1. INTRODUCTION

The Bombay High Court has recently, in the case of Nikhil H. Malkan v. Standard Chartered Bank1 decided an important question of law regarding the interpretation of Section 29A(3) of the Arbitration and Conciliation Act, 1996 ("the Act"). This particular question of law has invited divergent views from multiple high courts and therefore, requires an intervention and interpretation of the provision by the Supreme Court of India.

2. BACKGROUND OF THE CASE

In Nikhil Malkan's (supra) case, the disputes of the parties were before an arbitral tribunal. Section 29A(1) of the Act provides that arbitral tribunal is required to pass an award within a period of 12 (twelve) months from the date of completion of pleadings. The said period of 12 (twelve) months can further be extended by the consent of the parties for a period of 6 (six) months under Section 29A(3) of the Act. In the present case, pleadings in the arbitration were completed on February 07, 2022. Therefore, the statutory mandate of the arbitral tribunal, in terms of Section 29A(1) of the Act, was to end on February 06, 2023. Admittedly, the parties by consent extended the said period by another 6 (six) months, i.e. till August 06, 2023, which is also permissible under Section 29A(3) of the Act. However, the arbitration was not completed by August 06, 2023.

The final hearing in the arbitration commenced before the arbitral tribunal on September 11, 2023, and the hearing was completed on October 12, 2023, and the matter was reserved for award. In the meantime, on October 10, 2023, the petitioner Mr. Nikhil Malkan filed an application before the Bombay High Court under Section 29A(4) of the Act seeking an extension of the mandate of the arbitral tribunal beyond the period of August 06, 2023, as the same had already expired. The respondent objected to this application stating that once the mandate has automatically expired on August 06, 2023, the court cannot entertain an application for extending a mandate, as it has already stood terminated by the operation of law. The legal question which was before the court was whether after statutory mandate of arbitral tribunal has come to an end, an application for extension of the mandate can be entertained by the court or not.

3. LEGAL POSITION AND ANALYSIS BY THE COURT

The Act was amended in the year 2015, wherein Section 29A was introduced for the first time with a view to ensure adjudication of arbitration in an expeditious manner. Originally, Section 29A of the Act provided for the disposal of arbitration within a period of 12 (twelve) months from the date of reference of the dispute to arbitration. Section 29A of the Act was amended in the year 2019, and the legislature provided that the period of 12 (twelve) months for the adjudication of arbitration dispute would commence from the date of completion of pleadings. Therefore, as per the present arbitration regime, an arbitration is required to be completed by the tribunal within a period of 12 (twelve) months from the date of completion of pleadings by the parties to the arbitration. This is envisaged under Section 29A(1) of the Act. This period of 12 (twelve) months can further be extended by a period of 6 (six) months with the consent of both parties under Section 29A(3) of the said Act. Therefore, the statute warrants an arbitration to be completed and disposed off within a maximum period of 18 (eighteen) months from the date of completion of the pleadings.

Section 29A(4) of the Act provides consequences of not passing the award within the period of 18 (eighteen) months period as mentioned above. As per Section 29A(4) of the Act, the mandate of the arbitrator or the arbitral tribunal will come to end upon expiry of the 18 (eighteen) months, unless the court has, either prior to or after the expiry of the period so specified, extended the period. From the perusal of the provision of Section 29A(4) at first glance, it appears that Court, being satisfied of justifiable reasons, has the power to extend the time period of 18 (eighteen) months, i.e. the mandate of the arbitral tribunal, either before or after such term has expired. The Act is, however, silent as to when such an extension is to be sought before the court. This is where divergent views have been taken by different High Courts.

The Calcutta High Court and the Patna High Court have taken the view that even though the court retains the power to extend the mandate of arbitral tribunal prior to or after the expiry of the statutory period given in Section 29A of the Act, however, an application seeking such an extension has to be made or filed prior to the expiry of the mandate of the arbitral tribunal. The application filed, where the statutory period has already come to an end, cannot be entertained by the court. The Patna High Court in the case of South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited2 has come to a conclusion that once the period of 18 (eighteen) months (aggregate of period mentioned in Sections 29A(1) and 29A(3) of the Act) has expired, there is no right given under the Act to any party to file an application seeking extension as the mandate of the tribunal would be terminated by operation of law.

As an illustration, if the 12 (twelve) months period is over after completion of pleadings and the parties have extended the period by further 6 (six) months by consent, the application to court for subsequent extension has to be preferred before the expiry of the 6 (six) months so extended. Similar interpretation is also adopted by the Calcutta High Court in the case of Rohan Builders (India) Private Limited v. Berger Paints Pvt. Ltd3. The order of the Calcutta High Court is subsequently stayed by the Hon'ble Supreme Court in a special leave petition filed against the order. The Hon'ble Supreme Court in the matter of Vridavan Advisory Serivices LLP v. Deep Shambhulal Bhanusali4, has also admitted and decided to hear an identical legal point, which is currently pending before the Hon'ble Court.

Per contra, the Delhi High court in the case of ATC Telecom Infrastructure Private Limited v. Bharat Sanchar Nigam Limited5, differed from the views taken by Calcutta High Court and Patna High Court and held that the entire objective of the Act would be defeated if the parties are barred from preferring an application after the mandate of arbitral tribunal is over. The Delhi High Court had remarked that:

"16. No doubt, the purpose of Section 29A of the A&C Act is to prescribe and regulate the timelines for completion of the arbitral proceedings; however, a perusal of Section 29A of the A&C Act itself makes it clear that it does not contemplate any inflexible outer deadline for completion of arbitral proceedings, and affords flexibility to the contracting parties, and also to the Court for extension of the time period in appropriate cases. The purport of Section 29A of the A&C Act was clearly not to tie the hands of the parties or the court, and prevent extension of time even where warranted, simply because the petition under Section 29A(4) of the A&C Act came to be filed a few days after expiration of the deadline contemplated under Section 29A(1) or Section 29A(3) of the A&C Act. Had it been intended by the legislature to provide for a blanket prohibition on extension of time after the expiration of the period contemplated under Section 29A(1) or Section 29A(3) of the A&C Act (unless a petition under Section 29A(4) of the A&C Act was filed prior to expiry of the said period), nothing would have been easier than to say so."

The Bombay High Court in Malkan's case now agreed with the view taken by the Delhi High Court and consequently disagreed with the view taken by the Calcutta High Court and Patna High Court. The Bombay High Court, after considering the judgments of Delhi High Court, Patna High Court, and Calcutta High Court (supra) held that:

"15. Having perused Section 29A(4) of the said Act, particularly in the light of use of the words "either prior to or after the expiry of the period so specified", this Court finds that the purpose for which Section 29A was introduced in the aforesaid Act would be defeated, if it is to be held that the Court could exercise power to extend the mandate of the learned Arbitrator even after expiry of the extended period only if the application or petition for extension of mandate is filed prior to expiry of such mandate. There is nothing in the provision to indicate that if such an application or petition is not filed before the expiry of the mandate of the learned Arbitrator, the Court would be rendered powerless to exercise its authority. The aforesaid provision i.e. Section 29A of the aforesaid Act, is a provision that enables the Court to pass appropriate orders in order to ensure that the arbitral proceeding reaches its logical conclusion. No purpose would be served in holding that if such an application or petition for extension of mandate of the learned Arbitrator is filed after the expiry of the mandate, the Court would be in no position to entertain the same. Any apprehension regarding inordinate and unexplained delay on the part of the party approaching the Court can be addressed by holding that the Court would extend the mandate only when it is satisfied that sufficient grounds are made out for granting extension of mandate of the learned Arbitrator.

16. In view of the above, this Court respectfully disagrees with the views expressed by the learned Single Judge of the Calcutta High Court in the case of Rohan Builders (India) Private Limited Vs. Berger Paints India Limited (supra) and the Division Bench of the Patna High Court in the case of South Bihar Power Distribution Company Limited Vs. Bhagalpur Electricity Distribution Company Private Limited a Private Limited Company registered under the Companies Act, 1956 (supra) in the aforementioned judgments. This Court is in agreement with the view adopted by the Delhi High Court in the case of ATC Telecom Infrastructure Private Limited Vs. Bharat Sanchar Nigam Limited (supra)."

4. CONCLUSION

It is therefore clear that different High Courts have differed on the legal point as to when an application for extension of arbitration mandate needs to be preferred and/or initiated and different High Courts have arrived at different conclusions. Nevertheless, the issue is now sub-judice before the Supreme Court in the case of Vridavan Advisory Serivices LLP v. Deep Shambhulal Bhanusali, which will have ramifications on the mandate of arbitral tribunals envisaged under the Act. As the law is yet to be laid down by the Hon'ble Supreme Court in this regard, as an abundant caution, it is advisable to approach the court seeking extension of the arbitral tribunal's mandate, before the mandate expires, instead of approaching the court after expiry of the statutory period.

Footnotes

1. Arbitration Petition (Lodging) No. 28255 of 2023, decided on November 30, 2023.

2. 2023 SCC Online Pat 1658.

3. Arbitration Petition 328 of 2023.

4. Special Leave Petition (Civil) No. 24489 of 2023.

5. O.M.P (Misc) (Comm) 466/2023.

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