Time to pass arbitral award can be extended even after 18 month deadline: Supreme Court

Applications to extend the deadline to pass an arbitral award can be filed even after the eighteen-month time limit mentioned in Section 29A of the Arbitration and Conciliation Act, the Supreme Court held on Thursday [Rohan Builders India Private Limited v Berger Paints India Limited]..Section 29A says that arbitral awards should be made within twelve months of completing pleadings, or (if the parties consent to it) within an extended period of six months (totalling a maximum of eighteen months). Section 29A (4) adds that if the award is not passed within this timeframe, the arbitral mandate will stand terminated unless it is extended by a court order. .In its judgment today, a Bench of Justices Sanjiv Khanna and R Mahadevan observed that such termination of an arbitral mandate under Section 29A after eighteen months is not absolute or set in stone. Rather, such termination would depend on whether an application has been made to extend the eighteen-month deadline. Pertinently, the Court clarified that this application can also be filed after the eighteen-month deadline under Section 29A is over."We hold that an application for extension of the time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) is maintainable even after the expiry of the twelve-month or the extended six-month period, as the case may be. The court while adjudicating such extension applications will be guided by the principle of sufficient cause," the Court said. .The Bench further opined that the word "terminate" in Section 29A(4) cannot be interpreted restrictively."Section 29A intends to ensure the timely completion of arbitral proceedings while allowing courts the flexibility to grant extensions when warranted," the Court observed.The Court also noted that Section 29A allows courts to extend the arbitral award deadline "either prior to or after the expiry of the (eighteen-month) period." In this context, it added that courts should be careful not to prescribe a limitation period that the legislature has refrained from imposing in the law."Courts should be wary of prescribing a specific period of limitation in cases where the legislature has refrained from doing so.24 If we give a narrow and restrictive meaning to Section 29A(4), we would be indulging in judicial legislation by incorporating a negative stipulation of a bar of limitation, which has a severe annulling effect," the judgment said. .Moreover, the Court opined that there are sufficient safeguards to ensure that arbitration timelines are respected, even if applications to extend the same are entertained after the eighteen-month deadline. In this regard, the Court noted that such extensions of time are only to be granted for sufficient cause, and not mechanically. "Such extension is not granted mechanically on filing of the application. The judicial discretion of the court in terms of the enactment acts as a deterrent against any party abusing the process of law or espousing a frivolous or vexatious application. Further, the court can impose terms and conditions while granting an extension. Delay, even on the part of the arbitral tribunal, is not countenanced," the Court said..The judgment was passed on a batch of appeals that raised the question of whether an application to extend an arbitral mandate can be filed after the eighteen-month deadline in Section 29A.The top court noticed that several High Courts had taken divergent views.Some High Courts had held that such an extension application must be filed before the arbitral mandate terminates (that is, within the twelve-month period or the extended six-month period).One such ruling came from the Calcutta High Court, which observed that allowing an extension application after the time limit mentioned in Section 29A would 'encourage rogue litigants' and render timelines inconsequential.The Supreme Court objected to the said reasoning, particularly the High Court's narrow interpretation of the term "terminate" in Section 29A, observing that such a view may lead to absurd results. "(If such a view is accepted) 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)," the top court pointed out. The Bench added that while interpreting a law, courts must strive to give it meaningful life and avoid cadaveric consequences that result in unworkable or impracticable scenarios..Senior Advocate Nakul Dewan appeared for Rohan Builders India (appellant who challenged the Calcutta High Court ruling).Senior Advocate Gopal Jain briefed by a team from Cyril Amarchand Mangaldas comprising Partner Raunak Dhillon, Principal Associate Madhavi Khanna, and Senior Associate Isha Malik appeared for IDBI Bank Limited.Senior Advocate Siddharth Bhatnagar appeared for some of the other appellants.Advocates Vanita Bhargava, Ajay Bhargava, Wamika Trehan, and Raddhika Khanna Tandon, briefed by a team from Khaitan & Co., appeared for Berger Paints India (a respondent).Senior Advocate Shyam Divan briefed by a team from Khaitan & Khaitan appeared for KMP Expressways Limited.Senior Advocate Neeraj Kishan Kaul appeared for some of the other respondents..[Read judgment]