Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Date of decision: 13 NOVEMBER, 2024
IN THE MATTER OF:
+ O.M.P.(MISC.)(COMM.) 695/2024
OVINGTON FINANCE PVT. LTD. .....Petitioner
Through: Mr. Aniket Rajput, Advocate
versus
BINDIYA NAGAR .....Respondent
Through: Mr. Rahul Yadav, Advocate
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT (ORAL)
1. This is a petition under Section 29A (5) of the Arbitration &
Conciliation Act, 1996 on behalf of the Petitioner seeking extension of time
for making an arbitral award by the learned Arbitrator.
2. The facts of the case reveal that the Petitioner had entered into a Loan
Agreement with the Respondent on 20.11.2018 for the sum of Rs.20 lakhs.
Under the loan agreement, a sum of Rs.20 lakhs was disbursed to the
Respondent by the Petitioner and repayment was to be made in terms of the
loan agreement.
3. Since the Respondent did not adhere to the terms of repayment of the
loan amount, the loan agreement was terminated by notice dated 02.03.2022.
It is stated that a sum of Rs. 17,58,186/- was due and payable by the
Respondent till the termination of the agreement.
4. A legal notice was issued to the Respondent but the Respondent did
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not make the payment which resulted in the Petitioner approaching this
Court by filing a petition under Section 11 of the Arbitration & Conciliation
Act seeking appointment of an Arbitrator. This Court vide Order dated
03.03.2023 in ARB.P. 810/2022 appointed Mr. Hardik Rupal, Advocate, as
the Sole Arbitrator to adjudicate the disputes between the parties.
5. The matter is proceeding before the learned Arbitrator. Material on
record indicates that on 25.07.2024, the Tribunal was to convene to cross-
examine CW-1. However, the matter was adjourned. On 11.07.2024, a
request was made by the Claimant to examine additional witness, namely,
Prahlad Singh Chauhan, Director & General Manager of the company.
6. Learned Counsel for the Respondent on 02.08.2024 filed an
application before the Arbitral Tribunal challenging the mandate of the
Tribunal for passing an award beyond the statutory time limit stating that
one year period under Section 29A (1) of the Arbitration & Conciliation Act
was over and therefore, the mandate of the Arbitrator has to be terminated.
7. On 06.08.2024, the learned Arbitration terminated the proceedings for
want of consent by the Respondent to continue with the arbitration
proceedings and allowed the application of the Respondent.
8. Learned Counsel for the Petitioner/Claimant stated that the Petitioner
would be moving an application for extension of mandate of the Arbitral
Tribunal and the learned Arbitrator requested the parties to inform the
decision of this Court when the same is passed. The Petitioner has
approached this Court by filing the instant petition under Section 29A (5) of
the Arbitration & Conciliation Act, 1996 for extending the mandate of the
Arbitral Tribunal for a period of one year.
9. On 09.09.2024, this Court issued notice in the matter. On 23.09.2024,
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learned Counsel for the Respondent sought some more time to file the reply.
10. Learned Counsel for the Respondent raised a preliminary objection
stating that since the amount that is claimed is less than Rs.2 crore, this
Court will not have the jurisdiction to entertain this application under
Section 29A(5) of the Arbitration & Conciliation Act.
11. Learned Counsel for the Respondent states that under Section 2(1)(e)
of the Arbitration & Conciliation Act, in case of arbitration other than
international commercial arbitration, the disputes can only be adjudicated by
the principal civil court of original jurisdiction in a district having the
jurisdiction to decide the question forming the subject matter of the
arbitration and this Court does not have the pecuniary jurisdiction to
entertain the application.
12. Learned Counsel for the Respondent places reliance on the Judgment
passed by the Andhra Pradesh High Court in in Dr. V V Subbarao v. Dr.
Appa Rao Mukkamala & Ors., 2024 SCC OnLine AP 1668, which has
taken a view that after the appointment of an Arbitral Tribunal, the High
Court becomes functus officio and the mandate can be only extended by the
Court as defined under Section 2(1)(e) of the Arbitration & Conciliation
Act. Learned Counsel for the Respondent also places reliance on the
Judgment passed by the Apex Court in State of West Bengal & Ors. v.
Associated Contractors, (2015) 1 SCC 32, which is a judgment which has
been passed in the context of Section 9 of the Arbitration & Conciliation
Act.
13. Per contra , learned Counsel for the Petitioner, contends that the issue
has been settled by a Coordinate Bench of this Court in DDA v. Tara Chand
Sumit Construction Company, 2020 SCC OnLine Del 2501, wherein this
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Court has taken a view that if the appointment is made by a High Court, then
only the High Court will have the jurisdiction to entertain the application for
extending the mandate of the Arbitral Tribunal.
14. Heard learned Counsel for the parties and perused the material on
record.
15. In the present case, the Arbitrator has been appointed by this Court
under Section 11(6) of the Arbitration & Conciliation Act. The contention of
the learned Counsel for the Respondent is that an arbitrator can be appointed
only by an High Court in case of domestic arbitration or by the Hon’ble
Supreme Court in case of international arbitration but subsequent to the
appointment of arbitrator all other application can be dealt with by the Court
of Competent Jurisdiction under Section 2(1)(e) of the Arbitration &
Conciliation Act, 1996.
16. Learned Counsel for the Respondent relies on Section 2(1)(e) of the
Arbitration & Conciliation Act, 1996. Section 2(1)(e) of the Arbitration &
Conciliation Act, 1996 defines 'Court'. Section 2(1)(e) (i) reads as under:-
" 2.(1) (e) “Court” means—
(i) in the case of an arbitration other than international
commercial arbitration, the principal civil court of original
jurisdiction in a district, and includes the High Court in
exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter
of the arbitration if the same had been the subject-matter of a
suit, but does not include any civil court of a grade inferior to
such principal civil court, or any Court of Small Causes ;"
He, therefore, states that since the claim is less than Rs. 2 crores, the
Petitioner has to approach the Court having the pecuniary jurisdiction to
entertain the dispute.
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17. Undoubtedly, the argument raised by the learned Counsel for the
Respondent is an attractive one and the Respondent is supported by the
Judgment passed the Andhra Pradesh High Court in Dr. V V Subbarao v.
Dr. Appa Rao Mukkamala & Ors., 2024 SCC OnLine AP 1668 . However,
this Court is unable to agree with the Judgment of the Andhra Pradesh High
Court for the reason that if the argument of the learned Counsel for the
Respondent is accepted, then there are chances of conflict between the High
Court and the concerned Civil Court of original jurisdiction wherein this
Court would appoint an Arbitrator under Section 11 of the Arbitration &
Conciliation Act, whereas the concerned Civil Court of original jurisdiction
under Section 2(1)(e) will have jurisdiction to substitute an Arbitrator which
will go against the scheme of the Act, a fact not considered by the Andhra
Pradesh High Court.
18. Section 29A(4), (5), (6) of the Arbitration Act reads as under:
" 29A.Time limit for arbitral award.--
.....
(4) If the award is not made within the period specified
in sub-section (1) or the extended period specified
under sub-section (3), the mandate of the arbitrator(s)
shall terminate unless the Court has, either prior to or
after the expiry of the period so specified, extended the
period:
Provided that while extending the period under this
sub-section, if the Court finds that the proceedings
have been delayed for the reasons attributable to the
arbitral tribunal, then, it may order reduction of fees of
arbitrator(s) by not exceeding five per cent. for each
month of such delay.
[Provided further that where an application under sub-
section (5) is pending, the mandate of the arbitrator
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shall continue till the disposal of the said application:
Provided also that the arbitrator shall be given an
opportunity of being heard before the fees is reduced.]
(5) The extension of period referred to in sub-section
(4) may be on the application of 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.
(6) While extending the period referred to in sub-
section (4), it shall be open to the Court to substitute
one or all of the arbitrators and if one or all of the
arbitrators are substituted, the arbitral proceedings
shall continue from the stage already reached and on
the basis of the evidence and material already on
record, and the arbitrator(s) appointed under this
section shall be deemed to have received the said
evidence and material."
19. On an application for extension of mandate, the Court can either
extend the mandate or refuse to extend the mandate. Similarly, under
Section 29A(6) of the Arbitration Act the Court can allow substitution of
one or all of the arbitrators. The power to appoint an arbitration has been
conferred only on the High Court in the case of a domestic arbitration and
on the Supreme Court in case of international arbitration. If the contention of
the learned Counsel for the Respondent is accepted then the power to
substitute the arbitrator will vest in a Court other than the High Court or the
Supreme Court which will go against the scheme of the Act.
20. This issue has been dealt with by a Coordinate Bench of this Court in
DDA v. Tara Chand Sumit Construction Company, 2020 SCC OnLine Del
2501, which has observed as under:-
" 26 . When one looks at the definition of the term
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„Court‟ under Section 2(1)(e) of the Act, it is clear that
in case of International Commercial Arbitration, the
Court would mean the High Court, in exercise of its
ordinary original civil jurisdiction, having jurisdiction
to decide the questions forming the subject matter of
the arbitration if the same had been the subject matter
of the sui or the High Court having jurisdiction to hear
appeals of Courts subordinate to that High Court.
However, in cases of arbitration other than
International Commercial Arbitration, Court would be
the Principal Civil Court of original jurisdiction in a
District and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction
to decide questions forming subject matter of the
arbitration if the same had been the subject matter of
the suit. This definition has been substituted by way of
the Amendment Act 3 of 2016, which came into effect
from 23.10.2015.
27 . If the definition of the term „Court‟ is looked into,
no doubt the contention of the respondent seems
plausible that the power to extend the mandate of the
Arbitrator would lie with the Principal Civil Court.
However, on a careful analysis, in my opinion, this
interpretation would lead to complications and would
perhaps be in the teeth of the powers of the Courts
under Section 11 of the Act. Thus, the question that
poses a challenge is, whether the term „Court‟ can be
interpreted differently in the context of Section 29A.
In my view, sub-Section (1) of Section 2 of the Act
itself gives that answer, as it begins with the
expression “in this part, unless the context otherwise
requires”.
28 . Power to extend the mandate of an Arbitrator
under Section 29A(4), beyond the period of 12 months
and further extended period of six months only lies
with the Court. This power can be exercised either
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before the period has expired or even after the period
is over. Neither the Arbitrator can grant this extension
and nor can the parties by their mutual consent extend
the period beyond 18 months. Till this point,
interpreting the term „Court‟ to mean the Principal
Civil Court as defined in Section 2(1)(e) would, to my
mind, pose no difficulty. The complexity, however,
arises by virtue of the power of the Court to substitute
the Arbitrator while extending the mandate and this
complication is of a higher degree if the earlier
Arbitrator has been appointed by the High Court or the
Supreme Court. Coupled with this, one cannot lose
sight of the fact that the Legislature in its wisdom has
conferred the powers of appointment of an Arbitrator
only on the High Court or the Supreme Court,
depending on the nature of arbitration and as and
when the power is invoked by either of the parties.
There may be many cases in which while extending the
mandate of the Arbitrators, the Court may be of the
view that for some valid reasons the Arbitrators are
required to be substituted, in which case the Court may
exercise the power and appoint a substituted Arbitrator
and extend the mandate.
29. In case a petition under Section 29A of the Act is
filed before the Principal Civil Court for extension of
mandate and the occasion for substitution arises,
then the Principal Civil Court will be called upon to
exercise the power of substituting the Arbitrator. In a
given case, the Arbitrator being substituted could be
an Arbitrator who had been appointed by the
Supreme Court or the High Court. This would lead to
a situation where the conflict would arise between the
power of superior Courts to appoint Arbitrators under
Section 11 of the Act and those of the Civil Court to
substitute those Arbitrators under Section 29A of the
Act. This would be clearly in the teeth of provisions of
Section 11 of the Act, which confers the power of
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appointment of Arbitrators only on the High Court or
the Supreme Court, as the case may be. The only way,
therefore, this conflict can be resolved or reconciled,
in my opinion, will be by interpreting the term „Court‟
in the context of Section 29A of the Act, to be a Court
which has the power to appoint an Arbitrator under
Section 11 of the Act. Accepting the contention of the
respondent would lead to an inconceivable and
impermissible situation where, particularly in case of
Court appointed Arbitrators, where the Civil Courts
would substitute and appoint Arbitrators, while
extending the mandate under Section 29A of the Act.
30 . Similarly, in case of International Commercial
Arbitration, if one was to follow the definition of the
term Court under Section 2(1)(e) and apply the same in
a strict sense, then it would be the High Court
exercising Original or Appellate jurisdiction which
would have the power to extend the mandate and
substitute the Arbitrator. In such a situation, the High
Court would be substituting an Arbitrator appointed by
the Supreme Court which would perhaps lead to the
High Court over stepping its jurisdiction as the power
to appoint the Arbitrator is exclusively in the domain of
the Supreme Court. Thus, in the opinion of this Court,
an application under Section 29A of the Act seeking
extension of the mandate of the Arbitrator would lie
only before the Court which has the power to appoint
Arbitrator under Section 11 of the Act and not with the
Civil Courts. The interpretation given by learned
counsel for the respondent that for purposes of Section
29A, Court would mean the Principal Civil Court in
case of domestic arbitration, would nullify the powers
of the Superior Courts under Section 11 of the Act.
31 . Petitions under Section 11 of the Act are filed
irrespective of the pecuniary jurisdiction of the Court
and the same analogy would apply to the petitions
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under Section 29A of the Act. There is, thus, no merit in
the contention of the learned counsel for the
respondent that this Court has no pecuniary
jurisdiction to entertain the petition, the value of the
claims being below Rs. 2 Crores."
(emphasis supplied)
21. Coordinate Bench of this Court in Tara Chand (supra) placed reliance
on the Judgment passed the Gujarat High Court in Nilesh Ramanbhai Patel
v. Bhanubhai Ramanbhai Patel, 2018 SCC OnLine Guj 5017, wherein the
Gujarat High Court observed as under:-
" 15 . This provision thus make a few things clear.
Firstly, the power to extend the mandate of an
arbitrator under sub-section (4) of Section 29A beyond
the period of twelve months or such further period it
may have been extended in terms of sub-section (3) of
Section 29A rests with the Court. Neither the arbitrator
nor parties even by joint consent can extend such
period. The Court on the other hand has vast powers
for extension of the period even after such period is
over. While doing so the Court could also choose to
substitute one or all of the arbitrators and this is where
the definition of term „Court‟ contained in Section
2(1)(e) does not fit. It is inconceivable that the
legislature would vest the power in the Principal Civil
Judge to substitute an arbitrator who may have been
appointed by the High Court or Supreme Court. Even
otherwise, it would be wholly impermissible since the
powers for appointment of an arbitrator when the
situation so arises, vest in the High Court or the
Supreme Court as the case may be in terms of sub-
section (4), (5) and (6) of Section 11 of the Act. If
therefore there is a case for extension of the term of an
arbitrator who has been appointed by the High Court
or Supreme Court and if the contention of Shri Mehta
that such an application would lie only before the
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Principal Civil Court is upheld, powers under sub-
section (6) of Section 29A would be non-operatable. In
such a situation sub-section (6) of Section 29A would
be rendered otiose. The powers under sub-section (6)
of Section 29A are of considerable significance. The
powers for extending the mandate of an arbitrator are
coupled with the power to substitute an arbitrator.
These powers of substitution of an arbitrator are thus
concomitant to the principal powers for granting an
extension. If for valid reasons the Court finds that it
is a fit case for extending the mandate of the
arbitrator but that by itself may not be sufficient to
bring about an early end to the arbitral proceedings,
the Court may also consider substituting the existing
arbitrator. It would be wholly incumbent to hold that
under sub-section (6) of Section 29A the legislature has
vested powers in the Civil Court to make appointment
of arbitrators by substituting an arbitrator or the
whole panel of arbitrators appointed by the High
Court under Section 11 of the Act. If we therefore
accept this contention of Shri Mehta, it would lead to
irreconcilable conflict between the power of the
superior Courts to appoint arbitrators under section 11
of the Act and those of the Civil Court to substitute
such arbitrators under Section 29A(6). This conflict
can be avoided only by understanding the term “court”
for the purpose of Section 29A as the Court which
appointed the arbitrator in case of Court constituted
arbitral Tribunal.
16 . Very similar situation would arise in case of an
international commercial arbitration, where the power
to make an appointment of an arbitrator in terms of
Section 11 vests exclusively with the Supreme Court. In
terms of Section 2(1)(e) the Court in such a case would
be the High Court either exercising original
jurisdiction or appellate jurisdiction. Even in such a
case if the High Court were to exercise power of
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substitution of an arbitrator, it would be transgressing
its jurisdiction since the power to appoint an arbitrator
in an international commercial arbitrator rests
exclusively with the Supreme Court."
(emphasis supplied)
This Court is in respectful agreement with the Co-ordinate Bench of this
Court.
22. The Bombay High Court in KIPL Vistacore Infra Projects v.
Municipal Corporation of city of Ichalkarnji, 2024 SSC OnLine Bom 327,
after relying on the Judgment passed by a Coordinate Bench of this Court in
Tara Chand (supra) has observed as under:-
" 42 . The Delhi High Court, has, therefore, considered
the entire gamut of the power to be exercised under
Section 29A by the „Court‟, which include the power
given to substitute one or all of the Arbitrators, while
extending the period referred to in Sub-Section (4).
Evidently, if a contingency arise that while extending
the mandate of the Arbitrator, it becomes necessary to
substitute an Arbitrator, then the question would arise,
whether an Arbitrator appointed by the High Court,
can be substituted by the Principal District Judge as
the power to appoint an Arbitrator under Section 11 is
the exclusive prerogative of the High Court in case of
domestic arbitration and the Supreme Court in case of
International Arbitration.
43 . The legislature, therefore, has consciously used the
word „Court‟ which is empowerd to extend the
mandate of the Arbitrator, if it has expired as it is that
„Court‟ which has appointed the Arbitrator and while
extending the period, if the Court finds that the
proceedings have been delayed for the reasons
attributable to the Arbitral Tribunal, then it is even
empowered to reduce fees of the Arbitrator(s), in the
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manner set out in the proviso.
44. The term „Court‟ used in Sub-Section (4) as well
as in the Scheme of Section 29A, would therefore,
have to be construed as a „Court‟ in reference to the
context. It is highly inconceivable that an Arbitrator
is appointed by the High Court or Supreme Court in
case of International Commercial Arbitration and the
Principal Civil Court of Original Jurisdiction in a
district which is sub ordinate to the High Court, shall
exercise the power under Sub-Section (4) or or that
matter power under Sub-Section (6) of substituting
Arbitrator while extending the period referred in Sub-
Section 4.
45 . Apart from this, Sub-Section (7) and (8) are also
illustrative of the intention of the legislature that it
never intended to strictly construe the term „Court‟ as
defined in Section 2(1) of the Act.
46 . The provision contained in Form of Section 29A
inserted by the Amendment Act No. 3 of 2016, which
contemplated the timeline for conclusion of the arbitral
proceedings with an intention to encourage arbitration
as a speedy mode of resolution of disputes. Section 29-
A is a scheme in itself which, in order to conclude the
arbitration in an expedient manner provided for
entitlement of the Tribunal to receive such amount of
additional fees as the parties agree if the Award is
within a period of six months after the Tribunal enters
the reference. It provides a mechanism if the Award is
not made within the period specified or the extended
period of six months as upon the expiry of this period,
the mandate of the Arbitrator shall terminate unless
the Court extend the period.
47 . The power to be exercised in extending the
mandate of Tribunal is of great significance since
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neither the parties themselves by consent are
empowered to extend the mandate but for the period of
six months when it can by consent extend the period by
six months, but for further extension, it is only the
Court which can be approached and upon being
satisfied that the mandate of the Tribunal deserve an
extension on sufficient cause being shown upon such
terms and conditions as the Court may impose, the
mandate can be extended.
48. If the power under Section 29A is to be exercised
by Principal Civil Court of the District, though it may
be competent to extend the mandate, but when the
question of substitution arises, an anamolous
situation would result as an Arbitrator appointed by
the High Court or Supreme Court shall stand
substituted by the Principal Civil Court, as an
appointment of the Arbitrator in any case under
Section 11 is the prerogative of the High Court in
case of Domestic Arbitration and the Supreme Court,
in case of International Arbitration."
(emphasis supplied)
23. A perusal of the above-said judgments shows that this Court and the
Bombay High Court in KIPL Vistacore Infra Projects (supra) are of the
opinion that if power under Section 29A of the Arbitration & Conciliation
Act is exercised by a Court subordinate to the High Court, then the
Arbitrator appointed by the High Court in case of domestic arbitration or the
Supreme Court in case of international commercial arbitration will stand
substituted by the competent court of civil jurisdiction which would be in
teeth of Section 11 of the Arbitration & Conciliation Act which gives the
prerogative only to the High Court in case of domestic arbitration or the
Supreme Court in case of international arbitration to appoint Arbitrator
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under Section 11 of the Arbitration & Conciliation Act.
24. This Court is also of the opinion that such an interpretation will give
the power to the Civil Court to substitute and also to appoint Arbitrators
under Sections 14 and 15 of the Arbitration & Conciliation Act who can be
appointed only by the High Courts or the Supreme Court in case of domestic
and international arbitration respectively and therefore for the purposes of
Section 29A of the Arbitration & Conciliation Act, the term "Court" must
mean only to be the Court which has appointed the Arbitrator and therefore
the Court to extend the time or substitute the Arbitrator would only be the
Court which has appointed the Arbitrator and no other Court.
25. The Judgment passed by the Apex Court in Associated Contractors
(supra) which has been relied on by the Petitioner was dealing with an
application under Section 9 of the Arbitration & Conciliation Act. The said
judgment is not applicable to the facts of the present case. While exercising
power under Section 9 of the Arbitration & Conciliation Act, application
would have to go before the principal Civil Court of jurisdiction of that
District which will have the power to grant interim measures. It is useful to
mention at this juncture that Section 9 of the Arbitration & Conciliation Act
deals with interim measures passed by a Court and therefore the term
"Court" would have to take the meaning of the Court under Section 2(1)(e)
whereas Section 29A(4) of the Arbitration & Conciliation Act deals with the
power to terminate the mandate or extend the time limit for arbitral award
and Section 29A(6) gives the power to the Court to substitute one or all
Arbitrators which tantamount to appointment of Arbitrator which otherwise
under the scheme of the Act is only with the High Court in case of domestic
arbitration and the Apex Court in case of international arbitration. The term
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"court" in Section 29A of the Arbitration Act, therefore, has to be only the
High Court in case of domestic arbitration.
26. This Court is therefore in agreement with the view taken by the
Coordinate Bench of this Court in Tara Chand (supra) and respectfully
disagrees with the view taken by the Andhra Pradesh High Court in Dr. V V
Subbarao (supra). The facts of the present case reveal that notice of
invocation was sent to the Respondent on 02.03.2022 and this Court
appointed an Arbitrator on 03.03.2023. Two years have passed and there has
been substantial progress in the arbitration proceedings and there is no
concrete reason forthcoming as to why the Respondent is not agreeing to
extend the mandate of the Arbitral Tribunal. Valuable time and effort has
been spent by the learned Arbitrator and without any valid reason, this Court
is not inclined to terminate the mandate of the Arbitral Tribunal. No
worthwhile material has been given by the Respondent to show that the
Arbitrator has been lax in proceeding with the arbitration or that the mandate
of the Arbitral Tribunal has to be terminated.
27. In view of the foregoing, this Court is inclined to extend the mandate
of the Arbitral Tribunal for a period of one year from today for making the
Arbitral Award.
28. The petition is disposed of along with pending application(s), if any.
SUBRAMONIUM PRASAD, J
NOVEMBER 13, 2024
hsk
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