[Ayush is a student at National Law School of India University.]
Recently, in Rohan Builders v. Berger Paints India, the Supreme Court (SC) clarified that termination of the arbitral mandate under Section 29A(4) of the Arbitration and Conciliation Act 1996 (Act) is not to be strictly interpreted. This indicates that an application under Section 29A (5) of the Act to extend the time to make an award by the tribunal can be accepted even after the termination of the tribunal's mandate under Section 29A(4). Section 29A(4) provides that if the award is not made within the specified period (12 months) or the extended period (6 months) then the mandate of the arbitrator(s) would be terminated subject to further extension by the court.
The SC, in this case, noted the inconsistent High Court (HC) judgments on the question on application under Section 29A(5) after the expiry of the mandated period. Unfortunately, the SC missed the opportunity to answer another relevant question on whether an application for an extension can be made under Section 29A(5) after the delivery of the award by the tribunal, a matter also subjected to inconsistent HC judgments.
This article examines the opposing HC judgments and claims that the recent SC judgment, by being silent on the issue, supports the position wherein an application to extend the tenure of the arbitral tribunal can be made even if the award was passed after the mandated period. The paper claims that this interpretation would make Section 29A toothless and goes against the legislative intent of the 2015 amendment.
The Conflicting Rational between High Courts
The Delhi HC in Powergrid Corporation of India v. SPML Infra Limited determined that if the award has already been issued, an application under Section 29A of the Act asking for an extension of the arbitrator's mandate is not tenable. In its ruling, the court reasoned that there is no explicit provision in Section 29A of the Act allowing the courts to provide an extension following the rendering of an award. The language of the provision would not have been omitted if the legislature had intended for Section 28 of the Act of 1940 to apply to Section 29A of the Act, as Section 28 allows for an application to be entertained even after the award has been passed.
The court added, according to Section 29A(4), if the award is not issued within the allotted time, the arbitrator's mandate will be terminated unless the timeframe has been extended by the court, either before or after the deadline expires. Therefore, the clause makes it quite clear that the processes must continue to be pending and unresolved and that requests for extensions of time may be made, provided that the award has not yet been delivered.
However, in RKEC Projects Limited v. The Cochin Port Trust, the High Court of Kerala found that if there is a good reason, a petition under Section 29A of the Act is still tenable even after the award is delivered. It was contended that Section 32 of the Act's termination of the arbitrator's authority is not absolute and may be subject to the powers of extension granted by sub-sections (3) and (4) of Section 29A.
The HC decided that despite the expiration of the arbitrator's mandate, the court may still consider claims for extensions under sub-sections (3) and (4) of Section 29A, which allow requests for time extensions to be heard either before or after the deadline has passed. In its ruling, the court noted that although arbitral tribunal mandates have been held by courts to extend past the date of the award if an application for an extension of time under Section 29A(5) is still pending, an interpretation has emerged that suggests that although the arbitral tribunal's mandate typically ends with the delivery of the award, this termination is not absolute and may always be subject to the court's discretion.
The Problem with Kerala HC Judgment
The Delhi HC made it clear that any interpretation that would point that an application can be made even if the award is made after the specified period in Section 29A would lead to inconsistency in reading other sub-sections under Section 29A. Further, it is argued that a reading proposed by Kerala HC renders Section 29A completely toothless as it allows the arbitral tribunal to extend even after the expiry of the allotted time. The 2015 amendment specifically added Section 29A in order to make the arbitration process more efficient and to make sure it does not become as cumbersome as litigation.
The judicial overreach of Kerala HC not only undermined the consequence of its interpretation but also introduced the test of 'sufficient cause' out of thin air, thereby undermining the legislature's intent. Further, the judgment discusses the court's powers under Section 29A to extend the mandate of the arbitrator even after the award but does not adequately distinguish between procedural and substantive judicial authority. There is no specific guidance on how courts should balance the rights of parties challenging awards passed after the expiry of the arbitrator's mandate. It is specifically important because cases, where awards have been passed should be treated differently from the cases where the application is only to extend the tenure of the tribunal. In the former case, relying completely on the discretion of the court undermines the legislature's intention by going completely opposite to Section 29A(1).
Rohan Builders and Kerala HC Judgment
The HC judgment of Rohan Builders, which upheld that the application for extension has to be made before the period of termination of the arbitral tribunal, was referred and rejected by the Kerala HC. The Kerala HC stated that an application can be made and considered even after the tribunal has ended and the Award has been issued.
The SC judgment in Rohan Builders follows similar reasoning. Although the court did not specify how the passing of the award affects the eligibility for an extension, it indicated that the term termination should not be seen as absolute. The SC's decision supports the Kerala HC's ruling in RKEC Projects Limited, agreeing that courts can extend the time for an arbitral tribunal to deliver its Award even after the deadline under Section 29A of the Act. Both rulings clarify that a tribunal's authority does not automatically end when the deadline passes; instead, courts can extend the deadline and allow the tribunal to issue its award.
In Rohan Builders, SC dismissed the idea of strictly interpreting the term 'terminate' in Section 29A (4), stating that courts can extend the time limit both before and after it expires. This is in line with the RKEC ruling, where the Kerala HC decided that courts can extend the time for an award after it has already been delivered if there's a good reason for the delay. Together, these judgments support the idea that Section 29A should be applied with flexibility, ensuring that procedural or reasonable delays do not automatically void the tribunal's authority. This strengthens the approach set out in RKEC, where courts can extend deadlines even after the delivery of the Award in order to 'preserve' the validity of the arbitration process.
In essence, Rohan Builder suggests that termination under Section 29A is not absolute. The Kerala HC judgment can now be interpreted to mean that if termination did not occur even after the deadline had passed, the tribunal still had the authority to pass the award, making it valid. This also indicates that sub-sections (1) and (3) of Section 29A are not strict deadlines as an exception of ‘sufficient cause’ has been carved out by the HC and the SC judgment reinforces this exception by making termination conditional, rather than absolute.
Conclusion
The article aims to highlight that the recent SC decision, if read with the Kerala HC judgment would potentially conclude that the courts do have the power to extend the termination period of the tribunal even after the award has been passed. This would result in two main issues. First, there would be no need for the tribunal to adhere to the deadlines provided in Section 29A, as evident by the Kerala HC judgment. Secondly, and more importantly, this would be a great example of judicial overreach wherein the court has stepped into the shoes of the legislature to ascertain a position that goes completely against the aim of the 2015 amendment.
While the SC in Rohan Builders had the opportunity to answer the present question, it chose to stick to the case facts in that case. Therefore, it is clearly foreseeable that a SC bench might be seated to clarify which HC's position is correct. In the meantime, a joint reading of SC's Rohan Builders and Kerala HC's RKEC point to a concerning position that the court can extend the tenure of the arbitral tribunal even if the award was passed after the termination of the tribunal for exceeding the mandated period under Section 29A (4).
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