Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
2024 INSC 889
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO._________/2024
SPECIAL LEAVE PETITION (CIVIL) NO. 2272 OF 2024
M/S AJAY PROTECH PVT. LTD. ...APPELLANT(S)
VERSUS
GENERAL MANAGER & ANR. …RESPONDENT(S)
J U D G M E N T
PAMIDIGHANTAM SRI NARASIMHA, J .
1. Leave granted.
2. The short issue in this appeal is whether the application filed
by the appellant under Section 29A(4) of the Arbitration and
1
Conciliation Act, 1996 for extension of the mandate of the Arbitral
Tribunal ought to have been allowed by the High Court. The text
of Section 29A was sufficient for us to come to the conclusion that
the Court has the power and jurisdiction to extend the period.
Further, in the facts and circumstances of the case, we found that
there is ‘sufficient cause’ for the Court to extend the period for
Signature Not Verified
making the Award. Thus, we have allowed the appeal and extended
Digitally signed by
INDU MARWAH
Date: 2024.11.22
17:56:20 IST
Reason:
1
Hereinafter “the Act”.
1
st
the time till 31 December, 2024 to make the Award. In this
context, we have also explained the purport of the expression
sufficient cause employed in this section.
3. The brief facts are as follows. The appellant entered into a
works contract with respondent no. 1. Subsequently when
disputes arose, appellant sought resolution through arbitration by
issuing a notice on 12.02.2018. Appellant’s application under
Section 11 of the Act for appointment of a sole arbitrator was
allowed by the High Court by orders dated 08.02.2019 and
15.02.2019.
3.1 After the first meeting of the Arbitral Tribunal on 24.06.2019,
parties were given time to complete their pleadings, which were in-
fact completed on 09.10.2019. The statutorily stipulated 12-month
period under Section 29A(1) for making the award commences
from this date, and would expire on 08.10.2020. Further, as the
parties can extend this period by another 6 months by mutual
consent as per Section 29A(3), upon such mutual extension the
time for making the award got extended till 09.04.2021. Therefore,
the 18-month period, which commenced from 09.10.2019, would
have naturally expired on 09.04.2021.
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3.2 However, before the expiry of the said period, in fact even
before the first stretch of 12 months, the nation was affected by
the COVID pandemic. Taking note of this situation, this Court in
Re: Cognizance for Extension of Limitation by order dated
10.01.2022 passed orders declaring that the period between
15.03.2020 and 28.02.2022 shall be excluded in computing
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periods of limitation under Sections 23(4) and 29(A) of the Act .
The relevant portion of the said order is as under:
“
5. Taking into consideration the arguments advanced by the
learned counsel and the impact of the surge of the virus on
public health and adversities faced by litigants in the
prevailing conditions, we deem it appropriate to dispose of MA
No. 21 of 2022 with the following directions:
*
5.4. It is further clarified that the period from 15-3-2020 till 28-
2-2022 shall also stand excluded in computing the periods
prescribed under Sections 23(4) and 29-A of the Arbitration
and Conciliation Act, 1996, Section 12-A of the Commercial
Courts Act, 2015 and provisos (b) and (c) of Section 138 of the
Negotiable Instruments Act, 1881 and any other laws, which
prescribe period(s) of limitation for instituting proceedings,
outer limits (within which the court or tribunal can condone
delay) and termination of proceedings .”
3.3 Returning to the arbitral proceedings, the Arbitral Tribunal
framed issues on 21.11.2019 and posted the matter for arguments
for December 2019 and January 2020 but was compelled to
adjourn the proceedings due to the pandemic. The record reveals
that the proceedings resumed in the year 2022, and in fact, the
2
In re: Cognizance for Extension of Limitation , (2022) 3 SCC 117.
3
hearing was concluded on 05.05.2023. It is an admitted fact that
the parties to the arbitration agreement have submitted before the
Arbitral Tribunal that they would move the Court under Section
29A(4) of the Act for appropriate orders for extension of time for
making the award. In furtherance of the undertaking, an
application under Section 29A(4) was filed by the appellant before
the Gujarat High Court on 01.08.2023.
4. By the order dated 03.11.2023 impugned before us, the High
Court dismissed the application. The High Court reasoned that the
initial statutory period of 12 months expired on 08.10.2020, and
the same was extended by the mutual consent of the parties till
09.04.2021. Noting that the application for extension was
preferred only in August 2023, High Court held that there is no
explanation for a delay of more than 2 years, 4 months in
approaching it. The High Court held that the mandate of the
Arbitral Tribunal stood terminated on 09.04.2021, at which point
there was not even an application for extension of time pending
before it. In this view of the matter, the application was found to
be misconceived, and was dismissed by the order impugned before
us.
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5. We have heard Mr. Gaurav Agrawal, learned senior counsel
for the appellant, and Mr. Vikramjit Banerjee, learned ASG for the
respondents.
5.1 Relying on this Court’s declaration Re: Cognizance for
Extension of Limitation dated 10.01.2022 extending limitation on
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account of the pandemic, Mr. Agrawal submits that the High
Court ought to have excluded the period between 15.03.2020 and
28.02.2022 while determining the date on which the Tribunal’s
mandate stood terminated. Further, he submits that the
respondent had agreed to apply for extension of time before the
Arbitral Tribunal, as is recorded in the Minutes of Arbitral Meeting
dated 05.05.2023.
5.2 Mr. Vikramjit Banerjee, ASG, submits that even if the benefit
of this Court’s order is considered, the Tribunal’s mandate expired
on 31.10.2022, and there is still a nine-month delay in filing the
application. Further, placing reliance on a recent decision of this
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Court in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. ,
he submits that an application under Section 29A(4) must be filed
before the mandate of the Tribunal expires. It cannot be
subsequently filed as the provision stipulates termination of the
3
ibid.
4
2024 SCC OnLine SC 2494.
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Tribunal’s mandate on expiry of the statutory and extendable
period.
6. Having heard learned senior counsel and the learned ASG,
there are two issues that we must consider:
i. Whether the application for extension can be entertained
if it is filed after the expiry of the Arbitral Tribunal’s
mandate?
ii. If yes, do the facts and circumstances warrant an
extension in the present case?
7. When must an application under Section 29A(4) be filed. The
first issue is no longer res integra in view of a recent decision of
this Court in Rohan Builders (supra). Despite Mr. Banerjee’s
reliance on this decision, we find that it squarely covers the issue
against him. Before dealing with this decision, it is necessary to
take note of the text and wording of the relevant portion of Section
29A of the Act:
“29A. Time limit for arbitral award.— (1) The award 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 under sub-section (4) of
section 23:
Provided that the award in the matter of international
commercial arbitration may be made as expeditiously as
possible and endeavor may be made to dispose of the matter
within a period of twelve months from the date of completion
of pleadings under sub-section (4) of section 23.
*
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(3) The parties may, by consent, extend the period specified in
sub-section (1) for making award for a further period not
exceeding six months.
(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 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.”
(emphasis supplied)
8. The effect of the provision is that if the arbitral award is not
made within 12 months from when the pleadings are completed,
extendable by a further 6 months by mutual consent of parties,
the Tribunal’s mandate will terminate, unless the court either prior
or after the expiry of the period , extends it. The wording of sub-
section (4) clearly and explicitly enables a court to extend the
Tribunal’s mandate after expiry of the statutory and extendable
period of 18 months.
9. This Court in Rohan Builders (supra) has held that the
application for extension of time can be filed even after the expiry
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of the period in sub-sections (1) and (3). Even if sub-section (4)
provides for the termination of the Tribunal’s mandate on the
expiry of the period, it recognises party autonomy to move an
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application before the Court for further extension. Thus, the
termination of mandate under the provision is only conditional on
the non-filing of an extension application, and cannot be taken to
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mean that the mandate cannot be extended once it expires. The
relevant portion of the judgment is extracted:
“6. Section 29A(4) is the provision which requires
interpretation. It states that where the award is not made
within the specified period of twelve or eighteen months, the
mandate of the arbitral tribunal will terminate. However, this
provision does not apply if the court has extended the period,
either before or after the expiry of the initial or the extended
term. In other words, Section 29A(4) empowers the court to
extend the period for making of the arbitral award beyond a
period of twelve months or eighteen months, as the case may
be. The expression “either prior to or after the expiry of the
period so specified” is unambiguous. It can be deduced by the
language that the court can extend the time where an
application is filed after the expiry of the period under
subsection (1) or the extended period in terms of sub-section
(3). The court has the power to extend the period for making
an award at any time before or after the mandated period.”
(emphasis supplied)
10. The wording of Section 29A(4) and the decision in Rohan
Builders (supra) clearly answer the first issue in favour of the
appellant, i.e., an application for extension can be filed either
5
Rohan Builders (supra), para 6.
6
ibid, paras 10 and 11.
7
ibid, para 12.
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before or after the termination of the Tribunal’s mandate upon
expiry of the statutory and extendable period.
11. Whether extension must be granted . The next question is
whether an extension of time should be granted in the present
case. As per Section 29A(5), the decision to extend the time is an
exercise of discretion by the court and must be done on sufficient
cause being shown, and on such terms and conditions that the
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court deems fit. This Court, in Rohan Builders (supra), has held:
“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, 2015,
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….
15. Rohan Builders (India) Pvt. Ltd. (supra) highlights that an
interpretation allowing an extension application post the
expiry period would encourage rogue litigants and render the
timeline for making the award inconsequential. 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. The first proviso to Section 29A(4) permits
8
ibid, para 15.
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a fee reduction of up to five percent for each month of delay
attributable to the arbitral tribunal.”
12. The issue before us is not whether the application under
Section 29A(4) is filed within the permissible time for seeking
extension, i.e., 12 months, followed by another 6 months at the
consent of the parties. The real issue is whether there is a sufficient
cause for the Court to extend the period for making of the award.
For considering whether there is a sufficient cause or not, it is
necessary to take into account the following events. As indicated
earlier, even before expiry of the period of 12 months under Section
29A(1), commencing from 09.10.2019 (date of completion of
pleadings), the COVID pandemic had started. The period between
15.03.2020 and 28.02.2022 is anyways mandated to be excluded
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from periods of limitation. Therefore, from the date of completion
of pleadings till 15.03.2020, only a period of 5 months is taken. If
the remainder of the 18 months period is reckoned from
28.02.2022, the said period would expire on 31.03.2023. In other
words, the appellant would have been within the period specified
under Section 29A(1) read with Section 29A(3) had it filed the
application by such date. However, the problem arose because the
9
In re, Cognizance for Extension of Limitation (supra), para 5.4.
10
application was filed on 01.08.2023. Really speaking, it is the
period commencing from 31.03.2023 to 01.08.2023 that the Court
is to take into account for considering whether there is sufficient
cause to exercise the power under Section 29A(5) to extend the
period.
13. In view of the above, it is clear that the reasoning adopted by
the High Court in holding that there is a delay of 2 years, 4 months
in filing the application is erroneous.
14. We will have to consider if there is sufficient cause for not
filing the application before 31.03.2023. In the application for
extension, the appellant has submitted that the reasons for
extension of time are as follows: (i) the Arbitral Tribunal proceeded
with online hearings in 2022, but was required to adjourn the
proceedings on several occasions at the request of the respondents’
counsel as the panel from which the arbitrator was appointed had
been changed. (ii) That the dispute involved technical and legal
questions, and the record of the case is bulky. (iii) That the delay
is neither attributable to the parties, nor to the Arbitral Tribunal,
who have acted in a prompt and cautious manner. (iv) The hearing
is complete, and only the award needs to be declared, thereby
leading to hardship to the parties if the time for making the award
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is not extended. On these grounds, the appellant prayed for a one-
month extension under Section 29A(4).
15. Efficiency in the conduct of arbitral proceedings is integral to
the effectiveness of the dispute resolution remedy through
arbitration. Efficiency is inextricably connected with expeditious
conclusion of arbitral proceedings. While the statute incorporates
party autonomy even with respect to the conduct and conclusion
of arbitral proceedings, there is a statutory recognition of the
power of the Court to step in wherever it is necessary to ensure
that the process of resolution of the dispute is taken to its logical
end, if according to the Court, the circumstances so warrant. It is
in this context that the Arbitration and Conciliation Act adopts the
well-known language of limitation statutes and provides that the
Court can extend the time if it finds that there is sufficient cause .
16. The meaning of 'sufficient cause' for extending the time to
make an award must take colour from the underlying purpose of
the arbitration process. The primary objective in rendering an
arbitral award is to resolve disputes through the agreed dispute
resolution mechanism as contracted by the parties. Therefore,
should be interpreted in the context of facilitating
'sufficient cause'
effective dispute resolution.
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17. Having taken note of the fact that the pandemic had
commenced even before the expiry of 12 months from the
completion of pleadings, this Court excluding the period between
15.03.2020 to 28.02.2023 in Re: Cognizance for Extension of
Limitation (supra), and the agreement between the parties on
05.05.2023 to seek extension of time by filing an application before
the Court, we are of the opinion that there is sufficient cause for
extension of time.
18. In view of the above, we allow the Civil Appeal arising out of
SLP (C) No. 2272/2024 and set aside the order and judgment
passed by the High Court in MCA No. 1/2023 dated 03.11.2023,
and extend the period for making of the award by the Arbitral
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Tribunal till 31 December, 2024.
19. The parties shall bear their own costs.
………………………………....J.
[PAMIDIGHANTAM SRI NARASIMHA]
………………………………....J.
[SANDEEP MEHTA]
NEW DELHI;
NOVEMBER 22, 2024.
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