2024 (9) TMI 610 - SC - Indian Laws

Interpretation of statute - Section 29A of the Arbitration and Conciliation Act, 1996 - whether application for extension of time under Section 29A of the Arbitration and Conciliation Act, 19961 can be filed after the expiry of the period for making of the arbitral award? - HELD THAT - As per the second proviso to Section 29A(4), the mandate of the arbitral tribunal continues where an application under sub-section (5) is pending. However, an application for extension of period of the arbitral tribunal is to be decided by the court in terms of sub-section (5), and sub-sections (6) to (8) may be invoked. The power to extend time period for making of the award vests with the court, and not with the arbitral tribunal. Therefore, the arbitral tribunal may not pronounce the award till an application under Section 29A(5) of the A C Act is sub-judice before the court. In a given case, where an award is pronounced during the pendency of an application for extension of period of the arbitral tribunal, the court must still decide the application under sub-section (5), and may even, where an award has been pronounced, invoke, when required and justified, sub-sections (6) to (8), or the first and third proviso to Section 29A(4) of the A C Act. While interpreting a statute, meaningful life must be given to an enactment or rule and avoid cadaveric consequences that result in unworkable or impracticable scenarios. An interpretation which produces an unreasonable result is not to be imputed to a statute if there is some other equally possible construction which is acceptable, practical and pragmatic. Thus, 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 appeals are directed to be listed in the week commencing 30.09.2024 for final hearing and disposal.

Issues Involved:
1. Whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed after the expiry of the period for making the arbitral award.

Issue-wise Detailed Analysis:

1. Interpretation of Section 29A of the Arbitration and Conciliation Act, 1996:

The primary issue in this judgment is whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 (A & C Act) can be filed after the expiry of the period for making the arbitral award. The High Court at Calcutta in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited held that such an application can only be entertained if filed before the expiry of the mandate of the arbitral tribunal. Similarly, the High Court of Judicature at Patna in South Bihar Power Distribution Company Limited v. Bhagalpur Electricity Distribution Company Private Limited concurred with this view. However, other High Courts, including Delhi, Bombay, Kerala, Madras, and Jammu and Kashmir, have taken the opposite view, allowing applications for extension even after the expiry period.

2. Analysis of Section 29A Provisions:

Section 29A(1) mandates that an arbitral award must be made within twelve months from the date of completion of pleadings. Section 29A(3) allows parties to extend this period by six months by consent. Section 29A(4) states that if the award is not made within the specified period, the mandate of the arbitral tribunal shall terminate unless the court extends the period either before or after the expiry of the period. The court can extend the period for making the award at any time before or after the mandated period.

3. Legislative Intent and Interpretation:

The judgment emphasizes that the word "terminate" in Section 29A(4) should not be read in isolation but in conjunction with the surrounding words and expressions. The legislative intent is to ensure the timely completion of arbitral proceedings while allowing flexibility for extensions when warranted. The judgment rejects a narrow interpretation that would require parties to file for an extension before the expiry period, as this would lead to impractical and unreasonable results.

4. Judicial Discretion and Sufficient Cause:

Section 29A(5) allows a party to file an application for an extension of time, and the court can grant this extension for sufficient cause and on such terms and conditions as may be imposed. The court's judicial discretion acts as a deterrent against abuse of the process. The court can also impose costs and substitute arbitrators if necessary, ensuring efficiency and expediency in the arbitral process.

5. Legislative History and Recommendations:

The judgment refers to the 176th Report of the Law Commission of India, which recommended a time limit for making arbitral awards to avoid delays. The Arbitration and Conciliation (Amendment) Act, 2015, inserted Section 29A to ensure arbitration proceedings are completed without unnecessary adjournments and delays.

6. Practical Implications and Efficiency:

A restrictive interpretation would force parties to rush to court even before the expiry period, leading to unnecessary complications and delays. The judgment emphasizes that the legislative intent is to facilitate arbitration and avoid litigation. The court's power to extend the period for making an award ensures that arbitration proceedings can continue efficiently, even if an extension application is filed after the expiry period.

Conclusion:

The Supreme Court accepted the view 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. The court will be guided by the principle of sufficient cause and the observations made in the judgment. The appeals are directed to be listed for final hearing and disposal in the week commencing 30.09.2024.

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