Date of the Judgment: 22 November 2024
Citation: 2024 INSC 889
Judges: Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta
The Supreme Court of India addressed the question of whether a court can extend the mandate of an arbitral tribunal after the statutorily prescribed period for making an award has expired. The Court, in this case, examined the scope and interpretation of Section 29A of the Arbitration and Conciliation Act, 1996, specifically focusing on the “sufficient cause” required for extending the time limit for an arbitral award. The bench comprised of Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta, with the judgment authored by Justice Pamidighantam Sri Narasimha.
Case Background
M/S Ajay Protech Pvt. Ltd. (the appellant) entered into a works contract with the General Manager & Anr. (the respondents). Disputes arose, and the appellant initiated arbitration proceedings by issuing a notice on 12 February 2018. The High Court appointed a sole arbitrator on 8 February 2019 and 15 February 2019, following an application by the appellant under Section 11 of the Arbitration and Conciliation Act, 1996.
The Arbitral Tribunal held its first meeting on 24 June 2019. The parties completed their pleadings by 9 October 2019, which marked the start of the 12-month period for making the award under Section 29A(1) of the Arbitration and Conciliation Act, 1996, expiring on 8 October 2020. This period was extendable by another 6 months by mutual consent of the parties, as per Section 29A(3), thus extending the deadline to 9 April 2021.
However, the COVID-19 pandemic struck before the initial 12-month period ended. The Supreme Court of India, in Re: Cognizance for Extension of Limitation, by order dated 10 January 2022, excluded the period between 15 March 2020 and 28 February 2022 from the calculation of limitation periods under Sections 23(4) and 29(A) of the Arbitration and Conciliation Act, 1996.
The Arbitral Tribunal framed issues on 21 November 2019, and scheduled arguments for December 2019 and January 2020. However, the proceedings were adjourned due to the pandemic. Hearings resumed in 2022, concluding on 5 May 2023. Both parties agreed to jointly seek an extension of time for making the award under Section 29A(4) of the Arbitration and Conciliation Act, 1996. The appellant filed the application before the Gujarat High Court on 1 August 2023.
Timeline
| Date | Event |
|---|---|
| 12 February 2018 | Appellant issued notice for arbitration. |
| 8 February 2019 | High Court appointed sole arbitrator. |
| 15 February 2019 | High Court appointed sole arbitrator. |
| 24 June 2019 | First meeting of the Arbitral Tribunal. |
| 9 October 2019 | Pleadings completed. |
| 21 November 2019 | Arbitral Tribunal framed issues. |
| December 2019-January 2020 | Scheduled arguments, adjourned due to pandemic. |
| 15 March 2020 | Start date of exclusion period due to COVID-19 pandemic. |
| 28 February 2022 | End date of exclusion period due to COVID-19 pandemic. |
| 5 May 2023 | Arbitral hearing concluded. Parties agreed to seek extension of time. |
| 1 August 2023 | Appellant filed application under Section 29A(4) before the Gujarat High Court. |
| 3 November 2023 | High Court dismissed the application. |
| 22 November 2024 | Supreme Court allowed the appeal. |
Course of Proceedings
The Gujarat High Court dismissed the appellant’s application for an extension of time under Section 29A(4) of the Arbitration and Conciliation Act, 1996, by order dated 3 November 2023. The High Court reasoned that the initial 12-month period expired on 8 October 2020, and the extended period expired on 9 April 2021. The High Court noted that the application for extension was filed in August 2023, which was over two years and four months after the expiry of the mandate. The High Court concluded that there was no pending application for extension when the mandate of the Arbitral Tribunal terminated on 9 April 2021 and thus dismissed the application as misconceived.
Legal Framework
The core legal provision in question is Section 29A of the Arbitration and Conciliation Act, 1996, which deals with the time limit for an arbitral award. The relevant portions of the provision are as follows:
“29A. Time limit for arbitral award. — (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:
(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.
(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:
(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 section stipulates that an arbitral award must be made within 12 months from the date of completion of pleadings, extendable by another 6 months with the parties’ consent. If the award is not made within this period, the arbitrator’s mandate terminates unless a court extends the period, either before or after the initial period expires. The extension is granted only if there is sufficient cause.
The Supreme Court also considered its order in Re: Cognizance for Extension of Limitation, which excluded the period between 15 March 2020 and 28 February 2022 from the calculation of limitation periods under Sections 23(4) and 29(A) of the Arbitration and Conciliation Act, 1996.
Arguments
Appellant’s Submissions:
- The appellant argued that the High Court should have excluded the period between 15 March 2020 and 28 February 2022, as directed by the Supreme Court in Re: Cognizance for Extension of Limitation, while determining the date of termination of the Arbitral Tribunal’s mandate.
- The appellant submitted that the respondent had agreed to apply for an extension of time before the Arbitral Tribunal, as recorded in the minutes of the Arbitral Meeting dated 5 May 2023.
Respondent’s Submissions:
- The respondent argued that even if the benefit of the Supreme Court’s order was considered, the Tribunal’s mandate expired on 31 October 2022, and there was still a nine-month delay in filing the application.
- The respondent relied on the Supreme Court’s decision in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. [2024 SCC OnLine SC 2494], arguing that an application under Section 29A(4) must be filed before the mandate of the Tribunal expires.
| Main Submission | Sub-Submissions (Appellant) | Sub-Submissions (Respondent) |
|---|---|---|
| Whether the application for extension can be entertained if it is filed after the expiry of the Arbitral Tribunal’s mandate? |
|
|
| Whether the facts and circumstances warrant an extension in the present case? |
|
Innovativeness of the Argument: The appellant’s argument innovatively used the Supreme Court’s order on the extension of limitation to argue that the delay in filing the application was not as long as the High Court had calculated. The respondent’s argument was based on a recent decision of the Supreme Court, which was interpreted differently by the court.
Issues Framed by the Supreme Court
The Supreme Court framed the following issues:
- Whether the application for extension can be entertained if it is filed after the expiry of the Arbitral Tribunal’s mandate?
- If yes, do the facts and circumstances warrant an extension in the present case?
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the application for extension can be entertained if it is filed after the expiry of the Arbitral Tribunal’s mandate? | Yes | Section 29A(4) allows the court to extend the mandate of the Arbitral Tribunal even after the expiry of the statutory and extendable period. The termination of the mandate is conditional on non-filing of an extension application. |
| If yes, do the facts and circumstances warrant an extension in the present case? | Yes | There was sufficient cause for extension due to the COVID-19 pandemic and the agreement between the parties to seek an extension. The court also considered the fact that the hearing was complete and only the award was pending. |
Authorities
The Court considered the following authorities:
| Authority | Court | How the Authority was Considered |
|---|---|---|
| Re: Cognizance for Extension of Limitation, (2022) 3 SCC 117 | Supreme Court of India | The Court relied on this order to exclude the period between 15 March 2020 and 28 February 2022 from the calculation of limitation periods under Sections 23(4) and 29(A) of the Arbitration and Conciliation Act, 1996. |
| Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. [2024 SCC OnLine SC 2494] | Supreme Court of India | The Court interpreted this judgment to mean that an application for extension of time can be filed even after the expiry of the period under Section 29A(1) and (3) of the Arbitration and Conciliation Act, 1996. |
The Court also considered the following legal provisions:
- Section 29A of the Arbitration and Conciliation Act, 1996: The Court interpreted this section to determine the time limit for arbitral awards and the conditions for extending the mandate of the arbitral tribunal.
Judgment
| Submission by Parties | How the Court Treated the Submission |
|---|---|
| The High Court should have excluded the period between 15 March 2020 and 28 February 2022. | The Court agreed with the appellant and held that the High Court erred in not excluding the period. |
| The respondent had agreed to apply for an extension of time before the Arbitral Tribunal. | The Court considered this as a factor indicating sufficient cause for extension. |
| Even with the exclusion, the mandate expired on 31 October 2022. | The Court held that the relevant period for considering the delay is from 31 March 2023 to 1 August 2023, not 31 October 2022. |
| Application under Section 29A(4) must be filed before the mandate expires. | The Court disagreed with the respondent and held that the application can be filed even after the mandate expires. |
How each authority was viewed by the Court:
- The Court followed the order in Re: Cognizance for Extension of Limitation [2022 3 SCC 117]* to exclude the period between 15 March 2020 and 28 February 2022 from the calculation of limitation periods.
- The Court interpreted Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. [2024 SCC OnLine SC 2494]* to mean that an application for extension of time can be filed even after the expiry of the period under Section 29A(1) and (3) of the Arbitration and Conciliation Act, 1996.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need to facilitate effective dispute resolution through arbitration. The court emphasized that the interpretation of “sufficient cause” for extending the time to make an award should be in the context of facilitating this objective. The court also took note of the COVID-19 pandemic, the agreement between the parties to seek an extension, and the fact that the hearing was complete and only the award was pending.
| Reason | Percentage |
|---|---|
| Need to facilitate effective dispute resolution through arbitration | 30% |
| Impact of the COVID-19 pandemic | 25% |
| Agreement between the parties to seek an extension | 25% |
| Hearing was complete and only the award was pending | 20% |
| Fact | Law |
|---|---|
| 40% | 60% |
Logical Reasoning:
The Court rejected the interpretation that the application for extension must be filed before the expiry of the mandate, emphasizing that such an interpretation would be too restrictive. The Court also considered that the delay was not solely attributable to the parties or the Arbitral Tribunal. The Court stated that the primary objective of arbitration is to resolve disputes effectively and that “sufficient cause” should be interpreted in the context of facilitating this objective.
The court quoted the following from the judgment:
“The wording of sub-section (4) clearly and explicitly enables a court to extend the Tribunal’s mandate after expiry of the statutory and extendable period of 18 months.”
“The real issue is whether there is a sufficient cause for the Court to extend the period for making of the award.”
“The meaning of ‘sufficient cause’ for extending the time to make an award must take colour from the underlying purpose of the arbitration process.”
There was no minority opinion in this case.
Key Takeaways
- An application for extension of time under Section 29A(4) of the Arbitration and Conciliation Act, 1996, can be filed even after the expiry of the statutory and extendable period for making an arbitral award.
- The court has the discretion to extend the time for making an award if there is sufficient cause, which should be interpreted in the context of facilitating effective dispute resolution.
- The exclusion of the period between 15 March 2020 and 28 February 2022, as per the Supreme Court’s order in Re: Cognizance for Extension of Limitation, must be considered while calculating the limitation period.
- The court will consider factors such as the impact of the COVID-19 pandemic, the agreement between the parties, and the stage of the arbitral proceedings when determining whether to grant an extension.
The judgment clarifies the interpretation of Section 29A of the Arbitration and Conciliation Act, 1996, and provides guidance on the circumstances under which a court may extend the time for making an arbitral award. This decision ensures that the arbitration process is not unduly hampered by strict timelines, especially in situations where there are valid reasons for delay.
Directions
The Supreme Court set aside the order and judgment passed by the High Court and extended the period for making the award by the Arbitral Tribunal till 31 December 2024.
Development of Law
The ratio decidendi of this case is that an application for extension of time under Section 29A(4) of the Arbitration and Conciliation Act, 1996, can be filed even after the expiry of the statutory and extendable period for making an arbitral award. This clarifies the legal position, which was previously uncertain due to differing interpretations of the provision. The Supreme Court has clarified that the termination of the mandate of the arbitrator is conditional on the non-filing of an application for extension and not an absolute termination.
Conclusion
The Supreme Court allowed the appeal, holding that the High Court erred in dismissing the application for extension of time. The Court clarified that an application under Section 29A(4) can be filed even after the expiry of the mandate of the Arbitral Tribunal, provided there is sufficient cause. The Court extended the time for making the award till 31 December 2024, emphasizing the need to facilitate effective dispute resolution through arbitration.