S.29A Arbitration | ‘Sufficient cause’ for an extension of time for adjudication must be interpreted to facilitate the effective resolution of the dispute: Supreme Court

In extending the deadline for the arbitration award, the Supreme Court recently observed that an extension may be allowed even after the expiry of the statutory deadline and the expression “sufficient cause” in Art. 29A of the Arbitration and Conciliation Act should be colored by the primary purpose of the arbitration process (i.e. to facilitate effective dispute resolution).

“The meaning of the word ‘sufficient cause’ for an extension of time for making an award must relate to the primary purpose of the arbitration process. The primary purpose of issuing an arbitration award is to resolve disputes through an agreed dispute resolution mechanism in accordance with the contract. Therefore, “sufficient cause” should be interpreted in the context of facilitating the effective resolution of the dispute,” said the bench Justices PS Narasimha and Sandeep Mehta.

Factual background

The dispute between the appellant and respondent No. 1 was referred to arbitration. The maximum statutory deadline for granting the award (12 months + 6 months) started on October 9, 2019 and would naturally expire on April 9, 2021.

However, before this period passed, India was hit by the Covid-19 pandemic. This resulted in the adjournment of the proceedings by the arbitral tribunal, which were finally resumed in 2022. The hearing was concluded on May 5, 2023, and the parties filed an application to the Supreme Court of Gujarat under Art. 29A section 4 of the Act to extend the deadline for conducting arbitration, the tribunal awarding the award.

The High Court on 03/11/2023 rejected this application, finding that an extension had been requested in August 2023, even though the maximum statutory deadline had expired on 09/04/2021. No application for an extension had been made on 09/04/2021 extension, resulting in a delay of more than 2 years.

Concerned by this decision, the applicant appealed to the Supreme Court.

The applicant’s case

The appellant argued that when determining the date of expiry of the mandate of the Tribunal, the High Court should have excluded the period between March 15, 2020 and February 28, 2022, having regard to the decisions of the Supreme Court in ref. no. In Re: Awareness of the extension of the statute of limitations. He requested an extension of the mandate of the Arbitral Tribunal by one month on the following grounds:

(i) In 2022, the Arbitral Tribunal conducted hearings online, but was forced to postpone the proceedings several times at the request of the defendants’ counsel due to a change in the composition of the arbitrator;

(ii) the dispute concerned technical and legal issues and the file was voluminous;

(iii) the delay was not attributable to either the parties or the Arbitral Tribunal, which acted promptly and carefully;

(iv) the hearing had ended and only a judgment had to be announced, which led to difficulties if the deadline for the judgment was not extended.

Issues

(i) Can a request for extension be granted if made after the expiry of the mandate of the arbitral tribunal?

(ii) Whether the appellant’s application for extension should have been allowed by the High Court?

Court observations

The Supreme Court, analyzing Art. 29A section 4 of the Act noted that section 4 of this Act allows the court to extend the court’s mandate after the expiry of the statutory, with the possibility of extension, period of 18 months.

“The effect of the provision is that if the arbitration award is not issued within 12 months from the date of supplementing the pleadings, with the possibility of extension by mutual consent of the parties for another 6 months, the mandate of the Tribunal will expire, unless the court before or after the expiry of the deadline, extends it. Wording of section 4 expressly and unequivocally enables the court to extend the mandate of the Tribunal after the expiry of the statutory and extendable period of 18 months.”

Reference was made to the 2010 decision Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd.in which it was stated that Art. 29A section 4 recognizes the parties’ autonomy to submit an extension request even if the statutory deadline has expired. The expiry of the mandate is conditional only on the failure to submit an application for extension and cannot be understood to mean that it cannot be extended after the expiry of the mandate.

On the second issue, it was opined that the extension of time was a discretionary power of the courts to be exercised upon showing “sufficient cause”.

“While the Statute provides for party autonomy even in the conduct and termination of arbitration proceedings, the Act recognizes the power of the Court to step in where necessary to ensure that the dispute resolution process is adopted for its logical purpose if, in the opinion of the Court, the circumstances so warrant. . It is in this context that the Arbitration and Conciliation Act adopts the well-known wording of the limitation provisions and provides that the Court may extend the period if it considers that this is the case. sufficient reason.”

Taking into account the fact that the pandemic began even before the expiry of 12 months from the end of the letters in this case, the Tribunal omitted the period from March 15, 2020 to February 28, 2023. Moreover, taking into account the agreement concluded between the parties (of May 5 2023) to seek an extension of time by making an application to the High Court, it was held that there was a sufficient basis for the extension of time.

Application

The appeal was allowed and the deadline for issuing the judgment was extended to December 31, 2024.

Case Title: M/S AJAY PROTECH PVT. limited liability company VERSUS GENERAL MANAGER & ANR., SLP (C) NO. 2272 Z 2024

Citation: 2024 LiveLaw (SC) 915

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