INTRODUCTION

In the recent case of Nikhil H. Malkan v. Standard Chartered Bank (Arbitration Petition (Lodging) No. 28255 of 2023), the Bombay High Court addressed a significant legal issue concerning the interpretation of Section 29A(3) of the Arbitration and Conciliation Act, 1996 ("the Act"). This specific legal question has given rise to conflicting perspectives across various high courts, underscoring the need for the Supreme Court of India to intervene and provide a definitive interpretation of the provision.

BACKGROUND

In the case of Nikhil Malkan (mentioned above), the parties' disputes were under consideration by an arbitral tribunal. According to Section 29A(1) of the Act, the arbitral tribunal is obligated to issue an award within 12 months from the completion of pleadings. This period can be extended by the parties' consent for an additional 6 months as per Section 29A(3) of the Act. In this specific instance, the pleadings concluded on February 07, 2022, setting the statutory deadline for the arbitral tribunal's mandate at February 06, 2023. The parties mutually agreed to extend this period until August 06, 2023, in accordance with Section 29A(3) of the Act.

However, despite the extension, the arbitration was not concluded by August 06, 2023. The final hearing commenced on September 11, 2023, concluding on October 12, 2023, with the matter reserved for award. On October 10, 2023, petitioner Mr. Nikhil Malkan filed an application under Section 29A(4) of the Act before the Bombay High Court, seeking an extension of the arbitral tribunal's mandate beyond the expired period of August 06, 2023. The respondent opposed the application, contending that once the mandate automatically terminated on August 06, 2023, the court cannot entertain an application for an extension, as it has already ceased to exist by operation of law. The legal question addressed by the court was whether, after the statutory mandate of the arbitral tribunal has expired, the court can entertain an application for an extension of the mandate or not.

LEGAL POSITION AND ANALYSIS BY THE COURT

The Act was amended in the year 2015, wherein Section 29A was introduced for the first time with a view to ensure adjudication of arbitration in an expeditious manner. Originally, Section 29A of the Act provided for the disposal of arbitration within a period of 12 (twelve) months from the date of reference of the dispute to arbitration. Section 29A of the Act was amended in the year 2019, and the legislature provided that the period of 12 (twelve) months for the adjudication of arbitration dispute would commence from the date of completion of pleadings. Therefore, as per the present arbitration regime, an arbitration is required to be completed by the tribunal within a period of 12 (twelve) months from the date of completion of pleadings by the parties to the arbitration. This is envisaged under Section 29A(1) of the Act. This period of 12 (twelve) months can further be extended by a period of 6 (six) months with the consent of both parties under Section 29A(3) of the said Act. Therefore, the statute warrants an arbitration to be completed and disposed off within a maximum period of 18 (eighteen) months from the date of completion of the pleadings.

Section 29A(4) of the Act outlines the consequences if an award is not passed within the specified 18-month period, as discussed earlier. According to this provision, the mandate of the arbitrator or arbitral tribunal automatically ceases at the end of the 18-month period, unless the court, either before or after the specified period, extends it. While Section 29A(4) seemingly grants the court the authority to extend the 18-month period upon satisfaction of justifiable reasons, it is silent on when such an extension must be sought before the court. This lack of clarity has led to varying interpretations among different High Courts.

The Calcutta High Court and the Patna High Court assert that although the court retains the power to extend the mandate of the arbitral tribunal before or after the statutory period's expiration, an application for such an extension must be submitted before the tribunal's mandate expires. They argue that once the 18-month period elapses, there is no provision in the Act allowing a party to file an application for an extension, as the tribunal's mandate is terminated by operation of law. For example, if the initial 12-month period following the completion of pleadings is over and the parties have mutually extended it by 6 months, any application for a subsequent extension must be filed before the expiration of this extended 6-month period. This interpretation is consistent with decisions such as the one in the case of South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited (2023 SCC Online Pat 1658).

Contrarily, the Delhi High Court, in the case of ATC Telecom Infrastructure Private Limited v. Bharat Sanchar Nigam Limited, takes a different stance. It disagrees with the Calcutta and Patna High Courts, arguing that barring parties from submitting an application after the arbitral tribunal's mandate has expired would defeat the entire purpose of the Act. The Delhi High Court emphasizes that the Act's objective would be compromised if parties are restricted from seeking an extension after the tribunal's mandate has concluded. This position is reflected in the court's observation that:

"[...] the entire objective of the Act would be defeated if the parties are barred from preferring an application after the mandate of the arbitral tribunal is over."

“16. No doubt, the purpose of Section 29A of the A&C Act is to prescribe and regulate the timelines for completion of the arbitral proceedings; however, a perusal of Section 29A of the A&C Act itself makes it clear that it does not contemplate any inflexible outer deadline for completion of arbitral proceedings, and affords flexibility to the contracting parties, and also to the Court for extension of the time period in appropriate cases. The purport of Section 29A of the A&C Act was clearly not to tie the hands of the parties or the court, and prevent extension of time even where warranted, simply because the petition under Section 29A(4) of the A&C Act came to be filed a few days after expiration of the deadline contemplated under Section 29A(1) or Section 29A(3) of the A&C Act. Had it been intended by the legislature to provide for a blanket prohibition on extension of time after the expiration of the period contemplated under Section 29A(1) or Section 29A(3) of the A&C Act (unless a petition under Section 29A(4) of the A&C Act was filed prior to expiry of the said period), nothing would have been easier than to say so.”

In the case of Malkan, the Bombay High Court has aligned its perspective with that of the Delhi High Court and, in contrast, disagreed with the positions taken by the Calcutta High Court and Patna High Court. The Bombay High Court, upon a thorough examination of the judgments from the Delhi, Patna, and Calcutta High Courts, concluded that:

"15. Having perused Section 29A(4) of the said Act, particularly in the light of use of the words 'either prior to or after the expiry of the period so specified,' this Court finds that the purpose for which Section 29A was introduced in the aforesaid Act would be defeated if it is to be held that the Court could exercise power to extend the mandate of the learned Arbitrator even after expiry of the extended period only if the application or petition for extension of mandate is filed prior to expiry of such mandate. 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. The aforesaid provision i.e. Section 29A of the aforesaid Act, is a provision that enables the Court to pass appropriate orders to ensure that the arbitral proceeding reaches its logical conclusion. No purpose would be served in holding that if such an application or petition for the extension of the mandate of the learned Arbitrator is filed after the expiry of the mandate, the Court would be in no position to entertain the same. Any apprehension regarding inordinate and unexplained delay on the part of the party approaching the Court can be addressed by holding that the Court would extend the mandate only when it is satisfied that sufficient grounds are made out for granting an extension of the mandate of the learned Arbitrator."

“16. In view of the above, this Court respectfully disagrees with the views expressed by the learned Single Judge of the Calcutta High Court in the case of Rohan Builders (India) Private Limited Vs. Berger Paints India Limited (Arbitration Petition 328 of 2023) and the Division Bench of the Patna High Court in the case of South Bihar Power Distribution Company Limited Vs. Bhagalpur Electricity Distribution Company Private Limited a Private Limited Company registered under the Companies Act, 1956 (supra) in the aforementioned judgments. This Court is in agreement with the view adopted by the Delhi High Court in the case of ATC Telecom Infrastructure Private Limited Vs. Bharat Sanchar Nigam Limited (O.M.P (Misc) (Comm) 466/2023).”

CONCLUSION

The legal question regarding the timing of filing an application for the extension of arbitration mandate has led to divergent opinions among various High Courts. This issue is currently awaiting resolution by the Supreme Court in the case of Vridavan Advisory Services LLP v. Deep Shambhulal Bhanusali (Special Leave Petition (Civil) No. 24489 of 2023). The outcome of this case is expected to have significant implications for the mandates of arbitral tribunals as outlined in the Act.

Given the lack of a definitive ruling by the Supreme Court on this matter, it is prudent to exercise caution and approach the court for an extension of the arbitral tribunal's mandate before it expires. This cautious approach is advisable in light of the varied conclusions reached by different High Courts. Until the Supreme Court provides clarity on this legal point, seeking an extension before the expiration of the statutory period is a precautionary measure to ensure compliance with any future rulings on the matter.

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