I. Introduction
Party autonomy has been described as the “cornerstone of the modern arbitration”. This essential premise of party autonomy has been continuously stated by courts throughout jurisdictions and accepted by national laws. The UNCITRAL framework is entirely novel and unique in its approach. However, it does have some important attributes, one of which is the principle of party autonomy. A scrutiny of the aforementioned occurrences leads to the conclusion that party autonomy is prioritized in arbitration. However, it should be highlighted that many approaches exist, with each country taking its own stance within the context of the party autonomy principle. Most national arbitration laws specify a time limit for issuing an award. Interestingly, the most popular arbitration seats, such as London and Singapore, do not include time limits. In the Indian context, a distinct strategy has been taken involving the prescription of time limits, the extension of time limits, and the expiration of time upon an ongoing arbitration proceeding. This article examines Section 29A of Arbitration and Conciliation Act, 1996 [“Act”] and the judgment of Supreme Court [“SC”] in the case of Rohan Builders (India) Private Limited v. Berger Paints India Limited [“Rohan Builders”].
II. Section 29A Arbitration and Conciliation Act: Analysis
The Indian legal system has had time constraints in place for a long time. Rule 3 of the First Schedule of the Arbitration Act, 1940 [“1940 Act”] required an arbitrator to issue an award within four months of accepting the reference. Furthermore, under Section 28(1) of the 1940 Act, courts could extend the time limit for issuing an award. But it was apparent that the lack of a specified time period for passing awards resulted in massive delays in arbitration proceedings. Despite the delays, judges consistently recognized that time was of the essence in arbitration process. Prior to the implementation of Section 29A, if the stated time period under an arbitration agreement lapsed “without any further provisions for an extension of the period,” courts determined that the proceedings had concluded and the arbitrators’ mandate had ceased. However, due to the delays in the arbitral proceedings the Law Commission of India (the LCI) in its 176th Report on the Arbitration and Conciliation (Amendment) Bill, 2001, LCI came upon a solution in the form of a new statutory provision for establishing the time restrictions, as outlined in draft Section 29A. This was done in order to ensure efficiency in the conclusion of arbitral proceedings.
The Arbitration and Conciliation (Amendment) Act of 2015 [“2015 Amendment Act”], provided legislative intervention to reduce delays in arbitral proceedings. According to Section 29A (1) of the Act, inserted vide the 2015 Amendment Act, the arbitral award must be pronounced within 12 months, which can be extended to 18 months with the parties’ consent, from the date on which the arbitral tribunal entered upon reference. The statutory limit was further altered by the Amending Act of 2019, which mandated that arbitration proceedings to be concluded within 12 months of the filing of pleadings.
Furthermore, Section 29A(3) of the Act allows for a six-month extension by mutual consent of the parties for passing the award. Similarly, Section 29A(4) of the Act states that if the award is not issued in accordance with Section 29A(1) or within the extended period specified in Section 29A(3), the parties may apply to the court for an extension of the arbitral tribunal’s mandate. While the clause plainly specifies that the tribunal’s mandate can be extended even after the specified time period under Section 29A has expired, it does not specify whether such extensions can be requested after the specified period has expired.
III. Supreme Court's Jurisprudence in Rohan Builders
The Hon’ble Supreme Court of India [“SC”], through the recent case of Rohan Builders had ended the long ongoing debate regarding, “whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the expiry of the period for making of the arbitral award”.
Notably, this case arose from an application filed by Rohan Builders (the Petitioner) before the Hon’ble High Court of Calcutta under Section 29(4) of the Arbitration Act, seeking an extension of the arbitral tribunal’s mandate because the arbitral tribunal failed to render the verdict within the specified timeframe. As a result, Berger Paints (the Respondent) opposed the application, claiming among things, that the Petitioner should have sought an extension while the arbitral tribunal’s mandate was still in effect and that any subsequent application is unsustainable.
The SC in delivering the judgment that under Section 29A(4) of the Act, the power of the arbitral tribunal to extend the mandate beyond twelve or eighteen months can be exercised by the courts even after the mandate has expired, is based on reasoning, as set out hereinbelow:
Firstly, the SC held that the expression “either prior to or after the expiry of the period so specified” in Section 29A(4) of the Act implies that the court has the power to extend the period for making an award at any time before or after the mandated period, provided that such extension of time is granted by the court only for ‘sufficient cause’ and on such terms and conditions as the court may impose.
Secondly, the SC also addressed the interpretation of the word “terminate” in Section 29A(4) of the Act, stating that it should not be interpreted in isolation with literal dictionary meaning, but rather in context with the surrounding words and expressions. Thus, the correct understanding enables the arbitral tribunal functus officio, but not in absolute terms.
Thirdly, the SC citing the decision of the High Court of Calcutta in Ashok Kumar Gupta v. M.D. Creations, found that termination under Section 29A(4) is not absolute in nature. Relying on Section 29A(5) of the Act, it was stated that the court’s power to extend the time is exercised only in cases where there is sufficient cause for such extension, and the court also has the authority to impose terms and conditions.
Lastly, the SC was of the opinion that Section 29A of the Act strives to ensure the speedy completion of arbitral processes, emphasizing on the effectiveness of India’s arbitration system. A strict interpretation of the section would result in several difficulties, undermining the Act’s intent. If a time limit extension is not granted, a party will have to go to the court before the time period expires. As a result, the SC provided a broad interpretation of Section 29A, allowing for extension of time required by the Act.
IV. Conclusion & Way Forward
The SC’s decision in the case of Rohan Builders marks a watershed moment in the arbitration landscape, recognizing the importance of party autonomy and allowing parties to seek extensions as needed. It is important to note that the SC has not ignored the relevance of time periods; rather, it has highlighted that judicial discretion must be employed with utmost vigilance, underlining the safeguards provided by the Act to ensure that extensions are not arbitrarily granted. An interpretive method must recognise the legal text’s goal or purpose. Section 29A is intended to facilitate the timely conclusion of arbitral proceedings while giving courts the option to grant extensions when justified.
A meaningful interpretation of Section 29A of the Act is provided to avoid impossible or impractical outcomes. Narrow interpretation would present an additional challenge by relegating a faultless party to a new referral or the appointment of an arbitrator under the Act, thereby hampering arbitration rather than facilitating it.
The courts may impose terms and conditions while granting such an extension. Furthermore, in some cases, if the court finds that the proceedings have been delayed for the reasons attributable to the tribunal then it may reduce the fees of arbitrator(s) by not exceeding five percent for each month of the delay. This is in accordance of first proviso to Section 29A (4) of the Act. Where an award is pronounced during the pendency of an application for extension of the period of the arbitral tribunal, the court must decide the application under sub-section (5) and may even, where an award has been pronounced, invoke, when required and justified, sub-sections (6) to (8), or the first and third proviso to Section 29A (4) of the Act. The court ruled that an application for an extension of time period for passing arbitral award under Section 29A might be made even after the twelve month or extended six-month period has expired, as the case may be. Thus, clarifying the meaning of Section 29A of the Act, will enhance trust in arbitration as a viable means of resolving disputes, promoting a more arbitration supportive environment in India.
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