M/S Rcc Infraventures Ltd & Ors. vs. M/S Dmi Finance Pvt Ltd & Ors.

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 18.09.2024
Judgment pronounced on: 19 .12.2024

+ O.M.P. (MISC.)(COMM.) 41/2024
M/S RCC INFRAVENTURES LTD & ORS .....Petitioners
Through: Ms Amrita Panda and Mr Udbhav
Gady, Advs.
Versus
M/S DMI FINANCE PVT LTD & ORS. .....Respondents
Through: Ms Geeta Luthra, Sr. Adv. with Ms
Shivani Luthra Lohiya, Ms Lalit
Mohini Bhat, Mr Nitin Saluja, Mr
Manas Aggarwal, Ms Ishita Soni, Mr
Pranya Madan, Ms Ishita Agarwal,
Ms Anirban Chanda, Mr B.S. Jakhar,
Mr Vikram Singh Jakhar, Mr Nihar
Dagar and Ms Varnika Sharma, Advs.
for R-1.
Mr Siddharth Khattar, Mr Divij
Andley and Mr Gaurav Parewa, Advs.
for R-2 and R-3 (through VC)


CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH

J U D G M E N T

: JASMEET SINGH, J

1. The present petition has been filed under section 29 A (4) and (5) of
the Arbitration and Conciliation Act, 1996 (“A&C Act”) read with
section 7 of the Commercial Courts Act, 2015 seeking extension of
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the mandate of the Learned Sole Arbitrator for a period of one year for
concluding the arbitral proceedings and passing the arbitral award.
Factual matrix
2. Petitioner Nos. 1 and 2 are group companies incorporated in the years
2011 and 2013 having their registered office at 14, Ground Floor,
Vipul Agora, MG Road, Gurugram-122002, Haryana and are involved
in the field of infrastructure development. Petitioner Nos. 3 and 4 are
the Managing Directors of the petitioner nos. 1 and 2 companies
respectively.
3. Respondent no. 1 is a Non-Banking Financial Company registered
with the Reserve Bank of India and is in the business of providing
loans and financial facilities to corporate entities in India.
4. Respondent no. 2 is a limited liability partnership incorporated under
the Limited Liability Partnership Act, 2008 in the month of July 2018.
It is stated that the respondent no. 2 was incorporated as a partnership
between the petitioner no. 1 company and its one partner namely, M/s
R.K. Infracorp Pvt. Ltd. for execution of fourlaning of 71 km of the
Haridwar – Nagina section of the NH-74.
5. Respondent no. 3 is a company incorporated under the Companies
Act, 2013 on 06.04.2015. It is stated that respondent no. 3 and one,
namely, Mr. Jatin Mehndiratta are the partners of the respondent no. 2.
On 05.01.2020, the respondent no. 3 company became the partner of
the respondent no. 2 with a majority stake of 99%, and is in charge of
the day-to-day affairs of the Respondent No. 2.
6. The disputes between the parties arise in relation to the Memorandum
of Understanding and Reconstitution Deed dated 05.01.2020 executed
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between the parties. The principle controversy between the parties is
that as per the petitioners, the petitioners were coerced to execute the
Memorandum of Understanding and the Reconstitution Deed dated
05.01.2020 which were executed to address the outstanding payments
owed to various vendors, including sub-contractors and suppliers, in
connection with the four laning of 71 km of the Haridwar – Nagina
section of the NH-74 .
7. Subsequently, the petitioners filed a petition under section 9 of the
A&C Act being O.M.P.(I) (COMM.) 249/2020 and vide order dated
02.11.2020, the parties were referred to arbitration of Justice R.
Banumathi (Retd.), Judge, Hon’ble Supreme Court of India.
Consequently, the first procedural hearing in the arbitration took place
on 27.11.2020.
8. On 15.09.2021, the parties were referred to mediation before the Delhi
High Court Mediation and Conciliation Centre and the same was
intimated to the Sole Arbitrator, however, the mediation between the
parties failed and in the month of the November 2022, the petitioner
approached the Sole Arbitrator to continue with the arbitral
proceedings.
9. The pleadings in the arbitral proceedings came to be completed on
18.05.2022 and the period of one year for concluding the arbitral
proceedings and passing of the arbitral award in terms of section 29 A
(1) of the A&C Act began from the said date. The said period of one
year expired on 17.05.2023. Thereafter, the parties by filing a joint
memo in terms of section 29 A (3) of the A&C Act extended the
mandate of the sole arbitrator by a further period of six months in
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terms of Section 29A (3) of the A&C Act and the mandate of the Sole
Arbitrator stood extended up to 31.08.2023.However, in the present
matter the parties have stated that the mandate of the Sole Arbitrator
was extended by a period of 6 months and stood extended to
16.11.2023.
10. It seems that there is some confusion with respect to when the
mandate of the learned sole arbitrator stood expired. The procedural
order dated 21.07.2023 contains both the dates i.e. 16.11.2023 and
31.08.2023. However, in order to avoid any confusion I am going by
the date mentioned in the joint memo filed by both the parties seeking
extension of the mandate of the sole arbitrator, whereby the parties
agreed to extend the mandate of the sole arbitrator till 31.08.2024
only.
11. In the order dated 21.07.2023, passed by the Sole Arbitrator, the
parties were directed to file an application under section 29 A (4) of
the A&C Act seeking extension of the mandate of the Sole Arbitrator.
The operative portion of the order dated 21.07.2023 reads as under:-
“3. Direction to file Application before the Court under
Section 29A(4) seeking extension of time: The matter is
pending for examination of the witnesses and number of
witnesses are to be examined it will take some time for
completion of the matter and passing of the Award. As the
proceedings in the matter is ongoing and the recording of
Evidence is yet to be completed/ Final Arguments are yet to
be heard and since voluminous documents and oral
Evidence is involved, the parties are further directed to file
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an Application before the High Court of Delhi as prescribed
under Section 29A (4) of the Act for extension of time for
passing the award for a period of one year.”
12. Hence the present petition.
Submissions on behalf of the petitioner
13. Ms. Panda, learned counsel for the petitioners primarily submits that
an application seeking extension of the mandate of the Arbitral
Tribunal can be filed even after the expiry of the mandate of the
Arbitral Tribunal. In this regard, she places reliance on Rohan
Builders (India) Private Limited v. Berger Paints India Limited 2024
SCC Online SC 2494.
14. She further states that the delay in the arbitral proceedings is because
the disputes raised in the arbitral proceedings require examination of
financial transactions of a highly complex nature, involving
submissions and analysis of expert reports. In addition, the records are
voluminous in nature. Further, multiple witnesses are required to be
examined with extensive oral evidence and cross examination.
15. She states that the delay in the arbitral proceedings was also because a
considerable amount of time was expended on account of the parties
being referred to mediation vide order dated 15.09.2021, after which
the arbitral proceedings were stalled and it is only after the mediation
failed, the arbitral proceedings commenced again in November 2022
i.e. after a period of one year. Furthermore, the entire computed fees
of the Sole Arbitrator with respect to the claims has also been paid by
the petitioners.
16. She further states that the respondent no. 1 had earlier also given its
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consent in terms of section 29 A (3) of the A&C Act for extension of
the mandate of the sole arbitrator and therefore, respondent No. 1 has
waived any objections to the delays in the arbitral proceedings prior to
July 2023.
17. She states that the respondent no. 1 has not made a single allegation
against the Sole Arbitrator, or in the manner in which the arbitral
proceedings have been conducted by the Sole Arbitrator. Hence, no
cause has been shown by respondent no. 1 for either termination of the
mandate of the sole arbitrator or reduction in fees payable to the
arbitrator.
18. Learned counsel in order to support her arguments has also placed
reliance on Wadia Techno-Engineering Services Ltd. v. Director
General of Married Accommodation Project , 2023 SCC Online Del
2990; Reliance Infrastructure Ltd. v. Madhyanchal Vidyut Vitran
Nigam Ltd. , 2023 SCC Online Del 4894; ATC Telecom
Infrastructure (P) Ltd. v. BSNL , 2023 SCC Online Del 7135; ATS
Infrastructure Ltd. v. Rasbehari Traders , 2023 SCC Online Del
8645l; PSA Protech & Infralogistics (P) Ltd. v. Food Corpn. of India
2024 SCC Online Del 5543; KMP Expressways Ltd. v. IDBI Bank
Ltd ., 2024 SCC Online Del 2617 and Power Mech Projects Ltd. v.
Doosan Power Systems India (P) Ltd ., 2024 SCC OnLine Del 4412.
Submissions on behalf of the respondent No. 1
19. Ms. Luthra, learned senior counsel vehemently opposes the
contentions raised by the petitioners and states that the extension of
the mandate of the Arbitral Tribunal should not be granted
mechanically and the discretion of the court to grant such extension
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should only be exercised when there is ‘sufficient cause’. In this
regard, learned senior counsel places reliance on Rohan Builders
(supra) and more particularly para 15 of the said judgment which
reads as under:-
“15...... However, it is apposite to note that under Section
29A(5), the power of the court to extend the time is to be
exercised only in cases where there is sufficient cause for
such extension. Such extension is not granted mechanically
on filing of the application. The judicial discretion of the
court in terms of the enactment acts as a deterrent against
any party abusing the process of law or espousing a
frivolous or vexatious application. Further, the court can
impose terms and conditions while granting an extension.
Delay, even on the part of the arbitral tribunal, is not
countenanced.....”
20. She states that as per the joint memo filed seeking extension of the
mandate of the sole arbitrator in terms of section 29 A (3) of the A&C
Act, the mandate of the sole arbitrator stood extended upto 31.08.2023
and the present petition has been filed after an inordinate delay of 4
months.
21. She further submits that vide order dated 21.07.2023, the sole
arbitrator had directed the parties to file an application seeking
extension of the mandate as the matter was pending for examination
of witnesses and the record was voluminous, however, the petitioners
did not file an application for extension of the mandate of the sole
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arbitrator till 12.01.2024 and the petitioners have not given any
explanation for such delay.
22. She states that the delay in the arbitral proceedings are attributable to
the petitioners. Further, the petitioners have not explained the delay of
4 months in filing the present petition, despite clear directions given
by the Sole Arbitrator in terms of the order dated 21.07.2023. Hence,
the present petition should be dismissed.
Analysis

23. I have heard learned counsel for the parties.
24. It will be pertinent to mention the few relevant dates:-

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25. It is the case of the respondents that the extension under Section 29A
of the A&C Act should not be granted mechanically but only in cases,
where sufficient cause of delay in the arbitral proceedings has been
shown.
26. The only issue before me is that whether the petitioner has shown
sufficient cause for delay and whether the arbitral proceedings have
been delayed inordinately on account of the acts of the petitioner. In
this regard, reliance is placed upon the judgment laid down by the
Hon’ble Supreme Court in Rohan Builders (supra) and more
particularly paras 13 and 14 of the said judgment wherein the Hon’ble
Supreme court inter alia held as under:-
“13. An interpretive process must recognize the goal or
purpose of the legal text. Section 29A intends to ensure the
timely completion of arbitral proceedings while allowing
courts the flexibility to grant extensions when warranted.
Prescribing a limitation period, unless clearly stated in
words or necessary, should not be accepted. Bar by
limitation has penal and fatal consequences. This Court in
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North Eastern Chemicals Industries (P) Ltd. v. Ashok Paper
Mill (Assam) Ltd.observed:
“When no limitation stands prescribed it would be
inappropriate for a Court to supplant the legislature's
wisdom by its own and provide a limitation, more so in
accordance with what it believes to be the appropriate
period.”
Courts should be wary of prescribing a specific period of
limitation in cases where the legislature has refrained from
doing so. If we give a narrow and restrictive meaning to
Section 29A (4), we would be indulging in judicial
legislation by incorporating a negative stipulation of a bar
of limitation, which has a severe annulling effect. Such an
interpretation will add words to widen the scope of
legislation and amount to modification or rewriting of the
statute. If the legislature intended such an outcome, it could
have stated in the statute that - “the Court may extend the
period only if the application is filed before the expiry of the
mandate of the arbitrator, not after”. Indeed, there would
have been no need to use the phrase “after the expiry of the
period” in the statute. In other words, a rigid interpretation
would amount to legislating and prescribing a limitation
period for filing an application under Section 29A, when the
section does not conspicuously so state. Rather, the
expression and intent of the provision are to the contrary.
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14. In our opinion, a restrictive interpretation would lead
to rigour, impediments and complexities. A party would
have to rush to the court even when the period of arbitral
mandate of twelve months has not expired, notwithstanding
the possibility of a consent-based extension of six months
under Section 29A (3). Narrow interpretation presents an
additional challenge by relegating a faultless party to a
fresh reference or appointment of an arbitrator under the A
& C Act, thereby impeding arbitration rather than
facilitating it. The legislature vide the 2015 Amendment
envisions arbitration as a litigant-centric process by
expediting disposal of cases and reducing the cost of
litigation. A narrow interpretation will be
counterproductive. The intention is appropriately captured
in the following observations made in the 176th Report of
the Law Commission of India:
xxx xxx xxx
“2.21.1 (…) But the omission of the provision for
extension of time and therefore the absence of any time
limit has given rise to another problem, namely, that
awards are getting delayed before the arbitral tribunal
even under the 1996 Act. One view is that this is on
account of the absence of a provision as to time limit
for passing an award.
xxx xxx xxx
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2.21.3 (…) The time limit can be more realistic subject
to extension only by the court. Delays ranging from
five years to even fourteen years in a single arbitration
have come to the Commission's notice. The Supreme
Court of India has also referred to these delays of the
arbitral tribunal. The point here is that these delays
are occurring even in cases where there is no court
intervention during the arbitral process. The removal
of the time limit is having its own adverse
consequences. There can be a provision for early
disposal of the applications for extension, if that is one
of the reasons for omitting a provision prescribing a
time limit, say one month. Parties can be permitted to
extend time by one year. Pending the application for
extension, we propose to allow the arbitration
proceedings to continue.(…)
xxx xxx xxx
2.21.4 It is, therefore, proposed to implement the
recommendation made in the 76th Report of the Law
Commission with the modification that an award must
be passed at least within one year of the arbitrators
entering on the reference. The initial period will be one
year. Thereafter, parties can, by consent, extend the
period upto a maximum of another one year. Beyond
the one year plus the period agreed to by mutual
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consent, the court will have to grant extension.
Applications for extension are to be disposed of within
one month. While granting extension, the court may
impose costs and also indicate the future procedure to
be followed by the tribunal. There will, therefore, be a
further proviso, that further extension beyond the
period stated above should be granted by the Court.
We are not inclined to suggest a cap on the power of
extension as recommended by the Law Commission
earlier. There may be cases where the court feels that
more than 24 months is necessary. It can be left to the
court to fix an upper limit. It must be provided that
beyond 24 months, neither the parties by consent, nor
the arbitral tribunal could extend the period. The
court's order will be necessary in this regard. But in
order to see that delay in disposal of extension
applications does not hamper arbitration, we propose
to allow arbitration to continue pending disposal of the
application.
2.21.5 One other important aspect here is that if there
is a delay beyond the initial one year and the period
agreed to by the parties (with an upper of another one
year) and also any period of extension granted by the
Court, there is no point in terminating the arbitration
proceedings. We propose it as they should be
continued till award is passed. Such a termination may
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indeed result in waste of time and money for the parties
after lot of evidence is led. In fact, if the proceedings
were to terminate and the claimant is to file a separate
suit, it will even become necessary to exclude the
period spent in arbitration proceedings, if he was not
at fault, by amending sec. 43 (5) to cover such a
situation. But the Commission is of the view that there
is a better solution to the problem.
The Commission, therefore, proposes to see that an
arbitral award is ultimately passed even if the above said
delays have taken place. In order that there is no further
delay, the Commission proposes that after the period of
initial one year and the further period agreed to by the
parties (subject to a maximum of one year) is over, the
arbitration proceedings will nearly stand suspended and
will get revived as soon as any party to the proceedings
files an application in the Court for extension of time. In
case none of the parties files an application, even then the
arbitral tribunal may seek an extension from the Court.
From the moment the application is filed, the arbitration
proceedings can be continued. When the Court takes up
the application for extension, it shall grant extension
subject to any order as to costs and it shall fix up the time
schedule for the future procedure before the arbitral
tribunal. It will initially pass an order granting extension
of time and fixing the time frame before the arbitral
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tribunal and will continue to pass further orders till time
the award is passed. This procedure will ensure that
ultimately an award is passed.”
27. The Hon’ble Supreme Court in the aforesaid judgment has relied upon
th
the 176 Report of the Law Commission of India, wherein it was held
that the termination of the mandate of the Arbitral Tribunal results in
waste of time, resources and money for the parties. The same is
predicated on the fact that the parties and the Arbitral Tribunal have
invested a lot of time, effort and energy in the arbitral proceedings.
The essence of the A&C Act is a litigant-centric process to expedite
the disposal of cases and reducing the cost of litigation.
28. In the present case, the mandate of the Sole Arbitrator terminated on
31.08.2023 and the present petition was filed on 12.01.2024 i.e. after a
period of four and a half months.
29. To my mind, the said delay of four and a half months in filing the
present petition is not an inordinate delay to direct that the mandate of
the Sole Arbitrator should not be extended or a substitute arbitrator
should be appointed.
30. The pleadings in the arbitral proceedings have already been completed
and the Claimants i.e. the petitioners have started its evidence. In this
regard, my attention has been drawn to order dated 19.09.2023,
whereby CW-1 is being examined. Further, the entire computed fees
of the learned sole arbitrator with respect to the claims has been paid
by the petitioners.
31. For the said reasons, the petition is allowed and the mandate of the
Sole Arbitrator is extended by a period of 1 year from the date of this
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judgment.
32. The period from 31.08.2023 till today stands regularised.
33. The petition is disposed of accordingly.



JASMEET SINGH, J
priyesh
DECEMBER 19,2024/




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