On September 4, 2023, the Calcutta High Court, in the case of Rohan Builders (India) (P) Ltd. v. Berger Paints India Limited has held that Section 29-A (4) of the Arbitration and Conciliation Act, 1996 (“Act”) requires that an application for extending the arbitrator’s mandate must be made during the subsistence of the mandate. Failure to do so results in the automatic termination of the mandate by operation of law, rendering any subsequent award void. The Court dismissed the petitions seeking an extension of the arbitrator’s mandate as they were filed after the termination of the mandates.

Brief Facts:

The Court was tasked with adjudicating three similar applications, preferred by the petitioners under Section 29-A (4) of the Act, wherein they sought an extension of the mandate for the Ld. Arbitrators to make and publish their awards. The Respondents in all three applications opposed the extension of the arbitrator's mandate. Furthermore, these cases are intertwined with proceedings related to the initiation of the corporate insolvency resolution process (“CIRP”) against the petitioners under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

Issue:

Whether the Court is conferred with the power under Section 29-A (4) of the Act, to extend the mandate of the arbitrator when an application for extension is made after the expiration of the period stipulated in Section 29-A (1) or (3) of the Act?

Submission on behalf of the petitioners:

The submissions made on behalf of the petitioners are summarized below:

1. The Petitioners contended that an application for an extension of the arbitrator's mandate is maintainable even if submitted after the expiration of the period stipulated in Section 29-A (1) of the Act. This argument stems from the proviso in Section 29-A (4) of the Act, granting the Court the authority to extend it, whether before or after the period specified in Section 29-A (1), provided that sufficient cause under Section 29-A (5) has been established;
2. The petitioners relied upon the 176th and 246th Law Commission Reports to support their position. These reports emphasize that the legislative intent was to expedite the arbitration process, and to achieve this objective, the Court has been endowed with ample powers to extend the arbitrators' mandate when sufficient cause has been demonstrated;
3. Furthermore, the petitioners contended that the period of CIRP represents a break in the sequence specified under Section 29-A of the Act.

Submissions on behalf of the respondents:

The submissions made on behalf of the respondents are summarized below:

1. The respondents argued that the 176th Law Commission Report, when read in conjunction with Section 29A of the Act, clearly states that the arbitrator's mandate would automatically cease to exist if the application for extension is not filed within the stipulated mandate period.
2. Furthermore, the respondents contended that the legislature's choice of the term "terminate" implies that the proceedings would conclusively conclude if the award is not rendered within the statutory timeframe.

Decision of the Court:

In arriving at a conclusion, the Court examined the legislative intent behind the inclusion of Section 29A in the Act. The Court held the view that the 176th Law Commission Report had recommended the use of the term "suspended" in reference to the arbitration mandate after the expiration of the specified period under subsection 1 of Section 29A. However, the current version of the Act employs the term "terminated" instead of "suspended." Hence, the Court opined that the 176th Law Commission's proposal to suspend the arbitrator's mandate following the expiry of statutory timelines under Section 29-A (1) or (3) did not gain favor with the Legislature, and the term "terminated" was substituted, indicating the legislative intent that, following the expiration of the period specified in subsection 1 of Section 29A, the arbitration mandate is terminated. In the present case, the respondents objected to the extension of the arbitration mandate. However, even if both parties consent to such an extension, it would not be permissible if the application for extension is made after the expiry of the period specified under the Act.

Furthermore, in accordance with Section 29-A (4) and (5) of the Act, the Court possesses the power to grant an extension of the mandate of the arbitration if sufficient cause is demonstrated. The language used in Section A (4) states that 'the mandate of the arbitrator(s) shall terminate...'. If the arbitral tribunal proceeds to issue an award after the expiration of the prescribed timelines, the award would be susceptible to jurisdictional errors. This is because there is no provision for the renewal of the tribunal's mandate once it has terminated by operation of law

Hence, the Court held that all three applications for extension had been filed after the termination of the mandate of the arbitration, and therefore, the Court is statutorily precluded from extending the mandate. Accordingly, all the applications were dismissed.

Please find attached a copy of the judgement.

This update has been contributed by Murtaza Kachwalla (Partner) and Palash Moolchandani (Associate).

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