Karnataka HC Upholds Setting Aside Of Award Requiring Landowners To Clear ₹50-Lakh Mortgage And Execute Development MoU After Arbitrator’s 18-Month Mandate Expired

The parties entered into MoUs dated 10 June 2016 concerning the proposed joint development of land.

After a dispute, the appellant invoked arbitration. The sole arbitrator entered upon the reference on 28 October 2017 and made an award on 24 June 2019, directing the respondents to discharge a mortgage, provide road access, rectify the survey particulars and execute the MoUs.

The respondents challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The District Court set it aside, holding that the arbitrator’s mandate had expired under Section 29A.

The appellant appealed under Section 37, arguing, among other things, that the parties’ participation amounted to consent to an extension and that the 2019 amendment could apply to the proceedings.

Under the version of Section 29A applicable when the award was made, an award had to be issued within 12 months from the date the tribunal entered upon the reference; the parties could, by consent, extend that period by up to six months under Section 29A(3).

If the award was not made within the prescribed or consent-extended period, the tribunal’s mandate terminated unless the court extended the time under Section 29A(4), either before or after expiry.

The Court considered authorities addressing the procedural and retrospective operation of the 2019 amendment, including Shapoorji Pallonji & Co. Pvt. Ltd. v. Jindal India Thermal Power Ltd., ONGC Petro Additions Ltd. v. Fernas Construction Co. Inc., SARA International Pvt. Ltd. v. South Eastern Railways, and Tata Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd.

It also referred to Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. and C. Velusamy v. K. Indhera on termination of the mandate and post-expiry extension.

The award was made on 24 June 2019, more than 18 months after the arbitrator entered upon the reference on 28 October 2017. Even assuming the parties’ conduct extended the original 12-month period by the full six months permitted under Section 29A(3), the mandate had expired before the award was issued.

The Court held that the parties’ failure to object could not prevent the statutory termination of the mandate, and no court extension had been obtained.

The 2019 amendment, though considered procedural in nature, could not assist the appellant because the award had already been issued before the amendment’s notification on 30 August 2019; no arbitral proceeding remained pending on that date to which the amended provision could apply.

It dismissed both appeals, leaving in place the District Court’s orders setting aside the arbitral award; all pending interlocutory applications were also disposed of.