Court Has To Necessarily Extend Mandate Of The Arbitrator If No Ground For Its Substitution Is Made Out, No Need For A Separate Section 29A Application: Delhi High Court

The High Court of Delhi has held that a Court exercising powers under Sections 14 & 15 of the A&C Act can extend the mandate of the arbitrator if no ground for its substitution is made out in the application. The bench of Justice Neena Bansal Krishna held that once the Court is satisfied that there is no ground for substitution of the arbitrator, the Court can extend the mandate even without an application under Section 29A(4) of the Act. The Court held that requirement of an application is not a pre-condition for seeking extension of the mandate of the arbitrator, moreover, the Court's discretion is not predicated on an application and it can exercise this discretion otherwise also. Facts The parties entered into a Loan Agreement dated 15.02.2014 wherein the respondent no.1 took a loan from the petitioner. The other respondents stood as guarantors for the loan. A dispute arose between the parties when the respondents failed to repay the loan amount. Accordingly, the petitioner invoked the arbitration clause and the dispute was referred to arbitrator. Before the arbitrator, the respondents moved an application under Section 16 of the Act on the ground of non-stamping of the agreement. The tribunal allowed the application. Resultantly, the petitioner filed an appeal and the order of the tribunal was reversed. Against this, the respondents preferred an SLP. The Apex Court disposed of the SLP by observing that the arbitrator can impound the agreement and get it stamped. Thereafter, the respondents preferred two clarificatory applications before the Apex Court. Thereafter, the respondents preferred an application under Section 33, 35 and 38 of the Stamps Act. Thereafter, the arbitrator could not conduct proceedings on a couple of hearings. Aggrieved thereby, the petitioner filed an application under Section 14 & 15 of the Act seeking termination of the mandate of the arbitrator and appointment of a substitute arbitrator. Submissions by the Parties The petitioner made the following submissions: No effective hearing has taken place in the proceedings since 2023.The arbitrator has not been able to effectively hear the matter on last 3 hearings. The mandate of the arbitrator expired in October 2022 and the extended period of 6 months with consent has also expired in April 2023. Once the mandate has expired, the tribunal becomes functus oficio and de jure unable unable to proceed with the arbitral proceedings. Analysis by the Court The Court observed that the arbitrator entered reference in May 2019 and thereafter, an application under 16 was filed before it on 21.08.2019 which was disposed of on 22.10.2020. The Court held that the long delay in the disposal of this application was the onset of the covid-19 and the consequent nationwide lockdown. The Court also observed that against this order, an appeal was allowed against which an SLP and two clarificatory applications were preferred. The Court held that from October 2020 till July 2022, the proceedings could not proceed due to ongoing litigation between the parties. The Court also observed that on 17.08.2023, the parties and the tribunal had a Case Management hearing and dates till 14.11.2023 were fixed for hearing. The Court held that the delay in the proceedings cannot be attributed to the arbitrator as initially it was on account of Covid-19 virus and the lockdown and thereafter, on account of the multiple rounds of litigation between the parties. The Court held that the petitoner has not been able to satisfy that the tribunal has been negligent in conducting the arbitral proceedings. Next, the Court considered the issue of whether the mandate of the tribunal could be extended, after its expiry, without an application under Section 29A of the Act. The Court held that a Court exercising powers under Sections 14 & 15 of the A&C Act can extend the mandate of the arbitrator if no ground for its substitution is made out in the application. The Court held that once the Court is satisfied that there is no ground for substitution of the arbitrator, the Court can extend the mandate even without an application under Section 29A(4) of the Act. The Court held that requirement of an application is not a pre-condition for seeking extension of the mandate of the arbitrator, moreover, the Court's discretion is not predicated on an application and it can exercise this discretion otherwise also. The Court observed that both parties have consented to the extension in view of substantial investment of time and money. Accordingly, the Court extended the mandate by 6 months. Case Title: Religare Finvest Limited v. Widescreen Holdings Pvt LtdCitation: 2024 LiveLaw (Del) 482 Date: 04.04.2024 Counsel for the Petitioner: Mr. Ashish Dholakia, Sr. Advocate with Mr. Vipin Tyagi and Ms. Priyamvada Mishra, Advocates. ...

Court Has To Necessarily Extend Mandate Of The Arbitrator If No Ground For Its Substitution Is Made Out, No Need For A Separate Section 29A Application: Delhi High Court

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