While extending the time limit for an arbitral tribunal to pass its award, the Supreme Court has recently observed that extension may be permitted even after the statutory time limit has expired and the expression “sufficient cause” under Section 29A of the Arbitration and Conciliation Act should take the color of the underlying objective of the arbitration process (i.e. to facilitate effective resolution of disputes).

“The meaning of “sufficient cause” for extending the time necessary to render an award must be influenced by the underlying objective of the arbitration process. The primary objective of making an arbitral award is to resolve disputes through the agreed dispute resolution mechanism, as contracted by the parties. Therefore, the term “sufficient cause” must be interpreted in the context of facilitating effective dispute resolution. said a bench of Justices 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 the award (12 months + 6 months) began on 09.10.2019 and would naturally have expired on 09.04.2021.

However, before this period expired, India was hit by the Covid-19 pandemic. This led the arbitral tribunal to adjourn the proceedings, which finally resumed in 2022. The hearing concluded on 05.05.2023 and the parties applied to the Gujarat High Court, under Section 29A (4 ) of the law, an extension of the deadline so that arbitration is possible. court to render the sentence.

The High Court rejected this request on 03.11.2023, finding that the extension had been requested in August 2023, even though the maximum legal deadline expired on 09.04.2021. No extension request was in progress as of 04/09/2021 and there was therefore a delay of more than 2 years.

Aggrieved by this order, the appellant approached the Supreme Court.

Appellant’s case

The petitioner contended that while determining the date on which the term of the tribunal ended, the High Court should have excluded the period between 15.03.2020 and 28.02.2022, keeping in view the orders of the Supreme Court in the case In Re: Knowledge of the extension of the prescription. She requested a one-month extension of the arbitral tribunal’s mandate for the following reasons:

(i) the Arbitral Tribunal held online hearings in 2022, but had to adjourn the proceedings several times at the request of counsel for the respondents, as the panel from which the arbitrator was appointed had been changed;

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

(iii) the delay is attributable neither to the parties nor to the arbitral tribunal, which acted quickly and prudently;

(iv) the hearing was complete and only the sentence was to be declared, which would cause difficulties if the time limit for rendering the sentence was not extended.

Problems

(i) Can a request for extension be admissible if filed after the expiration of the mandate of the arbitral tribunal?

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

Court observations

The Supreme Court analyzed Section 29A(4) of the Act and observed that sub-section (4) thereof enables a court to extend the term of the court after the expiry of the statutory and extendable period of 18 month.

“The effect of this provision is that if the arbitral award is not rendered within 12 months from the end of the pleadings, extendable by a further 6 months by mutual consent of the parties, the mandate of the Tribunal will end, unless the court either before or after the expiration of the time limit, extends it The wording of subsection (4) clearly and explicitly permits a court to extend the term of the Tribunal after the expiration of the statutory and extendable time limit of 18. month.

Reference was made to the decision rendered in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd.where it was held that section 29A(4) recognizes the autonomy of the parties to make an application for an extension even if the statutory period has expired. Termination of the mandate is only conditional on the non-filing of a request for extension and cannot be interpreted as meaning that the mandate cannot be extended once expired.

On the second question, some have considered that the extension of time is a discretionary power of the courts which must be exercised on the basis of “sufficient grounds”.

“Although the statute incorporates party autonomy even with respect to the conduct and conclusion of arbitral proceedings, there is statutory recognition of the power of the Court to intervene whenever it is necessary to ensure that the process resolution of the dispute is carried out to its logical end, if in the Court’s opinion, the circumstances justify it. It is in this context that the Arbitration and Conciliation Act adopts the well-known language of the statutes of limitation and. provides that the Court may extend the time limit if she finds that there is sufficient cause.”

Taking note of the fact that the pandemic had started even before the expiration of a period of 12 months from the end of the proceedings in the present case, the Court excluded the period between 03.15.2020 and 02.28.2023 . Further, in view of an agreement between the parties (dated 05.05.2023) to seek an extension of the time limit by filing an application before the High Court, he held that there was sufficient ground to justify an extension of the time limit. deadline.

Conclusion

The appeal was upheld and the deadline for rendering the award was extended until 12/31/2024.

File Title: M/S AJAY PROTECH PVT. LTD. AGAINST GENERAL DIRECTOR AND ANR., SLP (C) NO. 2272 FROM 2024

Citation: 2024 LiveLaw (SC) 915

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