TaxTMI 
TaxTMI 
2024 (9) TMI 610
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.... SANJIV KHANNA , J. Leave granted. 2. This common judgment decides whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 19961 can be filed after the expiry of the period for making of the arbitral award. The High Court at Calcutta in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited2 has held that the application for extension of time under Sections 29A(4) and 29A(5) of the A & C Act can only be entertained if filed before the expiry of the mandate of the arbitral tribunal. The High Court at Calcutta held that once the mandate of the arbitral tribunal is terminated by afflux of time of twelve months, or when so consented to by the parties after a further six-month extension, the power of the court to extend time under Section 29A(4) cannot be invoked. A similar view has been taken by a Division Bench of the High Court of Judicature at Patna in South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited.3 However, a catena of judgments from other High Courts have taken an opposite view. The High Court of Delhi in ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar ....
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....ess the court has, either prior to or after the expiry of the period so specified, extended the period: Provided that while extending the period under this sub-section, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay: Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced. (5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the court. (6) While extending the period referred to in sub-section (4), it shall be open to the court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and ....
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....nder Section 29A(1) is not applicable to international commercial arbitration. As per the amendment made by Act No. 33 of 2019, the twelve-month period commences from the date of completion of pleadings under Section 23(4) of the A & C Act. Earlier, Section 29A(1) had stipulated that the twelve-month period would begin from the date the arbitral tribunal enters upon reference. Section 29A(2) states that if the award is made within six months, the arbitral tribunal will be entitled to receive such amount as additional fees as the parties may agree. 6. Section 29A(4) is the provision which requires interpretation. It states that where the award is not made within the specified period of twelve or eighteen17 months, the mandate of the arbitral tribunal will terminate. However, this provision does not apply if the court has extended the period, either before or after the expiry of the initial or the extended term. In other words, Section 29A(4) empowers the court to extend the period for making of the arbitral award beyond a period of twelve months or eighteen months, as the case may be. The expression "either prior to or after the expiry of the period so specified" is unambiguous. It....
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....s, an interpretive exercise must be conducted with careful consideration of both the text and the context of the provision. Therefore, sometimes the court eschews a literal construction if it produces manifest absurdity or unjust results.19 10. The word "terminate" in Section 29A(4) has to be read in the context of the said provision.20 It should not be read as an isolated word with a strict dictionary meaning, but rather in conjunction with the surrounding words and expressions which warrant recognition and consideration. This evinces the legislative intent. Secondly, the legislative preference for the term "terminate" over "suspend" is apparent, since the word "suspend" could cause incongruity and a legal conundrum if no party files an application for an extension of time. In such a scenario, the arbitral proceedings would stand suspended ad infinitum. Therefore, the legislature by using the word "terminate" intends to affirm the principle of party autonomy. Resultantly, if neither party moves an application for an extension of time for making the award, the arbitration proceedings are terminated. Consequences follow. Clearly, the use of the word "suspension" would have led to i....
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....ng of the statute. If the legislature intended such an outcome, it could have stated in the statute that - "the Court may extend the period only if the application is filed before the expiry of the mandate of the arbitrator, not after". Indeed, there would have been no need to use the phrase "after the expiry of the period" in the statute. In other words, a rigid interpretation would amount to legislating and prescribing a limitation period for filing an application under Section 29A, when the section does not conspicuously so state. Rather, the expression and intent of the provision are to the contrary. 14. In our opinion, a restrictive interpretation would lead to rigour, impediments and complexities. A party would have to rush to the court even when the period of arbitral mandate of twelve months has not expired, notwithstanding the possibility of a consent-based extension of six months under Section 29A(3). Narrow interpretation presents an additional challenge by relegating a faultless party to a fresh reference or appointment of an arbitrator under the A & C Act25, thereby impeding arbitration rather than facilitating it.26 The legislature vide the 2015 Amendment envisions a....
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....may be cases where the court feels that more than 24 months is necessary. It can be left to the court to fix an upper limit. It must be provided that beyond 24 months, neither the parties by consent, nor the arbitral tribunal could extend the period. The court's order will be necessary in this regard. But in order to see that delay in disposal of extension applications does not hamper arbitration, we propose to allow arbitration to continue pending disposal of the application. 2.21.5 One other important aspect here is that if there is a delay beyond the initial one year and the period agreed to by the parties (with an upper of another one year) and also any period of extension granted by the Court, there is no point in terminating the arbitration proceedings. We propose it as they should be continued till award is passed. Such a termination may indeed result in waste of time and money for the parties after lot of evidence is led. In fact, if the proceedings were to terminate and the claimant is to file a separate suit, it will even become necessary to exclude the period spent in arbitration proceedings, if he was not at fault, by amending sec. 43(5) to cover such a situation. Bu....
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....ction 29A(4) - may substitute one or all the arbitrators. Section 29A(7) states that if a new arbitrator(s) is appointed, the reconstituted arbitral tribunal shall be deemed to be in continuation of the previously appointed arbitral tribunal. This obliterates the need to file a fresh application under Section 11 of the A & C Act for the appointment of an arbitrator. In the event of substitution of arbitrator(s), the arbitral proceedings will commence from the stage already reached. Evidence or material already on record is deemed to be received by the newly constituted tribunal. The aforesaid deeming provisions underscore the legislative intent to effectuate efficiency and expediency in the arbitral process. This intent is also demonstrated in Sections 29A(8) and 29A(9). The court in terms of Section 29A(8) has the power to impose actual or exemplary costs upon the parties. Lastly, Section 29A(9) stipulates that an application for extension under sub-section (5) must be disposed of expeditiously, with the endeavour of doing so within sixty days from the date of filing. 17. As per the second proviso to Section 29A(4), the mandate of the arbitral tribunal continues where an applicat....
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.... Vidyut Vitran Nigam Limited, 2023:DHC:5745 et al. 7 2023:BHC-OS:14063. 8 2023 SCC OnLine Ker 5151. 9 2020 SCC OnLine Mad 737. 10 2023 SCC OnLine J&K 1255. 11 2024 SCC OnLine Cal 6909. 12 This Court while issuing notice in the Civil Appeal a/o SLP (C) No. 2115 of 2024 had granted a stay on the operation of the common judgment in Rohan Builders (India) Pvt. Ltd. (supra). 13 Paragraph 3 to the First Schedule of the Arbitration Act, 1940 reads: "3. The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow." 14 "28. Power to Court only to enlarge time for making award.- (1) The Court may, if thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award. (2) Any provision in an arbitration agreement whereby the arbitrators or umpire may except with the consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of no effect." 15 Se....
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.... arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5) shall be disposed of by the court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.' " 16 Section 29A was further amended vide the Arbitration and Conciliation (Amendment) Act, 2019 (Act No. 33 of 2019) which read: "6. Amendment of Section 29-A.- In Section 29-A of the principal Act,- (a) for sub-section (1), the following sub-section shall be substituted, namely:- '(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under subsection (4) of Section 23: Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twel....