Author
Syed Raiyyan, Student at Rajiv Gandhi National University of Law
Keywords
Arbitration, Section 29A, Extension of Mandate, Termination, Calcutta High Court,
Abstract
The case of Rohan Builders (India) Private Limited v. Berger Paints India Limited(Rohan Builders) highlights a contentious interpretation of Section 29A(4) of the Arbitration and Conciliation Act by the Calcutta High Court. This judgment deviates from the conventional understanding of the provision, creating ambiguity around the timing for seeking an extension of the arbitral tribunal’s mandate. Section 29A mandates that arbitral awards must be made within 12 months, extendable by 6 months with parties' consent. The Court’s interpretation stipulates that extension applications must be filed before the mandate terminates, conflicting with other high courts that allow post-expiry applications. This analysis explores the reasoning behind the Calcutta High Court's decision, examining the legislative intent and the meanings of terms like "termination" and "extension." It critiques the rigidity of this interpretation, arguing that it undermines the flexibility inherent in arbitration. The comment suggests legislative amendments to reconcile the need for timely arbitration with its flexible nature.
Introduction
In Rohan Builders, the Calcutta High Court (CHC) held that once the period under Section 29A(1) and Section 29A(3) comes to an end, no appeal to extend this period under Section 29(4) can filed before the Court. In doing so, the Court appears to have gone against a rather simple understanding of Section 29A(4) of the Arbitration and Conciliation Act.
Section 29A was brought in through an amendment to ensure expeditious disposal of arbitration suits. As it stands today, Section 29A(1) provides that the arbitral award is to be made within 12 months after the completion of pleadings in disputes in domestic arbitration. Section 29A(3) allows the parties to, by consent, extend the said period for making an award for up to six months. Section 29A(4) stipulates that if this period under 29A(1) and (3) lapses and no award is passed, the authority of the arbitral tribunal is ipso facto terminated, “unless the Court has, either prior to or after the expiry of the period so specified, extended the period” if it believes there exist sufficient cause, extend the timeframe ‘on such terms and conditions’ as may be imposed by the Court.
The Section fails to clarify if it is the application to extend the period that can be filed after the expiration of the period or whether it is only the order of the court that can be given before or after the ‘termination’ of the tribunal’s mandate. On this question, various High Courts have held that the application for the extension of the period can be filed even after the period has come to an end. In Rohan Builders, the CHC decided that the application for the extension of the eighteen-month (or twelve) period must be filed while the period is still going on and when the mandate of the tribunal is still in place. This deviation, it is argued,stems not from a gaffe but is rather rooted in a problematic gap that pervades the law.
The Judgement
The CHC primarily relied on the meaning of the ‘termination’ to reach its decision. Firstly, it went into the intentions of the Legislature in deciding to use the term. It concluded that the Legislature had very consciously decided to use the term ‘termination’, contrasting it with the suggestions from the 176th Law Commission Report, which envisioned the concept of “suspension of mandate” to be made “applicable for the intervening period between “termination of mandate” and “filing of an application for extension of mandate”.
The Court, then, delved into the scope of the word ‘extension’ used in the Section. Citing Provash Chandra Dalui v. Biswanath Banerjee, it observed that “the Supreme Court drew a distinction between the words “extension” and “renewal” and explained that to “extend means to enlarge, expand, lengthen, prolong, to carry out further than its original limit”.” It held that since the wording of the Section uses the verb ‘extend’ instead of ‘renew’ or ‘revive’, it can only come into play if the mandate of the tribunal exists. As a result, it concluded, once the mandate ends, no application can be moved to the Court. Moreover, it clarified that the phrase ‘prior to or after the expiry of’ is meant not for the filing of the application but solely for the disposal of the application filed during the twelve or the eighteen months, i.e. till when the mandate had not terminated.
Analysis
Based on the various judicial pronouncement on the Section, two broad interpretations can be made, each construing the phrase ‘prior to or after the expiry of’ differently. The first interpretation contends that nothing in the Section prevents the parties from approaching the court even after the period specified has expired. The Court is well empowered to grant the extension in such situations, as long as it is satisfied that sufficient cause exists for the same. The second interpretation, the one taken by the CHC, is that the phrase only means that the Court is at liberty to grant the extension even after the mandate has terminated, however, it cannot be said that this same is true for filing of applications before the Court. The Court can only be approached if the period specified in the Section is still going on and has not expired.
I
The first interpretation raises significant doubts, particularly regarding the limitation period for filing an extension application after the mandate has "terminated." It would be unreasonable to argue that no such restriction is necessary. The Bombay High Court’s decision in Nikhil H. Malkan v. Standard Chartered Investment and Loans (India) Ltd. is pertinent for this discussion. Faced with the same question as the CHC in Rohan Builder, it held “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.” Against the question of limitation for filing such appeal, the Court reasoned that delays in filing could be mitigated by the court's discretion in granting extensions only if sufficient grounds exist. Yet, this does not resolve the limbo in which the tribunal's status would remain under this interpretation. This concern is heightened by Section 29A(4), which states that if an application for extension is accepted, the mandate of the tribunal "continues" until the proceedings are concluded. If the interpretation is accepted, it raises questions about how a terminated mandate can continue. Will this mean that the tribunal that has lost its right to adjudicate a particular case will be revested with it; albeit temporarily, i.e. till the disposal of the application; if the Court, solely on application of one of the parties, admits a case filed under Section 29A(5)? Would this mean the tribunal's mandate is revived rather than continued, and if so, has the legislature erred in using this term?
II
The CHC’s decision tried to answer these questions. It sought to understand the meaning of the term ‘termination’ used in the clause as opposed to ‘suspension,’ as suggested by the 176th Law Commission Report. It found that the Commission proposed for the mandate to be suspended once the time limit provided comes to an end, and reached the ‘inescapable conclusion’ that this view ‘did not find favour’ with the Legislature, which substituted the word ‘suspended’ with ‘terminated in the final provision. Therefore, it held that once the period provided in the clause comes to an end, the mandate of the tribunal shall stand terminated.
Secondly, it went into the meaning of the term extension. The Court rightly noted that the term ‘extension’ can only mean furthering or enlarging something that already exists. It would be erroneous to equate it with ‘revival’ or ‘renewal’, which would mean restarting something that has ended. If the mandate of a tribunal is terminated, and thereby, its right to adjudicate on a dispute comes to an end, it can only adjudicate the issue after it is revested with that right, and its mandate is revived. Since the word ‘extended’ is used in the provision, the Court’s power under Section 29A(4) should be understood as limited to enlarging the mandate's period, not renewing it.
Importantly, the Delhi High Court in ATC Telecom Infrastructure Pvt. Ltd. v. Bharat Sanchar Nigam Ltd. rejected this interpretation of the CHC. While holding that there is no restriction on the parties to file an application within the period provided, it asked that if the interpretation of the CHC the case, then how exactly are we to conclude that the Court has the power to pronounce the order after the mandate has terminated? Would not any extension of the period mean that the court is renewing the mandate of the tribunal, and if so, how can that be allowed if the CHC’s reasoning is followed? The answer lies in the Section itself. Firstly, the Section is couched as “the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period.” The word ‘unless’ signifies that the mandate itself is not terminated once the application is admitted, granted that it was filed within the period specified. Moreover, the phrase ‘either prior to or after the expiry of’ is followed by the ‘period so specified’, and not ‘mandate’. Therefore, the Court can only extend the mandate after the period specified in the clause has expired, and not after the mandate has expired. Secondly, this is supported by “Providedfurther that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application.” The word ‘continues’ here again clarifies that if an application is filed for the extension of the period laid down in Section 29A(1) and (3), then the mandate would continue.
The interpretation of the CHC suffers from a different drawback. The interpretation would shackle the Section with a rigidity that may hinder the flexibility of arbitration– its key advantage over traditional legislature. The BN Srikrishna Committee appositely noted that countries like the UK, Singapore, and Hong Kong do not have a clause akin to 29A, allowing parties to determine the pace of proceedings. The Committee also noted how the Section discourage institutionalised arbitration as the arbitration centres often have their own time frames and guidelines. On the other hand, the 176th Law Commission Report highlighted the need for Section 29A to address arbitration delays. The law, however, should not be forced to one of the two extremes. For instance, a provision that subjects the clause to the agreement between the parties that is reached prior to the commencement of the proceedings could be inserted and may help in ensuring the arbitrations security. These agreements can also include the rules and time frame set up by the institutions to which the party have referred their dispute. Thus, it is quite possible to give a liberal meaning to the Section that it, while providing a timeframe, does not become so recalcitrant that it restrains the flexible nature of the Arbitration.
Conclusion
The error of law is often found through its application. The enforcement of this particular clause has highlighted its shortcomings. The conflicting definitions provided by different Courts have only brought to the surface the latent apertures in the clause. The judgment of the Calcutta High Court does try to fill these gaps but at the same time, its interpretation leads to rigidity and inflexibility that could potentially stifle the flexible and informal nature of arbitration. An appeal now remains pending in the Supreme Court against the decision of the Calcutta High Court. It is hoped that the Court keeps the intricacies and nuances in mind while pronouncing its judgment, and clears these clouds of uncertainties.
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