completion of the proceedings.
Case Title: M/S Ajay Protech Pvt. Ltd. v. General Manager & Anr.
Citation: Special Leave Petition (Civil) No. 2272 of 2024
Coram: Justice Pamidighantam Sri Narasimha, Justice Sandeep Mehta
Advocate for Appellant: Adv. Gaurav Agrawal (Sr. Adv.), C. George Thomas (AOR), Manan Daga, Kaarunya Lakshmi
Advocate for Respondent: Adv. Amrish Kumar
Read Judgment @LatestLaws.com
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