Application For Extension Of Time U/S. 29A A&C Act Can Be Filed Before Or After Termination Of Arbitral Tribunal’s Mandate: SC
The Supreme Court clarified that an application for extension can be filed either before or after the termination of the Arbitral Tribunal’s mandate upon expiry of the statutory and extendable period and 'sufficient cause' should be interpreted in the context of facilitating effective dispute resolution.
The Apex Court had to consider the issue whether the application filed by the appellant under Section 29A(4) of the Arbitration and Conciliation Act, 19961 for extension of the mandate of the Arbitral Tribunal ought to have been allowed by the High Court.
The Division Bench comprising Justice Pamidighantam Sri Narasimha & Justice Sandeep Mehta said, “While the statute incorporates party autonomy even with respect to the conduct and conclusion of arbitral proceedings, there is a statutory recognition of the power of the Court to step in wherever it is necessary to ensure that the process of resolution of the dispute is taken to its logical end, if according to the Court, the circumstances so warrant.”
Senior Advocate Gaurav Agrawal represented the Appellant while AOR Amrish Kumar represented the Respondents.
The appellant, in this case, entered into a works contract with respondent no. 1. Subsequently when disputes arose, appellant sought resolution through arbitration by issuing a notice. Appellant’s application under Section 11 of the Act for appointment of a sole arbitrator was allowed by the High Court. After the first meeting of the Arbitral Tribunal, parties were given time to complete their pleadings. The statutorily stipulated 12-month period under Section 29A(1) for making the award was supposed to expire on October 8, 2020. However, due to the onset of COVID, duration of 2 years was excluded from the set timeline.
The hearing was concluded on May 05,2023 and an application under Section 29A(4) was filed by the appellant before the Gujarat High Court for extension of time for making the award but the same was rejected. Aggrieved thereby, the appellants approached the Supreme Court.
Referring to section 29A and the judgment in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd 2024 SCC OnLine SC 2494, the Bench observed that the wording of subsection (4) clearly enables a court to extend the Tribunal’s mandate after expiry of the statutory and extendable period of 18 months and application for extension of time can be filed even after the expiry of the period in sub-sections (1) and (3). 5 Even if sub-section (4) provides for the termination of the Tribunal’s mandate on the expiry of the period, it recognises party autonomy to move an application before the Court for further extension. It was also observed in Rohan Builders (Supra) that the termination of mandate under the provision is only conditional on the non-filing of an extension application, and cannot be taken to mean that the mandate cannot be extended once it expires.
“The wording of Section 29A(4) and the decision in Rohan Builders (supra) clearly answer the first issue in favour of the appellant, i.e., an application for extension can be filed either before or after the termination of the Tribunal’s mandate upon expiry of the statutory and extendable period”, the Bench held.
Another issue before the Bench was whether an extension of time should be granted in the present case. Reference was made to Section 29A(5), which states that the decision to extend the time is an exercise of discretion by the court and must be done on sufficient cause being shown, and on such terms and conditions that the court deems fit.
The Court clarified that it was the period commencing from 31.03.2023 to 01.08.2023 that the Court was to take into account for considering whether there was sufficient cause to exercise the power under Section 29A(5) to extend the period. As per the Bench, the reasoning adopted by the High Court in holding that there is a delay of 2 years, 4 months in filing the application was erroneous.
Highlighting the fact that the Court can extend the time if it finds that there is sufficient cause, the Bench asserted, “The meaning of 'sufficient cause' for extending the time to make an award must take colour from the underlying purpose of the arbitration process. The primary objective in rendering an arbitral award is to resolve disputes through the agreed dispute resolution mechanism as contracted by the parties. Therefore, 'sufficient cause' should be interpreted in the context of facilitating effective dispute resolution.”
The Bench further added, “Having taken note of the fact that the pandemic had commenced even before the expiry of 12 months from the completion of pleadings, this Court excluding the period between 15.03.2020 to 28.02.2023 in Re: Cognizance for Extension of Limitation (supra), and the agreement between the parties on 05.05.2023 to seek extension of time by filing an application before the Court, we are of the opinion that there is sufficient cause for extension of time.”
Allowing the appeal and setting aside the judgment of the High Court, the Bench extended the period for making of the award by the Arbitral Tribunal till December 31, 2024.
Cause Title: M/S Ajay Protech Pvt. Ltd. v. General Manager & Anr [Neutral Citation: 2024 INSC 889]
Appearance:
Petitioner: Senior Advocate Gaurav Agrawal, AOR C. George Thomas, Advocates Manan Daga, Kaarunya Lakshmi
Respondents: AOR Amrish Kumar
