The Supreme Court of India, in a significant judgment delivered by a bench comprising Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta, emphasized that “sufficient cause” for extending an arbitral tribunal’s mandate must align with the overarching goal of facilitating effective dispute resolution. The ruling came in the case of M/S Ajay Protech Pvt. Ltd. v. General Manager & Anr., Civil Appeal No. _____/2024 (arising out of SLP (C) No. 2272/2024).
The court allowed an extension of time for the arbitral tribunal to deliver its award, overturning an earlier dismissal by the Gujarat High Court.
Background of the Case
The case involved M/S Ajay Protech Pvt. Ltd., which had entered into a works contract with the respondents. When disputes arose, arbitration proceedings were initiated in 2018. After the High Court appointed a sole arbitrator in February 2019, the tribunal began proceedings, with pleadings completed on October 9, 2019. This date marked the commencement of the statutory 12-month timeline under Section 29A(1) of the Arbitration and Conciliation Act, 1996, for the tribunal to deliver its award.
Despite a mutual six-month extension by the parties as permitted under Section 29A(3), the process was delayed due to the COVID-19 pandemic. By the time the appellant filed an application under Section 29A(4) in August 2023, the Gujarat High Court rejected it, stating that the tribunal’s mandate had terminated on April 9, 2021, and no sufficient cause was provided to justify the delay.
Key Legal Issues
The Supreme Court addressed two primary questions:
1. Timing of Applications Under Section 29A(4): Can an application to extend the mandate be filed after the expiration of the tribunal’s term?
2. Sufficient Cause for Extension: Were there valid grounds in this case to justify an extension of time for the arbitral tribunal?
Observations and Decision
Filing of Extension Applications Post-Mandate Expiry
The Supreme Court reaffirmed its earlier decision in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd., which clarified that courts can extend an arbitral tribunal’s mandate even after its statutory or mutually extended term has expired. Citing the explicit language of Section 29A(4), the court noted that extensions could be granted “either prior to or after the expiry of the period so specified.”
Sufficient Cause and Its Scope
The court delved into the meaning of “sufficient cause” under Section 29A(5), noting that it must be interpreted in light of arbitration’s purpose—effective and efficient dispute resolution. Recognizing the delays caused by the pandemic, it held that the High Court had erred in computing the period of delay. Excluding the COVID-19 pandemic period (March 15, 2020, to February 28, 2022), as mandated by the Supreme Court in Re: Cognizance for Extension of Limitation, the court found that the application for extension was not excessively delayed.
The court further observed that efficiency in arbitration is critical but must be balanced with flexibility to address unforeseen circumstances. The tribunal had resumed proceedings post-pandemic, concluding hearings in May 2023, with only the award pending. Denying an extension would have caused undue hardship to the parties.
Court’s Quote on Dispute Resolution
Highlighting the broader purpose of arbitration, the bench remarked, “The meaning of ‘sufficient cause’ for extending the time to make an award must take color from the underlying purpose of the arbitration process. Effective dispute resolution must remain central to the court’s discretion.”
The Supreme Court allowed the appeal, set aside the Gujarat High Court’s judgment, and extended the tribunal’s mandate to December 31, 2024. This decision ensures that the arbitral process can reach its logical conclusion without forcing the parties to restart proceedings.
