S.29A Arbitration | ‘Sufficient cause’ to extend time for award should be interpreted to facilitate effective dispute resolution: Supreme Court

In extending the time within which an arbitral tribunal must pronounce its award, the Supreme Court recently observed that extension can be allowed even after the expiry of statutory time and that the expression ‘sufficient cause’ under Section 29A of the Arbitration and Conciliation Act should be colored by the underlying purpose of the arbitration process (i.e. facilitating effective dispute resolution).

“The meaning of ‘sufficient cause’ for extending the time to render an award must derive color from the underlying purpose of the arbitration process. The primary purpose in rendering an arbitration award is to resolve disputes through the agreed dispute resolution mechanism as agreed upon by the parties, therefore ‘sufficient cause’ must be interpreted in the context of facilitating effective dispute resolution.” said a bench Judges PS Narasimha and Sandeep Mehta.

Factual background

The dispute between the appellant and respondent No. 1 was referred to arbitration. The maximum legal period for granting (12 months + 6 months) started on 09.10.2019 and would of course have expired on 09.04.2021.

However, before this period expired, India was hit by the Covid-19 pandemic. This caused the arbitral tribunal to suspend the proceedings, which eventually resumed in 2022. The hearing concluded on May 5, 2023 and the parties moved the Gujarat High Court under Section 29A(4) of the Act for an extension of time for the arbitration. court to make the ruling.

The High Court dismissed this request on 3.11.2023, holding that the extension was requested in August 2023 even though the maximum statutory period had expired on 09.04.2021. On 09.04.2021, no extension application was being processed and there was therefore a delay of more than 2 years.

Because the appellant felt aggrieved by this order, he went to the Supreme Court.

Appellant’s case

The appellant argued that in determining the date on which the tribunal’s mandate ended, the High Court should have excluded the period between March 15, 2020 and February 28, 2022, in view of the Supreme Court’s decisions in In Re: Knowledge of the extension of constraint. It prayed for a one-month extension of the arbitral tribunal’s mandate on the following grounds:

(i) the arbitral tribunal moved to online hearings in 2022, but had to repeatedly adjourn the proceedings at the request of counsel for the respondents because the panel from which the arbitrator was appointed had changed;

(ii) the dispute involved technical and legal issues, and the case file was extensive;

(iii) the delay was not attributable to the parties nor to the arbitral tribunal, which acted quickly and prudently;

(iv) the hearing was completed and only the verdict had to be announced, which led to hardship if the time for pronouncing the verdict was not extended.

Problems

(i) Can an application for extension be considered if it is submitted after the expiry of the arbitral tribunal’s mandate?

(ii) Should the High Court have granted the application for extension filed by the appellant?

Observations of the Court

The Supreme Court analyzed Section 29A(4) of the Act and noted that subsection (4) thereof enables a court to extend the mandate of the tribunal after the expiry of the statutory and renewable period of 18 months.

“The effect of this provision is that if the arbitral award is not made within twelve months from the time of the conclusion of oral arguments, which may be extended for a further six months by mutual consent of the parties, the mandate of the Tribunal shall terminate, unless the court extends it prior or later to the expiry of the period. The wording of subsection (4) clearly and expressly allows a court to extend the mandate of the Tribunal after the expiry of the statutory and renewable period of 18 months.

Reference was made to the decision of Rohan Builders (India) Pvt. Ltd v Berger Paints India Ltd.where it was held that Article 29A(4) recognizes the autonomy of the party to apply for extension even if the statutory period has expired. The termination of the mandate is conditional solely on the failure to submit a renewal application, and cannot be construed as a sign that the mandate cannot be renewed once it expires.

On the second issue, it was held that extension of time is a discretionary power of the courts which must be made on the basis of “sufficient cause”.

“Although the Statute includes party autonomy, even with regard to the conduct and conclusion of arbitration proceedings, there is a legal recognition of the power of the Court to intervene where necessary to ensure that the process for the resolution of the dispute is taken to a higher level. its logical end, if the circumstances justify it in the opinion of the Court. In this context, the Arbitration and Conciliation Act adopts the familiar language of statutes of limitations and provides that the Court may extend time if it finds that there is a statute of limitations. sufficient reason.”

Taking into account the fact that the pandemic had already started before the expiry of twelve months from the completion of the oral arguments in the present case, the Court excluded the period between 15.03.2020 and 28.02.2023. Further, in view of an agreement between the parties (dated May 5, 2023) to seek an extension of time by filing an application in the High Court, she was of the opinion that there was sufficient cause for an extension of time.

Conclusion

The appeal was allowed and the deadline for granting was extended to 31.12.2024.

Case Title: M/S AJAY PROTECH PVT. LTD. VS GENERAL MANAGER & ANR., SLP (C) NO. 2272 OF 2024

Citation: 2024 LiveLaw (SC) 915

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