Arbitration Award Time Limit: Supreme Court Clarifies Extension Under Section 29A(4)

The case of M/S Ajay Protech Pvt. Ltd. vs. General Manager & Anr. is a crucial ruling regarding the extension of the mandate of an arbitral tribunal under Section 29A(4) of the Arbitration and Conciliation Act, 1996. The Supreme Court ruled that courts have the power to extend the time for arbitration awards even after the mandate has technically expired. The judgment provides clarity on the interpretation of ‘sufficient cause’ for granting such an extension.

Background of the Case

The appellant, M/S Ajay Protech Pvt. Ltd., entered into a works contract with the respondent, General Manager. When disputes arose, the appellant invoked arbitration on February 12, 2018, and the High Court appointed a sole arbitrator in orders dated February 8, 2019, and February 15, 2019.

The arbitration process officially began with the first meeting on June 24, 2019. The statutory 12-month period for making the award under Section 29A(1) started from the completion of pleadings on October 9, 2019. The period was extendable by six months through mutual consent under Section 29A(3), taking the final deadline to April 9, 2021. However, due to the COVID-19 pandemic, arbitration proceedings faced delays.

Legal Issues and Arguments

Appellant’s Arguments

The COVID-19 pandemic had disrupted proceedings, leading to unavoidable delays.
The Supreme Court’s decision in Re: Cognizance for Extension of Limitation excluded the period from March 15, 2020, to February 28, 2022 from the calculation of limitation.
The arbitration hearings resumed in 2022, and arguments concluded on May 5, 2023.
Both parties agreed before the arbitral tribunal to seek an extension of time for making the award.
The appellant filed an application under Section 29A(4) in August 2023, seeking an extension of time.

Respondent’s Arguments

Even considering the COVID-related extensions, the arbitration mandate had expired on October 31, 2022.
The appellant delayed filing the extension application by nine months.
As per Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd., an extension application should be filed before the mandate expires.

High Court’s Decision

The Gujarat High Court dismissed the application for extension, stating:

The statutory period had expired on April 9, 2021, and even after COVID exclusions, the deadline ended on October 31, 2022.
The extension application was filed after 2 years and 4 months, without justification for the delay.
The arbitral tribunal’s mandate had already expired, so the extension application was ‘misconceived.’

Supreme Court’s Analysis

1. Can an Extension Application Be Filed After the Expiry of the Mandate?

The Court ruled that an application under Section 29A(4) can be filed even after the expiry of the arbitral tribunal’s mandate. The judgment in Rohan Builders (India) Pvt. Ltd. supports this interpretation:

“Section 29A(4) explicitly empowers the court to extend the period for making an award even after the expiry of the statutory and extendable period. The termination of the mandate is conditional upon the non-filing of an extension application.”

2. Was the High Court’s Calculation of Delay Correct?

The Supreme Court noted that the High Court’s calculation was incorrect. The exclusion of the COVID-affected period (March 15, 2020 – February 28, 2022) meant that the statutory deadline should have been adjusted accordingly. The arbitration deadline should have been March 31, 2023, not October 31, 2022.

3. Was There ‘Sufficient Cause’ for an Extension?

The Court considered several factors:

The pandemic caused unavoidable delays.
The parties had agreed before the arbitral tribunal to seek an extension.
The arbitration hearing was already concluded, and only the award was pending.
Delays were not solely attributable to the appellant.

The Court ruled that there was ‘sufficient cause’ for an extension and that granting it would ensure completion of the arbitration rather than forcing a fresh dispute resolution process.

Supreme Court’s Verdict

The Supreme Court set aside the Gujarat High Court’s order and ruled:

The application under Section 29A(4) was valid even though it was filed after the mandate’s expiry.
There was sufficient cause to grant an extension.
The time for making the arbitral award was extended until December 31, 2024.

The Court emphasized:

“Efficiency in the conduct of arbitral proceedings is integral to the effectiveness of the dispute resolution mechanism. A rigid interpretation would be counterproductive to the legislative intent of the Arbitration Act.”

Conclusion

This ruling is a significant precedent for arbitration cases in India. It clarifies that:

Court-ordered extensions under Section 29A(4) can be granted even after the arbitral tribunal’s mandate has expired.
Delays caused by external factors like the COVID-19 pandemic constitute ‘sufficient cause’ for extending arbitration deadlines.
Ensuring the completion of arbitration proceedings is preferable to forcing parties into fresh disputes.

The decision reinforces the judiciary’s pro-arbitration stance, ensuring that procedural delays do not derail arbitration awards.

Petitioner Name: M/S Ajay Protech Pvt. Ltd..
Respondent Name: General Manager & Anr..
Judgment By: Justice Pamidighantam Sri Narasimha, Justice Sandeep Mehta.
Place Of Incident: Gujarat.
Judgment Date: 22-11-2024.

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