15 Sep 2023 7:30 AM GMT
The Calcutta High Court has recently held that the mandate of an arbitral tribunal is held to be terminated under Section 29A of the Arbitration & Conciliation Act, 1996, (“1996 Act”), unless the same is extended during its subsistence, in the absence of which, an arbitrator would become de jure inadmissible.In disposing of three arbitration petitions containing the aforesaid...
The Calcutta High Court has recently held that the mandate of an arbitral tribunal is held to be terminated under Section 29A of the Arbitration & Conciliation Act, 1996, (“1996 Act”), unless the same is extended during its subsistence, in the absence of which, an arbitrator would become de jure inadmissible.
In disposing of three arbitration petitions containing the aforesaid identical point of law, a single-bench of Justice Moushumi Bhattacharya held:
Section 29-A of The Arbitration and Conciliation Act, 1996 contemplates making of the award within the prescribed statutory timelines. The timelines are to be read as mandatory limits where the arbitrator and the parties to the arbitration are required to be conscious and vigilant of the cut-off dates for applying for extension of the mandate of the arbitral tribunal. The application for extension must be made during continuation of the mandate and not thereafter. If the arbitral tribunal proceeds to make an award after expiry of the timelines, the award would suffer from a jurisdictional error. This is by reason of the fact that there is no provision for renewal of mandate of the tribunal once it stands terminated by operation of law.
Brief facts of the Case
The Court was seized of the aforesaid common point of law involved in three arbitration petitions, on whether it could extend the mandate of an arbitral tribunal under Section 29-A(4) of the 1996 Act after the said mandate had terminated.
Petitioners in all three applications had prayed for extension of the Arbitrators’ mandates in order to make and publish the awards, while the respondents had opposed the aforesaid prayer.
Petitioners had sought extension of the arbitrators mandate in exercise of the Court’s power under Section 29-A(4), but the relief could not be granted since the respondents did not agree to extend the mandate, and the extension application had been filed after expiry of the period for making award under Section 29-A(1).
Petitioners argued that an application for extension of arbitrator’s mandate would be maintainable even if filed after the expiry of time u/s 29-A(1) of the 1996 Act, since under s.29-A(4), the Court had the power to extend it either before or after the period u/s 29-A(1), if sufficiency of cause u/s 29-A(5) had been made out.
Petitioners relied on the 176th and 246th Law Commission Reports to submit that the legislative objective re: arbitration, was to expedite the process and that to achieve such ends, the Court had been conferred with sufficient powers to extend the mandate of arbitrators if sufficient cause had been made out.
Respondents, on the other hand argued that the 176th Law Commission Report read with Section 29A of the Arbitration Act, clearly states that the mandate of an arbitrator would terminate by operation of law, if the extension application was not made within period of the mandate.
It was argued that as opposed to suspension of mandate, the legislature had used the word “terminate” to mean that proceedings would end if award was not made within the statutory time.
Findings of the Court
In dealing with the arguments of the parties, the Court looked at the Section 29 of the Arbitration Act, and held that Section 29-A(4) and (5) did not contemplate any further windows for extension of arbitrators’ mandate, outside of an application being made for a 12 month extension, followed by another 6 months extension by consent of the parties, if the award was not made within the prescribed time-frame.
It was held that the insertion of Section 29-A into the Act in 2016 was “an intervention in the sense of mandating statutory timelines for making of the award.”
Court held: The erstwhile position in law thus makes it clear that the Court was empowered to extend the mandate for making the award regardless of whether the time had expired for making the award. Section 29-A changed all that and brought in not only strict time-limits for making of the award but also the concept of termination of the mandate if the award is not made within the prescribed statutory timelines.
In further examining whether Section 29-A(4) gave Courts the power to extend the mandate of a tribunal if an application for extension was made after the statutory period, the Court looked at the legislative history behind insertion of Section 29-A to the Arbitration Act in 2016.
It observed: The mandate of the arbitral tribunal to make the award within 12 months after completion of pleadings [under section 29-A(1)] or within the extended time of 6 months [under section 29-A(3)] would stand terminated once the timelines are exhausted and the mandate would not remain in suspension till filing of the application for extension of the mandate under section 29-A(4).
To arrive at a decision over whether an extension application could be filed after the mandate of the tribunal had terminated u/s 29-A, the Court looked at the interpretation of the word “extend” as it appeared in Section 29.
It was observed that the “conscious use” of the word ‘extend’ in Section 29-A(4) would indicate that the mandate of the tribunal must be in subsistence at the time of making an application for extension. Court held that words used in the statute must be given literal meaning with due regard for their contextual placement and legislative intent. It found:
The words “extended period” read with “…the mandate of the arbitrator(s) shall terminate….” in section 29-A(4) unerringly presumes that the mandate is a continuing one at the time of making the application for extension. If the application is not made within a continuing mandate, the mandate shall simply terminate…parties must take effective and time-bound steps for extending the arbitral tribunal’s mandate for making the award within the subsistence of the mandate and not after the mandate expires.”
Finally, in observing that the object of inserting Section 29-A was to expedite the arbitration process, the Court concluded that stakeholders in an arbitrations process ought to be vigilant to expediting the process in order to enable an award.
It was held that a party could not be permitted under Section 29-A to make an application under subsection (4) for extending mandate of an arbitrator at any time after the mandate had expired, and that if the Court would empower itself to extend the aforesaid mandate, then “it would inevitably lead to breaching limits for making the award envisaged under Section 29-A.”
The Court under section 29-A(4) and (5) of the Act can only pass an order for permitting extension for sufficiency of cause. Section 29-A(4) uses the mandatory-peremptory words “…… the mandate of the arbitrator(s) shall terminate….”.
In the present applications, the mandates admittedly terminated before the applications for extension were filed in the Court. The Court is therefore statutorily - precluded from extending the mandate.
Coram: Justice Moushumi Bhattacharya
Case: Rohan Builders (India) Pvt. Ltd. v Berger Paints India Limited & connected applications
Citation: 2023 LiveLaw (Cal) 266
Click Here To Read/Download Judgment