By: Digvijay Khatai and Jibisa Janvi Behera.

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Introduction

In a recent judgment pronounced on 6^th November 2023, the Delhi High Court ruled that a Court exercising powers under Section 29A of the Arbitration & Conciliation Act 1996   (Arbitration Act) is empowered to extend the mandate of the arbitrator even in cases where the application seeking extension of time is not made within the time limit fixed for the making of the award. The Sachin Datta Bench held that in cases where arbitrators have acted expediently, backed by the consent of the concerned parties and where ample justifications exist for granting extension of arbitrator’s mandate, applications made after the expiry of the same are valid in law.

In this blog, the authors delve deeply into the approach taken by the Delhi High Court ATC Telecom Infrastructure Pvt Ltd v. BSNL (ATC Telecom case) judgment to analyze some unintended implications that might arise with it.

Factual Matrix

The case denotes a dispute between ATC Telecom Infrastructure Private Limited (ATC Telecom) and Bharat Sanchar Nigam Limited (BSNL)  wherein the Bench of Justice Sachin Datta was hearing two applications under Section 29A-(4) for the extension of arbitrator’s mandate. The second application was submitted by ATC Telecom a month after the expiry of the mandate. Hence, the maintainability of the same was challenged by BSNL on the grounds that it was incumbent upon ATC to apply for the same during the subsistence period i.e., before the expiry of the mandate. 

Existing Jurisprudence

The 2015 amendment inserted Section 29-A to the act wherein sub-section (1) limits the time period for the arbitral tribunal to announce the arbitral award to twelve months from the date of completion of pleadings, the time of which is enshrined under sub-section 23(4). Further, the same can be extended, with the consent of the parties for a period not extending six months under sub-section 29-A(3). However, in case the arbitral tribunal fails to announce the award either under the time period under sub-section (1) or under sub-section (3), the mandate of the arbitrator shall end unless the court extends the mandate, under sub-section (4), for a sufficient cause upon application by the parties under sub-section (5). 

The Delhi HC in Reliance Infrastructure Ltd. v. Madhyanchal Vidyut Vitran Nigam Ltd and the  Kerela HC in Hiran Valiiyakkil Lal v. Vineeth M.V. ruled that that the arbitrator’s mandate can be extended by the Court either prior or after the expiry of the time period to make arbitral awards on account of a ‘sufficient cause’ which has to be justified by the applicant. 

Similarly, emphasizing the need to adhere precisely to the deadlines mentioned in the aforesaid provisions, the Bombay HC in the Fed bank Financial Service Ltd through its AO Zahid Sultan v Narendra H Shelar through his LRs & Ors ruled that the applicant shall file for extension as soon as possible without waiting for the mandate to expire and that any delay shall not be entertained. Similarly, in the Rohan Builders (P) Ltd V. Berger Paints India Ltd, Calcutta HC ruled that if the arbitrator’s mandate comes to an end upon completion of statutory timelines under Section 29A of the 1996 act, it is no longer possible to seek an extension and hence any application after such expiry shall not be entertained. A further emphasis was laid on the reasoning that had the framers intended to allow the application after the expiry, the same wouldn’t have been termed ‘termination’ but would have used ‘revive’ or ‘renew’. 

However, in Wadia Techno-Engineering Services Ltd v. Director General of Married Accommodation Project, the Delhi HC saw no justification in the text of the aforesaid provisions to hold that the power of the court to extend the mandate of the arbitrator could be exercised only in cases where the application has been made ‘prior’ to the expiry of the same.

The Ruling

Taking cognizance of the aforesaid judgments, the Delhi HC chose not to concur with the reasoning of the Rohan Builder (Supra) judgment. The Court described the Rohan Builder (supra) ruling as ‘potentially thwart rather than subserving the legislative intent’.  

Additionally, the Court had to rely on the Letang v. Cooper, Mobarik Ali Ahmed v. State of Bombay and the Ratanlal Bansilal v. Kishorilal Goenka judgments to bring to notice how legislative intents behind statutes must be construed with intentions and goals of the Parliament coupled with the motive that they seek to achieve and not merely Law Commission reports and absolute terminological interpretations of the statutes.

The Court ruled that an application under section 29A(4) can be filed after the expiry of the mandate of the arbitrator. It reasoned that since the court has been empowered by the section to extend the arbitrator’s mandate either ‘prior’ or ‘after’ the expiry of the same, it sees no reason why an application of extension ‘after’ the expiry shall not be entertained. Such a prospect has no statutory backing whatsoever.  While adjudicating the facts of the impugned Telcom (supra) case, it was observed that the arbitrator had expeditiously acted from the beginning and has also recorded the consent of the concerned parties for extending the period of the mandate beyond the statutory timelines.  Taking cognizance of ample justification to extend the mandate, it saw no reason for not entertaining the petition, merely on the grounds that the same was made after expiry. Therefore, the reasoning is also in consonance with Section 29A(5) that emphasizes ‘sufficient cause’ as a pre-condition for granting extension beyond the said timelines.

The Justice Sachin Datta Bench also went further to state that to comply with the reasoning laid down in the Rohan Building (Supra) would not only undermine the efficacy of the arbitral procedure but would jeopardize party autonomy, which finally defeats the purpose of arbitration.

The Need For Adhering to a Reasonable Time Limit

While we acknowledge that the ruling aims to restore the fundamental objectives of arbitration i.e., party autonomy, instead of the legislative objectives that have been pursued thus far, we also must acknowledge that a loophole is being created in the process.  

Summing up deadlines mandated under sub-sections 29-A(1), 29-A(3) and 29-A(4) implies that it has been two years since the arbitrators received the notice of appointment and the arbitral award is still unannounced. While the Delhi HC ruling allows applications for the extension of arbitrator’s mandate, after the expiry of the same, it does not provide a ‘reasonable time limit’ in which such an application is made. The absence of such a time limit can have implications that can undermine the efficacy of the arbitral procedure. With the absence of a reasonable time limit, a party to an arbitration proceeding will have a free pass to apply for such extensions offhandedly, that can even go beyond a period of eight months or a year. This will extend the arbitral procedure to period extending to a period of three years, contrary to what was initially intended to be one year and six months. Further, such a party can justify the delayed application after the expiry, with the ratio laid down in the ruling.

 One might argue this contention with the ‘sufficient cause factor’ enshrined under sub-section 29-A(5). However, we need to understand that the ‘sufficient cause factor’ intends to extend the arbitrator’s mandate beyond the statutory timelines under the section; it has no rational nexus with the justification of an ‘unreasonably delayed’ application ‘after’ the expiry of the mandate.    

It is completely agreed that in cases where arbitrators have acted expeditiously throughout the proceedings and the consent of parties have been recorded; the ingredient of sufficient cause is fulfilled to extend the mandate of arbitrators beyond the statutory deadline of two years. However, when the court allows applications after the expiry of the mandate, it is crucial to adhere to a reasonable time limit, wherein such an application is made. While the Court has sought to protect party autonomy under the provision, it also needs to cater to the time-bound aspect to maintain the efficacy of the arbitral procedure.

Conclusion

The ATC telecom ruling has sought to protect party autonomy in cases where an extension for arbitrator’s mandate is sought by applicants after the expiry of the mandate under Section 29A, on grounds of expeditious behavior of the arbitrator and consent of all the parties. Where an application for extension is allowed after the expiry of the arbitrator’s mandate, a reasonable time limit must be prescribed to prevent the unintended implications discussed above. While the legal issue has not yet been adjudicated by the Supreme Court, it must be realized that the prescription of such a time limit is a legislative responsibility than a judicial one. Party autonomy and a time bound procedure are essential features that make arbitration the most desired mechanism for resolving commercial disputes. In this case, a balance must be struck between the two to maintain the efficacy of the arbitral procedure and to holistically achieve the foundational goals of arbitration.