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Consequence of No Consent in Extension of Mandate of Arbitral Tribunal under Section 29 of The Arbitration and Conciliation Act, 1996

Article by Ankur Mishra & Akash Singh

Introduction

Under Section 29A of the Arbitration and Conciliation Act, 1996 (“Act”), awards 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. These stipulations as to timelines for completion of arbitral proceedings are intended to sensitize the parties and the Arbitral Tribunal to aim for culmination of the arbitration proceedings expeditiously.[1] In cases where award is not made within the stipulated period of twelve months, Section 29A of the Act prescribes two modes for extension of the mandate of the arbitral tribunal. Firstly, the parties under Section 29A(3) of the Act may with consent extend the period for making of award by a further period not exceeding six months.  Secondly, the Court may under Section 29(4) read with Section 29(5) of the Act either prior to or after the expiry of the stipulated time period extend the time period within which award is required to be made by the arbitral tribunal. The word ‘extend’ means to enlarge, expand, lengthen, prolong, to carry out further than its original limit.[2] Such extension of mandate of the arbitral tribunal by the Court is on application by 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.

In a recent judgment titled “Larsen and Toubro Limited v. IIC Limited, (“L&T v. IIC”) Hon’ble Delhi High Court was called upon to decide the requirement of consent by the parties in exercise of power by the Court to extend the time period for making arbitral award under Section 29A(4) of the Act. In L&T v. IIC, party to the arbitration i.e. IIC had undergone insolvency proceedings and liquidator had been appointed towards the same. L&T had sought the consent of the IICL’s Liquidator for a six-month extension of the Arbitral Tribunal’s mandate under Section 29A(3) of the Act. However, no such consent was granted by IICL’s Liquidators. Being aggrieved, L&T had approached the Hon’ble Delhi High Court seeking extension of the mandate of the Tribunal in terms of Section 29A(4) of the Act. The Hon’ble Delhi High Court has ruled that the Court is empowered under Section 29A(4) of the Act to extend the mandate of the arbitral tribunal even in absence of consent by the parties to the arbitration. Accordingly, the Hon’ble Delhi High Court extended the mandate of the Arbitral Tribunal.

Difference between extension of mandate under Section 29A(3) and Section 29(4) of the Act

From a contextual reading of the sections, it is evident that the remedies under Section 29A of the Act for extension of time period, namely Section 29A(3) and Section 29A(4) of the Act, have their own sphere and does not control the meaning and the exercise of the other. At the outset, Section 29A(3) of the Act allows the parties to extend the mandate of arbitral tribunal “for a further period not exceeding six months” meaning that said act of extension under Sub-section (3) is required to be executed during the subsistence of the twelve months. Whereas, the Court may extend the time period under Section 29A(4) either prior to or after the expiry of the time period stipulated in Section 29A(1) or extended period under Section 29A(3) of the Act. Thus, the sole remedy for extension of mandate after expiry of the period specified in Section 29A(1) of the Act is by way of an application before the Court under Section 29A(4) of the Act. As for extension of time before expiry of the period of twelve months stipulated in Section 29A(1), Section 29A provides that extension of time period by parties under Section 29A(3) can only be taken before application is made under Section 29A(4) of the Act seeking extension of period by the Court. This is borne from the difference in the wordings of Section 29A(3) and Section 29A(4) wherein Section 29A(3) provides for extension of period specified in Section 29A(1) i.e. twelve months while Section 29A(4) provides for extension of period specified in sub-section (1) or the extended period specified under sub-section (3). In Hiran Valiiyakkil Lal v. Vineeth M.V.[3], Hon’ble Kerala High Court negatived the contention that the mandate of the arbitrator can be extended by the Court under sub-section (4) only in cases where the period for passing the award by the arbitral tribunal is extended for a period not exceeding six month by the parties, by consent, as provided under subsection (3) of Section 29A of the Act.

Scope of Power of Court to extend the mandate under Section 29A(4) of the Act

In L&T vs. IIC, the Hon’ble Delhi High Court reiterated that Section 29A(4) of the Act contemplates two situations: where the mandate is not extended and the time of 12 months has expired as per sub-section (1) or where the mandate has been extended for a further six months by consent of parties under Section 29A(3) of the Act. The Hon’ble Delhi High Court ruled that in either of the two situations, the Court has the power to extend the mandate of the Arbitral Tribunal. The Hon’ble Delhi High Court also ruled that there is no limitation on the power of the Court to extend the mandate of the Arbitral Tribunal on the basis that consent for extension of mandate has not been given by one of the parties to the arbitration. However, the exercise of power to extend the mandate is subject the arbitral proceedings being pending at the time of the application.[4]

The Hon’ble Delhi High Court has observed that there can be many instances where a party may not be able to give its consent for extension of the mandate of the arbitral tribunal. The Court under Section 29A(4) of the Act is not powerless to extend the mandate of the arbitral tribunal on mere non-giving of the consent by the parties.  In Satnam Global Infrasprojects Ltd v. BHEL,[5] it was held by the Hon’ble Calcutta High Court that the timelines under Section 29A of the Act cast a responsibility on the parties not only to obtain consent from the other; but also on the other party to communicate the refusal (to give consent) during the subsistence of the mandate. Thus, one party cannot be held responsible for slipping of the timelines particularly where the other party does not communicate a clear and unequivocal “no consent”.

Sufficient Cause and not Consent: Ingredient for Extension of Mandate under Section 29A(4) of the Act

Under Section 29A(4) read with Section 29A(5) of the Act, the mandate of the arbitral tribunal may be extended by the Court ‘only’ for sufficient cause and on terms and conditions imposed by the Court. In Wadia Techno-Engineering Services Limited,[6] (“Wadia”) the Hon’ble Delhi High Court has observed that to read the requirement of consent in Section 29A(4) of the Act would make the requirement of sufficient cause irrelevant and the adjudication by the Court unnecessary. In H.P. Singh[7], the Hon’ble Jammu & Kashmir High Court observed that the power conferred to the Court for extension of time, obviously, it would require application of judicial mind which is an attribute of a Court and not required nor contemplated when the extension of time is made by the parties by consent. Thus, before directing any extension of the period under Sub-section (4), the Court has to be satisfied with the genuineness and sufficiency of the cause for extension of period put forth by the applicant and the Court may allow extension by imposing such terms and conditions as the Court may deem fit. Thus, it was held in H.P. Singh that, extension of time by the Court under Section 29(A)(4) of the Act can be done by application of judicial mind, which invariably would require that the Court has to be satisfied with the sufficiency of cause for extension of the mandate of the arbitral tribunal. The Court under Section 29A(4) of the Act is not bound to grant extension of mandate of the arbitral tribunal, if the cause projected is frivolous, vexatious, belated and hopelessly time barred or merely to prolong the arbitral process unnecessarily. The Courts under Section 29A of the Act are required to determine the attributability of delay[8] and whether parties have diligently proceed with their claims. In most cases, the need for extension of mandate arises after applications for amendment[9], challenge to jurisdiction and extension of time for filing of Statement of Claim or Statement of Defense due to voluminous documentation[10].

Given that sufficient cause is a common phrase used under different statutes, its interpretation has to be guided by the import and scope of enquiry under Section 29A of the Act. The scope of proceedings under Section 29A of the Act is limited to what is sufficient cause for extension of mandate of the arbitral tribunal vis-à-vis expeditious culmination of arbitral proceedings. Correspondingly, the only ground for removal of the Arbitrator under Section 29A of the Act can be the failure of the Arbitrator to proceed expeditiously in the adjudication process.[11] Sufficient Cause has been defined as the presence of legal and adequate reasons as may be necessary to answer the purpose intended. The sufficient cause should be such as it would persuade the court, in exercise of its judicial discretion, to treat the delay as an excusable one.[12] It means a cause for which a party could not be blamed for his absence. A party should not have acted with negligence or lack of bona fides.[13] The expression “sufficient cause” necessarily implies an element of sincerity, bona fide and reasonableness.[14]

Conclusion

A recourse to Court under Section 29A for the purpose of extension of mandate is a common occurrence for arbitration proceedings in India. The judgment of Hon’ble Delhi High Court in L&T vs. IIC has clarified the difference between extension of mandate under Section 29A(3) and Section 29A(4) of the Act and that the consent of the parties or lack thereof would not impede the power of the Court to extend the mandate of the arbitral tribunal in case the Court is satisfied that sufficient cause exists for the same. The judgment offers clarity in circumstances where consent for extension of mandate of arbitral tribunal is withheld or denied by one party. Parties are thus advised to apprise themselves in advance as to whether the other party is capable of giving consent owing to reasons such as insolvency proceedings etc and make arrangements for approaching the Court for extension of mandate under Section 29A(4) of the Act.

[1] NCC Ltd v. Union of India, 2018 SCC OnLine Del 12699
[2] Mitra’s Legal and Commercial Dictionary, 6th Edition
[3] Hiran Valiiyakkil Lal v. Vineeth M.V. and Others, 2023 SCC OnLine Ker 5151
[4] Powergrid Corporation of India Limited v. SPML Infra Limited, 2023 SCC OnLine Del 8324. Also See Suryadev Alloys and Power Pvt Ltd v. Govindraja Textiles Pvt Ltd, 2020 SCC OnLine Mad 7858.
[5] Satnam Global Infraprojects Limited v. Bharat Heavy Electricals Limited, 2023 SCC OnLine Cal 4668
[6] Wadia Techno-Engineering Services Limited (2023 SCC OnLine Del 2990)
[7] H.P. Singh v. G. M. Northern Railways and Others, 2023 SCC OnLine J&K 1255.
[8] Puneet solanki and another v. Sapsi electronics pvt ltd, 2018 SCC OnLine Del 10619
[9] ASF insignia Sez P. ltd v. Punj Lloyd Ltd, 2017 SCConline Del 10124
[10] International Trenching Pvt. Ltd v. Power Grid Corporation of India Ltd 2017 SCC OnLine Del 10801
[11] NCC Ltd v. Union of India, 2018 SCC OnLine Del 12699
[12] Balwant Singh v. Jagdish Singh, (2010) 8 SCC 685
[13] Basawaraj v. Land Acquisition Officer, (2013) 14 SCC 81
[14] Sankaran Pillai v. V.P. Venuguduswami, (1999) 6 SCC 396
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