Supreme Court clarifies time extension for arbitral awards under Section 29A of the Arbitration and Conciliation Act, 1996: Rohan Builders vs. Berger Paints (2024)

Date of the Judgment: September 12, 2024
Citation: 2024 INSC 686
Judges: Sanjiv Khanna, J. and R. Mahadevan, J.
Can a court extend the deadline for an arbitral award even after the initial time limit has passed? The Supreme Court of India addressed this critical question in a recent judgment, clarifying the interpretation of Section 29A of the Arbitration and Conciliation Act, 1996. This judgment settles a conflict among various High Courts regarding the timelines for extending arbitral mandates. The majority opinion was authored by Justice Sanjiv Khanna, with Justice R. Mahadevan concurring.

Case Background

The case involves a dispute between Rohan Builders (India) Private Limited and Berger Paints India Limited. The core issue revolves around whether an application for extending the time limit for an arbitral award under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the initial period for making the award has expired. This legal question arose because different High Courts had conflicting views on this matter. The appellant, Rohan Builders, was contesting the decision of the High Court at Calcutta, which held that such applications must be filed before the expiry of the arbitral tribunal’s mandate.

Timeline

Course of Proceedings

The High Court at Calcutta in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited held that an application for extension of time under Sections 29A(4) and 29A(5) of the Arbitration and Conciliation Act, 1996 can only be entertained if filed before the expiry of the mandate of the arbitral tribunal. A similar view was taken by the High Court of Judicature at Patna in South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited. However, several other High Courts, including the High Court of Delhi, High Court of Judicature at Bombay, High Court of Kerala, High Court of Madras, and High Court of Jammu and Kashmir and Ladakh, held the opposite view, stating that an application for time extension can be filed even after the expiry of the initial or extended period. Subsequently, the High Court at Calcutta in a later decision in Ashok Kumar Gupta v. M.D. Creations and Others, aligned with the view of the other High Courts. The Supreme Court granted leave to appeal to resolve this conflict.

Legal Framework

The core of this case revolves around Section 29A of the Arbitration and Conciliation Act, 1996. This section sets time limits for making arbitral awards and allows for extensions under certain conditions. Here’s a breakdown of the relevant parts:

• Section 29A(1): “The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23…” This sets a 12-month deadline for domestic arbitrations, starting from the completion of pleadings.
• Section 29A(3): “The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.” This allows parties to mutually extend the deadline by up to six months.
• Section 29A(4): “If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the court has, either prior to or after the expiry of the period so specified, extended the period…” This states that the arbitrator’s mandate ends if the award isn’t made within the time limits, unless a court extends the period before or after the deadline.
• Section 29A(5): “The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the court.” This allows any party to apply for an extension, which is granted only if there is sufficient cause.
• Section 29A(6): “While extending the period referred to in sub-section (4), it shall be open to the court to substitute one or all of the arbitrators…” This allows the court to replace arbitrators while extending the time.

The Supreme Court also considered the Arbitration Act, 1940, which had different provisions for time limits and extensions. The 1940 Act allowed courts to extend time for making an award, regardless of whether the original time had expired. The introduction of Section 29A in the 1996 Act aimed to streamline arbitration proceedings and prevent delays.

Arguments

The core of the dispute lies in the interpretation of Section 29A(4) of the Arbitration and Conciliation Act, 1996, specifically the phrase “either prior to or after the expiry of the period so specified.” The High Court at Calcutta had held that the mandate of the arbitral tribunal terminates automatically upon the expiry of the specified time, and thus an application for extension under Section 29A(5) must be filed before this termination. The High Court relied on the use of the word “terminate” in Section 29A(4), arguing that it reflects a legislative intent to end the arbitral tribunal’s mandate once the time limit expires. The High Court also cited the 176th Report of the Law Commission of India, which had suggested using the term “suspend” instead of “terminate,” to support its interpretation that termination is absolute.

On the other hand, the High Courts of Delhi, Bombay, Kerala, Madras, and Jammu and Kashmir and Ladakh held that the court has the power to extend the time even after the expiry of the initial or extended period. These High Courts emphasized the phrase “either prior to or after the expiry of the period so specified” in Section 29A(4), arguing that it clearly allows for applications for extension to be filed after the time limit has passed. They also argued that a restrictive interpretation would lead to unnecessary complexities and delays in arbitration proceedings.

The arguments can be summarized as follows:

• Arguments for strict interpretation (High Court at Calcutta):
  • The word “terminate” in Section 29A(4) indicates the end of the arbitral tribunal’s mandate upon expiry of the time limit.
  • The legislative intent was to ensure timely completion of arbitration and not to allow open-ended extensions.
  • An application for extension must be filed before the mandate terminates to be valid.
• Arguments for liberal interpretation (High Courts of Delhi, Bombay, Kerala, Madras, and Jammu and Kashmir and Ladakh):
  • Section 29A(4) explicitly allows the court to extend the time “either prior to or after the expiry of the period.”
  • A strict interpretation would lead to unnecessary delays and fresh arbitrations.
  • The court’s power to extend time is subject to “sufficient cause,” preventing abuse.

Submissions by Parties

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. 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 the arbitral award.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that an application for extension of time under Section 29A(4) read with Section 29A(5) of the Arbitration and Conciliation Act, 1996 is maintainable even after the expiry of the twelve-month or the extended six-month period. The court rejected the strict interpretation of the word “terminate” in Section 29A(4) and held that it does not mean absolute termination of the arbitral mandate. The court emphasized that the phrase “either prior to or after the expiry of the period so specified” in Section 29A(4) clearly allows for applications for extension to be filed after the time limit has passed.

The court also noted that the power to extend time is to be exercised only in cases where there is sufficient cause for such extension, and the court can impose terms and conditions while granting an extension. The court further stated that a narrow interpretation would lead to unnecessary delays and fresh arbitrations, which is contrary to the objective of the 2015 Amendment to the Arbitration and Conciliation Act, 1996.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited: The Supreme Court overruled this judgment of the High Court at Calcutta.
• South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited: The Supreme Court overruled this judgment of the High Court of Judicature at Patna.
• ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar Nigam Ltd.: The Supreme Court approved this judgment of the High Court of Delhi.
• Wadia Techno-Engineering Services Limited v. Director General of Married Accommodation Project and Another: The Supreme Court approved this judgment of the High Court of Delhi.
• Nikhil H. Malkan and Others v. Standard Chartered Investment and Loans (India) Limited: The Supreme Court approved this judgment of the High Court of Judicature at Bombay.
• Hiran Valiiyakkil Lal and Others v. Vineeth M.V. and Others: The Supreme Court approved this judgment of the High Court of Kerala.
• G.N.Pandian v. S. Vasudevan and Others: The Supreme Court approved this judgment of the High Court of Madras.
• H.P.Singh v. G.M. Northern Railways and Others: The Supreme Court approved this judgment of the High Court of Jammu and Kashmir and Ladakh.
• Ashok Kumar Gupta v. M.D. Creations and Others: The Supreme Court approved this judgment of the High Court at Calcutta.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors, as evidenced by the sentiment analysis of the reasons given in the judgment:

Fact:Law Ratio

The sentiment analysis indicates that the court was primarily influenced by the plain language of the statute and the need to ensure that arbitration remains an effective mechanism for dispute resolution. The court also took into account the practical implications of a strict interpretation, which would lead to unnecessary delays and fresh arbitrations. The ratio of fact to law shows that the court’s decision was primarily driven by legal considerations, with a lesser emphasis on the specific factual aspects of the case.

Logical Reasoning

The Court considered the text of Section 29A(4) and the purpose of the Arbitration and Conciliation Act, 1996, to arrive at the conclusion that an application for extension of time can be filed even after the expiry of the time limit for making an arbitral award.

Key Takeaways

• An application for extending the time limit for an arbitral award under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed even after the initial or extended time period has expired.
• The word “terminate” in Section 29A(4) does not mean absolute termination but is conditional upon the non-filing of an extension application.
• Courts have the power to extend the time, but this power is to be exercised only when there is sufficient cause.
• This judgment clarifies the law and promotes the efficient resolution of disputes through arbitration.

Directions

The Supreme Court directed the appeals to be listed in the week commencing 30.09.2024 for final hearing and disposal.

Specific Amendments Analysis

There is no specific amendment analysis in the judgment.

Development of Law

The ratio decidendi of this case is that an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 is maintainable even after the expiry of the time limit for making an arbitral award. This judgment overrules the previous position taken by the High Court at Calcutta and the High Court of Judicature at Patna, and aligns with the view of the High Courts of Delhi, Bombay, Kerala, Madras, and Jammu and Kashmir and Ladakh. This ruling clarifies the interpretation of Section 29A and promotes the efficient resolution of disputes through arbitration.

Conclusion

The Supreme Court’s judgment in Rohan Builders (India) Private Limited v. Berger Paints India Limited clarifies a crucial aspect of arbitration law in India. By holding that an extension application can be filed even after the expiry of the initial time limit, the court has ensured that arbitration proceedings are not unduly terminated due to rigid timelines. This decision promotes a more flexible and efficient approach to arbitration, aligning with the legislative intent of the Arbitration and Conciliation Act, 1996.