By Akash Rathi, Advocate, Partner at Lex Maven

The Arbitration and Conciliation Act, 1996 is central to regulating arbitration proceedings in India, and it plays a key role in shaping Alternative Dispute Resolution (ADR) mechanisms. One of the significant provisions under this Act, Section 29A, defines the time limits for making an arbitral award and the circumstances under which extensions can be granted. Understanding Section 29A(5) and the Court’s discretion in extending the time period for making the award is vital for parties engaged in arbitration and other forms of ADR.

Key Provisions of Section 29A:

1. Section 29A(1): The arbitral award must be made within 12 months from the date of completion of pleadings.
2. Section 29A(3): The parties may mutually extend this period by another 6 months (making the total period 18 months).
3. Section 29A(4): If the award is not made within the 18-month period, the mandate of the arbitral tribunal terminates, unless the court extends the period either before or after the expiry of the stipulated time.
4. Section 29A(5): The Court can extend the time for making the award, but only upon the application of a party and for sufficient cause. The Court has discretion to impose terms and conditions while granting the extension.

Recent Judicial Interpretations:

The scope of Section 29A(5) was recently clarified by the Supreme Court in two important judgments.

1. Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. (2024):
   1. The Court held that an application for extension can be filed even after the expiry of the time specified in Section 29A(1) and (3), acknowledging that the termination of the tribunal’s mandate under Section 29A(4) is conditional. If the parties move the Court before or after the expiry, the Court retains the authority to grant an extension, ensuring the continuity of the arbitral process.
   1. The Court emphasized that a restrictive interpretation of the provision would create unnecessary challenges, potentially stalling arbitration by forcing a party to approach the Court even before the 12-month period expires, or by preventing the continuation of arbitration in cases where no party is at fault.
2. Ajay Protech Pvt. Ltd. v. General Manager & Anr. (2024):
   1. The Supreme Court clarified that extending the time under Section 29A(5) is an exercise of judicial discretion, which must be done only when sufficient cause is shown.
   1. The Court emphasized that efficiency in arbitral proceedings is crucial to the efficacy of arbitration as a dispute resolution mechanism. The interpretation of “sufficient cause” should focus on facilitating effective dispute resolution, rather than penalizing delays that may be beyond the control of the parties or the tribunal.
   1. The Court also noted that the exercise of discretion should not be mechanical. The Court should evaluate the circumstances carefully and impose terms if necessary to ensure the proceedings are progressing in good faith.

Interpretation of “Sufficient Cause”:

• The meaning of ‘sufficient cause’ under Section 29A(5) is not rigid but should be interpreted with a view to promoting effective dispute resolution. The Court should look at the facts and the reasons for delay, considering the purpose of arbitration as a timely and cost-effective dispute resolution process.
• The discretion to extend the mandate of the tribunal should be exercised flexibly, in a way that does not penalize the parties or obstruct the arbitration process if the delay is justified.

Exercise of Judicial Discretion:

• The Supreme Court emphasized that judicial discretion in extending time under Section 29A(5) must be exercised carefully, balancing the need for efficiency with the realities of the arbitral process. This discretion is not absolute and should be exercised only where a valid cause is shown.
• Importantly, the Court can impose conditions when granting an extension to prevent misuse of the process or to ensure that the delay does not undermine the arbitral process.

Conclusion:

The recent judicial interpretations underscore that Section 29A(5) should be interpreted broadly to promote the object of the Arbitration and Conciliation Act, which is to facilitate the resolution of disputes efficiently. A restrictive interpretation would complicate the process and hinder the very purpose of arbitration. The Court’s discretion to extend the time for making the award under Section 29A(5) should be exercised judiciously, ensuring that the dispute resolution process is not derailed by technicalities, but instead is steered towards a fair and timely resolution.